21 The last relevant conversation between Mr Hiscock and Mr Emerton is recorded in Mr Hiscock's affidavit as having occurred at about 9.45am on Monday 21 January 2008 in terms to the following effect:
"I said:
'What happened, the website shows that none of the MFS shares were sold?'
He said:
'All of the shares were sold on Friday for an average price of $1.04. The website is not correct. It was taken out of my hands. They decided to pull the trigger. Very sorry mate, there was nothing I could do.'"
22 Relevant entries are recorded in Mr Emerton's diary on two days. An entry on Tuesday 5 January 2008 is as follows:
"1.45pm. Advised Michael Hiscock of MFS share price & margin call."
23 Mr Emerton's diary contains five relevant entries on Friday 18 January 2008, as follows:
1. "[Indecipherable] Michael Hiscock 0412 XXX XXX"
2. "[Indecipherable] Spoke with Michael Hiscock & advised of margin call & our intention of selling enough shares to cover"
3. "3,312,121 MFS Clawson Holdings"
4. "11.42 Michael Hiscock > in a meeting - Canada"
5. "12pm Michael Hiscock
- Thinking what he could pledge
- Considering his legal position
- Would like to manage the position over a few
weeks"
24 The plaintiff has produced calculations and analyses made by reference to contemporary market data which shows that a different course of selling conduct on Tuesday 15 January 2008 and Friday 18 January 2008 could have either cleared the debt altogether or left a negligible balance only. Of course, whether the market would and could have accommodated the hypothesised sales without any appreciable decrease in market price is something that the analysis does not show.
25 In order to test the plaintiff's proposition that there was an oral variation of the written contract or an estoppel, it is necessary to go back to the written terms and to look at them in greater detail.
26 The written loan agreement consists of several "parts" (designated A to H) and an application form and an introductory "risk disclosure statement". The lastmentioned contains a message to the borrower ("you") as follows:
" Monitoring
If you hold a margin loan, you should monitor your loan amount owing at all times. Citigroup Wealth Advisors is not obliged to do the monitoring for you, and will not do so for your benefit, even if it monitors those amounts for Citigroup Wealth Advisors' own benefit. Before entering into a margin lending transaction of the type, you should carefully consider whether you can monitor your obligations to the appropriate level."
27 Part A contains a clause 5.3 as follows:
"You must pay all amounts due under this Agreement in full without setting off amounts you believe we owe you, or a guarantor, or without counterclaiming any amount from us. All payments you make must be free of any withholding or deduction of taxes, unless the law prevents this."
28 Part B deals with margin calls. After making provision for the making of margin calls by the lender, it provides in clause 28.4:
"If we give you a margin call notice then you must by 3.00pm (Sydney time) on the next business day either:
(a) pay to us part of the total loan amount outstanding; or
(b) give us security interest over additional property that is acceptable to us; or
(c) sell, or irrevocably direct us to sell, a part or all of your mortgaged property (and apply the sale proceeds in repaying the loan amount outstanding);
to ensure that the loan amount outstanding is reduced to an amount which is not (and will not in the reasonably foreseeable future be) greater than the security value of your portfolio."
29 Clause 28.5 then says that in certain specified events - including "if you fail to comply with a margin call notice" -
"then we may sell such part of your portfolio as is necessary to ensure that the loan amount outstanding is reduced to an amount which is not (and will not in the reasonably foreseeable future be) greater than the security value of your portfolio. We undertake to apply the proceeds of any such sale to your loan amount."
30 Clause 28.6 provides:
"You acknowledge and agree that:
(a) it is your sole responsibility (and not ours) to monitor the total loan amount outstanding and the value of your portfolio at all times;
(b) if we monitor your loan amount and the value of your portfolio we do so for our benefit only;
(c) we are under no obligation to give you a margin call notice (despite being entitled to) and you must not take it as a representation that we will not give such a notice;
(d) we may sell any of the securities forming part of the mortgaged properties at any time without giving you a margin call notice or any other call notice if the events in clause 28.5 above occur; and
(e) if you were introduced to us by your financial planner or adviser, your financial planner or adviser may request that all communications (including notice of margin calls) go through them, in which case you authorise us to deal with your financial planner or adviser only and you agree that we have no obligation to contact you directly whatsoever, including in the event of a margin call."
31 All these provisions make it clear that, as between the lender and the borrower, it is the borrower's responsibility to monitor the value of the borrower's portfolio and the loan balance outstanding. In the event of a margin call, it is the borrower who must act to pay off the loan to the required extent, provide further security or sell (or direct the lender to sell) a part of the borrower's portfolio, with the proceeds being applied to reduce the loan balance. In case of failure by the borrower to comply with a margin call, the lender has a discretion to sell. Nothing explicit is said about the way in which the discretion is to be exercised.
32 The thesis propounded by the plaintiff appears to be that the conversations to which I have referred varied this contractual position in such a way, first, that the defendant, as lender, came under an obligation to sell securities out of the borrower's portfolio at such times and in such quantities as might be necessary to cause the loan balance to be reduced in the way most advantageous to the plaintiff as borrower; and, second, that, if that obligation was not duly performed, the loan balance was to be regarded as reduced to the extent that would have occurred had the obligation been duly performed. Mr Grieve QC did not actually articulate the variation in precisely these terms but reliance on the calculations and analyses referred to at paragraph [24] above, as well as the s 459H(1)(a) ground alone, is explicable only on the basis that the contractual regime was varied in that way.
33 Was this arguably the result of the conversations between Mr Hiscock and Mr Emerton? In addressing that question, I am content to have regard wholly to the conversations deposed to by Mr Hiscock and to assume that those conversations occurred as he alleges, leaving to one side the contrary indications coming from Mr Emerton's diary notes (which, if anything, tend to undermine Mr Hiscock's account to the detriment of the plaintiff's case).
34 Mr Hiscock's evidence shows that Mr Emerton raised with Mr Hiscock on Friday 11 January 2008 the need to sell part of the portfolio unless cash or further security was forthcoming and that it was Mr Hiscock who gave the clear instruction to "sell the BHP, NAB and Macquarie shares plus as many of the MFS shares as you need to maintain the account within the required margin", adding, "it is your call". In the next conversation (also on Friday 11 January 2008), Mr Emerton reported having sold the shares in BHP, NAB and Macquarie together with 500,000 MFS shares. He foreshadowed a need to sell further shares on the following Monday if the market did not improve. Mr Hiscock then gave a clear instruction:
"Do what you have to do to maintain the account within the margin. If you need to sell more shares, I understand."
35 On Thursday, 17 January 2008, when Mr Emerton said there was a need to sell enough shares to bring the account into line and that the market was falling, Mr Hiscock replied:
"Do whatever you have to do. Sell as many shares as you need to. I will leave it to you."
36 On Friday 18 January 2008, after inquiring about progress with selling, Mr Hiscock said that he would "leave you to it".
37 The plaintiff contends in written submissions that the conversation at about 9.45am on Friday 18 January 2008 entailed an instruction by the plaintiff to the defendant to sell the remaining MFS shares immediately; and a representation by the defendant that it would do so. That proposition is simply unsustainable, having regard to the words used. No representation as to timing was made by Mr Emerton. And Mr Hiscock, having given an instruction to "do whatever you have to do" and to "sell as many shares as you need to", then re-affirmed the defendant's discretion: "I will leave you to it". This was not an instruction to sell immediately. It was confirmation that the defendant should sell at its discretion.
38 I must confess that I cannot see any clear basis on which it could be said that the defendant undertook the contractual obligation for which the plaintiff contends. At the outset, on Friday 11 January 2008, Mr Hiscock gave an instruction consistent with his acceptance of the position that it was for the plaintiff to decide what to do in the event of a margin call. He directed that shares be sold. He specified the order in which they were to be sold. On subsequent days, he gave further instructions, in each case indicating that the defendant should act at its discretion ("do whatever you have to do"). The existence of a discretion on the defendant's part was part and parcel of the existing written contract. There was not, to my mind, any apparent indication by Mr Hiscock that he was seeking to impose upon the defendant any conditions or constraints with respect to the exercise of the discretion - much less was there any apparent indication by Mr Emerton that the defendant was accepting conditions or constraints. Mr Hiscock, for the plaintiff, confirmed in the conversations that the discretion existed and should be exercised. Mr Emerton, for the defendant, acknowledged the existence of the discretion and indicated that the defendant would exercise it.
39 In the present proceedings, I am not called upon to come to a final conclusion about the existence of the supplementary oral terms for which the plaintiff contends. I am required to do no more than determine whether the case the plaintiff advances rises to the level of "a plausible contention requiring investigation": Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 at 787 per McLelland CJ in Eq,
40 For the reasons I have given, I am not persuaded that the plaintiff has shown any such plausible contention requiring investigation.
41 The plaintiff has therefore failed to show that there is, in terms of
s 459H(1)(a), a genuine dispute as to the existence or amount of the debt the subject of the statutory demand. There is no assertion of offsetting claim within s 459H(1)(b), with the result that the possibility of damages for breach of an implied contractual obligation in terms similar to that incurred by a mortgagee exercising power of sale does not arise for consideration.
42 The originating process is dismissed with costs.
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