Territory Sheet Metal Pty Ltd v Australia and New Zealand Banking Group Limited

Territory Sheet Metal Pty Ltd & Others v Australia and New Zealand Banking Group

Limited [2009] NTSC 31

PARTIES: TERRITORY SHEET METAL PTY LTD
(ACN 009 634 333)
DAVID LENNOX SMITH
EDWARD CHARLES DEAN
SUSAN ELLEN DEAN
NICHOLE KERRIAN SMITH
v
AUSTRALIA AND NEW ZEALAND
BANKING GROUP LTD
(ACN 005 357 522)
TITLE OF COURT: SUPREME COURT OF THE NORTHERN
TERRITORY
JURISDICTION: SUPREME COURT OF THE TERRITORY
EXERCISING TERRITORY JURISDICTION
FILE NO: 177 of 2000
DELIVERED: 9 July 2009
HEARING DATES: 2-6 June, 10-18 June, 28 August –
17 September, 19-26 September,
20 -31 October 2008, 9,10 and 12 February
2009
JUDGMENT OF: OLSSON AJ
CATCHWORDS:
Claims for damages by customers and sureties against bank -- Claims based on asserted
breaches of the provisions of s 51A and s 52 of Trade Practices Act(Cth), common law
duty of care, fiduciary duty and contract, and by reason of alleged negligent
misstatement -- pleas by defendant of contributory negligence -- counterclaims by
defendant based on deceit, negligent misrepresentation and alleged breaches of s 52 of
Trade Practices Act(Cth) and s 42 Consumer Affairs and Fair Trading Act (NT) -- loan
facilities approved by respondent bank to corporate plaintiff -- personal plaintiffs
sureties for those facilities -- discussion of principles as to liability in relation to causes
of action promoted by respective parties -- expert evidence as to banking practice and
financial aspects reviewed -- breaches of contract by defendant in respect of the
processing of two cheques -- other causes of action maintained by parties not made out -
- issues of causation discussed -- basis on which damages fall to be assessed -- primary
findings published.
REPRESENTATION:
Counsel:

Plaintiff: D Trim QC and R Sallis
Defendant: J Kelly SC and D McConnel
Solicitors:

Plaintiff: Woodcock Solicitors
Defendant: Cridlands MB

Judgment category classification: A
Judgment ID Number: Ols200901
Number of pages: 517
IN THE SUPREME COURT
OF THE NORTHERN TERRITORY
OF AUSTRALIA
AT DARWIN
Territory Sheet Metal Pty Ltd v Australia and New Zealand Banking Group

Ltd [2009] NTSC 31

No. 177 of 2000

BETWEEN:
TERRITORY SHEET METAL PTY
LTD (ACN 009 634 333)
First Plaintiff

SMITH, DAVID LENNOX
Third Plaintiff

DEAN, EDWARD CHARLES
Fourth Plaintiff

DEAN, SUSAN ELLEN
Fifth Plaintiff

SMITH, NICOLE KERRIAN SMITH

Sixth Plaintiff
AND:
AUSTRALIA AND NEW ZEALAND
BANKING GROUP LTD
(ACN 005 357 522)
Defendant

CORAM: OLSSON AJ
REASONS FOR JUDGMENT
(Delivered 9 July 2009)

Index

Pages

Definitions 1-2

PART I

Introduction and the Narrative Facts

Paragraphs

Introduction 1-3
Relevant narrative aspects:

Credibility issues (key narrative witnesses) 4

DLS 5-19

ECD 20-34
The witness Bradley 35-39
The witness Barnett 40-43
The witness Meers 44-46
The witness Pedler 47-52
The witness Flynn 53-54
The witness Wellman 55-58
The witness Baylis 59-71
The witness Burford 72-77

General background

Preliminary 78-80

Relevant history 81-115

The re-financing proposal 116-212

The finance application 213-285
The finance agreement 286-317

The ANZ security requirements 318-321
The alleged Godwin properties 322-338
Events leading up to the settlement of the ANZ loans 339-453
Settlement of the ANZ loans 454-463
Caveats on the alleged Godwin properties and their
ultimate removal 464-486

The procurement of the $570,000 cheque 487-504

A request to the ANZ for additional finance 505-512

Godwin’s fraudulent conduct is revealed 513-520
The ultimate situation causing the $570,000

obtained by Godwin from NPG 521-524

The ANZ exit strategy 525-548

TSM ceases to trade 549-568
The situation immediately prior to and post February

1998 as revealed by cross examination of DLS 569-581
Some reflections on the conduct and attitudes of DLS,

ECD and Godwin 582-588

PART II

Expert banking evidence and the evidentiary case as to damages

The expert evidence related to banking procedures and

responsibilities 589

The witness Guild 590-635
The witness Kirkmoe 636-647
The witness Silver 648-703
The witness McFadden 704-737
A matter of terminology 738-745

The evidentiary case as to damages:

General 746-764
Specific areas of work

Rain water tank production 765-774
Curved flashings 775-785
Spectre metal door and window awnings 786-797
Battenless and screwless roofing/cladding systems 798-804

Prefabricated housing units 805-817

The plaintiffs’ technical experts

The witness Marcroft 818-823
The witness Valastro 824-828
The witness Maschke 829-857

The defence technical experts

The witness Sullivan 858-885
Curved flashings
Awnings
Battenless and screwless cladding systems

The witness Newley 886-910
The witness Neil Clarke 911-928

The expert evidence as to quantum:

The witness Martin 929-974
The witness Clark 975-1009

The witness Edwards 1010-1111

The expert evidence as to technical and financial aspects 1112
General conclusions as to the opinions of the

financial experts 1113-1126

PART III

A consideration of the causes of action relied on by

the plaintiffs:

Introduction 1127-1134
The claims based on the provisions of the TPA

The claim 1135-1141
Relevant principles 1142-1159
The basis of the claim made 1160
Issues arising 1161-1193
Claims based on breach of common law duty of care
and breach of contract

General 1194-1196
Some important legal principles 1197-1230
Some preliminary considerations 1231-1249
When did the relationship of banker/customer come

into existence? 1250-1267

Claims based on common law duty of care

The claims as pleaded 1268-1283
Issues arising 1284-1328
Claims based in contract

The claims as pleaded 1329-1345
Issues arising 1346-1412
Issues arising in relation to parties other than TSM

in respect of the banker/customer relationship period 1413
Claims based on breach of fiduciary duty

The basis of the claims 1414-1424
Relevant general principles 1425-1442
Issues arising 1443-1485

Claims based on negligent misstatement

The basis of the claims 1486-1492
Relevant principles 1493-1506
Issues arising 1507-1523

The issues as to damages claimed by the plaintiffs

Introduction 1524-1526

Principles to be applied 1527-1545
Damages issues as debated by the parties:

General 1546-1570
Specific heads of claim 1571-1688

The defendant’s plea of contributory negligence 1689-1712
The defendant’s counterclaim

The pleaded basis of the counterclaim 1713-1721
Specific counterclaims 1722-1728
The final basis as pursued 1729-1730
Issues arising 1731-1761

Conclusion 1762
OLSSON AJ:
Definitions
In the course of these reasons I propose to employ the following
expressions:

Expression Meaning
“ANZ”: the defendant
“ATO” the Australian Taxation Office
“CAFTA”: the Consumer Affairs and Fair Trading Act
(NT)
“CBA”: The Commonwealth Bank of Australia
“CRAA”: the Credit Reference Association of
Australia
“DLS”: David Lennox Smith
“ECD”: Edward Charles Dean
“LTD”: LTD Constructions (NT) Pty Ltd
“NAB”: National Australia Bank
“NKS”: Nicole Kerrian Smith
“NPG”: Northern Property Group Pty Ltd
“primary proceedings”: the plaintiffs’ claims against the defendant
as expressed in the statement of claim

“secondary proceedings”:

the defendant’s claims against DLS and ECD as expressed in its finally amended counterclaim
“SED”: Susan Ellen Dean
“the alleged Godwin properties” a collective reference to both the
Brayshaw Crescent property and the Wells
Street property

“the Anula property”: the property situated and known as 10
Kohinoor Street, Anula, formerly owned
by ECD and SED
“the Brayshaw Crescent property”: the property situated at and known as
7 Brayshaw Crescent, Millner

“the finance agreement”: the finance agreement defined in paragraph
37 of the statement of claim, as said to
have been evidenced by a letter dated
19 November 1997 written by the ANZ to
TSM
“the finance application”: the application made to the ANZ as
referred to in paragraph 14 of the
statement of claim having the oral and
documentary content pleaded, as well as
the documents comprising the re-financing
proposal, the relevant ANZ Business
Credit Application, an associated
document titled “Security to be offered”
and Personal Statements of Position of
DLS, ECD and Lionel Anthony Godwin
(“Godwin”) respectively (Exhibit P1 pages
57-66, 83-93)

“the first LTD development project” the construction by LTD of initial pre- fabricated units at Shearwater Drive,
Bakewell, as referred to in paragraph 8.4 of the statement of claim
“the first October meeting”: the meeting said to have been held on
14 October 1997, as referred to in
paragraph 17.3 of the statement of claim
“the first November meeting”: the meeting said to have been held on or about 7 November 1997, as referred to in paragraph 27 of the statement of claim
“the fourth October meeting”: the meeting said to have been held on 29 October 1997, as referred to in paragraph
17.6 of the statement of claim
“the indicative proposal”: the indicative ANZ proposal, being a letter dated 22 October 1997 written by the ANZ
to TSM (Exhibit P1 pages 76-82)
“the October meetings”: a collective reference to the first, second,
third and fourth October meetings
“the November meetings”: a collective reference to the first
November meeting and the second
November meeting
“the Raffles Road property”: the property situated at and known as 2 Raffles Road, Palmerston, being the former home of DLS and NKS
“the re-financing proposal”: the written TSM re-financing proposal, a
copy of which is reproduced at pages 57 to
67 inclusive of Exhibit P1
“the second LTD development project”: the construction by LTD of eight
pre-fabricated units on Lot 5745, Town of
Palmerston

“the second October meeting”: the meeting said to have been held on 16 October 1997, as referred to in paragraph
17.4 of the statement of claim
“the second November meeting”: the meeting said to have been held on

13 November 1997, as referred to in

paragraph 30 of the statement of claim

“the statement of claim”: the plaintiffs’ statement of claim as finally
amended in these proceedings
“the third October meeting”: the meeting said to have been held on
22 October 1997, as referred to in
paragraph 17.5 of the statement of claim
“the Territory”: The Northern Territory of Australia
“the TSM land and workshop premises”: the property situated at and known

as 16 Sadgroves Crescent, Winnellie

“the TSM overdraft account”: the TSM Account No 015-896 3530-42732
with the ANZ
“the Wells Street property”: the property situated at and known as
22 Wells Street, Parap ( also variously
referred to as 22 Wells Street, Darwin and
22 Wells Street, Ludmilla)
“the $570,000 cheque”: the cheque for that amount dated 2 January
1998 drawn by Flynn Petroleum Pty Ltd
on Westpac Banking Corporation in favour
of ANZ
“the $460,000 cheque”: the cheque for that amount dated
24 December 1997 in favour of Godwin
drawn on the ANZ against the TSM
overdraft account
“TPA”: the Trade Practices Act, 1974 (Cth)
“TSM”: Territory Sheet Metal Pty Ltd
For the sake of brevity all witnesses and other natural persons not otherwise
included in the foregoing definitions will usually be referred to in these
reasons solely by their surnames.

PART I

Introduction and the Narrative Facts

Introduction

In these proceedings the plaintiffs claim damages from the defendant in

relation to certain transactions said to have occurred in mid to late 1997 and
early 1998. The claim asserts against the defendant breaches of the
provisions of s 51A and s 52 of the TPA, breach of common law duty of
care, breach of fiduciary duty, negligent misstatement and breaches of
contract.

The defendant denies the key assertions made against it and has filed a
counterclaim against the third and fourth plaintiffs. This seeks declarations that those plaintiffs are liable to indemnify the ANZ against the costs of the
primary proceedings and any amount that it may be ordered to pay to TSM
by way of damages, damages in deceit, negligent misrepresentation and in

respect of alleged breaches of s 52 of the TPA and s 42 of CAFTA, as well
as Hungerfords v Walker[1] interest.

At the commencement of the trial Mr Trim, of senior counsel for the
plaintiffs, announced that the claims by LTD were to be discontinued.
Having regard to the terminology employed in the amended statement of

claim I have retained much of the original title of these proceedings and
have referred to the various remaining plaintiffs, as set out in that title, by
their original numerical designations so as to avoid confusion.
Relevant narrative aspects
Credibility issues

I will, in the course of these reasons, be making comments touching on the
accuracy of the evidence and credibility of certain witnesses in context. However, it is desirable that I express my general views as to some key
witnesses at the outset. I will, in doing so, indicate the broad basis of those views, but will not pause to conduct a truly exhaustive analysis of all of the relevant evidence at this point. I will simply advert to indicative aspects of it in support of the conclusions expressed.
The third plaintiff – David Lennox Smith
The essential foundation of the plaintiffs’ narrative case was laid by the

evidence of DLS and the documentary material referred to by or put to him.
That documentary material was not under challenge as to its authenticity and
forms an important context in which his oral and written testimony fall to be
examined.

DLS presented in evidence in chief as a confident and articulate witness,

with a seemingly good grasp of the relevant narrative facts. His responses
were spontaneous and apparently frank and it was apparent that he had an
excellent grasp of technical aspects of the work and activities of TSM and
LTD. He came across as a man who was obviously highly competent and
innovative in relation to the work activities of which he spoke.

On the other hand, it rapidly emerged, both from his evidence and the
repeated business disasters referred to by him, that he had an unduly trusting and somewhat naïve, if not cavalier, approach to business administration and relationships.
This is clearly illustrated by his lack of due diligence before admitting
Godwin into the relevant business activities and ensuring that he was in a
position to fulfil his commitment and in fact did so; as well as the

unquestioning acceptance by DLS of the various false statements,[2] excuses
and promises subsequently made by Godwin; permitting him to make
withdrawals from the LTD account for personal purposes on un-kept
promises to repay after a brief time, which were never effectively followed
up[3] and the unquestioning acceptance of the statement that he had advanced
$100,000 in relation to one of the properties purchased for the purposes of
development, to which I shall later refer in more detail.

Another illustration is the acceptance (without follow up) of Godwin’s

statement that he would immediately pay the proceeds of the $460,000
cheque to NPG as directed by DLS, in circumstances to which I will
hereafter refer. Sound administration was not, and obviously is not, the
forte of DLS.

At trial, DLS was subjected to a searching cross examination that extended
over a very lengthy period. At the end of that time, his credibility appeared to some extent tarnished and the accuracy of certain aspects of his testimony
was clearly open to question.
I hasten to say that such situation arose in connection with his general

evidence of relevant events. His technical evidence was not, generally
speaking, the subject of successful challenge.

In the event, I have approached his evidence as to narrative events with

considerable caution and have particularly looked to test it against objective
documentary evidence or other testimony that I regard as being accurate.

I do not suggest that DLS was necessarily or deliberately giving false
testimony. In many situations where issues of accuracy and credibility

arose, I consider that these were more probably than not related to either
defective memory or, in a number of instances, ex post facto reasoning on
his part.

The gestation period of these proceedings has been long, difficult and

complex. Of necessity it has involved repetitive examination and discussion
of a complicated factual history and a vast quantity of documentation.
Moreover, most of the relevant events took place in excess of 10 years ago.

It is small wonder that some defects of memory did occur and that some degree of ex post facto reasoning did appear to exist, although, by way of example, it is clear that the assertion of DLS that, post February 1998, TSM

was forced to revert merely to the core businesses of general sheet metal
work and general jobbing was a demonstrable overstatement, as I later
illustrate.

An ineluctable conclusion must also be that, at certain points in the relevant
narrative sequence of events, DLS did not hesitate to be party to what were either deliberate misrepresentations to, or at least a deliberate withholding of information from, the ANZ in a manner that does not breed present
confidence as to his credibility.
I do not intend to suggest that he was a knowing party to or aware of a

variety of falsehoods, misrepresentations and even criminal behaviour
perpetrated by the person Godwin, to whom I shall be referring in some
detail. Clearly, he was not. He was just as much a victim of them as were
the ANZ and others.

I consider that, without in any sense attempting to be fully definitive, some,
but not all, of the key pointers to my foregoing conclusions are:

(1) There can, in my view, be no doubt that the document constituting
the re-financing proposal, was seriously misleading in a number of
major respects to which I will later refer and that DLS must have
appreciated that fact.

(2) I am left with the distinct impression that he and his colleagues were
in a most difficult financial quandary at the time and did not hesitate
to withhold important information from the ANZ, particularly as to
the extent of borrowings that had been made to support the LTD
activities and a substantial TSM indebtedness to the ATO.
(3) I am of the opinion that it was no accident that the re-financing
proposal and application to the ANZ were ultimately pursued in the

name and on behalf of TSM, rather than on behalf of LTD – so as to avoid a need for full disclosure of the financial history and dealings of the latter.[4] Accordingly, the LTD financials and banking history were never supplied to the ANZ. The financial accommodation in
question would probably never have been forthcoming from the ANZ,
had the relevant full and correct information been made known to it.
(5) I found some of the explanations given by DLS in that regard
somewhat disingenuous (e.g. concerning the reason for non-
disclosure of the financial transactions between LTD and NPG).
When given, they smacked of a degree of rationalisation in the
thinking of DLS that did not enhance his credit.
(6) Whilst I do not accuse DLS of deliberate falsehood in that regard, I

consider that his memory was plainly defective concerning the circumstances when the ANZ relationship manager Baylis first entered upon the scene and as to who requested the principals of
TSM and LTD to complete the Personal Statements of Position.
(7) I will also deal with those topics in more detail in due course, but
merely comment at this stage that the present expressed memory of
DLS as to these aspects is difficult to align with contemporaneous
written records raised by ANZ officers.
(8) DLS sought, throughout his evidence, to portray a minimized
detailed knowledge of various financial transactions and, in
particular, his state of awareness at times of the extent of TSM and
LTD cash flow problems and resultant cheque dishonours. I have
great difficulty in accepting that his knowledge was so limited.
(9) Equally, I do not accept that he failed to appreciate the impropriety
of certain of the corporate transactions such as the giving of the
charge to NPG in breach of the terms of the pre-existing security to
the CBA and the giving of security to the ANZ in respect of relevant
properties when the NPG charge was already in place.
(10) There is no doubt that he has shifted ground over time as to certain
aspects of his narrative history of events. For example, he has
vacillated as to whether Godwin was to pay out the Raffles Road
property mortgage as part of, or in addition to, his promised capital
contribution of $400,000.[5]
(11) There is also his present evidence that the sum of approximately
$110,000 involved was, in effect, to be a short-term loan to be repaid
out of unit sales -- a topic that emerged for the first time in the
course of his cross examination. It is to be noted that ECD testified
that Godwin undertook to find the sum in addition to his promised
capital contribution.
(12) There is also an inconsistency between the various versions of what
DLS says Godwin represented had been paid to NPG in reduction of
its loans. In Exhibit P10 paragraph 211 reference is made to a
supposed payment of $400,000, whereas in Exhibit P12 paragraph
125 there is reference to a proposed payment of $460,000, neither of
which was, of course, consistent with any recognition that
contributions of substance had already been made by Godwin to TSM
(albeit that he had drawn back some or all of them).

I will not tarry at this point to recite a further exhaustive chronicle of other

matters bearing on the credibility of DLS. There are additional aspects that
will readily emerge in the course of my resume of the facts.
The fourth plaintiff – Edward Charles Dean

ECD also gave oral evidence in addition to his written statements and was
subjected to a substantial cross examination.
He presented as a careful witness who gave considered responses to
questions. He impressed as a person who was attempting to give accurate

evidence to the best of his recollection. He was not evasive in his answers,
nor did he hedge as to matters put to him.

However, it is plain from his evidence that he was no less a party than DLS
to the preparation and submission of a re-financing proposal that was
patently misleading in respects that I elsewhere identify.
Once again, I think that here was a person who was quite inexperienced and
even naive in relation to commercial dealings.
He was constrained to concede that there had been a deliberate omission to

reveal the existence of relevant charges to NPG and the CBA and no
disclosure of the considerable debt of TSM to the ATO on a basis that, on
the face of it, was quite unconvincing.

It is of interest to note that ECD conceded that reference was made in the re-
financing proposal to the successful completion by LTD of the relevant
development project in circumstances in which he had not even conducted

any analysis to ascertain whether a profit had, in fact, been made in respect
of it.

It is fair to say that Ms Kelly, of senior counsel for the defendant, sought to
strongly attack the credibility of this witness in cross examination, in large measure by reference to the content of entries in his 1997 and 1998 diaries. She also went so far as to suggest to him that he was a knowing party to the

supply to the ANZ (in early 1998) of patently bogus contracts for the sale of
properties.

I have concluded that this witness was not deliberately dishonest in the
evidence that he gave and I am not satisfied that he was a knowing party to the supply to the ANZ of contract documentation that he knew or suspected
at the time to be false.
I also conclude that his diary entries not only did not purport to be full or

verbatim records of everything that took place, but they merely constituted
staccato notes or impressions of the substance of situations and
conversations as ECD perceived them to be at the time, in light of his then
understanding of the relevant factual background. They did not pretend to
constitute a full record of all that occurred.

I acknowledge that his complicity in the preparation of the re-financing
proposal does him little credit, but even allowing for that, he came across as
a generally honest and reliable witness.
I particularly have regard to the fact that it is apparent that Godwin was a

highly plausible, fraudulent confidence person of the first order who,
apparently, had little difficulty in convincing those with whom he dealt of
the truth and validity of his many representations.

I have no doubt that ECD and, for that matter, DLS (both of whom had
known Godwin and his background for some time and were his social
friends) trusted him implicitly until the awful reality of the true situation

eventually emerged. Such was Godwin’s presentation that he had no
difficulty in even deceiving the witness Flynn who, patently, was a shrewd,
experienced and successful businessman.

I assess both ECD and DLS as being persons of relatively little

sophistication in personal business relationships. What, in the case of
persons of more acute intellect and business experience in financial matters,
may seem beyond normal acceptance in the commercial world simply did
not register with them.

Warning bells did not sound as might have been expected and it is
important, in assessing credibility, not to review the narrative events with
undue wisdom stemming from hindsight.
One might, for example, have expected a person such as ECD to have seen
through Godwin and his representations at the stage when the latter was

constantly shifting ground and not honouring his undertakings, but I am
convinced that both he and DLS did not. I am persuaded that ECD’s
testimony ought to be accepted as generally accurate, except where it is in
conflict with objective evidence that refutes it, or as I otherwise indicate in
these reasons.

The witness Martin Bradley

This witness was the ANZ business development manager who had initial
interaction with DLS, ECD and Godwin. He had held that position for only

about 12 months at the relevant time. He had no experience in handling
matters of the complexity and magnitude of the TSM re-financing proposal
at the time when he became seised of it.[6]

It is clear that he has little present independent memory of the details of

what occurred in 1997, is unaware of what happened to his diary for that
year and did not make any detailed contemporaneous notes.

He testified that he maintained what he termed a work file, which seems to
have been little more than a collection of some miscellaneous documents
that he says he eventually passed on to the witness Baylis, when the TSM
loans were formally approved. No such file, as a separate identifiable
collection of documents, has been produced.
His response to many questions in cross examination was to the effect that
he cannot now recall the relevant detail asked of him. It is plain that he has
no positive recollection of how many meetings he held with DLS, ECD and responses as to what he may have said to them were no more than ex post facto rationalisation on his part.
In the event, I have approached his evidence with a distinct lack of

confidence in its weight and have found it generally of limited assistance. I
certainly could not safely rely on it as controverting any specific evidence
of DLS and/or ECD as to what took place and when.
The witness Deane Barnett
[40] This witness was an articulate, intelligent and highly experienced bank
officer who has held a variety of senior posts with the ANZ, including that of branch relationship manager. A number of his positions have related to processing credit applications of various types.
[41] Barnett had obviously done his homework prior to giving evidence,
reviewing such documentation as now exists. He brought copies with him. I gained the impression that his recollection of detailed events was somewhat
superior to that of Bradley -- although there were some facets of the narrative events of which he did not retain any, or a clear, memory.

He was generally a frank, objective and impressive witness, although I had some difficulty in following the logic of certain of his conceptual approaches.[7]
In general, I accept the accuracy of his factual evidence, to the extent that
he professed a clear recollection of the relevant events. The core thrust of
that evidence concerned his role as the business underwriter who processed
the finance application in Adelaide on receipt of it from Bradley and then

reported his recommendation concerning it to his manager (the witness
Wellman), as an approving authority.
The witness Darren Meers

This witness was, at the relevant times, employed by the ANZ as a small-
business relieving manager. He professes no significant memory of the
detail of any of the factual events pertinent to this case in which he may
have been involved.
All that he can say is that he generally recalls attending at the TSM premises

with Bradley on two occasions in 1997, when the refinancing proposal was
canvassed. He thought that, on the second occasion, he participated with
Bradley in a visit to what was probably the second LTD development site.

I have not been able to derive definitive assistance from what he had to say.
The witness Brian Pedler
This witness is a highly experienced bank officer, who has had particular

experience and expertise in the credit area. At the relevant times, he was in
charge of the ANZ Credit Centre for South Australia and the Territory. He
was responsible for overseeing retail credit relationship managers on the
front line, as distinct from corporate credit and institutional borrowers.

Pedler had the oversight of six credit managers, of whom the witness
Wellman was one.
His memory was that those managers each had a personal discretion up to
about $1.5m -- $2m, although it was Pedler’s practice, as portion of his overseeing role, to "second look" at various lending decisions on a spot check basis. He thought that he so looked at Wellman’s review of the
finance application[8] at relevant times.
Wellman’s memory was that his discretion at the time was limited to $1m
and that, therefore, Pedler’s concurrence was required in any event.[9]
Pedler projected as a confident, careful and objective person, although I formed the impression that his primary field of expertise and experience was
in the credit area, rather than in front line branch banking procedures.
I found most of his evidence generally impressive, albeit that he came across

as being slightly defensive at times. I did not find his evidence concerning
front-line branch banking procedures as impressive as that related to his
apparent primary field of expertise.
The witness Michael Flynn
[53] Flynn presented as an articulate and confident business-person, who

responded frankly and spontaneously to questions asked of him. He did not
profess an independent memory of a number of matters of detail, but was
content to rely on a statement that he made to a police officer in about 2000,
as accurately expressing his then memory.

Subject to what I hereafter say, I accept his evidence as generally accurate,
due allowance being made for his present limitations of memory.
The witness Chris Wellman
This witness presented as a confident, articulate and intelligent bank officer,

obviously well experienced in credit management. Unfortunately, he
professed no present memory of his involvement in the transactions relevant
to these proceedings.

He was able to acknowledge such an involvement only by virtue of his

recognition of his signatures and writing on some memoranda, notably the
documents appearing under Tabs 24, 26 and 28 of Exhibit D51.

Although he said that a perusal of certain of that documentation stimulated a
limited degree of memory, I am not convinced that it did. The whole
flavour of his evidence was such that it became clear that any seemingly
positive evidence of what had occurred was little more than ex post facto
rationalisation on his part.
The only real assistance derived from his testimony was with regard to
certain conceptual evidence that he gave, to which I will later refer.
The witness John Baylis
This witness has been employed by the ANZ for some 42 years. He has
been a relationship manager and the senior officer at the ANZ lending centre
at Winnellie since 1992.
Baylis presented as something of an enigma. His professed memory

seemingly improved as he went along and appeared to be based largely on
documents that he perused. I do not consider that he had any significant
independent memory of many events at all and was, in large measure,

merely regurgitating what he read in his diary notes and other
documentation.

I carefully observed him in the witness box and, at the end of the day, did
not find him an impressive witness.
At times he professed a positive recollection of events that I do not consider
that he truly had and, as I will later demonstrate, there are inconsistencies
between his written statements and his oral evidence. Often, when pressed
in cross examination, it was plain that he had no present detailed
independent recollection of numerous events and circumstances.
His memory of what meetings he had with the principals of TSM in late
1997 was quite hazy and, I consider, to some extent, inaccurate.[10].
It seemed to me that various aspects of his testimony were little more than
reconstruction on his part.
He professed no present memory of the initial dishonour of the $460,000

cheque, no diary note concerning it (of the nature that he referred to) has
been found and I simply do not believe him when he asserts that he would
have spoken to one of the directors of TSM prior to the dishonour.11

There is no evidence to suggest that he did and it is significant that he does
not appear to have made a diary note of any such conversation.
He had no definitive memory of how it was that Godwin came to be

speaking to him on behalf of TSM,12 as recorded in his credit memorandum
of 18 November 1997.13

His sole prior memory of Godwin was being introduced to him as the LTD
development project officer on site at Palmerston during one of the initial
meetings.14 His responses in cross examination[15] are also instructive.
Baylis first stated that he could not remember what was said by Godwin to
him concerning the NAB mortgages over the alleged Godwin properties, but,
shortly after, volunteered in cross examination that Godwin said that any mortgage liability was only for a small amount and he would clear it up[16]. Oddly, this does not seem to have rung any alarm bells with Baylis when it
later emerged that very substantial liabilities must have been paid out by
means of the $460,000 cheque.
There are other problematic aspects of his evidence to which I shall come in
context in due course.
All in all, I have treated his evidence with great caution. I am not prepared
to act on it, except where it is supported by other convincing evidence.
The witness Burford
This witness was, at all material times, employed by the ANZ as assistant to
the witness Baylis. He is presently working as a finance broker in regional
South Australia.
He presented as a frank and honest witness, but professed little detailed

memory of relevant events. He recalls some involvement with the TSM
transactions and said that he did not have anything to do with them until the
point was reached at which the file was handed over to Baylis for
management. The two of them shared the one office at the time.

This witness was able to identify his own handwriting on certain of the
documents reproduced in Exhibit D51. These refreshed his memory that he

conducted and/or arranged for various searches, made out formal valuation
requests for Baylis to sign and generally attended to or arranged the
production of various letters and security documentation. It was he, for
example, who drafted the finance agreement and the letters expressing the
formal approvals of the ANZ advances.

He was unable, due to lack of memory, to throw much light on the events
that took place at the Lands Titles Office, when the witness Ordogh sought
to lodge the ANZ security documents for registration on 5 January 1998.
His sole memory is that there was a telephone conversation with Ordogh
when she was present at the Lands Titles Office and Godwin was apparently also there at the time. He may have actually spoken to her on that day more than once.[17]
For the most part, this witness was unable to contribute more than already
emerges from the written documentation. He does not profess positive recollections of most of what is there recorded. At best, he was able to speak of some of his usual practices.
It follows that he was unable to make any really substantial positive

contribution to the evidence beyond identification of relevant
documentation.
General background
Preliminary
[78] What follows, except as otherwise specifically indicated, constitutes my
distillation of the relevant narrative facts as I find them to be from the

whole of the evidence. A good deal of the narrative history is either common
ground or has been extracted from objective sources such as documentation
and records, the provenance of which is not in issue.

I have not set out, in these reasons, to discuss every last facet of the vast
volume of evidentiary material placed before me, but I have, of course, considered it all. Any failure to refer to specific evidence should not be taken to indicate that I have overlooked or ignored it.
My expressed conclusions are the product of an analysis of the totality of
the evidence and are intended as a convenient summary of my relevant
findings of narrative fact, except where otherwise specifically indicated. It

should be understood that, whenever, in these reasons, I have merely recited
a fact or statement without immediate or later express or implied
qualification or contrary comment, I have accepted that fact or statement as
accurate and as having been proved and/or made on the balance of
probabilities.
Relevant history

TSM carried on a sheet metal fabrication business (mainly in the Territory)

between 1987 and 2001. As time went by, it became involved in building
development and construction projects in concert with and eventually in
succession to LTD, as hereafter appears.

TSM was first registered in 1987. The plant, equipment, goodwill and other
assets required for its operations were, save as later appears, vested in it.
The original principals of TSM were DLS and a person named Coleman,
who was bought out shortly prior to 1995.
ECD joined DLS in that year as a principal of TSM, indirectly contributing some $260,000 by means of a loan procured through ATSIC, which was serviced by TSM on behalf of ECD. The servicing costs were debited to his loan account with the company.

[85] Thereafter DLS essentially attended to estimating, product development and

some floor work, whilst ECD looked after the administrative functions of
the business, including the development of computing and promotional
aspects.

A liquidation order was made in respect of TSM on 26 June 2001. That was
followed by Voluntary Administration on 6 June 2007 and a Deed of
Company Arrangement on 16 July of the same year.

[87] The expert witness Martin, who became the administrator of TSM,

confirmed that the company records indicate that, when ECD bought into the
business, NKS sold her then half share to him. She thereupon lent the
purchase price to TSM and the company granted a charge to ATSIC to
guarantee the ECD loan. Shareholdings in TSM were ultimately adjusted so
that, in the final result, DLS and NKS each held one share and ECD held
two shares.

LTD was incorporated on 28 May 1997 and eventually became the purchaser

or registered owner of the property that was the site of the first LTD
development project and also that which was the subject of the second LTD
development project. It was de-registered on 14 March 2004, but

subsequently restored to the register by order of Riley J dated 24 August
2007.
[89] At all material times:

(1) DLS was a director of TSM and LTD;
(2) He was both an owner of the Raffles Road property and a joint owner
(with ECD) of the TSM land and workshop premises;
(3) His wife NKS was the other owner of the Raffles Road property;
(4) ECD has also been a director of TSM and LTD;
(5) He was an owner of the Anula property and a joint owner of the TSM
land and workshop premises;
(6) His wife SED was the other owner of the Anula property; and
(7) ANZ was a corporate body carrying on a general banking business,
inter alia, in the Territory.

It is fair to say that TSM experienced continuous cash flow problems from at

least about 1995 onwards. That problem was exacerbated by the fact that
general workflow tended to drop off during the wet season and it was

difficult to keep all staff gainfully employed during the wet season months.

It was decided, in 1996, to acquire and move to more commodious premises at 16 Sadgroves Crescent Winnellie (i.e. the TSM land and workshop premises). It is not clear as to precisely when the move took place, but a
perusal of Exhibit P35 indicates expenditure in relation to the new premises
from about mid 1996 to early 1997.
A total amount of $380,000 was eventually committed to enable the re-
location to occur and the acquisition of the site was largely financed by a
loan procured from the CBA for $300,000. DLS conceded that its servicing

commitment to the CBA on that loan may well have been greater than the
rent previously paid by it in respect of the former premises.

As of early 1997 TSM had already sustained losses of the order of $38,000
in relation to a failed tank construction venture in Brisbane, to which I shall

refer in due course. It also sustained a loss of $40,000 in having to effect
remedial work on a large roofing project at the Royal Darwin Hospital, when
its subcontractor had performed defective work and then became insolvent.

The first few months of 1997 proved slow due to the wet season downturn

and creditors were pressing. The CBA was unwilling to increase the then
TSM overdraft. DLS and ECD were anxious to find some means of infusion
of additional working capital.

This situation led to the bringing into being of LTD and the involvement of
Godwin.
DLS and ECD had been acquainted with him in a social setting for some
years and he came from a well known and respected Darwin family. He

expressed interest in being involved in the then proposed business of LTD
and agreed to contribute capital funding of $400,000 in relation to it.

DLS and ECD had conceived the idea of TSM prefabricating residential

units at the TSM land and workshop premises and of LTD then rapidly
erecting the relevant segments on site. This was intended to overcome the
wet season downturn in work and also result in cost savings related to
travel, taking materials to various sites and co-ordinating the activities of
the different trades.

LTD was, accordingly, incorporated at the instance of DLS, ECD and
Godwin on the footing that all three were to be directors of and equal
shareholders in it.

[99] The evidence indicates that this entity was specifically brought into

existence for the purpose of implementing the proposed initiatives already
described, by acquiring land, erecting pre-fabricated homes or units (the
components of which were to be manufactured by TSM) and then reselling
allotments of land and completed dwellings or units on it.
[100] DLS estimated that the total cost of the then proposed first LTD
development project, including land acquisition, was likely to be about
$750,000. The problem that had to be addressed at the time was how such a
project could be funded.
[101] To that end Godwin had become involved in the formation of LTD on his

undertaking to make the capital contribution of $400,000, initially in
relation to the first LTD development project and subsequently for the
purposes of the second LTD development project.
[102] He represented to DLS and ECD that he would be able to do so by selling

some shares he held or by borrowing money against the alleged Godwin
properties, which he said he owned.
[103] Construction work on the first LTD project commenced close to the time of
incorporation of LTD (i.e. about the end of May 1997), at which stage no

cash contribution had actually been made by Godwin and no other funding
arrangements had been put in place to support the project.
[104] Godwin did make some limited contributions (totalling $81,500) early in
June 1997,[18] at which time LTD had still not arranged relevant loan
accommodation with the CBA, its then banker.
[105] Further, construction actually got under way before the site acquisition had
been finalised and title achieved – which did not occur until mid August
1997.
[106] On or about 11 August 1997 the CBA approved a $350,000 overdraft facility

on the personal guarantees of the three LTD directors and the security of a
first mortgage over the site of the second LTD development project, as well
as a floating charge dated 11 August 1997 over the assets of the company.
[107] By this time the first LTD development project units were close to completion.
[108] Work commenced on the second LTD development project units very shortly

after the overdraft facility had been granted, but at a stage when that project
remained essentially unfunded and the cost of the first had really absorbed
all available funds.
[109] The initial units for the second LTD development project had been constructed and moved to the site by 18 October 1997 and the final units were on site by 9 November 1997.[19]
[110] As appears from Exhibit D13, the CBA overdraft facility was of a short term

nature and required the proceeds of sale of the first LTD development
project units to be applied in extinguishment of it, repayment in full being
required by 15 November 1997.
[111] The witness Hammond testified that the CBA actually declined to provide
further financing for the second LTD development project because of the

unsatisfactory management of the LTD account and, in particular, the
substantial number of dishonoured cheques in relation to it.[20]
[112] Exhibit D61 graphically indicates the unsatisfactory situation adverted to by
him. In large measure, this was precipitated by various cheques generated
by Godwin and/or Traci Lew-Fatt that were dishonoured and a series of false
representations that were made by Godwin to Hammond over time.
[113] Hammond's evidence rendered it clear that, had the CBA known the true

situation concerning the financial position of TSM, LTD and the three
directors of the latter, and having regard to the unsatisfactory dealings with
the LTD account in any event, there would have been little likelihood of that
bank granting further advances for any purpose.
[114] Indeed, Hammond’s evidence left me with the very distinct impression that
the CBA was far from displeased to quit the TSM and LTD accounts, as and
when that actually occurred.
[115] DLS said that he knew, at the time, that some cheques were being
dishonoured, but was by no means aware of the extent of that problem, as
revealed by the exhibit to which I have referred.
The re-financing proposal
[116] As at about July 1997, Godwin had, in net practical terms, contributed only

a relatively small portion of the working capital promised by him and there
was a shortfall of funds with which to progress and complete the second
LTD development project when it was embarked on in about late August
1997.
[117] TSM and LTD had both been suffering and continued to suffer a chronic
shortage of funds.
[118] When challenged by DLS and ECD concerning his failure to produce the
promised $400,000 in full, Godwin initially stated that he was getting
money from the NAB by mortgaging the alleged Godwin properties, but later stated that, as the bank was messing him around, he would get the
funds from his father instead.
[119] In the event, only a portion of the funds originally promised was ever
forthcoming and Godwin even made substantial drawings against that for his

own purposes. On 26 September 1997 a cheque written by his de facto wife
in the sum of $120,000 by way of purported capital injection on his behalf
was dishonoured.
[120] Details of the transactions involving Godwin appear from cash book entries
recorded in Exhibit P16 and the relevant CBA bank records.[21]
[121] The summary based on details extracted from those sources[22] indicates that
the net situation was that, from and after 29 August 1997, Godwin had taken

more from LTD than he had contributed. By 7 November 1997, his net
contribution was nil and he actually owed LTD slightly in excess of
$133,000.
[122] The highest net contribution credit he ever achieved was $91,800 in mid
July 1997, but that was steadily extinguished by reason of his drawings
thereafter.
[123] It must be borne in mind that the bulk of the short term CBA overdraft
facility was not in fact available for satisfaction of general creditors of LTD.
[124] The first LTD development project had gone forward by some arrangement with the vendor of the site for deferred payment and the second LTD development project site had also not been paid for. This resulted in a total

amount of $234,685.12 being drawn against the overdraft facility on
11 August 1997 to effect settlements in respect of the two sites.
[125] Sales of the first LTD development project units commenced settling in

early October 1997 and, by 15 October, the short term overdraft had
virtually been eliminated. Thereafter, the CBA account was generally in
debit to a fairly nominal amount until, on or about 24 November, LTD
seems to have been granted a further overdraft limit of about $100,000.
[126] In mid 1997 the witness Flynn, a social acquaintance of DLS and ECD, who

traded in Darwin through Flynn Petroleum Group (NT) Pty Ltd, agreed to
advance money to LTD on a short term basis, to assist in furthering its
projects, albeit at a very high rate of interest as what he termed a lender of
last resort. He utilised NPG, which initially advanced some money on an
unsecured basis, as the vehicle for that purpose.
[127] Flynn’s memory is that DLS and ECD introduced Godwin to him as a
director of LTD and a person who was looking after the financial side of
things, while they were looking after the building work.
[128] That said, the plaintiffs assert that it was DLS who negotiated each of the
advances made to LTD with Flynn and received the cheques for them, other than the $570,000 cheque. On the other hand Flynn stated to the police that he was mainly dealing with Godwin.
[129] I prefer the evidence of DLS which is reinforced by that of ECD.[23] I

consider that Flynn’s memory as to this is suspect and that he was focusing
mainly on the later events involving Godwin’s fraud.
[130] I will return to consider the dealings with Flynn and NPG in greater detail in
due course. As will later emerge, LTD had, by early October, borrowed a

total of $800,000 from that source on a short term basis. By the close of
1997 it had an accruing liability for interest payments to NPG of the order
of $22,000 per month.
[131] LTD was in default with its interest payments to NPG as from about October
1997. For its part, TSM was unable to meet accruing loan payments to
ATSIC and was in arrears with its main supplier, Union Steel. TSM was, in
effect, attempting to carry substantial debts of LTD.
[132] Inter alia, Godwin approached officers of the ANZ at its Winnellie Branch
to explore a possible re-financing of the LTD business operations in a

manner that would provide additional working capital, both for that
company and also TSM, at a lesser rate of interest.
[133] The ANZ was not the TSM or LTD banker at the time, although it had been
TSM’s banker in the period 1988-1995. The indebtedness of the company in

mid 1997 was to the CBA, Esanda Finance, ATSIC and other entities. TSM
had originally moved away from the ANZ to obtain a greater level of
financing, albeit at higher rates of interest.
[134] Godwin’s activities led to the making of the finance application by TSM.
That application is said by the plaintiffs to have been partly oral (at the
October meetings and the November meetings between DLS, ECD and
Godwin, one the one hand, and various officers of the ANZ, on the other)
and partly in writing.
[135] The documentary material referred to ultimately consisted of the re-

financing proposal,[24] an ANZ Business Credit Application,[25] three Personal
Statements of Position in the names of DLS, ECD and Godwin respectively[26]
and some financial statements.
[136] The initial step in the process was the first October meeting, which took
place at TSM’s then business premises at Winnellie. This meeting involved
DLS, ECD, Godwin and an officer of the ANZ (the witness Bradley). There

was a general discussion of the activities and needs of TSM. I am satisfied
that, in the course of this meeting, Bradley requested the production of what
ultimately proved to be the re-financing proposal.
[137] I accept the evidence of DLS in that regard.[27] The evidence of ECD was

also to the same effect.[28] I further accept that, in the case of the first
October meeting, there was also some reference to the fact that Godwin had
become involved in LTD by making a capital contribution that he had only
partly paid, but was not involved in the operations of TSM.
[138] Bradley thought that the re-financing proposal was produced at (or possibly
even before) the first meeting[29] and that this was the meeting at which the witness Meers was also present. I think that he was mistaken as to this. I prefer the evidence of the plaintiffs’ witnesses on this topic. I consider that
it was produced at the second October meeting, at which Meers was present.
[139] Bradley testified that, at an interview with Detective Polychrone in
September 1998 (and when he probably still had his 1997 diary available to him), he stated that the meeting at which Meers was present was on
16 October 1997.[30] This seems to be correct.
[140] Bradley stated in cross examination that he could only recall being involved
in two meetings, the first being that on 16 October 1997 and the second
being one occasion when he and Meers were taken by car to Shearwater
Drive to view the LTD development there.[31] This is in discord with ECD’s
diary entries, as elsewhere appears, and cannot be correct.
[141] The re-financing proposal contains no reference either to the eight units then

under construction or the financing that had been provided by NPG, an
aspect to which I will later return. DLS said at one point that the reason for
this was that he told Bradley that finance had been arranged with a third
party in relation to the eight units in question.
[142] His initial evidence at trial was that a sum of $800,000 then owed by LTD to
NPG was not referred to because it was a liability to be discharged from the
proceeds of sale of the eight units.
[143] He went on to say that, to secure the loan eventually granted by the ANZ to
TSM, a mortgage was actually given over the second LTD development
project site, because he did not understand that a charge already given to
NPG prohibited the giving of a mortgage by TSM over the relevant land.

[144]

The sites involved in both the first LTD development project and the second recited.[32]
[145] I accept that, at the first October meeting, Bradley said that he would

ultimately come back with a suggestion as to the best way to structure the
TSM financing to meet its requirements.33
[146] I am also satisfied that he not only requested that TSM prepare the re-
financing proposal, so that the security position could be examined, but also
stated that the bank would require unencumbered security titles.
[147] I found Bradley’s evidence as to what might have been said in that regard
quite unconvincing.
[148] I am of the view that the re-financing proposal was prepared after the first
October meeting (whenever that may have been held) and prior to the second
October meeting. The evidence suggests that ECD was the principal
draftsman of it, albeit that he produced the document in concert with DLS

and Godwin. It is fair comment to say that the proposal set out to portray
the existence of a comfortable excess of assets over liabilities on the part of
the companies and the directors, viewed as a single group.
[149] I pause to reiterate that it is beyond question that the re-financing proposal

was flawed in a number of respects. It was inaccurate to the point of being
seriously misleading, bearing in mind that it purported, accurately, to
disclose the financial position of the group comprised of TSM, each of the
three directors of LTD personally and, impliedly, LTD itself.
[150] Without attempting to be fully definitive as to all issues, major inaccuracies
were:

(1) The values attributed to the alleged Godwin properties were
substantially over-inflated (by something of the order of $170,000), as was the value of the TSM land and workshop premises (by about $100,000);34

(2) The alleged Godwin properties were asserted to be unencumbered
assets of Godwin, whereas, in truth, the registered owners were third
parties and the properties were, in aggregate, encumbered by first
mortgages securing debts of about $460,000 (i.e. up to virtually their
full value);35
(3) It was represented that security in the form of a $300,000 fixed
deposit (said by Godwin to be held by him) would be available,
whereas no such monies existed;
(4) The overall liability situation was understated, quite apart from the
amount due to NPG, having regard to what was due to all other
creditors of TSM/LTD;
(5) It was not made clear that the completion of the second LTD
development project was, in practical terms, unfunded and that all
proceeds of sale of units up to that time had been or would be
absorbed in satisfying then existing liabilities. (All proceeds of the
NPG borrowings had, by that time, also been expended);
(6) It was represented that the first LTD development project had
successfully been completed. The inference was that it had been
financially successful, whereas TSM had done no detailed final
costing check on it and, particularly when the very high NPG
borrowing costs were brought into account, the project could well
have been far from financially successful – as, indeed, proved to be
the case;
(7) The proposal stated that, although LTD had only been in operation
for a short period of time, it had turned over $2.2 million. That
statement was simply incorrect;
(8) Generally, the proposal represented the companies as being in good
financial shape when, in fact, they were not.
(9) TSM had experienced recurrent difficulties in paying suppliers in
199736, was substantially in arrears with its group tax and PPS
commitments and it had used its existing CBA accommodation up to
the limit.
(10) By no later than 24 October 1997, the point was reached whereby
CBA commenced actually dishonouring cheques drawn by LTD; and
(11) It is to be observed that, in the spreadsheet included in the re-
financing proposal, there is a reference to company tax, but this
certainly does not make it apparent that TSM was paying off
substantial arrears of group tax and PPS obligations.
[151] The proposal also made no reference to the advances totalling $800,000 that
had been made by LTD to NPG, or of a fixed and floating charge given by
LTD to NPG on 15 September 1997 to secure that liability.
[152] It was the stance of DLS that these were irrelevant when the proposal was
prepared because an arrangement that had been come to for NPG to take

over the 8 units in extinguishment of the LTD debt (to which later reference
will be made) was then still in force. On the other hand the completion of
the units was then unfunded and LTD was in financial difficulty.
[153] There can be little doubt that the representations made and failures to make
full disclosure in the re-financing proposal and what appear to have been

some associated statements made to Bradley directly impacted on the
conclusions eventually come to by Barnett, the ANZ business underwriter
who assessed the formal finance application that followed it.

[154] He commented in his diary note summary dated 7 November 1997 that

“Customers clearly have shown the ability to repay both their projected and
current debts, in both their personal and company names.” This was
scarcely an accurate description of the true situation at the time.
[155] It is also said in the same diary note that, when the cash flow was prepared,
the customer had intended to borrow to fund the ongoing work of LTD,
“thus the interest costs associated on the cash flow”. However, the note
indicated that a sale of their last project to one buyer at $960,000 had
shelved the need for these facilities. There is a further comment that the customers would be funding a majority of the LTD business by their own cash flow.
[156] DLS denied in cross-examination any knowledge of a representation that the

second LTD development project was being sold to a single buyer at
$960,000. He was at a loss to explain how the bank had arrived at that
conclusion. Further, it is clear that none of the principals of LTD could
possibly have been in a position to ensure the cash flow funding referred to.
[157] That situation needs ultimately to be considered in concert with the content

of the ANZ internal memorandum written by Barnett to the ANZ “State
Credit SA & NT” on 11 November,37 from which two points emerge.
[158] The first is that, on the information that had been provided to the bank, the
income margin for 1997 was thought to be $54,218, which was illusory
bearing in mind the undisclosed commitment to pay considerable arrears of
group tax and PPS at the rate of $1,000 per week.
[159] The second was the further reference to the supposed single buyer of the

second LTD project for $960,000, together with the asserted existence of a
$300,000 fixed deposit held as security by the CBA.
[160] Ms Kelly pointed out during cross examination of DLS that there were
therefore three misrepresentations emerging from that material. They were
respectively:

(1) the assertion of the single buyer for $960,000;
(2) the alleged existence of the $300,000 term deposit; and
(3) the failure to disclose all borrowings that had been made.
[161] It was, inter alia, represented by Godwin to DLS, ECD and the ANZ as
portion of both the re-financing proposal and the finance application, (both
orally and/or in the written re-financing proposal) that he was the owner of the alleged Godwin properties, the market values of which were asserted in
the proposal to aggregate $580,000.
[162] The evidence of Bradley38 illustrates what was conveyed to him. The

significance of the falsehood of those representations is discussed by him at
T1572, 1573. He accepted that, had he been aware of the true situation, he
would have felt obliged to draw it to the attention of DLS and ECD, so that
they could consider their position and potentially increased exposure.39
[163] As already emerges, it was further asserted to Bradley that each of those
properties was (or would be) unencumbered and would be available to the
ANZ to support any ultimate finance agreement by TSM and LTD with it.40
Godwin did reveal at the times of the discussions that there was a small
mortgage of about $9,000 on one property that would be discharged.
[164] I accept that those representations were re-iterated at subsequent meetings
between the individuals referred to and officers of the ANZ.
[165] The directors of TSM also confirmed to the ANZ that there was an existing

mortgage of about $110,000 on the home of DLS. Godwin undertook
(probably at the second October meeting) to pay this off by way of loan to
TSM, in addition to his commitment to contribute the originally agreed sum

of $400,000.41 That undertaking was expressed in the presence of both the
directors of TSM and the ANZ bank officers present at the meeting.
[166] DLS says that, when asked by Bradley at one of the meetings (possibly the
second October meeting) how he would be able to do so, Godwin responded that he would fund the payment either by selling some shares that he held or
from money made available to him by his father, so that the Raffles Road
property could be made available to the ANZ as a first mortgage security.
[167] Bradley has no present memory of what may have been said concerning the

existing mortgage over the Raffles Road property.[42] I have no reason to
reject what was said by DLS on this score.
[168] I here pause to comment that it is quite clear that the representations made
to Bradley led him to the understanding that, as he reported in his credit

memoranda, LTD had no lending history. It is difficult to escape the
conclusion that the re-financing proposal was deliberately put forward on
the basis of proposed advances to TSM alone, so that the LTD borrowings
and general financial history would not have to be disclosed.
[169] The LTD financials and bank statements up to that point were never
supplied to the ANZ.
[170] So it was that, in his memorandum reproduced at Exhibit P1 page 178,
Bradley reported “All loans to be fully repaid, nothing left”. This clearly
indicates that he was given to understand that, on the taking up of any ANZ
loans, there would be no other relevant liabilities of significance in relation
to what was being proposed.
[171] In his cross-examination DLS conceded that Bradley had been told that there

would be no borrowings in the group other than the TSM borrowing that was
being applied for from the ANZ.[43]
[172] DLS testified that, as a consequence of the arrangement arrived at with NPG
for it to take over the units comprised in the second LTD development
project (to which I elsewhere refer), there was then no debt due to that
company. However, he was constrained to concede that, when that arrangement was rescinded on about 17 November 1997 following discussions at a "retreat" held by relevant TSM and LTD personnel, no
attempt was made to convey the changed situation to the ANZ.[44]
[173] A written record was duly made of the decisions taken at the retreat[45] and a

copy of this was supplied to Baylis. Amongst other entries in that record
was the notation “LTD Units $844k to Flynn - Refinance/recovery of
Units/settlement of contract”.
[174] Baylis accepted that he duly received a copy of the record, but asserted that
he did not study it in detail.
[175] He claims that he did not register at the time that the notation indicated that
$844,000 may have been owed to Flynn (NPG). If such an implication had
been derived by him, this would have rung alarm bells.
[176] He said that he would have sought to ascertain how the loan was secured and

would have re-examined the Group capacity to repay all of its debts,
including any advances made by the ANZ to TSM. However, he claims that
such an implication did not occur to him at the time.[46]
[177] The statements contained in the diary note prepared by the witness Barnett

on 7 November 1997 (prepared on the basis of information supplied by
Bradley and obtained by him from the principals of TSM) to the effect that
the customers clearly have shown the ability to repay both their projected and the then current debts, in both their personal and company names, and his generally favourable report in relation to the finance application were

undoubtedly the product of a withholding of important relevant information
by the directors of TSM, as I have recited.
[178] DLS accepted in cross examination that, had the ANZ been given full
information of the true group debt position as at the date on which it finally

considered the finance application, it is unlikely that such application would
have been favourably reported upon.[47]
[179] The practical effect of the misrepresentations made in and in relation to the
re-financing proposal was illustrated by the expert witness Edwards.
[180] As he sought to demonstrate in paragraph 111 of his report,[48] the
representations made to Bradley (and thus Barnett) implied that the relevant group had net assets of the order of $1,344,733,[49] whereas the true situation was that, as at 31 October 1997, the total net worth was, in the opinion of
Edwards, only of the order of $132,550.[50]
[181] That result was calculated on the material supplied to him, principally the

relevant TSM financials and LTD cash book entries.[51] He did not profess to
have, in effect, audited it in detail.
[182] The last mentioned figure was struck after giving full credit for items such
as jewellery and other personal effects as well as asserted superannuation credits, items that are not normally accorded significant value by a lender because of non-accessibility.[52] As I read Table 8 and is reflected in Exhibit
P74, those two items total about $240,000, including alleged (but non-
existent) superannuation of $170,000 held by Godwin.
[183] Edwards calculated that, by 5 November 1997, when the initial request for
finance had escalated to $1,050,000, the net group asset position was of the
order of $116,738.[53] As at 19 November 1997 it stood at about $106,214.[54]
[184] These figures need to be considered against the original background of what
is said in paragraphs 45, 64 and 69 of Exhibit D62 and the first reworking of
calculations as set out in Exhibit D64.
[185] In so reciting the evidence I by no means ignore the fact that, in cross
examination, Mr Sallis sought to challenge the accuracy or appropriateness of Edwards’ detailed calculations in certain respects.[55] I also bear in mind the criticism expressed by Mr Sallis as to the asserted error on the part of
Edwards in relation to his assumption that there was a liability of $119,485
to the CBA[56] and note that this contention was never put by him to Edwards
in cross examination.
[186] Given that there may well be force in certain of the criticisms advanced and,
in particular, the question of whether the assumptions that he was asked to

make in calculating the losses on the two LTD development projects were
entirely accurate, it nevertheless remains apparent on the face of the
material before me that, in substance, the key thrust of the points made by
Edwards as to the fairly minimal true net asset position of the group at the
relevant dates remains valid.
[187] It is of course true, as Mr Sallis stressed to Edwards,[57] that the relevant
figures need to be viewed in light of the short lived arrangement with Flynn

to take over the second LTD development project in satisfaction of the debt
to NPG. Nevertheless, the reality of the situation was that, at all material
times, the group financial position was precarious, both in terms of net asset
position and also liquidity.
[188] Having so recited the effect of Edwards’ evidence in the above regard, there
are several points that need to be noted with regard to it.
[189] First, his calculations were based (in part) on a computer produced version

of the LTD cash book.[58] There were in fact two versions of that document,
namely Exhibit P73 and Exhibit P16, the content of which varied slightly,
for a reason that is not readily apparent.
[190] The witness proceeded on the basis of the content of Exhibit P73. Had he
proceeded on the basis of Exhibit P16, the resultant figures in (for example)
Exhibit P74 would have varied by just over $3,000. The difference is not significant for present purposes.
[191] Second, in so far as the figures arrived at relate to the financial position of
Godwin, Edwards derived certain of them from a consideration of the
documents MFI P71 and MFI P72, related to criminal proceedings against
Godwin,[59] an issue to which I shall later return.
[192] Edwards indicated that, by reference to paragraph 47(e) of his report
Exhibit D62, he had, inter alia, relied upon the criminal proceedings
documentation for the figures set out in items (2), (6) and (7) inclusive in
Table 9, totalling $166,000. He testified that, if these were excised as not
proven, the total net assets of the group would increase by the last

mentioned sum to $298,550.[60] This would not have changed the opinion
arrived at by him.[61]
[193] Third, and perhaps most importantly, it is clear that the assumptions that
Edwards was requested to make concerning the total project costs in respect of the second LTD development project (i.e. that they were likely to be consistent with those for the first LTD development project)[62] were inconsistent with the data set out in the LTD financials for the year ended
30 June 1999.[63]
[194] The assumptions accepted gave rise to a capitalised loss of $369,837, as

referred to in Exhibit P74, whereas a capitalised loss derived from
Exhibit P77 was a total of only $293,079.
[195] Edwards accepted that, if the figures from the financials were adopted, then
the practical consequence was that the net group asset position as at
31 October 1997 would have been increased by the amount of the difference
between the two sums.
[196] It is stating the obvious to say that the adoption of figures derived from the
financials has the consequence of indicating that, as at 31 October 1997, the

net asset position of the relevant group was still quite nominal. This is
specifically so when due allowance is made in respect of the non-accessible
items referred to in paragraph [182] of these reasons.
[197] Having said that, I note one feature of the cross examination of Edwards.[64]
An assumption of the project costs, as made by Edwards, tends to leave unexplained how the total project situation was in fact funded, bearing in mind the figures there discussed. Edwards accepted that this called in question the detailed accuracy of the assumed cost figures that he was asked
to adopt.[65]
[198] On the other hand it was certainly also Martin’s view that losses were
probably sustained on the projects, as I elsewhere recite. I consider that he

was correct in so concluding. I further discuss that aspect in the course of
reviewing the evidence given by Edwards.
[199] The evidence given by Edwards in re-examination[66] concerning the figures
in the relevant LTD financials suggests that, on a review of all available
data, the assumptions made and figures arrived at by him were not grossly
erroneous.

[200] I return to the chronological narrative sequence of events.

[201] The evidence indicates that the main purpose of the second October meeting
was to present the refinancing proposal to Bradley and to briefly discuss at least certain of its contents. He does not profess to recall the precise detail

of the discussion that then took place. However, I took him to accept that
the outcome of the meeting was that he was to consider the re-financing
proposal and come back with an indicative proposal as to how the ANZ
might best meet TSM’s business requirements.[67]
[202] I am not satisfied that he gave any undertaking or made any statement to
DLS, ECD or Godwin to the effect that the ANZ would check the proposed

security properties and their values prior to producing the indicative
proposal, or would carry out relevant credit checks at any specific time.
[203] I accept that Bradley probably made it clear that, in due course, the bank

would need to carry out checks as to the value of proposed security
properties and relevant CRAA checks as a precondition of advancing any
monies. It is to be noted that it was not until the indicative proposal was presented to the ANZ that reference was specifically made to the need for
the plaintiffs to supply CRAA credit search authorities and also authorities
to value the proposed security properties.
[204] Bradley generated the letter containing the indicative proposal to TSM to
lend money to it on or about 22 October 1997. This sought various

authorities and made certain statements to TSM concerning future business
relationships. The letter represented that, by banking with the ANZ, TSM
would:
“… experience

•

Professional services provided by bankers with backgrounds in small-business which caters proactively to your individual requirements.

•

Bankers who always seek to 'add value' to your business through a thorough understanding of your present and future needs.

•

Access to the ANZ Global Network, which includes Electronic Banking, ANZ Stockbroking, Esanda, ANZ Funds Management, Global Treasury, and International Services.”

[205] I observe that the indicative proposal, in adverting to the ANZ security
requirements, contemplated, inter alia, taking a first registered mortgage over only one of the alleged Godwin properties, namely the Wells Street property.
[206] The indicative proposal, inter alia, rendered it clear that no formal offer of
finance was being made at that stage. It said that “Before an offer to finance
can be made to you, ANZ’s normal credit process must be satisfied”.
[207] I take that to be a reference to the normal internal ANZ credit appraisal
process for its purposes, involving, amongst other considerations, a review
of securities offered and their values and the results of CRAA credit checks.
[208] I see no convincing evidence that it was represented to any of the plaintiffs
that any such processes would be carried out either in their interests or even
in the joint interests of themselves and the bank. Nor do I construe the

relevant wording to simply relate to the review and checks to which I have
referred. I consider that it was plainly a reference to the normal prudential,
due diligence, assessment conducted by the ANZ as to the overall viability
of and risk attendant on any proposed lending transaction.
[209] I here pause to note that DLS testified that, although, in the refinancing
proposal, TSM had made specific structural requests for financial
accommodation, Bradley had given advice about different loan structures and represented that he would choose the best structure to properly set up the company’s business.[68]
[210] In giving that evidence DLS conceded that no complaint was made in the

statement of claim concerning the structure that was actually proposed by
the ANZ.
[211] The diary maintained by ECD[69] does not contain any record of meetings with
ANZ bank officers prior to 24 October 1997 i.e. two days subsequent to the
date pleaded as that on which the third October meeting was held. On
24 October 1997, ECD recorded in his diary:
“ANZ blokes attended TSM and discussed proposals, gave us
2 scenarios; looks good at this stage -- will discuss the matter.”

[212] This entry suggests that the third October meeting may have been held later
than the date pleaded. However, I am satisfied that it was at such a meeting
that the indicative proposal was presented by Bradley to DLS, ECD and
Godwin and then discussed, at least to some extent.
The finance application
[213] The indicative proposal was followed by various further meetings between
officers of the ANZ and certain of the plaintiffs.
[214] The first LTD development project had been completed by about the end of October and the second LTD development project was well under way.
TSM was then contemplating the purchase of a further property at Margaret
Street Stuart Park for the purpose of yet a third project, in relation to which
additional finance, beyond that originally contemplated, would be required.
[215] NPG had progressively lent a series of amounts to finance the LTD

operations, commencing on 23 July 1997. By 7 October 1997 it had
advanced the total of $800,000 to LTD.
[216] I have already recited that, as time went by, re-payment of advances made

[1760]  In the instant case, the immediate and real cause of any liability that arises
in favour of any of the plaintiffs was not the entry into the finance
agreement per se, but, rather, the direct result of the ANZ’s breaches of contract. As has been demonstrated, no loss was sustained by entry into the finance agreement as such. On the contrary, the ANZ profited from
that agreement.
[1761]  It follows that the ANZ has not made good its counterclaim because it has
failed on the issue of causation.
Conclusion
[1762]  As indicated to the parties I will hear counsel as to the orders that ought to
be made in these proceedings as a consequence of the findings that I have
expressed.

______________________________

[1] Hungerfords v Walker (1989) 171 CLR 125.

[2] cf T664- 671.

[3] cf T 505-506, 517-518.

[4] cf T613, 621, 632.

[5] cf Exhibit P10 paragraph 199 and Exhibit P12 paragraphs 94-96.

[6] See T1535 et seq, 1549.

[7] see, for example, T1652-1656.

[8] see, for example MFI D51 Tab 24 page 123.

[9] Exhibit D56 para 4.

[10] cf his statement of 20 August 2007 reproduced in Trial Book Volume 9 at page 479, where he states

that he had no independent recollection of what was said by each of the people present at any of the meetings.	11	cf T1787-1788.
12	T1823.
13	MFI D51 p 144.
14	T1808.

[15]at T1818, 1822-1823.

[16] T1828.

[17] T1896.

[18] Exhibit D11.

[19] See relevant entries in Exhibit D 38.

[20] Exhibit D61, T1962. See also Exhibit D15.

[21] Exhibit D11.

[22] Exhibit D65.

[23] See supplementary statement of the latter, paragraph 42.

[24] Exhibit P1 p 57 et seq.

[25] Exhibit P1 p 83.

[26] Exhibit P1 p 89 et seq.

[27] (T216).

[28] (T1002).

[29] (T1555).

[30] (T1551).

[31] (T1555).

[32] See also the DLS explanation recorded at T228 - 230, which seems to reflect some rather confused

thinking on his part.	33	(T1563).
34	(cf T587-588).
35	(Exhibit P1 page 316).
36	See, for example, numerous entries in ECD’s diary Exhibit D38.
37	Exhibit P1 page 209.
38	T1571, 1572.
39	T1573.
40	cf paragraph 5 of the re-financing proposal.
41	See cross-examination as to this at T793-796 and the variance between paragraph 199 of Exhibit

P10 and paragraph 96 of Exhibit P12. cf also ECD’s initial statement reproduced at Trial Book
Volume 1 Tab 2 Par 84 as amended.

[42] T1569.

[43] T618.

[44] T619.

[45] Exhibit P1 page 220.

[46] Statement dated 26 May 2008, paragraphs 2 to 6 inclusive.

[47] T632.

[48] Exhibit D62, amplified and adjusted in certain respects in Exhibit D64.

[49] Report paragraph 42.

[50] Exhibit P74.

[51] T2274.

[52] Exhibit D62 paragraph 48.

[53] Exhibit P75.

[54] Exhibit P76.

[55] T2223 et seq, 2256-2268, 2277 et seq.

[56] See page 174 of his written submissions.

[57] cf T2238-2242.

[58] See Exhibit P73.

[59] See Exhibit D62 paragraph 47(e) and T2334.

[60] T2498.

[61] T2499.

[62] See Exhibit D62 paragraph 74(d).

[63] Exhibit P77.

[64] As recorded at T2328-2332.

[65] T2334.

[66] As recorded at T2495-2497.

[67] T1563.

[68] T893 et seq.

[69] Exhibit D38.

[70] Viz on or about 29 October 1997.

[71] Exhibit P1 p 225.

[72] See Exhibit D38.

[73] T1810-1816.

[74] See documentation behind Tab 10 in Exhibit D51.

[75] See documentation behind Tab 21 of Exhibit D51.

[78] T1598, 1602-1603.

[79] Exhibit P63.

[80] T1621-1622.

[81] Exhibit D51 Tab 36.

[82] Tab 39.

[83] See T1626 et seq.

[84] Exhibit P1 p 367.

[85] Exhibit D51 Tab 29.

[86] Exhibit D51 Tab 24.

[87] See T1673-1677.

[88] T1691.

[89] T1694 et seq.

[90] T1699.

[91] See memorandum reproduced at MFI D51 Tab 27.

[92] T640.

[93] cf Exhibit D51 pages 121 and 134.

[94] See T1590.

[95] T1596.

[96] T1593.

[97] T1608.

[98] T1595.

[99] Exhibit D51 Tab 29.

[100] T1744.

[101] T1745.

[102] Exhibit P1 p 225.

[103] Exhibit P1 p 225.

[104] Exhibit D55.

[105] Trial Book Volume 9 p 738.

[106] Exhibit P1 p 208.

[107] Exhibit D51 Tab 31.

[108] Exhibit D51 Tab 32.

[109] Exhibit P9 p 5.

[110] T169-170.

[111] T828.

[112] cf Exhibits D21 and D28.

[113] As appears in Exhibit D51 p 150.

[114] Exhibit D18.

[115] Copies of search notes made by him are reproduced at Exhibit D51 Tabs 16 and 17.

[116] T1776.

[117] Exhibit D59.

[118] T1776

[119] As to this see the Baylis cross examination at T1827-1828.

[120] T1850.

[121] Exhibit D51 Tab 36 p 164.

[122] Described at Exhibit P1 p 253 as the property at 22 Wells St. Darwin.

[123] Exhibit P1 p 316.

[124] Exhibit P1 p 316.

[125] T820.

[126] Portion of Exhibit D57.

[127] Exhibit D3.

[128] Trial Book Vol 10 p 1255.

[129] Exhibit P1 pages 242, 243.

[130] T1783.

[131] T1783.

[132] T231.

[133] T1848.

[134] T926

[135] Exhibit P1 p 295.

[136] Exhibit D51 Tab 45.

[137] T1347-1349.

[138] See mortgage registered on 15 December 1997 Exhibit D60.

[139] Exhibit P1 p 302.

[140] Exhibit P1 p 358.

[141] Exhibit P1 pp 302 – 303.

[142] Exhibit D51 p 375.

[143] T804-805.

[144] T1854.

[145] T1853.

[146] Exhibit P12.

[147] Exhibit D25.

[148] The substance of which was put to DLS in cross examination at T807.

[149] T1144.

[150] T800.

[151] See also the Baylis memorandum of 10 February 1995 (Exhibit D51 p 260).

[152] Exhibit D38.

[153] Exhibit P1 p 308.

[154] Exhibit P1 p 306.

[155] Exhibit P1 p 304. cf also the Baylis diary note of 6 February 1998 (Exhibit D51 p 253).

[156] T1786.

[157] T1786.

[158] cf T1844.

[159] T1789.

[160] See Exhibit P1 p 310.

161 T1574.

[162] See Exhibit P1 pp 303, 315.

[163] T1644-1645.

[164] T1789

[170] See T1841-1844 and Exhibit P67 p 14.

[171] T1855.

[172] T1843-1844.

[173] T1849.

[174] T1855.

[175] T1856-1859.

[176] T1859.

[177] T1860.

[178] T1860-1862.

[179] T1862-1863.

[180] As recorded at T1865-1866.

[181] T1869-1870.

[182] T1865.

[183] T813.

[184] Exhibit D46.

[185] As appears from Exhibit P1 p 322.

[186] Exhibit D26.

[187] See Defendant’s reply p 95.

[188] Exhibit P25.

[189] T259.

[190] Exhibit P46.

[191] Exhibit P46, p 1.

[192] Exhibit P59.

[193] Exhibit D55.

[194] T1729.

[195] See Trial Book Vol 9 p 746.

[196] Exhibit P1 pp 306 and 307.

[197] Exhibit D51 Tab 57.

[198] cf T900.

[199] Exhibit D36.

[200] Forming portion of Exhibit D36.

[201] Exhibit D51 Tab 60.

[202] Exhibit D51 pp 270-271.

[203] Exhibit D51 Tabs 75 and 76.

[204] Exhibit D51 p 296.

[205] Exhibit D51 Tab 77.

[206] Exhibit D51 Tab 79 and Exhibit D18.

[207] As appears from the detail recorded in Exhibit P1 at p 423.

[208] T1735.

[209] cf DLS cross examination at T873 et seq.

[210] T904, Exhibit D31.

[211] T888.

[212] T1011.

[213] Exhibit P41.

[214] Exhibit P45.

[215] Exhibit P34.

[216] Exhibit P1 page 435.

[217] T322.

[218] See, for example, Exhibit P2 Tab 1 pp 232, 294-295.

[219] As expressed by him in later memoranda – Exhibit P1 pp 375-376.

[220] T1639 et seq.

[221] T1707-1708.

[222] As recorded at T1708-1709.

[223] T1709-1713.

[224] T1710-1713.

[225] T1712.

[226] T1722.

[227] T352-353.

[228] cf T355-356 with T364.

[229] Once again, it may well be the situation that, in so opining, this witness did not have before him a

copy of Exhibit D26.

[230] T2035.

[231] Annexed to Exhibit D66.

[232] Exhibit D51 p 90.

[233] T2026-2028.

[234] MFI D67.

[235] T2021.

[236] T2022.

[237] T2029.

[238] T2033.

[239] T2034-2035.

[240] T2424.

[241] T2424.

[242] T2426.

[243] T2427.

[244] T2428.

[245] T2429.

[246] T2431-2433.

[247] T2440.

[248] T2441.

[249] T2447.

[250] T2433.

[251] T2437-2439.

[252] T2442.

[253] T2448-2449.

[254] T2450.

[255] T2452.

[256] T2459-2464.

[257] T2775-2776.

[258] T2776.

[259] T2777.

[260] T2778-2779.

[261] T2780.

[262] T2781-2782.

[263] T2783-2784.

[264] T2787.

[265] T2789.

[266] T2789.

[267] As recorded at T2789-2792.

[268] T2797.

[269] T2798.

[270] T2799.

[271] T2800.

[272] T2803.

[273] T2805.

[274] T2806.

[275] Exhibit D87.

[276] T2682-2683.

[277] T2683.

[278] T2683-2684.

[279] T2685.

[280] T2688.

[281] Exhibit P23.

[282] Exhibit P24.

[283] These are illustrated by the video constituting Exhibit P30.

[284] T880 et seq.

[285] T1339.

[286] Exhibit P30.

[287] Trial Book Vol 5 pages 932-949, Trial Book Vol 7 pp 524-540.

[288] T1354.

[289] Exhibit P34.

[290] T1329-1330.

[291] It is referred to in the transcript at T2523-2543.

[292] cf T2552.

[293] T2552.

[294] Exhibit P29.

[295] T2553.

[296] T2555-2556.

[297] T2663.

[298] T2664-2665.

[299] T2560.

[300] Exhibit P30.

[301] T2560.

[308] T2571-2573.

[309] Exhibit D77 paragraph 85.

[310] Exhibit D77 paragraph 101-106 and T2574. cf also T2591-2592.

[311] T2576-2578, Exhibit D77 paragraphs 111-112.

[312] T2578.

[313] Exhibit D77 Paragraph 128.

[314] Exhibit D77 paragraph 155.

[315] T2659-2660.

[316] T2661.

[317] T2705.

[318] T2740.

[319] T2705-2706.

[320] Exhibit D91 p 13, T2707.

[321] T2707.

[322] T2708.

[323] cf Exhibit P13.

[324] T2717.

[325] T2725.

[326] T2739-2740.

[327] T2750.

[328] Exhibits P30 and P28.

[329] T2753.

[330] T2753-2756, 2761.

[331] T2756, 2766.

[332] T2754 et seq.

[333] T2755, 2765-2766.

[334] T2766-2767.

[335] Exhibits D92, D93.

[336] T2758.

[337] T2759.

[338] As recorded at T1352-1353.

[339] T1351.

[340] As recorded at T1353.

[341] (2001) 52 NSWLR 705 at 729-745.

[342] See Schedule R 2 to Exhibit P 53.

[343] T1276.

[344] cf Exhibit D63 paragraph 76 (b) and T2207.

[345] T1277.

[346] Exhibit P 53.

[347] As referred to in paragraph 8.2 of Exhibit P 52.

[348] T1284.

[349] Exhibit P53.

[350] T1291-1296, Schedule R2 to Exhibit P53.

[351] Exhibit D62, paragraphs 26 and 30.

[352] Exhibit D62.

[353] For reasons expressed by him in paragraphs 21 and 22 and paragraph 83 et seq of Exhibit D62.

[354] For the reasons set out in paragraphs 51 to 54 inclusive of Exhibit D62.

[355] Paragraph 30.

[356] Exhibit D62 paragraph 69 and Annexure G.

[357] Exhibit D62 Appendix E.

[358] T2284-2285.

[359] Paragraph 75 of Exhibit D62 and Appendix D to that report.

[360] T2286-2287. See also discussion at T2289-2290.

[361] Exhibit D62, paragraph 79.

[362] T2001.

[363] Exhibit P53.

[364] T2002.

[365] Exhibit D62.

[366] Exhibit D62 paragraph 90.

[367] Exhibit P53.

[368] Exhibit D62 paragraphs 93 and 94.

[369] T2004.

[370] Exhibit D62 paragraph 103.

[371] T2003.

[372] Exhibit P54 paragraph 6.

[373] T2004.

[374] T2005. See also the points made by Edwards in Exhibit D62 paragraphs 104-108, in relation to the

impact of retained cash for working capital and the effect of not adequately allowing for it in
estimating economic loss.

[375] T2006-2007.

[376] T2008-2009.

[377] These are referred to at T2010 et seq and Exhibit D62 paragraph 21.

[378] T2346.

[379] T2042.

[380] T2042.

[381] T2108.

[382] T2107-108.

[383] T2042-2043.

[384] T2043.

[385] T2360.

[386] Exhibit D63.

[387] T2044-2045.

[388] Exhibit D62 paragraph 111.

[389] Exhibit D63 paragraphs 19-34 and Edwards’ oral evidence at T2045 et seq.

[390] T2051.

[391] See calculations referred to at T2058.

[392] e.g. those referred to in paragraphs 34 and 49 of Exhibit D63 and Exhibits P80 and P81.

[393] T2400.

[394] T2400 et seq, 2403, 2404-2405.

[395] T2049-2055.

[396] One was sold to SED for $94,431.78 (T1141) and the other to NKS (for approximately

$138,000(T152).	397	T2055.
398	T2056-2058.
399	T2369 et seq.
400	Exhibits P80 and P81.
401	T2369 et seq.
402	T2380, 2387,2394.
403	T2379.
404	T2483-2484.
405	T2379.
406	T2394, 2397-2398.
407	As demonstrated in Exhibit D75.
408	Exhibits D73 and D74.
409	T2491-2493.
410	T2491.
411	T2494.
412	Exhibit D51 page 69.
413	T2495.
414	T2135-2140.
415	cf T2485-2488.
416	T2468.
417	cf T2192-2195.
418	T2157-2158.
419	T2182-2183.
420	See, for example, T2071-2186, 2106, 2199, 2209, 2212-2214, 2217 et seq, 2248-2252, 2364 et seq,

2366-2368,2395-2396, 2398-2399, 2407-2415, 2469-2470 and so on.

[421] T2294 et seq.

[422] Henjo Investments Proprietary Limited And Others v Collins Marrickville Proprietary Limited

(1988) 79 ALR 83 at 93).	423	FAI General Insurance Co Ltd v RAIA Insurance Brokers Ltd (1992) 108 ALR 479.
424	Butcher v Lachlan Elder Realty Proprietary Limited (2004) 79 ALJR 308.
425	World Series Cricket Proprietary Limited v Parish (1977) 16 ALR 181.
426	McDonald's System of Australia Proprietary Limited v McWilliams Wines Proprietary Limited
(1979) 41 FLR 436.	427	(1986) 68 ALR 77).
428	(1992) 111 ALR 649 at 666.
429	(1993) 113 ALR 517 at 522-523.
430	(1992) 110 ALR 608.
431	See also the discussion of this topic by Gummow J in Demagogue at 618-619 -- to fall within s 52

it must, he argued, be demonstrated that the circumstances are such as to give rise to the reasonable
expectation that, if some relevant fact exists, it would be disclosed. In such a case silence could
support the existence of an inference that the relevant fact does not exist.

[432] (1991) 29 FCR 415.

[433] (1991) 105 ALR 25 at 48.

[434] (1993) 114 ALR 355, 375.

[435] T539.

[436] T1104.

[437] T1104.

[438] T 541, 1104.

[439] T1106, 528-529.

[440] (1987) 73 ALR 233 at 240.

[441] cf T140-144, 176, 185-186.

[442] As I have found, Barnett had become aware of the title situation related to the Brayshaw Crescent

property by reason of the TVS valuation by no later than about 7 November 1997 and Burford
conducted his searches on or about 18 on 19 November 1997.

[443] (1981) 53 FLR 340.

[444] (1986) 60 ALJR 239.

[445] (2002) 4 VR 252 at 271.

[446] [1986] AC 80.

447 [1978] VR 555.

[448] [1921] 3 KB 110, 127.

[449] (Ryan v Bank of New South Wales [1978] VR 555 at 579).

[450] [1968] 1WLR 1555.

[451] Ryan v Bank of New South Wales [1978] VR 555 at 582.

[452] Ryan v Bank of New South Wales [1978] VR 555 at 583.

[453] [1996] 39 NSWLR 377.

[454] [1918] AC 777.

[455] Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd [1986] AC 80.

[456] [1996] 39 NSWLR 377 at 388.

[457] [1975] 2 NZLR 7 at 22.

[458] At paragraph 5.74 of his text.

[459] [1972] 1WLR 602.

[460] Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548, see also Barclays Bank plc v Quincecare Ltd and

Another [1992] 4 All ER 363 at 376.

[461] [1972] 2 NSWLR 967, 976-978 (“Varker”).

[462] National Australia Bank Limited v Nemur Varity Pty Ltd (2002) 4 VR 252 at 271.

[463] Varker v Commercial Banking Co of Sydney Ltd [1972] 2 NSWLR 967 at 976-978.

[464] Varker v Commercial Banking Co of Sydney Ltd [1972] 2 NSWLR 967 at 978.

[465] Goodwin v National Bank of Australasia Ltd [1968] 117 CLR 173 at 175.

466 Goodwin v National Bank of Australasia Ltd [1968] 117 CLR 173 at 175.

[467] Federal Court of Australia, 23 October 1998.

[468] cf Lord Campbell in Hamilton v Watson (1845) 12 Cl & F 109, 119.

[469] (1912) 2 KB 72 at 83.

[470] London General Omnibus Company, Ltd v Holloway (1912) 2 KB 72 at 83.

[471] London General Omnibus Company, Ltd v Holloway (1912) 2 KB 72 at 85.

[472] London General Omnibus Company, Ltd v Holloway (1912) 2 KB 72 at 82.

[473] London General Omnibus Company, Ltd v Holloway (1912) 2 KB 72 at 87.

[474] cf Cooper v National Provincial Bank (1945) 2 All ER 641, 645.

[475] London General Omnibus Company, Ltd v Holloway (1912) 2 KB 72 at 83 cf Vaughan Williams LJ

in Holloway at 77.	476	(cf Blackburn J in Lee v Jones (1864) 17 C.B. (NS) 482, 506) .
477	London General Omnibus Company, Ltd v Holloway (1912) 2 KB 72 at 79.
478	cf Perre v Apand Pty Ltd [1999] 198 CLR 180.
479	At 197.
480	Perre v Apand Pty Ltd [1999] 198 CLR 180, cf McHugh J at 210.
481	(1998) 192 CLR 330 at 419-420.
482	(1992) 176 CLR 408.
483	(1988) 164 CLR 539.
484	(1997) 188 CLR 159
485	(1976) 136 CLR 529, see Stephen J at 578.
486	Perre v Apand Pty Ltd [1999] 198 CLR 180 at 259.
487	Ex D51 tabs 34 to 36 inclusive.
488	As appears from Exhibit D18.
489	(T1782).
490	cf Perri v Coolangatta Investments Proprietary Limited [1982] 56 ALJR 445.
491	In paragraphs 76.6 to 76.10 inclusive of the statement of claim.
492	Which I take to be a reference to the first drawing against the new overdraft account just prior to
the initial FDA drawdown on 27 November 1997.	493	The Bell Group Ltd Inc (in liq) v Westpac Banking Corporation (No 9) [2008] WASC 239, National

Bank of Australia v Morris (1992) AC 287.

[494] Exhibit D51 Tabs 37(a), (b) and (c).

[495] Heyman, 571 ??

[496] [1964] NSW 692.

[497] cf Tyree, Banking Law in Australia paragraph 11.210.

[498] cf Turner at 695 and discussion in Quincecare at 372.

[499] Yeoman Credit Ltd v Latter [1961] 1 WLR 828.

[500] See reasoning of Steyn J in Quincecare at 383-384.

[501] Exhibit D51 pages 188-191.

[502] cf evidence of Pedler at T1708,1713.

[503] T1859.

[504] T1709.

[505] Quincecare [1992] 4 All ER 363 at 376.

[506] In response to a question put to him by me, Baylis accepted that the fact that the cheque was drawn in favour of Godwin and was being cleared into his account necessarily gave rise to the inference that the relevant monies were about to be applied for his purposes and not those of the company (T1866).

507

Indeed Baylis did not even note that fact at the time (T1854).

[508] The Raffles Road property mortgage was, of course, separately paid out of the TSM account by the ANZ itself. As already emerges, the evidence simply does not establish how or in what circumstances the TSM authority to settle the liability on the Raffles Road property (Exhibit D26) came into existence. Nor does it appear why the mortgage over that property was discharged with funds drawn on the TSM account and not by Godwin, in accordance with his undertaking to do so.

[509] cf T1865.

[510] That was also a view shared by the witness Barnett (T1644).

[511] Hospital Products Ltd v United States Surgical Corporation and Others (1984) 156 CLR 41 at 68.

[512] Hospital Products Ltd v United States Surgical Corporation and Others (1984) 156 CLR 41 at 68,

96.

[513] Hospital Products Ltd v United States Surgical Corporation and Others (1984) 156 CLR 41 at 68 at

70, 118-119.	514	Hospital Products Ltd v United States Surgical Corporation and Others (1984) 156 CLR 41 at 68 at
97.	515	United Dominions Corporation Ltd v Brian Proprietary Limited and Others (1985) 157 CLR 1.
516	Hospital Products Ltd v United States Surgical Corporation and Others (1984) 156 CLR 41 at 68 at
69.	517	(Consul Development Proprietary Limited v DPC Estates Proprietary Limited (1975) 132 CLR 373

at 393).

[518] Golby and Another v Commonwealth Bank Of Australia (1996) 72 FCR 134, 136.

[519] Commonwealth Bank of Australia and Another v Smith and Another (1991) 42 FCR 390.

[520] (1986) 160 CLR 371 at 384-385.

[521] (1866) 2 L. R. Ch. App. 55 at 61.

[522] [1975] 1 QB 326 at 341.

[523] In the sense adverted to in Tate.

[524] cf Ex D51 Tab 68B p 2.

[525] Specifically concerning the financial position of Godwin and any equity possessed by him in the

alleged Godwin properties.

[526] Exhibit D18.

[527] Hospital Products Ltd v United States Surgical Corporation and Others (1984) 156 CLR 41 at 68.

[528] [1928] Tas LR 1.

[529] (1983) 107LSJS 306.

[530] (1864) 4 De G.J. & Sm 388.

[531] [1964] AC 465.

[532] (1968) 122 CLR 556.

[533] (1970) 122 CLR 628.

[534] Hedley Byrne v Heller [1964] AC 465 at 483.

[535] The Mutual Life & Citizens Assurance Co Ltd and Another v Evatt (1968) 122 CLR 556 at 586.

[536] cf Kitto J in Evatt at 583.

[537] The Mutual Life & Citizens Assurance Co Ltd and Another v Evatt (1968) 122 CLR 556 at 571.

[538] The Mutual Life & Citizens Assurance Co Ltd and Another v Evatt (1968) 122 CLR 556 at 573.

[539] cf Holmes v Jones (1907) 4 CLR 1692 at 1706.

[540] The Mutual Life & Citizens Assurance Co Ltd and Another v Evatt (1968) 122 CLR 556.

[541] [1992-1994] 179 CLR 332.

[542] National Australia Bank Limited v Nemur Varity Pty Ltd (2002) 4 VR 252.

[543] (1854) 9 Exch 341 at 354.

[544] National Australia Bank Limited v Nemur Varity Pty Ltd (2002) 4 VR 252 at 269 notes 34, 35, 36.

[545] Hadley v Baxendale (1854) 9 Exch 341.

[546] [1969] 1 AC 350 at 385.

[547] (1972) 127 CLR 454 at 471.

[548] (1991) 174 CLR 64 at 99.

[549] (1993) 176 CLR 344 at 368).

[550] National Australia Bank Limited v Nemur Varity Pty Ltd (2002) 4 VR 252 at 270.

[551] Hadley v Baxendale (1854) 9 Exch 341.

[552] National Australia Bank Limited v Nemur Varity Pty Ltd (2002) 4 VR 252.

[553] Sellars v Adelaide Petroleum NL and Others [1992-1994] 179 CLR 332 at 353, 355.

[554] [1999] 1 NZLR 644.

[555] (1999) 79 SASR 185.

[556] Sellars v Adelaide Petroleum NL and Others [1992-1994] 179 CLR 332.

[557] Exhibit D51 pp 245-248.

[558] (2000) SASC 97

[559] (2001) 53 NSWLR 213

[560] (1907) 4 CLR 1514.

[561] (1964) 111 CLR 210.

[562] Exhibit D51 p 249.

[563] Sellars v Adelaide Petroleum NL and Others [1992-1994] 179 CLR 332.

[564] The balance of the original $570,000 paid to the credit of the TSM account with the ANZ was, of

course, utilised to discharge the mortgage to the CBA over the Raffles Road property. It was shown
in the TSM financials as an advance to DLS and NKS.

[565] Sellars v Adelaide Petroleum NL and Others [1992-1994] 179 CLR 332.

[566] Sellars v Adelaide Petroleum NL and Others [1992-1994] 179 CLR 332 at 350.

[567] Sellars v Adelaide Petroleum NL and Others [1992-1994] 179 CLR 332 at 355.

[568] (1990) 169 CLR 638.

[569] (1999) 197 CLR 1.

[570] Astley v Austrust Ltd (1999) 197 CLR 1 at 20-23.

[571] [1995] 2 AC 145.

[572] Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd [1986] AC 80.

[573] National Australia Bank Limited v Nemur Varity Pty Ltd (2002) 4 VR 252.

[574] National Australia Bank Ltd v Hokit Pty Ltd and Others [1996] 39 NSWLR 377.

[575] Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd [1986] AC 80 at 107.

[576] National Australia Bank Ltd v Hokit Pty Ltd and Others [1996] 39 NSWLR 377.

[577] National Australia Bank Ltd v Hokit Pty Ltd and Others [1996] 39 NSWLR 377.

[578] (2007) WASC 11.

[579] [2002] QSC 316.

[580] Exhibit D51 pages 110-118, 134-136.

[581] T2237.

[582] (1984) 57 ALR 167 at 182-183.

[583] e.g. the title situations of the alleged Godwin properties and the existence of encumbrances

registered on them.

[584] Mahony v J. Kruschich (Demolitions) Proprietary Limited and Another (1985) 156 CLR 522, Haber

v Walker [1963] VR 339.

[585] [1991] 171 CLR 506.

[586] March v E. & MH Stramare Proprietary Limited and Another [1991] 171 CLR 506.

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Citations

Territory Sheet Metal Pty Ltd v Australia and New Zealand Banking Group Limited [2009] NTSC 31

Most Recent Citation

Territory Sheet Metal Pty Ltd v Australia and New Zealand Banking Group Ltd [2010] NTSC 3

Cases Citing This Decision

1

Territory Sheet Metal Pty Ltd v Australia and New Zealand Banking Group Ltd [2010] NTSC 3

Cases Cited

43

Statutory Material Cited

0

Hungerfords v Walker [1989] HCA 8

Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305

PARTIES:	TERRITORY SHEET METAL PTY LTD
(ACN 009 634 333)
DAVID LENNOX SMITH
EDWARD CHARLES DEAN
SUSAN ELLEN DEAN
NICHOLE KERRIAN SMITH
v
AUSTRALIA AND NEW ZEALAND BANKING GROUP LTD
(ACN 005 357 522)
TITLE OF COURT:	SUPREME COURT OF THE NORTHERN TERRITORY
JURISDICTION:	SUPREME COURT OF THE TERRITORY EXERCISING TERRITORY JURISDICTION
FILE NO:	177 of 2000
DELIVERED:	9 July 2009
HEARING DATES:	2-6 June, 10-18 June, 28 August – 17 September, 19-26 September, 20 -31 October 2008, 9,10 and 12 February 2009
JUDGMENT OF:	OLSSON AJ
CATCHWORDS:

Plaintiff:	D Trim QC and R Sallis
Defendant:	J Kelly SC and D McConnel

Plaintiff:	Woodcock Solicitors
Defendant:	Cridlands MB
Judgment category classification:	A
Judgment ID Number:	Ols200901
Number of pages:	517
IN THE SUPREME COURT OF THE NORTHERN TERRITORY OF AUSTRALIA AT DARWIN

DLS	5-19
ECD	20-34
The witness Bradley	35-39
The witness Barnett	40-43
The witness Meers	44-46
The witness Pedler	47-52
The witness Flynn	53-54
The witness Wellman	55-58
The witness Baylis	59-71
The witness Burford	72-77

The re-financing proposal	116-212
The finance application	213-285
The finance agreement	286-317
The ANZ security requirements	318-321
The alleged Godwin properties	322-338
Events leading up to the settlement of the ANZ loans	339-453
Settlement of the ANZ loans	454-463
Caveats on the alleged Godwin properties and their
ultimate removal	464-486
The procurement of the $570,000 cheque	487-504
A request to the ANZ for additional finance	505-512
Godwin’s fraudulent conduct is revealed	513-520
The ultimate situation causing the $570,000
obtained by Godwin from NPG	521-524
The ANZ exit strategy	525-548
TSM ceases to trade	549-568
The situation immediately prior to and post February
1998 as revealed by cross examination of DLS	569-581

The witness Guild	590-635
The witness Kirkmoe	636-647
The witness Silver	648-703
The witness McFadden	704-737
A matter of terminology	738-745

Rain water tank production	765-774
Curved flashings	775-785
Spectre metal door and window awnings	786-797

The witness Marcroft	818-823
The witness Valastro	824-828
The witness Maschke	829-857

The witness Martin	929-974
The witness Clark	975-1009
The witness Edwards	1010-1111

The expert evidence as to technical and financial aspects	1112
General conclusions as to the opinions of the
financial experts	1113-1126

Introduction	1127-1134
The claims based on the provisions of the TPA
The claim	1135-1141
Relevant principles	1142-1159
The basis of the claim made	1160
Issues arising	1161-1193

General	1194-1196
Some important legal principles	1197-1230
Some preliminary considerations	1231-1249
When did the relationship of banker/customer come

The claims as pleaded	1329-1345
Issues arising	1346-1412
Issues arising in relation to parties other than TSM
in respect of the banker/customer relationship period	1413

The basis of the claims	1414-1424
Relevant general principles	1425-1442
Issues arising	1443-1485

The basis of the claims	1486-1492
Relevant principles	1493-1506
Issues arising	1507-1523

Principles to be applied	1527-1545
Damages issues as debated by the parties:
General	1546-1570
Specific heads of claim	1571-1688

The defendant’s plea of contributory negligence	1689-1712
The defendant’s counterclaim

The pleaded basis of the counterclaim	1713-1721
Specific counterclaims	1722-1728
The final basis as pursued	1729-1730
Issues arising	1731-1761

Expression	Meaning
“ANZ”:	the defendant
“ATO”	the Australian Taxation Office
“CAFTA”:	the Consumer Affairs and Fair Trading Act (NT)
“CBA”:	The Commonwealth Bank of Australia
“CRAA”:	the Credit Reference Association of Australia
“DLS”:	David Lennox Smith
“ECD”:	Edward Charles Dean
“LTD”:	LTD Constructions (NT) Pty Ltd
“NAB”:	National Australia Bank
“NKS”:	Nicole Kerrian Smith
“NPG”:	Northern Property Group Pty Ltd
“primary proceedings”:	the plaintiffs’ claims against the defendant as expressed in the statement of claim
“secondary proceedings”:	the defendant’s claims against DLS and ECD as expressed in its finally amended counterclaim
“SED”:	Susan Ellen Dean

“the finance agreement”:	the finance agreement defined in paragraph 37 of the statement of claim, as said to
have been evidenced by a letter dated
19 November 1997 written by the ANZ to TSM
“the finance application”:	the application made to the ANZ as referred to in paragraph 14 of the statement of claim having the oral and documentary content pleaded, as well as
the documents comprising the re-financing proposal, the relevant ANZ Business
Credit Application, an associated
document titled “Security to be offered”
and Personal Statements of Position of DLS, ECD and Lionel Anthony Godwin (“Godwin”) respectively (Exhibit P1 pages
57-66, 83-93)
“the first LTD development project”	the construction by LTD of initial pre- fabricated units at Shearwater Drive,
Bakewell, as referred to in paragraph 8.4 of the statement of claim
“the first October meeting”:	the meeting said to have been held on 14 October 1997, as referred to in paragraph 17.3 of the statement of claim
“the first November meeting”:	the meeting said to have been held on or about 7 November 1997, as referred to in paragraph 27 of the statement of claim
“the fourth October meeting”:	the meeting said to have been held on 29 October 1997, as referred to in paragraph
17.6 of the statement of claim
“the indicative proposal”:	the indicative ANZ proposal, being a letter dated 22 October 1997 written by the ANZ
to TSM (Exhibit P1 pages 76-82)
“the October meetings”:	a collective reference to the first, second, third and fourth October meetings
“the November meetings”:	a collective reference to the first November meeting and the second November meeting
“the Raffles Road property”:	the property situated at and known as 2 Raffles Road, Palmerston, being the former home of DLS and NKS
“the re-financing proposal”:	the written TSM re-financing proposal, a copy of which is reproduced at pages 57 to 67 inclusive of Exhibit P1

[2009] NTSC 31

09/07/2009

“the second October meeting”:	the meeting said to have been held on 16 October 1997, as referred to in paragraph
17.4 of the statement of claim

“the statement of claim”:	the plaintiffs’ statement of claim as finally amended in these proceedings
“the third October meeting”:	the meeting said to have been held on 22 October 1997, as referred to in paragraph 17.5 of the statement of claim
“the Territory”:	The Northern Territory of Australia

“the TSM overdraft account”:	the TSM Account No 015-896 3530-42732 with the ANZ
“the Wells Street property”:	the property situated at and known as 22 Wells Street, Parap ( also variously referred to as 22 Wells Street, Darwin and 22 Wells Street, Ludmilla)
“the $570,000 cheque”:	the cheque for that amount dated 2 January 1998 drawn by Flynn Petroleum Pty Ltd on Westpac Banking Corporation in favour of ANZ
“the $460,000 cheque”:	the cheque for that amount dated 24 December 1997 in favour of Godwin drawn on the ANZ against the TSM
overdraft account
“TPA”:	the Trade Practices Act, 1974 (Cth)
“TSM”:	Territory Sheet Metal Pty Ltd

(2)	I am left with the distinct impression that he and his colleagues were
in a most difficult financial quandary at the time and did not hesitate
to withhold important information from the ANZ, particularly as to
the extent of borrowings that had been made to support the LTD
activities and a substantial TSM indebtedness to the ATO.
(3)	I am of the opinion that it was no accident that the re-financing
proposal and application to the ANZ were ultimately pursued in the
name and on behalf of TSM, rather than on behalf of LTD – so as to avoid a need for full disclosure of the financial history and dealings of the latter.[4] Accordingly, the LTD financials and banking history were never supplied to the ANZ. The financial accommodation in
question would probably never have been forthcoming from the ANZ,
had the relevant full and correct information been made known to it.
(5)	I found some of the explanations given by DLS in that regard
somewhat disingenuous (e.g. concerning the reason for non- disclosure of the financial transactions between LTD and NPG).
When given, they smacked of a degree of rationalisation in the
thinking of DLS that did not enhance his credit.
(6)	Whilst I do not accuse DLS of deliberate falsehood in that regard, I
consider that his memory was plainly defective concerning the circumstances when the ANZ relationship manager Baylis first entered upon the scene and as to who requested the principals of
TSM and LTD to complete the Personal Statements of Position.
(7)	I will also deal with those topics in more detail in due course, but
merely comment at this stage that the present expressed memory of DLS as to these aspects is difficult to align with contemporaneous
written records raised by ANZ officers.
(8)	DLS sought, throughout his evidence, to portray a minimized
detailed knowledge of various financial transactions and, in
particular, his state of awareness at times of the extent of TSM and
LTD cash flow problems and resultant cheque dishonours. I have
great difficulty in accepting that his knowledge was so limited.
(9)	Equally, I do not accept that he failed to appreciate the impropriety
of certain of the corporate transactions such as the giving of the charge to NPG in breach of the terms of the pre-existing security to the CBA and the giving of security to the ANZ in respect of relevant
properties when the NPG charge was already in place.
(10)	There is no doubt that he has shifted ground over time as to certain
aspects of his narrative history of events. For example, he has vacillated as to whether Godwin was to pay out the Raffles Road property mortgage as part of, or in addition to, his promised capital
contribution of $400,000.[5]
(11)	There is also his present evidence that the sum of approximately
$110,000 involved was, in effect, to be a short-term loan to be repaid
out of unit sales -- a topic that emerged for the first time in the course of his cross examination. It is to be noted that ECD testified that Godwin undertook to find the sum in addition to his promised
capital contribution.
(12)	There is also an inconsistency between the various versions of what
DLS says Godwin represented had been paid to NPG in reduction of
its loans. In Exhibit P10 paragraph 211 reference is made to a
supposed payment of $400,000, whereas in Exhibit P12 paragraph 125 there is reference to a proposed payment of $460,000, neither of
which was, of course, consistent with any recognition that contributions of substance had already been made by Godwin to TSM (albeit that he had drawn back some or all of them).

(2)	The alleged Godwin properties were asserted to be unencumbered
assets of Godwin, whereas, in truth, the registered owners were third parties and the properties were, in aggregate, encumbered by first
mortgages securing debts of about $460,000 (i.e. up to virtually their full value);35
(3)	It was represented that security in the form of a $300,000 fixed
deposit (said by Godwin to be held by him) would be available,
whereas no such monies existed;
(4)	The overall liability situation was understated, quite apart from the
amount due to NPG, having regard to what was due to all other creditors of TSM/LTD;
(5)	It was not made clear that the completion of the second LTD
development project was, in practical terms, unfunded and that all
proceeds of sale of units up to that time had been or would be
absorbed in satisfying then existing liabilities. (All proceeds of the NPG borrowings had, by that time, also been expended);
(6)	It was represented that the first LTD development project had successfully been completed. The inference was that it had been financially successful, whereas TSM had done no detailed final
costing check on it and, particularly when the very high NPG borrowing costs were brought into account, the project could well
have been far from financially successful – as, indeed, proved to be
the case;
(7)	The proposal stated that, although LTD had only been in operation
for a short period of time, it had turned over $2.2 million. That
statement was simply incorrect;
(8)	Generally, the proposal represented the companies as being in good
financial shape when, in fact, they were not.
(9)	TSM had experienced recurrent difficulties in paying suppliers in
199736, was substantially in arrears with its group tax and PPS
commitments and it had used its existing CBA accommodation up to the limit.
(10)	By no later than 24 October 1997, the point was reached whereby
CBA commenced actually dishonouring cheques drawn by LTD; and
(11)	It is to be observed that, in the spreadsheet included in the re-
financing proposal, there is a reference to company tax, but this
certainly does not make it apparent that TSM was paying off substantial arrears of group tax and PPS obligations.

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