Stern v National Australia Bank

Federal Court of Australia|1999-07-01|Before: McClelland J, Tamberlin J

Background 3 The time-frame over which the relevant events occurred is between 1986 and 1996. The applicants are brother and sister. They are Sydney residents and are the children of Fani Pollak who died on 18 November 1987 and Mihail Pollak who predeceased her. 4 On 17 September 1986, the Bank, in California, made an interest only loan to Fani Pollak of $US 3 million ("the loan") which was repayable on 31 July 1993 or at an earlier date in the event of acceleration under what is known as a "due on sale" clause. The loan was secured by a mortgage over property in the Los Angeles suburb of Van Nuys. Erected on the land were office buildings and residential buildings with a car park. Mrs Pollak held the property partly in her own right and partly as executrix of the estate of her late husband, Mihail. The loan was documented by a promissory note given by Fani Pollak on 17 September 1986 (the promissory note). In addition, she executed a Deed of Trust and Leasehold Deed of Trust and Security agreement and Fixture filing with Assignment of Rents (the Deed of Trust). The loan documents were executed by Fani Pollak, both in her own right and, as executrix of the estate of Mihail Pollak. 5 Under the will of Fani Pollak, Mrs Ilana Stern was appointed executrix of her estate and the applicants were the two sole beneficiaries. At that time the estate was said to have a value of $ 64 million. 6 Clause 2.26 of the Deed of Trust is of central importance in this matter and reads as follows: "2.26 In the event that the interest of the Trustor in the Property, or any part thereof, or any interest therein is sold, agreed to be sold, encumbered, conveyed, alienated or otherwise transferred by the Trustor, whether by operation of law or otherwise, the Note, irrespective of the maturity dates expressed therein, at the option of the Beneficiary [the Bank], and without demand or notice, shall immediately become due and payable…" 7 An important issue in the present proceeding is whether cl 2.26 operated under Californian law to "accelerate" the due date for re-payment of the loan upon the death of Fani Pollak or upon the distribution of the assets of the estate under her will. 8 During 1986, there were negotiations in relation to the terms of the Deed of Trust in which the applicant, Mr Joseph Pollak, was involved. As a consequence of these negotiations a letter, dated 22 September 1986, was delivered by the Bank addressed to Fani Pollak, which reads: "This letter is to confirm the agreement of National Australia Bank that a distribution or other transfer of the real property described in the … Deed of Trust from Fani Pollak, as Executor, to Fani Pollak, a widow shall not constitute a transfer of such property described in paragraph 2.26 of such Deed of Trust." 9 During 1986 through to 1996 both Mrs Fani Pollak and the applicants had retained a Los Angeles law firm, Gibson Dunn & Crutcher ("Gibson") and the Bank had retained the Californian firm of Lillick McHose & Charles ("Lillick"). 10 The Bank records indicate that as at 17 December 1987, the applicants had informed the Bank that the family did not intend to sell the Van Nuys property and the Bank noted that prepayment of their loan was therefore not expected in the near future. 11 During 1988 there were negotiations between the Bank and the applicants arising from an application by the applicants for a new loan of $US 1 million. This loan was proposed to be secured by property at Burbank, also in the Los Angeles area. The documentation for this transaction was closely modelled on the documentation used in the Fani Pollak loan of September 1986. 12 On 29 March 1988, the Superior Court of California admitted the will of Fani Pollak to probate. Letters testamentary were then filed on 8 April 1988. As will be discussed later, there then followed a period of four months within which claims against the estate were required to be made under Californian law. It is common ground that the Bank made no claim within this period. 13 During 1988, the applicants' dealings with the Bank were largely with Mr Steve Kirschbaum, who was Vice-President, Corporate, of what is described as the Los Angeles Agency of the Bank. Other sections of the Bank which were involved in the consideration of the application, were the Americas Administration in New York, and the local bank manager in Double Bay, a suburb of Sydney. Mr Kirschbaum died some time prior to the matter coming on for hearing. 14 At "some time" between January and March 1988, Dr Pollak says that he had a telephone conversation with Mr Kirschbaum in which Mr Kirschbaum told him that the Bank was empowered to call the loan due and payable on the death of the borrower, but that the Bank had decided not to call the loan (on the Van Nuys property) due provided that the applicants signed personal Guarantees and Assumption Agreement. It is claimed that it was also said that when the assumption agreements were later signed that would extinguish any personal liability of the applicants to the Bank. He says that Mr Kirschbaum threatened that unless this was agreed to the Bank would call the loan due. Acting on this statement, Dr Pollak says that he later signed a guarantee, letter agreement and assumption agreement. This conversation is not admitted by the Bank. There is no documentary evidence to support either the occurrence or the contents of this conversation in 1988. 15 It was in about early May 1988 that Joseph Pollak applied for the additional $US 1 million loan on the security of the Burbank property already referred to. An internal Bank memo of 23 June 1988 records in relation to the Burbank loan that: "The request has been lodged by Dr and Mrs Stern, the sole beneficiary, and according to our understanding, this loan and the existing US$3 million term loan will be assumed by the Sterns upon settlement of the estate." 16 The reference to "Dr and Mrs Stern" is incorrect and it should be to Dr Pollak and his sister Mrs Stern, as should the reference to "the Sterns". Joseph Pollak and Ilana Stern were the sole beneficiaries of the residue of the estate of Fani Pollak 17 Also in that memorandum from the New York office to Los Angeles Agency of the Bank, the question is asked: "3. Can we claim repayment of our existing loan or does the loan have to run its full course before we can be repaid? 4. Can the estate be settled prior to repayment of our loan? If so, what is the status of our loan under such circumstances?" 18 The response from Los Angeles Agency was: "(3) It is not intended that we be repaid from the Estate. These deals are stand alone with recourse to the projects we finance, with repayment from the income derived." 19 Internal communications within the Bank indicate that the Bank was not certain of its position at this time. There is a file note which indicates that the existing US$3 million term loan was not subject to acceleration under Californian law while the judicial process of settling the estate continued. This record indicates a different view to that allegedly expressed by Mr Kirschbaum to the effect that a loan was due and payable on the death of Fani Pollak and lends support to the conclusion that the conversation did not take place. 20 On 29 June 1988, the New York office wrote to Los Angeles Agency seeking confirmation that Mrs Stern would become the Bank's "obligor" with respect to both loans when the estate is settled. New York also wanted, at this time, financial information concerning Mrs Stern and her credit-worthiness to support her obligations as the obligor on the two loans in question. In early July 1988, the Bank sought further details of the loan and this led to a conversation between Dr Pollak and Mr Connelly of the Bank's Double Bay branch. On 11 July 1988 Mr Connolly recorded in a note to the Regional Manager of the Bank that the applicants were of the opinion that the new loan and the existing loan were not to be linked. It also recorded that the beneficiaries requested that a clause be introduced into the loan that upon the winding up of the estate of Fani Pollak in the US, the two loans should be automatically transferred to the names of the applicants under the existing terms and conditions. 21 On 12 July 1988 and 11 August 1988 the personal financial information sought by the Bank was furnished on behalf of the applicants. In a file note of 25 August 1988 of the Bank it is recorded that the Bank had been advised that both beneficiaries, Mrs Stern and Mr Pollak, would be obligors for both loans when the estate settled, and the New York Assistant Vice President recorded that he had asked Los Angeles to confirm whether the obligations would be joint and several. The New York office considered that the credit-worthiness of the estate was supported by the property value. The file note then recommended that subject to clarification of whether the obligations of Mr and Mrs Stern should be joint and several, the Burbank loan for $US 1 million could proceed. 22 The Bank's concern as to clarification was also reflected in an internal memo of 30 August 1988. A New York office file note indicates that Los Angeles Agency was not certain what form the documentation would take to ensure the applicants would be the obligors of record for both loans. 23 On 14 September 1988, Lillick, acting as attorneys for the Bank, sent documents to Gibson, acting for the applicants, which included a Promissory Note, Deed of Trust, guarantees and a Financing Statement in relation to the proposed $US 1 million loan. The letter records that the Promissory Note and Deed of Trust were based on the documents used in connection with the $US 3 million loan from the Bank to Fani Pollak and Fani Pollak as executor. 24 Prior to 21 September and after negotiations with Dr Pollak, the Bank agreed to vary cl 2.26 of the Deed of Trust in relation to the Burbank loan by adding the following words: "[…including without limitation,] a transfer by Trustor to both Elenka Ilana Stern and Joseph Pollak (collectively, "Stern and Pollak") …Notwithstanding any provision in this Paragraph to the contrary, a transfer of the property to both Stern and Pollak shall not constitute a Transfer if: (i) both Stern and Pollak complete, execute and deliver to Beneficiary an assumption agreement in the form of Exhibit A attached to the Note and a UCC-1 financing statement and (ii) cause the issue on title endorsements insuring the continuing priority of this Deed of Trust, in form and substance reasonably satisfactory to Beneficiary." 25 On 22 September 1988 revised Burbank documents were sent by Lillick to Gibson acting for the applicants. 26 Meanwhile in relation to the assumption of the Van Nuys loan, on 18 October the Bank's attorney sent to the applicants' attorneys documents "to be used in connection with an assumption" by the applicants "of a $3,000,000 loan made to Fani Pollak and Fani Pollak as Executor of the Estate of Mihai Pollak". The documents comprised a letter agreement and guarantees to be executed by the applicants. In a file note of 29 November the Bank records that an assumption agreement for the $US 3 million loan was being drafted. It noted that the beneficiaries had volunteered to guarantee the loans until the assumption agreements are drawn up. The record further notes that the recent $US 1 million loan to the estate of Fani Pollak was to be made only on the condition that the $US 3 million loan was assumed. 27 On 6 December 1988, Lillick, for the Bank, sent to the applicants' agent Mr Sam Patronete at the Van Nuys building a letter agreement (the "Letter Agreement") and two guarantees (the "Guarantees") in respect of the $US 3 million loan for execution by the applicants. The Letter Agreement was dated 19 October 1988 and reads as follows: " October 19, 1988 Elenka Ilana Stern 43 Kambala Road Bellevue Hill Sydney NSW Australia 2023 Joseph Pollak 69 Victoria Rd Bellevue Hills [sic] Sydney NSW Australia 2023 Re: That certain loan ("Loan") from National Australia Bank, Limited, acting through its Los Angeles Agency ("Lender"), to Fani Pollak, a widow and Fani Pollak, as Executor of the Estate of Mihai Pollak, also known as Mihail Pollak, under the Independent Administration of Estates Act as filed in the Superior Court, County of Los Angeles, Probate Case No. P690628, in the original principal amount of $3,000,000 _____________________________________________ Dear Ms Stern and Mr Pollak: This letter is to confirm the agreement between you and Lender. The Loan is evidenced by that certain Promissory Note dated September 17, 1986 ("Note") and secured by that certain Deed of Trust and Leasehold Deed of Trust and Security Agreement and Fixture Filing with Assignment of Rents dated September 17, 1986 and recorded October 2, 1986 as Instrument No. 86-1327881 in the Official Records of Los Angeles County, California ("Deed of Trust") covering those certain fee and leasehold estates described therein (the "Property"). You have informed Lender that the interest in the Property of Fani Pollak, as Executor of the Estate of Mihai Pollak, also known as Mihail Pollak, under the Independent Administration of Estates Act, as filed in the Superior Court, County of Los Angeles, Probate Case No. P690628, was transferred to Fani Pollak. You have further informed Lender that Fani Pollak is deceased and title to the Property is currently vested in Elenka Ilana Stern, as Executrix for the Estate of Fani Pollak under the Independent Administration of Estate's Acts filed in the Superior Court, County of Los Angeles, Probate Case No. P721538 ("Stern, as Executrix"). Notwithstanding any provisions in Paragraph 2.26 of the Deed of Trust to the contrary, a transfer of the Property to both Elenka Ilana Stern and Joseph Pollak ("Stern and Pollak") shall not constitute a transfer in violation of Paragraph 2.26 of the Deed of Trust if: (i) Stern and Pollak complete, execute and deliver to beneficiary an assumption agreement in the form of Exhibit A attached hereto and a UCC-1 Financing Statement and (ii) cause the issuance of title endorsements insuring the continuing priority of the Deed of Trust on the Property in form and substance reasonably satisfactory to the Lender. Concurrently with the execution of this letter by the parties hereto, Elenka Ilana Stern, an individual and Joseph Pollak, an individual, shall guaranty the Loan pursuant to guaranties of even date herewith ("Guaranties"). The Guaranties shall terminate upon your assumption of the Loan in accordance with the terms of this letter. Please confirm you agreement to the foregoing by the execution of a counterpart of this letter at the place indicated below and return such counterpart to the Lender. Very truly yours, NATIONAL AUSTRALIA BANK, LIMITED acting through its Los Angeles Agency By: (Signature) Title: Vice President The foregoing is accepted and Agreed to by the undersigned. (Signature) Elenka Ilana Stern (Signature) Joseph Pollak" (Emphasis added) 28 In terms, the above document records a negotiated amendment to the Deed of Trust and meets a request insisted on by Dr Pollak to the effect that the Guarantees should terminate upon assumption of the loan in accordance with the terms of the Letter Agreement. The earlier paragraph beginning "Notwithstanding" reflects the modification made earlier in relation to the Burbank documentation for $US 1 million. Under the guarantee documents relating to Van Nuys signed by the applicants they undertook to personally guarantee the obligations of the borrower "Fani Pollak". Attached to each of the guarantee documents signed by the applicants there was a copy of the proposed assumption agreement which was proposed to replace the Guarantees. This draft assumption agreement provided that Stern and Pollak would assume jointly and severally all the obligations of Fani Pollak under the original loan documents and would agree to be bound by all the terms of those documents. 29 During 1989 the Bank obtained further up-to-date financial information from the applicants. Thereafter, nothing of significance for present purposes occurred during 1989 or 1990 apart from some interim distributions from the estate. 30 On 6 May 1992 the Bank noted after discussion with Dr Pollak that it was pressing for details of the financial position of the applicants. On 26 May 1992 New York requested Los Angeles Agency to press for finalisation of both loans as soon as possible to ensure full repayment by the maturity date (31 July 1993). A note to this effect was signed by the Senior Vice President in the New York office. On 28 May 1992, in a file note, Mr Hutchieson of Los Angeles Agency, referred to the Bank's "mandate" for repayment of the loan in mid-1993. 31 In a letter of 8 June 1992 to Ilana Stern, Mr John Hutchieson, who was then Senior Vice-President of Los Angeles Agency, sought further details and valuations for other property. The letter pointed out that the Van Nuys $US 3 million loan was due for repayment on 31 July 1993 and that the Bank needed to know what sources of income were available to service interest payments and repay the principal. That letter also contained a draft copy of the assumption agreement which had been annexed to the earlier Guarantees signed by the parties. Mr Hutchieson advised that the assumption agreements must be signed by both Mrs Stern and Dr Pollak once the estate had been resolved. A draft copy of the assumption agreement was also sent to Dr Pollak by separate letter. 32 On 25 June Mr Hutchieson wrote a follow up letter pointing out that he had not received the financial information and he suggested that Mrs Stern might contact either himself or Mr George Hayrapetian, an Assistant Vice-President, who began work for the Bank on 15 June 1992. The information was sent by Mrs Stern showing properties whose equity value was stated to be $9,245,000. 33 On 21 July 1992 Dr Pollak requested three amendments to the assumption agreements. One of these was to add a final paragraph to them as follows: "Stern and Pollak are hereby irrevocably released by lender from any and all obligations under that certain Guarantee dated … executed by Stern and Pollak in favour of Lender. " 34 This again reflects the anxiety of Dr Pollak to be released from the guarantee. 35 On 23 July 1992, Mr Hayrapetian replied pointing out that under the Letter Agreement of 19 October 1988, the Guarantees would terminate upon assumption of the loan and that therefore it was not necessary to worry about the Guarantees being enforced. On 30 July Dr Pollak intimated in a letter to Mr Hayrapetian that he had a concern about the lender's consent. The Bank's legal counsel required the language to remain the same and Dr Pollak on 13 August returned the duly executed assumption agreements, one for the Van Nuys loan and one for the Burbank loan. It is the assumption agreement on the Van Nuys loan (the "Assumption Agreement") which is in issue in these proceedings. At no time did either of the applicants suggest in the correspondence that they were not bound by the terms of the Assumption Agreement or that they understood they would not incur any personal liability under it. 36 Misleading conduct was alleged by the applicants arising from discussions with Mr Hayrapetian. It is alleged that in or about late May 1992 (which was three weeks before Mr Hayrapetian commenced employment with the Bank) Dr Pollak had a telephone conversation in which Mr Hayrapetian said to him that the Bank was in difficulty and needed the assumption agreements executed because no claim had been notified by the Bank within the required four month claim period which expired on 8 August 1988. Dr Pollak says that Mr Hayrapetian agreed in that conversation to extend the loan for a five or seven year term. Further, upon being told by Dr Pollak that any assumption agreement would not be signed unless the Bank agreed to exclude the applicants from any personal liability, Mr Hayrapetian is claimed to have replied that the Bank had to be flexible in its expectations. Of course, such an agreement would be contrary to the basic requirement of the assumption agreements. 37 Mr Hayrapetian gave oral evidence and he denied the conversation alleged. 38 Dr Pollak also alleges that on 23 July 1992 he had a conversation with Mr Hayrapetian in which the latter is alleged to have said that the Bank confirmed that it would not be looking to the applicants personally to repay the loan and that they were only looking to the property. Dr Pollak then asked Mr Hayrapetian to put that in writing and fax it to him even in handwriting. Mr Hayrapetian agreed to do so. Mr Hayrapetian is further alleged to have then said that the Bank would give a few years extension and that he could not see the Bank calling the loan due upon the applicants' signing the assumption agreements. 39 The fax from Mr Hayrapetian of 23 July to Dr Pollak reads: "As reflected by the attached letter agreement, guarantees shall terminate upon assumption of loan thus, you don't have to worry about the guarantees being enforced." 40 Dr Pollak agrees that thirty minutes later he received a faxed copy. There is no suggestion that he protested to Mr Hayrapetian or anyone else that the fax did not reflect the conversation alleged to have taken place. Mr Hayrapetian denies the substance of this conversation. 41 Dr Pollak says that on 12 August 1992 he told Mrs Stern that Mr Hayrapetian assured him they would not be personally liable for the Bank's loan. He says he showed her the fax and said that it was in response to a request to confirm the absence of personal liability and that after this conversation the Assumption Agreement was executed. It was also alleged (at the end of final addresses) that the letter of 28 July from the Bank to Dr Pollak enclosing the assumption agreements for execution was further conduct on the part of the Bank that was misleading and deceptive, representing that the Bank was entitled to rely upon the Letter Agreement and, accordingly, to call up the loan unless the applicants executed the assumption agreements. It should be noted that in his affidavit of 22 February 1996 Dr Pollak makes no reference to this letter. Nor does Mrs Stern in her evidence. There is no suggestion in their initial affidavits that either of them relied on it. Nor is there any suggestion in the second affidavit of Dr Pollak of 16 October 1998 to that effect, and the letter of 28 July is not referred to in his third affidavit of 27 November 1998. 42 The Bank wrote to Dr Pollak, on 8 December 1992, "confirming" that the Van Nuys loan would be maturing on 31 July 1993 and that it would not be renewed. The evidence of Dr Pollak was to the effect that this came as a complete surprise. Dr Pollak said that he was extremely angry on receiving the letter and that he felt that he had been lied to by the Bank. A meeting was held on 9 December 1992 with Dr Pollak and Mrs Stern's husband, Dr Stern, in which it was confirmed by the Bank that the loan must be repaid by 31 July 1993. 43 On 21 January 1993, the applicants' lawyer wrote to the Bank's lawyer seeking confirmation that the Assumption agreement, together with the endorsement and financing statements, satisfied the requirements for assumption of the Van Nuys loan. This was confirmed by the lawyers for the Bank. 44 On 14 June Dr Pollak wrote to his Los Angeles attorney pressing for an assurance that the assumption agreements had been filed. He wrote: "Dear Bill, Unless you have heard from Nancy Morrison and she is sending by messenger the original assumption docts for recording, then please fax her your request. Please fax her every day until we get a response. Please advise whether UCC-1 statement has been filed and that there is absolutely no further items to complete … Advise me immediately should there be any delays." 45 This further reflects the anxiety of Dr Pollak at that time to ensure that the Guarantees had come to an end. 46 On 23 June 1993 Mr Hayrapetian wrote to the Executive Vice President of the New York branch of the Bank, updating him on recent communications with Dr Pollak. In par 2 of that note he wrote: "… If the Burbank property is sold, the proceeds will be used to fully repay the $3M note due July 30, 1993. All remaining collateral (Van Nuys building and adjoining properties) will then be used to secure the $1M note due on October 27, 1995." 47 On 16 July 1993 Mr Hayrapetian wrote to Dr Pollak stating that the Bank had agreed to extend the maturity date of the Van Nuys loan to 30 October 1993 and requested details of financial statements, which, he stated, must clearly support the restructure of the loan for the extension. 48 Further correspondence followed and on 31 August 1993 Los Angeles Agency wrote to the applicants foreshadowing the commencement of a judicial foreclosure action in the Superior Court of the State of California under s 726 of the Californian Code of Civil Procedure with a view to the eventual recovery of any deficiency against the applicants personal assets. In the relevant period, s 726 provided: "(a) There can be but one form of action for the recovery of any debt or the enforcement of any right secured by mortgage upon real property … which action shall be in accordance with the provisions of this chapter. In the action the court may, by its judgment, direct the sale of the encumbered real property…. (b) The decree for the foreclosure of a mortgage or deed of trust secured by real property … shall declare the amount of the indebtedness or right so secured and, unless judgment for any deficiency there may be between the sale price and the amount due with costs is waived by the judgment creditor … shall determine the personal liability of any defendant for the payment of the debt secured by the mortgage or deed of trust and shall name the defendants against whom a deficiency judgment may be ordered … In the event that deficiency is not waived … and it is decreed that any defendant is personally liable for the debt, then upon application of the plaintiff filed at any time within three months of the date of the foreclosure sale and after a hearing thereon at which the court shall take evidence and at which hearing either party may present evidence as to the fair value of the real property or estate for years therein sold as of the date of sale, the court shall render a money judgment against the defendant or defendants for the amount by which the amount of the indebtedness with interest and costs of levy and sale and of action exceeds the fair value of the real property …sold as of the date of sale. …"(Emphasis added) 49 The Bank, in February 1994, filed a verified complaint in the Superior Court seeking judicial foreclosure. The applicants filed a defence document in general terms relying among a number of other matters on waiver, and fraudulent or negligent misrepresentation. However, there was no specification of any particular matters. However, at the hearing on 2 May 1995 counsel for the applicants stated that the applicants did not oppose judicial foreclosure (though they opposed the format of the judgment) and judgment for judicial foreclosure was given on that date. Order 5 of the Orders then made was in these terms: "Defendants Pollak & Stern, and each of them, are personally liable for payment of the sums secured by the deed of trust, and a deficiency judgment may be ordered following proceedings prescribed by law…." 50 It was then necessary to seek a judgment for the deficiency before the Bank's entitlement could be quantified. 51 In a declaration dated 15 February 1996 Dr Pollak made no reference to any conversation with Mr Kirschbaum. Although he referred to conversations with Mr Hayrapetian these were to the effect that the Bank would be willing to extend the Van Nuys note when it became due in 1993 for 5 or 7 years with an agreed amortisation period over that time. He records that on 31 July 1993 after the loan became due he had had numerous conversations with bank officers, including Mr Hayrapetian, and the Bank made it clear it was not prepared to make any extension except on terms which were unacceptable to Dr Pollak. 52 Dr Pollak recounts that in January 1994 an earthquake struck the Los Angeles area and severely damaged the Van Nuys property which was without earthquake insurance and the value of the property was severely diminished. He also attributed the decline in the value of Van Nuys to the general recession in southern California after the earthquake. 53 On 26 April 1996 a deficiency judgment was given by the Superior Court of California to the effect that the Bank was entitled to recover from the applicants, and each of them, $US 3,813,689 plus attorney fees, costs and interest. This is the deficiency judgment against the applicants which the Bank seeks to enforce in this Court. An appeal was taken by the applicants to the Court of Appeal of the State of California but this was unsuccessful. I now turn to the first issue which concerns misleading conduct.

Misleading and deceptive conduct - s 52 Trade Practices Act 54 The applicants' case is concerned with representations allegedly made to particular persons, namely to the applicants, and not to the public at large; therefore primary attention must be focused on the particular negotiations and other conduct of the individuals in relation to the particular transactions, and on the establishment of a sufficient causal link between the respondent's conduct and the applicants loss or damage: see Elders Trustee & Executor Co Pty Ltd v E G Reeves Pty Ltd (1987) 78 ALR 193 at 241 per Gummow J, citing Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 202 per Deane and Fitzgerald JJ. 55 The applicants in their Amended Statement of Claim filed allege that as at 17 September 1986, the date that the Van Nuys loan was taken out, Fani Pollak was the part-owner of the Van Nuys property in her own right and part-owner as executrix of the will of Mihail Pollak under Californian law. The land was subject to a mortgage to the Bank in respect of the loan. The security for that loan was the Promissory Note together with the Deed of Trust dated 17 September 1986. The pleadings set out the provisions of cl 2.26 of the Deed of Trust quoted earlier. 56 On 18 November 1987, the pleadings recite that Fani Pollak died leaving a will and reference is made to the grant of probate to Mrs Stern. The applicants claim that the applicants paid interest due under the mortgage between the death of Fani Pollak and 24 February 1993. At all relevant times, it is claimed, the Bank knew that Mrs Stern held the land as executrix of the estate of Fani Pollak. 57 The misleading conduct of the Bank falls broadly into parts. That is to say conduct alleged during 1988 and during 1992. 58 The 1988 representations relied on and their falsity are pleaded as follows: "6. That between January and October 1988 in trade or commerce the Bank represented to Dr Pollak and Mrs Stern:- (a) That the Bank was, or would be on the distribution of Fani Pollak's estate entitled to enforce the due on sale provision of the Mortgage. (b) That the Bank would not enforce the due on sale provision of the Mortgage if Dr Pollak and Mrs Stern both:- (i) completed executed and delivered to the Bank an assumption agreement in a specified form. (ii) executed the letter agreement dated 19 October, 1988. (iii) concurrently with their acceptance of the offer thereby made by the Bank completed executed and delivered to the Bank personal guarantees of the obligations of Fani Pollak to the Bank under the Mortgage. Particulars (A) Telephone conversation between Steven Kirschbaum on behalf of the Bank and Dr Pollak between January and March 1988. (B) The terminology of the letter agreement dated 19 October, 1988 as prepared by the Bank. (C) In so far as the above representation was made to Mrs Stern, the same was so made not to Mrs Stern in person, but to Dr Pollak purportedly representing himself and Mrs Stern. (c) That the Promissory Note and said Deed of Trust were enforceable according to their terms and thus enforceable against the Estate of the late Fani Pollak. Particulars The terminology of the letter agreement dated 19 October 1988 as prepared by the Bank 6A. The representations referred to in paragraph 6 were false and by making the representations the Bank engaged in conduct that was misleading and deceptive within the meaning of section 52 of the Trade Practices Act 1974. Particulars (i) The Bank was not entitled to enforce the due on sale provision in the Mortgage because, on its proper construction in accordance with the law of California, it was not enlivened by the death of Fani Pollak or by the distribution of the estate of Fani Pollak. (ii) Alternatively if, which is denied, the Bank was entitled to enforce the due on sale provision in the Mortgage by reason of the Death of Fani Pollak or the distribution of the estate of Fani Pollak the Bank: (a) knew of the death of Fani Pollak (b) thereafter accepted payments of of [sic] interest from the estate of Fani Pollak in respect of the loan the subject of the Promissory Note of 17 November 1986; (c) accepted such payments without any reservation of its alleged right to later enforce the due on sale provision; and thereby waived any right it might otherwise have had to enforce the due on sale provision. (iii) failed to give notice of its claim to the Estate in accordance The Promissory Note and said Deed of Trust were not enforceable according to their terms because the Bank had with Californian Probate Code Section 700." 59 This Amended Statement of Claim further pleaded reliance on the misrepresentations and lack of consideration in the signing of the documents. It also pleaded that had the applicants known of particular matters on which the Bank was silent they would not have executed the Letter Agreement, the Guarantees and the Assumption Agreement. The matters relied on are the failure of the Bank to file with the Superior Court a notice of its claim as a creditor against the estate, and the consequence of this failure, namely that the Bank was not entitled to proceed against the assets of the estate beyond its security. 60 I will now turn to each of the heads of alleged misrepresentations and conduct.

Bank's entitlement to enforce the due on sale provision 61 The applicants rely on two events. The first is a conversation between Dr Pollak and Mr Kirschbaum of Los Angeles Agency sometime between January and March 1988. The purport of the misrepresentations is set out earlier in this judgment. 62 Dr Pollak does not give evidence as to any part of the conversation with Mr Kirschbaum other than is pleaded as misrepresentation. There are no notes of it by either party and no other records or correspondence were produced in evidence that any such conversation occurred. The absence of any record is surprising given the important assurances attributed to the Bank as to assertion of its entitlement and the indications as to the contents of the Assumption Agreement which, of course, was not drafted until later in the year. This latter circumstance attributes a degree of prescience to Mr Kirschbaum as to the form and contents of legal documents to be drawn up in the future. The Bank's later internal documents indicate lack of certainty in the Bank's understanding as to the form and wording of such documents. During this period Dr Pollak retained Gibson as his Attorney. They had acted in relation to the estate of Fani Pollak. There is no evidence as to advice being sought by the applicants from Gibson as a consequence of the alleged threat made by Mr Kirschbaum to call up the loan. At that time Dr Pollak was a qualified medical practitioner and also a law student, and was certainly not naive in commercial matters. Indeed, his evidence and conduct during 1988 and later years indicates considerable commercial astuteness. He was admitted to the Bar of New South Wales in August 1990. 63 A particularly curious aspect of the alleged statements by Mr Kirschbaum is the assertion that the assumption agreements would extinguish the liabilities of the applicants. One basic purpose of the assumption agreements in terms, as indeed their name suggests, was to ensure that the applicants would assume liability for the debts in their own right. 64 There is no indication that Dr Pollak made any inquiries as to the provisions of any guarantee or assumption agreement of the type allegedly foreshadowed by Mr Kirschbaum at this time. The suggestion that Mr Kirschbaum gave an assurance that any personal liability would be extinguished or that Dr Pollak so understood anything said by Mr Kirschbaum is not accepted. The alleged conversation took place over ten years ago and without the assistance of any record it is clearly difficult to recall the precise terms used. To a large extent the evidence of Mrs Stern was to the effect that she did not recall a number of the matters because they were so long ago and said she relied on her brother. It is apparent from the reference to an "assumption agreement" that the applicants would be obliged to assume liability as borrowers under the loan. This is supported by the fact that Mr Connelly of the Double Bay branch recorded in his Memorandum of 11 July 1989 that the applicants had requested that on the winding up of the estate of Fani Pollak the two loans (Van Nuys and Burbank) be transferred into their names. This record is consistent with an understanding on the Bank's part that there would be an assumption of liability by the applicants. Further, there is a marked failure on the part of Dr Pollak or Mrs Stern to raise any specific assertion about conversations with Mr Kirschbaum and his "assurances" in subsequent dealings with the Bank, and with the lawyers, and in proceedings before the Californian Court. 65 The applicants submit that the Kirschbaum conversation should be accepted insofar as it alleges that he claimed that the Bank was empowered to sell on the basis that the contrary was not expressly put in cross-examination. However, the whole conversation was put in issue in the pleadings and it was apparent that both the occurrence and context of that conversation were in issue. The conversation was only particularised in the pleadings with respect to an allegation that the Bank would not enforce the "due on sale" provision of the mortgage. What Mr Kirschbaum is alleged to have said is not consistent with the express terms of the assumption agreements later signed by them. Further, the applicants in submissions do not seek to rely on the alleged statement that the liability would be extinguished. This is consistent with a conclusion that such a statement by Mr Kirschbaum was highly unlikely, which in turn suggests that the conversation did not take place. Accordingly, it is understandable why the cross-examination was not directed to that part of the alleged conversation which referred to the "due on sale" provision becoming enforceable. In my view, there is no procedural unfairness on this aspect of the matter: cf Browne v Dunn [1894] 6 R 67 at 79; Seymour v Australian Broadcasting Commission (1977) 19 NSWLR 219 at 236 per Mahoney JA; Allied Pastoral Holdings Pty Ltd v Commissioner of Taxation [1983] 1 NSWLR 1; and In the marriage of L C and T C (1998) 23 Fam LR 75 at 82-83. 66 On the evidence I am satisfied that the alleged conversation with Mr Kirschbaum did not take place.

The Letter Agreement 67 The Letter Agreement, dated 19 October 1988, is the second matter relied on by the applicants to support their claim that the Bank had asserted that it was empowered to enforce a claim under the Promissory Note and Deed of Trust against the Estate of the late Fani Pollak according to their terms. (Reliance on the tendering of the Letter Agreement to the applicants to ground this pleading was particularised in correspondence between the parties' legal representatives in this proceedings.) It is also said that this letter falsely represented that the Bank was entitled to enforce the "due on sale" provision and call on the loan due and payable as a result of Fani's death and/or the distribution of her estate. It is said that the proffering of this letter for execution together with the terms of the letter amounted to misleading and deceptive conduct. 68 Regard must be paid to the language of the letter. It states that it confirms an agreement and in terms makes no representation. There is then a reference to the Promissory Note and the Deed of Trust of 17 September 1986 recording information from the applicants that the interest of Fani Pollak as executor of the estate of Mihail Pollak was transferred to Fani Pollak. It recites that the applicants have further informed the Bank that Fani Pollak had died and that title was currently vested in Ilana Stern as executrix. 69 The Letter Agreement proceeds to set out an exception to cl 2.26 of the Deed of Trust to the effect that a transfer to the applicants would not constitute a transfer in violation of that Deed if certain conditions were fulfilled. In my view, this is not a representation as to enforceability of the "due on sale" provision. The only other operative paragraph of the Letter Agreement records an agreement with the applicants that the Guarantees would terminate upon an assumption agreement being entered into. Again, I do not consider there is any representation implicit in this statement. There is no assertion by the Bank of anything. There is only a commitment to act or not act in a certain way. The Letter Agreement simply reflects a position the Bank agreed to take, favourably to the applicants, arrived at after negotiations conducted during a period when the applicants had retained experienced attorneys through whose hands the relevant documents had passed. 70 The substantive clauses in the Letter Agreement reflect an acute appreciation by the applicants of the need to be alert to protect what they perceived to be their best interests as against the Bank. There were attorneys on both sides and it is, in my opinion, unlikely that no legal advice was sought by the applicants in relation to the Letter Agreement or other documents and their effect. 71 The available bank records indicate that the Bank considered the loan was not subject to acceleration while the judicial process of settling the estate continued and that the applicants proposed to assume the loans under the existing terms and conditions. A Bank file note of 29 November 1988 records, as noted earlier, that the applicants "volunteered" to guarantee the loans until the assumption agreements were drawn up and that the Burbank loan was being made only upon condition that the Van Nuys loan would be assumed. I find that on the evidence, the two loans were agreed to be linked despite the contrary position taken by the applicants in earlier communications. It is evident that the documentation for the Burbank loan was closely modelled on the Van Nuys documents. In my view, while Dr Pollak did not want the two loans to be linked up, I am satisfied that as early July 1998 the Bank's position was to the contrary and the negotiations proceeded on the basis that the two loans were related. 72 At no relevant time did the applicants or their attorneys refer to the Letter Agreement, or the Bank's conduct in relation to it, as constituting misleading or deceptive conduct. In the 1994 Californian proceedings, while as noted there was a generalised reference to large numbers of defences including negligent or fraudulent misrepresentations, there are no particulars concerning the Letter Agreement. Nor is there any record of any such contention being raised either with the Bank or with any other person or body including legal advisers until well into these proceedings. 73 I do not accept that either the Letter Agreement or the Bank's conduct in relation to it constituted misleading conduct towards the applicants to the effect that the Bank falsely represented that it was entitled to enforce the "due on sale" provision. In my view, the Letter Agreement was not understood by the applicants as making the representations alleged. Non-enforcement of clause 2.26 74 Insofar as it is alleged that the Bank represented it would not enforce the "due on sale" provisions if certain documents were signed, there is no falsity. The documents were signed and the Bank honoured this understanding and it has not been suggested that the Bank attempted to enforce the "due on sale" provisions contrary to its agreement.

Probate Code ss 700, 716 - failure to claim 75 During the relevant period, s 700 of the Californian Probate Code provided: "s 700 Notice to creditors; publication; time for filing or presentation of claims (a) Publication of the Notice of Death and of Petition to Administer the Estate … shall … constitute notice to the creditors of the decedent, requiring all persons having claims against the decedent to file them in the office of the Clerk of the Court from which the letters issued … within four months of the first issuance of letters…." 76 The relevant period for the purpose of this section was between 8 April 1988 and 8 August 1988. During this period it is agreed that no claim was filed by the Bank. It is therefore said that the Bank's conduct in relation to the Letter Agreement was misleading because that agreement implied there was an enforceable claim against the estate on the part of the Bank when in fact it was barred. This aspect of the alleged misleading and deceptive conduct of course could not depend on the alleged Kirschbaum statement because that was made before the period commenced to run. 77 Section 700 must be read together with s 716 of the Code. Subsection (b) of that section provides that: "(b) An action may be brought by the holder of a mortgage … to enforce the same against the property of the estate subject thereto, where all recourse against any other property of the estate is expressly waived in the complaint…." 78 The applicants submit that, because of the failure to file any claim the Bank's conduct in proffering for signature the Letter Agreement was misleading and deceptive because it thereby represented that the Promissory Note and Deed of Trust were enforceable according to their terms against the Estate of Fani Pollak and that this was contrary to the true legal position. 79 The first response to this is that the Letter Agreement makes no representation but records an earlier agreement and it is not concerned with the enforceability of either document. I accept this submission. 80 The negotiations by the Bank in relation to the Letter Agreement did not make it incumbent on the Bank to disclose to the applicants, if indeed it was then present to its mind, that there had been non-compliance with the Probate Code. The evidence does not satisfy me that the Bank understood that its rights were adversely affected by failure to comply with s 700 of the Probate Code. Had there been any representation arising from the Bank's conduct, which I do not accept, it could only, in the circumstances, be taken as a matter of the Bank's opinion as to its legal entitlement: see Pappas v Soulac (1983) 50 ALR 231 at 234; Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 199; Elders Trustee and Executor Co Ltd v E G Reeves Pty Ltd (1987) 78 ALR 193 per Gummow at 241; Leda Holdings Pty Ltd v Oraka Pty Ltd (1997) ATPR ¶41-601 per Branson and Emmett JJ at 40,515. I refer to Gummow J's comments in Elders at 241: "It is, of course, fundamental that s 52 is not designed for the benefit of persons who fail, in the circumstances of the case, to take reasonable care of their own interests and also that it would be wrong to select particular words or acts which, although misleading in isolation, do not have that character when viewed in context …" 81 As counsel for the Bank points out, the form of the Letter Agreement was under consideration from late June onwards prior to the expiry of the Probate Code claim period on 8 August. It is, in my view, more likely than not on the evidence that as executrix, Mrs Stern was aware prior to late 1988 of the non-filing of the claim by the Bank. 82 The evidence leads me to the conclusion that the applicants did not rely on any representation as to the enforceability of the Promissory Note and Deed of Trust when they entered into the Letter Agreement. They must be taken to have known of the issues as to enforceability because of the position of Mrs Stern as executrix of the claims against the Estate. The Estate and the applicants had retained experienced attorneys who were available to them during 1988 in relation to the Estate and the documentation with the Bank. In my view, the applicants signed the 1988 documents because they wanted the Van Nuys property distributed to them. This was arranged on the basis of the obligations under the loans being eventually assumed by them and in consideration of the Bank's waiver of any rights it might have to accelerate the loan. The evidence does not lead to the conclusion that the Bank considered whether the Probate Code had affected its rights prior to execution of the 1988 documents. In the circumstances, there could be no reasonable expectation on the part of the applicants that the Bank would inform them as to its omission to file a claim within the specified period before entering into the 1988 Agreements such that failure to do so would be misleading or deceptive conduct: see Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 32, 41; Warner v Elders Rural Finance Ltd (1993) 41 FCR 399 per Foster and Drummond JJ at 401-402; Leda Holdings Pty Ltd v Oraka Pty Ltd (1997) ATPR ¶41-601 per Branson and Emmett JJ at 40,514. Waiver by acceptance of interest 83 Clause 6A(ii) of the Amended Statement of Claim alleges that if the Bank was entitled to enforce the due on sale provision in the mortgage by reason of the death of Fani Pollak or the distribution of her estate, then the Bank, knowing of her death and yet accepting payments of interest under the loan without reservation, thereby waived any rights it might have to enforce the due on sale provision. 84 On the assumption, which I reject, that this amounted to misleading or deceptive conduct, I do not consider that there was any waiver. The applicants agree in submissions that under Californian law, the conduct must be so inconsistent with an intent to enforce a right as to induce a reasonable belief that the right had been relinquished, and that this requires clear and convincing evidence: see Waller v Truck Insurance Exchange Inc (1995) 11 Cal 4th 1. In the Waller case, the Court held at p 31 that: "… case law is clear that a waiver is the intentional relinquishment of a known right after knowledge of the facts… The burden … is on the party claiming a waiver of a right to prove it by clear and convincing evidence that does not leave the matter to speculation, and doubtful cases will be decided against waiver'. " 85 Under the loan, the interest payments were due and payable on 31 January and 31 July of each year prior to the maturity date. Fani Pollak died on 18 September 1987. Accordingly, there were two relevant interest payments, for the purposes of this submission, namely on 31 January 1988 and 31 July 1988. Even if I had found that statements attributed to Mr Kirschbaum had been made, the vague reference as to the time at which they were made does not indicate that the Bank was aware of its rights by 31 January 1988. In relation to the payment on 31 July 1988 and the findings I have made in relation to the effect of the Letter Agreement and the Guarantees, and to the conduct of the Bank during 1988, I do not consider that acceptance of a payment on 31 July 1988 could in any way support a finding of an intent on the part of the Bank to waive its right to accelerate. There is no evidence that the Bank directed its attention to this question. This is particularly so having regard to internal file notes which indicated considerable uncertainty within in the Bank as to its rights at that time. It is not established that there was sufficient clear knowledge in the Bank to ground a waiver or estoppel. There is simply no clear and convincing evidence to this effect. The proposition is speculative only. Indeed, on the contrary, the Bank was anxious to preserve its security and rights by way of the guarantees and the assumption agreements. 86 For these reasons I reject the argument based on waiver. The 1992 conduct 87 Having decided that there was no misrepresentation and/or no falsity in representations made, and no reliance on the critical 1988 conduct, the applicant's case really fails at this point. This is because by early 1989 the Letter Agreement and Guarantees had been executed and were valid and binding. However, submissions are made by the applicants in relation to further misleading and deceptive conduct by the Bank and I will now turn to consider them. 88 The 1992 misleading and deceptive conduct alleged is set out in pars 11 and 12 of the ASC which reads as follows: "11. That on 23 July 1992 the Bank represented to Dr Pollak and Mrs Stern:- (a) That the Bank was entitled to rely on the Personal Guarantees and the letter agreement dated 19 October 1988: (b) That the Bank would not rely on the Personal Guarantees if Mrs Stern and Dr Pollak both:- (i) completed executed and delivered to the Bank an assumption agreement in a specified form. (ii) completed executed and delivered to the Bank a UCC-1 financing statement. (iii) caused title endorsements to be issued ensuring the continuing priority of the Mortgage in a form and substance reasonably satisfactory to the Bank. (c) That the Bank would extend the Mortgage after July 1993 for a further term of five to seven years and capitalise the interest due thereon if Mrs Stern and Dr Pollak:- (i) completed executed and delivered to the Bank an assumption agreement in a specified form. (ii) completed executed and delivered to the Bank a UCC-1 financing statement. (iii) caused title endorsements to be issued ensuring the continuing priority of the Mortgage in a form and substance reasonably satisfactory to the Bank. Particulars Telephone conversation between George Hayrapetian and Dr Pollak and facsimile from the Bank of 23 July 1992 (d) Neither Mrs Stern nor Dr Pollak would have any personal liability under any such assumption agreement in regard to the loan the subject of the Mortgage. 12. The Bank was silent as to the facts that:- (a) It had a policy at the relevant time not to provide further facilities in the form of the Mortgage. (b) The Bank would require repayment of the Mortgage principal on maturity on 31 July, 1993." 89 Further pleadings arising out of those allegations are as follows: "13. Relying upon the representations referred to in paragraph 11 herein and induced by them Dr Pollak and Mrs Stern:- (i) completed executed and delivered to the Bank an assumption agreement in a specified form ("the 1992 Assumption Agreement"). ii) caused title endorsements to be issued ensuring the continuing priority of the Mortgage in a form and substance reasonably satisfactory to the Bank. 14. The representations referred to in paragraph 11(a) herein were false and by making the representations referred to in paragraph 11(a), (c) and (d) and by remaining silent in the circumstances set forth in paragraphs 9 and 12 the Bank engaged in conduct that was misleading and deceptive within the meaning of section 52 of the Trade Practices Act 1974. Particulars The guarantees and letter were not enforceable for the reasons particularised in relation to paragraph 6A above. The representations in paragraph 11(c) and 11(d) related to future matters and the Bank had no reasonable grounds for the making of the representations. 15. Had Dr Pollak and Mrs Stern known of the matters referred to in paragraph 12 herein they would not have completed executed and delivered to the Bank the 1992 Assumption Agreement. 15A. In so far as the representations pleaded in paragraph 11 were made by the Bank to Mrs Stern, they were so made by the Bank to Mrs Stern by Dr Pollak on the Bank's behalf, the Bank having appointed Dr Pollak its agent for the purpose of obtaining Mrs Stern's execution of the 1992 Assumption Agreement. Particulars Letter dated 28 July 1992 from the Bank to Dr Pollak. 15B. Neither Dr Pollak nor Mrs Stern obtained any benefit from signing the 1992 Assumption Agreement, and no consideration was in any event furnished by the Bank for the signing of such documents by Mrs Stern and Dr Pollak. 15C. Alternatively, the 1992 Assumption Agreement did not impose personal liability on Dr Pollak and Mrs Stern beyond the value of the security held by the Bank because Dr Pollak and Mrs Stern assumed only the obligations of the Estate which were themselves limited in the fashion and for the reasons referred to in the particulars to paragraph 6A above. …" 90 I refer to the discussion at paragraphs 30-42 above of the factual background to these allegations. Dr Pollak claims that he had a telephone conversation with Mr Hayrapetian, an officer of Los Angeles Agency, in late May 1992, in which the latter said that the Bank had overlooked filing a claim in the estate and needed an Assumption Agreement executed and recorded. Dr Pollak alleges that Mr Hayrapetian indicated that the Bank would agree to exclude the applicants from personal liability under the Assumption Agreement and that the Bank would extend the loan on a five or seven year term. On 21 July 1992, Dr Pollak wrote to Mr Hutchieson at the Los Angeles Agency requesting certain amendments to the assumption agreements, in particular for addition of a final clause irrevocably releasing the applicants from the Guarantees. There was no mention of the alleged conversation nor of the alleged personal liability and extension concerns. On 23 July 1992 Dr Pollak alleges a further conversation with Mr Hayrapetian in which Dr Pollak sought to amend the documents sent to him by the Bank. He says that he wanted to be certain that the applicants would have no personal liability with regard to the loan and that Mr Hayrapetian assured him that the Bank would not be looking to the applicants personally paying back the loan. The substance of these conversations is denied by Mr Hayrapetian. 91 At the end of the conversation of 23 July recounted above, Dr Pollak says that he asked Mr Hayrapetian to put in writing what he had said and fax it to Dr Pollak. A fax was received thirty minutes later by Dr Pollak which reads: "As reflected by the attached letter agreement, guaranties shall terminate upon assumption of loan. Thus, you don't have to worry about the guaranties being enforced." (Original emphasis) 92 The Letter Agreement says nothing about relieving the applicants of "personal liability" under the Assumption Agreement but is rather to the contrary. The Bank required these Agreements to replace the Guarantees and the Guarantees were thereupon terminated. This was an accurate statement as to the termination of Guarantees. The fax does not make any reference to any extension of the loan. Nor does it refer to the Assumption Agreement not being enforced personally as alleged by Dr Pollak. Apart from the fax there is no other record of this 23 July conversation. In particular, it is significant Dr Pollak did not make any record of the conversation. There was no complaint made to anyone by Dr Pollak that the fax did not properly record the contents of the important aspects of the conversation. The conversation was referred to by the applicants in the Californian proceedings but only in relation to the alleged offer for an extension of the period of the loan but not in relation to the assumption of personal liability. 93 As at July 1992, Dr Pollak had completed his legal studies and he was a legal practitioner in New South Wales. He was acquainted with the complexities of commercial and contract law. 94 On 28 July 1992 Mr Hayrapetian sent the assumption agreements to the applicants for signature. The letter enclosing the Agreement reads: 95 "Dear Dr Pollak, Please review and execute the enclosed documents…" 96 On 30 July Dr Pollak after reviewing the documents and before signing them wrote: "Thank you for the relevant documentation. I find of concern only the language in the Lender's Consent. As I read Section 2.26 of the Deed of Trust, there are no conditions to be satisfied. Rather Section 2.26 states that the lender has a certain right if the property is transferred. My first proposal would be to delete the words 'upon satisfaction of the conditions set forth in Section 2.26 of the Deed of Trust.' If your legal counsel is not amenable to deleting to that language, then I would propose that the language be changed to read as follows: 'upon recordation of the fee interest in the propety [sic] to Elenka Ilana Stern and Joseph Pollak'. Once your office has decided upon the appropriate amendment, please fax to me the amended language inserted in the Lender's consent page so that I may make a hardcopy and take it back with me for signature to Australia on Friday night."(Emphasis added) 97 On 31 July, the Los Angeles Agency notified Dr Pollak that the Bank insisted on leaving the language pertaining to section 2.26. On the same day Dr Pollak wrote to Mr Hayrapetian: "Enclosed is my copy of Section 2.26 of the Deed of Trust. There has been obvious confusion since your Section 2.26 would not have required my comments. Accordingly, provided that your section 2.26 … is the applicable section for both loans then please disregard my earlier request for changing the language." 98 On 13 August 1992 Dr Pollak sent the executed assumption agreements to Mr Hayrapetian. 99 The fact that the Bank insisted on detailed personal financial information from the applicants as discussed above, is hardly consistent with an expressed intention on the part of the Bank not to impose any personal liability upon the applicants. Nor is it consistent with giving any undertaking not to enforce the Assumption Agreement according to its terms. The recitals in the Assumption Agreement specify that the applicants would assume the liabilities of Fani Pollak under the loan documents which, of course, include the 1986 Promissory Note under the Deed of Trust. Further, the allegations by Dr Pollak that the loan would be extended by five to seven years after maturity are inconsistent with the terms of the Assumption Agreement. There is no suggestion in the correspondence from Dr Pollak in July-August 1992 that there had ever been any agreement to release the applicants from personal liability in the Assumption Agreement nor of any extension of the loan repayment for a period of years. At this time Mr Hayrapetian held a relatively junior position in the Bank and had only recently been employed. He denies making the representations and it is unlikely, to say the least, that he would have given such assurances which were quite contrary to the Bank's position as evidenced by its records. 100 I do not accept that Mr Hayrapetian made any statement that the loan would be extended by a period of five to seven years or that he asserted that the applicants would not incur any personal liability as a result of executing the Assumption Agreement. 101 The applicants further submit that by the conduct of the Bank in sending the Assumption Agreement to the applicants on 28 July 1992 for execution, the Bank implicitly represented that it was entitled to rely on the personal Guarantees and the Letter Agreement and therefore that prior to execution of the Letter Agreement it was entitled to call up the loan because the due on sale clause had been activated. The misrepresentation equally arose, so it is said, by implication from Mr Hayrapetian's fax of 23 July and the lenders consent (annexed to the Assumption Agreement). The 23 July fax is silent as to the Bank's entitlement to call up the loan or as to any waiver or any variation of the documents by way of collateral agreement or representation. The effect of the fax was to indicate that the Assumption Agreement would replace the Guarantees in accordance with the Letter Agreement. Neither the fax nor the letter of 28 July enclosing the documents made any representations as to acceleration. I do not accept that the conduct of the Bank was understood by the applicants as asserting anything about entitlement to call up the loan in 1992. 102 The letter of 28 July 1992 is only mentioned in the particulars to Clause 15A inserted in the applicants' Statement of Claim by an amendment made in October 1998, but only in relation to the question whether Dr Pollak was the agent of the Bank in his communications with his sister Mrs Stern. 103 It is surprising in the extreme that the implications said to arise from the tender of the letter of 28 July together with the assumption agreements for signature, if in fact they misled the applicants, were not specifically raised or disclosed in the myriad of court proceedings which began in 1994 or in any correspondence or documents relating to those proceedings. 104 The timing of the application for the proposed amendment to the pleadings seeking to rely on the letter of 28 July, lends support to a conclusion that the applicants did not understand the letter of 28 July and the tendering of documents to have been a misrepresentation. Dr Pollak would have been aware of the alleged misrepresentation on 8 December 1992 when the Bank notified the applicants of its refusal to extend the loan beyond the maturity date of 31 July 1993. This is significant because Dr Pollak swore that this made him "extremely angry" because he "had been lied to by the Bank." However he did not raise it with the Bank and , moreover, he said that he did not communicate the Bank's position to his sister Mrs Stern. 105 I do not accept the explanation proffered by Dr Pollak that he did not want to antagonise the Bank because the Assumption Agreement had not been recorded and therefore the Guarantees were still in force. He said he wanted to take title to the Van Nuys property on the estate being wound up so that his liability to the Bank would cease on the basis of what Mr Hayrapetian said, and this led him to remain silent. On his version of events the Bank's demand was completely contrary to his knowledge and understanding and the representations made by the Bank. Yet he made no record to support his case against the Bank on or after 8 December 1992. He might have been expected at least to approach his lawyers or make some record or formulation of his reasons for challenging the Bank's position. Further, I do not accept, having regard to the obviously close relationship between Dr Pollak and his sister, that he did not disclose to his sister around this time the position taken by the Bank. 106 I do not accept that any representations were made by Mr Hayrapetian or the Bank, either expressly or by silence as to an extension of the term of the loan and personal liability as alleged, or that there was any misrepresentation or falsity in what was said by the Bank. Nor do I accept that the applicants placed any reliance on the alleged misleading conversations or conduct by the Bank during 1992.

Construction of clause 2.26 - of the Deed of Trust 107 The parties have selected Californian law as the applicable law. The proof of foreign law in this Court was considered in Allstate Life Insurance Co v Australia & New Zealand Banking Group Ltd (No 33) (1996) 64 FCR 79 at 82, where Lindgren J followed the statement of Sheller JA in United States Trust Co of New York v Australia and New Zealand Banking Group Ltd (1995) 37 NSWLR 131 at 146 that: "A distinction is to be drawn between the content of foreign law which this court would treat as a question of fact, about which evidence is receivable, and the application of foreign law once its content has been ascertained, upon which evidence is not receivable…" 108 See also United States Surgical Corporation v Hospital Products International (SC(NSW), McClelland J, 19 April 1982, unreported); National Mutual Holdings Pty Ltd v Sentry Corpn (1989) 22 FCR 209 at 226; and Nygh Conflict of Laws in Australia 6th ed. 1995. 109 Accordingly, I approach the "expert" evidence in this case on the basis that it provides evidence of the relevant Californian law and the effect of relevant authorities. However the application of that law to the particular facts is a matter for the Court of the forum. In this case there has been evidence of both Californian and Federal United States law. In view of the specific evidence adduced, I consider that the presumption that the relevant United States law is the same as Australian law has been displaced. 110 The construction question is whether under Californian law the acceleration provision in cl 2.26 of the Deed of Trust executed by Fani Pollak was enlivened either on the death of Fani Pollak or upon distribution of the assets in her estate. More specifically, the question is whether the clause intended that on her death, or on distribution of the estate's assets, the monies due under the loan would become immediately due and payable. 111 The question was the subject of expert evidence from Mr Panelli, a retired Justice of the Californian Superior Court, who was of the opinion that the clause had not been enlivened. Therefore, in his view, any representation to the effect that it had been activated on the death of Fani Pollak or would be activated on distribution was incorrect. Mr Sigman, an experienced practising attorney in California, who was called by the Bank, considered that the clause was activated on death or distribution. 112 The Deed of Trust is not in a standard printed form. The Deed was negotiated by the parties with the assistance of lawyers on both sides. This is confirmed by correspondence during 1986 between lawyers and by a letter of 22 September 1986 in relation to clause 2.26, by which the Bank affirmed its agreement to a proposal by Dr Pollak that a distribution or other transfer of the real property in the Deed of Trust from Fani Pollak as executrix to Fani Pollak personally, would not constitute a transfer of the trust property within the meaning of cl 2.26. Having regard to the fact that it was a negotiated contract and that there was no suggestion of duress or any unfair conduct in its negotiation, I do not think that the construction of the contract is controlled by any predisposition that in the event of ambiguity it should be construed against either party. 113 Mr Sigman referred to a canon of construction which was rarely applied in California, that where different constructions of a provision are equally open the Court should take that which is most favourable to the party in whose favour the provision would operate. I do not consider that this provision is of assistance in the present case. It is the normal and ordinary language used that is controlling in the light of any relevant authority. 114 The conflict between the two experts demonstrates that the words in questions are capable of more than one interpretation and that the intent of the provision in the Deed is an open question so far as any relevant Court decisions of the California Courts are concerned. There are, according to the evidence, no authorities directly on point. Insofar as the onus is on the applicant to establish that there was an incorrect statement of law by the Bank I am not satisfied that any falsity has been made out even assuming that there was any representation by conduct or statement. 115 One matter which is clear is that the provision is cast in far reaching language designed to cover a wide range of events. The use of words such as "conveyed, alienated or otherwise transferred" and the language referring to "whether by operation of law or otherwise" are words of the broadest import and indicate an extensive reach was intended. The purpose of the clause is clearly to effect an acceleration of the time for payment in the specified circumstances. There is of course a tension between the notion of a transfer "by the Trustor" and the expression "by operation of law or otherwise." If the transfer takes place by operation of law it will generally not be a transfer by the trustor. Yet this is what is contemplated by the clause. 116 In the present case the execution of the will did not effect the transfer but upon death the property passed to the estate to be directed to the beneficiaries in accordance with the terms mandated by the will. The language of the clause, in my view, is sufficiently broad to cover the present circumstances whereby on the death of Fani Pollak the Van Nuys property was to pass under the will for distribution to the applicants. The events on which the obligation operates are the death of Fani Pollak and the distribution of the estate. The instrument under which the transfer of the property arises is the will, which specifies the ultimate destination of the property. 117 Mr Panelli approached the question on the basis that the Deed was the Bank's document and therefore ought to be construed against it. This, in my view, was not the correct approach in relation to the 1986 Deed of Trust, which was a negotiated document with input from both sides, in circumstances where lawyers had been retained and where Fani Pollak had considerable financial resources. He referred to a contract of adhesion which the Deed of Trust was certainly not. In addition, he did not give proper weight to the effect of the words "or otherwise". 118 Each of the authorities on which Mr Panelli relied were in different terms in material respects from the current matter. In addition, the authorities relied on were mainly before the 1982 Garn Act. This was a Californian Act which evidenced a change in the policy of the Californian legislature in relation to acceleration clauses towards a more liberal view. Moreover, the authorities relied on by Mr Panelli were mainly cases involving forfeiture and not acceleration provisions. As a result of the acceleration clause the borrower does not lose the property but may have to renegotiate a loan upon different terms. This may be difficult in a particular case, but nevertheless the two types of provision are different both in concept and effect. 119 Mr Sigman points out that there is no limitation on the types of transfer covered by the clause and that, in terms, the expression could cover "a transfer by devise". The concept of a "transfer by devise" is a concept which appears in some of the legislation which was before the Court. The transfer in this case arises by operation of the will upon death and subsequent distribution to the nominated beneficiaries by the terms of the will. Mr Sigman identifies the purpose of cl 2.26 as being to permit acceleration in the event that the property ceases to be vested in the trustor. 120 In the light of the evidence and the above matters I prefer the conclusions advanced by Mr Sigman as to the operation of clause 2.26 under Californian law over those of Mr Panelli, especially having regard to the enactment of the Garn Act. Mr Sigman's analysis gives full effect to what was intended to be a far-reaching provision whereas that of Mr Panelli does not. Accordingly, even if, which is not accepted, there was any representation that the acceleration clause had been or would be enlivened, I accept that as a correct statement of the effect of clause 2.26 under Californian law in the present case. It follows that as there was no misrepresentation then the allegations against the entitlement of the Bank on this basis must fail. 121 Moreover, it seems to me that even if there could be extracted from the evidence statements relied on as to the Bank's entitlement, such statements are properly characterised as expressions of the Bank's position as to how it proposed to act in the circumstances rather than as being positive assertions about its legal entitlement. The Bank's alleged statements, if made, also might properly be considered to be no more than expressions of opinion as to how the Bank perceived its position in relation to its entitlement under the Deed: see Parkdale and other cases referred to at par 80 above. 122 Having reached the above conclusions, in my opinion the further questions and issues raised in the case are not necessary for the determination of these proceedings apart from the question of enforcement of the judgment, and accordingly I do not propose to deal with them in any detail but I will express my conclusions and reasons briefly on these matters. Credit 123 Generally, when considering the evidence in this case it is important to bear in mind that the initial events occurred between eight to twelve years ago and that recollections of parties without any documentary corroborative support have a tendency to be unreliable, especially as to the precise wording or nuances as to the sense of conversations. In addition, the applicants are of course, vitally interested in the outcome of this large claim by the Bank and I consider that, as is evident from the transcript, this has coloured their perceptions of past events to a considerable extent. In particular, a consideration of the transcript of Mrs Stern's evidence lends support to the Bank's submission that she came to Court to present a case rather than to answer questions in an open and direct manner. Her recollection of events was not good. 124 I do not accept either of the applicant's evidence in relation to any matter of significance which is not supported by objective facts; whether in the form of records, corroborative evidence or inherent probability arising from circumstances. In particular, the conduct of the applicants in relation to the lack of protest as to their claims is inconsistent with their versions of events. Moreover, their abandonment of a number of positions originally taken, when it came to final submissions, tended to indicate a significant degree of improvisation and opportunism in the formulation of their case. 125 Some specific matters which bear on the applicants' credibility are that their defences in California in 1994 and later apparently made no specific reference to most of the allegations now relied on as constituting misleading or deceptive conduct. They consented to judgment in California without pressing the allegations now levelled at the Bank. There was no satisfactory explanation for this failure. Further, the reliance by the applicants on the obvious accidental omission of clause 1 in the Van Nuys Assumption Agreement was raised in evidence but not strongly pressed in final submissions. The assertions of Dr Pollak as to his non-comprehension of the personal liability imposed by the draft assumption agreement is not credible given that as at late 1992 he had considerable commercial experience and a substantial appreciation of the law. The Estate of Fani Pollak also retained throughout the period 1986 to 1996 competent and experienced Californian attorneys. The fact that Dr Pollak and Mrs Stern were requested throughout 1992 for details of their financial position, is inconsistent with any notion that they did not understand they were assuming personal liability for the debt of the Estate. No question was asked of the Bank as to why the details were being obtained in view of the fact, on their case, that they had been promised that there would be no personal liability. The assertions by Dr Pollak in 1986 that he did not understand what was meant by a Deed of Trust or a Promissory Note, in the light of the negotiations cannot be accepted. Again, Dr Pollak pursued his reliance on the fax of 23 July 1992 to support his case and his abandonment of this late in the day does not further his credibility. This was in relation to a conversation alleged to have taken place before the fax was sent which expressed his version of an important conversation with Mr Hayrapetian on 23 July in which promises were claimed to have been made by the Bank. The fax simply does not comply with the alleged promises made by Mr Hayrapetian, yet Dr Pollak did not protest and there was no follow up. 126 At the time of the first conversation alleged in May 1992, Mr Hayrapetian was not employed by the Bank. He was employed on 15 June 1992 and he was the most junior of the management staff at the Bank at the time of the alleged promises on 23 July 1992. It is unlikely that he would have made statements as to the extension of the loan for a period of years, and as to the non-assertion by the Bank of its rights to pursue personal liability when it is clear from Bank records that the Bank was anxious to strengthen its position in relation to the Van Nuys loan. Mr Hayrapetian's evidence as to his conversation with Dr Pollak accords with the probabilities given his relatively low position and his then short period of service at the Bank. The Bank's documentation is consistent with the testimony of Mr Hayrapetian. Dr Pollak's recollection of the time of his conversation with Mr Hayrapetian was not accurate. 127 There is also the assertion by Dr Pollak that he did not tell Mrs Stern about the contents of the letter of 8 December 1992 from the Bank. This is not credible given the obviously close and intertwined family and financial relationship with his sister and the alleged impact which the alleged change of position by the Bank made to them at that time. 128 The approach taken by the applicants in relation to the omission of clause 1 in the Van Nuys Assumption Agreement was described by counsel for the Bank as "opportunistic". This description is apposite. On the evidence it is clear that this was a clerical error and I find that neither of the applicants were misled as a result of it. The evidence of Dr Pollak was substantially shaken in the course of cross-examination. In addition, in one instance Dr Pollak asserted existence of a non-existent letter dated 31 August 1992 signalling that the Bank would not extend the term of the loan, but later after lengthy cross-examination he withdrew this assertion and conceded there as no such letter. 129 The evidence of Mrs Stern to a large extent was that she could not remember or that she was not involved. Her answers were generally evasive and for the most part were non-responsive. Her recollection was poor in the extreme and her evidence in my view could not be relied on. I am also satisfied that she was well aware at all relevant times either through Dr Stern, her husband, or through Dr Pollak as to what was taking place. She was the executrix of the estate and took the necessary actions in reliance no doubt on legal advice. 130 Dr Stern, the husband of Mrs Stern, was mentioned in connection with some events but he was not called to give any evidence to support the applicants' case, although he was present throughout most of the hearing. Was Dr Pollak the Bank's agent? 131 It was submitted that the correspondence indicated that Dr Pollak in communications with Mrs Stern was acting as the agent of the Bank and not as agent for Mrs Stern, and that therefore if misleading information was given by Dr Pollak to Mrs Stern then it was attributed to the Bank and not to its agent Dr Pollak. Having regard to the position which Mrs Stern occupied as executrix and the actions which she took on legal advice, I am not satisfied that this submission has been made out. In my view Dr Pollak was acting on behalf of himself and his sister. She trusted him and was content to leave the important dealings with the Bank to Dr Pollak. There are no relevant differences for practical purposes so far as the issues in this case are concerned between the awareness of Dr Pollak and his sister. 132 In summary, although Dr Pollak at times presented documents to his sister for signature at the suggestion of the Bank this did not give rise to any agency relationship whereby any misstatements by Dr Pollak could be attributed to the Bank in favour of Mrs Stern. Enforcement of Californian judgment - Public Policy 133 The elements that must be established for recognition and enforcement of a foreign judgment are outlined by Professor Nygh in Conflict of Laws in Australia, 6th ed 1995 at p 137, as follows: "To entitle a foreign judgment to recognition at common law four conditions must be satisfied: (a) the foreign court must have exercised a jurisdiction which Australian courts will recognise; (b) the foreign judgment must be final and conclusive; (c) there must be an identity of parties; and (d) if based on a judgment in personam , the judgment must be for a fixed debt. The onus of establishing the existence of those conditions rests upon the party seeking to rely upon the foreign judgment. The party must not only establish that the foreign court had jurisdiction in the international sense, but also that the foreign judgment was final and conclusive according to the law under which it was pronounced. Once that onus is satisfied, the judgment is prima facie entitled to enforcement as a valid obligation, unless the defendant can establish one or more of the recognised defences to the enforcement of a foreign judgment." 134 I am satisfied, and it was not argued otherwise, that the four conditions referred to have been established in this case, and it now remains for me to determine the validity of the public policy defence raised by the applicants. 135 The applicants submit that this Court would not or should not enforce the Californian judgment because its enforcement would be contrary to Australian public policy. 136 The public policy relied on is identified as being the policy that Australian Corporations should not, outside Australia, engage in conduct proscribed by s 52 of the Trade Practices Act 1974 read in conjunction with s 5 of that Act. It is said that such public policy is at least as great, for example, as that associated with defences of undue influence and duress. It is further said that if an Australian Corporation engages in such proscribed conduct outside Australia but nonetheless obtains a judgment against the victim in relation to that conduct, it would be "offensive" to Australian public policy to permit that judgment to be enforced without giving the defendant an opportunity to raise such defence or to pursue such claims, unless an equivalent defence or claim was available in the foreign jurisdiction. 137 The applicants rely on the decision of the Court of Appeal in Israel Discount Bank of New York v Hadjipateras [1984] 1 WLR 137. That was a case which concerned an application made to enforce a judgment in England, which it was said was against public policy because it was based on a transaction which was tainted by undue influence. In that case the respondent alleged that he had signed a guarantee under the undue influence of his father. The Court of Appeal reversed the decision of the primary judge and the substance of the decision is that the respondent had deliberately refrained from raising a defence in New York and was therefore not entitled to take the point in the English courts. The decision does not advance the applicants' case. 138 As the editors of Dicey and Morris on The Conflict of Laws, 12th ed. 1993, point out at 511 -512, there are very few reported cases in which foreign judgments in personam have been denied enforcement or recognition for reasons of public policy. One example given by the authors is the Irish case of Mayo-Perrott v Mayo-Perrott [1958] IR 336 where the Supreme Court of the Republic of Ireland refused to enforce an English order for costs in favour of a wife against her husband which was ancillary to an English divorce decree. One of the reasons given was that the cause of action could not have supported an action in the Irish Republic where divorce is not allowed, and enforcement of an order ancillary to a divorce decree was contrary to Irish public policy. 139 Professor Nygh in his work Conflict of Laws in Australia 6th ed. 1995, at 157 says: "A foreign judgment may be contrary to public policy because it is founded on a law which is not acceptable to the public policy of the forum, such as a judgment for the wages of a prostitute or an order for maintenance of a child not confined to minority or other specified period …. A foreign judgment may also be contrary to public policy because it was obtained in a manner obnoxious to the law of forum such as duress, or undue influence … Foreign judgments affecting personal status eg divorces, annulments and adoptions have also been denied recognition under the discretionary power to refuse recognition if such orders have been obtained in circumstances abroad, or have an effect on a party in the forum which is 'contrary to substantial justice'". 140 The public policy which can be availed of as a defence to enforcement of a foreign judgment is narrower and more limited in private international law than in municipal law. It is pointed out in Cheshire and North's Private International Law , 12th ed. 1992, at 129: "A transaction that is valid by its foreign governing law should not be nullified on this ground unless its enforcement would offend some moral, social or economic principle so sacrosanct in English eyes as to require its maintenance at all costs and without exception." 141 The learned authors refer to the judgment of Cardozo J in Loucks v Standard Oil Co of New York (1918) 224 NY 99 at 111 where his Honour said: "…a right of action is property. If a foreign statute gives a right the mere fact we do not give a like right is no reason for refusing to help Bank in getting what belongs to him. We are not so provincial as to say that every solution of a problem is wrong because we deal with it otherwise at home … The courts are not free to refuse to enforce a foreign right at the pleasure of the judges, to suit the individual notion of expediency or fairness. They do not close their doors unless help would violate some fundamental principle of justice, some prevalent conception of good morals, some deep rooted tradition of the common weal." (Emphasis added) 142 In Soleimany v Soleimany [1999] QB 785 the Court of Appeal refused to enforce an award where it was apparent on its face that the arbitrator was dealing with an illicit enterprise under which it was the joint intention that carpets would be smuggled out of Iran illegally. The arbitrator considered that illegality would be of no relevance since he was applying Jewish law under which any purported illegality would have no effect on the right of a party. The English Court of Appeal refused to enforce the award on the ground that it would be contrary to public policy. The Court emphasised that it was dealing with a decision which found as a fact that it was the common intention of the parties to commit an illegal act. 143 The thread running through the authorities is that the extent to which the enforcement of the foreign judgment is contrary to public policy must be of a high order to establish a defence. A number of the cases involve questions of moral and ethical policy; fairness of procedure, and illegality, of a fundamental nature. 144 In the present case it seems to me that the enforcement of the Californian deficiency judgment in Australia is not against fundamental Australian public policy in the sense used in the above authorities, even if such a claim or defence was not available in the Californian proceedings as that provided in s 52 of the TPA. 145 Counsel for the applicants points out that under Californian law (s 17200 of the Californian Business and Professions Code) a claim or defence can be raised if there has been unfair competition in the sense of any unlawful or unfair business practice. However, it is pointed out by Mr Panelli and Mr Resser that some Californian decisions indicate that there need to be multiple victims and that a one-off misrepresentation may not be sufficient to constitute a practice. There was a conflict between Mr Sigman, for the Bank, and Mr Panelli and Mr Resser for the applicants, on the question whether this defence could have been raised in the present case and whether it was equivalent in nature to the provisions of s 52. In my opinion on the evidence, the preferable view is that the alleged misrepresentations and continuing conduct over the period 1988 to 1992 could properly be described as a course of conduct. I consider that there is a substantially equivalent cause of action available in California if a proper case can be made out. Therefore in my view the applicants could not in any event avail themselves of the public policy defence to enforcement on the basis that the matter complained of could not have been raised in the Californian proceedings. 146 Further, it seems to me that there is a clear underlying Californian public policy against unfair business practices. Section 17200 of the Californian Code is in my view underpinned by a similar policy to that underlying the relevant provisions of the TPA. There is no repugnance between the applicable laws of California and Australian public policy indicated in the authorities. 147 In the present case, having regard to the authorities referred to, I am not satisfied that even assuming it was not possible to raise the defence under s 52 or a corresponding provision in California at the time of the judgment, that either the Californian law or the enforcement of the Californian judgement would be so inconsistent or repugnant to the policy underlying the provisions of the TPA that enforcement should be refused.

Limitation Defence 148 The Bank submits that the applicants' claims are brought outside the three year limitation period prescribed by s 82 of the TPA. Under that section the period runs from the date on which the cause of action accrued. However, the right to damages under s 82 does not arise where there is merely a potential or contingent loss, but only when the loss is crystallised or the contingency met: see Wardley Australia Limited v The State of Western Australia (1992) 175 CLR 514 at 532-3, 538. 149 In the present case in the Judgment of Foreclosure and Order of Sale of 2 May 1995 the Superior Court of the State of California stated that: "Defendants Pollak & Stern, and each of them, are personally liable for payment of the sum secured by the deed of trust, and a deficiency judgment, may be ordered following proceedings prescribed by law." 150 Before a loss accrued in the present case it was necessary for the Bank to obtain a judicial foreclosure order and a deficiency judgment. Until these were obtained, under the law of California the contingencies had not been satisfied. The order made by the Court on the foreclosure indicates the discretionary element in the deficiency judgment. In the circumstances, the outstanding contingencies were not satisfied until the deficiency judgment was given on 19 June 1996. Accordingly, the proceedings were commenced within the three year period. I do not accept the Bank's submissions on this point.

Ministerial consent - s 5 TPA 151 Section 5(3) of the TPA requires that: "(3) Where a claim under section 82 is made in a proceeding, a person is not entitled to rely at a hearing … on conduct to which a provision of this Act extends …except with the consent of the Minister." (Emphasis added) 152 In the present case, all necessary Ministerial consents were obtained prior to the conclusion of the hearing. In my view that is sufficient: see Natureland Parks Pty Ltd v My- Life Corporation Pty Ltd (1996) 67 FCR 237 at 240; and Tycoon Holdings Pty Ltd v Trencor Inc [1995] ¶41-413 at 40,581; cf Yamaji v Westpac Banking Corporation (1993) 42 FCR 436 at 440. The words "at a hearing" lend support to this conclusion. If it had been intended to require consent before the hearing appropriate language to make this clear would have been used. The language of subs 5(3) is to be contrasted with that used in subs 5(4) which provides that a person other than the Minister or the Commission is not entitled to make an application except with the consent of the Minister. The words "at a hearing" in subs 5(3) contemplate a period through to the finalisation of the hearing and include the final submissions. The Minister's consent to the making of the application in proceeding NG 149 of 1996 was not obtained prior to the commencement of that proceeding, but was obtained prior to the commencement of NG 81 of 1998 and N 302 of 1999. For these reasons I do not accept the submission based on the absence of Ministerial consent. 153 It was faintly suggested by the Bank that the Ministerial consent needed to be that of the specific appointed Attorney-General and that a consent could not be signed by any other Minister. There is no substance in this submission as becomes apparent when regard is had to ss 18C and 19 of the Acts Interpretation Act 1901 (Cth).

Election between proceedings 154 The applicants have three concurrent sets of proceedings on foot. They are substantially in the same form and they were instituted to comply with the requirement for the consent of the Minister and under subs 5(3) of the TPA and to avoid defeat by reason of the limitation period. In each of the proceedings, subject to one amendment, the allegations are substantially identical and identical relief is sought. In my view, apart from a claim in costs, no prejudice arises in this case if the applicants are not to put their election. In the circumstances of this case I do not consider that an election needs to be made. In any event, the applicants have succeed on the limitation question and this issue becomes hypothetical.

Anshun - raising of s 52 in the California proceeding 155 The Bank submits that under Californian law a claim under s 52 could have been raised in the Californian proceedings and that therefore there is an issue estoppel from making the claim in the present proceedings. There was some expert evidence given by Mr Sigman and Mr Resser as to the way a Californian Court would have approached this question, with particular regard to the principles set forth in ss 187 and 188 of the Restatement. A useful starting point is the fact that the parties have selected Californian law to govern their relationships together with the fact that the closest and most substantial connection of the subject matter in the present proceeding is clearly with the State of California. The property in question was in California; the transactions were governed by Californian law and the relevant dealings were for the most part conducted in California. In addition, I take into account the evidence of Mr Resser that the Californian Court would be likely to apply Californian and not Australian law because it would take what he describes as a "California centric" approach. Another important consideration is that s 86(4) of the TPA confers jurisdiction on the Australian Federal Court which is exclusive of the jurisdiction of any other court except for certain courts of the States or Territories and of the High Court under the Australian Constitution. If s 52 had been raised in California, the California Court would in my view have declined to exercise jurisdiction because of the clear statement of Australian policy expressed in s 86.

Trade and Commerce 156 It was suggested that the allegations relied on by the applicants as to misleading and deceptive conduct did not occur in "trade and commerce … between Australia and places outside Australia": see ss 4(1) and 52. I do not accept this proposition. The whole context in which the statements were made was a commercial one concerning obligations incurred in California in relation to Californian property by Australian residents. The statements and conduct were in the course of ongoing business dealings over eight years between the Bank and the applicants involving the transmission of commercial documents and financial information between the applicants in Australia and the Bank in California. There is no substance in this submission.

Amendment to par 11 of the Amended Statement of Claim 157 In submissions in reply on 6 July 1999 the applicants sought leave to amend their particulars in par 11 of the Amended Statement of Claim. This amendment had been notified to the Bank on 30 April 1999. I am not satisfied that any undue prejudice or unfairness has been shown to be suffered by the Bank as a consequence of the amendment and I accordingly I allow the amendment.

Conclusion 158 For the above reasons the application by Dr Pollak and Mrs Stern should be dismissed. The application by the Bank for enforcement of the judgment is granted. I order the parties to bring in Short Minutes to give effect to these reasons within fourteen days when I will hear the parties on costs. I certify that the preceding one hundred and fifty-eight (158) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin.

Counsel for Joseph Pollak and Ilana Elenka Stern: R B S MacFarlan QC J W J Stevenson

Solicitor for Joseph Pollak and Ilana Elenka Stern Denes Ebner

Counsel for National Australia Bank Limited: R J Burbridge QC S M P Reeves

Solicitor for National Australia Bank Limited: Mallesons Stephen Jacques

Date of Hearing: 1-4, 8-9 December 1998, 12, 13, 20, 27-28 April 1999 7 July 1999

Date of Judgment: 15 October 1999

Trade Practice Act 1974(Cth)ss 5, 51A, 52

Trade Practices Act 1974(Cth)ss 4(1), 5, 52, 82, 86

Stern v National Australia Bank [1999] FCA 1421 TRADE PRACTICES - misleading and deceptive conduct - whether Bank made false representations concerning the enforceability of loan documents, acceleration clause, and extension of a loan - whether silence constituted misleading conduct - reasonable expectation - where representations were expressions of opinion - whether applicants relied on misleading and deceptive conduct when they entered into guarantees and later an assumption agreement - whether Ministerial consent required before commencement or conclusion of hearing - Trade Practice Act 1974 (Cth) ss 5, 51A, 52 LIMITATION PERIOD - under s 52 of the Trade Practices Act 1974 (Cth) limitation period runs from date on which cause of action accrued - right to damages under s 82 arises when loss is crystallised or contingency is met - loss accrued under Californian law when judicial foreclosure order as well as deficiency judgment had been given RECOGNITION AND ENFORCEMENT - application for recognition and enforcement of foreign judgment - deficiency judgment of Californian court - defence to enforcement if contrary to Australian public policy - relevant policy identified as policy in s 52 together with s 5 of the Trade Practices Act 1974 (Cth) - whether foreign judgment contrary to Australian public policy - whether foreign law contrary to Australian public policy FOREIGN LAW - choice of law - proof of foreign law a question of fact - expert evidence on content of foreign law - application of foreign law to the facts a matter for the Court of the forum - construction of acceleration clause in a Deed of Trust ESTOPPEL - Anshun estoppel - whether a claim under s 52 could have been raised in the Californian proceedings creating an estoppel from making the claim in the present proceedings WAIVER - application of substantive law of California - intent to relinquish right - whether Bank waived its right to enforce an acceleration clause in a loan by acceptance of payment of interest AGENCY - whether one applicant was agent for Bank when he communicated information given to him by Bank to the other applicant

Trade Practices Act 1974 (Cth) ss 4(1), 5, 52, 82, 86 Acts Interpretation Act 1901 (Cth) ss 18C, 19 Elders Trustee & Executor Co Pty Ltd v E G Reeves Pty Ltd (1987) 78 ALR 193 applied Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 cited Browne v Dunn [1894] 6 R 67 cited Seymour v Australian Broadcasting Commission (1977) 19 NSWLR 219 cited Allied Pastoral Holdings Pty Ltd v Commissioner of Taxation [1983] 1 NSWLR 1 cited In the marriage of L C and T C (1998) 23 Fam LR 75 cited Pappas v Soulac (1983) 50 ALR 231 at 234 cited Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 cited Elders Trustee and Executor Co Ltd v E G Reeves Pty Ltd (1987) 78 ALR 193 cited Leda Holdings Pty Ltd v Oraka Pty Ltd (1997) ATPR ¶41-601 cited Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 cited Warner v Elders Rural Finance Ltd (1993) 41 FCR 399 cited Waller v Truck Insurance Exchange Inc (1995) 11 Cal 4th applied Allstate Life Insurance Co v Australia & New Zealand Banking Group Ltd (No 33) (1996) 64 FCR 79 followed United States Trust Co of New York v Australia and New Zealand Banking Group Ltd (1995) 37 NSWLR 131 followed United States Surgical Corporation v Hospital Products International (SC(NSW), McClelland J, 19 April 1982, unreported) cited National Mutual Holdings Pty Ltd v Sentry Corpn (1989) 22 FCR 209 cited Israel Discount Bank of New York v Hadjipateras [1984] 1 WLR 137 considered Mayo-Perrot v Mayo-Perrot [1958] IR 336 considered Loucks v Standard Oil Co of New York 224 NY 99 at 111 (1918) followed Soleimany v Soleimany [1999] QB 785 considered Wardley Australia Limited v The State of Western Australia (1992) 175 CLR 514 cited Cheshire and North's Private International Law 12th ed. 1992 Dicey and Morris on The Conflict of Laws 12th ed. 1993 Nygh Conflict of Laws in Australia 6th ed. 1995 ILANA ELENKA STERN AND JOSEPH POLLAK v NATIONAL AUSTRALIA BANK

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