Westpac Banking Corp Ltd v Lim, Cho & Allmarin Pty Ltd
[1995] QSC 181
•15 August 1995
IN THE SUPREME COURT
OF QUEENSLAND
BRISBANE No. 1362 of 1992
[Westpac Banking Corp Ltd v Lim, Cho & Allmarin Pty Ltd]
BETWEEN:
WESTPAC BANKING CORPORATION LIMITED
(A.R.B.N. 007 457 141)
Plaintiff
AND:
SWEE HUAN LIM
First Defendant
AND:
HONG LIEN CHO
Second Defendant
AND:
ALLMARIN PTY LTD
Third Defendant
REASONS FOR JUDGMENT - THOMAS J.
Delivered:15 August 1995
CATCHWORDS: BANKING - certificate of amount due - whether signature of manager on demand amounts to "certificate" - establishment of foreign exchange overdraft account - whether bank obliged to use wholesale conversion rate upon establishment of account - demand for incorrect amount - whether demand effective against customer - whether demand effect against guarantor - unauthorised debits - onus of proof.
Counsel:R. Traves for the Plaintiff
Solicitors:Feez Ruthning for the Plaintiff
S.H. Lim in person for the Defendants
Hearing Date: 7-10 August 1995
IN THE SUPREME COURT
OF QUEENSLAND
BRISBANE No. 1362 of 1992
BETWEEN:
WESTPAC BANKING CORPORATION LIMITED
(A.R.B.N. 007 457 141)
Plaintiff
AND:
SWEE HUAN LIM
First Defendant
AND:
HONG LIEN CHO
Second Defendant
AND:
ALLMARIN PTY LTD
Third Defendant
REASONS FOR JUDGMENT - THOMAS J.
Delivered the 15th day of August 1995
In this action the plaintiff ("Westpac") seeks various judgments arising out of the non-repayment by the third defendant Allmarin Pty Ltd ("the Company") of a loan granted in 1989. The first defendant ("Mr Lim") and the second defendant ("Mrs Cho") were the shareholder directors and persons in control of the Company. They provided their home at Wishart as security pursuant to a bill of mortgage, and also gave guarantees in respect of the loan. The Company also provided a property at Tingalpa as security for the loan pursuant to a bill of mortgage. The action seeks to recover possession of the two properties, and a money judgment against Mr Lim and Mrs Cho based on the guarantees.
Mr Lim appeared on behalf of all the defendants at the trial.
On 29 July 1988 Westpac granted a facility with an overdraft limit of $20,000 in favour of the Company. Security for advances to the Company was given by Mr Lim and Mrs Cho by means of a mortgage dated 3 August 1988, the security being the Wishart house property. It covered all moneys already advanced or thereafter advanced or paid by the bank to or for the mortgagor or the debtor, with the Company being designated as the debtor. The other mortgage dated 13 September 1989 was granted by the Company.
On 13 September 1989 Mr Lim and Mrs Cho signed a guarantee which promised payment to the bank of all moneys already advanced or paid or thereafter advanced or paid by the bank to or for the debtor, again designating the debtor as the Company.
The business of the Company was the exporting of shark fins, bêche-de-mer and like products to Asian markets. The company was in debt to AGC and desired to refinance through Westpac. Bank facilities were granted pursuant to a letter dated 26 July 1989 approving the establishment of a $220,000 term loan and $100,000 as an optional currency trade finance limit with annual review. These facilities were restructured in a further facility letter dated 30 November 1989 (executed by the Company on or about 4 October 1989). The defendants concede (apart from a contention that the Company was short-changed approximately $1800 in transfers involving the foreign exchange account) that the plaintiff provided the facilities that were promised. Pursuant to the agreement Westpac continued the earlier account No. 130199 at the Moorooka Branch with a limit of AUD$20,000 ("the first facility"); granted a term loan of $120,000 at the same branch with account No. 130746 ("the second facility"); and granted a foreign currency overdraft in Singapore dollars equivalent to AUD$200,000 in account No. 400088 ("the third facility").
Under the terms of the agreement interest on the term loan (second facility) was to be debited to the first facility. Otherwise interest was to be debited directly to the facilities concerned.
Of course the defendants were also subject to be obligations imposed by the two mortgages and the guarantee.
The substantial effect of the arrangements was to pay out on 22 September 1989 the Company's debt to AGC of approximately $320,000. This meant that all the accounts commenced in a situation close to or slightly in excess of the maximum overdraft level. The expectation, no doubt generated from Mr Lim's description of his business, was that reasonable trading would enable the debts to be reduced. Indeed Mr Lim had projected an anticipated before tax profit of $334,000 from the first twelve months' trading.
The first facility commenced overdrawn slightly more than the limit, and the account proceeded to be further overdrawn. Indeed the same is true of the other accounts, although the second facility, the interest upon which was to be charged to the first facility, generally remained at a level only slightly above the stated limit.
From an early stage the bank manager, Mr Jempsen, expressed his concern at the rising levels of debt. On 10 January 1990 he raised his concerns and was given a variety of explanations by Mr Lim including a drop in overseas prices, his sacking of a manager who had pilfered stocks and diverted orders to another organisation, problems in dealing with the shark fishermen, the difficulty in getting local supplies because shark fishing was only a side-line to prawn fishing, the existence of negotiations with a fertiliser company to produce fishmeal and so on. He claimed there were tentative negotiations with companies interested in buying his whole business. The two men agreed that to shut the business down would be disastrous, and the bank agreed to hold off initially for a couple of weeks. On subsequent occasions Mr Lim succeeded in persuading Mr Jempsen to allow the matter to run on. He contended that the business was heading in the right direction and that Westpac should be entrepreneurial enough to recognise that fact. He indicated that by the beginning of February there would be a $600,000 letter of credit established which would yield agency benefits to him.
On 23 February 1990 Mr Jempsen faxed a copy of a letter to the defendants advising that they were not to draw any more cheques until they had brought the debt back to lower levels, and that there were to be no more drawings without his prior approval. A further letter to this effect was sent on 2 March 1990. Notwithstanding this, on 4 March the Company drew a cheque for $336.44 payable to Bundaberg Seafoods. On 6 March Westpac declined to pay the cheque. When it was re-presented a week later (13 March) it was paid. I am satisfied that the bank was entitled to dishonour the cheque. It is claimed on the defendants' behalf that the dishonouring of the cheque caused a downturn in the Company's business and that it made it impossible for the Company to obtain reasonable supplies of local product. This is not established on the evidence. There is reason to think that the Company had before this encountered similar difficulties in obtaining reliable supply and was planning to obtain the great majority of its products from overseas. The picture seems to be one of progressive business failure, and it cannot be inferred that the dishonouring of this one cheque can be blamed for the defendants' business problems. There seems to have been a basic lack of working capital and of insufficiency of profit at all material times.
On 31 October 1990 the bank established an account at its Moorooka Branch called "Allmarin Pty Ltd Singapore Account". Its number was 110999. This was described as the bringing back on shore of the Singapore dollars account. The Company did not specifically authorise this step and it never availed itself of the facility, and conducted no transactions therein. I am inclined to regard this as a bookkeeping exercise by the bank. There was an existing liability in the Singapore account of $284,992.63 (SD) and this was converted into Australian dollars expressed as an overdraft here rather than as an overdraft in Singapore. The only entries in the account are the debiting of interest (which, subject to quantum, the bank was entitled to charge), some bank fees and some small amounts for government tax on debits. The effect of these matters on the overall debt owed by the third defendant is quite small but it will be considered later.
In November 1991 written demands for payment were made upon all three defendants. In January 1992 notices of default under the Property Law Act were given to all three defendants. On 28 February 1992 notices to quit were given to all three defendants. I am satisfied that all the above documents were duly posted and received.
The money claim originally brought by Westpac included somewhat complex entitlements to interest. It is not necessary to pursue this, because by amendment the only interest which is now claimed is simple interest at the rates agreed in the facility letter of 30 November 1989. None of that interest has been compounded, and Westpac is plainly entitled to at least the amount of interest that is now claimed.
Prima facie, and subject to any set-offs or reductions that may arise when I deal with the defence and counterclaim, the plaintiff is, as against the Company, entitled to payment of a principal debt of $347,091.99, and to interest of $246,084.61. The total is $593,176.60. The above amounts have been subdivided into the amounts shown in the three relevant accounts as follows:Overdraft account $35,254.37
Term loan account $125,351.49
Singapore dollars account $186,486.13
Likewise the interest has been subdivided into the amount attributable to the principal represented in those accounts as follows:
Interest on overdraft account $41,282.39
Interest on term loan account $108,377.14
Interest on Singapore dollars account $96,425.08
Interest has in all cases been calculated from the advancing of the particular loan up to 7 August 1995. The essential details appear in the affidavit of Mr Baker, ex.19.
I turn to the issues raised on behalf of the defendants. There is a conflict of evidence between Mr Jempsen (the bank manager) and the first defendant Mr Lim. Mr Jempsen made extensive contemporaneous notes and these tell a credible story. Mr Lim who appeared in person on behalf of all three defendants was in my view a coy witness, unwilling to face the reality of his situation. I have no hesitation in accepting the evidence of Mr Jempsen.
So far as service of the notices is concerned, Mr Lim does not deny receiving them, and the weight of evidence favours a finding that they were actually received by the persons to whom they were addressed. This is strengthened by the content of the defendants' affidavits of documents. They have in any event been served pursuant to the requirements of clause 39 of the mortgage which makes posting to the last known address sufficient service. I shall proceed however on the footing that they were actually served. It may be noted that notices of default were not in any event necessary under s.84 of the Property Law Act, as the present proceedings do not seek the exercise of a power of sale. It may also be the case that a notice to quit is not required by s.124 in the case of an attornment clause creating a tenancy from week to week. I do not need to explore this matter further because I am satisfied in any event that actual service of all such notices was effected.
By the defence and counterclaim, the first and second defendants seek to set aside the Wishart mortgage and the guarantee on the basis of alleged misleading and deceptive conduct on the part of the plaintiff. The primary basis appears to be an allegation that Westpac agreed to provide a $200,000 foreign currency overdraft facility to enable the Company to trade in Singapore dollars but in fact did not do so. I do not consider that any deceptive conduct has been made out. The main purpose of the arrangements was the refinancing of the AGC loans, and it is conceded that the bank established the facilities which it undertook to establish. It may be noted that complaints of this kind were not made when one would expect them to have been made if they contained substance. The main problem seems to have been that Mr Lim's expectations of solid trading were never realised and he was accordingly unable to take advantage of the facilities that were established. It is true that the bank did not inject the additional capital which, with hindsight, may have been necessary if the Company was to prosper, but Westpac was not obliged to advance more than it agreed to advance, and is not responsible for the consequences of the Company's commercial judgment.
There is a claim for damages by reason of the dishonoured cheque to Bundaberg Seafoods on 6 March 1990. In my view the bank was at that time entitled to dishonour the cheque. It had warned the defendants that it would not permit further drawings, and it seems that the Company was prepared to test the bank's resolve. Furthermore, although I accept that embarrassment resulted, damage has not been proved to have flowed from this action. There is evidence of commercial disputes and difficulties preceding this particular incident. The non-payment was merely a symptom of a chronic shortage of money. The Company was in any event looking for overseas products as its primary source of supply.
The defendants also complain of the transaction by the bank, during the currency of the Singapore dollars account, of four forward exchange contracts. These were conducted between 13 June 1990 and 31 October 1990. The first of these resulted in a loss of SD$9300.91 (AUD$6355). The second transaction resulted in a profit of SD$1176.32 (AUD$813) and the third in a profit of SD$17,007.33 (AUD$13,446). The results of these transactions were debited and credited respectively to the Singapore dollars account (No. 400088), the net result being a credit of SD$8882 (about AUD$7091). There was also a fourth transaction which resulted in what is described as a notional credit being allowed in the Company's favour when the account was brought on shore through the establishment of account 110999, of AUD$3995.09.
In short, the net effect of these transactions has been to benefit the defendant Company by something more than AUD$10,000. I suspect that this issue was raised by the defendants as part of the policy of raising every possible point of criticism against Westpac. The point of the criticism is that the defendant did not sign any of the authorisations that were requested to these transactions. The complaint is also persisted in that the loss resulting from the first transaction which produced a loss, was debited at a particular sensitive time and that it contributed to a lack of liquidity at least until it was offset a few months later by the profitable transactions. However the temporary debit did not in my view produce any significant change in the overall position of the Company or its ability to trade. Indeed overall the benefits from these transactions have resulted in a net gain and improved liquidity over a longer period to the third defendant. It is unnecessary to decide whether Mr Jempsen was orally authorised by Mr Lim to proceed with these transactions. Even if they were unauthorised, no damage has resulted to any of the defendants.
There is a further claim (in para.32(a) of the defence and counterclaim) to the effect that the conversion of the Singapore facility into Australian dollars was at a rate which disadvantaged the Company and thereby increased its indebtedness to the plaintiff. The particulars show that the claim is based upon the allegation that it should not have been converted at that time, and that the notional conversion should be at the current exchange rate. At the time of pleading the exchange rate of 1.3432 had dropped to 1.1316. As it was a transfer of a debit, the defendant gained by the effecting of the conversion at the earlier date. There is no evidence before me that the rate is now different from that alleged in the pleading. There is no substance in this allegation, and it is incapable of demonstrating any damage on the part of the Company.
There is a further claim (in para.31(b) of the defence and counterclaim) that the bank dishonoured a cheque payable to Yellow Courier for $25, on 10 January 1991. No warning was given to the customer with respect to that course of action, and the bank's action was probably in breach of its duty to the customer. However there is no evidence of any aftermath, and no damage is proved to have been suffered in consequence of this dishonoured cheque.
A claim is also made (in para.38 of the defence and counterclaim) that between 26 July 1989 and 20 November 1991 Westpac, without authority, divulged confidential information concerning the company to other banks. It seems that on two occasions, once to the Standard Chartered Bank on 13 February 1990, and later to the Commonwealth Bank on 14 May 1990 Mr Jempsen responded to requests for opinions concerning the creditworthiness of the company. Mr Jempsen said that this was common practice at the time. Notwithstanding this I think that the practice is questionable and probably infringes an implied duty of confidentiality in favour of the customer. It is not necessary for me to express a concluded opinion on the matter and I note in passing counsel's reference to Tournier v. National Provincial & Union Bank of England [1924] 1 K.B. 461, 473, and Paget 9th ed. p.158. Such conduct is now covered by legislation (s.18N of the Privacy Amendment Act (Cth) 1990) which commenced operation on 24 December 1990. However the events in question preceded the legislation, and are to be judged by common law principles. My provisional view is that these disclosures should not be regarded as impliedly authorised by the customer. There is however no evidence of any damage being caused by either of the two disclosures.
I turn to allegations concerning unauthorised debits. It was submitted that a debit of $1051.77 in the first facility on 2 October 1989 was unauthorised to the extent of $521. This is based upon the fact that it is for interest on the advance of $220,000 which is recorded in the second facility (account 130746). Such facility was created only on 25 September 1989, whereas the interest represents a charge from 22 September 1989. If interest is chargeable only from the date of establishing the account, then the correct interest is only $530.77. It seems to me that under the Company's mortgage and under the facility arrangement there was a contractual right to charge interest from the date of making of the loan, and that the loan commenced upon discharge by the bank of AGC's liability; this can be demonstrated to have occurred on 22 September (see ex.2 pp.69 and 93). Interest was therefore payable for the period 22 September 1989 to 29 September 1989 at the agreed rate of 1.5 percent above the indicator lending rate, and the calculation is correct. The amount was ultimately debited to the first facility pursuant to the authority received by the bank on 4 October 1989 (ex.2, p.68).
It is alleged that $15 was incorrectly charged to the Company's second facility on 27 June 1990. The bank's justification for this is its "commission" for the first forward exchange transaction (see ex.B to Mr Schmidt's affidavit, ex.59). As there is some doubt concerning whether this was an authorised transaction, and as there is no clear evidence authorising the bank to charge for its services in arranging such a transaction I consider that the charge must be regarded as unauthorised. It may also be observed that the claim for "commission" on a losing sale is not convincing. Broadly speaking it might seem reasonable to permit the bank to bring this sum into reckoning against the $10,000 unauthorised benefit which I will permit the Company to retain as the result of these transactions. However that is not the way in which the accounting proceeded. As this particular item is challenged and cannot in itself be supported, the defendants' claim for its deletion should be upheld. There is a further $15 debited to an account on 11 October 1990 which, again, was in respect of alleged commission. It should also be deleted.
Two further errors are raised in relation to debits to the second facility on 16 July 1991. The debits were of $2948.45 and $3199.00. The bank concedes it should not have debited these amounts to the second facility. They represented interest that was properly chargeable to the Singapore facility. In this matter the defendant has demonstrated a technical error in that the bank should have debited these amounts to the Singapore facility. However those amounts were correctly debitable as interest, and in the end no loss or damage is proved by the defendants. In short this was interest properly payable but was debited to the wrong account.
In paragraph 20(1) of the defence and counterclaim it is alleged that interest was charged upon the third facility between 29 December 1989 and 12 February 1990 at an excessive rate. This is now conceded, the interest having been charged at 22 percent instead of 9.5 percent. This however was quickly corrected once it was identified. On 12 February 1990 there was an immediate credit of $7428.26 SD in respect of the overcharge and the matter was explained by letter the same day. The effect then was that for a period of six weeks the Company's account was slightly more in debit than it should have been. There is no evidence of any substantial consequence from this.
There is a further claim (in para. 20(ii)) of excessive interest being charged to the first facility resulting in "excess debit" of $3254. The claim is in my view correct, and it cannot be justified by the bank on the footing that there was an implied term that the bank could charge interest at "the usual rate charged by the bank to a customer" on money which exceeds the agreed limit of a facility. However the overcharge is now not brought into the plaintiff's claim. It has abandoned all claims to interest and replaced them with a calculation of simple interest at the agreed rates. The reworked accounts (contained in Mr Baker's affidavit, ex.19) mean that the original error has been eliminated.
The end result of this error is that at material times the Company's account was made to appear further in debit than it really was.
A further similar claim appears in para.20(iii) concerning excess debits to the extent of $1183. The same comments apply. On the claim now presented there is no such error, but at material times the accounts were stated showing the defendant to have been further in debit than was truly the case.
In para.30 of the defence and counterclaim there are six alleged unauthorised debits. These fall into three categories.
(a)$500 debited on 3 August 1990 in account 130199. I find that Mr Jempsen was specifically authorised by Mr Lim to make that debit in order to cover certain cheques which he had at Mr Lim's request permitted to be paid from another of the accounts.
(b)Four debits headed "Westpac Life" totalling $1011.52. These debits were made at various times between 17 July 1990 and 8 January 1991. Mr Lim and Mrs Cho were at material times covered by "Key Man" insurance policies and no doubt it was in the interests of all parties that these payments were made. They were debts of Mr Lim and Mrs Cho and these payments discharged those debts. The items appeared in the statements and they were not queried until some time later. It is certainly not an uncommon practice for a lending authority to be given the right to apply funds towards the payment of such accounts, but I have not been referred to any contractual right to do so in this instance. So far as I can tell neither Mr Jempsen nor Mr Lim gave any evidence on this particular point and very little was said about it in address, save that Mr Traves on behalf of the bank invited me to find implied consent on the defendant's part to the making of such payments. Mr Traves also submitted that the demands for payment amounted to "a certificate signed by . . a manager stating the amount of the moneys hereby secured" within the meaning of clause 31 of the mortgage and clause 10 of the guarantees. If this submission is correct, the clauses provide that the certificate is conclusive evidence against the mortgagor and the debtor that the amount is the amount due. That consequence would of course be reduced by s.57 of the Property Law Act to prima facie evidence only. There are however a number of problems in the path of this submission. Only some of the demands were signed by a manager, namely the notices of default and the notices to quit. The demands for payment of the securities dated 20 and 29 November 1991 were signed by an "officer" under the style ,
"Westpac Banking Corporation
J.L. Anderson
Acting in place of Manager Legal"
Perhaps that would satisfy the requirement of "certificate . . on behalf of any manager" although I am inclined to think that in such an instance one would need actual evidence of authority to sign on behalf of a manager. I shall therefore confine attention to exhibits 13, 14 and 15 which were signed by a manager. These notices required payment of $517,758.75 "being the total of the amounts specified in the second schedule hereto". That schedule states,
"Allmarin Pty Ltd
Current account (principal and interest) $141,758.40
Term loan account (principal and interest) $127,056.05
Singapore account (principal and interest) $248,944.30
Total: $517,758.75 "
There is of course no mention of the now disputed items, but plainly they were included in the amount then demanded.
In my view these notices are essentially demands. They certainly do not purport to be a certification relying upon the power given by clause 31 of the mortgage. Indeed, neither the document nor any part of it purports to be a certificate. It is of course possible for a document to be a certificate without an express statement that it is one, but the essence of a certificate is a formal statement by a person with authority to rule on a particular point dealing with that particular point. In my view these documents are essentially demands, and do not amount to a separate act of certification under the power given by clause 31 of the mortgage.
What then is the answer to the deduction of the Westpac Life payments? The plaintiff alleges a certain total sum is due. The defendant denies that it is due and puts the plaintiff to proof of its whole claim. The defendants also specifically deny that these payments are due. In this situation the onus of proving an entitlement to charge them against the defendants is upon the plaintiff. If the evidence is unsatisfactory, as it is in this instance, the plaintiff fails, and its claim must be reduced by the amounts in question.
(c)On 12 October 1990 a deduction was made of $79.92 with the notation "reversal entry". It has been put in issue by the defendants. There is no evidence at all from either party concerning this item. In this situation I hold that the bank's entitlement to charge that sum against the defendants has not been established and the claim must be reduced by that sum.
The total of the amounts for which the bank's claim will need to be reduced in consequence of these points is $1091.44.
There is a further claim in para.33 of the defence and counterclaim that the Company was, by reason of the conversion of the third facility into account 110999, exposed to higher interest rates than would have applied had the conversion not occurred. This occurred after 1 November 1990. The allegation seems to be correct, but as the bank's claim is now for simple interest at the agreed rate on a proven principal, there will be no loss as a result of these actions by the bank.
Paragraphs 34 and 35 of the defence and counterclaim complain about the creation of account 110999. Certainly the defendants did not authorise the bank to establish that particular account. I do not consider that the authority to establish a foreign currency account in Singapore authorised the bank to turn it into something quite different in Australia. That is not to say that the bank was not entitled to cancel the Singapore account or to freeze it or to decline to allow it to be further operated given the level of default. As I see it, the so-called converted on-shore account number 110999 should be regarded as an internal book entry by the bank, and the holding available for the use of the defendant of an account that it did not want and that it did not use. The action of the bank did not bind the defendants, and should not be permitted to cause their indebtedness to increase. Of course interest would continue to accrue under the original loan contract. Such actions did not cause any damage, because the debit balance in the Singapore account on 31 October 1990 was converted to a debit entry in Australian dollars. No loss can be shown on the conversion, and no disadvantage was incurred by reason of the fact that the conversion occurred at that time rather than now.
However the charging of bank fees on an unauthorised account cannot be permitted. Neither should the defendant be required to pay the government tax on debits in an account which was not authorised.
These amounts come to $355.40 and $26.15 respectively.
Paragraph 36 of the counterclaim charges debits of $208.32 and $347.20. However these are shown to have been insurance premiums on the Wishart and Tingalpa properties and to have been authorised by the mortgage.
By amendment the defendants were permitted to claim that they were in effect short-changed in the transfer of a credit at the time of creation of the Singapore account on 4 December 1989. This depends upon the applicable conversion rate when a bank is dealing with its customer, and transferring funds from a foreign account into a domestic account. In this complex area there are many rates including ordinary buying and selling rates, as well as an inter-bank rate, or the wholesale rate under which banks will deal with other banks. This is regarded as the best possible rate. If the bank had applied that rate (which at the material time was 1.5235) to the transfer of SD$150,000, the customer would have been $965 better off. The rate actually applied to the customer in this instance was 1.5385, and there is evidence from Mr Schmidt that that was a reasonable rate for a bank to transact with a customer. However it was not really an arm's length dealing between the bank and the customer. The bank was setting up a facility that it had promised its customer, and the means of doing this included the establishing of an Australian credit by means of creating a Singapore debit. By the creation of a Singapore dollar overdraft the customer was given Australian dollars. Now it may well be that evidence could be given of practices that might make it reasonable for the bank to make additional profit upon such an arrangement, but the evidence here falls short of this. Prima facie it seems to me that in this instance the bank owes a duty of direct conversion without profit. With some hesitation I am prepared to hold that the customer should not be charged a rate higher than the bank would be prepared to deal with another bank. It was after all merely administering what it had undertaken to do on behalf of the customer.
Applying Mr Schmidt's evidence, if the bank had used the most favoured rate, the Company's account would on 4 December 1989 been credited with an additional $965; and on 6 December 1989 with a further $872.58.
It can be seen that despite the multiplicity of the issues and challenges raised in the defence and counterclaim, overall they have relatively little impact on the true state of the account between the parties. A number of errors have been demonstrated on the bank's part in the administration of the accounts, and perhaps the most significant of these were overcharges of interest from time to time which caused the financial position of the Company to seem worse than it actually was, and to that extent the liquidity of the defendant Company was to some extent reduced. However these errors did not contribute in any substantial way to the failure of the Company to make the profits it had hoped to achieve. Other than the specific overcharges or errors where I have indicated correction needs to be made, I am not satisfied that the defendants have proved any breach of duty on the part of the bank which has caused damage to the Company or which reduces the obligation of the third defendant to repay the proven amounts of the loan and the interest.
There remains an important point upon which neither party addressed. The bank has overcome some of the more significant of its errors by amending the claim to one for simple interest at the correct rates. Its present case can be seen through the reconstituted accounts contained in Mr Baker's affidavit, ex.19. Those accounts however were not the basis of the demands which were served on 20 November 1991, and subsequently, in order to found the bank's claims under the guarantee, and ultimately for possession. The figures below show that the bank then demanded about $40,000 more than it can now substantiate. There are also the issues upon which I have found in favour of the defendants, which produce a slightly more favourable position from the defendants' point of view. The total readjustment of account in favour of the defendants (including both principal and interest) in consequence of my findings is less than $6,500, of which about $4,500 should have been included in the bank's accounting as at 20 November 1991.The bank's demand on 20 November 1991 was for payment of the following amounts:
| Current account (principal and interest) | $136,362.01 |
| Term loan account (principal and interest) | $127,476.83 |
| Singapore account (principal and interest) | $243,693.84 |
Total: | $507,532.68 |
Doing the best I can on the basis of Mr Baker's reconstruction, the state of the account between the parties as at 20 November 1991, before making allowance for the deductions I have allowed, would have been approximately the following.
| Current account (principal and interest) | $115,146.00 |
| Term loan account (principal) | $125,351.00 |
| Singapore account (principal and interest) | $226,891.00 |
Total: | $467,388.00 |
The true position as at November 1991, on the basis of my findings upon the defence and counterclaim, is that the figures last stated should be reduced by about $4500, most of which would be attributable to the current account.
The question arises whether the demand of 20 November 1991, and subsequent demands, were valid ones.
At the material time it seems to me that all three accounts were in excess of the agreed limits. As early as 13 July 1990 the defendant company had been placed on a strictly credit basis on all accounts. Interest continued to accrue, but there was no effective reduction. In these circumstances the bank was entitled to demand repayment of the debts. Mr Lim contended that the bank ought to have put the Company into receivership, conceding that it had the right and the power to do so, and that it should have done so at an early stage rather than permitting the situation to run on. In my view the bank postponed its demands in order to give Mr Lim and his Company the maximum opportunity to make good his continued optimistic predictions, but that this failed to achieve the desired result. The defendant company was in default under the terms of its facility agreements in November 1991, and the bank was entitled to demand repayment. Their defaults included failure to meet the interest monthly, and it may be noted that the term loan was during the bank's pleasure. Other events which could trigger the right to demand such payment included the formation of opinion by the bank or a manager that there was a significant deterioration in the financial position of the Company. Under the mortgages there was a right to demand payment of all moneys thereby secured (which included the amounts advanced by the bank to the Company ), on demand, "unless there is an agreement in writing to the contrary". All accounts were repayable in the event of default in respect of any one of them.
The fact that an erroneous amount was included in the demands does not necessarily impair the validity of the notice (compare Bunbury Foods Pty Ltd v. National Bank of Australasia Ltd (1984) 51 ALR 609, and on appeal, (1983-1984) 153 CLR 491; Bank of Baroda v. Panessar [1987] Ch. 335; Clarke v. Japan Machines (Australia) Pty Ltd [1984] 1 Qd.R. 404, 413). In the Bunbury Foods case the High Court rejected the notion of a general rule that notice of demand must specify the amount of the debt. That applies to the demand upon the Company. However the Court observed with respect to demands upon guarantors:"There is perhaps a stronger case for saying that, when a third party, for example, a guarantor, is called upon to pay the debt of another, the creditor should specify the amount. But in the circumstances of this case it is unnecessary to explore the problem further."
Accepting a higher level of obligation in relation to a demand upon a guarantor, it does not follow that the statement of an incorrect amount will, of itself, invalidate such a demand. As the law stands a mixed question of fact and law is involved, and it would in my view be unwise to try to lay down a universal rule either that no amount needs to be stated or that the amount must be accurately stated. In determining validity of a particular notice, many factors may be relevant, including the wording of the instrument, the extent of the inaccuracy in the notice, the question of good faith, the question whether the debtor was misled or otherwise disadvantaged, the opportunity of the debtor to know what is required of him, her or it, the extent to which it may be inferred that the debtor was aware of the approximate level of the debt, the capacity of the debtor to meet the demand to the extent to which it was valid, and no doubt other factors as well (compare Clarke v. Japan Machines (Australia) above, p.413, and Bunbury Foods case above, p.503-504).
In the present case the extent of the error was less than ten percent of the amount owed, and it is not a situation where the error led to any different action on the part of the debtor than would otherwise have been taken.
The guarantee given by Mr Lim and Mrs Cho was of payment when demanded in writing from the guarantor of all moneys advanced or paid by the bank to or for the accommodation of the debtor company. The written demands in my opinion satisfy that requirement.
Summary
The bank is entitled to judgment for $593,176.60, less the amount of the deductions to which I have indicated the Company is entitled. In each instance there should be a deduction of the requisite amount from the principal debt, followed by a consequential calculation of the effect that such deductions would have had upon the interest. I propose to approximate the latter calculations. The interest rates varied between 9 and 22 percent, and I am informed that overall a median rate of 18 percent is close to the mark. I shall apply that rate to each item from the approximate date when the debit was wrongly entered.
| 1. Defence & counter-claim para 19 - unauthorised commission $30 | )Interest for 5 yrs @ 18% ) | $27.00 |
| 2. Defence & counter-claim para 30 - unauthorised debits $1091.44 | )Interest for 4 yrs 10 mnths @ 18% ) | $949.55 |
| 3. Defence & counterclaim para 34 ‑ fees and government tax charged on account 110999 $381.55 | )Interest for 4 yrs 2 mnths @ 18% ) | $286.20 |
| 4. Short payments by reason of non-application of most favourable conversion rate upon setting up of facilities $1837.58 | )Interest for 5 yrs 8 mnths @ 18% ) | $1874.35 |
| Principal: $3,340.57 | Interest: | $3,137.10 |
The amount properly payable as at 7 August 1995 by the third defendant to the plaintiff is $343,751.42 for principal and $242,947.51 for interest, making a total of $586,698.93. The guarantee of the first and second defendants makes them liable to pay this amount. There will be judgment for the plaintiff against the first and second defendants for $586,698.93.
The plaintiff is also entitled to an order for recovery of possession against the first two defendants pursuant to the Wishart mortgage, and to possession against the third defendant in respect of the Tingalpa mortgage.
0