The September 2006 facilities
194 Chad Molenaar says that in August 2006 he became aware that the Serobians and Schypsl were considering moving their account to the National Australia Bank ("the NAB"). He contacted Mrs Serobian to arrange lunch. He, Mark Hill (executive manager corporate banking), Mrs Serobian, and Patrick went to lunch.
195 Mrs Serobian says that the lunch was arranged after she had a conversation with Chad Molenaar in which she told him that the Bank was not fulfilling its promises and was taking all the money for its interest payments and would not let them set up or buy any new businesses for them to be able to pay them the interest from those businesses.
196 The lunch took place in Manly on about 23 August 2006 at a restaurant on the Ferry Wharf.
197 Mrs Serobian expressed dissatisfaction with the Bank.
198 Her evidence was that a conversation to the following effect took place:
MARK: We wouldn't want for anything to go wrong, nor do we want to lose you as our valued customer. We will fulfil all of your funding requirements from hereon in and we will fix your previous problems, don't worry.
CHRISTINE: That's what Kerry and Sue said in the beginning, the bank is just full of false promises.
MARK: I apologise, obviously there has been some miscommunication. We will fulfil all your immediate requirements, put a facility in place for the company to cover the set up of a couple of new centres and enough funds to cover payments until such time that the businesses generate enough income, what opportunities do you have available to you at the moment?
CHRISTINE: We would like to buy the property I mentioned to you at Ermington, the Hornsby one, the new one at Wyong that has a 30 year lease in place from the Council and we also require about $750,000.00 for another centre we have in mind.
MARK: I believe Chad was setting up a facility for about $850,000.00. We will increase that to $1,600,000.00 and from here on in any businesses you want to purchase we will provide the full funds for you to do so.
199 Patrick's evidence was that a conversation between Mark Hill and Mrs Serobian to the following effect took place:
MARK: We do not want to lose your business we will fulfil all of your funding requirements and resolve any lack of service that you feel you are experiencing…we will fulfil all of your immediate funding requirements based on our discussions today, what opportunities do you have available to you at the moment?
CHRISTINE: We have the property at Ermington as I had mentioned to Chad, Hornsby centre and the other new one at Wyong on a 30 year lease from the council, we will also require a further $750,000.00 for another centre we have in mind.
MARK: Chad was setting up the facility for $850,000.00, we will increase that amount to $1,600,000.00 and from here on we will fund any business you want to purchase or establish.
200 Mark Hill's evidence was that there was general discussion about the Serobians' businesses and their current facilities with the Bank and that Mrs Serobian asked a lot of questions and demanded detailed answers during the lunch. He says that the usual way he would describe a customer in good standing was as a valued customer. He denies that he said the words which Mrs Serobian and Patrick attribute to him. He denies that at any stage he or anyone on behalf of the Bank committed to providing any, let alone limitless, finance without further review or consideration.
201 Chad Molenaar says Mrs Serobian told them that the NAB was offering to refinance and to increase their facilities to $14 M. She told them that the NAB had calculated a value for "their business" simply on the basis of the number of places at any childcare centre. She wanted the Bank to do the same.
202 He says that general matters relating to the Serobians' business and their funding requirements were discussed and that Mrs Serobian spoke of her intention to expand the child care business. According to him she said they were looking to buy additional centres in Wyong and Muswellbrook and were continuing to develop and progress the properties at
Hornsby and Ermington. He accepts that she was critical of the Bank.
203 He denies that any conversation to the effect of the one which Mrs Serobian says she had with Mark Hill occurred.
204 On 28 August 2006 Chad Molenaar sent a fax to Mrs Serobian and Patrick asking for information about child care places at various child care centres.
205 On 29 August 2006 the Bank received under cover of a fax from Schypsl certain information about various childcare centres, including a projected cash flow for the Ermington childcare centre.
206 On 5 September 2006 in a Letter of Approval of that date the Bank approved an additional Multi-Option Facility for Schypsl of $1,050,000 and a further BetterBusiness Variable Rate Facility totalling $1,500,000 (including the earlier $800,000 facility - thus representing an increase in that facility of $700,000).
207 On 5 September 2006 a meeting took place at the Manly office at which were present Chad Molenaar, Mark Hill, Kerry Small, and the Serobians. Chad Molenaar could not recall whether Patrick was present.
208 Chad Molenaar says that he read to the Serobians, by way of summary, the description of the facilities appearing on the first page of the letter, pointing out the approved increases. The Approval Letter incorporated a Terms Schedule, Security Schedule and an Acceptance Document. He says he read to them the facilities described in the Acceptance Document. He says that he read to them the items and terms of the Terms Schedule for each facility and that he read or summarised each item of security stated in the Security Schedule for Schypsl. He says he read or summarised the Bank's fees and charges.
209 Chad Molenaar says that Mrs Serobian interrupted him stating that she wanted to rearrange these facilities so that the BetterBusiness Variable Rate Facility was for $1,600,000 rather than $1,500,000 and the Multi-Option Facility was reduced from $1,050,000 to $950,000.
210 According to Chad Molenaar, Kerry Small called her manager Roger Hastie by mobile phone, for permission to alter the document, which he gave, and alterations were made by hand to the Acceptance Document and initialled by Mark Hill and Kerry Small. The documents so amended were in evidence.
211 The Terms Schedule accompanying the 5 September 2006 Letter of Approval contained a provision that the release of funds would be strictly controlled by the Bank and would be subject to certain conditions. According to Chad Molenaar, Mrs Serobian objected to the wording of this condition, there was some discussion and new wording was proposed and approved by Roger Hastie during Kerry Small's conversation with him.
212 He says that there was considerable discussion about whether the Serobians would be able to obtain the consent of landlords of the leased child care centres to mortgages over leases in favour of the Bank and the Terms Schedule was varied after the discussion with Roger Hastie and handwritten by Mark Hill. The handwritten amendment was in the following terms:
"The Borrower undertakes to arrange execution of mortgage over leases of centres at Hornsby, Leichhardt, Wyong & Narrabeen, within 90 days.
The Bank agrees to fund the BetterBusiness Bill Facility Variable Rate $1.6m prior to the mortgages over the leases being executed."
213 The Terms Schedules for both these additional facilities contained a provision to the following effect:
"The Borrower undertakes not the borrow or raise money, exceeding the sum of $300,000.00 (other than to repay the Facilities in full) without the bank's prior written consent."
214 Chad Molenaar says he has a specific recollection of reading out this condition and telling the Serobians that the Bank may wish them to sign a formal document agreeing not to borrow or raise money exceeding the set sum without the Bank's approval. Chad Molenaar says that once agreement had been reached on the final terms of the facilities, the Serobians signed the Acceptance Document which covered both facilities. An Acceptance Document bearing the date 5 September 2006 with the Serobians' signatures as directors of Schypsl was in evidence.
215 By this time the $2 M facility was fully drawn. Chad Molenaar says that he took to the meeting an Approval Letter, dated 5 September 2006, including a Terms Schedule, amending the terms of the $2 M facility to a fixed term loan facility extending its term for four years and three months so as to be repayable on 11 January 2010. Item 9 of the Terms Schedule stated that the bill rate would be determined on the day of, or the working day preceding each drawdown and stated that the indicative yield rate for a 90 day bill with a face value of $2 M was 6.57%. He says that there was otherwise to be no change to the facility as the previous one had been a variable rate facility as was this one and this rate would have applied to a bill under the facility whether amended or not as it was a variable facility. He says he explained the changes to the Serobians.
216 Chad Molenaar says the 5 September 2006 meeting started around 4.30pm and ended at about 6.30pm.
217 Mark Hill also gave evidence of this meeting. According to him they arrived at about 4.30pm and the meeting lasted approximately 2 hours. He says this was the first time he met Mr Serobian. He asked him whether to call him Shane or Shahen and he replied "either".
218 He says that Chad Molenaar, Kerry Small, Mrs Serobian and he sat at a small table. Mr Serobian was present but did not take much part in the meeting.
219 According to Mark Hill, Chad Molenaar put the 5 September 2006 Letters of Approval, Acceptance Documents, Terms Schedules and Security Schedules on the table and proceeded to take Mrs Serobian through them.
220 He says that he was content for Chad Molenaar, the relationship executive, to explain the documents but that he concentrated on and followed the explanation of the documents. He says that Mrs Serobian interrupted on many occasions to ask questions. Mr Serobian was in the room although he was not part of the "huddle around the documents" as they were being explained.
221 He says that Mrs Serobian requested that the proposed Multi-Option Facility limit be reduced by $100,000 and the Variable Rate Bill Facility be increased by that amount. He says that Kerry Small exited the office and made a mobile telephone call to a person he understood to be Roger Hastie who had authority to make the change and that she came back and said, "that's fine". He says he amended the documents to accord with this change. He could not recall how the condition relating to the Bank's strict control over the release of funds was removed, although he initialled the striking out.
222 He says that a conversation about the Security Schedule occurred in which he said that consents to the mortgages over the leases were required before the facilities were drawn down, and that after discussion it was agreed that the documents would be amended so as to require an undertaking for the consents to be provided within 90 days. He says that Kerry Small called Roger Hastie to get approval for this change, which she got. Mark Hill wrote the provision relating to obtaining the mortgages in his own hand.
223 Kerry Small also gave evidence of this meeting and of the discussion which led to changes to the documents, and of her phone call to Roger Hastie. She says that they arrived between 4pm and 4.30pm.