JOSEPH ABRAM and JANETTE DAWN ABRAM v BANK OF NEW ZEALAND and MICHAEL J FITZPATRICK NG 622 of 1995

The various claims centred on a registered mortgage over the appellants' home securing a $170,000 loan provided by BNZ. The second respondent is a solicitor who prepared the mortgage documents and in whose presence they were executed by the appellants. Moore J dismissed the application, gave judgment for BNZ against the first appellant for $15,088.11, and against both appellants for possession of the land. The appeal is against those orders. Trial judge's findings In April 1987 the Abrams borrowed $90,000 from the National Australia Bank ("NAB") with which they built a house on land they already owned. In August 1987 Mr Abram was invited to transfer his American Express Gold Card facility to BNZ, which he did. At that time the Gold Card facility was an unsecured account with a limit of $10,000. A letter from BNZ to Mr Abram explained that the Gold Card credit line was an overdraft facility which was part of his Smarter Cheque Account. In late 1988 Mr Abram made enquiries of BNZ about a "Smarter Mortgage Account". In a letter of 9 February 1989, responding to his enquiry, BNZ explained that the Smarter Mortgage Account would operate like an overdraft facility, had no fixed term date and was perpetual. In February 1989 the Abrams jointly applied for a loan of $170,000 by way of a Smarter Mortgage Account. The loan was approved, and the letter of 29 March informing the Abrams of this was accompanied by BNZ's standard terms and conditions consisting of four pages of detailed typed conditions. One of them, clause 5(a), provided that the whole of the outstanding debit balance would become due and payable on demand. In early April the Abrams received a letter from Champion & Partners, solicitors for BNZ, inviting them to make an appointment to see Mr Fitzpatrick, one of the partners, for the purpose of signing mortgage documentation. The letter stated that Mr Fitzpatrick would give them "a full explanation of the mortgage documentation". The mortgage documents were signed at a meeting in Mr Fitzpatrick's office on 6 April. The judge accepted Mr Fitzpatrick's account of what happened at the meeting, though that account was based on the way in which Mr Fitzpatrick usually conducted such routine consultations rather than from recollection of the particular meeting. His Honour accepted Mr Fitzpatrick as a witness of truth. Mr Fitzpatrick explained the nature of the loan as a super bankcard: funds were made available that could be drawn upon up to a limit. He told the Abrams that any money owing on the facility would be secured by a mortgage. His role as solicitor was explained: he acted for BNZ, the Abrams could take the mortgage documents to their own solicitors for explanation, or he could explain them himself for a flat fee. The Abrams said they were happy for Mr Fitzpatrick to provide the explanation. He stressed that they had to pay interest on the due date each month, and that if payments were not made on time BNZ would want its money back, though it would have to give them time in which to remedy the situation. The mortgage documents were then signed, and the Abrams were provided with a draft memorandum of the solicitors' account. Mr Fitzpatrick did not mention to the Abrams that the credit card facility would also be secured by the mortgage. Indeed at that time he did not know that Mr Abrams had that facility. The mortgage contained an "all moneys" clause (clause 1(a)) by which the Abrams agreed to pay BNZ on demand all money outstanding by them "whether alone or jointly with any other person and whether as principal or surety". In April BNZ's mortgage was registered, and NAB's mortgage was discharged with part of the loan money. The Abrams availed themselves of most of the residue of the loan money, and were close to the agreed limit of $170,000 from about July 1989 to June 1992 when payments into the account ceased. By letter dated 9 June 1992 headed "Account No 37831 7000" Mr Abram informed BNZ that he would not be making any more cash payments into that account. Account No 37831 7000 is the credit card account. The trial judge said that Mr Abram's letter related as well to the Smarter Mortgage Account, but it is common ground that that was not the case. On the same day the Abrams commenced proceedings in this Court (No G369 of 1992) against BNZ and two of its employees, seeking a declaration that the Abrams did not owe BNZ $170,000, damages of $5 million and an injunction restraining BNZ from exercising powers conferred by the mortgage. Those proceedings were dismissed, as was the Abrams' appeal to the Full Court. In August 1992 BNZ made formal demand for payment of $172,664.36, the debit balance of the Smarter Mortgage Account. No payment was made. In September BNZ served on both Mr and Mrs Abram notices in apparent conformity with s.57 of the Real Property Act. The notices in respect of the "Smarter Mortgage Account" demanded payment of $175,611.64 within one month of service, in default of which BNZ would exercise its power of sale under the mortgage. 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 except for the sum demanded. No payment was received in response to any of the demands. By letter dated 2 September Mr Abram said he would be contesting all the notices and demands "on several grounds", and warned BNZ not to attempt to "execute any of these matters ex parte". The trial judge rejected Mr Abram's contention that had BNZ at this stage claimed only the outstanding interest, it would or might have been paid. He found that by this time the Abrams had made a decision not to make any payments, and to contest the matter in whatever way they believed was open to them. Mr Abram then wrote to BNZ pointing out that the credit card facility was in his name alone, and contending that it was unsecured. In response BNZ relied on the "all moneys clause" in the mortgage. However it later informed him that it would not be relying on the credit card notices. The judge's view of the witnesses We have already said that Moore J regarded Mr Fitzpatrick as a witness of truth. He said he gave the appearance of someone trying to recount truthfully his recollection, or lack of it, of the relevant events. He accepted that Mrs Abram was endeavouring to answer honestly questions put to her, but took the view that she was prepared to mould her answers to suit her case. Mr Abram was cross-examined for a day and a half, and himself conducted the case on behalf of the applicants. The judge formed the view that he was an intelligent man, quick to appreciate the consequences and implications of his evidence and submissions and those of others. He found that Mr Abram was prepared to exaggerate his evidence, and in a number of respects was prepared to give a false account both of his level of understanding of relevant matters and of material events. His Honour gave detailed reasons for his conclusion that Mr Abram was "demonstrably giving a false account" of several matters. We need refer to one only of his Honour's reasons, because it was the subject of a specific ground of appeal. One issue in the case was whether a document prepared by Mr Fitzpatrick, confirming that he had explained to the Abrams the effect of the mortgage documents, was stapled to the memorandum of mortgage when it was signed at the meeting on 6 April 1989. Mr Abram denied that this was the case. Mr Fitzpatrick said that the document would have been stapled to the memorandum. His Honour examined the memorandum and the indentations on and staple holes in it, and concluded that the confirmation of explanation was stapled to the memorandum when it was signed. Claims against BNZ The Abrams' main claims against BNZ can be summarized as follows: (a) BNZ owed them a fiduciary duty, a duty of care and a contractual obligation of fairness, full disclosure and conscionability, which duties it breached specifically by not informing the Abrams that the credit card facility would become secured by the mortgage, and generally by the manner in which they were induced to sign the mortgage and Mr Fitzpatrick's failure to explain the terms of the memorandum of mortgage. (b) The breaches in (a) also constituted unconscionable conduct within the meaning of s.51AB of the Trade Practices Act for which relief was sought under s.87. (c) The manner in which BNZ induced Mr Abram to enter the credit card facility constituted unconscionable conduct within s.51AB for which relief was sought under s.87. (d) The standard terms applying to the credit card facility, and in particular clauses 4(c), 5(a) and 6(b), were unjust within s.7 of the Contracts Review Act. (e) The terms and conditions applying to the Smarter Mortgage Account, and in particular clause 5(a) and the memorandum of mortgage, were unjust within s.7. Claims against Mr Fitzpatrick It was contended that by not adequately explaining the mortgage Mr Fitzpatrick had breached his fiduciary duty, his duty of care and his contractual obligations to the Abrams, and that they had suffered loss as a result. The Abrams also alleged breach of s.51AB. Trial judge's conclusions (a) Contracts Review Act Section 7(1) of the Contracts Review Act provides: Where the Court finds a contract or a provision of a contract to have been unjust in the circumstances relating to the contract at the time it was made, the Court may, if it considers it just to do so, and for the purpose of avoiding as far as practicable an unjust consequence or result, do any one or more of the following: (a) it may decide to refuse to enforce any or all of the provisions of the contract; (b) it may make an order declaring the contract void, in whole or in part; (c) it may make an order varying, in whole or in part, any provision of the contract; (d) it may, in relation to a land instrument, make an order for or with respect to requiring the execution of an instrument that: (i) varies, or has the effect of varying, the provisions of the land instrument; or (ii) terminates or otherwise affects, or has the effect of terminating or otherwise affecting, the operation or effect of the land instrument. "Unjust" is defined to include "unconscionable, harsh or oppressive". Section 9(2) requires the Court to have regard to a number of matters in determining whether a contract or a provision of a contract is unjust. Sub-section (5) provides: In determining whether it is just to grant relief in respect of a contract or a provision of a contract that is found to be unjust, the Court may have regard to the conduct of the parties to the proceedings in relation to the performance of the contract since it was made. The trial judge's treatment of this part of the case can be summarized as follows: (i) The only provisions that might attract the operation of s.7 were clause 5(a) of the standard terms and clause 1(a) of the memorandum, both of which permitted BNZ to require payment of all moneys owing on demand, and clause 1(a) to (h) together with clause 1(D) of the memorandum, by which loans other than the advance of $170,000 were secured. (ii) The clear impression created by BNZ's letter of 9 February 1989 was that the only requirement imposed on the borrower was to pay interest; there was no hint that the entire amount owed at any one time might be required to be repaid in full on demand. (iii) BNZ's letter of 29 March was to the same effect, and although BNZ's standard terms were enclosed, there was nothing to suggest that they might be inconsistent with what was conveyed by the letter. (iv) His Honour found it unnecessary to decide whether clause 5(a) of the terms and clause 1(a) of the memorandum were unjust, because, on the assumption that they were, he would have refused relief in the exercise of his discretion because of the conduct of the Abrams in failing to pay interest and commencing legal proceedings to avoid all liability under the mortgage. (v) His Honour also found it unnecessary to decide whether the provisions of the mortgage that secured the credit card facility were unjust, because no point would be served by granting relief as he intended to give judgment for BNZ on its cross claim to recover the money owing under the credit card facility. (b) Contract claims Moore J held that no contract existed between the Abrams and Mr Fitzpatrick. He was BNZ's solicitor, not theirs. This was conceded by Mr Abram in evidence. Mr Fitzpatrick did not dispute that he owed a duty to explain the mortgage documents to the Abrams. His Honour held that he had breached that duty by failing to explain the "on demand" and "all moneys" provisions. (c) Trade Practices claims and negligence His Honour held that BNZ's conduct did not constitute unconscionable conduct within s.51AB of the Trade Practices Act. He did not decide whether BNZ's breaches of duty contravened the other provisions of the Act relied on by the Abrams. That was because he was satisfied that any conduct of either BNZ or Mr Fitzpatrick that might be actionable at common law or under the Act did not cause the Abrams any loss or damage. His Honour gave two reasons for this conclusion. The first was that it was more probable than not that the Abrams would have executed the mortgage even if the memorandum of mortgage had been explained to them comprehensively. Their concern at the time was with the interest rates and charges being levied by NAB. Moreover their case, as pleaded, was that they effectively received no explanation at all. The second reason was that it was their failure to make interest payments that precipitated the events that followed, including BNZ's reliance on the impugned provisions. The imperfect knowledge the Abrams had about the mortgage had no material bearing on the course they adopted. They were not going to pay BNZ anything, and intended to have the mortgage set aside. (d) Fiduciary duty His Honour appears to have held that no fiduciary relationship existed between the Bank or Mr Fitzpatrick on the one hand and the Abrams on the other, that even if a duty had existed, there was no breach, and that even if there was a breach, he would have refused relief in the exercise of his discretion because of the Abrams' conduct in failing to pay interest and seeking to set aside the mortgage altogether. (e) Order for possession His Honour made an order for possession in favour of BNZ. BNZ did not issue s.57 notices in relation to the failure of the Abrams to make interest payments. This led to a submission by them that proceedings for possession under s.60 of the Real Property Act could be brought only if a notice had been issued under s.57 claiming interest and the notice was not complied with. His Honour pointed out that the right of BNZ to demand payment of principal did not depend on default in payment of interest. It was a right that arose under clause 5(a) of the terms together with clause 1 of the memorandum. Issues on the appeal The appellants' notice of appeal contained seventy eight grounds. They can be grouped under the following headings. (a) 9 June 1992 letter The trial judge was wrong when he said that in this letter Mr Abram informed BNZ that he was not going to make further payments into the Smarter Mortgage Account or the credit card facility. The letter related only to the latter. However nothing flows from this error. As his Honour pointed out, at the time of the letter the Abrams intended to make no further payments to BNZ on any account. And indeed they did not make any further payments into the Smarter Mortgage Account (or the credit card facility). On the very day of the letter they commenced the proceedings for a declaration that they did not owe anything under the mortgage. (b) Inspection of the memorandum The Abrams contended that having found the evidence of indentations on the first page after the case was closed, his Honour should have recalled the parties to allow them to tender evidence about that issue. His Honour said that the markings and their significance were not referred to at the hearing, and if his inspection had been crucial to a finding on any issue, he should (and doubtless would) have called the parties back and let them deal with the matter. But, in the circumstances, that course was not necessary. As his Honour said, the markings and their significance merely confirm what was apparent from other evidence. In those circumstances, his Honour was not obliged to afford the Abrams the opportunity to re-open the case. (c) No loss and damage His Honour found that the Abrams would probably have acted no differently had BNZ's right to demand payment of all moneys even in the absence of default, and the "all moneys" clause, been explained to them. It was put by the respondents that in the absence of evidence to the contrary, the proper inference was that the Abrams would not have acted differently: Jones v. Dunkel (1959) 101 CLR 298. We would prefer to say that the onus was on the Abrams to show on the balance of probabilities that they would have acted differently, and in the absence of evidence to that effect an essential part of their case was not made out. In any event, his Honour was amply entitled to find as he did. The Abrams' only alternatives were to stay with BNZ or go to a different lender. "All moneys" and "on demand" clauses are standard features of mortgages, and there is no reason to think that the Abrams would have been better off under any other mortgage. Further, the full amounts owed were demanded only after the Abrams defaulted by failing to make any further payments, and accordingly any provision entitling BNZ to call in the debt even in the absence of default, and any non-explanation thereof, were of no causal significance. (d) Contracts Review Act The power conferred by s.7(1) of the Contracts Review Act is discretionary - "the Court may, if it considers it just to do so ...". And s.9(5) expressly invites the Court in "determining whether it is just to grant relief" to have regard to the conduct of the parties in relation to the performance of the contract. Before an appellate court will interfere with a trial judge's exercise of discretion, it must be well satisfied that the discretion miscarried. It is never enough that the appellate court, left to itself, would have arrived at a different conclusion. Disagreement on matters which relate to the weight of evidence does not justify interference. Assessment of weight is particularly liable to be affected by seeing and hearing the witnesses, and accordingly an appellate court should be slow to override a primary judge's discretionary decision on grounds which only involve conflicting assessments of matters of weight. See, for example, Gronow v. Gronow (1979) 144 CLR 513, at pp.519-520, 525, 534. We discern no error in principle in the learned judge's exercise of discretion to refuse relief. The appellants' complaint that the judge erred in not granting relief under s.7 in so far as the mortgage related to the credit card facility has no substance. BNZ did not rely on the mortgage in relation to that facility. (e) Procedural complaints The appellants had six complaints relating to what may be called procedural matters. (i) The judge's refusal to grant an adjournment to allow further pursuit of the appeal in G369 of 1992.