Pham v ANZ Banking Group Ltd [2002] VSCA 206

GUARANTEE AND INDEMNITY - Contract of guarantee - Nature of disclosure necessary to surety - Whether non-disclosure.

2. There are before this Court two appeals, each of which arose in respect of moneys lent by the respondent ("the bank") to interests associated with members of an extended Vietnamese family (which I will refer to collectively as "the Phams"). In both proceedings the bank sought first to recover moneys advanced and secured by various mortgages and guarantees and secondly to obtain possession of properties which were the subject of relevant mortgages.

6. In this matter the action was commenced by writ issued on 15 May 1998 by the bank as plaintiff originally against six defendants. The third defendant was Cha Van Pham ("Cha") and the fourth defendant was Ba Thi Ha ("Ba"), his wife. The first defendant was An Ngoc Pham ("An Ngoc"), a son of Cha and Ba, against whom default judgment was entered. The second defendant was Trung Minh Pham ("Trung"), also a son, but who was not served with the writ. The fifth defendant was Hoang Khai Pham ("Khai"), a third son of Cha and Ba, and the sixth defendant was Thi Trang Tran ("Trang"), Khai's wife.

9. In this action Lincolns, a firm of solicitors who had acted for the Pham family, was joined as a third party by Cha, Ba, Khai and Trang. After commencement of the trial, the bank sought and was granted leave to join Lincolns as the seventh defendant. Ms Joyce Khoo, a solicitor employed by Lincolns, was also joined in the proceedings, but that third party claim was later struck out by consent.

12. The action came on before a judge of this Court on 14 April 1999 and after a trial lasting 21 days, on 8 December 1999 her Honour delivered judgment in favour of the bank. Then on 13 December 1999 the judge ordered that the bank recover possession of properties situated at 2 William Street, Abbotsford and 67-69 Weston Street, Brunswick, and entered judgment for the bank against Cha and Ba in the sum of $1,036,739.83 and against Khai and Trang in the sum of $1,288,880.07 and ordered costs against these four defendants, including reserved costs, on a solicitor and own client basis.

15. In this proceeding the bank sought to recover moneys against the defendants and to obtain possession of properties the subject of mortgages, acting on securities given by each defendant in relation to banking facilities provided by the bank to a family company, New Directions Clothing Co. Pty. Ltd. ("New Directions") and to An Ngoc.

18. At the trial Cha and Khai were represented by one counsel, and their respective wives Ba and Trang by a second counsel, presumably in anticipation of a defence being brought relying on the principle founded on Yerkey v. Jones[1]. The defendants raised a number of defences to the bank's action, first that the securities were unenforceable, secondly that they should be set aside on the ground that the bank had breached its "duty of disclosure", thirdly that the security documents should be set aside on the ground of unconscionability on the part of the bank, fourthly that Cha and Ba were mistaken as to the nature of the documents signed, fifthly that there had been mutual mistake with respect to the guarantee provided by Khai and Trang, next that Ba and Trang had "equities" to set aside the security documents arising from various matters such as their inability to understand English, next that the bank was estopped from enforcing the relevant securities against Ba and Trang, and finally that Ba and Trang were entitled to rely on Yerkey v. Jones.

21. The judge rejected each of these defences. Her Honour was satisfied after having heard evidence from a large number of witnesses including each of these four defendants that the security documents were duly signed by each defendant and that they did so in full awareness of the nature of the documents and the risks and consequences in the event of default by New Directions and An Ngoc. Her Honour found that the defendants comprehended the nature of the transactions when they provided the relevant securities to the bank. As to the supposed duty of disclosure, her Honour found that there was no duty imposed by the common law upon a financial institution such as the bank of a duty of disclosure as alleged, but that in any event each of the defendants knew the nature of the documents they signed. Her Honour also rejected the allegation of unconscionability against the bank and found that the defences of mistake were not made out.

24. The defendants also alleged that the firm of Lincolns had been retained either by the bank or New Directions to ensure that the defendants understood each of the security documents relating to them concerning the bank, and as a consequence that Lincolns owed a duty of care to the defendants, which duty had been breached by Lincolns' failure to explain and advise the defendants as to the effect of the security documents, and also by falsely certifying that the defendants understood the relevant documents when they did not. The judge's conclusions as to the fact that the defendants comprehended the nature of the transactions when they provided the relevant securities to the bank inevitably led to this claim by the defendants against Lincolns also failing. It is unnecessary to deal further with the bank's claim against Lincolns, which depended upon it being found that Lincolns had failed to advise Cha, Ba, Khai and Trang or that Lincolns had falsely certified the defendants' understanding of the relevant documents.

28. In this matter a writ was issued by the bank on 15 May 1998, the first defendant being Luu Cong Pham ("Luu"), a son of Cha and Ba, the second and third defendants being Dac Van Nguyen ("Dac"), and Loc Van Duong ("Loc"), both cousins of the Pham family. This action was heard together with the first action, and judgment was also delivered on 8 December 1999 by her Honour in favour of the bank. On 13 December 1999, the judge ordered that the bank recover possession of the property situated at Unit 3, 18-20 Harper Street, Abbotsford, and that judgment be entered for the bank against Luu in the sum of $590,635.63 and against Dac and Loc in the sum of $549,910.20 and costs, again including reserved costs, on a solicitor and own client basis.

31. In this proceeding the bank again sought to recover moneys against the three defendants pursuant to guarantees and to obtain possession of property the subject of a mortgage, acting on securities given by the three defendants in relation to banking facilities provided by the bank to another Pham family company, Vinh Binh Pty. Ltd. ("Vinh Binh"). The three defendants raised a number of defences to the bank's action including a claim that the bank had breached its duty of disclosure, that the security documents should be set aside on the ground of unconscionability on the part of the bank, and that the defendants were mistaken as to the nature of the documents signed. As to these defences the judge found that the defendants duly signed the security documents, in full awareness of the nature of the documents and the risks and consequences in the event of default by Vinh Binh. Her Honour found that the defendants comprehended the nature of the transactions when they provided the relevant securities to the bank. Her Honour rejected the claim of unconscionability on the part of the bank and as to the allegation of mistake was satisfied that the defendants understood the transactions. Her Honour also held that there was no duty of disclosure as alleged and, in any event, no breach of any such duty.

35. From the notice of appeal filed by the appellants, the following issues appear to be raised on the hearing of this appeal -

(a) Whether the decision of the judge that the defendants comprehended the nature of the transactions when they provided the relevant securities to the bank was against the evidence or the weight of the evidence; (b) Whether the judge's decision that Ms Khoo gave advice to the defendants as to the meaning of the security documents was against the evidence or the weight of the evidence; (c) Whether the judge erred in law by allowing leading questions to be put to witnesses by counsel for the bank; (d) Whether the judge erred in law by drawing any adverse inference against the defendants by reason of the failure to call An Ngoc to give evidence; and (e) Whether the judge erred in law in holding that there was no legal duty of disclosure on the part of the bank in relation to an explanation of the security documents.

40. The following issues are raised in this appeal -

(a) Whether the judge's decision that the defendants comprehended the nature of the transactions when they provided the relevant securities to the bank was against the evidence or the weight of the evidence;

(b) Whether the judge erred in law by drawing adverse inferences against the defendants by reason of the failure to call An Ngoc to give evidence;

(c) Whether the judge erred in law in holding there was no legal duty of disclosure on the part of the bank in relation to an explanation of the security documents.

The procedural history of these appeals

46. The notices of appeal were in each case dated 12 January 2000. On 18 April 2000 summonses were issued by the appellants in each appeal seeking orders in each case that the appeal not be taken to be abandoned and that there be a stay on the decision of the trial judge given on 13 December 1999. On 5 May 2000 Chernov, J.A. and I ordered in appeal No. 2038 that upon the appellants' undertaking to the Court to pay the bank $8,750 per calendar month commencing in the month of May 2000 execution on her Honour's judgment save as to certain parts be stayed until the hearing of the appeal and that the appeal not be taken to be abandoned. Like orders were made in relation to appeal No. 2039. In each case the orders were made upon the appellants by their counsel undertaking to make the payments in question, and to take all reasonable steps to expedite the hearing of the appeal. All appellants were then represented by Queen's Counsel.

49. On 11 May 2000 Messrs Ebsworth & Ebsworth, the solicitors for Lincolns, wrote to the appellants' solicitor Mr Anthony Zita noting that the bank was the sole respondent to the appeal. The letter enquired whether the appellants proposed to amend the title of the notice of appeal to include Lincolns and asking whether the appellants were prepared to agree to pay security for the costs of the appeal. No reply to this letter was received, and Messrs Ebsworth & Ebsworth wrote again on 25 May 2000 seeking a response to their first letter. Then on 31 May 2001, a summons was issued by the appellants seeking orders that Mr Zita be given leave to withdraw as practitioner for the appellants such leave being granted on 15 June 2001.

52. This appeal was first scheduled to be heard before the Court of Appeal on 27 May 2002. The Court then adjourned the hearing of the appeal from 27 May to 15 July 2002 of its own motion, the Court having determined that the proceeding would not be reached during the sitting time.

55. On 5 July 2002 Mr Zita, now practising under the firm name John V. Hayes & Co. Pty. Ltd., wrote to the solicitors for Lincolns, saying that he had received instructions to act on behalf of the appellants and stating that the notice of appeal required amendments to include relief against Lincolns. The letter stated that the appellants had not attended to these amendments and that also -

"It will also be necessary to obtain all witness statements and exhibits which as you are aware have been misplaced. We will obviously be seeking to retrieve as best as we can copies of evidence-in-chief and witness statements which are not recorded in the transcript. Accordingly we are not able to comply with the timetable and would seek a short adjournment of the appeal date in order to properly prepare for the hearing."

60. When the appeal came on for hearing on Monday 15 July 2002, the Phams were unrepresented, but a member of the family, Mr Kiet Pham, asked to be heard as a spokesman for the family on the ground that they could not speak or write English. Without necessarily accepting this proposition, having regard to the findings made by the trial judge, the Court permitted Mr Pham to make submissions on their behalf. The Court was then told that the appellants sought a short adjournment, for two reasons. In the first place Mr Pham told us that the appeal books did not contain the original statements of evidence-in-chief of the witnesses tendered during the trial and he needed time to locate and supply this material to the Court. Secondly, it was put that counsel who appeared at the trial was given the appeal books to examine at some time after 27 June 2002. Counsel then examined the brief from 5 to 8 July, inserted transcript references in the notice of appeal and drew attention to the fact that it would be necessary to seek "consequential relief" against Lincolns. Mr Pham told us that counsel advised that the appeal was not ready to proceed and that application should be made to amend the notice of appeal. Mr Pham said he then attempted to apply for an adjournment on Monday 8 July but was unable to make application before the date of the hearing of the appeal. Mr Pham's submission continued -

"Mr Heaton who appeared on our behalf in May 2000, regarding an application to the Court of Appeal made application to stay the order against [the judge's] judgment. The application was supported by the sworn affidavit of Mr An Ngoc Pham implicating an employee of Lincoln Lawyers. I have been advised that Mr An Ngoc Pham's affidavit provides enough evidence for us to join Lincoln Lawyers in the notice of appeal and in doing so, seek relief against Lincoln Lawyers. I did not know that [our counsel] did not amend the notice of appeal on the day. In the meantime I wish your Honours to refer to the transcript and the affidavit of An Ngoc Pham and the points raised in the grounds of appeal document and hope that it gives the appeal merit and thus, I hope that it may persuade your Honours to grant an adjournment, so that the appeal can be properly prepared and proceed, in context with the fresh evidence provided by Mr An Ngoc Pham's evidence and that counsel can be properly briefed. At this late stage I cannot find a solicitor who will act for my family, as the matter is not ready to proceed."

64. The affidavit of An Ngoc was sworn on 30 March 2000 and had been prepared before application was first made to the Court of Appeal for the stay of the orders of the trial judge. In that affidavit An Ngoc said he had been requested by the appellants to give evidence at the trial and had travelled to Melbourne on two occasions to do so in or about April 1999. An Ngoc said that he was in attendance at the Court at the commencement of the trial but the case was not at first ready to proceed and was delayed for two days because the plaintiff's witness statements had not then been filed. An Ngoc said that he was unable to remain in Melbourne any longer and returned to Vietnam but later returned to Melbourne expecting to give evidence only to find that the case had not progressed as quickly as anticipated. Application was made for An Ngoc to be interposed as a witness but this was rejected on the ground that it might prejudice the proper conduct of the trial. An Ngoc then resolved to leave Melbourne as it was likely he would have to wait several more days.

67. An Ngoc said that before the trial he gave certain instructions to counsel acting on behalf of the defendants but did not give him any instructions in relation to a secret agreement he had with Lan Tran, a law clerk employed by Lincolns who had been given the task of acting on behalf of the Pham family by her principal at the firm, solicitor Mr Kenny Yip. Her Honour found that Ms Tran handled most of the transactions for the Pham family concerning the ANZ Bank. The secret arrangement, according to An Ngoc, was that Lan Tran would be paid a commission of three per cent for the procuration of loans on behalf of his company New Directions. According to An Ngoc's affidavit he met Lan Tran in 1996, at which time she told him she was a solicitor. In April or May 1996 he told her that his company's overdraft limit was insufficient and asked her whether she was in a position to obtain an increased facility for him. According to An Ngoc she thereafter made arrangements with the ANZ Bank for new loan facilities for his company. When it became necessary to seek his family's support in borrowing money, An Ngoc said that he approached his father who refused to agree to lend him any money. He said he told Lan Tran who said she would fix it up, that she would arrange for the signing of the documentation and that he was not to worry. Later, according to An Ngoc, Lan Tran telephoned him and said that the documents had been signed, after which he met Lan Tran at his office and she then told him she wanted three per cent commission on loans she had obtained for him. According to the affidavit Lan Tran -

"Said words to the effect that `what I have done for you, nobody else can do, I want three per cent commission'. She said in words to the effect `they didn't have a clue' what it was they signed."

An Ngoc's affidavit asserted that he and Lan Tran approached the ANZ Bank on three or four occasions to borrow money. The affidavit contains other allegations against Lan Tran, including that she told An Ngoc to misrepresent his financial position to the ANZ Bank. An Ngoc said he paid Lan Tran two sums of $1,000 each in cash and three cheques in the approximate amount of $1,500 or thereabouts.

72. Mr Pham put to us that if An Ngoc's evidence had been before the trial judge, then her Honour would have given a very different judgment. His explanation for any delay in making the application was that the bank had been desperately trying to bankrupt the family and that it was not until 27 June that the federal magistrate had given a decision the effect of which was that bankruptcy proceedings could not continue before 22 August. Mr Pham said that the family could not have proceeded with the appeal until they worked out whether they would be bankrupt. The only material before the Court, however, was the order made by Federal Magistrate Walters on 17 June 2002 adjourning the bankruptcy petition to 22 August.

76. On 15 July the Court refused to grant an adjournment of the hearing to enable an application to be made to join Lincolns Lawyers as parties to the appeal. In giving short reasons for this refusal which the Court said it would supplement later, we said that it was far too late to inform the Court at the date of the hearing of the appeal of the intention to make application to amend the notice of appeal at some later date, when the appeal had been awaiting hearing for over two years, the appellants having more than two years before undertaken to take all reasonable steps to expedite the hearing of the appeal, and the facts upon which the application was to be based were known at that time; and secondly, the material then put before the Court suggested that the evidence upon which the application would be made was not on any view fresh evidence. I shall deal later with the application to admit fresh evidence. The Court on 15 July in fact adjourned the hearing to Thursday 18 July, but on that date, after more argument, adjourned the hearing of the appeal again to Tuesday 13 August to enable the appellants to brief counsel for the hearing. The following are my reasons for joining in the Court's refusal to permit the amendment of the notice of appeal which the appellants foreshadowed on 15 July.

79. Judgment had been delivered after the trial in both actions in December 1999. When the matter came before this Court for interlocutory directions in May 2000, the appellants were all represented by Queen's Counsel, and upon undertakings being given by counsel on the appellants' behalf to expedite the hearing of the appeal, orders were made, as I have said, that the appeals not be taken to be abandoned and the order of the trial judge of 13 December 1999 was stayed. The appellants' solicitor remained the solicitor on the record until 15 June 2001 when he was given leave to withdraw. The solicitors for Lincolns had, meanwhile, twice written to the appellants' solicitor enquiring whether the appellants proposed to amend the title of the notice of appeal to include Lincolns. Notice was not given of the appellants' intention to seek relief against Lincolns until more than two years after this interlocutory hearing, and immediately before the appeal was to be heard.

82. The material put forward by the appellants on 15 July contained little or no explanation for the delay in making the application to amend. Lincolns bore no responsibility for this delay, indeed they had attempted to clarify the position at an early stage, and had complied with all relevant directions. The appellants, on the other hand, had left the notice of appeal unamended for over two years, doing little or nothing in the prosecution of the appeal, notwithstanding their undertaking to expedite. The appellants at the door of the Court, as it were, sought to amend their appeal to make very serious allegations against Ms Lan Tran, these allegations having been known to the appellants for over two years, and even then, on 15 July, the appellants still put forward no application to amend, nor were any proposed amendments to the notice of appeal then placed before the Court, merely an application for an adjournment to enable an application for amendment to be made. Allegations of professional negligence should not be allowed to linger in this way: Howarth v. Adey[2]. Furthermore the evidence before the Court suggested that the appellants were unlikely then to be able to meet such orders for costs as might be made against them. Next, for reasons to which I shall turn shortly, the evidence upon which the appellants sought to rely is, in my view, in any event not "fresh evidence" and should not be admitted on the hearing of the appeal.

85. In all these circumstances I was satisfied that justice did not in this case require that the appellants should be given a further opportunity to amend their case; cf. UTSA Pty. Ltd. (In Liquidation) v. Ultra Tune Australia Pty. Ltd.[3]; Apex Pallet Hire Pty. Ltd. v. Brambles Holdings Ltd.[4]. Mr McGarvie for Lincolns submitted that this was a very different case from State of Queensland v. J.L. Holdings Pty. Ltd.[5], and instead was comparable with Sali v. SPC Ltd. & Anor[6], in which the High Court upheld the decision of the Full Court of Victoria refusing successive applications for an adjournment of the hearing of an appeal, a submission which I accepted.

89. I have already referred to the affidavit of An Ngoc sworn 30 March 2000 which contained the fresh evidence sought to be introduced on the appeal. Mr Parncuttt, who appeared for the appellants on the resumption of the appeal on Tuesday 13 August, also sought to rely on a further affidavit of An Ngoc sworn 6 August 2002. Mr Parncutt accepted that to be admitted the evidence alleged to be "fresh" had to satisfy the following three conditions - first, that the evidence could not have been obtained with reasonable diligence for use at the trial; secondly, the evidence must be such that, if given, it would probably have had an important influence on the result of the case, though it need not be decisive; and thirdly, the evidence must be apparently credible: see Orr v. Holmes[7]; Council of the City of Greater Wollongong v. Cowen[8]; and Commonwealth Bank of Australia v. Quade[9].

92. In relying on the affidavits of An Ngoc, Mr Parncutt submitted that An Ngoc had erroneously assumed that Tim Heng (an ANZ bank manager) was working in collaboration with Lan Tran and had unfairly implicated him in the obtaining of the Pham signatures to the security documents. The evidence in An Ngoc's affidavits was said to show evidence of a fraudulent motive of Lan Tran which could not have been obtained by the appellants with reasonable diligence and was evidence which would have had an important impact on the result of the case. It was submitted that An Ngoc had selectively given instructions to counsel acting on behalf of the appellants and had not included instructions as to the secret commissions paid to Lan Tran, nor the ignorance of Cha and Ba as to what they were signing when they signed the security documents, nor the procuration fee paid to Lan Tran by the respondent. It was argued that An Ngoc had previously concealed his own fraud and was now anxious to tell the truth. The Phams were argued to have acted with reasonable diligence in that they had sent counsel to Vietnam to seek out An Ngoc to ascertain the circumstances of the respondent's case against the appellants. An Ngoc had previously withheld the evidence he now sought to put before the Court on the basis of what was said to be his belief that if the bank had decided to pursue him for recovery of losses suffered by the Pham family, the bank would have moved against his business in Vietnam. It was said that An Ngoc did not disclose the activities of Lan Tran, particularly having regard to the fact that his family might institute proceedings for fraud as he was aware that the transactions the subject of the proceedings involved a deception of his mother and father and members of his family. Mr Parncutt submitted that the trial judge had placed considerable reliance on the evidence of Lan Tran, which should now be regarded as unsafe in the light of this new evidence.

95. The application to admit fresh evidence was the first issue argued on behalf of the appellants at the hearing of the appeal proper, and after hearing Mr Parncutt's argument on this issue the Court rejected the application to admit fresh evidence, saying that reasons for this rejection would be given later. The following are my reasons for joining in the rejection of the fresh evidence tendered.

98. The version of events now put forward by An Ngoc involved that he, who travelled from Vietnam to Melbourne on two occasions to give evidence in the hearing in and about April 1999 and who was in attendance at the start of the trial, gave limited instructions and some misinformation to the appellants' legal advisers. A critical issue was whether the appellants had understood the documents they signed. An Ngoc now said that he had been told by Lan Tran that she obtained the appellants' signatures to the agreement, and that "they didn't have a clue" what it was they signed. In other words, having direct evidence to support a critical aspect of the appellants' case, An Ngoc withheld it. The alleged reasons for withholding this evidence from the family's legal advisers included that he believed that it would have affected his business in Vietnam at the time if the bank had decided to pursue his business in Vietnam for recovery of losses suffered by the Pham family, and further that his family might institute proceedings for fraud. But the bank had already entered default judgment against An Ngoc and was in a position to pursue An Ngoc's assets if it chose to do so. Furthermore, the Pham family must already have been abundantly aware that, on the basis of the defences they had put forward, the transactions the subject of the proceedings involved a deception of An Ngoc's mother and father and other members of the family in which An Ngoc must have been involved.

101. Next, the version now put forward by An Ngoc asserted (see paragraphs 11, 12 and 13 of his affidavit sworn 30 March 2000) that he approached his father for help in obtaining the loan he required for his business, but his father refused to assist. An Ngoc said he reported this to Lan Tran who told him that she would fix it up and that she would arrange for the signing of the documentation. There was, however, at this stage no mention of any commission payable to her. According to An Ngoc, Lan Tran then telephoned him and announced that the documents had been signed. It was only when Lan Tran told An Ngoc that "What I have done for you nobody else can do. I want 3% commission", and "they didn't have a clue", that Lan Tran demanded 3% commission. In other words, Lan Tran's allegedly dishonest conduct had been supposedly carried out at a time when An Ngoc had made no agreement that he would pay her anything for her assistance, and her claim for payment amounted simply to a demand for commission after the event and which An Ngoc, of course, had no obligation whatever to accept. On this version of the facts, Lan Tran, on her own initiative and for no certain personal benefit, acted in this corrupt fashion in the hope, presumably, that she might receive an equally corrupt secret benefit, if she deceived Cha and Ba into signing documents they did not understand and which might have the most serious consequences for them financially, for the benefit of An Ngoc. Furthermore Cha, according to the affidavit material, was not deceived, since according to his witness statement, confirmed in the witness box, he alone signed, both for himself and Ba, the documents relating to the loan approval. Other evidence had it that Cha said he signed the loan application, believing it would never be approved. This version is obviously inconsistent with An Ngoc's assertion that Lan Tran had said that when they signed, they "didn't have a clue".

104. In my view the evidence put forward in An Ngoc's affidavits failed the first and third conditions mentioned above which must be satisfied for the admission of fresh evidence. As to the first, I did not accept that the evidence could not have been obtained with reasonable diligence for use at the trial. An Ngoc was present in Melbourne while a case was being prepared and at the commencement of and during the hearing. No attempt was made by the appellants' legal advisers to compel his attendance by means of subpoena, to have his evidence taken by means of video link, or to adjourn the trial to a date convenient to An Ngoc. Secondly, the evidence now put forward, and An Ngoc's explanation for not having volunteered this information beforehand, in the circumstances just discussed both failed the test of credibility.

107. It was also argued by the respondents that the new evidence merely sought to discredit the evidence given at trial by Lan Tran, and that affidavits which "merely show at the outside that there will be oath against oath"[10] should not be permitted to be used. In light of the conclusions already reached, it was unnecessary to consider this further ground for rejecting the supposed new evidence.

110. I now turn to a consideration of the issues argued in the appeal on the unamended notice of appeal, in the order Mr Parncutt's written submissions take them.

Issue 1: Whether the decision of the trial judge that the defendants comprehended the nature of the transactions when they provided the relevant securities to the bank was against the evidence or alternatively against the weight of evidence

114. The appellants' case was that the judge's conclusion that the Phams could comprehend written and spoken English was based upon the evidence of the ANZ Bank manager, Timothy Heng, Kenny Yip, the principal of the firm Lincolns Lawyers, and the law clerk employed by Lincolns, Lan Tran. It was submitted that, Lan Tran and the Phams both being Vietnamese, Lan Tran spoke in Vietnamese, not in English, to the Phams. Mr Parncutt submitted that the evidence at its highest for the bank was that Lan Tran speculated that she overheard Cha inside a room speaking English when she had never heard his voice before. The argument continued that there had been no basis for the statement made by the judge that[11] "Ms Tran gave evidence and was adamant throughout that the defendants spoke English and that she heard and observed them to speak English on a number of occasions". It was also submitted that her Honour had incorrectly said that it was never suggested to Ms Tran that she was wrong in her belief that Cha, Ba, Khai and Trang communicated in and understood English during her dealings with them.

117. The judge also accepted evidence from Kenny Yip that Cha, Ba and Trang spoke and comprehended English during his dealings with them. It was put to him in cross-examination that he had merely been guessing at this conclusion, which Mr Yip rejected saying that he was making a personal assessment of the appellants' ability to speak English. Mr Parncutt's argument was that Mr Yip spoke less than fluent English. Mr Yip had accepted that Cha would have difficulty understanding legal documents without assistance, and would not have had a proper understanding of a floating charge. Mr Yip said that Cha was not fluent in English.

120. This issue was not vigorously pressed by Mr Parncutt, and in my view it has little substance. The trial had taken some six weeks, and the judge was satisfied, having observed the demeanour of all witnesses in the course of their giving evidence over an extended period, and upon the basis of a number of additional factors which were set out in extenso in the judgment, that the security documents had all been duly signed by each appellant and that they did so in full awareness of the nature of the documents and the risks and consequences in the event of default, and further comprehended the nature of the transactions when they provided the relevant securities to the bank. It was, I think, plainly open to the trial judge to make these findings, and to accept and prefer the evidence of the bank's witnesses over that given by the appellants. It is not necessary to cite authority for the view that an appellate court will not interfere with a finding of fact by a trial judge based on the credibility of witnesses, unless the finding is clearly established to be wrong on grounds of error which do not depend merely on credibility. The general rule is, of course, that if the estimate of the trial judge of a witness forms any substantial part of the judge's reasons for the finding of fact, an appellate court will not interfere unless it can be shown that the judge has failed to use or has misused that advantage, or has acted on evidence inconsistent with facts incontrovertibly established elsewhere or which was glaringly improbable. In my view the first issue raised by the appellants should be rejected.

Issue 2: Whether evidence which was not led before the trial judge is admissible on appeal

124. Issue 2 was resolved by the Court's decision during the hearing that the evidence tendered in the affidavits of An Ngoc is not admissible as fresh evidence.

Issue 3: Whether the trial judge erred by drawing any adverse inference against the appellants by reason of the failure to call An Ngoc to give evidence

128. Noting that An Ngoc had not been called, the judge referred to the request made by counsel that An Ngoc be interposed to give his evidence in the course of the respondent's case, a witness statement from An Ngoc having been filed on behalf of all the appellants. The request to interpose An Ngoc was refused by her Honour with reasons given, and that refusal is not now challenged. Subsequently her Honour was informed during the course of the hearing that An Ngoc would not be called to give evidence and that his witness statement was not relied upon. Her Honour said that "No explanation was provided to the court save that An Ngoc had returned to Vietnam and had failed to come back to Melbourne for the purposes of giving evidence in the trial." Her Honour was satisfied that adverse inferences could be drawn from the appellants' failure to call An Ngoc.

131. Mr Parncutt argued that An Ngoc had travelled to Melbourne on two occasions to give evidence and was in attendance at court at the commencement of the trial but the case was not then ready to proceed. He submitted that the Court was informed of the reason for his non-attendance and no adverse inference should have been drawn since his absence was explained. Again, the argument was not vigorously pursued in this Court.

134. An Ngoc was the first defendant in proceeding 2038 of 1998. As the judge said, the general thrust of the appellants' evidence was that An Ngoc was the mastermind behind the business operations of the Pham family and that the financial disasters the family faced were essentially of his making. His role was a central one and it was to be expected that he would be called to give evidence on behalf of the appellants and that his evidence would be highly relevant to a number of matters raised before the Court. In these circumstances it was also to be expected that an adequate explanation would be offered for his absence from the witness box. No evidence was led as to the reasons for his absence from the witness box and, in my view, it was well open to the judge to find that no explanation for the failure to call An Ngoc had been given, or that any such explanation as there was was unsatisfactory.

Issue 4: Whether the decision of the judge that Ms Khoo gave advice to the appellants as to the meaning of the security documents was against the evidence or the weight of the evidence

138. Joyce Khoo was a non-Vietnamese speaking solicitor employed by Lincolns. Although she did not act for the Pham family her signature appeared on a number of bank documents as a witness to the signature of members of the family. The relevant finding of the judge was in the following terms[12] -

"Joyce Khoo gave evidence that she was unable to recall the occasion when she was asked to see Khai and Trang in relation to the loan documents concerning the Brunswick mortgage. After inspecting the file of Lincolns she was of the belief (but not recollection) that she attended Khai and Trang on 27 June 1996 and observed their signing of the Brunswick mortgage which was witnessed by Ms Tran and the guarantee which she witnessed. Ms Khoo believed from her examination of the Lincolns' file that she completed the certificate of witness of execution of mortgage. She observed that the handwritten components of the document bore entirely her handwriting. Ms Khoo had no recollection of providing advice to Khai and Trang in relation to the documents. As a result of her practice at the time she believed that as she witnessed the execution of the An Ngoc guarantee by Khai and Trang ... she would have given them general advice about guarantees. She believed that on the basis of her usual practice she would have told Khai and Trang that the guarantee was unlimited, that if the borrower did not repay they would be required to repay any debts, that they would each be liable for the full amount of the debts and that there was an indemnity which would render Khai and Trang liable to ANZ for any default, breaches, interest and costs. Ms Khoo believed she would also have informed Khai and Trang that the guarantee was a continuing guarantee. Ms Khoo did not make any diary note of her attendance upon Khai and Trang. She was unable to explain why she had not done so save that the legal practice of Lincolns was a busy one and that Khai and Trang were not her clients or that she may have made a time record which has not been retained."

142. Mr Parncutt argued that Ms Khoo gave no direct evidence of having given advice to the Phams regarding the meaning of the security documents, and further that her Honour erroneously found that it was not put to Ms Khoo that she had not explained the security documents when the evidence was that it was suggested to Ms Khoo that she knew she had not given any explanation of the documents.

145. Ms Khoo was vigorously cross-examined by several counsel. Her Honour was satisfied that Cha and Ba were provided with the information Ms Khoo said she gave them in her evidence, in particular the matters recited in a "checklist for guaranteees" prior to their execution of the security documents. Her Honour also accepted Ms Khoo's evidence to the effect that the New Directions guarantee was explained to Cha and Ba. The judge was, in my view, entitled to accept the evidence of Ms Khoo as to her usual practice[13]. Ms Khoo's evidence was, in effect, that she would not have signed the solicitor's certificates without giving the relevant advice. This argument was also not vigorously pressed on appeal, and in my view should be rejected.

Issue 5: Whether the learned judge erred in law by holding that there was no legal duty of disclosure on the part of the bank in relation to an explanation of the security documents

149. The judge found that there was no duty imposed by the common law upon a financial institution such as the bank of a duty of disclosure as alleged by the appellants. Her Honour said[14] -

"The next defence of Cha and Ba was that the relevant securities should be set aside because ANZ breached its `duty of disclosure'. On the evidence I am satisfied that in any event Cha and Ba knew the nature of the documents they signed. However, there is no duty imposed by the common law upon a financial institution such as ANZ of a duty of disclosure as alleged: Lam v. Ausintel Investments Australia Pty. Ltd.[15], Commonwealth Bank of Australia v. Mehta[16] ... With respect to the defence of Cha and Ba alleging breach of duty of disclosure I am satisfied that they were not misled or deceived by any non-disclosure on the part of ANZ as they were possessed with knowledge of the transactions. Insofar as it was alleged that the conduct of the bank in failing to disclose the nature of the transactions constituted a misrepresentation by silence I find the defence fails. On the evidence there was not a representation by the bank. Furthermore, the bank was entitled to rely upon the actions and advice of the solicitors Lincolns."

The defence of non-disclosure raised by Cha and Ba therefore failed. As to Khai and Trang, her Honour also held[17] that they were not misled or deceived by any non-disclosure on the part of ANZ as they comprehended the nature of the transactions with the bank. So also with Luu, Dac and Loc the judge said[18] that she was satisfied that they also were not misled or deceived by any non-disclosure on the part of ANZ as they were possessed with knowledge of the transaction.

154. In this Court Mr Parncutt earnestly argued that the principles governing the extent to which the bank was bound to make disclosure to a surety were, as stated in Hamilton v. Watson[19], that the creditor must disclose anything that might not naturally be expected to take place between the parties, a formulation approved in Commercial Bank of Australia Ltd. v. Amadio[20]. It was submitted that there was a limited duty of disclosure because of the creditor-guarantor relationship, the basis for the duty being argued to lie in the fact that failure to make full disclosure amounts to an implied representation that the thing does not exist. It was submitted that the duty of disclosure arises between a banker and customer where there is a special arrangement of a kind which the surety would not expect, "where there existed facts, the non-disclosure of which would effectively misrepresent material aspects of the transaction which the guarantor was undertaking to guarantee".[21] It was argued that the obligation is to reveal anything in the transaction between the banker and the customer "which has the effect that the position of the customer is different from that which the surety would naturally expect".[22]

157. The duty of disclosure by a creditor to a surety was stated by Lord Campbell in Hamilton v. Watson[23] as being that-

"unless questions be particularly put by the surety to gain this information, I hold that it is quite unnecessary for the creditor, to whom the suretyship is to be given, to make any such disclosure; and I should think that this might be considered as the criterion whether the disclosure ought to be made voluntarily, namely, whether there is anything that might not naturally be expected to take place between the parties who are concerned in the transaction, that is, whether there be a contract between the debtor and the creditor, to the effect that his position shall be different from that which the surety might naturally expect; and, if so, the surety is to see whether that is disclosed to him. But if there be nothing which might not naturally take place between these parties, then, if the surety would guard against particular perils, he must put the question, and he must gain the information which he requires."

161. The duty of disclosure alleged by the appellants was completely general,

alleged to arise simply from the fact that the bank and Cha, for example, were in a prospective creditor-guarantor relationship whereby the plaintiff owed a duty implied by law to Cha to disclose to him that he was signing documents securing the debts of New Directions.[24] The duty of disclosure alleged by the other appellants was in similar terms. The statement made by the trial judge in reasons for judgment that no such duty is imposed by the common law is, in my view, correct, since the defence did not allege that the duty of disclosure arose from anything which "might not naturally be expected to take place between the parties who are concerned in the transaction" or which was "to the effect that his position shall be different from that which the surety might naturally expect".[25] But this argument must in any event lead nowhere having regard to the fact that in the case of each appellant the trial judge found that they were not misled or deceived by any non-disclosure on the part of the bank and were possessed with appropriate knowledge of the transaction. On this issue, therefore, the appellants also fail.

166. Other grounds were raised by the appellants in various grounds of appeal, such as that the judge erred in law by allowing leading questions to be put to witnesses by counsel for the bank. All these other grounds were, as I understood it, abandoned by Mr Parncutt, and there was in any event nothing in them.

179. I have had the benefit of reading in draft the judgment of Charles, J.A. and, save for one matter on which I prefer not to express an opinion, I agree with his Honour's reasons and with his conclusion as to the disposition of these appeals.

182. In my view, it is unnecessary for me to express a view on the question whether there may be a legal duty imposed on a financial institution, as creditor, and, if so, what may be the parameters of such duty, to voluntarily disclose to a surety any matters which might affect the position of the surety and which the surety might not naturally expect. Given her Honour's findings of fact in this case, that in no instance was any appellant misled or deceived by the bank by any such non-disclosure, then the question does not fall to be resolved unless those findings of fact manifest error on the part of the judge. For the reasons given by Charles, J.A., I do not consider that her Honour's findings of fact were not open to her or were tainted by error in principle in her approach in deciding those disputed questions of fact.

185. I agree that the appeals should be dismissed.

[1] [1939] HCA 3; (1939) 63 C.L.R. 649.

[2] [1996] VICSC 4; [1996] 2 V.R. 535 at 552 per Brooking, J.A.

[3] (1996) 21 A.C.S.R. 457 at 459 per Hayne, J.A., with whom Brooking and Phillips, JJ.A. agreed.

[4] Unreported, Full Court of Supreme Court of Victoria, 8 April 1988 at p.5.

[5] [1997] HCA 1; (1997) 189 C.L.R. 146.

[6] [1993] HCA 47; (1993) 67 A.L.J.R. 841.

[7] [1948] HCA 16; (1948) 76 C.L.R. 632.

[8] [1955] HCA 16; (1955) 93 C.L.R. 435.

[10] Dean v. Brown [1909] 2 K.B. 573 at 587 per Farwell, L.J.; Brown v. Dean [1910] A.C. 373 at 375; Braddock v. Tillotson's Newspapers Ltd. [1950] 1 K.B. 47 at 53, approved in Akins v. National Australia Bank (1994) 34 N.S.W.L.R. 155 at 160-1.

[13] Connor v. Blacktown District Hospital [1971] 1 N.S.W.L.R. 713 per Asprey, J.A. at 721; Olga Investments v. Citipower [1998] 3 V.R. 485 at 497-498.

[15] (1990) 97 F.L.R. 458.

[16] (1991) 23 N.S.W.L.R. 84.

[18] Judgment at [177], in relation to proceeding 2039.

[19] [1845] EngR 568; (1845) 12 Cl. & F. 109 at 119; 109 E.R. 1339.

[20] (1983) 151 C.L.R. 451 at 455 per Gibbs, C.J.

[21] Westpac v. Robinson (1993) 30 N.S.W.L.R. 668 at 687.

[24] See Cha's amended defence para.33.

[25] Hamilton v. Watson 12 Cl. & F. at 119.