Bank of New Zealand v Winfield & Winfield [1990] QSC 373

10 ) 30 40 50 60 r--.,.,,-.,•-~- .. ,-,.T .. •'------1- 1 ilE\'!SED COP!.i~: :::::s:JEO ~ Court PqJ('rtins; Bu~eau S&qc( .313 -~tG: If; II I ,o ...--~ ... - ""~-,..~· IN THE SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION No. 2324 of 1989 BEFORE MR. JUSTICE RYAN BRIS3A:rn, 7 NOVEMBER 1990 (Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Chief Court Reporter,Court Reporting Bureau.) BETWEEN: BANK OF NEW ZEALAND -and- MARK JEFFREY WINFIELD and LYNETTE WINFIELD JUDGMENT Plaintiff Defendants HIS HONOUR: I give judgment for the plaintiff against the defendants in the sum of $379,000.88. I dismiss the counterclaim. I order the defendants to pay the plaintiff's costs of and incidental to the action including any reserved costs to be taxed. I publish my reasons. - · , Al",Vt. Printer, Qld. 1 10 20 30 40 50 60 -- 1 of 33 -- IN THE SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION Before Mr. Justice Ryan BETWEEN: AND: BANK OF NEW ZEALAND MARK JEFFREY WINFIELD and LYNETTE WINFIELD JUDGMENT - RYAN J. No. 2324 of 1989 Plaintiff Delivered the Eighth day of November, 1990. CATCHWORDS: Banker and customer - Overdraft facility - Whether money advanced is repayable on demand - Liability to pay interest and charges - Interest payable after facility withdrawn - Damages payable if facility wrongly withdrawn. Counsel: Mr. C. Carrigan for Plaintiff Mr. P. Favell for Defendants Solicitors: Hill & Taylor for Plaintiff Baker & Johnson for Defendant Hearing dates: 6th - 10th, 13th, 16th and 17th August, 1990. -- 2 of 33 -- IN THE SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION BETWEEN: AND: BANK OF NEW ZEALAND MARK JEFFREY WINFIELD and LYNETTE WINFIELD JUDGMENT - RYAN J. No. 2324 of 1989 Plaintiff Delivered the Eighth day of November, 1990. By a specially endorsed Writ of Summons issued on 10th July, 1989 the plaintiff (B.N.Z.) claimed $316,644.43 being money payable by the defendants to the plaintiff for money lent by the plaintiff to the defendants and for money paid by the plaintiff for the defendants as bankers for the defendants at their request, and for interest agreed to be paid to be paid upon money due from the defendants to the plaintiff up to 7th July, 1989. It claimed also interest on the sum of $316,644.43 at the rate of 23.75 per centum per annum agreed to be paid by the defendants from 7th July, 1989 until payment or judgment. The relations between the plaintiff and the defendants began following a meeting between Mr. Winfield and an employee of the bank, Miss Kennedy, at a social function towards the end of 1986. Miss Kennedy was employed by the plaintiff from 1986 until January, 1988 in the retail section of the bank. She encouraged Mr. Winfield to bank with the plaintiff, which she said wa_s offering unsecured overdrafts liberally to attract customers. Mr. Winfield had told Miss Kennedy that he was involved in buying -- 3 of 33 -- 2 and selling shares and in large property transactions. Miss Kennedy suggested to Mr. Winfield that he open a cheque account with the bank and then~ apply for an overdraft. An application for a "hardworking cheque account" was made by the defendants. Mr. Winfield was given a document (ex. 11) which invited him as a "Hardworking Cheque Account Customer" to apply for an overdraft facility and for a B.N.Z. Visa Card. The application form which was undated is signed by the defendants. It contains a declaration in these terms:- "I/We agree to your usual terms for operating bank accounts including (but not limited to) those included. in 'Terms and Conditions', a copy of which I/We have perused. I/We understand that this application does not constitute an offer or acceptance of credit. Any offer by Bank of New Zealand Australia of B.N.Z. Visa Card in response to this application will be made subject to the terms and conditions under which Bank of New Zealand overdraft and/or Visa Cards are granted or issued and which may be amended from time to time. A copy of the current terms and conditions may be inspected at any branch of Bank of New Zealand Australia on request and a copy will accompany any Visa Card(s) offered or overdraft facilities granted by Bank of New Zealand Australia." Mr. Winfield said that in February 1987 Miss Kennedy told him that the bank was very impressed with his share trading and that she believed that she could obtain for him an overdraft for share trading in the amount of $70,000.00. He said that he did not ask for the facility but Miss Kennedy offered it to him and he was very happy to have it. I accept this evidence. On 27th February, 1987, a letter was sent on behalf of the plaintiff signed by Miss Kennedy as Senior Retail Banker to the defendants advising them that their application for a B. N. z. Smarter Cheque Account had been approved, and that a cheque an·d deposit books would be ready in approximately three weeks. The -- 4 of 33 -- 3 account number was 085786-02. The limit of $70,000.00 overdraft applied for had been approved. A diary note signed by Miss Kennedy dated 26th June records that Mr. Winfield requested that his overdraft be increased to $125,000.00 to the end of June at which time "we anticipate a reduction of the overdraft to the original approved limit". On a few occasions the limit of $70,000.00 had been exceeded but without demur by the plaintiff's officials. According to Mr. Winfield, Miss Kennedy spoke to him in March, 1987. She told him that his share trading abilities had been observed by "people upstairs", and that· the Bank wanted to support successful people. She said she thought she could arrange an overdraft of $500,000.00, and that she thought the Bank might want to do a deal with him if he got that sort of money. On 27th March, 1987, Mr. Winfield wrote to Miss Kennedy a letter which he said was written at her suggestion. He thanked her for the approval of the $70,000.00 overdraft facility, and stated that "perhaps after six months of successful trading with the use of this money, you may look to increase the limit so that I can secure bigger positions in the stock market I am looking to make in excess of $500,000.00 profit over a 18 month period in this market." In August, 1987, an application was made by the defendants for an overdraft of $500,000.00. According to Miss Kennedy, Mr. Gagen who was the retail banking manager suggested to her that she tell Mr. Winfield that he would be eligible for ·a further overdraft and he suggested the figure of $500,000.00. -- 5 of 33 -- 4 She suggested that amount to Mr~ Winfield. Miss Kennedy said that she had been told by Mr. Gagen that because of the size and nature of the loan, and in light of Mr. Winfield' s proven ability to make money in the share market, the bank would be looking to do some sort of deal with him. She communicated this to Mr. Winfield. She gave this evidence: "I know that when the terms and conditions were given for the $500,000.00 that there was some further terms and conditions that I was to tell Mr. Winfield about. I don't remember what they were because they didn't mean anything to me, but there were other terms and conditions attached to it, and they were quite above my head it was all to do with, I think, share trading which I didn' t understand anyway and never. did." ·She said she told Mr. Winfield about these terms and conditions and that he was to use another broker. She thought that at the time when she was advising Mr. Winfield of the availability or approval of the overdraft facility, she told him he could prove himself to t~e bank and lay a foundation for a long term joint stock venture share dealing with the bank. Mi. Winfield gave evidence that late in August Miss Kennedy told him that she had got the $500,000.00 for him and she had been instructed that he was to do a deal with the bank in order to get the "$500,000.00. She read over the deal from a piece of paper. She said that the $500,000.00 was to be broken up into two parts. The first $100,000.00 was his money or his part of the $500,000.00, and the further $400,000.00 was to be the funds . . provided by the bank as a joint venture share trading deal. He gave an account of what he claimed was said to him by Miss Kennedy about the joint venture share trading agreemeni. He said that Miss Kennedy told him that "people from upstairs -- 6 of 33 -- 5 would be ~n contact with me in due course and would ask me to enter into formal documentation covering the arrangements with the bank. I said I would do that." He admitted that nobody from the bank had contacted him regarding the execution of any joint venture share trading agreement. At the beginning of the trial, an application was made to amend the defence to include allegations that the proffering of an overdraft facility by the plaintiff to the defendants was on terms and conditions that the defendants entered into a joint venture profit sharing arrangement containing certain terms, and that the offer of the facility was accepted by the defendants on terms and conditions which included those relating to the joint venture profit sharing arrangement. I refused that application, for reasons I gave at the time, but without prejudice to any just claim the defendants may have based upon the matters set out in the amended defence. Having said that, I consider that I should not determine in these proceedings whether such an arrangement was made. I allowed evidence of the alleged arrangements to be given, so as to understand what the defendant alleged to be the context in which the facility was granted. However having heard that evidence I do not consider that it helps me in any way in determining the issues properly raised before me. I would add only that in the course of cross-examination, Mr. Winfield said that when he put in his defence to the writ, Miss Kennnedy pleaded with him not to mention the joint venture deal, and he had not done.so for that reason. He said that he told his solicitors about everything that had happened after the plaintiff insisted on going to -- 7 of 33 -- 6 trial. That evidence only" confirmed me in the opinion I expressed at the beginning of the trial that an adjournment should not · be ·granted to allow the defendants to amend the defence. On 31st August, 1987r Miss Kennedy wrote to the defendants as follows: II Re: Proposed Funding for Share Trading Further to our discussion in regard to the abovementioned I am pleased to confirm that facilitiestotalling $500,000.00 have been approved on usual banking terms as follows: Borrower: Winfield, Mark Jeffrey & Lynette Type/Purpose, Amount of Facility: $500,000.00 fluctuating overdraft for working requirements Security:- ( 1 ) First registered mortgage over residential property at 14 Talaga Street, Westlake (2) First registered mortgage over lot 15 Alice Dickson Drive, Montville. (3) General 'lien over share script portfolio (4) In the event of sale of either or both properties or any share script replacement security of a similar nature to be provided to fully cover facility or a reduced facility and subject to normal bank requirements. Interest fees: Fluctuating overdraft facility to be at bank's base rate plus two per cent. A fee of $25.00 will apply for each share script transfer. Special conditions: Interest or facilities will be charged monthly and must be fully covered by borrower. Costs: The borrower will upon demand reimburse Bank of New Zealand, or upon Bank of New Zealand's direction, allreasonable expenses incurred by Bank of New Zealand in -- 8 of 33 -- 7 connection with the preparation, execution~ delivery and stamping of this facility. Such expenses shall also include all proper out of pocket expenses and proper overheads of Bank of New Zealand relating directly to the administration and enforcement of the facility after the occurrence of any default by the borrower, and including proper fees and expenses of solici tars, accountants and other professional consultants. Reserve requirements: The Bank of New Zealand reserves the right to re-negotiate these facilities in the event of any changes occurring in the controls imposed by the Federal Government/Reserve Bank on the Australian Banking system such as to materially effect the pricing of this facility. Kindly indicate your acceptance of the arrangements as outlined above by signing and returning the duplicate herewith." The letter was signed by Miss Kennedy as Senior Retail Banker. On the letter the following notation occurs. "We acknowledge receipt of your letter dated 31 st August, 1987 of which this is a copy. Terms and conditions as outlined therein are accepted." This is signed by the defendants on 9th September, 1987. Miss Kennedy gave evidence that a document (ex. A for Identification) headed "The terms and conditions of your Bank of New Zealand. cheque Account come without any. fine print" was usually sent out with a letter of approval, but she did not remember if a copy was sent with the letter of 31st August. She admitted that on many occasions letters of approval were sent out without a copy of the document when she forgot to send them. Mr. Winfield said that when he received the letter of approval there was not accompanying it any other document. I am not satisfied that the document (ex. A) was sent t.o the defendants at the time when the letter of 31st August, 1987 was sent to them. -- 9 of 33 -- 8" In my opinibn the expression "usual banking terms" in the letter of 31st August, 1987 did not incorporate by reference banking terms of ·any document other than the letter itself. It was submitted for the.plaintiff that those words referred the defendants to the usual terms for operating bank accounts as stated in the declaration in the application for a hardworking cheque account, and that this in turn referred them to ex. A. I accept that the "terms and conditions" in the declaration were those set out in ex. A but I consider that a customer of the bank upon reading the letter of 31 st August, 1987 would be justified in reading it as a document in which the terms set out in the document were the "usual banking terms". The letter prepared by the bank should be read "contra proferentem" and so read it should be interpreted as stating within its confines the terms in which the facility was granted. Accordingly I refuse to admit ex. A into evidence. There was nothing in the letter of 31st August, 1987 which expressly stated when the money advanced would be repayable. In the absence of any express provision the question is whether the bank was or was not entitled to terminate the overdraft arrangement without giving reasonable notice. There are many statements in the cases to the effect that normali~ a bank is not entitled to close a customer's account without reasonable notice. In National Westminster Bank v. Halesowen Presswork (1972) A.C. 785 at p. 820 Lord Kilbrandon said that this was at least mainly for the protection of outstanding cheques. In Joachimson v. Swiss Bank Corporation (1921) 2 K.B. at 110 Atkin L.J. stated at p. 127:- -- 10 of 33 -- 9 "That the contract between a bank and its customer 'includes a promise to repay any part of the amount due against the written order of the customer addressed to the bank at the branch and as such written orders may be . outstanding in the ordinary course of business for two or three days, it is the term of the contract that the bank .will not cease to do business with the customer except upon reasonable notice." In the same case at p. 125 Warrington L.J. observed that: "It is well settled that a banker is not at liberty to close an account in credit by payment of the credit balance without giving reasonable notice and making provision for outstanding cheques." It does not however follow from this that a bank is not at liberty to terminate an overdraft facility, as opposed to closing an account, without giving due notice. In Rouse v. Bradford Banking Co. (1894) A.C. 586 Lord Herschell L.C. said at p. 596: "It may be that an overdraft does not prevent the bank who have agreed to give it from at any time giving notice that it is no longer to continue and that they must be paid their money. This I think at least it does: If they have agreed to give an overdraft they cannot refuse to honour cheques or drafts within the limits of that overdraft which have been drawn and put ,into circulation before any notice to the person to whom they have agreed to give the overdraft that the limit is to be withdrawn." In Paget's Law of Banking 10th Ed. at pp. 182-183 the learned editor states:- "An overdraft is repayable on demand and forms of charge over security invariably provide accordingly. Nevertheless the right to repayment on demand should be exercised so as not unduly to prejudice the borrower's interest in the shape for example of outstanding cheques drawn in the belief that the facility was available even if the limit of overdraft has already been reached." In support of the first sentence the learned editor quot~s an unreported decision by Goff J. in Titford Property Co. v. Cannon Street Acceptances Limited (1975) 22nd May in which he -- 11 of 33 -- 10 said ~hat an ~rdinary ove~draft can be called in at any time. In relation to the second sentence he quotes from the judgment of Gibson J. in Williams and Glyn' s Bank Limited v. · Barnes (1981) Com.L.R. 205 the following passage: "There is an obligation upon the bank to honour cheques drawn within the agreed limit of an overdraft facility and presented before any demand for payment or notice to terminate a facility has been given. That obligation however does not by itself require any period of notice beyond the simple demand. The bank may by the con tract be required to honour cheques drawn within the agreed facility before the demand for repayment or notice to terminate but still be free to require payment by the customer of any sums previously lent which will be increased by any further cheques which the bank must honour." Knowledge by the bank that the overdraft was to be used in order to trade in shares would not in itself suggest that the overdraft was available for a fixed time. It might be otherwise if an ove 1 rdraft was granted for a specific purpose which entailed its being available for a period of time. See Williams and Glyn's Bank Limited v. Barnes (1981) Com.L.R. 205. Accordingly I accept the allegation in the statement of claim that it was a term of the agreement made on 31st August, 1987 that the whole of the outstanding debit balance on the account would become immediately due and payable by the defendants to the plaintiff on demand. The arrangement made in August, 1987 provided for interest on the fluctuating overdraft facility to be at the bank's base rate plus two per cent. The interest was to be charged monthly and it was required to be fully covered by the borrower. In my opinion in the case of a continuing overdraf.t facility a reference to interest to be at the bank's base rate plus two per cent must be understood as referring to the bank's -- 12 of 33 -- 1 1 base rate as it va~ied from time to time. See Re City and Country Property Bank (1895) 21 V.L.R. 405 at pp. 410-411. It was submitted for the plaintiff that on the proper construction of the special condition it required the defendants . to make monthly payments into the account to ext.inguish the interest charged for that period. It was said that if interest was not to be paid monthly by the-defendants there was no need to state any such special condition. Interest could then have been credited to the overdraft account until such time as the account exceeded the overdraft facility limit. The submission for the defendant was that the effect of the provision was simply that if the facility still had credit available then that credit could be used to cover the interest. I read the clause as providing for the charging monthly by the bank of interest at its current base rate plus two per cent on the fluctuating overdraft facility. The borrower was entitled to pay the interest as it fell due but he was not required to do so provided that the total amount of his indebtedness to the bank did not exceed the limit of the facility. It is alleged in the statement of claim that the defendants operated on the overdraft facility account by withdrawing money provided by the plaintiff from 31st August, 1987 to on or about 13th March, 1989. The defendants admit that from time to time they drew cheques from the overdraft facility afforded them by the plaintiff between those dates. In October, 1987 as a consequence of a crash in the share market the bank required all accounts on which it relied on shares as security to be examined. Mr. Gagen was in 1987 the -- 13 of 33 -- 12 Senior Manager, Retail Banking in the plaintiff's employ. He said that he arranged an interview with Mr. Winfield in his offic~ to~ards the end of October. Mr. Winfield told him that his ·main asset was commission due to him from his employer, Ci tisi t"e Developments. He said that he had shares but money was owing on them to a stock broker and he gave Mr. Gagen a list of his shares (ex. 12). On 29th October, 1987, a letter was sent to Mr. Gagen from Citisite Developments (Citisite) confirming that Mr. Winfield was employed by it as manager and was a director. Part of his salary package was the participation in gross profits of all its developments in the form of a bonus payment equivalent to 1 5 per cent on the gross profit of a project payable on the project finalisation. It set out the :bonuses forecasted as payable to Mr. Winfield on the current projects. It informed Mr. Gagen that Mr. Winfield had advised it that the plaintiff required a mandate directive that all bonus'payments be forwarded directly to the plaintiff in favour of Mr. Winfield' s bank account No. 08578602 immediately they became payable and stated that it required a letter from the plaintiff authorising it to do so. According to Mr. Gagen this letter was in accordance with the discussions he and Mr. Winfield had held. He gave this letter to the plaintiff's security office. Mr. Winfield gave ·evidence that he met Mr. Gagen in late October and at his request otitiined his financial position to him. · He "told Mr. Gagen that he expected over $1 million in commissions to come to him over the next 12 or 18 months. They discussed the assignment of those commissions as they came into -- 14 of 33 -- 13 the bank. Mr. Winfield said .that Mr. Gagen told him to assign the commissions and as they came in they would pay out the debt. Mr. Winfield agreed to do· this. Mr. Gagen then said "We will also make sure that there is sufficient time for you to comfortably pay the bank.without any problems from the bank" and suggested January, 1990 .. Mr. Winfield agreed. I do not accept that Mr. Gagen made this statement. Mr~ Gagen said that following receipt of the letter from Ci tisi te dated 29th October, 1987 a deed of assignment of commissions was drawn up which was signed by Ci tisi te and returned to the bank. That deed.dated 5th November, 1987 is annexed to a subsequent deed made on 17th December, 1987 and is part of ex. 16. By it Mr. Winfield agrees to assign to the bank the amounts of all bonuses which may become due .and p1 ayable by Citisite to him under the terms of his employment agreement at a time in the future as a result of the finalisation by Citisite 6f certain specified building projects. Citisite was to pay the bonuses into a bank account in the name of Mr. Winfield as nominated by the bank. The deed was to remain unconditionally effective up to 1st January, 1990 or until Citisite had paid the sum of $300,000.00 to the nominated bank account, which ever was · the earlier.· On 6th November, 1987 Mr. Gagen wrote to Mr. Winfield (ex .. 14) . He advised that the present position of the account of the defendants was that there was a debt of $28.00 in account 8578600 and of $496,910.47 in account 8578602. It set out a list of securities held and required additional top up security or debt reduction as it was apparent that facility utilisation -- 15 of 33 -- 14 had exceeded 65 per· cent of security value. It requested provision of additional share script with market value of around $609,000.00 by Wednesday, 11th November, 1987. Alternatively it stated it would be ready to consider the charging of other types of security which he·may have available. According to Mr. Winfield he asked Mr. Gagen why he had sent the letter of 6th November when he had already brought back to his office an executed deed setting out the assignment and bonuses he was to receive from Citisite. Mr. Gagen replied that he had dictated the · letter some time earlier and that the security he spoke about in .it was in fact the commissions and that it was a formal letter. I accept that this letter was probably dictated before the deed dated 5th November was brought to Mr. Gagen' s office, but the fact that the letter did not contain any reference to an extension of time until January 1990 to repay the bank confirms the conclusion I have reached that Mr. Gagen did not say that he would make sure that the defendant would be given sufficient time to pay the bank. No challenge was made to the statement that there was a debt in account 8578682· (the 02 account) of $496,910.47. Mr. Gagen said that he met Mr. Winfield in his office in mid-December. He agreed that this could have been on 14th December. Present also was Mrs. Bilsborough who was in the plaintiff's corporate division. The defendant's account had been transferred from· the retail division to the corporate division. According to Mr. Gagen, Mr. Winfield requested release of his share· script. Mr. Winfield was told, that the bank would be prepared to release the script provided the -- 16 of 33 -- 15 Citisite agreement was increased to-a value to cover the release of the script. He also required an updating by Mr. Winfield of his financial position and the return of the bank visa card. That updating was provided on 16th December, 1987 (ex. 15). Mr. Gagen's account was supported by that given by Mrs. Bilsborough. On the same day Mr. Winfield wrote to Mr. Gagen (ex. 3). He referred to the discussions with him·at Mr. Gagen's office -on that day and requested return of all scripts other than those of Eurolynx Limited. He stated that he was due to receive commissions from the sale of two projects and that the moneys would automatically be forwarded to the _bank.- He added:::·that "as I have always maintained I will honour the tdtal debt with your bank and eliminate the debt as soon as practicably possible." According to Mr. Winfield he gave to Mr. Gagen on l7t_h December the executed deed and Mr. Gagen gave him the script that he wanted~ Mr. Gagen also asked him for the bank's credit card and he gave that to him. Exhibit 16 purports to be a deed made on 17th December, 1987 between Bank of New Zealand, Mark Jeffrey Winfield and Citisite Developments. It recites that Mr. Winfield has agreed to cause to be paid to the bank certain bonuses which may become payable to him by his employer, Ci tisite. It contains six clauses. First Mr. Winfield irrevocably assigns to the bank the amounts of all bonuses which may become due and payable by Citisite to -himself under the terms of his employment agreement at a time in the future as a result of the finalisation by Citisite of the following building projects: -- 17 of 33 -- 16 Toowong Court, Rocklea, Breakfast-Creek, Quay Towers and Moorooka Secondly, Citisite shall only pay these bonuses into a bank account in the name of Mr. Winfield as nominated by the bank and not to any other account whereby Mr. Winfield is not the beneficiary of the funds in that account. Thirdly, Citisite by its execution of the deed acknowledges that it has received notice of the assignment by Mr. Winfield and agrees to pay the bonuses in the manner outlined. Fourthly the deed shall remain unconditionally effective for the period up to 1st January, 1990 or up until Citisite have paid the sum of $500,000.00 to the nominated bank account whichever is the earlier. Fifthly on 1st January~ 1990 or when Citisite have paid bonuses to an amount of $500,000.00 in the said manner, this deed shall be deemed to be at an end and shall have no further force or effect without notic"e of any of the parties referred. Neither of the parties are obliged to acknowledge the completion of obligations as set but therein. Sixthly thi deed cancels and replaces a similar deed between the parties dated 5th November, 1987, a copy of which is annexed. The document is signed by or on behalf of all parties but is not sealed. It is alleged in para. 11 of the defence that the terms of an agreement made between the plaintiff and the defendant during 19 8 7 included: (a) an agreement by the defendant to give additional security to the plaintiff. -- 18 of 33 -- 17 (b) an arrangement that the plaintiff would not call up the overdraft facility provided by it to the defendant without first having - ( i) exhausted the rights procured by it pursuant to a deed made on 17th December, 1987. (ii) giving the defendants reasonable notice of intention to make demand on them for the repayment of the overdraft facility. (c) an agreement whereby the plaintiff would notify the defendants of each change proposed by it - (i) in the base rate of interest ( ii) and of the date when it proposed that any new or varied rate of interest would apply to the overdraf~ facility. In my opinion the bank had no right to ;require the defendants to provide any security additional to that specified in the letter of 31 st August, 1987 as a condition for the continuance of the overdraft facility. Its remedy .. if the defendants refused to provide further security would be to terminate the agreement. I regard it as correct to say that the agreement made on 17th December, 1987 was one by which the ~efendants agreed to give additional security to the plaintiff. I am however unable to read it as including an arrangement that the plaintiff would not call up the overdraft facility provided by it to the . defendants without first having exhausted the rights procured by it pursuant to the document made on 1 7th December, 1987. That document is an agreement by which Citisite agrees to pay certain bonuses payable to Mr. Winfield into a -- 19 of 33 -- 18 bank accourit nominated by the bank- and Mr. Winfield agrees to pay to the bank those bonuses. The agreement provides also for the duration of those obligations. There is nothing in it.which expressly or impliedly limits the right of the plaintiff to call up the overdraft. Even if Mr. Gagen made the statements in their conversation in late October that Mr. Winfield said were made, I would be unable to ·treat this as amounting to the making of a collateral contract or as making the obligations under the document of 17th December, 1987 conditional upon an undertaking by the.bank not to terminate the facility until January, 1990. In my opinion their conversations were concerned with the negotiation of the terrrfs of an arrangement for - the provision by Mr. Winfield of further security following the collapse in value of existing securities in October, 1987 and the terms of that arrangement ~ere ~ully set out in the document executed on 17th December, 1987. J That document: was a valid and effective contract and ~~trinsic evidence is inadmissible to add to vary or contradict its terms. I ~an see nothing in the letter of 31st August, 1987 or the document of 17th December, 1987 from which it can be inferrec::i that · the plaintiff agreed to notify the defendants of each change proposed by it-in its base rate of interest and of the date when it proposed that any new or varied rate of interest would apply to the overdraft facility. Mr. ·Evans who is manager of the Corporate Di vision of the plaintiff, took over management of the accounts of the defendants in Januat'y, 1988~ At the end of January, 1988 he -- 20 of 33 -- 19 noted in a report that a bonus payment of $58,000.00 expected on 31st January, 1988 had not been received as the sale of a property ·had been deferred. until 7th March, 1988. The defendants had sold their land at Montville for $100,000.00 with settlement due on 18th February and stated that all proceeds would be directed in reduction of their debts. Mr. Winfield had stated that he had obtained refinance of his liabilities and would organize that clearance by 28th February, 1988. In a report at the end of February, 1988 he noted that the proceeds of the sale of the Montville land in the sum of $89,846.Q0 was directed in reduction of the defendants' debt and then Mr. Winfield had advised that he would not be refinancing the debt and:~ that it would be repaid in full by company bonuses . Mr. Evans said that he contacted Mr. Winfield .in May in relation to the interest accruing monthly on the account of approximately $6,000.00. Mr. Winfield said that he was unabie to cover fully that level of i:n.terest payment. He told Mr. Winfield that he would recommend to the bank that paymepts of $1,000.00 per month being part payment of interest accruing on the loan be accepted from the defendants. On 8th June, 1988 Mr. Evans wrote to Mr. Winfield (ex. 22) confirming that the bank was prepared to accept monthly repayments of $1,000.00 pending a further review by 31st August, 1988. Certain monthly payments were made but not after December, 1988. On 26th January, 1989 Mr. Winfield.informed Mr. Evans that he was no longer working for Citisite but he said .. that he was entitled to profit from certain Citisite developments. He sai°d that he had purchased five acres at Westlake Drive, Westlake for -- 21 of 33 -- 20 $250,000.00 and that upon completion of the erection of a house on the -1arid it would be worth $1,800,000.00. He said also that he had placed his house at Tolaga Street, Westlake on the market and expected to net $170,000.00. He said that in the event that funds were not received from Citisite within six weeks to clear the debt he would "see the bank right". After leaving Citisit~ Mr. Winfield took up the position of director of Dominion Bond Developments Limited. In February, 1989 Mr. Evans advised Mr. Winfield that the bank required repayment or refinance by 31st March, 1989. On 23rd February, 1989 he wrote to the defendants and stated that the bank had agreed to extend credit facilities on certain ~pecified terms and conditions. These were that the overdraft limit was $480,000.00, the interest rate was to be the B.N.Z. base rate (presently 17.75 per cent plus a margin of 3.0 per cent per annum), and the loan was to be cleared in full by 31st March, 1989. Th~ securit~ was to include a registered second bill of mortgage over property situated at Lot 1 Loff's Road, Westlake. The mortgage documents were prepared and held at the bank. On 28th February, 1989 Mr. Evans telephoned Mr. Winfield as the defendants had not called to execute the mortgage. He was told that Mrs. Winfield did not-want to be left in the position where the barik could sell their almost completed Westlake property, if Citisite ~elayed settlement beyond 31st March, 1989 but he said that she indicated that she would execute a mortgage provided they were given until 31st May, 1989 to clear the debt. -- 22 of 33 -- 21 Next day Mr. Winfield agreed to lodge £urther security by way of a lien over $130,000.00 worth of Dominion Bond Script and in addition to meet the monthly interest cost on the present debt. He told Mr. Evans-that settlement was due on the Citisite property on 31st March, 1989 and that he believed that Citisite's Board would make him an offer after a meeting on 10th March. He said that the defendants' house in Talaga Street, Westlake would be put to auction on 1 st April and that he believed that it would sell for in excess of $175,000.00. Mr. Winfield gave an account of his conversation with Mr. Evans. He said that at all stages he indicated that he would not give a second mortgage so as to put the bank in a positionwhere the bank could sell him out without giving him 12 months in which to clear the debt. I do not accept this evidence. On 3rd March, 1989 a without prejudice letter was received from Mr. Winf~eld. After receipt of that letter demands were served on the defendants for repayment of the debt. Counsel for Mr. Winfield waived the privilege at the trial and the letter was tendered (ex. 37). The demand dated 13th March, 1989 was for the payment forthwith of the sum of $450,641.03· being the amount of the overdrawn current account plus interest and charges ace.rued as at that date as detailed in a statement thereunder. The bank also demanded payment ·of interest on the amount. demanded accruing thereafter at the rate charged by the bank from time to time until the date of payment. The statement was in these terms: -- 23 of 33 -- Ov~rdrawn-current account M.J. and L. Winfield 22 Plus accrued interest from 1.3.89 -to today Total $447,210.38 $3,430.65 $450,641.03 At the end of March, 1989 the principal amount. due on the 02 account as shown in the plaintiff's records was $455,420.00. On 8th April, 1989 the Talaga Street, Westlake house was sold for $150,000.00. On 10th May a deposit was made of $145,624.00 being the proceeds of the sale of the Talaga Street property. On 19th May, 1989 a meeting was held at which Mr. Winfield and Mr. Samaradziya, Mr. Mark Ferguson ( the Assistant. Manager of the bank) and Mr. Evans were present. According to Mr. Evans th& meeting was held to discuss a proposal that B.N.Z. become bankers to Dominion Bond. He said there was no discussion at that meeting about Mr. Winfield's personal 02 account. Later he told Mr. Winfield that the bank was not interested in becoming Dominion Bonds' banker. Mr. Evans said that in July, 1989 he received a letter frqm Mr. Winfield (ex. 33). This referred to correspondence Mr. Winfield had received from the plaintiff's solicitors which he claim was "somewhat inconsistent" with the arrangement made with him in May. He stated: "When we came to your offices our agreement with youwas that the amount owing was to be repaid by no later than May, 1990. This agreement. was based on the moneys owed to myselfby Citisite Developments. If these arrangements are not honoured by the bank we will institute appropriate injunctions preventing the bank taking further action. Mr. Evans as you would recall there was a witness to this verbal agreement." -- 24 of 33 -- 23 Mr. Evans said he had made no such arrangement in May, 1989. He stated that he had later received a telephone call from Mr. Winfield and he told Mr. Winfield that he was upset about the false allegation in May. He claimed that Mjr. Winfield replied that he had to make those allegations as otherwise the bank would have gone ahead and he and his wife would be out in the street. According to Mr. Winfield at the meeting on 19th May, Mr. Evans told him that he would make sure that the bank did not do anything to hurt him. He said that Mr. Evans said "I will keep the bank from doing anything about this and I will make sure that they don't press you for at least another 12 months because~obviously Citisite will pay under the arrangements we have with them and the only way we are going to get our money is via that method." Mr. Winfield' s account of this discussion was apppinted generally by Mr. ·samaradziya who was at the time the .. Chief Executive Officer of Dominion Bond. I do not accept the evidence that there was any discussion of Mr. Winfield' s personal dealings with the bank . at this meeting and in particular the evidence that Mr. Evans would ensure that the bank did not press him for the money owing until May, 1990. In ex. 1 and also in ex. 67 there are included bank statements which purport to establish that at 13th March, 1989 the debt of the defendants to the bank in respect of the 02 Account were $450,641.03. This amount is comprised of a figure of $447,210.38 which is shown as owing on 26th February, 1989 -- 25 of 33 -- 24 plus interest on that amount until 13th March. It was proved that the documents in ex. 1 are ordinary books of account of the bank as defined in s. 85 (1) of the Evidence Act 1977, such evidence be'ing given by Mr. Maitland who is the credit manager with the bank and accordingly the entries in them are evidence of the matters, transactions and accounts recorded in them. Mr. Maitland admitted that he had not checked the entries in the bank statements to see if they were correct but by the terms in s. 84(1) of the Evidence Act 1977 the entry is itself evidence of the matters recorded. It was submitted that certain charges were improperly included having regard to the representation in ex. 11 that "they' re free". But that refers only to cheque books; other banking services are st~ted to be available at usual rates. There is nothing in the letter of 31st August, 1987 which refers to bank charges and fees. In my opinion, it would be an implied term of the agreement that the bank would be entitled to make charges which are imposed by statute or are usual charges for operating bank accounts, including overdraft facilities. The bank was therefore entitled to include such charges as bank account debit tax, account keeping and transaction fees charged by the bank, overdraft fees and unused limit fees. Such fees had already been charged, without any query by the defendants, prior to 31st August, 1987. However, Mr. Maitland was unable to give any explanation for the inclusion of items referred to as "sundry barik charges", and accordingly they must be excluded. Subject to the deduction of the amount of $300.00 imposed by way of sundry bank deposits on 31st May, 1988 and interest -- 26 of 33 -- 25 accrued on it, I am satisfied that at 13th March, 1989 the money payable by the defendants to the plaintiff was the amount it claimed, namely $450,641.03. The effect of the issuing of the notices of demand was, in my opinion, to terminate the overdraft facility. In these circumstances, I consider that the provisions in the letter of 31st August, 1987 in relation to interest ceased to be applicable I consider further that an appropriate rate of interest from that date until judgment is 19 per cent. Accordingly I calculate the amount owing by the defendants to the plaintiff as follows:- for - Amount claimed in notices of demand Less sundry bank charges and interest thereon Interest thereon at 19 per cent for 19 months Total Less: Payment of $15,092.65 plus interest thereon of $4,540.37 $450,641.03 347.50 450,293.53 135,468.30 585,761.83 Payment of $145,624.85 plus interest thereon of $41,503.08 206,760.95 $379,000.88 The defendants have counter-claimed against the plaintiff (a) an injunction rest~aining the ~laintiff from engaging in conduct in breach of s. 52 of the Trade Practices Act; -- 27 of 33 -- 26 (b) a declaration that the plaintiff is by its conduct precluded from relying on the notice of demand made on the defendant stated 13th March, 1989; (c) damages for breach of -contract; ( d) damages for breach of s. 5 2 of the Trade Practices Act. Particulars were given by the defendants of their counter-claim. It is alleged:- (1) the defendant Mark Winfield has and is still unable to obtain personal financing because of proceedings issued by the Bank of New Zealand. (2) as a consequence thereof the defendant, Mark Winfield was required to sell shares in Tracer Pty. Ltd. to pontinue his business and personal activities. Particulars of Sale 15.12.89 - 10 shares to Zodig Pty. Ltd. at $10,000.00 per share 1~.12.89 - one share to Scotwell Pty. Ltd. at $20,000.00. 15.12.89 - one share to Morabay Pty. Ltd. at $20,000.00 8.5.90 - one share to Walplace Pty. Ltd. of $50,000.00. (3) the current market value of such shares is $50,000.00 per share. (4) the defendant, Mark Winfield has therefore suffered a net loss of $460,000.00 given the current market value of shares in Tracer Pty. Ltd .. I have rejected the claim set out in para. 11 of the defence as to the terms of the agreement made between the plaintiff and the defendants during 1987. It follows that I -- 28 of 33 -- ' ! ~ 27 reject the· allegation that any representations made by the plaintiff were misleading and deceptive or tended. to mislead or deceive. I shall however assess damages for breach of contract and for breach of s. 52 of the Trade Practices Act on the assumption that I am incorrect in concluding that the defendants are not entitled to any remedy against the plaintiff and that contrary to my opinion the plaintiff was obliged not to call up the overdraft facility without first having exhausted the rights procured by it pursuant to the deed made on 17th December, 1987 and to give the de£endants reasonable notice of its intention to make demand on them for the repayment of the overdraft facility. I have assessed damages on the ground submitted by the defendants that the plaintiff had promised not to call up the overdraft facility until 1st January, 1990 or until Citisite had paid bonuses· in the amount of $500,000.00. The measure of damages will be that loss which resulted from the breach which was reasonably foreseeable as liable to result from it. The submission for the defendants is that Mr. Winfield had to sell shares which he otherwise would not have sold in order to exist and meet his obligations and that he_ thereby incurred loss. He was forced to do this because the issuing of the writ had the consequence that the defendants were unable to raise loan moneys which Mr. Winfield otherwise would have been able to do. It was foreseeable that the issue of the writ would have this consequence since it was known that the issuing of the writ .would be published among credit providers. Mr. Winfield gave evidence that after he left Dominion Bond in August, 1989 he took up a 50 per cent share holding in Tracer -- 29 of 33 -- 28 Pty. Ltd. and he took up an executive role with Thomsen Electronics. Tracer Pty. Ltd. is a company which owns 100 per cent of .the product and marketing rights to a technology called Tracer which he described as a motion controlled computer logic techncilogy. Thomsen Electronics Pty. Ltd. hold the intellectual property rights but all other rights have been transferred to Tracer Pty. Ltd. for ten years. The minutes of Tracer Pty. Ltd. for 13th November, 1989 record that by an agreement with Mr. Mark Winfield of Tracer 50 per cent of Tracer Pty. Ltd. had been offered to him at a cost of $150,000.00 to be paid in full before the end of November, 1989. Upon receipt of total payment, share transfers would be executed. In addition and as a consideration for 50 per cent equity in the company Mr. Winfield was to loan Tracer Pty. Ltd. a further sum of $100,000.00 be~ng for ~ssential working capital. This loan was to be paid back from the first income received by Tracer Pty. Ltd. Mr. Winfield paid for the shares and subsequently share certificates were issued to him. A receipt for the $150,000.00 from Mark Winfield to Thomsen Electronics Pty. Ltd. for 50 shares in Tracer Pty. Ltd. was tendered (ex. 51). Mr. Winfield gave evidence that he made several . applications for finance after the writ had issued but the applications were unsu6cessful. He said he wanted to raise funds to purchase his share holding in Tracer Pty. Ltd. to re-arrange his financial affairs and to give him something to survive with. However in cross-examination Mr. Winfield admitted that he· had made · certain successful applications fo·r finance since July, 1989. These were to the National Bank at -- 30 of 33 -- 29 Hamilton for an overdraft of $100,000.00; to the State Bank of New South Wales for a visa card for $10,000.00; and to the Natio:n.al Australia Bank for a Mastercard of $10,000.00. In November, 1989 he applied to Farrow Corporation for a loan of $1 .74 million in order to pay out a loan of about $900,000.00 to Elders Finance which had the first mortgage over his Westlake home and this application was successful. In addition Australian Guarantee Corporation became a lender to him when it took over his personal liability of about $50,000.00 from Equiticorp. I am satisfied however that Mr. Winfield experienced difficulties in obtaining finance which he had not experienced prior to the issue of the writ. The fact that the writ had been issued was noted in the files of the Credit Reference. Association of Australia Limited which is a licensed national credit reporting agency. It operates as a member owned organisation and its members consist of major finance companies, bank retailers and wholesalers and other licensed credit providers. When an individual applies for credit at any of the member institutions, the institution reports to the Association and does a credit reference on the individual's company. The files of the Association included under the heading of writs and summonses, the notation "date of writ - 10 July, 1989; Creditor - Bank of New Zealand; Amount $316,644.00; Court - Supreme Court; Debtor - M. and L. Winfield." I am satisfied that the entry of this note in the Association's file about the issuing of the writ contributed to Mr. Winfield's difficulties in obtaining finance. -- 31 of 33 -- 30 Mr. Winfield said that to meet his obligations to Thomsen Electronics for the acquisition of the shares in Tracer Pty. Ltd. and-to start paying the $100,000.00 he had to sell some of his share holding in Tracer Pty. Ltd. He said that he would not have sold those shares at that time if he was not required to raise the money and I accept that this is so. The shares had been sold to Mr. Winfield on 14th December at $3,000.00 a share. He sold 10 shares to Zodig Pty. Ltd. at $10,000.00 per share on 15th December, 1989 and one share each to Scotwell Pty. Ltd. and Morabay Pty. Ltd. on the same day for $20,000.00. In May, 1990 Mr. Winfield sold one share for $50,000.00 to Walplace Pty. Ltd. but on terms by which he agreed to buy the share back from the purchaser for $100,000.00 in May, 1991 if the purchaser so desired. It was submitted for the plaintiff that Mr. Winfield had made no loss on the sale of the shares but instead had made a substantial profit in respect of each of the sales. He had paid $75,000.00 for 25 shares, that is, $3,000.00 per share on average on 14th December, 1989. He had then sold 10 shares to Zodig Pty. Ltd. very shortly afterwards for $10,000.00 each. He had sold two other shares at the same time for $20,000.00 each. In the case of the sale to Walplace Pty. Ltd. the sale has not been completed and the purchase price has not been paid. The transfer was as I have stated on terms which provided for the repurchase of the share for $100,000.00 at the option of the purchaser. Evidence was given by an accountant, Mr. Peldan that at all times between the issue of the shares in Tracer Pty. Ltd. at -- 32 of 33 -- 31 $1.00 each and the present time the value of each of its 100 issue shares could not exceed their par value of $1.00. He gave detailed reasons for that conclusion which is set out in a report (ex. 92) but it emerged that he had not made any enquiries as to the marketability of Tracer or as to its stage of development. I accept that the sales of the shares were arms lengths transactions, but I am unable to accept that the evidence establishes that the current market value of the shares is $50,000.00 per share. The evidence adduced to support that figure consisted of testimony indicating that Tracer has considerable potential to make profits in the future, but no negotiations with prospective manufacturers have been finalised nor have arrangements been made for the distribution of the property. I am unable to conclude on the evidence placed before me that Mr. Winfield suffered any loss as a consequence of having to sell his shares in Tracer Pty. Ltd. I give judgment for the plaintiff against the defendants in the sum of $379,000.88. I dismiss the counter-claim. I order the defendants to pay the plaintiff's costs of and incidental to the action including any reserved costs to be taxed. -- 33 of 33 --