Bank of Western Australia Limited v Phil Zhanming Luo & Anor

1. The plaintiff is entitled to judgment for its debt and judgment for possession of the Property. DECISION : 2. The cross claim is to be dismissed. 3. The defendants are to be ordered to pay the plaintiff's costs of the proceedings. 4. These orders are to be stayed until 14 July 2010.

CATCHWORDS : Banking - Series of defences put forward by defendants including claims that loan contract was unenforceable or void or voidable - Non est factum doctrine - Unconscionability/undue influence - Duties of care owed by the Bank - Ordinarily a duty of care will not be imposed in a Banker/Customer relationship

LEGISLATION CITED : Australian Securities and Investment Commission Act 2001 (Cth) Trade Practices Act 1974 (Cth)

Allcard v Skinner (1887) 36 Ch D 145 Branwhite v Worcester Works Finance Ltd [1969] 1 AC 552 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 Commonwealth Bank of Australia v Smith (1991) 42 FCR 390 Esanda Finance Corporation Ltd v Spence Financial Group Pty Ltd [2006] WASC 177 Ford (By His Tutor Watkinson) v Perpetual Trustees Victoria Ltd (2009) 257 ALR 658 Galadriel Lothlorien Pty Ltd v Station 1 Pty Ltd [2008] NSWSC 91 Lomsargis v National Mutual Life Association of Australasia Ltd (2005) 2 Qd R 295 Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 CASES CITED : National Australia Bank Ltd v Nemur Varity Pty Ltd (2002) 4 VR 252 NMFM Property Pty Ltd v Citibank (No 10) (2000) 186 ALR 442 Permanent Trustee Company Limited v Gillian O'Donnell [2009] NSWSC 902 Petelin v Cullen (1975) 132 CLR 355 Politarhis v Westpac Banking Corp [2009] SASC 96 Radin v Commonwealth Bank of Australia [1998] FCA 1361 Saunders v Anglia Building Society (Gallie v Lee) [1971] AC 1004 Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd [1986] AC 80 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 Tomlin v Ford Credit Australia Ltd [2005] NSWSC 540

Bank of Western Australia Limited (Plaintiff) PARTIES : Mr Phil Zhanming Luo (First Defendant) Mrs Min Li Luo (Second Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

2009/298769 Bank of Western Australia Limited v Phil Zhanming Luo & Anor JUDGMENT The proceedings 1 These proceedings are brought by the Bank of Western Australia Ltd against Mr Phil Zhanming Luo and his wife Min Li Luo. 2 The bank claims that the defendants are indebted to it pursuant to a loan of $2,200,000 advanced on 20 June 2008. Pursuant to a mortgage granted by the defendants to the plaintiff over 13 Ryrie Street, Mosman, NSW, the plaintiff claims to be entitled to take possession of the property and to sell it. The defendants were joint tenants of the material property. 3 The defendants take issue with the Bank's alleged entitlement on a number of grounds. The matters put in issue by the defendants include:

Whether the loan contract entered into in October 2008 is unenforceable or is void or voidable and liable to be set aside, as the case may be:

(a) because it was entered into in the exercise of undue influence by the plaintiff upon the defendants, or

(b) because it was entered into in circumstances which were unconscionable and because it would be unconscionable to enforce the mortgage, whether under general law or pursuant to section 51AA of the Trade Practices Act 1974 (Cth) (TPA).

Whether the plaintiff's conduct and representations in and in relation to obtaining the execution of the loan contract entered into in October 2008 and the mortgage entered into in October 2008 was misleading and deceptive conduct in contravention of section 52 of the TPA and whether the contract of loan and mortgage should be set aside or the subject of other relief pursuant to section 87 of the TPA. [I accept that the claim put forward and alleging contraventions by the bank of section 52 of the Trade Practices Act should probably be understood to be a claim for contravention of section 12 DA of the Australian Securities and Investment Commission Act involving as it does a financial service]

Whether, if the mortgage of October 2008 is void or voidable or unenforceable, the mortgage entered into in June 2008 remains binding upon the first defendant or has been abandoned by the plaintiff.

Whether, if the contract of loan and mortgage entered into in October 2008 are not binding upon the defendants, the loan contract and mortgage entered into in June 2008 should be rectified so as to state that both defendants would provide a mortgage over their property as security for the loan.

Whether, by reason of the facts and matters and relief claimed in the Cross-Claim and Commercial List Cross-Claim Statement, the plaintiff as cross-defendant is liable to the defendants as cross-claimants in an amount in excess of $2,375,759.87 - the amount claimed by the plaintiff to be owing to it by the defendants (not including interest or charges accrued under the loan contract). Further, whether it would be inequitable for the plaintiff to be permitted to proceed to enforce the amount claimed without setting off any such liability owing to the defendants. . The evidence before the Court 4 The bank relied upon affidavit evidence called from:

(i) Mr Ewens the state manager-Broker Sales for the plaintiff;

(ii) Ms Hyde a partnership manager-Brokers Sales for the plaintiff;

(iii) Mr Norrish a product strategy manager-Mortgages for the plaintiff;

(iv) Ms Wilson a retail recovery officer for the plaintiff;

(v) Mr Banerjee a secured recovery officer for the plaintiff;

(vi) Mr Wooldridge a licensed process server. 5 Early in the hearing the bank made clear that Mr Ewens and Ms Hyde were present against the event that the defendants would seek to cross-examine them. Mr Ewens was called and very briefly cross-examined. There was no indication forthcoming from the defendants suggesting that they wished to cross-examine Ms Hyde. However after the defendants' case had been closed the defendants indicated a desire to recall Mr Ewens to be further cross-examined, and also to now cross-examine witnesses. Mr Ewens was unavailable but Ms Hyde was able to be located. Although this procedure was out of the ordinary, in the circumstances the Court permitted the late cross-examination by the defendants of Ms Hyde. 6 The evidence called by the defendants comprised affidavits by Mr Luo and by Mrs Luo. Who were Mr and Mrs Luo? 7 Mr Luo, was born in China in 1963. 8 Mrs Luo, was born in China in 1958. 9 They immigrated to Australia in 1988. 10 Mr Luo speaks and reads English reasonably competently. Mrs Luo speaks and understands a little English, but is more comfortable speaking her native language, Mandarin. 11 In 1994 the defendants established a textiles business known as Luois Pty Ltd. They were both the directors and only shareholders in that company. Sometime later they established a petroleum products business known as Worldwide Wholesalers Pty Ltd. Mrs Luo was the sole director and shareholder of that company. The facts 12 It is convenient to commence with the facts established on the evidence before the Court.

i. In June 2003 the defendants purchased as joint proprietors a residential property located at 13 Ryrie Street, Mosman (Property) for $2.55 million. The purchase was partially funded by a loan from the Commonwealth Bank of $2 million, secured by a mortgage over the Property: CB 196 - 199.

ii. In July 2006 the defendants refinanced the loan with the National Australia Bank, again secured by a mortgage over the Property: CB 202.

iii. In May 2008 the second defendant, Mrs Luo, noticed some newspaper and magazine advertisements for a mortgage broker known as Asset Mortgage Team: CB 242 - 244. Mrs Luo telephoned Jeanette Lee of Asset Mortgage Team, who said that Bankwest was offering loans at a rate below the market.

iv. Later in May 2008, the defendants signed an application form for a loan of $2.8 million from the plaintiff Bank, to be secured by a mortgage over the Property. The bulk of the loan was intended to refinance the defendants' existing debt to the National Australia Bank of approximately $2.7 million: CB 1 - 10. The application was submitted to the Bank by Ms Lee on behalf of the defendants.

v. On 11 June 2008 the defendants met with Ms Lee and executed four loan agreements (one of which was for $2.2 million and shall be referred to as the June Contract) for a total advance of $2,820,000, as well as a mortgage over the Property (June Mortgage): CB pgs 12 - 31, 42. The loan agreements and the mortgage nominated Mr Luo as the mortgagor, but erroneously omitted to also nominate Mrs Luo as a co-mortgagor. This error was not discovered until later.

vi. On 16 June 2008 Ms Lee sent an email to an officer of Bankwest, Anita Hyde, requesting that the Bank telegraphically transfer $50,000 of an anticipated surplus in the loan funds to a Bank of China account held by the defendants' company, Worldwide Wholesalers Pty Ltd (WW): CB 40.

vii. On 17 June 2008 Ms Lee sent an email to another bank officer, Carla Rizzo, stating that the defendants wanted the surplus loan funds on the same day as settlement: CB 40. Later that day, Ms Lee sent a further email to Ms Hyde, amending the amount to be transferred from $50,000 to $46,000: CB 39.

viii. On the afternoon of 19 June 2008, the refinance of the loan as between the NAB and Bankwest occurred. Bankwest tendered to the NAB a cheque for $2,752,460.13 in return for which it received a discharge of NAB's mortgage and the certificate of title for the Property: CB 41A.

ix. On Friday 20 June 2008 Bankwest caused $46,015 to be telegraphically transferred to WW's Bank of China account: CB 42B. The funds became available for drawing from the Bank of China account on Monday 23 June 2008: CB 57, 60.

x. In around August 2008 the Bank's officers became aware of the error in the June Mortgage because, of course, it was unable to be registered in that form: CB 62. This led to corrected versions of the loan contracts and mortgage being sent to the defendants on 2 and 4 September 2008: CB 64, 65.

xi. On 3 October 2008 the defendants executed corrected loan contracts, one of which was for $2.2 million (October Contract): CB pgs 103 - 119. On 15 October 2008 the defendants executed a corrected mortgage (October Mortgage): CB pg 133. The October Mortgage was registered on 24 October 2008: CB 150.

xii. The defendants have not made any repayment since 21 November 2008 and failed to make the repayment due on 9 December 2009: see Commercial List Statement at [10] and the Response at [10].

xiii. The Bank commenced these proceedings on 19 February 2009. Default judgment for possession of the Property was entered on 26 May 2009 and a notice to vacate the Property was issued to the defendants on 22 June 2009. On 29 June 2009 the Sheriff executed a writ of possession in relation to the Property. On the defendants' application, on 28 September 2009 Patten AJ set aside the Bank's default judgment and writ of possession. Claim under the October Contract and October Mortgage 13 The Bank's claims based on the October Contract and October Mortgage are set out in the Commercial List Statement at [3] - [17]. 14 The Bank relies on the following provisions of the October Contract and the October Mortgage to establish the debt and its entitlement to possession:

i. clause A.4.4 of the terms and conditions attaching to the October Contract contains the borrowers' covenant to repay the loan;

ii. clause A.20.1 entitles the Bank to prove the existence and amount of its debt by the issuing of a certificate;

iii. clause A.21.1 provides that the borrowers shall be in default if they fail to pay an amount owing when due, entitling the Bank to demand immediate payment of the unpaid balance and any other amount due;

iv. clause 3.1 of the October Mortgage contains a covenant to repay the loan;

v. clause 8.1 provides that the borrowers shall be in default if they fail to pay an amount owing when due;

vi. clause 8.4 contains the Bank's right to enter and take possession of the Property in the event of default. Clause 8.5 contains the Bank's right to sell the Property;

vii. clause 9.8 entitles the Bank to prove the existence and amount of its debt by the issuing of a written statement. 15 The defendants accept that they are in default of the October Contract and the October Mortgage: see the Commercial List Response at [10] and [15]. 16 The affidavit of Mr Banerjee annexes a certificate for the purposes of clause A.20.1 of the October Contract and clause 9.8 of the October Mortgage. The certificate establishes that as at 11 June 2010, the amount payable by the defendants was $2,475,433.59. The Bank's alternative claims under the June Contract and June Mortgage 17 If for any reason the Bank is not entitled to the relief it seeks under the October Contract and the October Mortgage, the Bank seeks:

ii. rectification of the June Contract and the June Mortgage, so as to add Mrs Luo as co-mortgagor. 18 To be entitled to rectification of the June Contract and the June Mortgage, the Bank is required to demonstrate that it was the mutual intention of the parties that Mrs Luo would be a co-mortgagor when those documents were executed: Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336. 19 It is clear that this was the parties' mutual intention, having regard to the following facts:

i. the defendants owned the Property as joint tenants;

ii. the defendants both provided mortgages to the Commonwealth Bank and the NAB before applying for re-finance with Bankwest;

iii. the application form nominates both defendants as registered proprietors of the security property: CB 6

iv. both defendants executed the June Mortgage as mortgagors: CB 42. The defendants' opposition to the Bank's claims 20 The defendants' resistance to those claims appears to be based on the matters alleged in the Commercial List Response at [8] - [9]. 21 In summary, the defendants contend that the October Contract and October Mortgage are 'void and unenforceable or voidable' on the grounds that:

i. the second defendant is not bound by the October Contract and October Mortgage because she could not read or understand them (or in other words, non est factum);

ii. the defendants were induced into signing the October Contract and October Mortgage by misrepresentations said to have been made by the Bank in contravention of s 52 of the Trade Practices Act ;

iii. the defendants' signatures on the October Contract and October Mortgage were procured through the Bank exercising undue influence;

iv. in circumstances where the defendants' signatures to the October Contract and October Mortgage were procured through 'false and untrue representations' it would be unconscionable to enforce the October Contract and October Mortgage. Examining the credit of the defendants 22 Mr Luo having made a number of affidavits [certain sections of which were disallowed on admissibility bases] gave evidence in chief from the witness box and was then cross-examined. It was very obvious that he viewed the circumstances as involving the bank misleading himself and his wife. That perception likely contributed [on many occasions through his evidence in chief as well as his cross-examination answers] to the way in which he conducted himself whilst in the witness box. As he was not represented by any legal practitioner, the Court permitted him [during his lengthy expose in chief] to tell the story as he recalled it, virtually without restriction. In that way it seemed to me that in combination with the affidavits to which he had deposed he had a fair opportunity to speak his mind and to state what he believed were the facts. 23 I formed the view that Mr Luo on many occasions when he perceived that a particular question may be troublesome for him, was not prepared to tell the whole truth. It is possible that Mr Luo's intimate attachment to the case, which clearly involved substantial stakes for himself and his wife, along with his strongly held view that the Bank had the misled the two of them, meant that his judgment was fatally clouded. But whatever the explanation for Mr Luo's conduct, the Court must deal with the evidence as it fell. In all of the circumstances, I am of the view that Mr Luo's evidence cannot be accepted unless corroborated by contemporaneous documents. 24 Under cross-examination it emerged that Mr Luo had been schooled in China and had attended Shanghai University. He had migrated to Australia in about 1998 and having initially been a storeman thereafter started his own business in textiles. That business was a profitable business. There was some difficulty in making clear the precise relationship between himself and his wife concerning shares in the company Worldwide Wholesalers which they had built up but it ultimately appeared that his wife was the shareholder in that company and she was the only director. 25 His cross-examination included being taken to financial statements for Luois. It eventuates that during the period 2006, 2007 and 2008 this company certainly had cash assets. His evidence was that the company would have been able to lend to Worldwide Wholesalers, $46,000 in June 2008 had he and his wife wished this to occur. 26 He was taken through a sequence of matters concerning the period up to and including when he and his wife purchased the home in Mosman. That property had been purchased with the assistance of a loan which he and his wife applied for and received from the Commonwealth Bank. They had engaged a licensed conveyancer, Ms Chan, to assist them with purchasing the home. This conveyancer was useful because she spoke Mandarin and this was the only language which Mrs Luo spoke. In general terms Mr Luo in describing the documents which he and his wife had signed before Ms Chan, said that she had explained things to them. Mr Luo recalled Ms Chan's explanation as being along the lines of: "this is a legal document, which mean is, you buy from someone else this property and in Australia our firm or solicitor only can do this for you to transfer the name from previous owner to your name". 27 Mr Luo acknowledged that his signature and his wife's signature had been witnessed by Ms Chan. He was asked what advice Ms Chan gave to him and his wife in relation to the mortgage document emanating from the Commonwealth Bank and his evidence was that Ms Chan had not explained much in relation to the mortgage documents but generally told them basically that this was a standard form so that the standard document had to be signed by both of them to obtain the necessary transfer. He was asked [transcript 32] the following question:

Q: But what you understood about this document is what you were granting to the Commonwealth bank was a mortgage over your property Answer: Yes 28 Other answers given by him in relation to this topic included [transcript 32-33]:

Q. What you understood is that money that the Commonwealth Bank was lending to you, you and your wife had to repay correct? A. Yes we borrow money from Bankwest, sorry, Commonwealth Bank.

Q. You knew you had to repay it? A. Yes we, yes with some conditions and the terms yes.

Q. And you knew that if you failed to repay the loan the Commonwealth Bank would be able to use the mortgage to take your home away from you didn't you? A. I am not very clear that, I don't know, I don't know, doesn't explain to me on this how we're going to do it but we didn't thought that way actually.

Q. Are you seriously telling his Honour that by the time you signed this mortgage you did not realise that if you failed to repay the loan the Commonwealth Bank would be able to take your home away from you? A. We only, I didn't know this conditions of particular but we know if we borrow money from Commonwealth we pay for it. We didn't think of we don't pay the money or the bank will take the house from us. To be honest with you at that time we not thinking of that.

Q. So by the time - I will start again? A. No I will agree with your opinion where you're coming from, I understand your point. But these days, on that time, we not thinking, we try to thinking if we don't pay the bank takes the house from us, no, really we never think about it that way no.

Q. When did you first understand that what a mortgage means is that the lender can take your home from you if you fail to repay the loan? A. Really, to be honest with you, I'll tell your Honour, judge and the Court and you after this all mess happen I learn a lot about a mortgage, I don't know really before, beforehand.

Q. So are you telling his Honour that Ms Chan took the time to explain to you that the transfer that appears at page 196 and 197 is a legal document that a solicitor must do where it records that you are buying the property from someone else and it's transferring it from you to the previous owner. You're telling his Honour that that's what Ms Chan told you about the transfer? A. Yes.

Q. And are you telling his Honour that Ms Chan told you nothing at all about the mortgage other than that it was a formality? A. I would have - I would have - I will not say nothing at all, other thing, no, she say it - basically that's a standard documents we have to sign because he transfer our mortgage - I mean, the house, he bought a house and this and that. This is a standard one, and nothing's complicated and this is a document you have to sign otherwise you can't - you can't change the standard form and things, so basically that's what she explained to us, and he buy the house and you have to sign this standard forms, so really I'll be honest with you, it's not much into detail or explanation, this clause, that clause, no, never into that way.

Q. You knew, didn't you, that by signing this document you were giving something to the Commonwealth Bank? A. No, to be honest with you, no, I don't know.

Q. Mr Luo-- A. I just signed this paper, as I understand it is, agreed, you know, I transferred this mortgage house and that's it and I have to engage with Commonwealth Bank.

Q. That evidence is untrue and you know it's untrue? A. No, whatever I say it's true, I'll be honest with you, from my bottom heart, God is up there. 29 He was also taken to the circumstances involved when he refinanced his loan with National Australia Bank, although he denied that by signing the mortgage required by the bank for that transaction, he knew that he was giving the National Australia Bank a mortgage. 30 His evidence was that Mr Peter Lee an officer at the Burwood branch of the National Australia Bank who spoke Chinese essentially failed to give him advice about the document he was signing:

Q. And do you see that on the left-hand side of the page there appears the name and signature of Peter Lee? A. Yes, Peter Lee, yes.

Q. When you refinanced your loan with the National Australia Bank you knew, didn't you, that you were going to have to repay that loan to the National Australia Bank? A. Yes.

Q. And you knew, didn't you, that by signing this document what you were doing was giving to the National Australia Bank a mortgage? A. I don't really understand that really at that time, no.

Q. --Luo, what did you think you were signing when you signed this document? A. We just transfer the - because we borrowed money from the National Bank and transfer the money, that's it, that's all we know.

Q. You knew by signing this document that you were giving something to the National Australia Bank, didn't you? A. Give us something - don't know, we just know we borrowed the money from them and we just kind of paid for the - whatever we borrowed, that's it.

Q. Mr Luo, are you a careful and prudent businessman, would you say that about yourself? A. Say that again?

Q. Would you say about yourself that you are a careful and prudent businessman?

Q. Do you know those words? A. Can I ask interpreter?

Q. Yes, yes? A. Thank you, your Honour. Okay, I'm not a very, very carefully - I'm very rough, you know, I'm rough when I do business, because I just look at the major thing and the rest of I don't ask.

Q. Do you say that you're an intelligent man, Mr Luo? A. I'm not foolish but the - are rough.

Q. Did you read this document before you signed it? A. Which document? Q. The document that is in front of you at page 202 and 203 of the Court book? A. To be honest with you I'm not reading, I'm not reading, I've just - Peter Lee or another consultant there, consultant to point, that's the place to sign and we signed, I'm not looking - is told this is a standard form you can't change."

Q. And did Mr Lee give you advice about what it was that you were signing? A. Not really, no.

Q. See, Mr Luo, the approach that you take in this litigation, isn't it, is that any time there is a document that doesn't suit you, you tell the Court that you didn't read it, that's true, isn't it? A. I don't understand what are you trying to say, no.

Q. At any time you have signed a document that doesn't suit you, you tell the Court, don't you, that you just didn't read it? A. I'll be honest with you, this page and this book, a booklet, I first - now, I've seen, I never read it before and you - I just answered your question, I don't know what he wanted, now, I just answer you by my heart, I just cross my heart, right, everything is the truth, that's what I can say.

Q. You are not being honest at all, you knew when you signed this document that you were giving the bank a mortgage over your property at Mosman, didn't you? A. I really, to be honest with you, I don't know what's that meaning, give us something to bank, no, I know I borrowed the money from bank and I signed this paper because I had to agree I borrowed the money and I had to pay for it. I don't know your meaning, sir, give us something to them - I don't understand that at the time, now I learn - I learn from this case. 31 Later in his cross-examination he gave the following answers concerning the application for the loan with Bankwest:

Q. I'll withdraw the question I'll move on. When you signed that form, Mr Luo, you knew, didn't you that you were applying for a loan from Bankwest for $2.8 million? A. 2.7, I remember.

Q. You had a loan with the National Australia Bank for $2.7 million didn't you? A. Yes.

Q. And you wanted Bankwest to lend you some extra money as well didn't you? A. That's offer from Janette Lee say gives us another 100,000.

Q. When you signed the form you knew, didn't you, that what you were doing was applying for a loan with Bankwest for $2.8 million? A. The reason that I say we have financed is better interest rate and provide a overdraft business banking facility, that's the reason.

Q. Answer this question yes or no if you can. When you signed the form you knew that you were applying for a loan with Bankwest for $2.8 million? A. Yes.

Q. When you signed the form you wanted Bankwest to pay your existing debt to the National Australia Bank of $2.7 million didn't you? A. Yes.

Q. And you knew that when you signed the form what Bankwest was interested to know is whether or not you could give the bank a mortgage over your property at Mosman? A. I didn't give a source at that time no, as I say it we don't know about much detail about the mortgage and mortgagor these thing. 32 He was also challenged in relation to the evidence which he had given before Patten AJ on 19 August 2009:

Q. You have evidence before Patten AJ on 19 August 2009 didn't you? A. Yeah.

Q. And you were cross-examined by me? A. Yes.

Q. On that occasion weren't you? A. Yes.

Q. And you were asked this question when you were before Patten J weren't you, "And what you intended when you signed this form" and that was a reference to the form you're now looking at, "Was that you and your wife would offer to the bank a mortgage over the property at Mosman, that's true isn't it" and you answered "Yeah". You were asked that question and you gave that answer on 18 August 2009, correct? A. Probably, I don't understand what he's saying, I don't know exactly meaning, we just say yes because we doesn't use, I should have used an interpreter these days. A lot of misunderstanding of your question or in the Court, we don't understand.

Q. Do you agree that you were asked that question? A. Say it again sorry.

Q. Do you agree that you were asked this question: "And what you intended when you signed this form was that you and your wife would offer to the bank a mortgage over the property at Mosman, that's true isn't?" Will you agree that you were asked that question before Patten J on 18 August 2009? A. You ask that question I agree…

Q. Mr Luo, I show you two pages from the transcript of the hearing before Patten AJ on 18 August 2009.

Q. Mr Luo, do you see that at the bottom of page 18 you were asked this question by me: "I'll ask the question again. Do you accept that you and your wife filled out this form in about May of 2008? A. We just signed, not fill out the form."

Q. Do you see that? A. Which number?

Q. The very last three lines on the page, page 18, Mr Luo? A. Yes, yes.

Q. Do you see that you were asked that question and you gave that answer? A. I agree to my answer.

Q. Turn over the page-to-page 19. On the third line of the page, starting at the third line of the page, do you admit that you were asked this question and gave this answer: "You understood, didn't you, when you were completing this form that what you were applying to Bankwest for was a loan to refinance your loan with the National Australia Bank? A. Yeah, we know Bankwest."

Q. Do you admit that you were asked that question and you gave that answer? A. Yes.

Q. On page 19 the next question and answer: "Q. I'm not sure that really answers my question. You understood, didn't you, when you signed this form that what you were applying for was a loan to Bankwest which would refinance your loan with the National Australia Bank, you knew that, didn't you? A. Yeah, we know we're going to refinance with Bankwest."

Q. Do you admit that you were asked that question and you gave that answer? A. Yes.

Q. The next question and answer: "And what you intended when you signed this form was that you and your wife would offer to the bank a mortgage over the property at Mosman, that's true, isn't it? A. Yes."

Q. Do you admit that you were asked that question and you gave that answer? A. No.

Q. Do you deny being asked that question in giving that answer? A. The answer is not a corrected--

Q. Do you deny being asked that question and giving that answer? A. I'm not agree with what I answered before.

Q. No, listen carefully to me, Mr Luo. Do you deny that you were asked that question and you gave that answer? A. Yes.

Q. You deny that, do you? A. Yes.

Q. Mr Luo, when you entered the witness box before Patten J on 18 August 2009 you took an oath to tell the truth, didn't you? A. Yes, I did. Q. So when you told Patten J on 18 August 2009 that when you signed the application form you intended to grant the bank a mortgage, that evidence was true, wasn't it? A. Yeah, I signed the mortgage.

Q. When you told Patten J that when you signed the form you intended to give to Bankwest a mortgage that evidence was true, wasn't it? A. I don't quite understand, the mortgage - whatever the question is, it's not a correct answer.

Q. Your evidence here today denying that you were asked that question and gave that answer is yet another example of you denying that you read something or understood something because it does not suit you, that's true, isn't it? A. No. 33 That portion of the transcript was tendered and admitted into evidence as exhibit T-3

34 As outlined above, I am of the view that Mr Luo's evidence cannot be accepted unless corroborated by contemporaneous documents.

The evidence given by Mrs Luo 35 Mrs Luo had made two affidavits and was cross-examined. 36 A central problem in accepting her evidence concerns the fact that in her second affidavit she confirmed the contents of the further affidavits made by Mr Luo. The clear inference was that she was merely purporting to adopt the entirety of the evidence given by Mr Luo. 37 She was assisted by a Court-appointed interpreter. She recalled that in June of 2003 she and her husband purchased the property in Mosman for $2.55 million having borrowed money from the Commonwealth Bank to assist in the purchase of the property. She recalled that she and her husband had engaged a conveyancer to assist with purchasing the property and gave evidence that the conveyancer spoke to her in Mandarin. She was asked a number of questions as to documents upon which she accepted that her signature appeared. 38 At transcript 66, she was shown the mortgage which is to be found in the Court book at page 197. It was put to her that when she signed that document she knew that what she was doing was signing a mortgage in favour of the Commonwealth Bank and she answered in the affirmative. 39 Likewise when shown the mortgage which appears at Court Book page 202 she agreed that in July 2006 she and her husband had refinanced the loan which they had with Commonwealth Bank of Australia by taking out a new loan with National Australia Bank. 40 At transcript 67, it was put to her that she knew on the day that she went to the Burwood branch of the National Australia Bank that she was there to sign documents to transfer the mortgage from the Commonwealth Bank to the National Australia Bank and she agreed with this being correct. She was shown her signature which appears at page 203 of the Court book and accepted that this was her signature and accepted the proposition that when she signed that document, what she knew was that she was granting to the National Australia Bank a mortgage over her Mosman property. 41 She was asked questions about what she talked to Ms Janet Lee about. Her evidence was that Ms Lee had told her that she was a broker for major banking and finance companies and had asked her about her husband's business. Being shown the first page of an application form to Bankwest she accepted that her signature appeared at the bottom of page 3. 42 She recognized her signature appearing on page 3 of the Court book as part of the loan summary document. Likewise she recognized her signature at the bottom of page 7 and 8 of the form transmitted to Bankwest. 43 Her cross-examination included the following:

Q: When you signed this form did you realise that what you were doing was signing an application form to Bankwest for a loan

Answer: Yes. 44 She was shown page 12 of the Court Book running up to page 16 being the loan agreement between Bankwest and herself and her husband for $2.2 million. Her answer was "actually what I knew was that I signed. What happened in between I did not know much at all". 45 Some further answers of hers in cross-examination were as follows:

Q. When you went to the meeting with Jeanette Li on 11 June 2008 you knew at that time that the National Australia Bank had a mortgage over your home at Mosman, correct? A. INTERPRETER: Yes.

Q. And when you went to the meeting with Jeanette Li, what you knew you were doing was signing forms so that Bankwest would take over the mortgage over your home at Mosman, correct? A. INTERPRETER: Suppose so. ..

Q. Mrs Luo, do you stand by the evidence you gave to his Honour a few minutes ago that you knew when you signed the documents with Janette Lee on 11 June 2008 that what you were doing was giving to Bankwest a mortgage over your property at Mosman? A. INTERPRETER: I was told about that, but what is in the context of that, I didn't know. …

Q. Mrs Luo do you stand by the evidence that you gave to his Honour a few minutes ago that when you signed the documents with Janette Lee on 11 June 2008 you understood that what you were doing was giving to Bankwest a mortgage over your property at Mosman? A. INTERPRETER: Actually I didn't read the document just signed.

Q. Can you just close up the folder that's before you. Just close the folder over please. Do you agree that you told his Honour about 5 minutes ago that when you signed the documents before Janette Lee on 11 June 2008 what you understood is that you were granting to Bankwest a mortgage over your property at Mosman? A. INTERPRETER: I only know refinance.

Q. Do you remember that I asked you this question when you had the meeting with Janette Lee you knew that Bankwest was taking over, correction, was taking a mortgage over your property at Mosman and you answered "I suppose so". Do you remember that? A. INTERPRETER: That is refinance the same.

Q. When you borrowed money from the Commonwealth Bank in 2003 you knew didn't you that you and your husband were going to have to repay it? A. INTERPRETER: Actually I'm a housewife, everything dealt with by my husband. I couldn't read those documents.

Q. So Mrs Luo, are you seriously telling his Honour that when you borrowed money from the Commonwealth Bank in 2003 to buy your home at Mosman you did not know whether or not you had to repay it? A. INTERPRETER: Of course we borrowed money from bank, it should be pay them back.

Q. Sorry, could you give the answer again please? A. INTERPRETER: Of course we borrowed money from bank I don't know what was, of course we will pay back.

Q. And you told his Honour earlier didn't you that you knew that you had given the Commonwealth Bank a mortgage over your property at Mosman? A. INTERPRETER: Yes.

Q. So you knew didn't you that if you and your husband were unable to repay the loan to the Commonwealth Bank that the bank would be able to take your property at Mosman? A. INTERPRETER: I didn't know.

Q. What did you think the mortgage entitled the Commonwealth Bank to do? A. INTERPRETER: All I knew is I borrowed the money I will pay them monthly.

Q. What did you think the mortgage entitled the Commonwealth Bank to do? A. INTERPRETER: I think its value, worth ..(not transcribable).. value.

Q. Sorry, could I have the answer again? A. INTERPRETER: I think it's value worth that value.

INTERPRETER: I only the literal translation, I don't know what said either.

Q. When you told his Honour that you knew that the Commonwealth Bank had a mortgage over your property what did you think that meant? A. INTERPRETER: I don't think I thought that much. Ever month I pay them the money.

Q. Just open the folder again at page 42 please? So when you signed the documents at page 42 at the very least you knew that it was something to do with the loan you were asking Bankwest to give you correct? A. INTERPRETER: Yes.

Q. You knew that it was something to do with your home at Mosman, correct? A. INTERPRETER: Yes.

Q. In September 2008 your husband told you, didn't he, that Bankwest wanted you and he to sign new loan documents correct? A. INTERPRETER: Yes.

Q. On the 3 October 2008 you and your husband signed four new loan agreements, correct? A. INTERPRETER: I didn't know I signed it before, why I need to sign again.

Q. Would you look at page 103 of the Court book please? Do you see that you signed the last page of the document that starts at page 103 on page 106? A. INTERPRETER: Are you asking me whether I read this?

Q. I am asking you whether or not you signed this document? A. INTERPRETER: Yes.

Q. Did you sign the document on 3 October 2008? A. INTERPRETER: Yes.

Q. Did you sign the document in the presence of your husband? A. INTERPRETER: Yes.

Q. Did you sign the document in the presence of Janette Lee? A. INTERPRETER: Yes.

Q. Did your husband or Janette Lee explain to you that this was the new document that Bankwest wanted you to sign? A. INTERPRETER: Nobody told me anything about the contract, just asked me to sign.

Q. If you had any doubt about what this document was for, you would have asked your husband about it, wouldn't you? A. INTERPRETER: Tell you the truth, if they ask me to sign something I just sign something, from the first document until the last, it just signed.

Q. You had your husband and Janette Lee present with you, both of whom could have explained to you this document if you wanted one, correct? A. INTERPRETER: I'm not used to asking questions therefore I didn't 46 In summary the evidence given by the second defendant certainly at times indicated that she had known that what she was doing during the course of refinancing loans with a number of the banks was to sign a mortgage. But on other occasions she appeared to flatly deny having been told anything about the reasons for the plaintiffs having taken their mortgage. As with Mr Luo, it is possible that Mrs Luo's intimate attachment to the case, which clearly involved substantial stakes for herself and her husband, along with her husband's strongly held view that the Bank had misled the two of them, meant that her judgment was fatally clouded. But whatever the explanation for her conduct, the Court must deal with the evidence as it fell. In all of the circumstances, I am of the view that Mrs Luo's evidence cannot be accepted unless corroborated by contemporaneous documents. Turning to the arguments raised by the defendants in defence and cross-claim Non est factum 47 The defence of non est factum is to be kept within narrow limits. In Petelin v Cullen (1975) 132 CLR 355 at 359 - 360, Barwick CJ, McTiernan, Gibbs, Stephen and Mason JJ held:

The class of persons who can avail themselves of the defence is limited. It is available to those who are unable to read owing to blindness or illiteracy and who must rely on others for advice as to what they are signing; it is also available to those who through no fault of their own are unable to have any understanding of the purport of a particular document. To make out the defence a defendant must show that he signed the document in the belief that it was radically different from what it was in fact and that, at least as against innocent persons, his failure to read and understand it was not due to carelessness on his part. Finally, it is accepted that there is a heavy onus on a defendant who seeks to establish the defence. All this is made clear by the recent decision of the House of Lords in Saunders v Anglia Building Society ( Gallie v Lee ) [1971] AC 1004 at 1019. [This passage was recently approved by the NSW Court of Appeal in Ford (By His Tutor Watkinson) v Perpetual Trustees Victoria Ltd (2009) 257 ALR 658.] 48 The defence of non est factum is raised by the second defendant, but not the first defendant: see the Commercial List Response at [8a] and [9a]. 49 In order to determine what Mrs Luo understood when she signed the October Mortgage, it is useful to review the various transactions that led to that event:

i. in June 2003 when the defendants purchased the Property, they engaged the assistance of a licensed conveyancer, Shirley Lai-Hung Chan. Ms Chan was a woman of Chinese background and was able to converse with the defendants in Mandarin. Ms Chan witnesses the defendants' signature on the mortgage given to the Commonwealth Bank: CB 198;

ii. in June 2006 the defendants met with Mr Peter Lee of the NAB to sign the mortgage for the refinance. Mr Lee was of Chinese background and could speak with Mr Luo in Cantonese. Mr Luo said he translated for his wife the important parts of what was said during that meeting;

iii. in May and June 2008 the defendants had a number of telephone conversations with their broker, Jeanette Lee, in relation to the possibility of refinancing with the Bank. On 11 June 2008 the defendants met with Jeanette Lee to sign the four loan contracts (including the June Contract) and the June Mortgage. As noted earlier, Ms Lee was of Chinese background and conversed with the defendants in Mandarin. Mrs Luo accepted in cross examination that when signing the documents, she at least understood that they related to the loan and had something to do with her home;

iv. in September 2008 Mr Luo told Mrs Luo that the Bank required them to sign corrected documentation;

v. on 3 October 2008 the defendants signed the corrected loan agreements, including the October Contract. Mrs Luo said she signed these documents in the presence of Jeanette Lee;

vi. on 15 October 2008 the defendants signed the October Mortgage in the presence of Ms Hyde. Mrs Luo accepted that the she knew that the document had something to do with the loan they had received from the Bank in June and her home. 50 Both defendants claimed that they did not read any of the documents they signed. Equally, they claimed that the documents were not explained to them. Even if those claims are true, they do not assist Mrs Luo in establishing the non est factum defence. If Mrs Luo wanted an explanation of the contents of any of the documents she signed, including the October Contract and the October Mortgage, she was capable of seeking that explanation from Jeanette Lee or her husband. Her failure to not seek that explanation was her choice and due to her own carelessness. The non est factum doctrine assists those who did not understand and were not capable of understanding a contractual document. As Petelin v Cullen makes clear, it does not assist the careless. That this is so accords with the more general proposition reaffirmed by the High Court in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [57] that a person who signs a document which is known by that person to contain contractual terms, and to affect legal relations, is bound by those terms, and it is immaterial that the person has not read the document. 51 In any event, it is clear that the defendants have not discharged the 'heavy onus' of demonstrating that Mrs Luo thought, when signing the October Mortgage, she was signing a document radically different from what it was in fact. To the contrary, she accepted that when signing the October Contract and the October Mortgage, she knew that she was signing documents relating to the loan she had received in June and that they had something to do with her house. 52 It is highly improbable that Mrs Luo did not understand that she was granting a mortgage to the Bank having regard to the following circumstances:

i. in June 2003 the defendants purchased the Property with the assistance of a loan from the Commonwealth Bank, secured by a mortgage over the Property;

ii. in July 2006 the defendants refinanced the loan with the NAB, again secured by a mortgage over the Property;

iii. in May 2008 the defendants lodged the application for refinance with the plaintiff, Bankwest. It is clear from the application form, signed by both defendants, that they intended to offer a mortgage over the Property as security for the loan: see CB pg.6;

iv. it is also clear that when signing the June Mortgage, they both believed that they were granting the Bank a mortgage over the Property: this is demonstrated by the fact that both defendants executed the June Mortgage in the section provided for the signature of mortgagors, witnessed by their broker, Ms Lee: CB pg 42;

v. Mr Luo gave evidence and was cross examined before Patten AJ on 18 September 2009 on the application to set aside the Bank's default judgment. On that occasion Mr Luo admitted that when signing the application form in May 2008, he intended that he and his wife would offer to the Bank a mortgage over the Property: T 19.15. Mr Luo also admitted that when signing the four loan agreements in June 2008, he believed that he and his wife were agreeing to give a mortgage over the Property: T 21.10, 28.46;

vi. as noted earlier, once the Bank realised in August 2008 that the June Mortgage omitted Mrs Luo's name from the mortgagor panel of the form, corrected loan agreements and mortgage were executed in October 2008. Mr Luo was cross-examined about this before Patten AJ. He said (T 29.21): Q. When you signed corrected loan documents in October 2008 you were happy to do so, weren't you, because you knew that you had always agreed that you and your wife would provide a mortgage over your property at Mosman? A. Yes. Misrepresentation in contravention of s 52 of the Trade Practices Act

First claim of misleading or deceptive conduct 53 The cross-claim at [13] - [16] alleges that the Bank made various misrepresentations in June 2008 in relation to when the loan funds would become available. This part of the cross claim fails for two reasons. First, the emails relied upon in the particulars to the cross claim at [13] and [14] do not contain the representations alleged. Ms Lee's email of 16 June 2008 (CB 40) constitutes a request made by the defendants' broker that $50,000 be deposited into their company's account. It is not capable of constituting a representation by the Bank that $50,000 would be deposited into their company's account on 17 June 2008. Ms Lee's email of 19 June 2008 (CB 47 bottom half of the page) contains a request for information, that is to say, Ms Lee was asking when the telegraphic transfer would be made. The email is not capable of constituting a representation by the Bank that $46,000 would be deposited into their company's account on 19 June 2008. 54 The second reason why this part of the cross claim fails is that it depends on the proposition that Ms Lee was the Bank's agent, whereas it is clear that she was an independent finance broker engaged by the defendants. That conclusion follows from the fact that there is no evidence that the Bank granted to Ms Lee any authority to provide information to the defendants or to make decisions in relation to the loan on behalf of the Bank. Mr Norrish's evidence was that Ms Lee was not appointed to be the Bank's agent. See also the advertisements at CB 242 - 244. Although the existence of an agency relationship depends on the facts of a particular case [Branwhite v Worcester Works Finance Ltd [1969] 1 AC 552 at 573, 587], a finance broker is prima facie the agent of the borrower, not the lender: Permanent Trustee Company Limited v Gillian O'Donnell [2009] NSWSC 902 at [339]. In Esanda Finance Corporation Ltd v Spence Financial Group Pty Ltd [2006] WASC 177 at [60] - [65] (approved by Hamilton J in Galadriel Lothlorien Pty Ltd v Station 1 Pty Ltd [2008] NSWSC 91 at [32]), it was held that:

While, therefore, whether in any case a finance broker is the agent of the financier is a question which must be determined on the facts of the particular case, there is a strong body of authority which supports the view that such an agency will not readily be inferred and it is not sufficient simply to show that the broker possessed and completed the finance application form, provided to the financier information required by the financier and received a fee or commission from the financier. 55 In any event, the loss alleged in the cross claim at [18] is misconceived for a number of reasons:

i. even if the loss claimed by the defendants was sustained, the proper plaintiff in respect of that loss would be Worldwide Wholesale Pty Ltd, being the entity said to have lost the benefit of exclusive distributorship with Sinopec;

ii. there is no evidence that the alleged 'cancellation' of Worldwide Wholesale's exclusive distributorship with Sinopec was caused by anything to do with this loan. The evidence said to prove the existence of the exclusive distributorship is a document entitled 'authority letter' apparently issued by Sinopec with validity from 1 January 2007 (CB 241). On that evidence, there is no basis for the Court to conclude that Sinopec could not deal with other distributors at any time and for any reason;

iii. the evidence demonstrates that notwithstanding the delay in payment, Sinopec was still prepared to deal with Worldwide Wholesale Pty Ltd. It appears from the email from Ms Peng of Sinopec to the first defendant dated 25 June 2008 that once Sinopec received the payment from Worldwide Wholesale on 25 June 2008, Sinopec re-booked the shipments that had apparently been cancelled due to non-payment on 19 and 20 June 2008: see CB 55. Second claim of misleading or deceptive conduct

56 The misrepresentation alleged by the defendants here is not particularised in the defence, however, it is pleaded in the defendants' cross claim at [19] - [25]. 57 The nature of the allegation is as follows:

i. the defendants claim that the Bank caused their company, WW, to suffer loss and damage through the Bank's failure to transfer the $46,000 to WW's account with the Bank of China before 23 June 2008;

ii. the defendants say that they signed the corrected loan and mortgage documents in October 2008 only after being promised by officers of the Bank (namely Anita Hyde and David Ewens) that the Bank would enquire into their claim that WW had suffered loss through the delay in it receiving the $46,000. They claim that the Bank has failed to make those enquiries. 58 In order to understand this part of the defence and cross claim it may be appropriate to recap some of what has already been set out in the reasons:

i. The first component of the defendants' cross-claim where they advance various complaints about the circumstances in which the Bank advanced the loan funds in June 2008. These allegations appear in the cross claim at [3] - [18].

ii. When the defendants applied to the Bank for the loan in May and June 2008, they were advised and assisted by a broker, Jeanette Lee of Asset Mortgage Team: CB 1, 37 - 41, 42, 47 - 52. Curiously, the defendants contend that Ms Lee was 'the [Bank's] broker' with the apparent consequence that Ms Lee was the Bank's agent. This contention is rejected.

iii. The cross claim alleges at [4] that it was a term of the June Contract that the Bank would make available up to $100,000 upon settlement of the loan as directed by the defendants. The origin of this term is not explained. It does not appear in the June Contract.

iv. On 16 June 2008 Ms Lee sent an email to Ms Anita Hyde of the Bank and requested that the Bank telegraphically transfer $50,000 to a nominated account held with the Bank of China: CB 40. On 17 June 2008 Ms Lee sent a further email to an officer of the Bank amending the amount to be transferred to $46,000: CB 39.

v. On 19 June 2008 Ms Lee had a telephone conversation with Ms Hyde, in which she requested that the sum of $46,000 be transferred to the Bank of China account urgently: see the affidavit of Ms Hyde at [19].

vi. On Friday 20 June 2008 the loan settled and the funds were disbursed, including the sum of $46,015 to the defendants: CB 43 - 46.

vii. The defendants say that the sum of $46,000 was available to be drawn by them from the Bank of China account on Monday, 23 June 2008: Commercial List Response at [9], [10], [12].

viii. The defendants claim that the failure of the Bank to have the $46,000 available to be drawn from the Bank of China account on 19 June 2008 irreparably damaged the commercial relationship between their company, Worldwide Wholesale Pty Ltd and a Chinese company called Sinopec.

ix. Returning to the defence to the October Contract and the October Mortgage, in summary, the defendants allege that officers of the Bank, namely David Ewens and Anita Hyde, orally represented in October 2008 that if the defendants signed the corrected loan agreements and mortgage, the Bank would 'actively enquire as to any damage or loss caused to [the defendants] and their company Worldwide Wholesale Pty Ltd' as a result of the failure of the Bank to have the $46,000 available to be drawn from the Bank of China account on 19 June 2008. 59 There is no merit in this defence for the following reasons:

i. there was no contractual obligation upon the Bank to advance the finance to the defendants by a particular date;

ii. there was no representation made by or on behalf of the Bank that the finance would be or had been advanced by a particular date. Merely because the request was made by Ms Lee does not mean that the Bank was under any legal obligation to comply with it; iii. to the extent that the defendant contends that Ms Lee was an agent of the Bank, as has been outlined this is incorrect and not established by any evidence. 60 The Bank denies the alleged promise to enquire was made at all. On this question, there is a conflict between the evidence of the Bank's witnesses and the evidence of the defendants. 61 Both Ms Hyde and Mr Ewens deny making any such promise: see the affidavit of Hyde at [38] - [41] and the affidavit of Ewens at [15] - [16]. Neither of them was cross-examined in any meaningful way in relation to this issue. It is objectively probable that they did not make the promise alleged because they had no need to do so. 62 Mr Luo said that the promise was made to him orally by Mr Ewens and Ms Hyde on various occasion between June and October 2008. If it was true that such a promise was made:

i. it is probable that he would have required the promise to be confirmed in writing, in view of the fact that he did not trust the Bank because he believed it had lied to him about transferring the $46,000 into WW's Bank of China account in June 2008;

ii. it is probable that he would have made a written complaint to the Bank within some reasonable time after signing the corrected documents in October 2008, to complain about the fact that the Bank had not honoured its promise. As it happens, the defendants' first written record of the alleged promise is contained in Mr Luo's affidavit of 22 July 2009 which was served in support of the motion to set aside the default judgment. 63 The defendants' evidence as to the alleged promise is rejected and the evidence of Mr Ewens and Ms Hyde is preferred. Unconscionability/undue influence 64 In the cross claim at [26] - [28] the defendants contend that the Bank acted unconscionably and with undue influence by making the alleged misrepresentations about enquiring into the defendants' claim for damages. 65 Undue influence cannot be defined with precision, however, it was described by Lindley LJ in Allcard v Skinner (1887) 36 Ch D 145 at 181 as 'some unfair and improper conduct, some coercion from outside, some overreaching, some form of cheating, and generally, though not always, some personal advantage obtained by' the guilty party. 66 Unconscionability arises where one party takes unfair advantage of another party's special disadvantage: Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 462, 474. 67 These defendants' contentions as to unconscionably and undue influence fail for the same reasons given above in relation to the alleged misrepresentations. 68 Moreover, even if the alleged promises were made, the Bank cannot have acted unconscionably by asking the defendants to execute documents in October 2008 to give effect to the obligations they had always intended to create in June 2008. The defendants can hardly expect equitable relief on the grounds of unconscionability, when at all times the Bank had an unassailable entitlement to rectification of the June Mortgage. Equity regards as done what ought to have been done. Further reasons why the cross-claim in relation to the alleged October agreement must fail

69 To the extent that the cross claim seeks damages for loss caused by the Bank's failure to enquire into 'any damage or loss caused to [the defendants] and their company Worldwide Wholesale Pty Ltd', the cross claim fails for the following reasons:

i. the defendants are not the proper claimant in respect of any loss sustained by Worldwide Wholesale Pty Ltd;

ii. the defendants did not suffer any loss - Mr Ewens explains that even if he had enquired into the defendants' claims, he would have concluded that they were not entitled to any compensation: see the affidavit of Mr Ewens at [8]. Duty of care 70 In the cross claim at [11], the defendants contend that the Bank owed them a duty to exercise reasonable skill, care and diligence in and about the making of the advance. It is alleged in the cross claim at [12] that the Bank breached that duty by failing to 'effect settlement of the advance on 17 June 2008' and by 'failing to make available the sum of $46,000 in the nominated account [of the defendants' company]… on 19 June 2008'. 71 Ordinarily a duty of care will not be imposed in a banker-customer relationship. In Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd [1986] AC 80 at 107 Lord Scarman, delivering the judgment of their Lordships, said:

Their Lordships do not believe that there is anything to the advantage of the law's development in searching for a liability in tort where the parties are in a contractual relationship. This is particularly so in a commercial relationship. Though it is possible as a matter of legal semantics to conduct an analysis of the rights and duties inherent in some contractual relationships including that of banker and customer either as a matter of contract law when the question will be what, if any, terms are to be implied or as a matter of tort law when the task will be to identify a duty arising from the proximity and character of the relationship between the parties, their Lordships believe it to be correct in principle and necessary for the avoidance of confusion in the law to adhere to the contractual analysis: on principle because it is a relationship in which the parties have, subject to a few exceptions, the right to determine their obligations to each other, and for the avoidance of confusion because different consequences do follow according to whether liability arises from contract or tort, eg in the limitation of action. 72 This passage was approved by Lindgren J in Radin v Commonwealth Bank of Australia [1998] FCA 1361 and again by his Honour in NMFM Property Pty Ltd v Citibank (No 10) (2000) 186 ALR 442 at [803]. See also National Australia Bank Ltd v Nemur Varity Pty Ltd (2002) 4 VR 252 at [45]-[46], Lomsargis v National Mutual Life Association of Australasia Ltd (2005) 2 Qd R 295 at [52]-[59] and Tomlin v Ford Credit Australia Ltd [2005] NSWSC 540 at [123]-[132] per McDougall J, especially at [124] where his Honour said:

Where the parties have agreed that a particular thing under the contract may be done by one of them in its uncontrolled discretion, the law should be slow to remake their bargain by imposing a duty of care the effect of which would be to fetter that contractually uncontrolled discretion . 73 In Politarhis v Westpac Banking Corp [2009] SASC 96 at [124] - [133], the Full Court of the Supreme Court of South Australia declined to hold that a bank owed a duty to take reasonable care to avoid causing a customer financial loss comprising his gambling losses. 74 In Commonwealth Bank of Australia v Smith (1991) 42 FCR 390 the Full Court of the Federal Court held that a bank may owe a duty of care where it has undertaken the role of financial adviser to a customer, however, this is clearly not such a case. 75 There is no need in this case to superimpose a duty of care over the obligations arising under the loan contract. The question whether the Bank should have effected settlement of the advance on 17 June 2008 or made available the sum of $46,000 in the defendants' company's account with Bank of China on 19 June 2008 is capable of being answered by reference to the contract. 76 The duty as postulated in the cross claim lacks adequate definition. In reality, the defendants would need to contend that the Bank was under a duty to advance the $46,000 at the time demanded by the defendants. That proposition need only be stated in order for it to be rejected. It emphasises why the contract is the appropriate mechanism for governing the rights and responsibilities of the parties. Implied term to exercise reasonable skill, care and diligence 77 In the cross claim at [5] the defendants contend that it was an implied term of the June Contract that the Bank would exercise reasonable skill, care and diligence in and about the making of the advance. Although not pleaded, it may be assumed that the defendants rely on the implied warranty of due care and skill supplied by s 12ED of the ASIC Act. 78 As stated above in relation to the postulated duty of care, an implied term to exercise reasonable care and skill lacks adequate content in this context. An implied warranty to exercise reasonable care and skill cannot be elevated to a requirement on a bank to make available loan funds at a time demanded by a customer. Decision 79 For the above reasons following orders are required to be made:

1. The plaintiff is entitled to judgment for its debt and judgment for possession of the Property.

3 The defendants are to be ordered to pay the plaintiff's costs of the proceedings.

4 These orders are to be stayed until 14 July 2010. Short minutes of order 80 The plaintiff is to bring in short minutes of order accompanied by the latest Dobs certificate. **********

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