That decision was affirmed on appeal in the House of Lord: Abrath v The North Eastern Railway Company (1886) 11 App Cas 247, at 249 per Earl of Selborne. See also Crowley v Glissan (No.2) (1905) 2 CLR 744 at 754 per Griffith CJ, 762 per Barton J, 762 per O'Connor J; Currie v Dempsey (1967) 69 SR (NSW) 116 at 125 per Walsh JA; Cross on Evidence (Australian edition) [7060] - [7070].
209 In the period 1988 to September 1991 Illawong had three directors, namely Mr Alcock, Mr Davis and Mr White. While Mr Alcock was the director who had by far the largest amount of contact with the Bank concerning the Illawong loan, all three directors had a financial interest in Illawong's success arising from their shareholding, and from the fact that each had given the Bank a guarantee of its debts. After September 1991 Mr Alcock and Mr Davis remained directors.
210 Mr Davis attended various meetings with State Bank - the meeting on 4 March 1992 (para [102] above), the meeting on 25 August 1992 (para [114] above), the meeting on 29 October 1992 with Mr Whitehead (para [122] above), a meeting in December 1992 with Mr Lyell (para [131] above), a meeting with St George on 12 January 1993 at which agreement was reached on the matters set out in para [133] above, and at the meeting with State Bank on 27 July 1993 (para [151] above), at which the interest rate adjustments made on settlement, and proposed to be made in the future, were discussed. He was also present at the meeting with the Bank on 21 September 1993 when the final interest adjustments were discussed (para [157] above). The personal and professional relationship between Mr Alcock and Mr Davis was such that they discussed matters regularly. Even though Mr Davis was not the leader in Illawong's relationship with State Bank (and indeed in January 1997 declined to meet with the Bank during a period when Mr Alcock could not be present), he was still a person who was likely to have knowledge of what had, or had not, been agreed between Illawong and State Bank.
211 Mrs Lorraine Davis was the company secretary. She worked in the office of the accountancy practice of Mr Alcock and Mr Davis, where she carried out bookkeeping tasks for Illawong. She had dealings with State Bank from time to time when she sought explanations of particular amounts which had been debited to Illawong's bank accounts, or requested credits for items appearing on Illawong's bank accounts which she thought were wrongly calculated. She attended the meeting on 21 September 1993.
212 While Mr and Mrs Davis are now divorced, both continue to live in Sydney. Mr Davis remains a close friend of Mr Alcock.
213 State Bank submits that Illawong's failure to call Mr and Mrs Davis and Mr White means that it cannot prove that there was no agreement as to interest during the Limbo Period. It submits that where an individual has the onus of establishing a negative fact, the individual must swear to the absence of the relevant matters and be available to be cross-examined, and that where a company asserts a negative the relevant officers of that company must give like evidence. It relies on cases where local councils have needed to prove that a particular decision was not actuated by a proscribed consideration: IW v The City of Perth (1997) 191 CLR 1 at 31-33, 51, 61-66; Australian Municipal, Administrative, Clerical and Services Union v Greater Dandenong City Council [2000] FCA 1231; (2000) 101 IR 143 at [42]-[52], [62]; on appeal, Greater Dandenong City Council v Australian Municipal, Administrative, Clerical and Services Union [2001] FCA 349; (2001) 112 FCR 232 at [142], [176].
214 I do not accept the proposition of law which the Bank advances. Further, the cases upon which it relies, concerned as they are with whether a single corporate decision was actuated by a proscribed motive, are distinguishable from the present case, where one of the matters which Illawong must prove is that no one acting on its behalf made an agreement with the Bank concerning interest rates.
215 While Illawong bears the onus of proving that there was no agreement as to the rate of interest during the Limbo Period, an onus of proof can, in principle, sometimes be discharged by means other than the calling of witnesses by the party who bears the onus. In the present case discovery has been given by both Illawong and State Bank. Some of State Bank's documentation relating to this period has been lost, but much still survives. In excess of 400 pages relating to the Limbo Period have been tendered. Three bank officers who dealt with the Illawong account during that period (namely Mr Rowland, Mr Eaton and Mr Fitzpatrick) have given evidence. Their recollection of the events of 1991 to 1993 is (understandably, given the time which has elapsed) imperfect, yet they give no evidence of any such agreement.
216 The question of whether the onus of proof has been discharged depends upon whether, taking into account all the evidence which has been called, I am persuaded that there was no agreement as to interest rates governing the period 8 April 1991 to 26 July 1993, or any part of it. The answer to that question does not depend upon a rigid rule of law like that which the Bank proposes.
217 However, the failure to call a witness who is in the camp of a party, and likely to have knowledge of the matters in dispute, justifies the drawing of a Jones v Dunkel (1959) 101 CLR 298 inference, that the evidence of that witness would not have helped the party.
218 As well, in deciding whether an onus of proof has been discharged, the Court bears in mind that oral testimony concerning events of as long ago as 1991 to 1993 has an inherent risk of being unreliable: Herron v McGregor (1986) 6 NSWLR 246 at 254-255; Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 at 551; Watson v Foxman (1995) 49 NSWLR 315. It also relevant here that various of the documents of State Bank relating to this matter have become lost (without it being suggested that the Bank has destroyed them because of their unhelpful nature). Thus there is less basis, in the present case by comparison with many other cases, for drawing inferences from the documentary record, because in the present case it would not be safe to assume that the documentary record available at the trial was one which was accurate and complete.
Agreement with Mr White in 1991?
219 The evidence leaves me unsatisfied that there was no agreement as to the interest rate to be paid in the communications between Mr White and bank officers concerning the waiving of penalty interest. It is clear that Mr White was seriously concerned by the fact that State Bank was threatening, in June-July 1991 to apply a penalty interest rate. The impression one gains of him from the evidence is that he is the sort of man who takes decisive action if his interests are threatened. He contacted Mr Rowland on 8 or 9 July 1991 and asked that penalty interest be waived (para [83] above). Further, Mr White's facsimile of 16 September 1991 (para [89] above) makes clear that there was another telephone conversation between Mr White and Mr Rowland, after 12 July 1991. The facsimile of 16 September 1991 gives reason to believe that in the course of the later telephone conversation Mr Rowland was told that the Bank would not be applying penalty interest. In fact, by 6 August 1991 Mr Eaton had decided that not only would penalty interest be waived, but the previous rate of interest would be applied, and Mr Rowland knew of that decision (para [87] above). In that situation, there is a real question about whether Mr Rowland told Mr White not only that penalty interest would be waived, but also that the previous rate would be applied. There is also, it seems to me, a real question about whether Mr White agreed to the application of that previous rate. That possibility is one which has not been negatived.
Agreement with Mr Alcock in 1991?
220 As Mr Rowland's file note of 6 August 1991 recorded (para [86] above) there was an appointment made for Mr Eaton to meet Mr Alcock on Monday, 12 August 1991. By that time Mr Eaton had decided that penalty interest would be waived, and the previous rate of interest (13.97%) would apply. Mr Eaton has produced two pages of file notes relating to that meeting. I would infer, from file notes of Mr Eaton dated 12 July 1991 that on 12 July 1991 Mr Eaton and Mr Alcock had spoken on the telephone. Mr Eaton's notes of the meeting of 12 August 1991 record various matters which Mr Alcock told him. One of those is "will fix $85K deposit tomorrow". In fact a credit of $84,871.23 appears in the "16" account on 22 August 1991, in unexplained circumstances. There might or might not have been an agreement about the making of that deposit, or the basis of its calculation.
221 Mr Eaton says that he can actually recall meeting with Mr Alcock at that meeting, and that his notes record matters stated to him by Mr Alcock. Mr Eaton says he does not recall Mr Alcock raising any complaint at that time concerning the continued charging of interest at the previous rate. I accept this evidence. However Mr Eaton does not give any evidence of communicating to Mr Alcock that interest would be charged at the previous rate, or of any discussion on that topic.
222 Mr Eaton's recollection was incomplete concerning his meetings with Mr Alcock. Mr Alcock's recollection was, likewise, incomplete. Mr Alcock was of the view that he had not met Mr Eaton at all until 23 October 1991. In light of the objective evidence in State Bank's file notes, and of Mr Eaton's recollection, Mr Alcock was mistaken in so thinking.
223 Mr Alcock gave affidavit evidence of having complained on 23 October 1991 to Mr Eaton, and in the period between 23 October 1991 and 20 December 1991 to Mr Fitzpatrick, about the interest rate which Illawong was being charged. Mr Eaton does not recall any such discussion. When cross-examined about his dealings with Mr Fitzpatrick in 1991, Mr Alcock did not recall having any dealings with him other than to correspond with him. In these circumstances I could not safely act on his affidavit evidence of having made complaints about the interest rate to Mr Fitzpatrick during 1991. Mr Alcock's letters of 18 and 20 December 1991 to Mr Fitzpatrick [para [96]-[98] above) made no complaint about the Bank's charging of interest at 13.97%. Given that those letters were an extensive listing of Mr Alcock's complaints against the Bank, it is unlikely that he had at any time in 1991 complained about being charged 13.97% interest.
224 An examination of the State Bank's Reference Rate from time to time shows that Illawong had, as events turned out, acted wisely by taking an interest rate which was fixed for three years from April 1988. While interest rates were in decline during 1990 and 1991, they were in decline from figures higher than those at which State Bank had lent to Illawong during the first three year term.
225 During 1992 - and it seems to me more likely that it was from some time after 7 April 1992 - Mr Alcock complained to the Bank about it continuing to charge 13.97%. I am not satisfied that any such complaints were made in 1991, however.
226 In these circumstances, I am not persuaded that there was no agreement, in the course of 1991, to the charging of interest at 13.97%.
Agreement Between Mr Fitzpatrick and Mr Alcock on 13 March 1992?
227 Mr Fitzpatrick's contemporaneous notes of the meeting of 13 March 1992 are sketchy, and he has little recollection of the meeting. However, it includes the entries "13.97%. 14.97%". It is likely, given the fact that he had been carrying out a reconstruction of the term loan account (para [100] above) on the alternative hypothesis of 13.97% and 14.97% being charged, that he would have told Mr Alcock about that. Mr Alcock has no recollection of any such discussion taking place. However, from Mr Fitzpatrick's note to Mrs Fahy (para [104] above), and the references in Mr Fitzpatrick's lending proposal of 7 April 1992 to the customer dropping a claim for overcharged interest, and to him having advised the customer of his findings concerning the complaint about overcharged interest, it seems likely that the interest charge was discussed between them. Mr Fitzpatrick came out of the meeting with the clear impression that Mr Alcock had dropped the complaints about interest which he was making in his December 1991 letters. By that time, the Bank had withdrawn its claim to impose penalty interest rates. I am not persuaded that there was no agreement at this time to the charging of interest at 13.97%.
Agreement on Rates June/September 1993?
228 Mr Fitzpatrick's reconstruction of the term loan account had extended over the period up to December 1991. On the basis of that reconstruction, he had recommended, on 7 April 1992, that Illawong be given a credit for $32,117. On 4 August 1992 Mr Alcock was told that an interest adjustment of $90,192.25 would be made when the new facility was settled, and that the making of this adjustment would bring the interest rate back to 13.97% (para [111] above). At the meeting on 25 August 1992 (para [114] above) the Bank again offered a credit for interest of $90,192.25, which Mr Alcock understood was in respect of the period up to April 1992 (as shown by his letter of 4 February 1993, para [135] above). By that same letter of 4 February 1993, Mr Alcock requested an additional credit, "from the date we accepted your offer", of the order of $160,000.
229 By his letter of 23 March 1993 (para [139] above) Mr Alcock was proposing a lesser concession than $160,000 on the part of the Bank, namely that it reduce the interest rate from December (1992). Mr Footit's memorandum of 12 July 1993 (para [145] above) recommends an interest adjustment of approximately $120,000, arising from a retrospective adjustment of the rate, so that it became Reference Rate plus 2% from 1 December 1992. The credit of $90,192 which was given on settlement was specifically notified to Illawong's solicitors by the Bank's solicitors on 15 June 1993 (para [144] above). It was the same amount as had been initially offered by the Bank on 25 August 1992. The additional amount of $144,318.26 was the amount which resulted from recalculating the interest at Reference Rate plus 2% from 1 December 1992 until the date of settlement of the new term loan facility.
230 It appears from Mr Whitehead's memorandum of 29 November 1992 (para [126] above) that at one stage in 1992 Illawong may have been seeking a pricing of Reference Rate plus 2% per annum. When there is this evidence that it was once seeking that rate, this increases a little the difficulty of Illawong's task of persuading the Court that it did not ultimately agree to interest, for the period 1 December 1992 onwards, being charged at Reference Rate plus 2%.
231 As mentioned previously, when Illawong gave discovery in this matter, it gave discovery of photocopies of documents. On the original of the facsimile to Mr Gillingham dated 14 September 1993 (para [154] above) Mr Alcock had written in pencil the words, near the reference to "$120,000??" "int reduction agreed because St G lowered interest".
232 When the original of that facsimile came to be produced to the Bank's solicitors (an event which happened on 22 October 2003) those pencil words had been rubbed out. In cross-examination concerning this rubbing out (which occurred after the cross-examination concerning rubbing out of the calculations showing interest calculations in 1997 at the rate of $80,000 per month) Mr Alcock did not agree that it was he who had rubbed the words out in the several weeks immediately before the trial. When asked once if he had any explanation for how the words came to be rubbed out after the plaintiff gave discovery his explanation was:
"I can only suggest that my solicitor had been asking me, trying to get to understand what I was talking about with the $90,000 and the $144,000 and I was sending them copies of things and trying to set out detailed explanations of it. That was some many, many months ago. This said this original was not in the my file from which the discovered documents were copied and I really do not know at what point of time that was rubbed out.
I can only suggest it may have been rubbed out because the $120,000 was, that a question mark, the 144 was a rate and that would have been part of my working through what happened to explain to my solicitor and barrister what happened in relation to that $120,000 adjustment because they were getting confused between the $90,000 and the 144 and the banks solicitor had put an entirely different inflection on those sums of money and I thought somebody should come forward and say what happened and I was doing that. That was months ago. I think I certainly did not rub it out within the last two weeks. I had no reason to. I took the copy which had that on it out of the file and swapped that. I would be a bit stupid to rub that out when that has already been discovered one way or the other and I was swapping one for the other. That is not what happened."
233 Asked again a little later, he had no explanation for how the words came to be rubbed out. He agreed that the original was in his office from the time that discovery was given until the time he was asked to produce the original, and that he could not image why any of his employees would have rubbed anything off the document. Mr Alcock was aware that the cornerstone of Illawong's case was that there was no agreement, in the period April 1991 to July 1993, between Illawong and the State Bank concerning interest rate.
234 Two days earlier in the cross-examination, when the topic of Mr Alcock rubbing out pencil notations from documents was first raised, his evidence was:
"Q. Is that why you have rubbed out on your documents the word "agreement" next to the interest rate?
OBJECTION
A. I don't know what you are talking about.
QUESTION DISALLOWED
Q. You had written the words in pencil on a document that has been discovered in this case "interest" we can't make out the next words and then the words "agreed" that was written in pencil on the documents?
A. Never.
Q. You have rubbed it out since this case started haven't you?
A. Never I have never agreed to an interest rate. "