Debbs_ v The National Bank of Australasia Ltd

Federal Court of Australia|1994-08-17|Before: Moore J, Wilcox J, Michael J

These proceedings concern claims made by Mr Joseph Abram and Mrs Janette Abram against the Bank of New Zealand ("BNZ") and Mr Michael Fitzpatrick. The Abrams allege contravention of ss5S1AB, 52, 53, 55A and s60 of the Trade Practices Act 1974 ("TP Act") by BNZ, with a consequential claim for damages under s82 and

relief under s87. They seek damages for negligence, breach of

2 - contract and breach of a fiduciary duty. They also seek damages in what is said to be a claim based on breaches of s57 of the Real Property Act 1900 (NSW) ("RP Act"). They claim relief under the Contracts Review Act 1980 (NSW) ("Review Act"). The claim against Mr Fitzpatrick alleges, inter alia, a breach of contract and fiduciary duty. BNZ cross-claims for an order for possession and judgment for a money sum. Central to these claims is a Registered Mortgage No Y337025 over the Abram's family home securing a $170,000 loan facility provided to the Abrams by BNZ. Mr Fitzpatrick is a solicitor who prepared the mortgage documents and had them executed by the Abrams. As a result of a direction given by Wilcox J on 4 July 1994 the matter has been heard, to this point, on issues other than the quantum of damages and this

The following is the background to these proceedings. It is, in the main, a chronology of events and reflects findings of fact I have made principally by reference to uncontentious evidence, much of it documentary. In 1985 the Abrams, who are a married couple, purchased a block of land at Erskine Park, Sydney from Landcom. They became the registered proprietors as joint tenants. One of the terms of the contract required them to build a house within three years from the date of purchase. In 1986 the Abrams made the decision to build. In April 1987

they borrowed $90,000 from the National Australia Bank Ltd

-3- ("NAB") which was secured by a mortgage over the Erskine Park

property. A home was built, in part, with the proceeds.

In August 1987 Mr Abram was invited to transfer his American Express Gold Card facility to BNZ which he did. At that time it was an unsecured account with a limit of $10,000 ("the credit card facility"). A letter he received from BNZ, dated September

1987, explained the nature of the facility. It read:

"Thank you for accepting your new Gold Card from American Express, with its credit line from Bank of New Zealand. I am pleased to welcome you as a new customer and explain to you how your Gold Card has delivered a lot more than you may have been expecting.

Your Gold Card credit line is an overdraft facility which is part of your new Bank of New Zealand Smarter Cheque Account. Unlike your former credit line, your Smarter Cheque Account offers you the choice of either operating in overdraft, or earning high money market interest on deposit balances. If you have been a regular Gold Card credit line user, you will now enjoy the benefits of no minimum monthly repayment and low overdraft interest rates - currently 17% p.a. - plus the convenience of cheque access to your approved overdraft limit.

If you have not been a regular Gold Card credit line user, you will now enjoy high money market interest rates on deposit balances and you will have the peace of mind of knowing that your overdraft is as close as your Smarter cheque book.

Your Smarter Cheque Account is much more than a charge card credit line. It is an interest bearing cheque account with an overdraft.

You can withdraw from your account by using your enclosed Smarter cheque book; by using your Credit Line Activator from American Express; or by using the American Express services for ATM's and cash advances.

Your Smarter Cheque Account lets you directly access any deposit balance, and then it automatically activates your overdraft as required. You will earn interest every day your deposit balance is $1,000 or more and you only pay interest when your account is in overdraft.

You can pay into your Smarter Cheque Account to add to your deposit balance or reduce your overdraft by using the enclosed deposit book. Simply mail your deposit with a completed deposit slip to any Bank of New Zealand branch or visit any of our branches in person. You can also use your Smarter deposit book to pay into your account through any branch of any bank in

Australia. (Other banks may charge a small fee for this service.)

There are no account maintenance, overdraft service, or unused limit fees on the Smarter Cheque Account. All you pay are statutory government charges and the normal transaction fees which are detailed in the enclosed schedule.

For additional Smarter cheque and deposit books please write to or visit the Bank of New Zealand branch at the address printed on your cheques. If you choose not to use your Smarter Cheque Account please keep the enclosed cheque and deposit books with your compliments for possible future use.

As a Smarter Cheque Account customer you will receive a monthly statement of your account which details all deposits and withdrawals, including interest earned on deposit balances and interest charged for overdraft use.

You are not required to make minimum monthly repayments on your Smarter Cheque Account overdraft. All we ask is that you do make regular deposits, and stay within your approved overdraft limit. Please remember that your monthly statement is a report of your position NOT an invoice of amounts owing. Do watch your overdraft balance carefully.

I am delighted to welcome you as a new customer to Bank of New Zealand and I am confident that you will be happy with the many benefits of your new Smarter Cheque Account. Should you wish to discuss an increase in your overdraft limit; arrange for the automatic transfer of funds from other bank accounts; or ask any questions about your new Smarter Cheque Account, your local Bank of New Zealand branch manager will be pleased to assist you.

P.S. I'm sure your Gold Card has delivered a lot more than you expected by linking with the Bank of New Zealand Smarter Cheque Account. Do take advantage of your new account goon. While, for convenience, I describe the facility as the credit card facility, it is plainly more than that."

In probably late 1988 Mr Abram became aware of an offer from BNZ contained in promotional material he had either received in the post or had seen at BNZ Parramatta branch of an account styled "Smarter Mortgage Account". He made inquiries about the account. He did so because of the level of the fees he was then paying to NAB. I should note that there is, in evidence, a

second mortgage to NAB signed by the Abrams and dated 6 February

Mr Abram submitted that it is a forgery. I do not accept that it is but nothing of substance, in my opinion, turns on its

As a result of those inquiries made of BNZ about the "Smarter Mortgage Account", Mr Abram received a letter dated 9 February 1989 from a BNZ Account Executive, Mr Tietjen, which stated that the facility would operate in a way similar to an overdraft facility and that it would be perpetual. The letter

Thank you for your enquiry concerning our new mortgage product. The features are summarised as follows:

The Bank will lend up to 90% of the registered valuation of the property. The minimum amount that can be obtained is $50,000.00.

Operates similar to an overdraft facility where you can

repay and redraw amounts within the established loan limit. A monthly repayment of interest is required and access to your loan is through a cheque/deposit book.

Interest rate as at 31st January 1989 is 15.5% and is a managed floating rate.

Facility has no Fixed Term date and is perpetual.

A First Registered Mortgage over residential freehold

There are NO loan service, unused limit, commitment, holding discharge, or early repayment fees applicable to the account.

Costs will be Establishment Fee of $500.00. Valuation Fee, Mortgage Insurance (Where loan exceeds 75% of valuation) and legal fees for preparation and registration of mortgage documentation.

Should you have any questions pertaining to our mortgage, please do not hesitate to contact me on 290 6666."

On more than one occasion, Mr Abram met the Account Executive, who requested Mr Abram to provide BNZ with a letter from his accountant verifying his income as he and his wife were self employed. He did so. Thereafter the Abrams jointly applied for a loan of $170,000 from BNZ to be by way of a "Smarter Mortgage Account". The application was signed on 27 February 1989 by Mr Abram and Mrs Abram and it included an agreement that the Abrams would be bound by BNZ's "usual terms and conditions" for operating bank accounts. The loan was to be used, in part,

to discharge the mortgage with the NAB. It was to be secured by

Their application was successful and on 29 March 1989 Ms V Dikkenberg, Assistant Manager, Loans Administration of BNZ wrote

Congratulations! I am pleased to advise that your application for a Smarter Mortgage from Bank of New Zealand with a limit of $170,000.00 has been approved.

Your Smarter Mortgage will be secured by a First Registered Mortgage over your property at 10 Lexington Avenue, ST CLAIR. A copy of the Bank's terms and conditions for the operation of your Smarter Mortgage Account is enclosed for your reference.

The current Smarter Mortgage interest rate is 17% per annum calculated on your daily balance and charged to your account each month. The rate varies from time to time and is published every Friday in the Australian Financial Review. An important feature of your Smarter Mortgage Account is repayment flexibility. You may choose the repayment schedule that best suits your personal cash flow. Of course, you may also draw down and repay funds within your approved limit without restriction so you can use your Smarter Mortgage to meet major expenses like provisional tax and school fees. All we ask is that you deposit sufficient funds each month to cover the amount of your monthly interest.

Your monthly statement will detail the amount of interest charged as well as cheques drawn, deposits made and any transaction fees or government charges. The minimum you need to deposit by the 20th of each month is the amount of interest detailed on your statement. Deposits to your account and the first cheque drawn

each month are free with a transaction fee of $1.00 applying to each cheque after the first. You can deposit to your account by using your personalised deposit slips at any branch of any bank in Australia. There are no unused limit, loan service or early repayment fees applicable to your Smarter Mortgage Account.

I am pleased to welcome you as a Smarter Mortgage customer of the Bank of New Zealand and I am confident that you will enjoy the many benefits of your Smarter Mortgage Account. If you have any

questions about your new Smarter Mortgage, please do not hesitate to contact me."

The enclosed terms and conditions ("the standard terms") constituted four pages of detailed typed conditions one of which

(a) The whole of the outstanding debit balance on the Account shall become immediately due and payable to the Bank on demand.

The Abrams received a letter from a firm of solicitors,

Re: ADVANCE FROM BANK OF NEW ZEALAND Security: 10 Lexington Avenue, St Clair

The Bank hag requested that we prepare mortgage documentation and check matters of Title in relation to the Bank's advance to you in the sum of $170,000 for which you should have received formal approval.

The mortgage documentation has been prepared and we would ask that you make an appointment to see Michael Fitzpatrick of this office as soon as possible for the purpose of signing mortgage documentation and discussing the Bank's other requirements.

A full explanation of the mortgage documentation and an outline of fees associated with the loan will be give (sic) to you at the time of your consultation with Mr Fitzpatrick.

Please bring with you at the time of your consultation the following documents: -

Copy of Certificates of Title, if available.
Council and Water Rate Notices/receipts.
Copy survey report, 149 Certificate, etc. if available.

We also ask that you provide us with a Fire Insurance Policy noting "Bank of New Zealand" as mortgagee for not less than

Please telephone Mr Fitzpatrick in the meantime if you have any enquiries."

Mr Fitzpatrick was a partner of that firm. Mortgage

documents were signed at a meeting at Mr Fitzpatrick's office on 6 April 1989. Much of the contentious evidence in these proceedings concerned this meeting and it is a matter I return to consider in more detail shortly. However it was not in issue

that Mr Fitzpatrick did not explain to the Abrams that the credit card facility would be secured by the mortgage. The terms upon which the mortgage was granted were contained in a Memorandum numbered V617544 ("the memorandum of mortgage"). There is an issue as to whether, when Mr and Mrs Abram signed an acknowledgment of receipt and explanation of the memorandum of mortgage, it was attached to the memorandum. At some stage the Abrams received a copy of the memorandum of mortgage. It

"The Mortgagor COVENANTS AND AGREES with the Bank and it is HEREBY DECLARED as follows:

THAT unless there is an agreement in writing between the Mortgagor and the Bank to the contrary (in which case the Mortgagor will pay the Bank at such time or times and in such manner as has been so agreed) the Mortgagor will pay to the Bank on demand in writing made upon the Mortgagor at any time or from time to time by or on behalf of the Bank the whole or such part as is specified in each such demand of:

(a) all and every part of any moneys which are now or may from time to time hereafter be owing or remain unpaid to the Bank in any manner or on any account or by reason of any circumstances whatsoever by the Mortgagor whether alone or jointly with any other person and whether as principal or surety,

({b) all and every part of any moneys (if any) which the Bank (whether requested so to do or not) has already

advanced or paid or is liable to pay or may hereafter (whether requested to do so or not) advance or pay or become liable to pay to or for or on account of or on behalf of the Mortgagor whether alone or jointly with any other person,"

While there is an issue about when it was received, to which I return, the Abrams received a memorandum of account from Champion and Partners dated 3 April 1989. There are two documents in evidence in the form of an account, one dated the 3 April 1989 and the other dated 19 April 1989. There are minor

differences between them. The memorandum of 3 April 1989 reads:

"Mr & Mrs J. Abram, 10 Lexington Avenue, ST. CLATR. N.S.W. 2759.

RE: ADVANCE FROM BANK OF NEW ZEALAND SECURITY: 10 Lexington Avenue, St. Clair

$170,000 - mortgagee costs only $ 796.00 Solicitor's scale fees on mortgage of $170,000 - mortgagor costs only $597.00 $1,393.00 SPECIALLY NOTED AT: $ 600.00 DISBURSEMENTS : - Stamp duty on mortgage $ 625.50 Registration fees - (a) Discharge of Mortgage (2) $ 84.00 (b) Mortgage $ 42.00 Miscellaneous $ 60.00 Section 149 Certificate $ 100.00 Settlement fee $ 25.00 Title Search $ 40.00 Final Search $ 17.00 TOTAL : $1,593.50

10 - The only difference between this account and that of 19 April 1989 is the way the disbursements are particularised. The account dated 19 April 1989 was under cover of a letter of the

RE: ADVANCE FROM BANK OF NEW ZEALAND SECURITY: 10 Lexington Avenue, St Clair

We wish to confirm that we have completed the loan transaction from the Bank of New Zealand and have attended to the discharge of the mortgage with National Australia Bank.

We are presently attending to the stamping and registration of the mortgage and title deeds and upon completion of the registration procedure you will be advised.

We enclose herewith Statement of Account showing how the advance was disbursed. The balance of the advance is presently being held in your account with Bank of New Zealand and you should contact the branch with regards to getting access to funds in the future.

We note that your insurance policy still shows the National Australia Bank as first mortgagee. We suggest that you take this letter to the G.I.0O. as proof of discharge of mortgage and have policy amended accordingly. Kindly forward original insurance policy to us so that same can be sent on to the Bank.

Should you have any enquiries in relation to the above, please do not hesitate to contact this office.

A further letter dated 5 May 1989 from Champion and Partners

RE: ADVANCE FROM BANK OF NEW ZEALAND SECURITY: 10 Lexington Avenue, St Clair

Enclosed please find copy of duly registered Mortgage and Certificate of Title Folio Identifier 309/708572.

We note that the only matter outstanding is receipt of original fire insurance policy from you covering the subject property for not less than $180,000 noting Bank of New Zealand as mortgagee. Please attend to this matter urgently.

We confirm that all title deeds are being held by the Bank of New Zealand and the matter has been finalised.

We trust that the entire transaction has been handled to your

satisfaction and we invite you to contact us again any time in the future should you require any assistance in legal matters."

Part of the moneys advanced were used to discharge the mortgage with NAB. Approximately three months after the mortgage was executed, the Abrams had accessed the residue of the funds and had reached close to the agreed limit of $170,000. The level of their indebtedness remained in that vicinity till payments into the account ceased. Mr Abram had a business as a computer consultant and salesman though that latter aspect of his work had ceased by mid 1990. Mr Abram was unemployed from February 1992. In June 1992, Mr Abram informed BNZ in writing that he was not going to make further payments to the Smarter Mortgage Account or the credit card facility. As it related to the credit card

Collections Executive (NSW) Bank of New Zealand 333-339 George street Sydney NSW 2000

I will not be making any more cash payments into this account.

I now know how all banks including the BANK of NEW ZEALAND create book-entry credit out of thin air at absolutely no cost to themselves, and I have come to the conclusion that I do not owe your bank anything.

If you do not agree, please let me know and I will if the Courts agree, without prejudice supply you with my own Book Entry Credit Certificate.

I have stopped using this account. I will not be responsible for any further charges made to this account after today.

On 9 June 1992 Mr and Mrs Abram commenced proceedings in this Court which became No G369 of 1992 against BNZ and two employees of BNZ. Those proceedings sought a declaration that the Abram's did not owe BNZ $170,000, damages from BNZ of five million dollars and an injunction restraining BNZ from exercising

The proceedings were the subject of a judgment of Einfeld J of 19 February 1993 summarily dismissing them against which the Abrams unsuccessfully appealed. The proceedings were founded on the theory of "credit creation" which had some currency at the time and has been considered in a number of judgments of this

Court: see Napier v National Australia Bank Ltd, Spender J, 16

April 1992 unreported, Fisher v Westpac Banking Corporation,

French J, 18 August 1992 unreported and Arnold v State Bank of

South Australia, Full Court, 18 November 1992 unreported.

In August 1992, Mr and Mrs Abram received a formal letter of demand from BNZ requiring payment of $172,664.36 which was the

debit balance of their overdrawn "Smarter Mortgage Account" at

The BANK OF NEW ZEALAND HEREBY MAKES DEMAND upon you for the payment forthwith of the sum of ONE HUNDRED AND SEVENTY TWO THOUSAND SIX HUNDRED AND SIXTY FOUR DOLLARS AND THIRTY SIX CENTS $172,664.36 being the amount of your overdrawn current account.

The Bank also demands payment of interest on the amount demanded accruing hereafter at the rate charged by the Bank from time to time until the date of payment.

This demand does not include any effects outstanding at the date hereof or any costs incurred by the Bank in collecting moneys due to it for which separate demand will (if necessary) be made upon you.

All moneys hereby demanded are to be paid to the Branch of the Bank at the above address but the Bank will accept payment at any other Branch of the Bank in Australia provided such payment is accompanied by your signed request to remit the moneys to such first-mentioned Branch.

In the event of failure by the Debtor to comply with this notice

the Bank intends to exercise the rights powers and remedies conferred upon it by law."

In September 1992, BNZ served notices in apparent conformity with s57 of the RP Act on both Mr and Mrs Abram. There were four notices in all. The notices in respect of the "Smarter Mortgage

" NOTICE PURSUANT TO SECTION 57 (2) (b) OF THE REAL PROPERTY ACT _1900

TO: JOSEPH ABRAM AND JANETTE DAWN ABRAM of 10 Lexington Avenue ST. CLAIR NSW

TAKE NOTICE that the Bank of New Zealand (ARBN 000 288) as Mortgagee under Registered Mortgage No. Y¥337025 of which you are the mortgagors hereby require you to make the undermentioned payments in respect of which you have made default:

Amount due and owing arising from failure to comply with a demand dated 22 July 1992 $175,611.64

NOTE that unless the requirements of this Notice are complied with within one month after service of this Notice, the Bank of New Zealand as Mortgagee under Registered Mortgage No. Y337025 proposes to exercise its power of sale under the said mortgage, and such other powers as are available to it under the said

NOTE FURTHER that Bank of New Zealand requires you to pay its costs and disbursements for preparing this Notice which total $150.

David Paul Cowling Solicitor for and on behalf of the Bank of New Zealand

The notices in respect of the credit card facility demanded payment of $10,450.95. They were in the same terms as the other

notices but the description of the debt was as follows:

Following your default in payment of minimum monthly payment of $305.37 that fell due on 17 July 1992 the Balance of your account is now payable, such balance, as at close of business 21 August 1992, totalling $10,450.95"

Indeed it is clear that by this stage the Abrams had decided

that no payments would be made and any claims for payment would be resisted. They had by then commenced proceedings in the

Federal Court. They responded to the notices by letter dated 2

"Vanessa-Ann Jenkins National Manager Collections Bank of New Zealand

I acknowledge receipt of your letter of demand dated 22/07/92 which was handed to me by you during our meeting in your offices on 22 July 1992.

I note that a copy of the same letter of demand dated 22/07/92 was delivered to Janette Dawn Abram at 7.30pm at the above address on 7 August 1992.

I acknowledge receipt of Notice pursuant to Section 57(2) (b) of the Real property Act 1900 and relating to Account Number 3783170000 dated 28 August 1992 and signed by David Paul Cowling on behalf of the Bank of New Zealand, the notice was delivered at 3.30pm on 1 September 1992.

I acknowledge receipt of Notice pursuant to Section 57(2) (b) of the Real property Act 1900 and relating to Account Number 9599710000 dated 28 August 1992 and signed by David Paul Cowling on behalf of the Bank of New Zealand, the notice was delivered at 3.30pm on 1 September 1992.

I will be contesting all the notices and demands on several grounds.

I warn you not to attempt to execute any of these matters ex parte.

I do not accept the suggestion made by Mr Abram in these proceedings that had a claim been made at this stage for outstanding interest it would have been paid or might have been paid. Whether because they were unable to pay or had an abiding belief in the argument about credit creation or both, the Abrams had, by this time, made a decision not to make any payments and to contest the matter in whatever way that they believed was open

Mr Abram wrote to BNZ informing them that it had made a mistake in respect of the credit card facility as it was unsecured and was solely in his name. BNZ informed him by letter that they were not in error and relied on the "all moneys clause" in the memorandum of mortgage. BNZ later informed Mr Abram that

it would not rely on those notices concerning the credit card

16 - facility. The present proceedings were commenced by application

The contentious evidence in detail - steps leading to the meeting

In attendance at the meeting of 6 April 1989 were Mr Abram, Mrs Abram, one of their children and Mr Fitzpatrick. There was an issue whether and to what extent others were present during the meeting. It is convenient to commence by recounting the evidence of Mr Fitzpatrick as he conceded certain matters of fact upon which the Abrams case depends. He had no direct recollection of the meeting. What he said occurred was based on his belief that he would have conducted the meeting in the way he had conducted similar meetings on hundreds of previous occasions. Much of his evidence as to what occurred prior to, at and following the meeting depended upon past practice and systems and procedures for undertaking this work. Mr Fitzpatrick gave the appearance of someone trying to recount truthfully his recollection, or lack of it, of the relevant events. I accept

Mr Fitzpatrick received written instructions from BNZ in the form of an instructions advice of 28 March 1989 and a letter dated 29 March 1989. The instructions identified the loan to which the mortgage would relate as an advance of $170,000. Mr Fitzpatrick then had in place a system for dealing with such

matters which involved the use of standard procedures and

17 - precedents. His account in his affidavit was that upon receiving these instructions a property search was undertaken and the letter of 3 April 1989 was sent to the Abrams. By then the mortgage documents had been prepared which involved recording information concerning the property and the names of the mortgagors on a printed standard form BNZ mortgage, and the

(i) acknowledgments of explanation of mortgage documents and an offer of independent legal advice to be signed

by each of the Abrams ("the general acknowledgment") ;

(ii) a warranty to be signed by the Abrams concerning the mortgaged property and their solvency ("the

(iii) an authority and direction to receive and pay moneys provided by BNZ to be signed by the Abrams ("the

(iv) an acceptance of the loan conditions and a further authority to pay to be signed by Mr Abrams ("the

(v) a confirmation of explanation to be affixed to the memorandum of mortgage ("the confirmation of

18 - The procedure also involved obtaining two copies of the memorandum of mortgage and the preparation of a draft memorandum of account. Mr Fitzpatrick denied that as part of the system he had instituted, the mortgagors would have been sent prior to any meeting with them, a copy of the draft memorandum of account, the memorandum of mortgage or the BNZ's standard terms. He denied

having kept copies of the last mentioned document in his offices.

Mr Fitzpatrick said that prior to the meeting commencing he would have had the printed mortgage form in duplicate, the five precedent documents, the memorandum of mortgage in duplicate, and the draft memorandum of account. A matter the parties viewed as of some significance was whether the confirmation of explanation was stapled to the front of a copy of the memorandum of mortgage.

The confirmation of explanation reads, in its completed form:

"I CONFIRM THAT THE CONTENTS OF THIS MEMORANDUM HAVE BEEN EXPLAINED TO ME AND THAT I HAVE RECEIVED A COPY.

DATED: 6.4.89" J Abram (signature) Joseph Abram (signature)

Mr Fitzpatrick said that it would have been stapled to the

In his affidavit Mr Fitzpatrick then recounts what he is likely to have said to the Abrams. I will not repeat all of it save to identify material matters that were discussed. He would have commenced by explaining the nature of the loan as a super bankcard, being funds made available that could be drawn upon

subject to a limit. He would have explained that the Abrams

-~ 19 - would have to service the interest requirements and the interest rate was variable. He would have also said in these introductory remarks that "any monies you are owing in respect of this financial accommodation will be secured by a mortgage". He would then have gone on to deal with his role as a solicitor in the

"Do you have a solicitor? You can use an independent solicitor, you do not have to use me. I am here for the bank but my instructions from the bank are to assist you in any way possible. You can take the documents away if you want to and have them explained by your own solicitor or I can explain them to you now. I do the work for a flat fee."

Mr Fitzpatrick denies saying, in this context, "there is no need to waste any money" or "you don't need another solicitor". He would then have asked if the Abrams were content for him to proceed and would have explained the relevant documents commencing with the mortgage which would have included the explanation that "It is a mortgage in respect of any monies loaned or advanced to you by the bank under this accommodation", The term "accommodation" would have been used earlier as a description of the "super bankcard". He would have explained five obligations arising under the memorandum of mortgage. The second to fifth were insurance of the property, the payment of rates, the property's maintenance and compliance with demands of the council and the like. The first concerned the payment of

interest which would have been explained in the following way:

"You understand that this is a loan and not a gift. The Bank wants the money back with interest and expects you to make those payments promptly and punctually, so your first obligation is to make prompt and punctual payment of interest. That means that the payments are due on the second of each month, that means the

second of each month not the third or the fourth but the second, do you understand that?"

As to a breach of this obligation, Mr Fitzpatrick would have

"... i£ you don't make your payments on time, the Bank can come to you and say "look if you're not fair dinkum about this we will have our money back now thank you very much". However, the Bank can't commence any legal proceedings against the property unless and until it has given you a notice in writing telling you what you have done wrong and giving you an opportunity, normally 28 days, in which to fix things up. If you fix things up with the Bank within that period that prevents the Bank from taking any further legal action against the property and you go back to square one. If however you ignore that notice or don't come to some arrangement to the satisfaction of the Bank within the time frame then that allows the Bank to institute legal proceedings against you to effect recovery of the property and the Bank would then proceed to exercise its power of sale. There are very strict laws as to how the Bank can go about that. It requires institution of proceedings which must be served on you. In texms of the Bank's exercise of its power of sale, they must generally obtain a good price, and they can only keep what is actually owed to them, any monies obtained in excess of that from the sale proceeds, come back to you. Do you understand all of that?"

He would then have said they could repay the loan at any time and later that Mr and Mrs Abrams would be jointly liable to the bank. Mr Fitzpatrick said he would then have got the Abrams to gign the five precedent documents, having read each of them out and showed them to the Abrams. When dealing with the memorandum of mortgage he would have said, when giving Mr Abram a copy, "keep this as a way of curing insomnia". When each of the documents had been signed, Mr Fitzpatrick would have witnessed those documents requiring a witness, and dated those requiring a date save for the mortgage because it is customarily dated on the date of settlement. After the documents had been executed he would have given the Abrams the draft memorandum of

account and said that they represented the standard charges

~ 21 - though they would be sent a final account in due course but it would not be likely to be any different. He would have briefly explained every item in the memorandum of account. Mr Fitzpatrick would have explained what was to happen next and the Abrams would have left with the draft memorandum of account and a copy of the memorandum of mortgage. Mr Fitzpatrick denied in his affidavit elements of the account of the meeting given by Mr

When called, Mr Fitzpatrick was asked some supplementary questions by his counsel and was cross examined by counsel for BNZ and then Mr Abram. It emerged from cross-examination by counsel for BNZ that Mr Fitzpatrick had first started working for BNZ in 1987, first drafted the precedent documents in 1987 and

that by mid 1988 they had been developed into a final form.

He also said that the patter he developed and which formed the basis of is affidavit, had been given thousands of times. Mr Fitzpatrick was prepared to adopt the word "patter" put to him

Mr Abram's cross-examination of Mr Pitzpatrick was not a particularly testing one in that no real attempt was made to ascertain whether the patter was so familiar to him that it was likely that the account he gave of it in his affidavit reflected the form of words used with the Abrams. However, questions were asked of Mr Fitzpatrick about his opening remarks concerning his

"Mr Fitzpatrick, were all these mortgages that you were involved in in organising the signatures and so on for the Bank of New Zealand, like ours, were they all cases where there was no other solicitor involved?---No, from time to time there were other solicitors involved.

Did you know that we did not have a solicitor before we attended your invitation?---Yes, well, it was suggested, I think, in the bank's letter of instruction to me that there was - that you didn't have a solicitor.

That we did?---That you didn't. I mean that's why I wrote to you. Had they - had the bank told me that you had a solicitor I would have written in the first instance to your solicitor rather than to you directly.

You say that you asked us if we had a solicitor, is that correct?---Yes.

And we obviously would have said no, is that correct?---Well, that was what obviously would have been the result because we proceeded with it.

Is it in your opinion, you tell me, is it okay for you to act for both parties in that situation?---In a line transaction? At that

time, yes. Bear in mind this that it was part of my usual patter to say this that I'm here for the bank, not for you. The bank instructs me to be as cooperative as I can with you to see that you get what you want. With that in mind if you want to take these documents away please do so, but if you are content to sign them here well then you may do so. It is a matter for you. So it wasn't my job to twist your arm to go elsewhere. It was my job to (a) look after the bank's interest, but in so doing assist the bank's customer, you, to get on with what you wanted to do.

Did you say something to the effect that in doing so would cause a delay?---No, that's not something that I would say.

So you would invite the customer along to sign, telling him that he might go away and see a solicitor and then you would have to make another appointment or sign them as it were, is that right, if you chose to do so?---Well, it may have been that you considered that that would cause a delay but it is not something that I would say to someone, this is going to cause a delay if you don-t - you have got to use me otherwise it will cause a delay. I mean that's not something I've ever said.

Well, I put it to you that that is what you said to us?---Well, I deny that."

It is to be noted in this answer, unlike the statement in his affidavit, Mr Fitzpatrick says that it was part of his patter

to say to the mortgagors that "I'm here for the Bank not for

23 - During the cross-examination, Mr Fitzpatrick conceded he was not aware at the time of the interview that Mr Abram had the

Mrs Abram's recollection of the meeting was limited. She swore a brief affidavit in which she says she attended the premises of Champion and Partners with her husband and thirteen month old daughter, Jessica. She said they were kept waiting at the top of some stairs, were invited into Mr Fitzpatrick''s office, her husband had a brief conversation with him while she engaged Jessica to keep her quiet, she signed some papers as instructed by Mr Fitzpatrick and then left. In supplementary evidence given orally she said the meeting concluded within half

My impression of Mrs Abram was that generally she was endeavouring to answer honestly questions put to her, though her attitude to the cross examiners was hostile and at times appeared belligerent. I gained the impression, however, that she was prepared to mould her answers to suit her case. In cross- examination she said that she did not read any of the documents she signed. She was content to leave to her husband the task of talking to Mr Fitzpatrick. It is plain that she was prepared to have her husband conduct the discussions with Mr Fitzpatrick on her behalf while she attended to the child and sign documents on the same basis. She did, however, recall making a comment about interest rates. She also recalled Mr Fitzpatrick saying

something about whether the Abrams had a solicitor, whether they

~ 24 - wanted to take the documents to be explained by their own solicitor and that he did the work for a flat fee if they wanted to use him. Generally, however, her evidence in cross- examination was to the effect that nothing was explained to her because the conversation was between Mr Fitzpatrick and her husband. She denied knowing what a mortgage was though she agreed that during the proceedings she had become aware that "the holder of the mortgage has the right in certain circumstances, to sell the property mortgaged to pay out moneys". However, she

did not agree that she had that understanding in 1989.

Mrs Abram did not accept that the various documents she signed were read out by Mr Fitzpatrick though conceded at least the warranty may have been read out loud to her husband. She said her husband did not take any documents from the meeting but was only able to say so because Mr Abram helped her carry a

stroller down the steps after the meeting concluded.

Mr Abram's account of the meeting and events leading to it were first recorded in a document entitled "note of conversation" prepared as the result of a direction of the Registrar. That account was later put into an affidavit form. After receiving the letter of 3 April 1989 from Champion and Partners, Mr Abram made an appointment by phone for 10.00am on 6 April 1989. They arrived at that time but were kept waiting till 10.30am. Their child was becoming restless. When the meeting started they were ushered into Mr Fitzpatrick's office. The child was by then

agitated and his wife was fully occupied keeping her quiet. Mr

25 ~ Fitzpatrick sat down behind a desk with the mortgage in front of him. Mr Fitzpatrick apologised for being late, said he was in a hurry to catch up, there was some conversation about Mr Abram's job, the house and Mrs Abram having her hands full placating the

The following is the account given by Mr Abram in an affidavit of the conversation concerning the mortgage which I set out in full as it is materially different from the reconstructed

Mr Abram, have you read the terms and conditions attached to the letter we sent out to you?

I said to Mr Fitzpatrick: If you mean the one about the credit cards etc. Yes I have.

Mr Abram, did you read the memorandum attached to the Jetter, the second page?

I said to Mr Fitzpatrick: Yes, I did.
Mr Fitzpatrick said to me:

Mr Abram, do you have another solicitor acting for you?

I said to Mr Fitzpatrick: No.
Mr Fitzpatrick said to me:

I thought that you had a solicitor acting for you when you signed the mortgage with the NAB, didn't you?

No, we have never had a family solicitor as such, we did have a solicitor acting for us when we purchased the block of land from Landcom, because as I recall, there was some requirement of Landcom to do so, a Mr Hickie in Crows Nest, but he is not our family solicitor as such, he was

recommended to us by our then Westpac bank manager at Five Dock, but we don't have a solicitor.

There is no need to waste any money on other Solicitors, you could go away and find another solicitor to represent you, but that would delay the signing of this mortgage and then if after all that, the bank was still willing to sign, you would both have to come back here again to sign and it would cost you more money in fees etc.

There is no need to do that, we trust you and the bank. Mr Fitzpatrick said to me:

At a glance

Court

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Judgment (382 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (17)