Federal Court of Australia|1989-04-21|Before: Neaves J

Re Kabwand Pty Ltd; EJR Pastoral Company Pty Ltd; Edward Plantagenet Somerset and Elsie Joy Somerset v National Australia Bank Limited [1989] FCA 131 (21 April 1989)

Re: KABWAND PTY. LTD; E.J.R. PASTORAL COMPANY PTY. LTD;

Trade Practices - misleading or deceptive conduct - express representation - whether silence constitutes misleading or deceptive conduct; principles discussed - inducement - construction of interest claims in loan agreements and mortgages - amendment to pleadings.

Rhone-Poulenc Agrochimie S.A. & Anor. v UIM Chemical Services Pty. Ltd. & Anor. (1986) 68 ALR 77

Henjo Investments Pty. Ltd. v Collins Marrickville Pty. Ltd. (1988) ATPR 40-850

Tournier v National Provincial and Union Bank of England (1924) 1 KB 461

Commissioner of Taxation v ANZ Banking Group Limited; Smorgon & Ors v Commissioner of Taxation (1978-9) 143 CLR 499

Gould & Anor v Vaggellas & Ors. (1985) 157 CLR 215

Smith v Chadwick (1882) 20 ChD 27

North Stafford Steel, Iron and Coal Company (Burslem) Limited v Ward (1868) LR 3 Exch 172

Adamastos Shipping Co. Ltd. v Anglo-Saxon Petroleum Co. Ltd. (1959) AC 133, (1958) 1 All ER 725

Scammell and Nephew Ltd. v Ouston (1941) AC 251

Placer Developments Ltd. v The Commonwealth [1969] HCA 29; (1969) 121 CLR 353

Loftus v Roberts (1902) 18 TLR 532

Cropper v Smith (1884) 26 ChD 701

Tildesley v Harper (1878) 10 ChD 393

Mr. Varritomas

Solicitors for Applicants: Cranston McEachern & Co.

Counsel for Respondent: Mr. Fryberg Q.C.

Mr. Morrison

Solicitors for Respondent: Thynne & MacArtney

The orders of Neaves J. made on 29 September 1988 be varied by adding Orders 3A and 3B as follows:

3A. The Cross Claimant recover possession of the

property being Lot 3 on Registered Plan No. 154075

and being the whole of the land contained in

Certificate of Title Volume 5569 Folio 208

consequent upon the determination of the tenancy

created by attornment under the terms and

conditions of the Bill of Mortgage dated 14 March

1985 in respect of the said land and executed by

the First Cross Respondent in favour of the Cross

Claimant.

3B. The Cross Claimant recover possession of the

property being the whole of the land contained in

Certificate of Title No. 270171 Volume 1507 Folio

161 consequent upon the determination of the

tenancy created by attornment under the terms and

conditions of the Bill of Mortgage dated 14 March

1985 in respect of the said land and executed by

the Second Cross Respondents in favour of the

Cross Claimant.

The appeal be dismissed.

The appellants pay the costs of the respondent of the appeal.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

The appellants sued the respondent in this Court alleging contravention by the respondent of s. 52 of the Trade Practices Act (Cth) 1974 ("the Act") and claiming damages and other relief. The respondent cross-claimed against the appellants for moneys due under certain loan agreements and guarantees and to recover possession of certain land the subject of mortgages in favour of the respondent. The learned trial Judge (Neaves J.) dismissed the application of the appellants and found for the respondent on its cross-claim.

2. The case arose in the following circumstances. The first appellant, Kabwand Pty. Limited ("Kabwand"), purchased a property known as "Gunna Doo" and the second appellant, E.J.R. Pastoral Company Pty. Limited ("E.J.R. Pastoral"), purchased a strawberry farm business being conducted on that property, in each case from the vendor, Jeffrey Robert Cardell senior. The third appellants, Edward Plantagenet Somerset and Elsie Joy Somerset, purchased at auction a property known as "Glenhaven" from the respondent which sold as mortgagee exercising its power of sale. Mr. and Mrs. Somerset are the sole shareholders and directors of Kabwand and of E.J.R. Pastoral, the latter being the trustee of the "Somerset Family Trust".

3. The alleged misleading or deceptive conduct of the respondent as pleaded in the amended statement of claim was that it deliberately refrained from informing the appellants:

"(a) that the strawberry farm business being

conducted on the property 'Gunna Doo' had

not earned and was not then earning

substantial profits or any significant

profits at all; and

(b) that the vendor, Jeffery Robert Cardell,

Senior, was indebted to the respondent for a

substantial sum of money (of the order of

$240,000) pertaining to the property 'Gunna

Doo' and the business being conducted

thereon."

The appellants also alleged that the respondent made a positive representation to them in contravention of s. 52, namely, that the strawberry farm business was a sound and prosperous business.

4. The appellants claimed that Mr. C.H. Cannon, the manager of the branch of the respondent at 441 Ruthven Street, Toowoomba engaged in the misleading and deceptive conduct in question. The essence of the appellants' case at the trial was that the conduct complained of occurred at meetings at which the purchase of "Glenhaven" and "Gunna Doo" was discussed between Mr. Somerset and Mr. Cannon on 30 October 1984 and 1 November 1984 and between Mr. and Mrs. Somerset and Mr. Cannon on 6 November 1984. The respondent denied that any such meeting as alleged took place on 30 October and 1 November 1984, and, whilst agreeing that Mr. Cannon met Mr. and Mrs. Somerset on 6 November 1984, denied that he had any relevant conversation with them on that day.

5. The appellants allege that they relied upon that conduct of the respondent and consequently entered into and completed the three contracts of purchase to which we have referred.

6. We should say at the outset that the issues raised on the appeal were narrower than those argued before the trial Judge, and, although in form they raised questions of law, upon analysis all issues but one before us ultimately turn on questions of fact, in particular on findings made by his Honour on the credibility of witnesses. His Honour made firm findings of credit and generally accepted the evidence adduced on behalf of the respondent and did not accept the witnesses called for the appellants.

7. The trial Judge said that the success of the appellants' case depended largely, if not wholly, on the credibility as witnesses of Mr. and Mrs. Somerset and that he formed "such an adverse view of Mrs. Somerset as a witness that ... I have completely disregarded what she has said except where it is confirmed by other credible evidence, oral or documentary."

8. The trial Judge rejected Mr. Somerset's evidence that he and Mr. Cannon met on 30 October 1984 and that a meeting took place on 1 November 1984. He expressed a preference for the evidence of Mr. Cannon that the first meeting at which any discussion took place between himself and Mr. Somerset, Mrs. Somerset also being present, was on 8 November 1984. His Honour based his findings of credit on his impressions of the witnesses, contemporaneous documents and the probabilities.

9. The appellants called Mr. G.L. Morrow, Mrs. R. Morrow and Mr. W.J. Taylor in their case to corroborate the fact that Mr. Somerset visited the respondent's premises at 441 Ruthven Street, Toowoomba on 30 October and 1 November 1984. His Honour found that the evidence of Mr. and Mrs. Morrow and of Mr. Taylor

"is not entirely satisfactory and is not

sufficient, in the light of the other matters to

which I have referred, to lead me to find that

meetings took place between Mr. Somerset and Mr.

Cannon on 30 October 1984 and 1 November 1984."

10. His Honour rejected the claim of the appellants that any misleading or deceptive conduct was engaged in by the respondent and that Mr. and Mrs. Somerset were induced to purchase Glenhaven by anything said to them by Mr. Cannon concerning the business being conducted on "Gunna Doo" and that nothing said by Mr. Cannon had induced them to do nothing.

11. By way of defence to the cross-claim of the respondent, Kabwand and Mr. and Mrs. Somerset relied upon the matters which they had advanced in support of their claim against the respondent asserting that by reason of those matters they were under no obligation to pay moneys to the respondent. His Honour rejected those defences. The remaining ground of defence was that the provisions of the relevant loan agreements which provided for the variation in the rate of interest payable on the principal moneys and the provisions of the relevant bills of mortgage providing for the rate of interest payable thereunder were void for uncertainty. His Honour rejected that defence.

12. It was agreed before his Honour that, in the event of the defences raised by the appellants being unsuccessful, the amount of their indebtedness to the respondent is $972,852.37 which is the amount for which judgment was entered against the appellants.

13. Some time before 1983 Mr. and Mrs. Somerset decided to sell two properties which they owned and to move to Toowoomba. On each of the properties E.J.R. Pastoral conducted a grazing business. One property "Clio" was sold in or about October 1983 and the other "Bimbadeen" was sold in 1984 under a contract which provided for settlement to take place by the end of October 1984. Mr. and Mrs. Somerset expected to have available for investment following the completion of the sales about $500,000 and that E.J.R. Pastoral would receive an additional sum of about $150,000 from the sale of machinery and wheat. Late in August or early September 1984 Mr. and Mrs. Somerset became interested in purchasing "Gunna Doo" some six kilometres north of Toowoomba on which the strawberry farm business was being carried on. The owner of the property was Mr. Cardell who had constructed facilities for the cultivation of strawberries and strawberry products on the property. Mr. Cardell was a customer of the respondent at the Ruthven Street, Toowoomba Branch and his account was a matter of some concern to the respondent. A Mr. MacDonald had introduced Mr. Somerset to Mr. Cardell. Mr. MacDonald was interested in entering into a partnership arrangement or joint venture with Mr. Somerset in relation to the strawberry farm. In mid September 1984 Mr. and Mrs. Somerset decided that they would not enter into the arrangement with Mr. and Mrs. MacDonald. On 17 or 18 September 1984 Mr. Somerset visited "Gunna Doo" and spoke to Mr. Cardell. Mr. Cardell wrote out and gave to Mr. Somerset a document headed "Running Costs per Month" which showed, inter alia, running costs of $2,272 per month, stock of $115,000 and a net return per annum of the business of $460,000. On 17 September 1984 Mr. Cardell gave Mr. Somerset a number of documents including one which set out details of the products which were being sold as part of the business being carried on at "Gunna Doo".

14. Mr. Somerset visited "Gunna Doo" on a number of occasions and went on delivery runs with Mr. Cardell seeking to find out as much as he could about the operation of the business. During Mr. Somerset's visits to "Gunna Doo" the terms upon which it and the strawberry business would be purchased were agreed.

15. On 28 September 1984 Mr. Somerset applied to the Toowoomba Branch of the Commonwealth Trading Bank of Australia for finance in the sum of $550,000 to assist in the purchase of "Gunna Doo". That application was refused .

16. Mr. and Mrs. Somerset had intended, after selling "Clio" and "Bimbadeen", to purchase another grazing property. To that end, while the events concerning "Gunna Doo" were unfolding, they examined a number of properties including "Glenhaven" which was a relatively small holding situated to the north of Toowoomba, not a great distance from "Gunna Doo". On 26 October 1984 E.J.R. Pastoral as purchaser executed a contract for the purchase of "Glenhaven" for $275,000. The contract was expressed to be subject to finance being arranged in the sum of not less than $250,000. The contract for the purchase of "Glenhaven" could not proceed because the respondent was in possession of the property as mortgagee and in exercise of its power of sale had arranged for the property to be put up for sale by auction. The branch of the respondent that was concerned with "Glenhaven" was not that of which Mr. Cannon was the manager but another branch situated at 33 Russell Street, Toowoomba.

17. It was contemplated by Mr. and Mrs. Somerset at all material times that any purchase of the strawberry farm business as distinct from "Gunna Doo" itself would be made by E.J.R. Pastoral as it had accumulated losses which could be used to offset, for income tax purposes, the expected profits from the operation of the strawberry farm.

18. On 2 November 1984 two contracts were executed each dated 1 November 1984; one between Mr. Cardell as vendor and Kabwand as purchaser for the purchase of "Gunna Doo" and related facilities for the sum of $310,000; and the other between Mr. Cardell as vendor and E.J.R. Pastoral as purchaser for the purchase of the strawberry farm business carried on at "Gunna Doo" for $315,000.

19. On 2 November 1984 Mr. Somerset drew a cheque dated 1 November 1984 on the account of E.J.R. Pastoral with the ANZ Bank in favour of Mr. Cardell in the sum of $500,000 being the deposit of $185,000 for the purchase of "Gunna Doo" and the whole of the purchase price of $315,000 for the business. Settlement of the transactions took place simultaneously with the execution of the contracts and the handing over of the cheque.

20. On 2 November 1984 Mr. Cardell handed certain documents to Mr. Somerset being documents headed:

(a) "J.R. Cardell - Estimated Cash Flow

Strawberry Growing Venture - Owner";

(b) "J.R. Cardell - Estimated Cash Flow (large

Glasshouse) Strawberry Growing Venture -

Grower";

(c) "Gunna Doo Enterprises Strawberry Farm -

Projected Cash Budget (Farming Operations)

1984/5".

21. The first two documents are dated 2 November 1984 and the third 27 July 1984. Document (a) shows estimated monthly receipts and expenditure over a period of twelve months not identified by date. Document (b) shows over a period of twelve months receipts of $348,000 and payments of $205,740 resulting in an estimated surplus of $142,660. Document (c) is a projected monthly cash budget for the period August 1984 to July 1985 inclusive and it shows monthly sales of $91,045 giving a total for the period of $1,092,540. Surplus for the period is shown at $468,640.

22. The trial Judge accepted the evidence of Mr. Cannon that he had not heard of Mr. or Mrs. Somerset until 1 November 1984 and that he had not met either of them before 6 November 1984 when he was introduced to them by another bank officer, Mr. Greaves.

23. Mr. and Mrs. Somerset were interviewed by Mr. Cannon on 8 November 1984, when they applied for the grant of a $300,000 loan facility to enable them to bid at auction for the purchase of "Glenhaven" the following day. They made no application for other finance. Mr. Somerset informed him of the purchase of "Gunna Doo" and spoke generally of his plans for the strawberry farm. Mr. Cannon did not say anything to Mr. Somerset about the position of Mr. Cardell's account with the bank or anything of his personal or business financial position or of the value of his business. He did say, however, to Mr. and Mrs. Somerset that the strawberry farm business had "an excellent cash flow situation". This statement was based on Mr. Cannon's knowledge of the amounts being credited to the account with the bank styled "Jeffery Robert Cardell trading as Gunna Doo Enterprises" and the etimates prepared by Mr. Cardell's accountants, copies of which had been given to him by Mr. Somerset. There was no discussion at that meeting of the profits or profitability of the strawberry farm business. Later Mr. Cannon agreed to grant the financial assistance requested by Mr. and Mrs. Somerset.

24. Mr. Cannon made a contemporaneous record of the events of 8 November 1984 which is an important document in the case and it reads as follows:

"Mr and Mrs Somerset called to discuss their need

for assistance to the extent of $300,000 to allow

them to purchase a property Glenhaven at auction.

This property has been placed to auction by our

Russell St Branch as mortgagees in possession. It

is expected that the property should sell for less

than $300,000 but that is yet to be seen when the

auction occurs. Mr and Mrs Somerset will require

assistance & I have taken from them their S/P

which shows a net asset position of in excess of

$1M. They have a block of units in James Street

and also have paid $500,000 for the strawberry

farm at 'Gunna Doo'. There is still a $125,000

debt to be paid on this property but this is to be

taken into either an overseas loan which is being

arranged or a loan from us which may yet come to

fruition. The strawberry farm has an excellent

cash flow situation and it is expected that

servicing of the $300,000 Bills would be quite

easy under reasonable weather conditions. In fact

when the sheds are in place, the strawberry

situation should be secure for all year round

strawberry growing and they expect to harvest some

3 kilos per plant which will make a considerable

amount of money for the company. The purchase of

'Gunna Doo' Strawberry Farm was in the name of

Kabwand Pty Ltd but the purchase of 'Glenhaven'

will most probably be in the name of Mr and Mrs

Somerset themselves. This proposition has been

discussed with Mr Arkell the Regional Manager and

he has agreed to assist should the property be

pruchased at settlement."

25. Mr. Cannon agreed when giving evidence that he said to Mr. and Mrs. Somerset that the strawberry farm business had "an excellent cash flow situation"; but the precise context in which he made that statement is not entirely clear. Mr. Somerset also agreed that he made the same statement to Mr. Cannon. Whether Mr. Cannon volunteered the statement or made it after reading the written material handed to him by Mr. Somerset or as confirmation of the same statement made by Mr. Somerset is not clear. However, Mr. Cannon said that he made the statement and the trial Judge accepted his evidence. For reasons which appear later this statement assumed greater importance on this appeal than it had at the trial.

26. Mr. Cardell was indebted to the respondent and there was an increasing indebtedness to it during 1984. Mr. Cardell's account was closely monitored by officers of the respondent, but the respondent was concerned that the total indebtedness should remain commensurate with the value of the security held.

27. On 9 November 1984 Mr. and Mrs. Somerset attended the auction for "Glenhaven" and successfully bid for the property at $320,000. The contract for the purchase of "Glenhaven" was dated 14 November 1984 and signed between the respondent as mortgagee exercising power of sale and Mr. and Mrs. Somerset as purchasers and there was more than one subsequent discussion between Mr. and Mrs. Somerset and Mr. Cannon in relation to the provision of finance for the purchase of "Glenhaven". Their application was approved on 12 December 1984, but the matter did not proceed for reasons to which reference is made later.

28. There were subsequent discussions about finance and on 5 March 1985 the respondent approved the provision of finance to Kabwand and Mr. and Mrs. Somerset in a total sum of $575,000. Various documents were executed on 14 March 1985 by Mr. and Mrs. Somerset, Kabwand and the respondent including three loan agreements and three bills of mortgage, one over "Glenhaven", another over "Gunna Doo" and the third over a property in Toowoomba owned by Mrs. Somerset. Guarantees were also signed by Mr. and Mrs. Somerset and Kabwand.

29. Mr. and Mrs. Somerset became suspicious that Mr. Cardell had deceived them about the production figures from "Gunna Doo" in relation to the strawberry farm business. Mr. Somerset met Mr. Cannon and informed him of the fact that Mr. Cardell Junior, Mr. Cardell's son, had told them on or about 6 May 1985 that they had been duped by his father into buying the property. Mr. Somerset sought the respondent's indulgence concerning the loans which had been made by it.

30. On 8 August 1985 Kabwand and E.J.R. Pastoral commenced an action in the Supreme Court of Queensland against Mr. Cardell and his family. The action proceeded to trial upon a claim for damages for deceit in connection with the negotiations leading to the making of the contracts for the purchase of "Gunna Doo" and the strawberry farm business. Judgment was given for Kabwand against the defendants in the sum of $49,838.52 and for E.J.R. Pastoral against them in the sum of $98,515 together with interest on the judgment sums. The judgment remains unsatisfied and it seems there is no prospect of the amounts awarded being paid. Both Mr. Cardell and his son, who was also a defendant in the action, are bankrupt. Judgment was entered on 9 July 1986.

31. The respondent gave notice to Mr. and Mrs. Somerset and Kabwand demanding payment of their indebtedness under the loan agreements, mortgages and guarantees. Also on 14 January 1986 notices were served by the respondent on Kabwand and Mr. and Mrs. Somerset requiring them to quit and deliver up possession of "Gunna Doo" and "Glenhaven".

32. On 13 February 1986 an action was commenced in the Supreme Court of Queensland by Mr. and Mrs. Somerset and Kabwand against the respondent claiming damages "for breach of contract and/or negligence and/or negligent mis-statement".

33. In March 1986 actions were commenced in the Supreme Court of Queensland by the respondent against Kabwand and Mr. and Mrs. Somerset seeking recovery of possession of Glenhaven and "Gunna Doo".

34. The proceedings in this Court were commenced on 17 June 1986.

35. The trial Judge accepted that the contract for the purchase by Kabwand of "Gunna Doo" and the contract for the purchase by E.J.R. Pastoral of the strawberry farm business were both executed on 2 November 1984 and that settlement under each contract took place immediately following the execution of those contracts. His Honour found that it was an essential element of the appellants' case that the conduct relied upon on the part of the respondent as being misleading or deceptive took place prior to that date. His Honour rejected the appellants' case that the conduct occurred during meetings between Mr. Somerset and Mr. Cannon on 30 October, 1 November and 6 November 1984.

36. His Honour found that no complaint of alleged misleading conduct by Mr. Cannon was made to any officer of the respondent before the commencement of the proceedings in this Court and that such complaints as were made related to other matters. His Honour found that the representation which Mr. Cannon is alleged to have made was formulated differently from time to time by the appellants and was not formulated in the form which it finally took at the trial until the statement of claim in the present proceeding was amended onr 30 June 1987.

37. His Honour found that Mr. Somerset had decided to purchase "Gunna Doo" well before any meeting which he asserts he had with Mr. Cannon. His Honour was also satisfied that the approach to Mr. Cannon was solely for the purpose of obtaining finance for the purchase of Glenhaven and that Mr. Somerset was not at all interested in or in seeking advice relevant to the question whether the purchase of "Gunna Doo" should be made. His Honour found that nothing which may have been said by Mr. Cannon to either Mr. or Mrs. Somerset on 8 November 1984 or on any prior occasion induced them to take or refrain from taking any action in relation to the contracts which had been executed by Kabwand and E.J.R. Pastoral on 2 November 1984. His Honour accepted the evidence of Mr. Cannon as to what was discussed at the meeting on 8 November 1984.

38. His Honour mentioned that, although Mr. Cannon had apparently substituted two diary notes of 31 July 1984 and 6 December 1984 for the original notes and although this action could justifiably be criticised, he did not regard Mr. Cannon's conduct in that regard as affecting his credibility as to the events with which the case was concerned. His Honour said that there was no suggestion that the diary note of 8 November 1984, so critical in this case, was originally different in content.

39. His Honour found that Mr. and Mrs. Somerset were not induced to purchase "Glenhaven" by anything said to them by Mr. Cannon concerning the business being conducted on "Gunna Doo". He found that prior to 26 October 1984 they had decided to purchase "Glenhaven" and had caused E.J.R. Pastoral to agree on that date to purchase the property. His Honour found that the proposal to purchase "Glenhaven" was not, on 26 October 1984, conditional upon the purchase of "Gunna Doo" and that nothing that occurred thereafter led him to conclude that "Glenhaven" would not have been purchased but for the purchase of the other property.

40. His Honour made a finding in relation to the statement by Mr. Cannon on 8 November 1984 that "the strawberry farm has an excellent cash flow situation" in these terms:

"Although, in the light of the findings I have

made, the matter ceases to be of any significance,

I find that the material identified by Mr Cannon

as providing the foundation for the statement made

by him to Mr and Mrs Somerset at the meeting on 8

November 1984 that '(t)he strawberry farm has an

excellent cash flow situation' provided no

sufficient basis for such an unequivocal and

unqualifieid statement. Mr. Cannon said he relied

upon the increasing level of the credits (other

than credits consequent upon the financial

assistance given to Mr. Cardell by the respondent)

made during 1984 to the account styled 'Jeffrey

Robert Cardell trading as Gunna Doo enterprises'

and the documents Exhibits G and H, produced to

the respondent by Mr. Somerset. I have already

made some analysis of the account and referred to

the general nature of Exhibits G and H. So far as

the latter contained information concerning the

cash flow of the business, they were estimates

only and, so far as Exhibit H is concerned, it

contained the disclaimer the text of which I have

already quoted."

41. The foregoing is a rather lengthy history of the matter which is taken from the findings of fact made by the trial Judge. This is a necessary course to take because, as mentioned earlier, except for the issues raised by the cross-claim going to the alleged uncertainty of the interest clauses in the loan agreements and bills of mortgage, the case turns essentially upon questions of fact and in particular upon his Honour's findings as to the credibility of witnesses.

42. At the trial the applicants sought to prove the allegations contained in paragraphs 7(a)(F)(ii), 7(b)(ii) and 7(c)(ii) of the further amended statement of claim that Mr. Cannon had stated on the three occasions referred to above, namely, 30 October 1984, 1 November 1984 and 6 November 1984, that the strawberry farm business conducted at "Gunnadoo" was a "sound and prosperous business."

43. As the trial Judge has not accepted that any meeting took place between either of the Somersets and Mr. Cannon on 30 October and 1 November and that any relevant discussion took place between Mr. Cannon and either Mr. or Mrs. Somerset on 6 November 1984, it follows that the alleged representations have not been made out. This leaves only the conversation between Mr. Cannon and Mr. and Mrs.Somerset on 8 November 1984 to be considered. At the hearing of this appeal senior counsel for the applicants argued that the alleged representations occurred on that date and that his clients ought to succeed.

44. The learned trial Judge accepted Mr. Cannon's version of what was discussed at the meeting on 8 November 1984. As mentioned earlier his Honour accepted Mr. Cannon's evidence that he said to Mr. and Mrs. Somerset that the "strawberry farm has an excellent cash flow situation." Mr. Cannon said that there was no discussion at that meeting of the profits or profitability of the strawberry farm business.

45. We do not consider that the reference made by Mr. Cannon to the excellent cash flow situation during the discussion with Mr. and Mrs. Somerset makes out any of the allegations in paragraph 7 of the amended statement of claim that the strawberry farm business was sound and prosperous.

46. The context in which the discussion took place was that the Somersets were applying to the respondent for finance to enable them to bid for the property "Glenhaven" at auction the following day. The strawberry farm business was discussed in relation to the servicing of the proposed loan for the purchase of "Glenhaven". The Somersets had produced during the discussion two documents exhibits G and H. These were documents entitled "Proposed movements of account and structure of Somerset Family Trust" and "J.R. Cardell - Estimated Cash Flow Strawberry Growing Venture - Owner." This last document was prepared by R.N. Elliott and Co., chartered accountants for the vendor Cardell.

47. This court does not consider that what was said by Mr. Cannon in relation to the excellent cash flow of the strawberry business makes out the allegation that on 8 November 1984 Mr. Cannon had represented "that the said business was a sound and prosperous business." In any event no express representation said to have been made on 8 November 1984 was pleaded in the statement of claim.

48. The trial Judge in his findings took the discussion of 8 November 1984 further. His Honour found, as mentioned earlier, that the material identified by Mr.Cannon as providing the foundation for the statement made by him to Mr. and Mrs. Somerset that the "strawberry farm has an excellent cash flow situation" provided no sufficient basis for such an unequivocal and unqualified statement.

49. His Honour found that Mr. Cannon "relied upon the increasing level of the credits (other than credits consequent upon the financial assistance given to Mr. Cardell by the respondent) made during 1984 to the account styled 'Jeffrey Robert Cardell trading as Gunna Doo Enterprises' and the documents exhibits G and H".

50. The trial Judge observed that he had made some analysis of the account. His Honour said of exhibits G and H that in so far as they related to the cash flow of the business they were based on estimates and that exhibit H contained a disclaimer which stated, inter alia, that it was prepared by the accountants from unsubstantiated estimates supplied to them by Mr. Cardell.

51. During his reply counsel for the appellants applied to this court to further amend the amended statement of claim. The amendments sought are as follows:-

1. Amend paragraph 7 to add new sub-paragraph (e) to read:-

"(e)Further on the 8th November, 1984 the said COL

CANNON stated to the third applicants that

strawberry farm ("Gunnadoo") had 'an excellent cash

flow situation';"

2. Add new sub-paragraph to paragraph 8 to read:

"(d)The strawberry farm did not have an excellent cash

flow situation, alternatively the Respondent had no

basis to make the statement referred to in

sub-paragrpah 7(e) without qualification.".

3. Amend paragraph 10 to read:-

"10.The Respondent deliberately refrained from

informing the Applicants ofthe matters referred to in

sub-paragraphs (a) and (b) of paragraph 8 hereof, and:-

(i) inform the Applicants that the said business was a

sound and prosperous business; and/or

(ii) stated that the said strawberry farm had 'an

excellent cash flow situation';

(iii) after stating that the said strawberry farm had

'an excellent cash flow situation' refrained from

stating anything to correct an impression thereby

created that the farm was a profitable and/or

soundand prosperous one."

4. Amend paragraph 12(a) to add after the word "and" in the

second line the symbol and word "/or" so that it reads

"and/or".

52. Counsel for the respondent opposed the amendments sought. His submission in essence was that the application to amend came far too late. He submitted that the issues raised by the amendments sought might well have been the subject of evidence at the trial. The issue as to the meaning of the alleged representation required a contextual exploration. Issues were raised, so he submitted, as to the truth of the representations and whether the alleged words related only to cash flow in the business of strawberry growing or cash flow in relation to the relevant bank account. It was submitted that issues would be raised as to the reliance, if any, placed upon the representations now sought to be pleaded which might have led to the respondent's case at the trial being conducted differently. There are also raised, counsel submitted, questions relating to heads of damage which might have required exploration at the trial.

53. We consider that there is substance in these submissions. The respondent has not had the opportunity to consider and, if necessary, meet those matters during the trial. The respondent's case at the trial may well have been conducted differently. To allow the amendments sought at this stage would be unfair to the respondent. The respondent would be deprived ofthe opportunity to meet by evidence if necessary or by cross-examination the new issues which would arise for decision if the amendments were allowed.

54. Under O.13 r.2 the Court has the following powers:

"2. (1) The Court may, at any stage of any proceeding, on

application by any party orof its own motion, order that

any document in the proceeding be amended, or that any

party have leave to amend any document in the

proceeding, in either case in such manner as the Court

thinks fit.

(2) All necessary amendments shall be made for the

purpose of detemining the real questions raised by or

otherwise depending on the proceeding, or of correcting

any defect or error in any proceeding, or of avoiding

multiplicity of proceedings."

56. In regard to the powers of this Court to allow amendments the Court ought to correct all kinds of errors or mistake, which are neither fraudulent nor intended to overreach, if it can be done without injustice to the other party (Cropper v. Smith (1884) 26 ChD 701 at 710). As Bramwell L.J. said in Tildesley v. Harper (1878) 10 ChD 393 at 396-7:

"My practice has always been to give leave to amend

unless I have been satisfied that the party applying was

acting mala fide, or that, by his blunder, he had done

some injury to his opponent which could not be

compensated for by costs or otherwise."

57. This Court considers that to allow the amendments sought at this stage would cause injury to the respondent which cannot be compensated for by costs or otherwise. To prevent such unfairness occurring the Court does not give the appellants leave to amend their statement of claim.

58. There is a further rason why the amendments sought should not be allowed. Because of the view taken by the trial Judge, particularly as to the meaning and effect of the relevant words spoken by Mr. Cannon on 8 November 1984 and his view that no inducement occurred, which are views shared by this Court, the effect of the amendments sought is fruitless and futile. For this reason as well this Court does not allow the application to amend.

Whether the Silence of Mr. Cannon Constituted Misleading Conduct

59. The appellants in their statement of claim alleged that the respondent deliberately refrained from informing them that Mr. Cardell's strawberry farm business had not earned and was not then earning substantial profits or any significant profits at all and further that Mr. Cardell was indebted to the respondent in the order of $240,000. Accordingly, it was said that the silence of the respondent in respect of these matters constituted misleading conduct within the meaning of that expression in s. 52 of the Act.

60. Whether Mr. Cannon's evidence be accepted or whether Mr. Somerset's evidence be accepted, it is clear that at no time did Mr. Cannon in any meeting in October or November 1984 inform the appellants or any of them either that Mr. Cardell's business was profitable or of his indebtedness to the respondent.

61. The trial Judge did not deal directly with the allegations, presumably because his Honour found that the first meeting between Mr. Somerset and Mr. Cannon took place on 8 November 1984, after the Somersets had purchased "Gunna Doo", and further that nothing said by Mr. Cannon had induced the appellants to do anything.

62. In one sense the allegation in the statement of claim that the respondent had refrained from informing the appellants that the property "Gunna Doo" was not earning profits was but the converse of the positive allegation that Mr. Cannon had informed the appellants that the business was a sound and prosperous one. Thus, if it had been found that Mr. Cannon had so informed the appellants, that conduct itself would admittedly have been misleading, and, subject to the question of inducement, would have entitled the appellants to succeed in their claim without further or separate consideration of the issue of the respondent's silence.

63. However, it is possible to consider the silence of Mr. Cannon separately from the issue of whether he positively represented that the business was sound and prosperous.

64. The question of the circumstances in which silence can constitute misleading conduct cannot be said to have been definitively settled.

65. In Rhone-Poulenc Agrochimie S.A. & Anor. v. U.I.M. Chemical Services Pty. Ltd. & Anor (1986) 68 ALR 77 Bowen C.J. at 84-85, while pointing out that the question whether silence constituted conduct which was misleading or deceptive depended upon the circumstances of a particular case, pointed to the common law where it has been held that silence may constitute misrepresentation where there is a legal obligation to divulge. His Honour continued:

"There are particular relationships which have been

held to raise an obligation of disclosure.

Contracts uberrimae fidei come to mind as examples

of this type of relationship. Indeed, there are

many particular relationships which raise duties

of disclosure. These include trustee and

beneficiary, solicitor and client, principal and

agent and guardian and ward. Where an obligation

to disclose arises an omission to inform the

person to whom the obligation is owed may, perhaps

on the basis that that person is entitled to

assume some fact or circumstance which does not

exist, constitute or be an ingredient in

misleading conduct."

66. Jackson J., after pointing out that s. 52(1) extended beyond the general law of misrepresentation, said at 102-3:

"It follows from what I have said that a vendor's

silence in circumstances where the common law

would not impose on him a duty to speak may

constitute conduct which is, or is likely to be,

misleading or deceptive in terms of s. 52(1).

Indeed one sees that in the statements of the

common law principle contained in Story on

Contracts vol 1, ss 516 and 517 and adopted by

Cockburn C.J. in Smith v Hughes, supra, at p 604

and by Griiffith C.J. in W. Scott, Fell & Co. Ltd.

v Lloyd, supra, at p 577, it is recognised in s.

516 that the vendor's silence may 'operate as an

injury to the party from whom it is concealed',

and in s. 517 that 'his (the vendor's) silence may

operate virtually to deceive the vendee'. Of

course, not every instance of silence on the part

of a vendor means that he has engaged in conduct

which is misleading or deceptive. It must be the

conduct of the vendor, ie the vendor's silence,

which induces or is likely to induce the mistaken

view on the part of the potential purchaser."

67. More recently in Henjo Investments Pty. Ltd. v Collins Marrickville Pty. Ltd. (1988) ATPR 40-850 Lockhart J., with whose reasons Burchett J. agreed, held in the circumstances of that case that there was a duty on the part of the vendor of a restaurant business to inform a purchaser that the business was licensed in respect of a smaller number of tables than in fact were used in the restaurant and that the silence of the vendor in those circumstances constituted misleading conduct. At 49,153 his Honour discussed the relevant principles as follows:-

"At common law, silence can give rise to an

actionable misrepresentation where there is a duty

upon the representor to reveal a matter if it

exists, and where the other party is therefore

entitled to infer that matter does not exist from

the silence of the representor: W. Scott, Fell &

Company Ltd.v Lloyd [1906] HCA 79; (1906) 4 CLR 572 per Griffith

C.J. at p 577; Halsbury's Law of England, 4th ed.,

Vol. 31, para. 1052. The circumstances in which

silence may constitute misleading conduct under

the Act were referred to in Rhone-Poulenc

Agrochimie SA & Anor v UIM Chemical Services Pty.

Ltd. & Anor. (1986) ATPR (Digest) 46-010; (1986)

12 FCR 477. That case established that silence

may be relied on in order to show a breach of sec.

52 when the circumstances give rise to an

obligation to disclose relevant facts: see Bowen

C.J. at ATPR p 53,047; FCR p 490, Lockhart J. at

ATPR p 53,048; FCR p 504 and Jackson J. at ATPR p

53,049; FCR p 508. The duty to disclose is not

confined to cases where there are particular

relationships, such as trustee and beneficiary or

solicitor and client, principal and agent and

guardian and ward. There is no useful purpose in

seeking to analyse the circumstances in which the

duty to disclose will arise as this must depend on

the facts of each case."

68. In the present circumstances, however, it could not be said that there was any duty on the part of Mr. Cannon to impart to the Somersets any information at all concerning the business or financial affairs of Mr. Cardell. Quite the contrary. Mr. Cannon as a bank manager had an implied contractual duty to keep confidential the business and financial affairs of Mr. Cardell: Tournier v National Provincial and Union Bank of England (1924) 1 KB 461; Commissioner of Taxation v Australia and New Zealand Banking Group Limited; Smorgon & Ors. v Commissioner of Taxation 143 CLR 499 ("Smorgon's Case").

69. A bank's duty of confidence is not absolute. It may, as in Smorgon, be overridden by statute or by the express or implied consent of the customer. It may be overridden where the bank has some duty to the public generally to disclose. In Tournier, Bankes L.J. at 473 expressed the qualifications to the contractual duty of confidentiality under four heads:-

"(a) Where disclosure is under compulsion by law;

(b) where there is a duty to the public to

disclose; (c) where the interests of the bank

require disclosure; (d) where the disclosure is

made by the express or implied consent of the

customer. An instance of the first class is the

duty to obey an order under the Bankers' Books

Evidence Act. Many instances of the second class

might be given. They may be summed up in the

language of Lord Finlay in Weld-Blundell v

Stephens (1920) AC 956, 965, where he speaks of

cases where a higher duty than the private duty is

involved, as where 'danger to the State or public

duty may supersede the duty of the agent to his

principal'. A simple instance of the third class

is where a bank issues a writ claiming payment of

an overdraft stating on the face of the writ the

amount of the overdraft. The familiar instance of

the last class is where the customer authorizes a

reference to his banker."

70. In our view the present circumstances did not fall within any of the four qualifications to the duty stated by Bankes L.J., and, for Mr. Cannon to have said anything at all about the business or affairs of his customer Mr. Cardell, would have been in clear breach of Mr. Cannon's obligations to him.

71. We should point out that there was no evidence from which it could be inferred that Mr. Cardell had expressly or impliedly authorised Mr. Cannon to communicate any matter to the Somersets. Although it appears that Mr. Cardell had recommended to Mr. Somerset that he approach Mr. Cannon for finance, Mr. Cannon denied that he had been told this and in any event it seems highly unlikely that Mr. Cardell, who acted throughout fraudulently in his dealings with Mr. Somerset, would have authorised Mr. Cannon to reveal the truth and thus frustrate his fraudulent intentions.

72. It was, however, argued that, once Mr. Cannon had at the meeting of 8 November 1984 made the statement about the excellent cash flow of the business, s. 52 imposed upon him the obligation to go on and give the true picture in relation to Mr. Cardell's business. Putting to one side that the appellants' case was never pleaded in this way in the hearing below, it is only another way of saying that the express statement as to the cash flow could itself, by being a half truth, be misleading or deceptive conduct. For the purpose of s. 52 that proposition could hardly be doubted. However the issue of silence is not raised independently in such a formulation of the appellant's case.

73. In our view the mere failure of Mr. Cannon to inform the Somersets that the business was unprofitable or of the indebtedness of Mr. Cardell to the bank was not in the circumstances of the present case misleading or deceptive conduct within s. 52 of the Act.

74. A finding that conduct is misleading or deceptive will not necessarily result in an applicant being entitled to recover damages, for s. 52 of the Act does not itself provide a remedy in damages; that remedy is to be found in ss. 82 and 87 of the Act. The right to damages arises where the applicant to the Court has suffered loss or damages "by" the conduct that was in contravention of s. 52. The relationship between the damages and the impugned conduct is expressed in the word "by" which signifies no more than that the loss or damage has to have been brought about by virtue of the conduct which is in contravention of s. 52.

75. No doubt, by way of analogy, the general law of deceit readily suggests the necessity that the misleading or deceptive conduct induce the situation which gives rise to damages, albeit that the conduct complained of need not be the sole inducement: cf Gould & Anor. v Vaggelas & Ors (1985) 157 CLR 215 at 236 per Wilson J.; but the connection to be found in the section and expressed in the word "by" is not necessarily limited by the common law concept of inducement. For present purposes it is sufficient to say that a person claiming damages must show either that he has been induced to do something or to refrain from doing something which gives rise to damage or has been influenced to do or refrain from doing something giving rise to damage by the conduct contravening s. 52: cf. Henjo Investments, supra, at 49,153-4, even if the issue of reliance may, as Lockhart J. indicated in Henjo, be more complex than the formulation of the test in terms of "influence" suggests.

76. The trial Judge found, as we have already said, that the first meeting between Mr. Cannon and the Somersets (apart from an initial introduction on 6 November) took place on 8 November 1984, some days after the appellants had entered into the contract to purchase "Gunna Doo" and paid $500,000, although there remained a further few days before the balance of purchase moneys of $125,000 plus adjustment was to be paid. In fact the payment of $125,000 was delayed until 14 March 1985.

77. Since in our view the appellants should be confined to the case presented by them below, the finding that there was no representation that Mr. Cardell's business was a sound and prosperous one and therefore no conduct by the respondent which was misleading or deceptive makes it unnecessary to consider whether the necessary connection between the conduct and the circumstances giving rise to damage was present. The appellants sought as we have already said, to argue that Mr. Cannon had represented to the Somersets that the business had an excellent cash flow, that representation being, it was said, conduct that was misleading or deceptive and which gave rise to damage.

78. Because the trial Judge had found that the statement as to cash flow was made on 8 November 1984 at the first meeting held between Mr. Cannon and Mr. Somerset the appellants argued that even if that finding be accepted, as we think it must, the appellants were as a matter of fact "influenced" by this representation in four ways causing them damage:-

(a) in not rescinding the contract with Mr. Cardell to

purchase "Gunna Doo";

(b) in proceeding to purchase the next day at auction

"Glenhaven";

(e) in expending funds on a hydrophonic shed and by

developing "Glenhaven" and "Gunna Doo";

(f) by borrowing funds from the respondent to enable

these expenditures to be met.

79. Clearly the statement of Mr. Cannon on 8 November 1984 could not have influenced the appellants in signing the original contract to purchase "Gunna Doo" which was entered into on 2 November 1984. The appellants were bound to complete that contract and pay the balance of the purchase price unless they had grounds to rescind it. But neither the making nor the not making of the statement by Mr. Cannon would be relevant to the rescission of that contract. The true gravamen of the appellants' case is not that the statement as to cash flow influenced them to keep that contract on foot; but that, if they had been advised by the respondent that Mr. Cardell had been guilty of misrepresentation, then they could have put an end to that contract. Yet as we have said, the failure of the respondent to give that advice was not misleading or deceptive conduct under s. 52 of the Act in the circumstances of the present case.

80. The second matter complained of is that the statement by Mr. Cannon induced or influenced the Somersets into purchasing "Glenhaven" at the auction the next day.

81. The trial Judge found as a fact that the Somersets were not induced to purchase "Glenhaven" by anything said to them by Mr. Cannon. They did so because their decision to purchase the property had been made earlier and they had in fact entered into a contract with the owner to purchase the property before discovering that the respondent proposed to auction it as mortgagee exercising power of sale. There was further evidence of Mrs. Somerset that, subject to financial constraints, she and her husband desired to purchase "Glenhaven" with or without "Gunna Doo" or any other farming property they might purchase. In these circumstances the finding of his Honour that the decision to purchase "Glenhaven" was not conditional upon the purchase of "Gunna Doo", even if the prospect of operating the properties in conjunction was a relevant factor, is sufficient to negate the submission that the proceeding with the purchase of this property, the development of it and the finance for its purchase and development were induced or influenced by Mr. Cannon's statement.

82. His Honour did not deal expressly in his judgment with the hydrophonic shed and improvements to "Gunna Doo". However, we note that the expenditure of funds in this way had been the subject of discussion between Mr. Cardell and the Somersets well before 8 November 1984 and appeared in the future cash flow projections prepared by Mr. Cardell and given to the Somersets. In these circumstances we are unable to infer in the absence of any other evidence that Mr. Cardell's statement as to cash flow influenced in any way the expenditure on these items or the obtaining of finance in respect of them.

83. The appellants submitted that, whatever the outcome of their appeal as to the claim under s. 52, they were entitled to succeed on their defence to the cross claim which arose out of provisions in the loan agreements and mortgages providing for interest. The appellants had entered into three loan agreements and pursuant to those loan agreements a number of securities by way of mortgage. Each of the loan agreements contained a clause 7 which in paragraph (a) provided for interest to be payable on the daily balance owing and in paragaraph (b) provided:

"Interest shall initially be calculated at the rate

set out in Item 3 in the Schedule but the Bank may

at any time hereafter at its sole discretion vary

either by way of increase or decrease the said

rate of interest conforming with general movements

in the Bank's interest rates without any

obligation on the Bank to notify you of such

variation."

84. The Schedule to each agreement provided for a rate of 15.25% and referred to specific securities by way of mortgage that were given at the same time as the agreements were entered into. Each mortgage contained a clause, (clause 35(a)) which was in the following form:

"The Mortgagor shall pay interest on the respective

moneys and amounts referred to in the definition

of the moneys hereby secured during the period

that they are owing or remain unpaid to the Bank,

calculated at the rate from time to time charged

by the Bank and computed from the day or

respective days of their being advanced or paid or

becoming owing (whichever first occurs)."

85. In the circumstances in which the documents were prepared and executed the loan agreements and the mortgages should be read and construed together: see Smith v Chadwick (1882) 20 ChD 27 at 62,63. In so far as there was any conflict between them the particular terms of the loan agreements should prevail over the general and standard terms of each of the mortgage documents: see North Stafford Steel, Iron and Coal Company (Burslem) Limited v Ward (1868) LR 3 Exch 172, Ex Ch, per Willes J. at 177; and Adamastos Shipping Co. Ltd. v Anglo-Saxon Petroleum Co. Ltd. (1959) AC 133, (1958) 1 All ER 725.

86. However we do not think that there is any conflict between the two clauses. Construed together they entitled the respondent to increase or reduce interest provided that the amount actually charged to the appellants was in accordance with the rate charged in similar circumstances to other customers of the bank so that, if the bank's rate or facilities to other customers increased by a percentage, then the rate charged to the appellants could similarly be increased.

87. It was submitted for the appellants that each of these clauses was void for uncertainty in that each permitted the respondent at its discretion to charge such amount of interest as it wished without reference to an external standard or, alternatively, that each clause was so obscure that it could not be given a definite or precise meaning. Reliance was placed on Scammell and Nephew Ltd. v Ouston (1941) AC 251, 268; Thorby v Goldberg [1964] HCA 41; (1964) 112 CLR 597, 613; Godecke v Kirwan [1973] HCA 38; (1973) 129 CLR 629 at 647-8 and Placer Development Ltd. v The Commonwealth [1969] HCA 29; (1969) 121 CLR 353 at 356, 361, 371-2.

88. Although the appellants' submissions proceeded on the basis that only one principle of law, that of uncertainty, was involved and that this principle operated to render the interest clause void (it was not disputed that the clause was, if void, severable) we are inclined to the view that the appellants' submissions to us involved three quite distinct principles.

89. It is beyond dispute that if parties to a contract do not agree upon a fundamental term there will be no contract at all. A purported contract by A to sell Blackacre to B for a price to be agreed upon will not constitute a contract between A and B. And if the terms of a so called contract are so vague that no precise meaning can be attributed to them, there will be no enforceable contract between them. The case of Scammell & Nephew Limited v Ouston, supra, is an illustration of this principle.

90. There is a second principle that it is an objection to a contract if one person is left to choose whether he will perform it: Thorby v Goldberg, supra. Thus a purported contract between A and B whereby A agreed to sell Blackacre to B if A so desired would be an unenforceable contract to sell Blackacre: it might in some circumstances, if for consideration, give A a right of first refusal. In one sense the reason why in such a case there is no contract may not depend on certainty; it may rather be said that the consideration given is illusory.

91. In Godecke v Kirwan at 646 Gibbs J. as his Honour then was, referred to this second principle as being:

"where words which by themselves constitute a

promise are accompanied by words which show that

the promisor is to have a discretion or option as

to whether he will carry out that which purports

to be the promise, the result is that there is no

contract on which an action can be brought",

citing Loftus v Roberts (1902) 18 TLR 532 at p 534 (in turn cited in Thorby v Goldberg).

92. A third but related principle is that there can be no concluded bargain if a vital matter has been left to the determination of one of the parties: Godecke v Kirwan (1973) 129 CLR per Gibbs J. at p 647. Whether "interest" is, in the context of a loan, a vital matter, was not debated before us; but it was not suggested that an agreement for a loan at such rate of interest as the lender required did not involve a concluded bargain vis a vis the principal of the loan; rather it was said that interest alone was not recoverable in such a case. Indeed, the parties are in agreement as to what the correct interest rate is, in the present case, if the clause as to interest is otherwise valid.

93. Accordingly the present is not a case which falls within the first principle. Neither, however, is the present a case where the respondent is given a discretion whether or not to perform the contract within the principle in Loftus v Roberts, supra. Thus if the right to interest be void in the present case it must be because it infringes the third principle to which we have referred.

94. Whether there be three principles or but one, it is clearly established that where an agreement produces a liability to pay a sum of money and the amount is not determined by the agreement the agreement will ordinarily be construed as requiring a reasonable sum to be paid. Provided the parties select some criteria which is capable of objective determination, the Court will enforce their agreement: cf. per Windeyer J. in Placer Development Limited v The Commonwealth [1969] HCA 29; (1969) 121 CLR 353 at 371-2. This is a reflection of the traditional doctrine that courts will endeavour to adopt a construction of a contract so as to preserve its validity rather than to frustrate the intentions of the parties. Thus as in Meehan v Jones [1982] HCA 52; (1981-2) 149 CLR 571 a contract entered into subject to satisfactory finance will be construed in such a way not that it entitles the party having the benefit of the condition to get out of the contract at his own whim but rather that the judgment of the purchaser "must be reached honestly, or honestly and reasonably" (per Mason J. at 590).

95. Whatever may be the case where a loan agreement provides that the lender may select any interest rate it pleases, the present is not that case. Here the rate of increase or decrease of interest must conform to the general rates of interest charged to customers of the bank, that is to say there is an objective market standard to be applied at all times. In these circumstances we do not think that it can be said that any of the three principles sought to be applied have application. As the trial Judge said, and we agree, the present clauses as to interest are "not to be construed as giving to the cross claimant a power at large. A borrower may challenge any increase on the basis that it has been fixed otherwise than in conformity with the general movements referred to".

96. Accordingly the clause in our opinion is not void for uncertainty and the appellants' argument as to the cross claim must fail.

97. Counsel for the respondent submitted to us that this Court should make an additional order to secure the respondent's right to possession of "Gunna Doo" and "Glenhaven". The trial Judge ordered that the respondent as mortgagee is entitled to possession of those properties. Although expressed as an order it is in substance a declaration, but it does not in terms order that the respondent recover possession of the properties. Counsel for the respondent sought orders which correspond with those sought in the application which commenced these proceedings.

98. It was not suggested by counsel for the appellants that these orders should not be made in the event of the appeal from the trial Judge's orders on the cross claim being dismissed. In our opinion the orders should be made. Hence we shall add to the Orders made by his Honour as orders 3A and 3B the following:

3A. The Cross Claimant recover possession of the property

being Lot 3 on Registered Plan No. 154075 and being the

whole of the land contained in Certificate of Title

Volume 5569 Folio 208 consequent upon the determination

of the tenancy created by attornment under the terms and

conditions of the Bill of Mortgage dated 14 March 1985

in respect of the said land and executed by the First

Cross Respondent in favour of the Cross Claimant.

3B. The Cross Claimant recover possession of the property

being the whole of the land contained in Certificate of

Title No. 270171 Volume 1507 Folio 161 consequent upon

the determination of the tenancy created by attornment

under the terms and conditions of the Bill of Mortgage

dated 14 March 1985 in respect of the said land and

executed by the Second Cross Respondents in favour of

the Cross Claimant.

1. That the orders of Neaves J. made on 29 September 1988

be varied by adding Orders 3A and 3B as follows:

3A. The Cross Claimant recover possession of the

property being Lot 3 on Registered Plan No. 154075

and being the whole of the land contained in

Certificate of Title Volume 5569 Folio 208

consequent upon the determination of the tenancy

created by attornment under the terms and

conditions of the Bill of Mortgage dated 14 March

1985 in respect of the said land and executed by

the First Cross Respondent in favour of the

Cross Claimant.

3B. The Cross Claimant recover possession of the

property being the whole of the land contained in

Certificate of Title No. 270171 Volume 1507 Folio

161 consequent upon the determination of the

tenancy created by attornment under the terms and

conditions of the Bill of Mortgage dated 14 March

1985 in respect of the said land and executed by

the Second Cross Respondents in favour of the

Cross Claimant.

2. That the appeal be dismissed;

3. That the appellants pay the costs of the respondent of

the appeal.

Court of Australia Act 1976

Re Kabwand Pty Ltd; EJR Pastoral Company Pty Ltd; Edward Plantagenet Somerset and Elsie Joy Somerset v National Australia Bank Limited [1989] FCA 131

At a glance

Court

Decision date

Before

Source

Judgment (143 paragraphs)

Re Kabwand Pty Ltd; EJR Pastoral Company Pty Ltd; Edward Plantagenet Somerset and Elsie Joy Somerset v National Australia Bank Limited [1989] FCA 131 (21 April 1989)

Parties

Legislation Cited (8)

Cases Cited (6)