Australia & New Zealand Banking Group Ltd v Theo [1993] QSC 205

-- TRANSCRIPT OF PROCEEDINGS--- ~ . ··, . . ' .... (Copyright in this transcript is vested in the' Crown. C-opies thereof must not be made or sold , Wltho~tthe written authority of the Director, State Reporting Bureau.(; _:_ ; : -•-- : - · -- • -··._ _ ·- - __ . _, ., RE~~ EO COP[~S ISSUED ··-· - ;·;·,. -- . ' .. St.:ue Reporting Bureau _-SUPREME COURT OF QUEENSLAND 'CIVIL JURISDICTION Date l'f "/ . - ·, ., : ~ .) .... . . ~~ ._ .. _;.", -!'· . ... .. ' No . 8 0 6 b f 1 -9 . .' ...... ~ - . .· •" AUSTRALIA AND NEW.ZEALAND BANKING GROUP LIMITED and-- BRISBANE .. DATE 28/06/93 -~~ . JUDGMENT 1 ..· '~~- .. ·. '\··-· .. . ~- .. Plaintiff ;Defendant ·, ·. .. , .. · ·: :;) ·,. \. ;·; '' ':·-·~: -:. . ·;. ··< ._ ·~ -'' ~ .. ' '·. ·,( '· 4th Floor, The Law Courts, GeorKeStreet, Brlsba~, Q. 4000 Televhone: (07J 227 4360. FacsimilP-' tn1l ??1 t;t;~? . ( ' ··,·· . ·' .; . ··'·' /, /·I / -- 1 of 7 -- ( 280693 jlk (Kiefel J) HER HONOUR: The plaintiff bank applies for summary judgment against the defendant under a written guarantee and indemnity given by him and dated 29 June 1978 with respect to a customer of the bank which is presently called Korab and Co Pty Ltd. By· clause 1 of that document the guarantor may be called upon at any time, regardless o{ the customer's default. The guarantor may be liable under clause 6.5 for all costs as between solicitor and client. Clause 19 contains a separate 10 indemnity. 20 n At 24 May 1993 the customer owed some $749,994.13, repres~nting its liability on each of an overdraft facility ~ !. ..,. and a fully drawn advance account, together with interest accrued to that date at the respective rates of 13.25 per cent 30 and 10.75 per cent. A letter of 1 June 1992 (Exhibit C1 to Mr Robertson's affidavit) evidences what was the then agreement between the parties concerning the overdraft facility and relevantly that 40 "The overdraft facility is payable on demand and the bank may cancel or withdraw the facility at any time ... ". The letter contains reference to a review date in August or October 1992. The fully drawn advance account was in February 1988 (see 50 Exhibit E1 to Mr Robertson's affidavit) subject to a term that "The loan is repayable on demand but unless demanded you must repay it by monthly instalmen.ts of ... 11 • Demand was made on the comp~ny and the guarantor on 25 May 1993 and neither has 60 2 ;' -- 2 of 7 -- I~ 0 280693 jlk (Kiefel J) paid. To this point so much is uncontested. I should add that Mr T North, for the plaintiff, predicted that the defendant might raise an issue as to the validity of the demand. It appears that at the time of service of the notice the defendant has deposed to the fact that a bank officer, a Mr Oakes, said to him words to the effect that the d6cuments were just a formality and that he need not worry about them. The defendant did not, however, seek to argue that that constituted some operative waiver affecting the validity of the demand. The defendant sought to raise a case concentrating entirely on earlier conversations between 0 Mr Oakes and, amongst others, the defendant (see paragraphs 39 0 0 to 43, inclusive, of Mr Thee's affidavit sworn 18 June 1993) which are said to give rise to an estoppel or waiver against the plaintiff or, alternatively, to found relief baied upon misleading and deceptive conduct under the Trade Practices Act. It may be, however, that the conversation at the time of service may, as a matter of evidence, throw some light on the earlier conversation relied upon. The defendant says in the affidavit I have referred to that at a meeting on 16 March 1993 the banking facilities referred to above were reviewed. Mr Oakes informed him that, "This is the way the Bank wants things done for Korab's banking facilities.", and then said words to the effect that the only way the bank was prepared to continue with the banking facilities and the financing of the company was to continue an overdraft facility with a limit of $300,000 and a further account (the number 2 account) in the name of the company was 3 10 20 30 40 50 60 -- 3 of 7 -- r ~-------- -~------- . 280693 jlk (Kiefel J) to be established, Th~s account ~as to op~rate in credit only. Importantly, he said that so long as the o~erdraft limit did not exceed $300,000 and the second account, in fact; operated in credit, the bank would maintain the overdraft and the current f~hancial facilit~es. At the conclusibn of ~the meeting Mr'Oakes said to Mr Thee that if members· of his family put'·$100;000 into the company, the bank would con~ide~ making further loan facilities available 10 to it. As a result, members of his family have loaned moneys 0 20 to the defendant, who in turn Has deposited the sum of $65,000 to the account of the company. The company maintained the various accounts on the· terms di'scussed. 'However, in April 1993 the bank advised that it would not make 30 the further funding available. Mr Oakes did, however, suggest to the company and Mr Thee that it act with some speed in obtaining further e~uity finance elsewhere. A commercial bill facility, oh the·other hand, matured and the bank apparently ~ncreased the o~~rdraft limit to accommodate it. No demand 0 0 was made for its repayment. 40 0 On 26 May 1993 Mrc Oakes attended upon the company and served_ demands upon it and the defendant. The conversation above referred to then took place. Mr Carrigan, for the defendant, submitted that the defendant's case w~s that the bank· promised on 16 March 1993 that it ~ould continue with its present level of funding so long as the company maintain~&'the limits imposed. Implicit in that- 4 50 60 -- 4 of 7 -- ( 0 0 0 ./'-- \ u 280693 jlk (Kiefel J) representation, which was made directly to Mr Theo, is that neither the company nor him would be called upon - for otherwise the promise would be nonsensical. He argued that it was to be implied, given the usual process of review between the bank and the company over the years, that that position 10 would maintain until the parties came to another arrangement. Again, implicit in that argument is that Mr Theo was induced to believe the situation would maintain. Mr Carrigan argues that, at the very least, the bank had a duty at the time to speak if the arrangement it intended was to call upon the 20 company or Mr Theo for payment at any time. Mr Theo personally has paid moneys in, and I take .it that it would be said at trial that the company was lulled into a sense of security and took no other steps to otherwise finance 30 its whole undertaking. Mr North's answer was that, seen in their true light, the facilities offered were by their very nature repayable on demand. By inference, the defendant could not reasonably have 40 understood it to be otherwise. 'rhat is somewhat difficult to determine on this application. Whilst the defendant may hav~·cql}siderable .d.lfficultles ..in successfully defending .flle action, it seems tq _me. at least argu..abla ~that ;.the conversations of 16 March 1993 may amount to a representation as to how the bank would conduct the account, at least until the time of a review. What the statement could have conveyed is more likely to be properly understood when a full consideration is had of the long banking history between the 5 50 60 -- 5 of 7 -- 280693 jlk (Kiefel J) parties and, more particularly, of all the conve'rsations concerning the ~anagem~nt report then undertaken and the problems, 'if any, then ~pertaining to the viability of the- business and the potential for its restructure. The question as 't.o the time within which any such representation would operafe ·is again better assessed having regard to those mitters. It·~eems tb me, however, that the statement has the potential to found an estoppel. 10 Assuming the representation was likely to lead the customer 20 0 and Mr Thee into error, it is only likely to be held misleading or deceptive if the bank, at the time it was made, knew it to be untrue or made it recklessly. See Global Sportsmen Pty Ltd v. Mirrot Newspapers Limited (19ff4) 2 FCR 82. Whether the bank came under a positive duty to speak (as 30 to which see Rhone-Poulenc Agrochimie SA v. DIM Chemical Services Pty Ltd G98~ 12 FCR 477) perhaps requires more, if 0 that is necessary. On this issue also it seems to me that () the quality of the representation and the understanding and intentions of the parties are best tested with regard to all 40 of the background circumstances not presently before me and which might be the subject of cross-examination. Similarly, the question of what relief, if any, should in the circumstances be afforded under the Trade Practices Act can only really be answered after that inquiry. 50 I propose granting leave to defend. The action may warrant a speedy trial but I think this is best answered after I have 6 60 0 "· -- 6 of 7 -- 280693 jlk (Kiefel J) considered the balance of the applications concerning, amongst other things, the validity of the appointment of a receiver. Those applications are to be heard in the near future. I order that the costs of the application be reserved and I 10 also order that the parties have liberty to apply upon the hearing of the balance of the applications presently adjourned before the Court. 20 30 0 40 50 60 7 -- 7 of 7 --