Bank of Western Australia Limited v Phil Zhanming Luo & Anor

Bank of Western Australia Limited v Phil Zhanming Luo & Anor - [2010] NSWSC 733 - NSWSC 2010 case summary — Zoe

[51]

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:

[111]

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:

[155]

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:

[175]

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

[180]

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:

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