National Australia Bank Limited v Anderson [2004] VSC 193

Supreme Court of Victoria|2004-06-01|Before: BONGIORNO J

Land law - mortgages - claim for possession - counterclaim for equitable relief and damages for negligent advice - special disability.

This case commenced as a claim for possession by the plaintiff of three parcels of land in Ararat over which it holds registered mortgages pursuant to the Transfer of Land Act 1958. The mortgages were dated (in the order in which they are set out in the plaintiff's Second Further Amended Statement of Claim) 26 August 1991, 28 May 1993 and 26 August 1991 and affect land at 116 High Street (referred to during the proceedings as the High Street land or the car park), 132 Lambert Street (referred to as the Lambert Street land or the Chalambar Motel) and 291-293 Barkly Street (referred to as the Barkly Street land, Café Dominica or simply Dominica). The mortgages secured all monies owing by the defendants to the plaintiff in their capacity as customers of the Bank. The plaintiff's claim is based upon defaults by the defendants in their failing to meet demands by the plaintiff made in September 1997 and September 1998 for repayment of various sums owed.

The proceeding was commenced by a writ issued by the plaintiff on 22 December 1997. There have been extensive interlocutory proceedings involving amendments to pleadings and other matters and the case has been fixed for trial on a number of occasions. At the time the trial actually commenced the defendants' case was pleaded in a document entitled Amended Defence and Counterclaim which was filed on 25 November 2003. Although that document contains denials of almost every allegation made by the plaintiff, in the course of discussing the procedure to be followed on the trial of the proceeding it was conceded by Mr J Selimi of counsel for the defendants that the only issues in the case calling for determination were those raised by the defendants' counterclaim; namely whether the defendants were entitled to equitable relief on the ground that the female defendant, Beverley Anderson, suffered from a "special disability" at times relevant to her dealings with the Bank and whether the plaintiff's local manager, Brad Beecham, gave certain negligent advice to the defendants in April 1991. The defendants contended that if they established that Beverley Anderson suffered from a psychiatric disability they were entitled to relief in equity in respect of their liability under the mortgages sued upon by the plaintiff and if they established that the Bank had made negligent representations and/or given them negligent advice they would be entitled to substantial damages.

In the preliminary discussions to which I have referred it became clear that this case might be one of those reasonably rare cases where it would be appropriate to separate the issue of damages from that of liability (in the broadest sense of that term) so that the complex evidence foreshadowed by the defendants on the damages issue by the filing of voluminous expert opinion could be deferred until the question of the plaintiff's liability to pay those damages and the effectiveness of its mortgages was determined. Accordingly the Court heard argument on the question of determining liability as a separate issue pursuant to RSC r.47.04. Mr Selimi accepted that the questions in dispute were those to which I have referred and supported the proposition that the question of damages should be deferred. Mr G H Garde QC, for the Bank, opposed any splitting of the case and submitted that the trial should be conducted as a whole on all issues in the ordinary way.

In the event I ruled, pursuant to RSC r 47.04, that there be a trial of the separate issues of the liability of each party to the other and that the determination of any question of damages be deferred and tried only if necessary. As the defendants carried the onus of proof on all of the substantive issues still remaining on the trial of the liability questions it was also ordered that the defendants present their case first.

The defendants' amended counterclaim commences by asserting that, between 1988 and 1992, the female defendant, Beverley Anderson, relied upon the plaintiff to exercise reasonable care and skill "in providing her with financial and investment advice". There follows extensive particulars which allege psychiatric problems from which Ms Anderson allegedly suffered and conversations between her and two successive managers of the Ormond branch of the Bank in late 1988 and early 1989 in which representations were allegedly made and advice allegedly given concerning Ms Anderson's financial affairs. The pleading goes on to allege that between 1988 and 1992 the Bank knew that Ms Anderson relied upon it to exercise reasonable care and skill in providing her with financial and investment advice and provides particulars of the Bank's knowledge of her alleged psychiatric condition. Those particulars included (after further amendment during the trial) allegations of conversations between Ms Anderson and the manager of the Bank's Ormond branch at various times concerning her psychiatric condition, her showing the manager a psychiatric report concerning that condition and her having had a sexual relationship with that bank manager in or about August 1990.

The principal allegation in the defendants' counterclaim is that contained in [7], that in 1991 the Bank advised them that they should proceed with the acquisition and development of a restaurant, motel and associated transportation services in Ararat, defined in the pleading as "the Development". Particulars of that advice refer to conversations in which the Bank's manager at the Ormond branch allegedly advised Ms Anderson that she should acquire a cash flow business to provide her with a regular income and that a restaurant might be an appropriate business, that Ms Anderson had a nett worth of approximately $1.8M and a conversation pleaded as being "between February and April 1991, in which the same bank manager allegedly advised Ms Anderson, amongst other things, to buy the Dominica property. The defendants' case, in essence, is that in reliance upon that advice they bought three properties in Ararat, borrowed large amounts of money from the Bank on the security of those properties and subsequently incurred substantial losses when the whole project failed. They alleged that the advice said to have been given by the Bank's manager was negligent in a number of specified particulars.

The Bank denied that any of its managers knew anything of any psychiatric condition suffered by Ms Anderson. It denied that it gave any investment advice to either of the defendants and, in particular, denied that it gave any advice with respect to the purchase of the properties in Ararat or the development of a restaurant and associated businesses.

In his outline of argument Mr Selimi defined the issues arising at the liability stage of the trial as follows:-

"A. THE UNCONSCIONABILITY ISSUE (1) Did the second named Defendant suffer from any special disability at the time she entered into each of the impugned mortgages? (2) If yes, did the Plaintiff know, or should it have known, of the special disability? (3) If yes, did the Plaintiff unconscientiously take advantage of the second named Defendant's special disability when entering into the impugned mortgages? B. THE NEGLIGENT ADVICE ISSUE (1) Did Mr.Beecham proffer the advice alleged in paragraph 7 of the Amended Counterclaim? Specifically, did he advise the Defendants to proceed with the acquisition and development of a restaurant ("the Dominica"), motel and associated transportation services in Ararat ("the Development Advice"? (2) If yes, was the advice negligent?" It is convenient to deal with these issues largely as Mr Selimi outlined them.

In his argument on the unconscionability issue Mr Selimi referred to Louth v Diprose[1] and Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd[2] in support of the argument that because of Beverley Anderson's "special disability", her "constitutional disability" and her "situational disadvantage", it would be unconscionable for the Bank to be able to maintain the mortgages upon which it has sued. This argument, of course, takes no account of the lack of any disability in Ms Anderson's co-defendant, Raymond John Anderson who was a joint proprietor and co-mortgagor with her in two of the properties and a tenant in common and co-mortgagor with her in respect of the third. However, having regard to the conclusions which I have reached as to Ms Anderson's alleged disability and the Bank's knowledge of it there is no need for me to examine or determine what might have been difficult, if interesting, questions of law concerning the enforceability of securities in circumstances where operative disability in one of two co-mortgagors is established.

Ms Anderson's "special disability" or "situational disadvantage"

The defendants' case is that Ms Anderson was suffering from a mental illness at the time she entered the mortgages the subject of this action such that she was under a "special disability", as that term was used by Deane J in Louth v Diprose[3], such that she was at a serious disadvantage vis-à-vis the Bank. They also contend that Ms Anderson was at a "situational disadvantage" vis-à-vis the Bank by reason of her having had a sexual relationship with her bank manager, Brad Beecham. They say that either, or both of these conditions in combination, seriously affected the ability of Ms Anderson to make a judgment in her own best interests at the time she entered into the relevant mortgages. The Bank is alleged to have, in effect, taken advantage of Ms Anderson's disabilities in providing her and her co-defendant with finance on the security of the three mortgages it now sues upon.

The evidence that Ms Anderson suffered from a mental illness at some stage is to be found in a series of copy medical reports which were tendered by the defendants without objection and were originally produced by their authors in respect of a WorkCare case relating to Ms Anderson's former employment as a teacher with the Victorian Education Department.

Dr Paul Kornan, a psychiatrist, in a report dated 23 December 1988 (to which reference will be made in another context hereunder) which was tendered in an edited form, concluded that at that time Ms Anderson had a mental illness for which she required psychiatric treatment. Dr Kornan had seen Ms Anderson some three years earlier on 7 November 1985 and, again, in December 1988. In his 1988 report he said that Ms Anderson:

". . . has a mental health problem which is showing itself more and more as being of the paranoid type as time goes on."

He thought that she was moving towards a psychotic ill health pattern which would soon become overt. Dr Kornan's report is addressed to Ms Anderson's employer's insurer, leading to the inference that he examined her at that insurer's request as part of its defence of her claim against that employer.

Dr David Horgan, Ms Anderson's treating psychiatrist, reported just three months after Dr Kornan, on 10 March 1989. He refers in that report to the imminent hearing of Ms Anderson's claim before the Accident Compensation Tribunal on 15 March. He claimed a greater knowledge of Ms Anderson than Dr Kornan due to his having seen her on approximately 100 occasions since 1985. He concluded that, contrary to Dr Kornan's opinion, she was not psychotic but in fact had stress induced symptoms manifesting as anxiety, depression and transient psychotic ideas although at the date of his report she had no psychotic ideas. He reported that she had strong feelings about a lack of discipline in the school system, that she was progressively organising her affairs and was coping with quite a number of "practicalities in her life". Dr Horgan concluded that Ms Anderson had a longstanding problem of anxiety and depression which went back to 1984.

A year later, on 9 February 1990, Ms Anderson was examined by Dr M J Nathar, another psychiatrist, on behalf of WorkCare. He said that she presented as a reasonably dressed and well presented lady. She had a normal range of response. She was not anxious nor unduly depressed nor elevated in her mood. Dr Nathar found her speech pattern to be disorganised and rambling but found no formal thought disorder. He thought that in the past she may have had olfactory hallucination associated with a depressive mood but had no other evidence of organic brain dysfunction. Like Dr Kornan he considered Ms Anderson had a psychotic illness with various manifestations such as paranoid features. She was having treatment at that time.

Dr G N Gibney, another psychiatrist, examined Ms Anderson on 27 April 1990. He considered that she had a manic depressive illness with a strong probability that she becomes psychotic and delusional in the course of the fluctuations of that illness. He thought she needed ongoing psychiatric care.

Dr Horgan reported on Ms Anderson on 19 July 1990. At that time he was seeing her on a weekly basis. He had treated her since July 1985. He repeated his earlier diagnosis of severe anxiety which, he said, had progressed into a combination of anxiety and severe depression. She was affected by panic attacks and described multiple symptoms of depressive illness. Significantly, Dr Horgan considered that Ms Anderson repeatedly displayed a pattern of being almost fully recovered during holiday periods, particularly the summer holiday period, only to relapse with a range of anxiety and depressive symptoms and physical symptoms within weeks of returning to the school situation.

Dr Nathar saw Ms Anderson again on 9 April 1991 when he confirmed his earlier diagnosis that she had a severe psychiatric illness of a manic depressive type with a significant associated anxiety reaction.

In a report dated 30 May 1991 Dr Horgan again repeated his earlier diagnosis of Ms Anderson and again noted that she displayed a pattern of being almost fully recovered during school holiday periods. He quoted passages from his clinical notes taken between 28 August 1990 and 26 March 1991 which cryptically described her complaints on each of 18 consultations. He considered that at the time of that report she had a depressive illness which illness had been affecting her for a number of years.

Finally, in two reports dated 5 and 27 February 2001, apparently written for the purpose of this litigation, Dr Horgan recounted a number of conversations with Ms Anderson in which she told him of many of the events to which she deposed in her evidence in this case including that she said that she was given advice by the plaintiff's manager, Brad Beecham, to purchase a restaurant and a motel and that he, Beecham, had had a sexual relationship with her. He also referred to Ms Anderson's reporting to him a number of matters concerning her business affairs.

Whilst Dr Horgan's opinion that Ms Anderson had a psychiatric condition of depression and anxiety for many years but had somewhat improved by February 2001 may be taken as valid medical opinion upon which the Court might act, if it is relevant to an issue between the parties, his repetition of Ms Anderson's story of her relationship with the plaintiff and its manager is of no assistance to the Court in determining whether what Ms Anderson says about that relationship is true. It is inadmissible hearsay. For the purposes of this litigation the truth of those matters must depend upon whether Ms Anderson's own evidence in this Court is accepted or not; not on the impression Ms Anderson made on Dr Horgan. In these reports Dr Horgan appears to be arguing a case for Ms Anderson, even to the extent of calling in aid other psychiatric opinion and referring to third party conversations as, in some way, verifying Ms Anderson's position. In doing this Dr Horgan has strayed well outside his area of expertise as a psychiatrist and, accordingly, no weight will be placed upon these matters in determining the ultimate probabilities in this case. Hearsay admitted, even without objection in a civil case, gains no cogency from that fact alone. It is still hearsay.

On the whole of the psychiatric evidence contained in the reports which I have read I conclude that Ms Anderson was probably suffering from a psychiatric condition which might be described as anxiety and depression with intermittent psychotic features over a long period; probably from about 1985 to some indeterminate time after May 1991. The severity of the illness fluctuated from severe to almost non-existent during school holiday periods. The exact diagnosis of that illness is immaterial for the purposes of this case. It matters little which of Dr Kornan or Dr Horgan was correct. Placing a particular diagnostic label on Ms Anderson's illness does not, of itself, enable the Court to determine whether, in fact, she was psychiatrically ill to such a degree as to lead to a finding that when she dealt with the Bank there was such ". . . an absence of any reasonable degree of equality"[4] between them so as to raise questions as to the propriety of the Bank's taking mortgages over the three properties which she bought with the first defendant. As this issue is inextricably bound up with the relationship between Ms Anderson and the Bank and the allied issue of whether the Bank knew or ought to have known of her psychiatric illness I turn now to consider that relationship and its relevance to the defendants' claims.

Ms Anderson married a Mr Jack Ahearne in 1985. He was then a man about 80 years of age whom she had known since she was quite young. At the time of that marriage she was divorced, having been previously married to Richard John Collinson. She was about 47 years of age. Mr Ahearne died in 1987 leaving Ms Anderson some 20 acres of vacant land which had been a farm at Avondale Heights. This farm was later sold at auction for $2M but the nett proceeds which Ms Anderson ultimately received were somewhat diminished by complications which arose in relation to the sale and which are not relevant to this proceeding.

At about this time Ms Anderson had what she described as "small accounts" with the plaintiff Bank at its Ormond branch, whilst more substantial accounts were maintained at another bank or banks. The manager of the Ormond branch of the plaintiff at this time was Mr Colin da Costa. File notes of the Bank written by him or his staff in 1988 demonstrate a relationship of banker and customer between the plaintiff and Ms Anderson. They referred to a request by her for temporary overdraft accommodation of $5,000 in January of that year, a similar request in July and a query in October as to whether the Bank wanted her to clear her then overdraft which stood at $1,200. The same note referred to the expected auction of the Avondale Heights property as taking place "around Christmas" and records a discussion between Mr da Costa and Ms Anderson about the bank's financial planning service which he offered to her in respect of the approximately $1M she was expecting to receive at a later date. There is no hint in the Bank's file at that time or subsequently as to any difficulty its manager or staff had in dealing with Ms Anderson either because of a psychiatric condition or otherwise.

Also in 1988 Ms Anderson bought a property at 34 Evelina Road Toorak for $410,000. She borrowed the funds for that purchase from the State Bank of Victoria at its Avondale Heights branch with which her late husband had banked. She told the Court that she spent some $300,000 on renovations to the Evelina Road property and recounted having dinner with relatives who at about the same time "talked me into their Portsea house so I purchased that . . .". The address of that property was 103 Back Beach Road Portsea.

In the course of her evidence Ms Anderson described her purchase of the Evelina Road property. She said it occurred before she had seen inside it or even the outside at the back. She said that she was walking past the property, which her daughter had always admired, when she saw the owner in the garden and said to him "Are you ever going to think of selling this?" He said "Well, I am about to put it on the market." Ms Anderson then said to him "How much do you want for it?" to which he replied "$410,000." She said "Good shake." She then shook hands with him and said that she considered herself to have bought the house.

Whether this bizarre event actually took place or not is immaterial. It really has nothing to do with this case. Its significance, if any, lies in the fact that it is entirely consistent with the way in which Ms Anderson says that some time later she bought two of the Ararat properties with which this case is concerned.

Ms Anderson said in her evidence that about the time she bought the Toorak and Portsea properties Mr da Costa told her that he would give her investment advice. She quoted him as saying: "Look, I'll take over all this and let's just do investment properties and I will do the lending and we will do negative gearing and save you tax." Or again: "I will take over your financial planning and I will do investment properties for you."

Mr da Costa denied these conversations. He explained that the Bank had a basic policy that its managers were not to give financial or investment advice. If financial advice was needed they were to refer a customer to the bank's financial planning service. This he did for Ms Anderson. He was emphatic that he had never advised her to buy investment properties and never gave her any advice in terms of what real estate she should buy. I accept Mr da Costa's evidence as to this matter. Not only is his evidence more inherently probable, there is not one document produced from any source which casts any doubt on it. Further, Ms Anderson conceded that she attended the Bank's financial planning office in East Malvern on Mr da Costa's referral and also consulted an independent financial planner of her own in relation to her financial position having regard to the money she received or expected to receive from the sale of the Avondale Heights property.

In March 1990 Mr Bradley James Beecham was appointed manager of the Ormond branch of the plaintiff Bank. He remained in that position until August 1992. Ms Anderson said that on first meeting her Mr Beecham said: "I have applied to the Ormond bank especially to look after you and your financial affairs". She said she felt that she had an immediate "soul connection" with him and that she was very pleased that he was going to look after her because "I looked into his eyes and I liked what I saw there". She said that she felt that Mr Beecham had taken over from her husband.

Ms Anderson said that shortly after she met Mr Beecham he called her in to the Bank and said that it was time for her to buy another investment property. She said that he told her that she should go and look for some and that he would "okay them". She said that Mr Beecham had said that he would "triple her money".

After this meeting with Mr Beecham, Ms Anderson said she drove around with a friend looking at different properties, collected brochures and took them back for him to see. She said he selected a property in Tooronga Road East Malvern and suggested that she buy it with her niece as an investment. She went to the auction of the property with her niece and bought it for $320,000. She borrowed money for the purchase from the plaintiff Bank, arranged by Mr Beecham.

Ms Anderson said that in about August 1990, roughly two weeks after the purchase of the Tooronga Road property had been settled and after she had moved in, she and Mr Beecham went to look at the property. Whilst there she drank a glass of champagne which, because of medication she was on at the time, had the effect of making her feel "really good". She said that she and Mr Beecham then "made love". In her words:-

"We were there in the house on our own, and he put his arms around me and I did - he was just like a husband to me at the time, and I am afraid, well, it got out of hand, or in hand, or - we had sex."

Ms Anderson said that she had had "plenty of lunches" with Mr Beecham, that he put his arm around her and that he had said he was "really going to look after (her)" but that this was the first act of sexual intercourse which had taken place between them. She said that sexual intercourse occurred thereafter on about five occasions, four of which occurred at Tooronga Road and one in Mr Beecham's office at the Bank at about 6.30 pm one evening.

In cross-examination Ms Anderson confirmed that the affair with Mr Beecham took place. As she put it:

"The affair took place. The connection took place. The love took place."

Whilst being questioned about her relationship with Mr Beecham Ms Anderson moved in the witness box as if she was uncomfortable, in the manner of a person who is either embarrassed or seeking to appear so. She claimed to be disgusted with herself. I found her actions in this regard and her evidence generally on the question of her sexual relationship with Mr Beecham to be theatrical and entirely unconvincing.

Ms Anita Robyn Winks gave evidence that she was a friend of Ms Anderson's. She said that on one particular day about 13 or 14 years ago she had a luncheon appointment with Ms Anderson and went to her home in Tooronga Road to pick her up. Upon arriving she observed that Ms Anderson's car was not in the driveway where she expected it. She said that she let herself into the house to wait for Ms Anderson to return but as she did so she heard noises coming from Ms Anderson's bedroom. She said she went to the bedroom where she found Ms Anderson engaged in an act of sexual intercourse with a man she didn't know. She said that she then went to the kitchen to make a cup of coffee to wait for Ms Anderson and the man to emerge. Ms Winks said that after some period of time had elapsed Ms Anderson and the man she had observed came into the kitchen where Ms Anderson introduced him to her as "Brad". She said that Ms Anderson said: "This is my friend from the bank". Ms Winks claimed to have been embarrassed by this episode.

Despite Ms Winks saying that she would not be able to recognise this man "if (she) fell over him" she was able to describe him as having had brownish hair and being about 5'7" or 5'8". In the course of the conversation she recounted as having occurred in the kitchen on that day she said that "Brad" explained to her that he was handling Ms Anderson's affairs. When asked to recall what he said, she said:-

"The gentleman turned around and said that he was handling Beverley's affairs for her. I think something - I really can't remember but it was brought up I was worried about her being a manic depressive and running out buying all this garbage that was terrible and he said `don't worry Anita. I am looking after it and here's my card if you need some help'. That was all. And left. He left."

This discussion is said to have all taken place within a very few minutes. In the course of her evidence Ms Winks repeated the statement she attributed to "Brad":-

She appeared very anxious, indeed over anxious, to convey that "Brad" was expressing concern for Ms Anderson, in the manner of a witness who has a firm belief as to why she was called and what she was expected to prove.

Ms Winks also gave evidence that on another occasion she had gone with Ms Anderson to the Ormond branch of the plaintiff where she had seen "Brad" again. She said he gave Ms Anderson $300 in cash, that she didn't sign anything and that, without any apparent prompting said "Don't worry about it Anita because I am looking after her affairs, we are looking for a property in the area". Ms Winks said that she again told "Brad" that she was worried about Ms Anderson's manic depression because she was running around "buying these silly things". His response was reported by Ms Winks as being "don't you worry about it because I am going to look after her money".

In cross-examination Ms Winks said that "Brad" appeared to be embarrassed during the conversation she had with him in the kitchen. She said "I think he was trying to cover his tracks". She said she spoke to him very quickly and she didn't know what position he held in the Bank. For all she knew, she said, he might have been a teller. She then quoted Brad as having said to her "if you need a loan, here's my card". She admitted having discussed some of her evidence with Ms Anderson and said that she couldn't remember a lot because it was so long ago. She again described "Brad's" hair as being "a mousy brownie colour". In answer to subsequent questions Ms Winks retreated from being able to describe "Brad" in any detail and referred to the fact that "we're going back 20 years". When asked whether she had spoken to "Brad" about manic depression Ms Winks said:-

"I didn't actually remember saying that but Beverley reminded me - I know I said it in the bank but then Bev reminded me that I had said it at the time."

She said that she had told "Brad" about the manic depression because she was worried about Ms Anderson who was buying stupid things. She said that "Brad" had calmed her down and said "no, I'm looking after everything". Ms Winks said that both "Brad" and Ms Anderson had been laughing in the kitchen when she had the discussion with them. She also agreed that in a statement she had made in 2001 she had made no reference to any discussion about manic depression with "Brad".

When Ms Winks was challenged generally as to her evidence and as to its veracity she said: "look my father was a Freemason, I'm a person of honour. I don't get up and say anything for anybody".

Although Ms Winks referred to a business card which "Brad" had given her she did not produce that card when she gave evidence. However, she subsequently did so. The card, as produced, was a business card of Mr Brad Beecham, Manager, National Australia Bank, 453 North Road, Ormond. It had seven digit telephone and fax numbers on it. On the back was writing in ballpoint pen consisting of a column of figures. Ms Winks said that the handwriting was that of Ms Anderson and that although the card had been given to her by "Brad" shortly after she had found him and Ms Anderson in flagrante delicto, Ms Anderson had subsequently written on the card when she and Ms Winks were having a financial discussion over coffee in a restaurant. Ms Winks said that Ms Anderson had been doing a financial calculation to show her, Ms Winks, how much it would cost to borrow a sum of money to enable her to go into a new business. She said that she had had the card for many years but that she had given it to Ms Anderson's solicitor about two years ago and had recently retrieved it from her. Later she said she gave it to her "this year sometime". No explanation was forthcoming either from Ms Winks or from counsel or solicitor for the defendants as to why the card had not been produced earlier. Curious as that circumstance is I place no significance on it in my overall assessment of this aspect of the case.

Mr Beecham has black hair. Indeed, it is completely and totally black with no sign of grey. It might be described as being almost unnaturally black. In his evidence he said that his hair began to turn grey at about the age of 17 at which point he began dyeing it. He has continued to do so, regularly, ever since. He produced a group photograph of the attendees at a National Australia Bank branch managers' course taken in May 1990 which he attended. In that photograph his hair appears to be as black as it was in Court when he gave his evidence. It could not be described as being "brownish" or "mousy brownie".

Mr Beecham said in evidence that he had never met Ms Anderson until he became the manager of the Ormond branch of the plaintiff Bank. He denied the statement which she attributed to him at the time they met. He denied ever having had lunch or socialising with her apart from on one occasion in Ararat after the Dominica restaurant had opened. He denied having had anything to do with the purchase of the Tooronga Road property and said that he first knew of its existence and of Ms Anderson's having purchased it when she approached him to obtain finance after she had bought it. He denied having ever had any personal or social relationship with Ms Anderson and, specifically, he denied that he had ever had sexual intercourse with her. He said that he had been happily married for 25 years and had three adult children. He said that he had never heard of Anita Winks and that he had certainly never had any conversation with her in the kitchen of Ms Anderson's house in Tooronga Road to which he had never been.

When asked when he first became aware of Ms Anderson's allegations that he had had an affair with her he said that he was told by the Bank's solicitors about "four or five years ago" that allegations of a sexual nature had been made. Mr Beecham left the employment of the Bank in 1994 and commenced his own business. As far as he was aware no complaint had ever been made to the Bank, either before or after he left, concerning any matter connected with Ms Anderson, sexual or otherwise.

Part of Ms Anderson's case (and, I assume, that of her co-defendant) as put by Mr Selimi, depends upon her proving that she was in a position of "situational disadvantage" vis-à-vis the Bank because of her having had a sexual relationship with Mr Beecham. Assuming, without deciding, that that submission is correct, it is necessary to determine whether her evidence as to that relationship is to be preferred to Mr Beecham's total denial, not only of the impropriety alleged by Ms Anderson but of any socialising with her, putting his arm around her or, for that matter, having anything to do with her purchase of the Tooronga Road property other than the arrangement of bank finance.

In this instance the problem presented by the diametrically opposed evidence of Ms Anderson and Ms Winks on one side and Mr Beecham on the other is not as difficult of resolution as it might be in many cases. I accept the evidence of Mr Beecham. I do not believe Ms Anderson. Whether she is suffering from a delusion or has deliberately concocted the story of her relationship with Mr Beecham there is no need for the Court to decide. It is sufficient that the evidence of Mr Beecham is clearly to be preferred. Even accepting that he may have had a strong motive to lie were he to have been unfaithful to his wife of (now) 25 years the probabilities are strongly in his favour. From Ms Anderson's bizarre account of her first meeting with Mr Beecham to her much repeated assertion that he said he was going to look after her (whatever that really means) I find her story of their whole relationship improbable and unconvincing. In particular and specifically I do not accept that Mr Beecham had any sexual relationship with Ms Anderson at any time. I do not accept that his relationship with her was ever any closer than that of bank manager and customer.

As far as Ms Winks is concerned I consider her evidence suffered from a rehearsed quality, especially as to what Mr Beecham was supposed to have said as to his looking after Ms Anderson immediately after the incident which Ms Winks claims to have witnessed. In this regard it strongly resembled the evidence of another witness to whom reference will need to be made in due course. I do not accept Ms Winks' evidence as to her having discovered Mr Beecham with Ms Anderson at the Tooronga Road house and I am satisfied that if Ms Winks ever saw Ms Anderson in a situation where she was having sexual intercourse in the circumstances she described the person she was having that intercourse with was not Brad Beecham. I am satisfied that Ms Winks discussed the evidence she was to give in this case with Ms Anderson and I am not satisfied that that discussion was limited to the matter she was prepared to concede. As far as the card which she produced is concerned, whatever might have been its provenance, it was not given to her in the kitchen of Ms Anderson's home in Tooronga Road in the circumstances she described.

Ms Anderson had no sexual or other relationship with the plaintiff's manager other than that of banker and customer. Accordingly there is no basis for the defendants' submissions based upon any "situational disability".

Mr Selimi acknowledges that any case the defendants might have to support some form of equitable relief in respect of the plaintiff's mortgages would depend, not only upon Ms Anderson suffering from a psychiatric condition but also that that psychiatric condition was of such a degree that there was an absence of any reasonable degree of equality between her and the Bank and that it was sufficiently evident to the Bank to make it prima facie unfair or "unconscionable" for the Bank to procure, accept or retain the benefit of her assent to the mortgages she now seeks to impugn.

Ms Anderson is adamant that she told Mr da Costa and later Mr Beecham that she had a psychiatric condition. She said she told Mr da Costa in 1988 that she was manic depressive. He allegedly replied: "Well, I'm here to look after you" or words to that effect. She said that later, when she had dealings with Mr Beecham she told him that she was seeing Dr Horgan on a regular basis because she had a severe psychiatric disorder which Dr Horgan called manic depression. She said that in response to her telling Mr Beecham this he replied:

"I love you the way you are, I love your manic side."

Ms Anderson said that she had been seen by the psychiatrist Dr Kornan and that, by mistake, he had sent a report of her condition to her next door neighbour who had given it to her. She said that this occurred when she lived in McPherson Ave Carnegie when she was married to her husband - although which husband she did not specify. It was long before she met Mr Beecham. She said she saw Dr Kornan twice. She did not state the date of the first consultation but said that the second was in December 1988 but that it was a report of the first consultation which, she said, came to her "by mistake".

Ms Anderson said that in March 1990 she showed Mr Beecham Dr Kornan's report; that is to say the report which she said was sent to her by mistake. She said it was the only report of Dr Kornan's of which she had the original. At the time she gave her evidence-in-chief she did not have that report with her as it was "in a safe", but said that she could bring it the following day. However, her counsel had her identify a document in the Court Book as being the document she claims to have shown Mr Beecham. The document she identified was a photocopy of an edited version of Dr Kornan's report of 23 December 1988 to which I have already referred. A section of the copy report headed "Sex and Marriage" appears to have been "whited" out prior to its being photocopied. The words "claiming privacy - not applicable" have been written over the whited out section although the last of those words is somewhat indecipherable.

A few days later Ms Anderson produced to the Court what appeared to be the original of Dr Kornan's report of 23 December 1988 in which he details a consultation of 16 December 1988. She repeated that it had been sent to a neighbour by Dr Kornan although she later thought that WorkCare may have sent it to her. She also said that the neighbour gave it to her in an opened envelope.

There are a number of features about this document worthy of comment. First, it appears to be an original letter addressed to WorkCare at its city address, signed by Dr Kornan. Secondly, it bears a receipt stamp on each of its six pages which, although partially illegible, contains the words "MAIL ROOM" and the date "28 DEC 1988". Each of those stamps is in the same position on each page as are identical copy stamps on the photocopy document already identified to which I have referred. Thirdly, the section of the report headed "Sex and Marriage" has been edited, but not as extensively as was the original of the document from which the already identified photocopy referred to was made and the words "claiming privacy - not applicable" are not on the original. Finally, it refers to an earlier consultation by Dr Kornan on 7 November 1985.

In her initial evidence to this Court Ms Anderson stated that the report she showed Mr Beecham was the "first report". It is a fair inference that she was referring to a report written by Dr Kornan after his consultation with her on 7 November 1985. She distinguished it from the "second report" which she said was referable to a consultation in late 1988. Subsequently however she identified the edited copy of the 1988 report shown to her by her counsel as the report she showed Mr Beecham and subsequently again produced the original of that report albeit edited slightly differently.

Ms Anderson said that she showed Dr Kornan's report to Mr Beecham in "the third month 1990". She said he read it and when asked what comment he made after he read it she said:-

" `It makes no difference to me I love you the way you are' or `I like you the way you are' I'm sorry, `I like you the way or are.' "

In their counterclaim the defendants had pleaded extensive particulars of the facts from which it was to be inferred that the Bank was aware of Ms Anderson's psychiatric illness. However the fact that Ms Anderson showed Mr Beecham Dr Kornan's medical report was not pleaded. In the event, on Mr Selimi's application, after Ms Anderson had given this evidence leave was given to the defendants to add a particular relating to the alleged showing of Dr Kornan's report to Mr Beecham. Its omission from the particulars until this time is, in the context of this case, not without considerable significance.

If Ms Anderson had shown Dr Kornan's report of 23 December 1988 to Mr Beecham and, as she asserted, he had read that report it would constitute powerful evidence that the bank was aware that Ms Anderson had a psychiatric illness at least in 1988 and it may go someway towards establishing the proposition that she had that illness at the relevant time, namely about the middle of 1991. The issue is, accordingly, important.

Ms Anderson's daughter Ms Janette Collinson gave evidence that she met Mr Beecham in 1988 or 1989. She said she was concerned to secure the interest which she claimed she had in the Evelina Road property and to ensure that her mother could not borrow on it. She referred to her mother being "out of control". She said that she did not get on with Raymond Moon (the first defendant) with whom her mother was by then "in business" and wanted to make sure that he wasn't going to get control of "anything from my part of the family".

Ms Collinson gave evidence of conversations with Mr Beecham on unspecified dates in which she said she told him that her mother was mentally unstable. She said her mother was carrying around a psychiatric report which Ms Collinson thought she was "sort of proud of". She identified Dr Kornan's report of 23 December 1988 as the report to which she was referring. She said she saw her mother show that report to "the bank manager" in 1988 or 1989. She fixed those dates by reference to a period when she was renovating the Evelina Road property. She said that Mr Beecham responded to the report by saying "I know she has been supered out". This was a reference, said Ms Collinson, to her mother being no longer with the Education Department.

Debra Mary Kelly, a natural healing therapist, gave evidence that she had known Ms Anderson for approximately 20 years. She described Ms Anderson's behaviour after 1985 as being "very confused" but that she seemed a lot calmer after she married Jack Ahearne. She said she met Mr Beecham in early 1990 when she went to the Bank with Ms Anderson. Ms Anderson wanted to cash a cheque. Whilst she was at the bank Ms Kelly said that she asked Mr Beecham if he knew about Ms Anderson's mental problems. She said that Mr Beecham said that he had read a doctor's report. No report was actually produced but she quoted Mr Beecham directly as saying "don't worry, I'm aware of Beverley's condition, I have read the doctor's report and I am taking special care of her and she is in good hands." She said that Mr Beecham put his hand on Ms Anderson's shoulder.

Ms Kelly said she never met Mr Beecham again but as at 1991/1992 Ms Anderson's condition was, she said, "terrible". She said she was very unwell.

Ms Kelly had, she said, purchased a property with Ms Anderson in Williams Road Toorak in about 1985. They owned the property together for some time before it was sold at a loss. She regarded it as a bad experience but conceded that Ms Anderson handled the finances and made the decision to buy the house in the area in which it was situated.

A number of other witnesses gave evidence deposing to Ms Anderson's appearance from time to time over the period each of them knew her. Much of the evidence was unfocused as to time and vague as to detail. It referred to her appearance being dishevelled and untidy from time to time, to her conversation being disjointed and to her behaviour being inappropriate. Examples were given of her having sometimes worn odd shoes or of attending social functions such as race meetings with obvious holes in her stockings. Some witnesses said she was forgetful and often lost things such as keys.

On this issue a number of witnesses who were bank officers at the Ormond branch of the plaintiff Bank at relevant times were called. Mr John Borg, who was the accountant from February 1991 to December 1994 described Ms Anderson as an eccentric type of lady and as being like "a Toorak person" who was dressed nicely. Ms Jessica Bugter was a teller at Ormond in February 1990. She also described Ms Anderson as being eccentric, particularly in the way she dressed. She recalled one occasion on which Ms Anderson had blue hair and "different" clothes. She said she was very well dressed in "loud" clothes. She said that Ms Anderson would instruct bank staff in exactly what she wanted to do and they would follow those instructions. Ms Bugter said that Ms Anderson never had any uncertainty so far as her bank accounts were concerned. She denied that Ms Anderson was disorganised.

Ms Amanda Armstrong worked at Ormond from June 1994 to September 1995. She knew Ms Anderson and had a number of conversations with her. She said that Ms Anderson displayed excellent knowledge of what was occurring with respect to her banking transactions. She denied a suggestion that Ms Anderson was disorganised.

Mr da Costa, who was the manager of the Ormond branch before Mr Beecham described Ms Anderson as being always polite and seeming to know what she was doing. He said she was a woman "doing well". Mr Beecham described Ms Anderson as being "just the same as a lot of the other customers". He described her as a business woman who knew what she wanted. She had a fair number of dealings going on in different places and he saw no difference between her and other good customers. He denied that he had ever seen any psychiatric report that related to her. Had he been shown such a report he said he would have referred the matter to his superiors.

Mr Beecham's description of Ms Anderson's physical appearance was that she was unremarkable. He could not recall her looking dishevelled or untidy and described her as well dressed, business like and always well groomed. He agreed that he knew that she had been on WorkCare at some stage but considered that there were no health issues with Ms Anderson that he needed to be concerned about.

The defendants also placed reliance, with respect to this part of their case, upon a medical certificate signed by Dr Horgan dated 20 December 1989 which certified that Ms Anderson was, at that time, suffering from stress and would be unfit for work from that date until 16 January 1990. They also relied upon an entry on a line of credit application concerning Ms Anderson dated 9 January 1987 which states "appears vague on occasions - sometimes gets muddled over her affairs".

Mr Beecham was cross-examined concerning his knowledge of Dr Kornan's report. He denied having ever seen it and said that he would not have needed to have read past the first line to have formed the view that it was "pretty scary stuff". The beginning of the report (actually the fourth line) quotes Ms Anderson as saying "you could be a murderer . . ." referring to Dr Korman.

Two of the mortgages which the defendants seek to impugn in this case are dated 26 August 1991. The third is dated almost two years later, 28 May 1993. No evidence was directed specifically to the establishment of any disability in Ms Anderson on those specific dates. It is also clear from the documents produced by the Bank that in the periods immediately prior to the execution of those mortgages the defendants were fully informed of the loans which were being made to them and of the securities which they were providing as security for those loans. Copies of letters of offer from the bank setting out these matters were acknowledged by each of the defendants by this signing of them. No evidence was lead as to the circumstances in which such signatures were placed on those copy letters not only by Ms Anderson but also by her co-defendant, Mr Anderson (or Mr Moon) who, it is not suggested, was under any disability.

Notwithstanding the evidence of Ms Anderson's daughter and her friend Ms Kelly I am not satisfied that any report of Dr Korman was ever seen by Mr Beecham or any other officer of the Bank. I prefer the evidence of Mr Beecham over that of those witnesses and Ms Anderson. Neither Ms Kelly nor Ms Collinson were impressive witnesses. In particular, Ms Kelly displayed a similar rehearsed quality in her evidence to that displayed by Ms Winks. Ms Collinson appeared confused and, indeed, conceded as much. Her ability to place events at particular times or to put them in sequence adds a degree of unreliability to her evidence even if such unreliability is understandable having regard to the passage of time.

As far as Ms Anderson's appearance is concerned I am not satisfied that it was ever such that whilst she was present at the Bank it was sufficiently evident to the relevant bank officers that she had a psychiatric disability of such a nature and of such severity as would render it unconscionable for the Bank to enter into ordinary banking dealings with her. On any view Ms Anderson conducted banking transactions with the plaintiff Bank and other banks over an extended period whilst she suffered from the psychiatric condition described either by Dr Kornan or Dr Horgan. Those transactions involved numerous loans and other banking transactions and, of course, at the same time she engaged in extensive buying and selling of real estate. Indeed, in an affidavit which she swore in support of an application to set aside a default judgment in this proceeding she described herself as having, from the early 1980's, dealt in real estate, buying properties and doing them up for re-sale. She continued to undertake such activities even after 1985 when, it would appear, she began to suffer, to a greater or lesser degree, from some form of psychiatric illness. There is no suggestion that she was unable to undertake these activities or that any of the numerous transactions which were described could have been set aside as being unconscionable on the part of those with whom she dealt.

Finally, with respect to this aspect of the case it should be noted that no argument was ever put by the defendants that the transactions which they now seek to impugn were such as to be unconscionable from the Bank's point of view. Even if Ms Anderson was suffering from a "special disability" known to the Bank the transactions which she now seeks to avoid were transactions in respect of which she and her co-defendant received full consideration. It was never suggested by Mr Selimi on their behalf that the mortgages are now sought to be set aside were in any way anything other than in respect of ordinary bank loans secured on real estate. Ms Anderson and her co-defendant purchased properties in Ararat for various sums of money. Had the plaintiff not made the loans secured by the now impugned mortgages the defendants would have had to have obtained similar loans from other lending institutions to meet their obligations under contracts which they had signed. Had they not done so they would have been in default under those contracts. There is no evidence, nor even any suggestion, that they could have obtained such loans on any better terms than they did from the plaintiff.

To be unconscionable conduct must be unfair, unjust, unscrupulous, unreasonable or excessive. It must be against the dictates of conscience as recognised by a court of equity. It must be seen, in accordance with the ordinary concepts of humanity, to be so unfair and against conscience that a court would intervene or so unreasonable and depressive so as to affront minimum standards of fair dealing.[5]

By taking security by way of these three mortgages for loans which it provided to the defendants on apparently ordinary commercial teams to enable them to finance the purchase of three properties in Ararat the plaintiff did not act unconscionably. There is no basis for setting aside any of those mortgages.

The defendants' case in negligence against the Bank is based upon alleged advice given to them by Mr Beecham to purchase the three properties in Ararat the subject of this action and to set up and operate a significant tourist facility incorporating those properties. The Bank's defence to this claim is simple. It denies that Mr Beecham ever gave any advice to either of the defendants to purchase any property in Ararat or, indeed, anywhere else. According to the Bank, the defendants purchased the Ararat properties of their own initiative and the only involvement of the Bank was in the provision of finance to enable them to complete purchases which they made, secured by the mortgages which the Bank now seeks to enforce.

"Dominica" is a Victorian era mansion on the western side of Barkly Street Ararat. Prior to its purchase by the defendants it was owned by the estate of the late Patricia Grano, a prominent Ararat solicitor who had inherited it from her father, also a solicitor, who had built it.

Ms Anderson told the Court that she became aware in February 1991 that Dominica was to be sold. She said she told Mr Beecham and asked him if he thought it would be a good investment property. She said she gave him a photo of the house which he kept. Mr Beecham's response, according to Ms Anderson, was that the house would make a wonderful restaurant. She said she had not thought of that possibility herself although she recalled that in October 1990 Mr Beecham had suggested to her that she invest in a "local" restaurant; presumably a restaurant local to the Ormond branch of the National Bank. She said that she did not accept Mr Beecham's suggestion at that time.

After speaking with Mr Beecham about Dominica, Ms Anderson said that she telephoned her brother who was an estate agent in Ararat and told him what Mr Beecham had said. She said that he expressed the view that Ararat would not be able to carry a restaurant like that. She reported this conversation to Mr Beecham, she said, whereupon Mr Beecham suggested to her that the property could be the basis of a "wine and food experience". It would be bigger than just a restaurant and would involve accommodation and groups who would get "special stay-over deals". Ms Anderson said that this conversation occurred in late February 1991 in a coffee shop in Ormond. At the time it occurred she said she showed Mr Beecham an estate agent's brochure advertising the forthcoming auction of the property.

Ms Anderson said that after this conversation Mr Beecham, who was then on holidays, telephoned her and said that he'd "seen Ararat" and that she should come and see him on 17 April. She was unable to date this conversation.

Ms Anderson then described a meeting with Mr Beecham on 17 April 1991, three days before the scheduled auction of Dominica. She said she was becoming very nervous about Mr Beecham's proposal which she said involved buying a motel in Ararat, a restaurant in Ararat and a house at the back of the restaurant to use as a car park. At the time of this discussion she had not seen inside Dominica and nor, to her knowledge had Mr Beecham.

Ms Anderson said that at this meeting she was accompanied by her co-defendant whom she referred to as Raymond Moon. She said Mr Moon had met Mr Beecham briefly on an earlier occasion. She said that at the meeting she asked Mr Beecham if he was quite sure that she should go ahead with "this". She said she was referring to the auction in three days time. At this point in her evidence Ms Anderson interpolated that earlier, in February, Mr Beecham had recommended that she buy a cheap small accommodation place that could be renovated and used as a "combined dine and stay deal". Indeed she virtually shifted the advice she said in earlier evidence Beecham had given her and Mr Moon in April back to February even though the defendants' pleading placed it in April.

Ms Anderson said that the day following her meeting with Beecham, 18 April, she drove to Ararat, went to the Chalambar Motel and bought it from a Mr Eric Kilbride for $180,000. She said she never inspected it. She did this, she said, because Mr Beecham told her to.

Returning to the meeting on 17 April, Ms Anderson agreed that so far as she was aware Mr Beecham had never inspected any of the properties which were discussed although she said he had earlier phoned and said "I've seen Ararat".

At this point in her evidence Ms Anderson referred to a "business plan". Earlier, in opening the defendants' case her counsel, Mr Selimi, had brandished a document which he referred to as "a smoking gun". This document, which was produced to the Court only as a photocopy was in the following terms;-

"National Australia Bank Customer Interview Account Titles

Purchased 291 Barkly St. Ararat. Agent's Estimate

The document was on an A4 sheet of paper bearing the National Australia Bank logo and the words "Customer Interview". There is space on the document to enter account details but in that respect it is blank. It has, in handwriting, the initials "B R" and the figures "91" in a column headed "Date".

Initially Ms Anderson said that Mr Beecham had this document in his office when he met her and Mr Moon on 17 April although "it wasn't quite all filled in". However she later conceded that she did not know whether the document she was talking about was this document or some other document. Thus its relevance to the defendants' case was diminished somewhat from the flamboyant use Mr Selimi had made of it in his opening. Mr Moon could not identify it at all.

Ms Anderson also referred to another document being a Line of Credit Application bearing the date 17 April 1991. She said that Mr Beecham had that document with him at the meeting and, in answer to a leading question from her counsel, said that it was filled in in her presence. She referred particularly to a notation under a heading "Contingent and Other Liabilities" and a figure of $430,000 with a reference to "R & B Anderson". [It should be noted at this point, that as at 17 April 1991 the first defendant's name was not Raymond Anderson but Raymond Moon. He did not change his surname to Anderson until 16 July, some three months later.]

Ms Anderson said that Mr Beecham had suggested the conservatory referred to on the "smoking gun" document set out above and explained that although he might never have seen the property he had seen a plan of it on the auction brochure which she had shown him. That document, a photocopy of which was produced, had an unscaled sketch plan on it. It also had the imprint of lips on it as if it had been kissed by someone wearing lipstick. Ms Anderson explained that when she gave it to Mr Beecham she kissed it as "this was my future and he done it for me so I gave him a kiss on the document". She said he returned the document to her.

At some time during the 17 April discussion Ms Anderson said that she left the Bank to speak to her daughter who was outside. She was away about 20 minutes. Upon her return she said that Mr Beecham said "Raymond has agreed to change his name to Anderson". She said she was surprised at this and asked Mr Beecham why this was happening, to which he replied "look we've worked it out ourselves don't you worry". She said that he then reminded her that she was the one with the severe psychiatric problem. She said that Mr Beecham said that Mr Moon's changing his name to Anderson would help with loans.

Ms Anderson said that the meeting with Mr Beecham took about an hour. Following the meeting she and Mr Moon left the Bank.

Ms Anderson said that the following day she drove to Ararat and bought the Chalambar Motel in the circumstances already described. She also said that at the same time she spoke to people who owned an old house at the back of Dominica. She said that she offered them $70,000 for the house which they immediately accepted. She said that she inspected neither the Chalambar Motel nor the house before she bought them. She said that she told Mr Beecham the following day, 19 April, by phone that she had bought the motel and the other property.

Ms Anderson said that on Saturday 20 April 1991 she attended the auction of Dominica with Mr Moon and bought it, after the auction, for $245,000. She said that Mr Beecham phoned her that day and she told him that she had bought the property.

The first defendant, Raymond Anderson also gave evidence about a conversation with Mr Beecham with Ms Anderson just prior to the auction of Dominica. Mr Anderson, (or Mr Moon as he said he preferred to be called) had known Ms Anderson since 1963. In the intervening period he had worked in the restaurant business in various capacities and, at the time of the conversation he said they had with Mr Beecham lived in Queensland. He said that some time early in 1991 Ms Anderson had told him about the Dominica and he became interested in being involved in its purchase and development. He had some money which he was prepared to invest.

Mr Moon gave an account of his and Ms Anderson's meeting with Mr Beecham shortly prior to the auction of Dominica in terms of a financial business plan which he said Mr Beecham was "drawing up for us". He explained that in these terms:-

"In this financial business plan he was drawing up for us and he said there was purchasing the old house, the mansion, the house behind for parking. Purchasing the motel for $180,000. Purchasing a shuttle bus to shuttle people to and fro to wineries and to also bring them to and fro from the motel to the restaurant. He also discussed told me had arranged finance for $350,000 for the restaurant and $80,000 for the house behind, a total of $430,000."

Mr Moon said that at some point Ms Anderson left the Bank to go and speak to her daughter. When she was out Mr Moon said that he told Mr Beecham that the money he was putting in was his retirement money. He said he asked Mr Beecham how secure is "it" and what assurances could he give that "it" would be okay. He said that Mr Beecham then passed over a business card which had the names of a number of companies written on the back. He said that whilst Ms Anderson was out of the room Mr Beecham said to him that it may seem strange, but considering her condition he (Beecham) would like him to change his name to Anderson. He said that Beecham explained "it will enhance our chances, it will make it - our chances better of getting loans from the Bank". Mr Moon said that he thought about it for a minute and then said "well, okay. If that is what you want-after all you're my adviser; you're handling my money".

Mr Moon also said that in the course of this discussion with Mr Beecham Mr Beecham had the document to which Ms Anderson had referred (and which is set out above) in his hand. Mr Moon said that he didn't read the document. He could not really identify it.

Mr Moon said that nothing else occurred in the conversation with Mr Beecham.

Both Mr Moon and Ms Anderson described in detail the subsequent progress of the Ararat development which involved extensive renovations to Dominica the obtaining of permits and licences, the hiring of staff (referred to as "management") the opening of the restaurant and its subsequent financial failure. Having regard to the conclusion which I have reached however with respect to the representations or advice which they allege Mr Beecham made or gave it is not necessary to rehearse the sorry history of the collapse of the project any further.

Mr Borg, who was the accountant at the Ormond branch of the Bank in June 1991 recorded a phone call on bank stationery which he received on 6 June. It was in the form of a memorandum to Mr Beecham in the following terms:-

Bev Anderson phoned and advise (sic) that she has purchased a property in "Arratt" (sic)

The document also recorded Ms Anderson's name at the top together with a phone number.

Mr Beecham gave evidence that until he saw that memo he was unaware of the purchase of the property in Ararat by Ms Anderson. Indeed he said that until he received that memo he was not aware of the existence of a property in Ararat that she might be interested in. He said that so far as he is aware the only time he has ever been to Ararat was when he was a teenager and passed through there with his parents on a holiday. He said that he had no familiarity with Ararat, its streets or its property values and never gave any advice to Ms Anderson or Mr Moon with respect to the purchase of any property in Ararat. He denied ever having suggested that Ms Anderson should buy a restaurant in Ormond or that Mr Moon should change his name. He went further and said that at the time Mr Moon said that he suggested the name change he (Beecham) did not even know that such a thing was possible. He had no recollection of any meeting with Ms Anderson and Mr Moon on 17 April 1991 but said that if he did have such a meeting he did not make the representations or give the advice attributed to him by Ms Anderson and, to some extent at least, by Mr Moon. He denied every having any telephone conversations with Ms Anderson concerning the auction of Dominica either before or after the auction took place.

The contract of sale for the purchase of Dominica is dated 20 April 1991. Settlement was due to occur on 18 October 1991. The contract of sale for the car park is dated 6 November 1991 with settlement due to occur on 20 December, although a statutory declaration purportedly made by Ms Anderson on 17 August 1991 gives the date of the sale as 5 July 1991. A contract for the purchase of the Chalambar motel by the defendants from Chegaer Pty Ltd is not dated but provides for settlement on 1 December 1991. It is subject to a special condition whereby the vendor will finance the purchase by the defendants to the extent of $90,000 for a term of 18 months.

A Mr Eric Kilbride gave evidence that he had been the owner of the Chalambar motel in 1991. Having regard to the name of the vendor on the contract of sale I assume he was a director of Chegaer Pty Ltd and the owner or part owner of its share capital. He said that in August of that year Ms Anderson approached him to buy the motel. She looked at it and, after bringing her partner to look at it, accepted his asking price of $180,000, a figure which, he said, he "pulled out of the hat."

No explanation of the obvious discrepancies between all of this evidence and that of Ms Anderson has ever been forthcoming.

Mr Beecham gave evidence that on 13 August 1991 he began to process an application for finance by Ms Anderson and Mr Anderson (as Mr Moon had by then become). The amount sought was for total accommodation by the Bank of $430,000 in favour of the defendants. A two page hand-written description of Ms Anderson's business and investment activities, which included a description of plans to renovate Dominica to turn it into a restaurant, a reference to the proposed sale of her Tooronga Road property, a description of the progress of a sub-division in Ararat and the prospect of its yielding available cash (a completely separate venture) and a reference to money owed to her by the Education Department accompanies the application. Mr Beecham said that this document was created by him on Ms Anderson's instructions. Also attached to the loan application was a statement of Ms Anderson's financial position at that time signed by her. It was proposed that the loan sought by the defendants would be provided in two amounts of $350,000 and $80,000 respectively; the first amount being made available on an interest only basis, the second on overdraft.

By formal bank letters dated 21 August 1991 the Bank offered the defendants the loans which they sought on the security of first mortgages over Dominica and the car park and, in the case of the overdraft, over the property at Evelina Road Toorak. The security was to be supported by a term deposit of $60,000 and guarantees by each of the defendants and Collinson Holdings Pty Ltd, a company associated with Ms Anderson and her daughter. The defendants acceptance of each of the loans was verified by each of their signatures on each of the letters of offer, which signatures were dated 26 August. Mr Beecham believed that those documents were probably signed in his office on the date they bear but he could not be certain of this.

In the course of this case there was never any challenge to the accuracy of any of this documentation. Its very existence is entirely inconsistent with the defendants' case.

The defendants' case as to the Bank's manager, Mr Beecham, having given them the advice alleged in their counter-claim depends for its acceptance upon the Court accepting as probable that a bank manager, upon being shown a real estate agent's auction brochure for a Victorian mansion in a country town of which he knew virtually nothing gave customers of the Bank advice that they should buy the mansion, extensively renovate it so as to turn it into a restaurant, buy another property to use as a car park, buy a motel to accommodate patrons for the restaurant and buy a bus to transport them to and from wineries and other attractions. Their case also seems to involve acceptance of the proposition that contemporaneously with giving them this advice the Bank manager offered them a loan of $430,000 without any application having been made by them to the Bank and without any valuation or even inspection of the properties which would, presumably, have had to have stood as security for the loan. The sheer audacity of the plan which the defendants say Mr Beecham advised them to undertake casts some doubt upon their case even before consideration is given to Mr Beecham's denial of ever having given such advice, serious credit issues which particularly affect Ms Anderson and contemporaneous documentation. To these can also be added that Mr Beecham or someone else would have to have completely reconstructed the Bank's file to hide the truth as asserted by the defendants and have done so without any discernible trace.

The Bank's case is that Mr Beecham first learned of the purchase of Dominica when he read Mr Borg's memorandum of 6 June 1991 recording a telephone conversation he had with Ms Anderson on that day. Ms Anderson never denied that such conversation took place and no satisfactory explanation was ever given as to why she phoned the Bank to convey this information to Mr Beecham in June if the April meeting had occurred as she said it did and she had subsequently purchased the relevant properties and reported that fact to Mr Beecham as she also asserted. Mr Selimi, in his argument, was unable to offer any explanation for this glaring inconsistency in the defendants' case other than to argue that it was not really inconsistent at all. I am unable to accept this argument. When this inconsistency is added to the inherent improbability of the defendants' case the situation of the defendants becomes grave indeed.

But that is not all. The Bank documentation to which I have referred (the loan application of 13 August 1991, with its long supporting description of the defendants' (particularly Ms Andersons') proposals, the documents approving that loan and the defendants' signatures on those documents, corroborates Mr Beecham and the Bank's position. If the loan had been approved, as the defendants assert, in April there would have been no need for the August documentation. Further, Mr Beecham had no authority to approve a loan of the size contemplated. He needed to submit it to a more senior bank officer. No reason has ever been advanced by the defendants as to why he would not follow the Bank's ordinary procedures for loans of the type contemplated in their particular case.

The defendants placed some importance upon a Line of Credit Application document dated 17 April 1991 found in the Bank's file. This was the date upon which they say they had the crucial meeting with Mr Beecham. Mr Beecham gave evidence that this was not in fact a loan application at all but rather a document initially raised by him to correct an internal error in the Bank which had cancelled a credit facility to which the second defendant, Ms Anderson, was entitled. He referred to page 4 of the document where, under the heading "Summary" he had written the reason for creating the particular document. He said further that the line on the document which was particularly relied upon by the defendants under the heading "Contingent and Other Liabilities" was not written by him but by another bank officer to ensure that Ms Anderson's file recorded the fact that she and Mr Anderson had accepted liability as guarantors in the sum of $430,000. As that event occurred on 21 August 1991 it seems clear that the entry must have been made after that date. That the entry was made after 16 July 1991 is corroborated by the fact that it refers to "R & B Anderson" and it was only on that day that Mr Moon changed his name to Anderson. The document cannot assist the defendants' case.

The provenance of the document referred to by Mr Selimi in his opening as the "smoking gun" which is reproduced above is somewhat unclear. As I have already noted it was tendered to the Court only in the form of a photocopy. The matters referred to on it suggest that it came to existence much later than 17 April and its resemblance to other documents created by a Mr John Moran who had earlier assisted for Ms Anderson (and perhaps the first defendant) as a "consultant" suggests that it may not have originated with the Bank at all despite the fact that the photocopy tendered was apparently on bank stationery. Whatever its origins I accept Mr Beecham's evidence that he knew nothing of this document and I am satisfied it was not created on or before 17 April 1991, if it was created by the Bank at all. Indeed the defendants eventually backed away from asserting that it existed in the form tendered at the time they say they had the meeting with Mr Beecham in which the negligent advice was given. It is of no assistance to the Court in resolving the factual issues in this case.

A Mr Selwyn Custance gave evidence on behalf of the defendants as to his involvement in various aspects of the Ararat project. He was a town planner who had earlier assisted Ms Anderson in relation to the Avondale Heights land she inherited from her husband. In this case he assisted the defendants with respect to planning issues surrounding the operation of Dominica as a restaurant. Whilst it is true that he believed that his involvement in the matter pre-dated the defendants' purchase of Dominica and that that involvement included conversations with Mr Beecham about it I am satisfied that in his dating of those conversations he is mistaken. He had no file upon which to rely and all of the documentation relating to his activities as a planner which was produced was dated or can be established to have been created well after 17 April. I do not regard Mr Custance's evidence as overcoming the difficulties in the defendants' case to which I have referred.

In the course of his address Mr Selimi conceded that the defendants' claim in negligence against the Bank could not succeed unless the Court substantially accepted their account of a meeting with Mr Beecham on or about 17 April 1991. For the reasons which I have set out I am satisfied that if any meeting between the defendants and Mr Beecham occurred on or about that date the advice attributed to Mr Beecham was certainly never given. He did not advise the defendants to purchase properties in Ararat or to open a restaurant. Even if Mr Beecham or the Bank owed the appropriate duty of care to Ms Anderson and Ms Anderson I am satisfied that nothing Mr Beecham or any other Bank officer did was in breach of that duty. The defendants' claim in negligence is totally without foundation.

The determination the Court has made of the unconscionability and negligence issues effectively determines the outcome of this proceeding. The plaintiff is entitled to the relief which it seeks, namely possession of each of the properties referred to in its Second Further Amended Statement of Claim and to the amounts owing under the mortgages registered over those properties. In a document tendered with his outline of submissions Mr Garde QC calculated the plaintiff's entitlement to a money judgment as at 11 December 2003, was based on documents tendered to Mr Garde establish those sums which were not disputed by Mr Selimi. The sum owing was calculated as being $883,551.16 and continuing up to judgment at $280.46 per day. As at 1 June 2004 the additional component amounts to $48,239.12 (172 days at $280.46 per day). The plaintiff is therefore entitled to judgment as at 1 June 2004 in the sum of $931,790.28.

The orders the Court will make (subject to any submissions by counsel as to form) will be as follows:

1. The plaintiff recover possession of all that piece of land in the Township and Parish of Ararat, County of Ripon, being Crown allotments 13 and 14, section 9 and being all that piece of land more particularly described in Certificate of Title volume 9338 and Folio 797 and known as 291-293 Barkly Street, Ararat in the State of Victoria.

2. The plaintiff recover possession of all that piece of land in the Parish of Ararat, County of Ripon being Crown allotment 27J, section 16 and being all that piece of land more particularly describe din Certificate of Title Volume 7428 Folio 489 and known as 132 Lambert Street, Ararat in the State of Victoria.

3. The plaintiff recover possession of all that piece of land in the Township and Parish of Ararat, being Lot 2 on plan of subdivision number 317344A and being all that piece of land more particularly described in Certificate of Title Volume 10070 Folio 064 and known as 116 High Street, Ararat in the State of Victoria.

4. There be judgment for the plaintiff against the defendants in the sum of $931,790.28.

5. The counterclaim of the defendants be dismissed.

6. The defendants pay the plaintiff's costs of the proceeding, including all reserved costs, to be taxed.

[1] [1992] HCA 61; (1992) 175 CLR 621, especially per Deane J at 637.

[4] Louth v Diprose [1992] HCA 61; (1992) 175 CLR 621 at 637.

[5] Zoneff v Elcom Credit Union Ltd (1990) 94 ALR 445; Commonwealth v Verwayen (1990) 170 CLR 394; Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447; Blomley v Ryan [1956] HCA 81; (1956) 99 CLR 362; Akins v National Australia Bank (1994) 34 NSWLR 155; Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd [2003] 8 CA 18; Marion Mitchell v 700 Young Street Pty Ltd [2003] VSCA 42.

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