Coshott & Anor v Commonwealth Bank of Australia

Court of Appeal (NSW)|2004-06-08|Before: Sheller JA, Ipp JA

Introduction 4 The appellants, Robert Gilbert Coshott and Ljiljana Coshott, appeal from a decision of Sorby DCJ in which his Honour entered a verdict and judgment for the respondent, the Commonwealth Bank of Australia. They had unsuccessfully sued the bank for the recovery of interest allegedly overpaid and damages. Essentially the appellants seek a new trial in the District Court. 5 There are 22 grounds of appeal in the Amended Notice of Appeal, although the oral submissions concentrated on three issues. A number of grounds of appeal were abandoned, ie the particulars in 2.1.1 to 2.1.3 in ground 2, grounds 9 - 12, 16 - 20 and 22. 6 The three issues debated at the hearing are grounds 1 and 2 (promissory estoppel), ground 3 (no finding an account 3397 (the FDL Account) ) and ground 7, the market rates issue. I will deal with these seriatim.

Grounds 1 and 2 - promissory estoppel 7 This ground relies on conversations in and after mid August 1988 between the first appellant and Mr Proctor from the bank. According to the pleading (the Further Amended Statement of Claim) the respondent represented to the appellants that the discounted bill facility remained the most effective option for them in that the interest rate on bank bills would decline sooner and faster than a fixed term variable interest mortgage. Accordingly, the appellants would benefit by remaining on a discounted bill facility rather than changing to a fixed term mortgage (paragraph 11). In reliance upon the representations it is claimed that the appellants remained on the discounted bill facility and lost the opportunity to refinance by a fixed term variable interest mortgage. 8 The appellants maintain that his Honour failed to deal with this aspect of the claim. Part of their case involves a complaint that on 11 November 1991 the bank unilaterally transferred the debts then owing to the bank (by then $1.32 million) from a Bill facility to a Bill Matured Account or fully drawn loan account (FDL). As a result, the appellants contend that they lost the benefit of falling interest rates on discounted bill facilities. 9 It is appropriate to note some of the terms of the original application for accommodation dated 14 March 1986. Clauses 2 (a), (c) and (i) provided: 2. It is clearly understood that the following terms and conditions shall apply to all accommodation granted to the applicant(s) by the Bank from time to time:- (a) Such accommodation shall be granted on the Bank's usual terms and conditions, the terms and conditions set out elsewhere in this Application and on such other terms and conditions as the Bank may from time to time impose. (c) The Bank may from time to time at its pleasure cancel or vary the limit of accommodation granted to the applicant(s) and/or vary the rate of interest and/or rate of discount and the charge for accepting or endorsing bills of exchange applicable to the accommodation granted to the applicant(s). (i) The applicant(s) undertake to make a full and true disclosure of the applicant's(s') current financial position to the Bank from time to time on demand 10 In the context of clause 2 (i) above it was the bank's case that the appellants were in continuous breach from at least September 1991. The correspondence demonstrates that the bank repeatedly required the appellants to provide financial details and statements but the appellants failed to do so. Indeed, the conduct of the first appellant was one of obfuscation and avoidance. The conduct in the months leading up to 11 November 1991 amounted to a clear breach of cl 2 (i) entitling the respondent to take the step that it did and transfer the debt in the bill facility falling due on that date to an FDL. 11 In the oral argument before the court the appellants submitted that there was an implied promise by the bank that the appellants would be permitted to stay on a bill discount facility for an indeterminate period until the interest rates on bills became lower than on fixed mortgage rates. As counsel for the respondent observed, this was neither pleaded nor put to his Honour below. At trial the August 1988 conversations were really put as a corollary to the earlier conversation in mid 1988 as part of paragraph 10. Both involved the same claim for damages. 12 Also, the appellants relied on a different reliance case before his Honour. The conversation of the first appellant relied on and put to Mr Proctor in cross-examination contained the following:- "I discussed with him whether I should lock in - change the Bank Bill facility to a fixed mortgage and lock the interest rate in to ride out this period of high interest that was coming." 13 As observed, the pleadings referred to a variable rate mortgage. Nor was there any evidence that a fixed term mortgage with a fixed interest rate was available. Further, there was no evidence that even if it had been available, it would have produced a better outcome for the appellants. Indeed Mr Proctor was not cross-examined on the issue of the availability to the appellants of a fixed interest rate mortgage. 14 In my opinion, the appellant's claim to a promissory estoppel must fail.

Ground 3 - Account No. 3397 (the FDL account) 15 Again, the claim here is that while his Honour commenced to deal with the issue he did not complete his findings. This ground concerns interest paid on the FDL account number 3397. It is alleged that interest was overpaid by around $10,000, although it is unclear how this is made up. Part of the dispute concerns payment of interest at the rate of 14% rather than 11.25% as contended for by the appellants. 16 The appellants relied on an expert witness, a Mr Ross Robson. He contended that in the period May - June 1994 the appellants were overcharged by approximately $3,875. He reached this conclusion by accepting the appellants' figure as to the correct interest rate (11.25%). This was not the interest rate shown on the bank statements which relevantly was 14%, see White Book Ex D Vol 1 at 208. It is abundantly clear that the bank was entitled to charge interest at this rate because the appellants admitted that they were in breach by failing to pay the required monthly loan repayments. 17 On 13 May 1994 the bank wrote to the appellants as follows:- We wish to inform you that due to the recent non-payment of monthly loan instalments, the nominal rate applicable to the above account will be increased to 14.00% per annum 18 This explains the difference in the interest for this period (May - June 1994). It also confirms that his Honour's reasoning was correct, see Judgment Red Book pages 127 and 133 - 134. 19 There remains a difference of some $300 odd. I accept the explanation in paragraph 73 of the respondent's written submissions that errors by Mr Robson account for this discrepancy. 20 This ground of appeal fails.

Ground 7 - market rates 21 The appellants' case is that they were to be charged the 'market rate' for the bills plus a 1% usage fee plus a 1% facility fee and that this was confirmed by Mr Proctor's note. At trial there was dispute as to which market applied. Again, the point of the appellants seems to have shifted in that it is claimed that they were overcharged 0.6% on most bills (0.3% on bills in excess of $500,000 and less than $1 million) but also varying rates in excess as shown by an aide memoir produced by counsel for the appellants in his written submissions in reply. 22 The process is explained in the affidavit of Mr Ellis Bugg. While there was an indicative mid rate exhibited on a whiteboard, the actual rate paid for a bill varied during the day. This explains why the variations are sometimes above 0.6% for smaller bills, and sometimes below. It explains the discrepancies from the whiteboard indicative rates. His affidavit also explains the markets. Where a bill was for a face value of less than $500,000 an extra 60 basis points or 0.6% was added. Where the face value was more than $500,000 and less than $1 million, the loading was 0.3%. These were sometimes termed "shrapnel" and the wholesale market was not used because it had minimum marketable parcels. 23 Mr Bugg's evidence was unchallenged and he was not cross-examined. It was never suggested to him that the appellants were entitled to a special rate not offered to other customers of the bank. 24 Moreover, apart from the application for accommodation, the other document governing the relationship between the parties was the mortgage contract. Under the mortgage the respondent was entitled to charge interest at a rate agreed in writing. If there was no such agreement, the rate was the rate charged or chargeable by the respondent to other customers on a like account (see cl 8). There was, in fact, no written agreement between the parties for the appellants to receive the wholesale bill rate and the rate actually charged to them was the same as the rate applied to other retail customers. 25 Accordingly, this aspect of the appeal also fails.

Miscellaneous remaining grounds 26 That leaves a small number of remaining grounds, ie 8, 13 - 15 and 21. Ground 8 appears to accompany ground 3 dealt with above and adds nothing. As to grounds 13 to 15, the written submissions of the respondent adequately answer those of the appellants' and are to be preferred. As to ground 21 no application was made to his Honour in the final submissions. In any event, I do not see why it cannot be dealt with in any costs assessment or be agreed between the parties. 27 It follows that the appeal should be dismissed with costs and it is unnecessary to address the Limitation Act defence. * * *

Last Modified: 07/02/2004 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

CITATION : Coshott & Anor v Commonwealth Bank of Australia [2004] NSWCA 189 HEARING DATE(S) : 8 June 2004 JUDGMENT DATE : 17 June 2004

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