Plum v Commonwealth Bank of Australia

The proceedings 3 On 21 May 2003, the Commonwealth Bank filed, in the District Court of New South Wales, a Statement of Liquidated Claim whereby it sought to recover from Mr Plum the sum of $204,043.55 plus interest and costs. This sum was said to be the balance due to the Commonwealth Bank after the sale of certain properties in Wagga Wagga that had been mortgaged by Mr Plum to the CSB in order to secure loans made to him by it. The proceeding was numbered 2201 of 2003. 4 On 15 August 2003, Mr Plum filed a Defence in matter 2201 of 2003 in which he admitted the terms of the mortgage but claimed it was not valid or enforceable against him, for reasons arising out of the terms of the Trade Practices Act 1974 (Cth) ('the TP Act') or the Contracts Review Act 1980 ('the CR Act'). Mr Plum also filed a cross-claim seeking damages. 5 On 14 August 2003, Mr Plum filed in this Court an Application, commencing proceeding NSD 983 of 2003, in which he named, as respondents, the Commonwealth Bank and Michael Quirk, a person who was employed at relevant times by CSB. The Application sought the following relief: '1. An order setting aside the agreements founding the loans advanced by the State Bank of New South Wales ("the Bank"). 2. An order declaring void or unenforceable the loan agreements either in relation to the repayment of monies advanced by the Bank to the Applicant and/or in relation to the payment of interest thereon. 3. An order requiring the First Respondent to repay such monies as the Court finds has been unconscionably retained by the Bank and/or it including by reason of the purported enforcement of its purported security to date. 4. An order discharging the Applicant from any further liability to the First Respondent. 5. An order rescinding the loan contracts. 6. Restitution of such monies to which the First Respondent is not entitled. 7. Equitable compensation or damages. 8. An account of profits. 9. Damages against the First and Second Respondent. 10. Damages or compensation against the First and Second Respondent pursuant to Sections 82 and 87 of the Trade Practices Act, Sections 86 and 72 of the Fair Trading Act, Sections 12GF and 12GM of the Australian Securities Investments Commission Act 1989 and 2001. 11. Ancilliary [sic] relief pursuant to Section 87 of the Trade Practices Act, Section 72 of the Fair Trading Act and Section 12GM of the Australian Securities & Investments Commission Act 1989 and 2001 and Section 7 of the Contracts Review Act 1981. 12. Interest pursuant to Section 51A of the Federal Court of Australia Act 1976. 13. Costs.' 6 A Statement of Claim, also filed by Mr Plum on 14 August 2003, pleaded that the loans advanced to him by CSB were procured by common law misrepresentation and/or misleading and deceptive conduct on the part of CSB and Mr Quirk. References were made to s 52 of the TP Act, s 42 of the Fair Trading Act 1987 (NSW)('the FT Act') and s 12DA of the Australian Securities and Investment Commission Act 2001 ('the ASIC Act'). To the extent that certain representations related to future matters, Mr Plum relied on s 51A of the TP Act, s 41 of the FT Act and s 12BB of the ASIC Act. 7 The Statement of Claim also included counts alleging negligence, unconscionable conduct and breach of fiduciary duty. 8 On 26 September 2003, Bennett J ordered that District Court proceeding 2201 of 2003 be transferred to this Court, pursuant to s 86A(4) of the TP Act and s 12GK(4) of the ASIC Act, and that the matters be conducted as a single proceeding on the basis of the pleadings in the District Court. The transferred proceeding was allocated Federal Court identification number NSD 1714 of 2003. 9 The hearing of the consolidated proceeding commenced on 7 February 2005. On that day, counsel for Mr Plum (Mr R D Wilson and Ms M Tibbey) indicated their client did not press the aspects of his claim that were based on unconscionability, the CR Act and breach of fiduciary duty. Counsel said the only issue in relation to the Commonwealth Bank's claim against their client was the legal validity of the mortgages, having regard to the conduct of CSB and Mr Quirk. In this respect, counsel said, they would argue only negligence and misleading or deceptive conduct. The result of counsel's announcement was that Mr Plum was effectively the moving party in the litigation. So it was agreed his case should be presented first. 10 At an early stage of presentation of evidence, a problem arose about the availability of a witness for cross-examination. This was resolved by agreement being reached that the hearing should proceed, in the first instance, only in relation to liability; that is, whether CSB and Mr Quirk were negligent or had engaged in misleading or deceptive conduct. Issues concerning the quantum of damages to be allowed, and the appropriate other relief (if any), were deferred to a later hearing, if that should prove necessary having regard to the findings on liability. 11 At the conclusion of the evidence, on 8 February 2005, counsel who had appeared for the Commonwealth Bank and Mr Quirk (Mr P J Dowdy) requested that submissions be put to the Court in writing. He said he wished to consider whether it was necessary or desirable, having regard to Mr Quirk's cross-examination, that Mr Quirk should be separately represented, for the purpose of presenting submissions. There being no objection by Mr Wilson, I acceded to this request. Written submissions were first supplied on behalf of Mr Plum. Separate submissions were later supplied on behalf of both the Commonwealth Bank and Mr Quirk. Counsel for Mr Plum replied. Outline of the facts 12 Mr Plum was born in 1950. He went to school in Wagga Wagga. He left school at the end of year 10, after having obtained his Intermediate Certificate. For some time, he worked as a shearer. He then bought a farm at Tarcutta, near Wagga Wagga. In 1989, Mr Plum commenced a carpenter's apprenticeship and moved back to Wagga Wagga. Towards the end of his apprenticeship, his employer and he built a number of duplex units on land that he had purchased with the proceeds of sale of his farm. 13 In 1993 or 1994, Mr Plum commenced to carry out building work on his own account. He purchased land at Kenneally Street, Wagga Wagga on which he built eight single storey villa units. For the purpose of this project, he borrowed money from Westpac Bank. He repaid the loan from the proceeds of sale of the units. 14 In early 1997, Mr Plum became aware that three adjoining Wagga Wagga parcels of land were being put up for sale, in one line, at auction. The properties were known as 67 and 69 Crampton Street and 52 Travers Street. Each parcel of land contained an old house. The auction was to take place on Friday, 7 March 1997. 15 The total area of the three properties was 7,588 square metres. Mr Plum conceived the idea of developing the whole site as a staged residential unit development. The site adjoined another property, 54 Travers Street, which also contained an old house. 16 Mr Plum had dealt with CSB in 1996, when he had borrowed money to finance the purchase of a property that he later sold. He still held a line of credit with CSB, in the sum of $80,000. This was secured over another Wagga Wagga property. 17 Mr Plum decided to approach CSB for finance to purchase the properties that were being offered at auction. He spoke to Mark Hately, a bank officer with whom he had previously dealt. Mr Hately referred him to Mr Quirk. At that time, Mr Quirk was employed by CSB as a Business Development Officer in the Small Business Department of its Wagga Wagga branch. 18 Mr Plum met Mr Quirk, by appointment, on 28 February 1997, exactly one week before the auction. This was the first contact between the two men. There is dispute between them as to what was said at that meeting. In paras 13-15 of an affidavit made on 16 March 2004, Mr Plum gave this account of the conversation: 'Mr Quirk and I sat down and I came straight to the point and told him what I wanted. I said words to the effect: "I am looking to purchase the properties which are coming up for auction on 7 March at 67, 69 Crampton Street and 52 Travers Street, Wagga. I am very interested in it. I will be needing a loan to buy the land and a further loan to develop it to construct about 30 units on it. The idea is to take 12 months to get approvals and then build it over two-three years. I think it will go for around $550,000. I am looking for an interest only loan on the basis that I will pay off the debt from the profits of the development." In response to my enquiry Mr Quirk said during the meeting words to the effect: "I think that you would be better served by taking out a housing loan to buy the properties. It will be quicker to obtain and at a cheaper rate of interest. You can later apply for a development loan to finance the actual construction of the townhouses". Mr Quirk said words to the effect "we can apply for a development loan later" … Mr Quirk did not at this meeting or at any time say to me words to the effect: (a) the bank is unlikely to approve the development loan; (b) there are particular lending requirements in relation to development loans and this will depend upon the circumstances at the time of the loan application; (c) The bank would not permit a home loan to be paid out of the profits of the townhouse development.' 19 The version of the conversation in Mr Quirk's affidavit is as follows: 'On or about 28 February 1997, I first met Mr Plum whom I had never previously met. My recollection is that he was referred to me by Mr Mark Hately, who was the manager of the South Wagga branch of the Bank. After meeting Mr Plum and the usual pleasantries, I took him to an office when he said to me words to the effect of: "There are three properties which are coming up for auction in a week's time, being 67 and 69 Crampton Street, and 52 Travers Street. There are houses on each of these properties and I believe that the rental income from these properties and my existing rental properties should generate sufficient income to service the necessary loan. I think that they will go at auction for around $520,000. Later on down the track, I will consider the development potential for these properties, but I want to hold them for at least twelve months and see how the residential property market goes in Wagga. I want to see whether the opening of the new bridge over the river will increase the demand for central Wagga home units. If things look good in the property market, I will probably try to put together a development company to finance the construction and sell some of my other properties to fund it. Until I know what I am really doing, I would like to have the loan on interest only for as long as possible. Do you think the Bank will be able to help?" I replied in words to the following effect: "Well Bill, you haven't left the Bank much time to get you a formal approval prior to auction. I can't approve the loan but I will take down your relevant financial information and put together a proposal as a matter of urgency to submit to the Bank in an attempt to get an approval before the auction. I will do all I can to achieve this. However, I can't make any promises. Mr Plum replied in words to the effect of: "I would appreciate that. What sort of interest only period do you think the Bank would approve?" I replied in words to the effect of: "Well, on an investment home loan the maximum interest only period the Bank allows is five years. You could perhaps have the first year at a fixed interest rate. If you now give me your basic financial details, I will complete this application on your behalf.' 20 It is common ground that Mr Quirk filled out a Business Finance Application form and this was signed by Mr Plum. The document listed Mr Plum's assets and liabilities. It contained the following note concerning the purpose of the proposed loan: '3 houses to by [sic] purchased. Net rental $300 per week = 15600.' 21 In his affidavit, Mr Quirk denied that Mr Plum said anything to him about a further loan to construct 30 units on the land or that he would build the units over the next two to three years, after taking about 12 months getting approvals. 22 It is common ground that Mr Quirk informed Mr Plum, in a telephone call shortly before the auction, that CSB would approve his loan application. At the auction, Mr Quirk purchased the three properties for a total sum of $525,000. 23 On 21 April 1997, Mr Plum signed an application to CSB for an interest-only 'Home Loan' of $550,000. Nothing turns on the content of that application. The loan was granted and the purchase was completed. 24 Some time after the auction sale, Mr Plum became aware that 54 Travers Street was available for purchase by private treaty. The property contained 1,200 square metres of land. Mr Plum thought it would be a valuable addition to the development site. He negotiated to buy the property for $154,000 and applied to CSB for a further loan of $170,000. This application was approved. In July 1997, Mr Plum completed the purchase of 54 Travers Street. 25 At about this time, Mr Plum formed a company, Quanttro Holdings Pty Ltd ('Quanttro'), in which he and his wife jointly held a four-sevenths interest. Three other persons (including Mr Plum's brother, Alan) each held a one-seventh interest. The idea was that Quanttro would be involved in the development of the land. In the meantime, it was agreed, the Quanttro shareholders would service the two CSB loans in proportion to their interest in the company. Mr Plum's solicitors told CSB about this arrangement. 26 Shortly before settlement of the 54 Travers Street purchase, Mr Plum became interested in purchasing 50 Travers Street. He met Mr Quirk on 17 July 1997 and discussed the possibility of borrowing a further $130,000. It is common ground that he told Mr Quirk about Quanttro and the arrangement he had made with the other Quanttro shareholders about interest payments. Mr Quirk conceded that, at least by the time of this meeting, he was aware of Mr Plum's desire to develop the whole site with townhouses. Mr Quirk said that, at the meeting of 17 July, he expressed pessimism to Mr Plum about the new application. In his affidavit, Mr Quirk claimed to have said words to this effect: 'Bill, I will need to get a number of things together and I will then submit this application to Sydney on your behalf. However, I should make it clear that this application will probably be tough to get approval for. Further, if in due course, you want to make an application for finance to develop the units, there will be no guarantee of that being approved. As the small business section can only process business applications up to $500,000, any such finance application will have to be dealt with in a separate part of the Bank.' 27 Mr Quirk assisted Mr Plum to complete the loan application. Mr Quirk submitted it to Patrick Guillon of Business Credit Services, at the Parramatta office of CSB, together with a memorandum in which he [Mr Quirk] said that Mr Plum was a 'well regarded CST [sic: CSB?] customer with all accounts in order'. He 'strongly recommended' the application for the new $130,000 loan. 28 Notwithstanding this recommendation, on 13 August 1997, the application was refused. Mr Quirk deposed that, in accordance with his usual practice, he would have telephoned Mr Plum and told him of the refusal. Mr Plum does not dispute that he became aware of the refusal at about this time. 29 Mr Plum retained architects to design the townhouses, to be erected on the first four parcels of land, and to prepare a development application for submission to Wagga Wagga City Council. Mr Plum said that, in late 1997, before he submitted the development application to the council, he called into the bank and informed Mr Quirk of his intention to demolish the Travers Street houses 'so site works can commence'. Mr Plum claimed that Mr Quirk acknowledged this information, with words like 'that's good', and did not offer any caution or advice against taking that step. Mr Quirk denied there was any such conversation. He claimed that the first he knew about demolition of the houses was in about March-April 1998, when Gary Traynor, a bank officer who was a friend of Alan Plum, said to him words such as 'Bill Plum has started his development - he's knocked down two of the houses'. Mr Quirk said he expressed surprise and told Mr Traynor that Mr Plum had not lodged any finance application with him. He claimed to have said to Mr Traynor: 'I don't know who will be financing him. Are you blokes looking at it yet? Wouldn't he need the Bank's permission to demolish the houses?' 30 Mr Quirk explained in evidence that 'you blokes' was a reference to the three-man team, of which Mr Traynor and Geoffrey Frost were members, that handled Wagga Wagga business loan applications for sums exceeding $500,000. According to Mr Quirk, Mr Traynor said he had not yet received any application and agreed that Mr Plum would need the bank's permission to demolish. 31 Mr Quirk gave evidence that, after work that day, he drove home via Travers Street and noticed that the houses at 52 and 54 Travers Street had been demolished. He said he was surprised at the demolition but did not regard it as his job to take up the matter with Mr Plum. 32 Mr Plum lodged a development application with the council on about 5 January 1998. This application sought approval for construction of 30 residential units on the combined site of 52 and 54 Travers Street and 67 and 69 Crampton Street. The development was intended to be staged; initially 20 units and then a further 10 units. On 5 February 1998, the council approved the application. 33 Mr Plum deposed that, with council's permission, the houses at 52 and 54 Travers Street were demolished in early March 1998. He erected an advertising hoarding on the site and commenced a marketing campaign. 34 In late April 1998, Mr Plum again contacted Mr Quirk. It is common ground that Mr Plum told Mr Quirk he was ready to apply for the development loan for the construction of the townhouses and that Mr Quirk replied he did not handle development loans and introduced him to Mr Frost. 35 Mr Frost submitted Mr Plum's development loan application to the relevant CSB approving authority in Sydney. It was rejected. Mr Plum then applied to other financial institutions. All his applications were unsuccessful. As he could not proceed with the townhouse project, he commenced to sell properties, including the four properties in the development site, and applied the proceeds towards reducing the debt ($720,000) he had incurred in order to purchase these properties. There was a shortfall, resulting in a residue of debt to the bank that, with accrued interest, amounted to $210,675.16 at 1 December 2003. The meeting of 28 February 1997 (i) Significance 36 The most important factual issue in the case is the content of the conversation at the meeting between Mr Plum and Mr Quirk on 28 February 1997, when Mr Plum sought a loan to enable him to bid at the auction due to be held on the following Friday. 37 The applicant's case is that Mr Quirk's conduct at that meeting was misleading or deceptive, having regard both to what he said and what he omitted to say; alternatively, that the conduct breached the duty of care which, Mr Plum argues, CSB owed to him. 38 The only participants in the conversation were Mr Plum and Mr Quirk. Nobody else was present at any stage. Neither participant claimed to have made a contemporaneous record of what was said. So it is necessary for me to consider carefully what each man said about the meeting during cross-examination. It may be necessary to determine the witnesses' respective credibility. It will be necessary for me to consider some evidence given by Mr Frost and Mr Traynor, relied on by Mr Plum, and certain bank documents that are argued to throw light on what occurred at the meeting. (ii) Mr Plum's oral evidence 39 In cross-examination, Mr Dowdy took Mr Plum to his earlier applications for finance. Mr Plum agreed that, although the bank officer who initially put together each of his earlier applications might have commented on its chance of success, he knew the final decision, in each case, was made by a higher bank officer. Mr Plum agreed that no architectural drawings or plans had been prepared by 28 February 1997. However, he disputed that he 'had no real awareness' of the likely cost of the development. He said he was able to form an idea of cost because of his earlier development projects. He thought the overall cost of the development, including purchase of the land, would be about $3,000,000. 40 Mr Plum denied Mr Dowdy's suggestions that he told Mr Quirk he would hold the properties for at least twelve months to assess their development potential and that he had spoken to Mr Quirk about assessing the effect of the new bridge. He agreed there had been discussion about the length of the loan and that it would be an interest-only loan. 41 Mr Plum denied he would still have gone ahead with the loan application, if Mr Quirk had told him CSB could now only consider the application for money to purchase the properties and he could later apply for a development loan to cover construction costs. Mr Plum explained his denial by saying: 'Well there's no guarantee there of me getting the loan, is there?' He insisted that he took Mr Quirk's response on 28 February 1997 as meaning the bank guaranteed it would advance a development loan for the construction costs of the development. 42 Mr Dowdy took Mr Plum to his affidavit statement about Mr Quirk saying he could later apply for a development loan to finance the construction of the town houses. The evidence went on: 'You, of course, knew and accepted in this meeting that at a later point of time, you would have to put in a development loan application to construct the buildings. Correct? --- Yes. But you say, do you, that was just an unnecessary formality because you were guaranteed the amount that you would require in any event. Is that what you say to the court? --- No, I understand that it should have been put in as one loan, the entirety of the loan, as I see it. Mr Quirk should have advised me that it should have been done in a development loan in the entirety of the purchase of the land and the actual development. I see, but the fact of the matter is, you accept that he made clear to you that a later development application by you would have to be put in? --- Yes. You've just told us that you were in effect, or you considered yourself to be guaranteed the full amount of the construction cost, haven't you? --- Yes, well the second - to put in the loan for the development I took as just a formality from being guaranteed the loan for the purchase of the land. And you assumed this from a man who [you] knew … couldn't even approve the loan of $550,000 you were asking. Is that right? --- Yes, but it had to go through bank channels to be approved. It's the same thing at the end of the day isn't it? Well, the only thing that Mr Quirk ever came back to tell you was that your loan of $520,000 had been approved. That's correct, isn't it? --- Yes. He never came back to you and said, well, the development loan has been approved for whatever this development cost, did he? --- But he didn't come back and say to me, it hasn't been, either. He never came back to you and said to you anything to the effect that any development loan application had been approved, did he? --- No.' 43 Mr Plum also agreed his formal application for the $550,000 loan, made after the auction, stated the loan's purpose as being to purchase an investment property. 44 Mr Plum agreed he could not produce any document from CSB that referred to approval of development loan funding. 45 Mr Dowdy referred Mr Plum to Mr Quirk's memorandum to Mr Guillon of 24 July 1997 recommending Mr Plum's application for the $130,000 loan; in particular, the following points: '• The vacent [sic] land to be purchased is next to the recently financed properties. • Customer's plan is to rent the properties in the short term (12-24 months) with long term plans to build 20 units on the block of properties. The long term plans will depend on the strength of the real estate market in Wagga Wagga. • Customer has formed a company with his brother, brother in law and a local real estate agent. The other three partners own 3/7ths with PW Plum owning 4/7ths of the company which will service the borrowings and eventually build the units. • Customer has been made aware that the Bank has made no guarantees as to the finance of the development.' 46 Mr Plum agreed the first point was correct, but not the second. He said the third point is not totally correct because the borrowings were to be serviced by the shareholders personally, not by the company. Mr Plum denied the accuracy of the fourth point. 47 Mr Plum firmly denied that Mr Quirk ever said to him that if, in due course, he made an application for construction finance, 'there will be no guarantee of that being approved'. Mr Plum agreed that he knew Mr Quirk only dealt in loans below $500,000 and had no power of approval; he could only refer applications to others. 48 Mr Dowdy took Mr Plum to his decision to demolish the Travers Street houses. The evidence went on: 'Why were you planning in late 1997 to demolish the houses when the bank had declined a small loan of $130,000? --- Because I still believed that it was going to be forthcoming. Sitting here in 2005, I can understand what you are saying. You would accept, would you not, with the benefit hindsight, that it was completely unreasonable for you to think that the bank would continue to lend you a development loan when it had refused a loan for $130,000? --- In hindsight. Well you put yourself before the court as an intelligent man and a capable business man, do you? --- Yes. Why would you have taken such an unreasonable view? Can you help us with that, to still continue to think that the bank would advance a sum which must be in the millions of dollars when it had refused a loan of 130,000? --- But you must agree with me, you learn a lot in life, don't you? And that's what I have learned. But why would you continue to think that, can you give us any inkling as to why you would continue to think the bank would lend you a large sum of money, in the millions of dollars, when it had just a month or two before declined a loan of 130,000, can you explain that? --- I just go from what I was thinking of at the time and what I knew and what I believed. As we both agree hindsight is a great thing. Anyway whatever you may have been planning, what I am putting to you is that you never told Mr Quirk that? --- I did.' 49 Mr Plum explained his delay, till April 1998, in making a formal application for development finance by saying he was busy with tradesmen, procuring materials and the like. His evidence went on: 'What was the point of making a development loan application if you were guaranteed the monies in any event? --- Well, you'd still have to apply for it, wouldn't you? Why do you say that you would have to apply for it? --- Well, for the formal documents and that of it. How else are you going to get it? There's got to be paper work in the Bank. According to your version of events, from 28 February 1997 you were entitled to require from the Bank a loan of any amount that you needed to fund the development according to whatever plans you'd put together. That's right, isn't it? --- No. You know and I know that you've still got to make an application. But, as you've said, you had a guarantee of whatever funding was required to make your development come good from the State Bank. Isn't that your case? --- I didn't have a written guarantee. I believe from the impression from my first meeting that it was forthcoming.' 50 Mr Plum denied he had made up his case in order to defeat the Commonwealth Bank's claim against him for his residual indebtedness. He did agree he had made no complaint about CSB's conduct until he received a letter of demand in 2001. He had solicitors advising him in 1998. 51 In re-examination, Mr Plum told Mr Wilson that he saw no relationship between CSB's refusal to finance the purchase of 50 Travers Street and the development loan. The effect of adding 50 Travers Street to the site would have been to enhance the development either by adding four extra units or making the original 30 units a little larger. (iii) Mr Frost's evidence 52 Mr Frost left the bank in December 1999. He was declared redundant. He recalled being introduced to Mr Plum by Mr Quirk in April or May 1998. At the first meeting, according to Mr Frost, Mr Plum said to him words to the following effect: 'I have bought four old homes at Crampton Street and Travers Street Wagga through the Bank and I want to develop the land and build some townhouses on it. I've come in to finalise the second stage of the loan.' 53 Mr Frost said he told Mr Plum it is 'a little bit more difficult than that' and outlined the basic requirements. In his evidence, Mr Frost went on to detail the steps he took on Mr Plum's behalf. However, he made it clear that he never thought the application for development finance would succeed; it did not comply with the bank's lending guidelines. Mr Frost said he told Mr Quirk, at the time, that the purchase loan should never have been approved. In his evidence, he advanced an opinion about that approval: 'I continue to maintain the opinion that it was bad banking practice for the Bank to have approved the initial investment loan to Mr Plum for the purchase of the four old houses at Crompton Street and Travers Street, Wagga Wagga. Had Mr Plum initially approached me for a loan to purchase the four houses in Wagga Wagga and develop them as townhouses, I would have considered the proposal in total. In particular, I would have said to Mr Plum words to the effect "The Bank needs to look at what you want to do with the properties and how you propose to finance the total project". In my opinion, the Bank should have investigated Mr Plum's proposal more fully rather than simply approving it initially on an investment housing basis without regard to his construction plans. According to the procedures which operated in the Wagga Wagga branch of the Bank at the time, had Mr Plum disclosed to Mr Mick Quirk in the first place that he intended to purchase the land for subsequent unit development, the matter should have come directly to my section of the Bank as it was a development proposal and therefore not a matter for the Small Business area of the Bank. In my opinion at the time the Bank approved in 1997 the home loan application by Mr Bill Plum for the purchase of the four old houses at Crampton Street and Travers Street Wagga, there was little or no prospect that the Bank would subsequently approve a construction loan application for the building of townhouses on that land in the absence of a significant change of circumstances.' Mr Frost gave reasons for that opinion. 54 Mr Frost also opined that, if Mr Plum had lodged an initial application for sufficient funding to cover both the purchase of the four properties and their development, CSB would have rejected that application because of the inadequacy of the proposed security and the serviceability arrangements and because Mr Plum did not have a history of successfully completing a project of this size. 55 In an affidavit in reply to Mr Quirk, Mr Frost said: 'if I had occupied Mr Quirk's position in the bank and a client had said to me the words attributed to Mr Plum therein, I would have regarded it as prudent conduct to discuss the application with a person experienced in development loans. This is particularly the case given the fact that:- • the development was to be long term; • Mr Plum was borrowing 100% of the purchase price of the development property.' 56 Mr Dowdy cross-examined Mr Frost about some peripheral matters but did not challenge any of the evidence I have mentioned. (iv) Mr Traynor's evidence 57 Mr Traynor, also, has now left the bank's employment. He recalled Mr Frost's involvement in seeking development finance for Mr Plum. Mr Traynor said that, at the time, he saw Mr Frost's analysis of the application. He almost immediately formed the view 'that there was no way the second loan application could have been approved by the bank'. He gave reasons for that view. Mr Traynor said: 'Should Mr Plum's matter [have] been handed over to me in the first place in 1997, I would have required a feasibility study to be undertaken of the total project including building costs and a marketing plan. It is likely that the bank would also have required the input of the credit assessment area, valuers, a building consultancy firm and an experienced project manager. In my opinion, had Mr Plum's loan application been put up as a total package for the purchase of the four home sites and the construction of the townhouses on it, the bank would not have approved his application. Mr Plum did not meet the bank's security or serviceability criteria. More importantly, Mr Plum did not have a track record of having successfully completed development of this size. No feasibility study had been carried out and the matter required a lot more work before it could be put up to the bank for approval.' 58 In an affidavit in reply, Mr Traynor said the first knowledge he had about demolition of the houses was from Mr Quirk; he was not involved in Mr Plum's finance application and he had no conversation with Alan Plum about the loan, the project or demolition of the houses. 59 In cross-examination, Mr Traynor agreed he was a friend of Alan Plum but he denied Mr Quirk's claim that he [Mr Traynor] told Mr Quirk about the demolition, based on what Alan Plum had told him. 60 Mr Dowdy did not challenge any of the evidence given by Mr Traynor concerning the manner in which Mr Plum's application had been handled. (v) Mr Quirk's oral evidence 61 Mr Wilson commenced his cross-examination of Mr Quirk by obtaining his agreement that, in the year to 30 June 1998, he received a CSB performance bonus. Mr Quirk agreed that, in order to qualify for the bonus, he had to satisfy a variety of criteria, including being responsible for writing loans over a certain amount (apparently $12 million) in the year. However, he said, housing loans carried less weight because the interest rate was lower than for business loans. Mr Quirk agreed that, in Wagga in 1997, $500,000 was a large housing loan. Mr Quirk agreed he had won some non-monetary awards in 1997 and 1998 for his performance in procuring loans. 62 Mr Wilson asked Mr Quirk some questions about proper banking practice. The evidence was as follows: 'What I'm suggesting to you is that in 1997, if a client came to you and said, I want to buy some land, get my approvals in 12 months and build some units on it, it would be contrary to banking process and what you had been taught and learnt to put up a home loan and disregard the construction component, correct? --- No, no, until we know what's the construction component, all we're looking at is one loan for the purchase of land. We don't know when or where the construction loan that you're referring to is coming through. So all we're doing is looking at a holding situation. But if it was apparent to you that the total cost of the land and construction component was significantly more than $500,000, you were required to pass it to the larger business banking section? --- No, no. What I'm suggesting to you is that in 1997, if a client came to you and said I want to buy land for $500,000 and build about 30 units on the land and it was apparent to you that the total project was going to be in the order of two or three million dollars and the timeframe was within the next year, you would have passed it and should have passed it to Mr Frost and Mr Traynor, correct? --- If we were aware of the amounts that you're talking about and the timeframes that you're talking about, it would have made sense to refer it to them. Yes, thank you. Now, had Mr Plum in his first meeting with you on 28 February 1997 said to you that he had plans to develop the block, get his approvals by March 1998 and build 25 units on the site, the position was this, isn't it, that you should have referred it to Mr Frost and Mr Traynor? --- No, because at the end of the day, we didn't have any timeframe or any amounts so all we were assessing at the time was whether the client could service the holding costs.' 63 Mr Quirk agreed that, if a client told him he intended to buy land, get approvals and build in twelve months, and was looking to the bank for construction finance, it would be standard practice to tell the client he has no guarantee of getting a construction loan until he later applies for it. 64 Mr Wilson referred Mr Quirk to a document discovered by the bank in the course of this litigation. The document became exhibit 5. It included seven sheets, some of which were handwritten. Mr Quirk acknowledged that he wrote the second and third sheets. He explained the notes they contained. His explanation confirmed he had contemplated, at the time, that Mr Plum might pay as much as $550,000 for the three properties due to be auctioned on 7 March 1997. 65 The third sheet contained the following material: '450 - 550 K P/P 3 tenanted houses $300 per week = Plans for development March 1998 (6 - 8 - ) $350,000

• 25 units Crampton/Travers/ $500,000 - 80% L/S (400,000) 66% 300,000' 66 In relation to this material, Mr Quirk gave the following evidence: 'The reference to March 1998, did you understand to be development to start in March 1998 after approvals had been obtained? --- To start planning for development March 1998. Planning for development March 1998? --- This is my diary notes before the interview I was - - - Please I am not asking you that at this stage. I'm asking you what is contemplated by the entry March 1998 and I am suggesting to you it is development to commence in March 1998 after approvals had been obtained by that time. That's a possible interpretation of your entries, correct? --- It is a possible. Thank you. Twenty five units, that's a reference to the size of the development, correct? --- Yes.' 67 Mr Quirk was asked about the history of this document. He said the handwritten material was his note of information that had been given to him by Mr Hately, before his first meeting with Mr Plum. He claimed Mr Hately had told him the estimated purchase price and the intended date and size of the development. His evidence went on: 'And having been told, according to your evidence, by Mr Hately, that Plum had plans for development in March 1998, didn't it strike you as strange that what, according to your evidence, he said was that he was planning to hold on to the properties until the bridge was built. Didn't it strike you as strange that Hately told you one thing and Plum had told you another. Didn't you cross examine him about that? --- After talking to Mr Plum there was no firm - anything about the deal, who was going into it, how much money was required, there was never any mention of a dollar figure as far as what the development was, whether there was any pre-sales, who was going to do the - whether a QS had been done, all those sort of things. None of those had been addressed. Mr Quirk, having been told by Hately on your evidence that Plum had plans for development in March 1998 and proposed 25 units, didn't you take this up with him in your meeting with him? --- Look, at the end of the day we just basically took the application, went through the process of what he was looking to do and submitted the application. We went through the time frame, as I've said in my affidavit that he was looking to buy those three properties but as it transpired things were added to it all the time. There was other properties purchased, there wasn't real - costings - - - Mr Quirk you have no recollection of what was said in this conversation with Plum in 28 February 1997, do you? --- As it's, sitting in here I have. Sitting there in the witness box apart from the documentation in front of you, you don't recall at all what was said in that meeting, do you, analysing your memory? --- Yes. You don't remember anything do you? --- I do. You do. Well, do you recall saying to Plum at that meeting, Mr Hately tells me you're going to build 25 units in about a year. What's made you change your mind so that you're now thinking of holding on to it until the build the bridge. Did any such discussion occur? --- No.' 68 Mr Quirk was questioned as to whether he asked Mr Plum anything about the development. He said: 'We talked in general terms. The main focus obviously from Mr Plum is it was a week before the auction and he had to get the feel to go to auction.' 69 Mr Quirk denied he was told, even in a general way, that Mr Plum intended to go ahead with the development within twelve months. He said: 'No, all I was being told was it was to acquire the land for future development'. 70 Mr Quirk agreed with Mr Wilson that his note contained no reference to the new bridge or to putting together a development company to finance the construction of the development. 71 Mr Wilson suggested to Mr Quirk that, by 17 July 1997, he had known for some time that Mr Plum intended to build units on the land. He replied: 'We always knew that he was intending to build units on the land. It was a block that he - that's what [he] said from day one. It was a property that he intended to develop in the future. Unfortunately, we didn't know an amount, any of the details, time frames, cash contribution, other partners, amounts that they would contribute, anything like that.' 72 Mr Quirk went on to agree with Mr Wilson's suggestion that Mr Plum had told him in February 1997 that 'he planned to build about 30 or 25' units, but Mr Quirk added 'he didn't have a time frame'. Later in his evidence, Mr Quirk said that, at the initial meeting in February, Mr Plum talked about '20 to 30' units. 73 Mr Wilson referred to a memorandum by Mr Quirk's immediate superior, Stephen Harrington, in support of the first loan application. It was dated 6 March 1997 and addressed to John Ginnane, a credit administrator in CSB's Sydney office. Mr Quirk agreed he had supplied the information contained in that memorandum. It described the purpose of the proposed loan in this way: 'The aim of the asset acquisition is to hold the properties for 12 months attracting rental to gauge what valuations do in the area following on from the opening of the new bridge and neighbouring residential development.' The memorandum made no reference to an intention to commence building within 12 months or to any plan to build 20-30 units, or any other number of units. 74 Towards the end of Mr Quirk's cross-examination, the following exchange occurred: 'And finally, Mr Quirk, do you agree that in the course of your duties in February 1997 you should have said to Mr Plum, Bill the bank can't guarantee any construction finance for your development? --- That's a standard, I do, I did. Did you say that to him in February '97? --- I did in all regards, yes. Did you say that to him in February 1997? --- All I basically said was we didn't know an amount and all we could do was address the initial application. But did you say to him words such as, Bill, the bank can't guarantee construction finance, did you say that to him in February 1997, those words, or words such as that? --- Yes. You did? --- Yes. That's the first time you have ever said that, when you said that in the witness box, isn't it? --- No.' Mr Quirk had not made that claim in his affidavit or earlier in his oral evidence. 75 In answer to a question from me, Mr Quirk said he saw Mr Harrington's memorandum of 6 March 1997, at about the time it was sent. I referred Mr Quirk to what was contained in the memorandum in relation to the purpose of the acquisition. Mr Quirk agreed this was inconsistent with the information that he had obtained, he said from Mr Hately, about 20 to 25 units in March 1998. He said he did not put to Mr Plum the information he had obtained from Mr Hately; there was nothing specific, 'all we talked about was a future development'. 76 Mr Quirk was unable to explain why he framed the loan application as one for $500,000 plus $20,000 expenses when he knew both of the estimate of $450,000 to $550,000 in the information that was said to emanate from Mr Hately and Mr Plum's expectation that the purchase price itself would be about $520,000. (vi) Mr Harrington 77 Mr Harrington made an affidavit to which he annexed his memorandum of 6 March 1997. In oral evidence, he said this document accurately reflected his discussions with Mr Quirk about Mr Plum's application. Although he could not remember the terms of those discussions, he was satisfied his memorandum did not omit anything of significance. (vii) Mr Creighton 78 Reginald Duncan Creighton is a retired officer of the National Australia Bank ('NAB'). During a career with that bank spanning 42 years, he held a variety of positions, including positions in which he was required to consider loan proposals recommended by NAB branch managers. Immediately before his retirement, he was NAB's senior credit controller for New South Wales and the Australian Capital Territory. 79 Mr Dowdy read an affidavit made by Mr Creighton in the capacity of expert witness. No objection was taken to the affidavit. Had an objection been taken, I would have rejected much of the affidavit; not because of any difficulty about Mr Creighton's expert qualifications, which are impressive, but because the drafter of the affidavit took the course of setting up the witness as a commentator on the facts of the case. As long ago as 1990, in Arnotts Limited v Trade Practices Commission (1989) 24 FCR 313 a Full Court condemned this practice. At 353, the Full Court said: 'The use of an expert witness to filter the facts, asking the witness to hear or read all the evidence and then express factual conclusions, is a practice which we have come across only in Pt IV litigation. We do not know its origin; such evidence was rejected in an early Pt IV decision: Trade Practices Commission v Ansett Transport Industries (Operations) Pty Ltd (1978) 32 FLR 305 at 329. Whatever its origin, the practice is illegitimate. It must be stopped. Part IV litigation is usually complex and expensive enough. It does not need this embellishment.' The pernicious practice seems now to have spread beyond Part IV of the TP Act. 80 I propose to pay no regard to Mr Creighton's views about the merits of Mr Quirk's factual evidence or the reasonableness of his conduct and thoughts. Those are not matters about which evidence ought to have been tendered. 81 Part of Mr Creighton's affidavit is admissible and helpful; in particular, his comments upon the loan applications made by Mr Plum to CSB. Mr Creighton analysed these applications and commented about their compliance or otherwise with the CSB lending criteria and good banking practice. Importantly, in para 13 of his affidavit, Mr Creighton said, in relation to the application for development finance: 'Unfortunately, Mr Plum lost the ability to re-finance his debt with the Bank when he demolished the building improvements on the Bank's securities, thereby destroying the safe LVR [loan to security valuation ratio] of 61% and also the debt serviceability through the loss of rental income. Had Mr Plum not demolished the buildings on the Bank's securities, I believe he could have, if he had wished to, successfully re-financed his debt with a number of other lenders following his declined application for a development loan with the Commonwealth Bank of Australia.' Mr Wilson did not cross-examine Mr Creighton about that paragraph. Submissions (i) Mr Plum 82 In written submissions supplied on behalf of Mr Plum, Mr Wilson summarised the competing versions of the 28 February 1997 conversation and focused on the third sheet of Mr Quirk's handwritten notes: see para 65 above. Mr Wilson said: 'The information contained in this handwritten document prepared by Quirk on 28 February 1997 is consistent with Plum's version of the 28 February 1997 conversation but is significantly different from Quirk's version of that conversation. In cross examination Quirk was unable to explain why he did not question Plum about his apparent change of mind concerning the timeframe of the development - it having changed from being one where there were plans for development in March 1998 after approvals had been obtained (as suggested by Hately) to one where the properties would be held for at least 12 months and the impact of the opening of the new bridge would be considered on the property market. It was suggested to Quirk in cross examination that the handwritten document prepared by him on 28 February 1997 was in fact a note of the conversation he had with Plum on that date. The respondent [Mr Plum] submits that this is the case. Even if Quirk's handwritten document of 28 February 1997 is a note of his meeting with Hately on that day, that note corroborates Plum's version of his meeting with Quirk. Quirk's evidence of the 28 February 1997 meeting was unsatisfactory. By comparison Plum impressed as a witness of truth and his version is to be preferred.' 83 Mr Wilson submitted that, as Mr Harrington had confirmed that the memorandum of 6 March 1997 accurately reflected the information conveyed to him by Mr Quirk, concerning his meeting with Mr Plum, 'it can only be concluded that Quirk did not accurately convey to Harrington what was said in his meeting with Plum'. 84 The submission went on: 'It was suggested to Quirk that he had deliberately misrepresented to Harrington the content of his meeting with Plum in order to do what was necessary to put together a loan application which was likely to be approved by the bank. Quirk had been a successful bank manager whose entitlement to bonuses depended amongst other things upon the level of loans he wrote. He had, in the 1997-98 financial year for a number of months picked up an award from the bank for his level of loans and it would appear that Quirk's motivation for misrepresenting to Harrington the content of his meeting with Plum was a desire to ensure that the loan application would succeed. As a result of his meeting with Quirk on 28 February 1997 Plum believed that construction loan finance for the building of the 30 units on the property was guaranteed even though ultimate approval rested with another section of the bank. Plum continued to maintain this belief until he was ultimately advised by Mr Geoff Frost of the bank that his construction loan application had been rejected in June or July 1998.' 85 Mr Wilson referred to Mr Quirk's concession that, if he knew a client was buying land with the intention of building units and was looking to the bank for finance, it would be good practice for him to warn the client that there was no guarantee of a construction loan. Mr Wilson emphasised that it was not until Mr Quirk's final answer in cross-examination that he claimed to have given such a warning to Mr Plum on 28 February 1997. 86 In relation to the dispute between Mr Plum and Mr Quirk as to whether they had a conversation about the prospective demolition of the Travers Street houses, Mr Wilson submitted: 'Quirk denies that any such conversation occurred with Plum on the topic of the demolition of the houses. Plum's evidence of this conversation is to be preferred. According to Plum he was in the habit of dropping into the bank and keeping Quirk up to date with developments with his project. Quirk accepted that he made a point of making clients feel that he was accessible and could drop in and say hello. There is good reason why Quirk would not recall the conversation. At the time it occurred, Quirk's substantial involvement with Plum had ended and in his mind the topic of construction finance was a matter for the larger business banking section of the bank. While Quirk may have regarded this as a casual conversation of little moment, it was a matter of much significance for Plum. He relied upon Quirk's reply as consent to demolish the houses. 87 Mr Wilson summarised his factual contentions by saying: 'Plum attended the auction on 7 March 1997 and purchased the property for $525,000 in the belief that construction loan approval had been given and that the granting of it was a mere formality. Subsequently, Plum purchased 54 Travers Street, Wagga and demolished the houses on the combined site in the belief that the granting of construction loan finance was a mere formality. Had Quirk at his first meeting with Plum on 28 February 1997 said that there can be no guarantees the bank will approve construction loan finance, Plum would not have gone ahead and bought the properties at auction. Furthermore, had Quirk followed the protocol in the bank at Wagga at the time which required that Plum's plans to buy the property be considered in the context of his plan to obtain approvals within 12 months and thereafter build 30 units on the site in a staged development, finance would not have been granted for the purchase of the property as insufficient time was available to fully consider the proposal.' 88 Mr Wilson referred to authorities dealing with the circumstances under which silence may be regarded as constituting, or being a component of, misleading or deceptive conduct. He then referred to Mr Plum's version of the 28 February 1997 conversation, according to which Mr Quirk advised Mr Plum to take out a housing loan to buy the properties and told him he could 'later apply for a development loan to finance the actual construction of the town houses'. Mr Wilson went on: 'The explanation and advice given by Quirk to Plum on how he could fund the project was incomplete and inadequate. It did not convey the information Plum reasonably expected to receive on this topic. Quirk did not tell Plum that there can be no guarantee of construction finance and that each application is to be considered on its merits at the time of application. Further, Quirk did not tell Plum that according to bank procedures the application to buy the land should be considered in the context of the proposal to build 30 units on it and should be sent to the larger business banking section of the bank. The failure by Quirk to disclose this further information to Plum was misleading and deceptive because the discussion which in fact occurred gave the false impression to Plum that: (a) according to Colonial State Bank procedures it was normal and appropriate that the housing loan and the construction loan be considered separately from his plans to obtain development consent within 12 months and thereafter build [the] 30 units over two-three years, (b) as Quirk had suggested an initial housing loan and a later development loan as a way of funding the project, there would be no problem in obtaining the development loan, and (c) that if the housing loan was approved, the development loan would also be approved in due course.' 89 Mr Wilson made a separate complaint about Mr Quirk's reaction to Mr Plum's claimed statement to him: 'I am looking for an interest only loan on the basis that I will pay off the debt from the profits of the development'. Mr Wilson commented: 'On any view of the evidence, the Colonial State Bank would not have permitted repayment of the loan from the profits of the development. But, Quirk did not inform Plum of this and his failure to correct this misapprehension on Plum's part amounted to misleading and deceptive conduct.' 90 I do not think there is anything in this last point. If Mr Plum said what he claims to have said, I doubt that he would have been using the term 'profits of the development' in a technical sense; that is, the surplus of receipts after payment of all outgoings. I think he would have meant, and been understood to have meant, the proceeds of sale of units in the development. That would have been the usual situation. 91 In relation to the negligence claim, Mr Wilson argued that CSB had a duty of care to Mr Plum. During the course of his cross-examination, Mr Quirk gave this evidence: 'When you met Mr Plum in February of 1998 and you had a discussion with him, you knew that he was relying on what you told him? --- No, I didn't know his background as far as what his business acumen was and his understanding of financial products etcetera. But you were suggesting to him that he apply for a home loan to buy the blocks of land and the houses, and you knew that he was relying on what you said to him in relation to the bank's products and how to go about acquiring the site and achieving his ends, correct? --- Yes.' 92 Building on that foundation, Mr Wilson submitted: 'Quirk's advice that Plum should take out a housing loan and apply for a development loan later to finance the actual construction was given on a topic in which Quirk had expertise. The occasion was not a casual one but was one to which liability ought apply (see: James v ANZ Bank (1985-86) 64 ALR 347 at 384 per Toohey J; San Sebastian Pty Ltd v The Minister (1986) 162 CLR 340 at 371-2 per Brennan J). … By advising Plum that he should take out a housing loan to buy the properties and later apply for a development loan to finance the actual construction of the town houses, Quirk led him to believe there would be no problem in obtaining development loan approval. Plum was led to believe that if the housing loan was approved the development loan would also be approved in due course. Quirk was not in a position to state one way or the other as to Plum's prospects of ultimately obtaining development loan approval and should have explicitly qualified his recommendation. Further, according to the practice in the bank, Plum's proposal to buy the property should have been considered in the context of his plan to obtain development consent within 12 months and build the 30 units thereafter and sent to the larger business banking section of the bank. Quirk did not follow this practice because he advised Plum to apply for an investment home loan in the first instance. Quirk was therefore careless in failing to apply the Colonial State Bank protocol to Plum's application for finance and in inducing him to believe that development loan finance would be granted in due course.' 93 Mr Wilson summarised Mr Plum's claim by saying: 'The bank through its manager Quirk and Quirk on his own behalf have engaged in misleading and deceptive conduct in breach of s52 of the Act. The bank through its manager Quirk gave careless advice to Plum at the meeting on 28 February 1997. In consequence of the misleading and deceptive conduct of the bank and Quirk and the bank's negligent advice, Plum purchased the properties and demolished the homes constructed thereon. In consequence of this he has suffered damage.' (ii) The bank 94 Mr Dowdy prepared the Commonwealth Bank's submissions. He commenced by disputing that CSB had owed a duty of care to Mr Plum. He cited several authorities. 95 Mr Dowdy commented that it 'appears to be suggested by [Mr Plum] that in some way [CSB's] alleged failure to follow its own in-house rules or procedures is in some way relevant to the claim in negligence'. Mr Dowdy cited the comment of Sheller JA, in Marzouk v Westpac Banking Corporation (New South Wales Court of Appeal, 14 October 1992, unreported) at 14-15, that a bank's procedures are designed for the protection of the relevant bank rather than its customers. Mr Dowdy said: 'Implicit in Mr Plum's case is that Mr Quirk actually had to state the obvious to the effect that there would be no guarantee any future development loan would be granted. But nothing in the circumstances called for this obvious statement to be made, particularly when the Bank was not Mr Plum's general banker and there was no specificity at all about what such development application would comprise.' 96 Mr Dowdy submitted that the 'high point of Mr Plum's case must be found in paragraphs 13-14 of his affidavit of 16 March 2004', set out at para 18 above. However, Mr Dowdy submitted, Mr Plum conceded in cross-examination: first, that the only amount of money he was seeking from CSB at this meeting was $520,000 to buy the properties; and, second, that he knew he had not left CSB much time to get a formal approval before the auction. Mr Dowdy went on: 'In these circumstances it would be unreasonable to find that a duty of care was called into existence and imposed by law upon both Mr Quirk and the Bank. All Mr Quirk said according to paragraph 14 of Mr Plum's affidavit was that Mr Plum could apply for a type of loan sufficient for the purposes of the auction and that he could later apply for a development loan, something that Mr Plum knew at the time in any event: TP65.2-4. In other words, Mr Quirk made a true and obvious statement which Mr Plum realised and accepted as the truth. Such a situation does not create a duty of care upon the Bank because neither Mr Quirk nor the Bank knew or should have known that Mr Plum was relying upon the Bank as an adviser. Further, it was plainly not reasonable for Mr Plum to rely upon the statement by Mr Quirk alleged in paragraph 14 as thereafter guaranteeing the grant of a development loan from the Bank; TP 63.10-26 and TP 90.18-20.' 97 The references to 'TP' in this passage are, of course, references to transcript. The passage at page 65 of the transcript is quoted at para 42 above. I think it supports Mr Dowdy's submission that Mr Plum was aware, on 28 February 1997, that he could later apply for a development loan. The passages at pages 63 and 90 of the transcript contain statements by Mr Plum that he believed that, once CSB approved his application for finance to purchase the properties, he had a guarantee it would provide development finance. 98 Mr Dowdy submitted that CSB would not, in any event, be vicariously liable for the actions of Mr Quirk. Mr Dowdy said 'the case run by Mr Plum is in effect that Mr Quirk was on a frolic of his own'; if Mr Quirk was guilty of negligent breach of care, he was not acting in the course of his employment. 99 Finally, in relation to negligence, Mr Dowdy submitted that 'the real and actual cause of any loss suffered by Mr Plum was his own independent and unreasonable decision' to demolish the houses at 52 and 54 Travers Street, after having been told that CSB would not lend him even a further $130,000. 100 In relation to Mr Plum's claim of misleading or deceptive conduct, Mr Dowdy submitted that the critical part of Mr Quirk's response to Mr Plum on 28 February 1997, on Mr Plum's version of the conversation, was that Mr Plum could later apply for a development loan. Mr Dowdy argued that 'the verb "to apply" inherently carries with it as much the possibility of refusal as acceptance'. He said: 'Mr Quirk's response could not reasonably or objectively create any impression that a development loan was guaranteed or even encouraged'. Mr Dowdy submitted it is not deceptive or misleading conduct, within the meaning of s 52 of the TP Act, merely to make one comment and not another which might be made; unless there are circumstances which represent, expressly or by implication, that the other comment would, if relevant, have been made. Mr Dowdy referred to relevant authorities. 101 In relation to this cause of action, also, Mr Dowdy submitted, first, that the effective cause of loss was Mr Plum's decision to demolish the houses and, second, that, if Mr Quirk committed a breach of s 52 of the TP Act, CSB was not vicariously liable for that breach. (ii) Mr Quirk 102 At some time after the conclusion of the evidence, Mr Quirk obtained separate legal representation. His new solicitor, Mr S Atkins, filed submissions on his behalf. 103 Mr Atkins conceded there was inconsistency between Mr Quirk's affidavit and oral evidence. He contended the 'inconsistency is such that this was clearly a witness who became confused and lost his way in the course of giving his evidence and Mr Quirk's evidence must be construed in that light'. 104 Mr Atkins went on: 'Mr Quirk's evidence and actions are explicable in circumstances where, from 28 February 1997, he proceeded on the understanding that no reasonable person could have thought that they could obtain a loan or a guarantee of a loan to finance a development, the cost of which could be some millions of dollars, on the scanty and general information provided by Mr Plum as to the nature of the development in their initial meeting and where no application had been made for any finance except the initial finance to purchase the properties. It is submitted that where Mr Quirk's evidence conflicts with the evidence of Mr Plum, the evidence of Mr Quirk should be preferred.' 105 Mr Atkins submitted that, despite inconsistencies between Mr Quirk's affidavit and oral evidence, 'there is no basis for any finding against the credit of Mr Quirk'. He then referred to the evidence, in some detail, in an endeavour to establish that Mr Quirk's oral evidence may be reconciled with what he told Mr Harrington and with his affidavit evidence. Mr Atkins concluded this section of his submission by defending Mr Quirk's claim that on 28 February 1997, he had told Mr Plum 'the bank can't guarantee construction finance'. Mr Atkins argued: 'Taken in its context this is not a belated assertion by Mr Quirk that he said to Mr Plum in February 1997 the explicit words "the Bank can't guarantee construction finance" but rather is consistent with Mr Quirk's evidence that he had made clear to Mr Plum that Mr Plum had left the Bank very little time to assess the application for a loan to purchase the properties at auction, that there was no information available from Mr Plum at that stage which could found an application to the Bank for development finance and that as such only the application for a loan to purchase the properties could go forward and any application for development finance would have to be attempted at a later stage.' 106 Mr Atkins put submissions regarding the July 1997 finance application (for $130,000) and the circumstances of Mr Quirk learning about demolition of the houses. 107 Finally, Mr Atkins dealt with Mr Quirk's bonus criteria. He said: 'Mr Quirk's uncontroverted evidence was that his performance in writing loans was only one of many factors taken into account in the award of a bonus and not necessarily the major factor at Colonial State Bank where "insurance was a major focus" … Further, the loan granted to Mr Plum in March 1997 was considered by the Bank to be in the same class as a residential housing loan and as such was "on a lower margin, lower interest rate and it didn't carry as much weight as a business loan, overdrafts, investment property, commercial property" in respect of bonus assessment … There is no evidence to contradict Mr Quirk's assertion at paragraph 69 of his affidavit sworn 30 June 2004 that "any possibility of bonus had no effect at all in my carrying out my duties in my position in Wagga with the bank during 1997 and 1998".' (transcript references omitted) (iv) Mr Plum in reply 108 In submissions in reply, Mr Wilson referred to Tepko Pty Ltd v Water Board (2001) 206 CLR 1 ('Tepko'), a case of alleged negligent misrepresentation. At 16-17 Gleeson CJ, Gummow and Hayne JJ discussed the circumstances that give rise to a duty of care in relation to provision of information or advice. Their Honours applied two points made by Barwick CJ in Mutual Life Citizens Assurance Co Ltd v Evatt (1968) 122 CLR 556 ('Evatt'): (i) 'the speaker must realise or the circumstances must be such that he ought to have realised that the recipient intends to act upon the information or advice in respect of his property or of himself in connection with some matter of business or serious consequence'; and (ii) 'the circumstances must be such that it is reasonable in all the circumstances for the recipient to seek, or to accept, and to rely upon the utterance of the speaker'. 109 Mr Wilson then referred to the passage in Mr Quirk's cross-examination quoted at para 91 above. Mr Wilson submitted: 'It may therefore be concluded that Quirk knew that Plum was relying upon his advice and it was reasonable in the circumstances for Plum to rely upon Quirk's advice.' 110 Mr Wilson went on: 'The Bank through Quirk was negligent in advising Plum that he should take out a housing loan and apply for a development loan later to finance the actual construction. Quirk had no reasonable basis for making this statement. According to Mr Geoffrey Charles Frost, Quirk should not have lodged the housing loan application at all on behalf of Plum. As Plum had disclosed that he wished to purchase the land in order to develop it as town houses, the proposal should have been considered in total and therefore passed to the larger business Banking section of the Commonwealth Bank rather than being retained by Mr Quirk in the small business area of the Bank.' 111 Mr Wilson also submitted: 'Had Quirk advised Plum that his application to purchase the land ought be considered in the context of his proposal to develop the town houses and that it ought be submitted to the larger business Banking section of the Bank, Plum would have realised first, that the loan could not have been processed in the small time available prior to the auction and second, that he could not be guaranteed development loan approval. Plum was therefore denied the informed choice of passing up the land because no one could say in the time available whether he would be likely to obtain development loan approval.' 112 Mr Wilson conceded that, although Mr Plum believed that, on 28 February 1997, a development loan had been guaranteed, an objective or reasonable observer would not think that had happened. He said: 'Plum's case in misleading and deceptive conduct against the Bank … is that Quirk on 28 February 1997 gave the false impression that it was appropriate to apply for a housing loan in the first instance and that there was some prospect of development loan approval being granted in the future - because otherwise he would not have suggested that Plum apply later for a development loan. It was Quirk's failure to correct this false impression by failing to advise Plum that development loan approval could not be predicted and that the housing loan ought properly be considered in the context of his construction plans by the larger business Banking area of the Bank which resulted in the loss. Had Quirk advised Plum that construction loan approval could not be predicted and that his application ought properly be considered by the larger business area of the Bank, Plum would not have proceeded to purchase the land.' Conclusions (i) The conversation of 28 February 1997 113 As I said earlier, the most important factual issue in this case concerns the content of the conversation of 28 February 1997 between Mr Plum and Mr Quirk. Mr Plum took no contemporaneous note of the conversation; neither, according to Mr Quirk's evidence, did he. 114 I am sceptical of the ability of any witness, however intelligent, honest and careful, accurately to recall the detail of any unrecorded conversation that occurred eight years earlier. Faced with conflicting versions of such a conversation, a tribunal of fact can only assess the probabilities about the content of such a conversation by reference to the surrounding circumstances, but taking into account the tribunal's general impression of the personalities, character and credit-worthiness of the relevant witnesses. 115 Taking this course, I have concluded that I should prefer Mr Plum's account of the conversation to that of Mr Quirk. I do not suggest that Mr Plum has recounted the exact words used by him and Mr Quirk. However, I think Mr Plum's evidence is likely more accurately to convey the substance and purport of the conversation, than that of Mr Quirk. 116 The meeting of 28 February 1997 was more significant to Mr Plum than it was to Mr Quirk. Mr Plum was contemplating a project substantially larger than any he had previously undertaken. Although he held real estate assets, he lacked the necessary cash resources to carry out the development. He needed to borrow the whole of the money that was necessary even to purchase the land. Without generous financial support, the project was doomed from the start. From Mr Plum's point of view, much turned on this interview. From Mr Quirk's point of view, this was just another loan application interview. In this context, the detail of the conversation is likely to have been more memorable to Mr Plum than to Mr Quirk. 117 Mr Plum's urgent need, on 28 February 1997, was to secure a promise from CSB of the funding necessary for him to bid at the auction due to be held seven days later. Mr Plum understood this was the only formal loan approval he could immediately obtain. On 28 February 1997, Mr Plum was in no position to submit a detailed development loan application to CSB. It would have been premature for him to have done so. He might be outbid at the auction; building plans and costings had yet to be prepared. However, Mr Plum knew the total area of the site. He had recently built some residential units in Wagga Wagga. So I accept he had a rough idea of the number of units he could build on the site and their approximate cost and yield. It would have been natural for Mr Plum to have explained his proposal to Mr Quirk and to have wished to receive assurance that a competently prepared application for development finance would have a reasonable prospect of approval; or, at least, that there was no apparent reason why it would be refused. 118 The issue in regard to the conversation, to my mind, is whether Mr Quirk's response to Mr Plum, spoken and unspoken, amounted to such an assurance. 119 Mr Plum struck me as an honest and straight-forward man, perhaps a little naďve. Although he had had some previous business experience, I do not think that, in 1997, he could properly have been described as a sophisticated businessman. In one respect, at least, he was imprudent. I refer to his action in demolishing the two Travers Street houses before making his application for development finance. I agree with Mr Wilson that this action may be seen as evidence of his confidence that a development loan application would be approved (and, perhaps, therefore as some corroboration of his version of the 28 February 1997 conversation). However, the demolition deprived Mr Plum of much-needed income. A prudent businessman would have sought to keep the houses tenanted until immediately before he was ready to commence construction of the new units. 120 Ordinarily, I assume, a person in Mr Quirk's position would have no reason to mislead the Court. Ordinarily, I would expect there to be a contemporaneous note of the relevant conversation. A remarkable feature of this case is that there is no such note, unless it is the third sheet in exhibit 5 (para 65 above). The other handwritten sheets seem, substantially at least, to be merely arithmetical calculations made by Mr Quirk, although the calculations might have been made during the course of his meeting with Mr Plum. 121 The third sheet contains information about the development proposal: an estimate of the price at which the property is expected to sell ($450,000-$550,000), the estimated number of units (25) and a development date (March 1998). Mr Plum deposed, and maintained in cross-examination, that, at the meeting of 28 February 1997, he gave Mr Quirk information consistent with this note, in respect of all these matters. 122 According to Mr Quirk, none of the information on the third sheet was given to him by Mr Plum. He claimed it all came from Mr Hately. That is a surprising claim, given that Mr Hately's only role was to refer Mr Plum, whom he already knew, to the officer of the bank Mr Hately considered best placed to deal with Mr Plum's needs. Given his limited role, it seems to me unlikely that Mr Hately would have taken detailed information from Mr Plum about his plans. Had he done so, I would have expected Mr Hately to pass on the information in documentary form, whether by email, a typed note or a note in Mr Hately's own handwriting; not orally, as may be inferred if Mr Quirk found it necessary to write out the information himself. 123 Another surprising aspect of Mr Quirk's account is his failure to reconcile Mr Hately's information with what Mr Plum told him at the interview. The handwritten note showed that Mr Plum already had ideas about the likely nature, size and timing of the development. There were 'plans for development' in March 1998. The term 'plans for development' is ambiguous. It might mean the development plans will be prepared (or perhaps completed) in or by March 1998; it might mean that construction of the development will commence by that time. Either interpretation is inconsistent with the thinking which, Mr Quirk insists, Mr Plum revealed to him: see para 19 above. This thinking involved holding the properties 'for at least twelve months' to 'see how the residential property market goes in Wagga', with particular reference to the effect on demand for units of the new bridge over the river, and concluding with a statement about '[u]ntil I know what I am really doing'. According to Mr Quirk, he made no effort to reconcile the two scenarios. He provided information to Mr Harrington that ignored what he had allegedly been told by Mr Hately. 124 A possible view of the evidence is that the handwritten note records what Mr Plum in fact told Mr Quirk on 28 February 1997 but that Mr Quirk misrepresented the position to Mr Harrington and, therefore, thought himself forced to maintain the misrepresentation in evidence in this case. 125 I agree with Mr Dowdy that the Commonwealth Bank should not be held liable to Mr Plum merely because Mr Quirk failed to follow proper bank practice, or even specific instructions, or misled another bank officer. Any such delinquency would be an internal matter. Internally reprehensible conduct of a bank officer only gives rise to external liability - for example, to a customer - if it results in the bank breaching a duty to that customer or a statutory norm of conduct. However, the fact that an action contravenes proper practice, or is otherwise internally reprehensible, may be relevant to a determination about the bank officer's credit and/or the likelihood of the officer having taken a particular course of action in relation to a customer. 126 Mr Wilson rightly realised the Court would be reluctant to find that Mr Quirk actively misled Mr Harrington and, subsequently, the Court itself. The Court would wish to be satisfied that Mr Quirk had a sufficient motive for such unacceptable conduct. In the absence of evidence to the contrary, the Court would ordinarily suppose that Mr Quirk would have had nothing to gain by misleading his superiors; that, in dealing with Mr Plum, he was simply doing his job; he was receiving and processing an application for finance, and had no personal stake in its outcome. It was for that reason, no doubt, that Mr Wilson questioned Mr Quirk about his bonus entitlement and the awards he had won. 127 The monetary value of the bonus received by Mr Quirk in the financial year 1997-98 was not great. However, Mr Quirk presumably gained prestige by qualifying for the bonus and winning his non-monetary awards. It is conceivable that the prospect of that prestige was a motivating factor in Mr Quirk's conduct in February 1997; presumably the prospect of prestige is the reason why CSB maintained a system of bonuses and awards. 128 Although the situation is not entirely clear, it seems that, if Mr Plum's application for purchase finance had been examined by CSB in the context of his need also for development finance, two results would have followed. First, the carriage of the purchase finance application would have been taken out of Mr Quirk's hands, since the necessary overall sum would have well exceeded his limit. Second, even the purchase finance application would have been refused. If either of those events had occurred, there would have been no loan to Mr Plum to be taken into account in CSB's assessment of Mr Quirk's entitlement to any bonus or award. 129 Perhaps, most bank officers would not be influenced to depart from their strict line of duty by the factors I have mentioned. However, those factors may affect the conduct of some bank officers. A bank runs that risk, if it establishes a personal incentive scheme operating alongside rigid demarcation of areas of responsibility. I am always reluctant to make a finding that a person has acted deceptively, and given false evidence. However, I have concluded that such a finding must be made against Mr Quirk. 130 I reject Mr Atkins' submission that Mr Quirk 'lost his way' in giving his oral evidence, and became confused. I acknowledge the possibility of an honest witness becoming confused, and thereby giving incorrect evidence. I have seen that happen on other occasions. However, my impression of what happened during Mr Quirk's cross-examination was that, confronted by his own handwritten notes, Mr Quirk invented a story about being given the information by Mr Hately. He did so deliberately, in an attempt to maintain the integrity of his affidavit evidence. However, it was not a convincing invention; the Hately story left unexplained Mr Quirk's failure to reconcile the information in exhibit 5 with what Mr Quirk claimed to have been said to him by Mr Plum. 131 The better view is that the substance of the conversation accords with the evidence of Mr Plum. I believe Mr Plum gave to Mr Quirk an outline of his plans for the site, if he succeeded in purchasing it at the auction, and that this outline included an estimated yield of about 25 units and an intention to commence building work in about March 1998, or at least to prepare detailed building plans by that time. 132 On the basis of the evidence of Mr Frost and Mr Traynor, which I accept, the proper course for Mr Quirk to have followed, in that situation, was to have had the project evaluated as a whole, before CSB approved purchase finance. Any overall evaluation would have had to be performed on a 'ball-park' basis; precise figures were not yet available. According to the evidence of Mr Frost and Mr Traynor, such an evaluation probably would have resulted in refusal of the purchase finance application. Mr Creighton's evidence does not go so far, although it does indicate a need for Mr Plum to have been warned about the situation. To the extent that there is a difference between the view expressed by Mr Frost and Mr Traynor and that of Mr Creighton, I prefer the former view. Mr Frost and Mr Traynor were relevant officers of the particular bank at the particular time. 133 Even if it was not Mr Quirk's duty to cause the making of a full evaluation, it was incumbent on him, at least, to disclose the position fully to Mr Harrington, leaving Mr Harrington (or Mr Harrington's superiors) to consider the appropriate course to take. It would only have been necessary for Mr Quirk to pass on to Mr Harrington the information noted on the third sheet in exhibit 5. It would not have mattered whether that information had come from Mr Hately or Mr Plum. If Mr Harrington had been given this information, it seems likely he would have followed CSB's standard practice of having a full evaluation made before any approval of the purchase finance application. 134 It is clear from Mr Harrington's evidence that the only information he received was that contained in the memorandum of 6 March 1997. The scenario depicted in that memorandum varied considerably from that outlined in the handwritten sheet. (ii) The negligent misrepresentation claim 135 Mr Dowdy argued that a prospective financier is under no general duty of care towards a borrower. Support for that proposition is provided by the decision of the Queensland Court of Appeal in Commonwealth Bank of Australia v Finding [2001] 1 Qd R 168. In that case, the respondent bank was a mortgagee exercising its power of sale over a hotel. The appellants, long standing customers of the respondent, applied for a loan of the funds necessary for them to purchase the hotel from the bank. The bank already held a valuation of the hotel, at a figure well below the proposed sale price. The bank also held reports in which its own officers expressed concern about the hotel's profitability. The bank did not disclose any of this material to the appellants. The bank provided the appellants with the funds necessary for them to proceed with the purchase. They sustained substantial losses. The trial judge dismissed their claim for damages. The Court of Appeal affirmed the trial judge's decision. Amongst other things, the Court of Appeal held that, as the bank had not assumed the role of financial adviser, it was under no duty to the appellants to acquaint them with the information that it held. 136 It is not necessary for me to note all the cases in which courts have considered the circumstances that are necessary in order to give rise to a duty of care in respect of a representation. The relevant law was recently considered by the High Court in Tepko. I have already noted the adoption by Gleeson CJ, Gummow and Hayne JJ of the principles enunciated by Barwick CJ in Evatt. Those principles were accepted by Gaudron J at 22-24. They were also accepted (at 46) by Kirby and Callinan JJ, with whom McHugh J agreed, notwithstanding that their Honours reached a different view on the facts of the case. 137 Application of the principles stated by Barwick CJ leads to failure of Mr Plum's claim of negligent misrepresentation. Even on his account of the conversation, on 28 February 1997, Mr Plum did not make known to Mr Quirk that he was looking to him for advice or information concerning development finance. According to his account of the matter, he told Mr Quirk that he would be 'needing a loan to buy the land and a further loan to develop it'. Mr Plum's immediate need was for purchase finance. He simply assumed he would later be able to obtain development finance from CSB. He did not ask Mr Quirk to comment about that assumption. Mr Quirk did not do so; he merely said that Mr Plum 'can later apply for a development loan'. Whatever might be said about the adequacy of this response in the context of s 52 of the TP Act, the exchange of 28 February 1997 was not an example of the situation postulated by Barwick CJ in Evatt. (iii) The misleading conduct claim 138 It cannot, I think, seriously be argued that anything expressly stated by Mr Quirk to Mr Plum on 28 February 1997 was misleading. Once again taking Mr Plum's version of the conversation, Mr Quirk merely told him he could 'later apply' for a development loan. That statement was undoubtedly true. 139 Accepting that situation, Mr Wilson cited the line of authority which establishes that, under some circumstances, silence may constitute misleading conduct. The principle has been applied in many cases. It was succinctly expressed by Black CJ in Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 ('Ramensky') at 32: 'Silence is to be assessed as a circumstance like any other. To say this is certainly not to impose any general duty of disclosure; the question is simply whether, having regard to all the relevant circumstances, there has been conduct that is misleading or deceptive or that is likely to mislead or deceive. To speak of "mere silence" or of a duty of disclosure can divert attention from that primary question. Although "mere silence" is a convenient way of describing some fact situations, there is in truth no such thing as "mere silence" because the significance of silence always falls to be considered in the context in which it occurs. That context may or may not include facts giving rise to a reasonable expectation, in the circumstances of the case, that if particular matters exist they will be disclosed.' 140 The principle was discussed, in the context of dealings between bank officer and customer, in Commonwealth Bank of Australia v Mehta [1991] 23 NSWLR 84, a decision of the New South Wales Court of Appeal. The respondents alleged that a bank officer gave them an inadequate explanation of the risks surrounding foreign currency loans. The trial judge found for the respondents, basing himself solely upon s 52 of the TP Act. 141 At 87-88, Samuels JA noted the error of construing s 52 by reference to common law principles. He thought s 52 prescribes 'a "norm of conduct" which should not be interpreted according to established principles under the general law and which, since it may be offended by acts both honest and reasonable …, is morally neutral'. Samuels JA went on: 'Accordingly, it is incorrect to use liability under the general law as a means of enlivening s 52. … silence is not misleading only where there is a duty to disclose at common law or in equity. It may simply be the element in all the circumstances of a case … which renders the conduct in question misleading or deceptive, whether or not it also constitutes breach of some other precept of law or equity. If that conduct involves, as here, the provision of an explanation, it must adequately convey the information which the recipient reasonably expects to receive. If it does not it may constitute a breach of s 52; and it may fail to do so because the explanation is simply wrong in certain respects, or because it is silent about material matters. In either case the explanation given may be likely to mislead or deceive because by positive mis-statement or by omission it conveys to the recipient a false impression. I prefer to use the term "adequate" to describe the required scope of the explanation because its lack of colour more readily suggests a measuring function than do more forceful words such as full or complete.' 142 At 88-89, Samuels JA said an essential element of the respondents' case must be that they accepted the bank officer's explanation 'as including all that they needed to know in the way of risk and management before finally deciding to proceed with the transaction'. 143 The situation in the present case differed from that in Mehta. Mr Plum did not seek any explanation from Mr Quirk. However, Mr Quirk volunteered some information about CSB's procedures. If the information was inadequate or defective would that entitle Mr Plum to succeed? 144 Mr Dowdy cited a statement of general principle made by Hill J in Winterton Constructions Pty Ltd v Hambros Australia Limited (1992) 39 FCR 97 at 114. His Honour said: 'Obviously, it is difficult to see how a mere silence could, of itself, constitute conduct which is misleading or deceptive or likely to mislead or deceive. However, if the circumstances are such that a person is entitled to believe that a relevant matter affecting him or her adversely would, if it existed, be communicated, then the failure to so communicate it may constitute conduct which is misleading or deceptive because the person who ultimately may act to his or her detriment is entitled to infer from the silence that no danger of detriment existed. Thus, where a duty to speak is imposed, silence may constitute misleading and deceptive conduct. Whether such a duty exists will clearly depend upon all the circumstances of the case.' 145 Mr Dowdy submitted 'it could not be seriously submitted that Mr Quirk deliberately omitted to make any such statement along the lines of "there can be no guarantee your application will be successful", which appears to be Mr Plum's complaint'. (Counsel's emphasis) 146 Three things may be said about this submission. First, I do not understand such a submission to be Mr Plum's complaint. At para 112, I quoted Mr Wilson's summary of his client's case: that Mr Quirk gave the false impression that it was appropriate for Mr Plum to apply for a housing loan in the first instance and there was a prospect of a development loan being approved later. Second, for the reasons I discussed at paras 130-132 above, I believe Mr Quirk's conduct was a deliberate course of action. Third, it does not matter whether or not Mr Quirk intended to mislead Mr Plum; as Samuels JA said in Mehta, s 52 'may be offended by actions both honest and reasonable'. 147 After careful consideration of the matter, I have reached the conclusion that Mr Plum's s 52 case must succeed. Accepting, as I do, Mr Plum's version of the conversation on 28 February 1997, it is apparent that Mr Plum disclosed to Mr Quirk his plan to carry out a residential unit development upon the three properties. He informed Mr Quirk he intended to spend about twelve months obtaining the necessary approvals and then to undertake the development, presumably in stages, over the ensuing two to three years. Mr Plum made clear to Mr Quirk that he would need a development loan and was looking to CSB to provide that loan. It would have been obvious to Mr Quirk that Mr Plum might be seriously disadvantaged if he was assisted by CSB to purchase the land, only to discover later that CSB would not provide the necessary development finance. Mr Quirk admitted in cross-examination that he knew Mr Plum was relying on what Mr Quirk said to him 'in relation to the bank's products and how to go about acquiring the site and achieving his ends'; the end, obviously, being a profitable development project. Mr Plum needed more than an assurance that CSB would receive and consider any development finance application that he cared to lodge. He needed an assurance, express or implied, that a properly prepared application would have a substantial prospect of success; at the very least, that there was no obvious reason why such an application would be rejected. Yet Mr Quirk did not tell Mr Plum: (i) that CSB's usual practice was for CSB to consider the total development proposal before providing purchase finance, a practice that was regarded as being in the borrower's interests as it provided assurance to the borrower before land was purchased; or (ii) that, under current circumstances, there was little or no chance of CSB approving development finance. 148 Had Mr Plum been told these things, he would not have purchased the land. If he had been told about item (ii), he probably would not have wished to do so. In any event, he would not have been able to do so. If CSB had followed the procedure mentioned in (i), the application for purchase finance would have failed. As there is no suggestion that Mr Plum had any alternative source of purchase finance, he would not have been able to participate in the auction. 149 Mr Quirk did not expressly inform Mr Plum that a properly prepared application for development finance would have a substantial prospect of success. However, I think Mr Plum would have been left with that impression when he left the bank on 28 February 1997, partly from what Mr Quirk had expressly said to him about later making an application for development finance, and partly from what he failed to say about that subject. As Black CJ pointed out in Ramensky, the ultimate question is whether, having regard to all the relevant circumstances, there has been conduct that is misleading or deceptive or that is likely to mislead or deceive. In this case, there was such conduct. 150 My conclusion about misleading conduct critically depends upon my finding that Mr Plum informed Mr Quirk, in some detail, about his development plans, including the fact that he proposed to commence work within about 12 months. It does not really matter whether the reference was to actual construction, as I think is the preferable interpretation of exhibit 5, or to preparation of detailed building plans. On either interpretation, Mr Plum was conveying to Mr Quirk a settled intention of carrying out a particular development project within a short time. As Mr Quirk accepted (see para 63 above), on this information, it was standard bank practice to tell clients that there is no guarantee that a development loan will be granted when a later application is made. 151 If I had believed Mr Quirk's evidence that Mr Plum had spoken of a speculative purchase, to enable him to hold the land for an indefinite period of time while he watched the local property market, I would have taken a different view. On that basis, there would have been no development project to evaluate. 152 The effect of Mr Quirk's conduct extended to Mr Plum's acquisition of 54 Travers Street in July 1997. At the time he contracted to purchase this property, Mr Plum still had not been told either of the items of information identified in para 147. Mr Plum purchased this extra parcel in order to add it to the development site, still under the belief there was a substantial prospect that CSB would approve a later application for development finance. Neither Mr Quirk nor any other bank officer had yet told Mr Plum that any application for development finance would not succeed. (iv) Vicarious liability 153 I reject Mr Dowdy's submission that the Commonwealth Bank is not liable for the conduct of Mr Quirk. Mr Quirk was a full-time employee of CSB. He interviewed Mr Plum in his capacity as a CSB officer, on behalf of CSB and in connection with a possible transaction between Mr Plum and CSB. Whatever the quality of Mr Quirk's conduct, it was conduct undertaken by him on behalf of CSB. Contrary to Mr Dowdy's submission, Mr Quirk was not engaged in a 'frolic of his own'; his conduct was CSB's conduct. Disposition 154 As I indicated earlier, the recent hearing was confined to the issue of liability. Mr Plum has established that, on 28 February 1997, CSB (through Mr Quirk) engaged in misleading or deceptive conduct and that Mr Quirk was involved in CSB's contraventions of the TP Act and FT Act. I will make declarations to that effect. 155 I will reserve issues of damages and other relief for determination at a later hearing, if necessary. Perhaps the parties will be able to agree upon these matters. They should attempt to do so. To facilitate discussions about them, I indicate that I accept Mr Plum's evidence that he told Mr Quirk of his intention to demolish the Travers Street houses before he did so. I do this partly because of my general view about the relative credibility of Mr Plum and Mr Quirk, partly because Mr Plum's evidence is supported by the evidence of Mr Traynor and also because of my consideration of inherent probabilities. Mr Plum said it was his practice to call in to see Mr Quirk, in order to keep him abreast of progress, and Mr Quirk, acknowledged that he prided himself on his availability to customers. Mr Plum has an open, communicative personality. He was enthusiastic about this project. It is unlikely he would have failed to inform Mr Quirk about his plans for getting site work underway. No doubt it is correct to say that Mr Quirk was not under any obligation to Mr Plum to stop him taking that step, or even to advise against it. However, if Mr Plum carried out the demolition work while still under the influence of the earlier misleading conduct (something which I have not determined at this stage), then any resultant loss of value would be recoverable from the respondents. 156 I will list the matter for directions on Friday, 8 July 2005 at 9.30am. My present disposition is to fix an August date for any damages hearing.

I certify that the preceding one hundred and fifty six (156) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Wilcox.

Counsel for Peter William Plum: Mr R D Wilson and Ms M Tibbey Solicitors for Peter William Plum: Gilshenan and Luton Counsel for the Commonwealth Mr P J Dowdy Bank and Michael Quirk at the hearing and the Commonwealth Bank in submissions: Solicitors for the Commonwealth Abbott Tout Bank and Michael Quirk at the hearing and the Commonwealth Bank in submissions: Solicitor for Mr S A Atkins of Henry Davis York Michael Quirk in submissions:

Date of Hearing: 7 and 8 February 2005