Westpac Banking Corporation v Robinson

The pleadings 2The pleadings took a rather unorthodox course which may be explained by the circumstance that Mrs Robinson represented herself throughout. Mrs Robinson, in her amended defence filed on 14 March 2013, made allegations which were more apposite to a cross-claim than to a defence since they included a claim for damages. The Bank filed a reply to the amended defence on 28 May 2013 which was, effectively, a joinder of issue and a defence to the putative cross-claim contained within the amended defence. However in August 2013 Mrs Robinson filed a document entitled amended cross-claim, to which the Bank filed a defence on 4 March 2014. On the first day of the hearing the Bank filed an amended statement of claim, an amended reply to the defence and an amended defence to the amended cross-claim. Mrs Robinson did not oppose these amendments. 3The issues in the proceedings are sufficiently defined by the pleadings. Mrs Robinson, at times, put submissions which might be regarded as outside the pleadings. However, the Bank did not object and I was disposed to allow her some latitude as a litigant in person.

The purchase of the Property 4On 24 September 2004 Mrs Robinson exchanged contracts for the purchase of a property in Hargraves Street, The Entrance North (the Property) for the sum of $600,000. She planned to run the business which she operated through Bead and Crystal Heaven Pty Limited (the Company) from a shopfront on the Property and to grant a lease to the Company for that purpose. The business traded as a retail and wholesale supplier of glass beads, crystals, jewellery and jewellery-making supplies. There was a Goods and Services Tax (GST) impost of $60,000 on the purchase because the Property was to be used for business purposes. She also planned to live in the house on the Property. 5Mrs Robinson was the sole director and shareholder of the Company and also its secretary. The Company was her only source of income. The rent paid by the Company under the lease of the Property would form part of her income, as would any profits of the Company which she decided to pay herself as income or distribute to herself. 6The contract originally provided for a settlement within six weeks but the parties subsequently agreed to extend it to a year. A deposit of $30,000 was originally paid. In about November 2004, Mrs Robinson arranged to lease the Property from the vendor pending completion and transferred the business of the Company to the shopfront area. Her family moved into the house on the Property. 7In an attempt to obtain finance through Merchant Mortgages Pty Limited, Mrs Robinson, or her husband on her behalf, engaged Preston Rowe Paterson to value the Property. They inspected the Property on 30 August 2005. Their opinion was that the Property was worth, as at 9 September 2005, $520,000, on the summation method or $610,000 on the direct comparison method. The valuer considered the latter method, with the capitalisation method, to provide the most appropriate value. 8In October 2005 Mrs Robinson, or her husband on her behalf, retained Robertson & Robertson to value the Property for mortgage purposes. They valued the Property at $500,000 as at 13 October 2005.

The further agreement to forfeit the deposit of $150,000 9A year after exchange Mrs Robinson was still not in a position to complete since she had not obtained the requisite finance. By facsimile dated 18 October 2005, the vendor offered to extend the completion date by six months to 24 April 2006 on the following conditions: (1) Mrs Robinson is to pay and agree to release unconditionally the sum of $110,000 to the vendor by 24 October 2005; (2) Mrs Robinson is to withdraw the caveat from the title by 24 October 2005; (3) The rent will increase to $1,000 per week from Monday 24 October 2005 until settlement on 24 April 2006; (4) If settlement does not take place on 24 April 2006, Mrs Robinson will forfeit all monies already paid to the vendor [being a total of $150,000]. 10The facsimile concluded by saying that, if settlement did not occur by 24 October 2005 or the above offer was not accepted, Mrs Robinson would have to vacate the Property immediately. Mrs Robinson accepted the vendor's offer.

Mrs Robinson's application for a loan from the Bank 11That day, 18 October 2005, Mrs Robinson filled out an application form for a business loan from Westpac. She did so in the presence of Greg Lumb, the Business Banking Manager of the Bank's Erina branch at a local café near the Property. Mr Lumb explained in his evidence that part of the service offered by the Bank was that its Business Banking Managers would visit customers to save them having to spend time away from their businesses. Mr Lumb, who lived at Norah Head, would sometimes visit Mrs Robinson on his way home from work. 12By the time Mrs Robinson filled in the loan application on 18 October 2005, she realised that Mr Lumb did not have authority to approve or decline the loan application which would be submitted to the Bank's credit department. She also knew that Mr Lumb's role was to liaise between her and the credit department and to obtain necessary information from her for its consideration. 13In the application Mrs Robinson wrote that her business required $600,000, of which her contribution would be $150,000. She told Mr Lumb that she had arranged to borrow $100,000 of this amount from her sister-in-law. The finance required was, accordingly, $450,000. An additional amount of $84,000 for stamp duty and GST was also needed. She described the purpose of the loan in her application as follows: "To purchase commercial property that my business (Bead and Crystal Heaven P/L) will then lease over 15 years- principal and interest." 14In the application Mrs Robinson recorded that the business had been established on 20 December 2002 and that she was the director and owned the business 100%. 15Mrs Robinson provided various documents to Mr Lumb, including the front page of the contract for the purchase of the Property and the Company's tax return for the year ended 30 June 2004 which declared a taxable income of $39,241. She also provided the Company's financial statements for that year. The balance sheet recorded that, as at 30 June 2004, the Company had total assets of $177,868.50. She provided her personal tax return for the year ended 30 June 2004 which showed her taxable income as $47,801. She also provided a Business Statement which she had typed herself in consultation with someone she described as a "business mentor". The Executive Summary read: "Our immediate aim is to obtain finance to purchase the property at 16 Hargraves Street, The Entrance North. This property is zoned commercial, and is used for both business purposes and as our sole residential property. Carol Robinson will be purchasing the property and leasing it to Bead and Crystal Heaven. This will enable a stable retail, wholesale and office, classroom and warehouse facility for the business to consolidate and go forward. We then plan to extend the shop to the boundary of the property, providing undercover parking for staff, increased storage, office and shop front, and build a residential property above that." 16The document contained a detailed description of the Company's business and its genesis and recounted that the Company was launched at the Stitches and Craft Show at Rosehill in February 2003. The Company leased a shop on the Central Coast which opened in April 2003 and was expanded to the premises next-door in June 2003. The document described the move to the Property in the following terms: "In November 2004 we were again running out of shelf and storage space. We found the current location available for sale, and negotiated a 12 month delay on settlement, with a lease until that time." 17On 19 October 2005 Mrs Robinson sent by facsimile to Mr Lumb a draft profit and loss statement for the Company for the year ended 30 June 2005 which showed total income of $1,222,552, cost of sales of $647,391, giving a gross profit of $575,161. After deduction of expenses of $481,328 the net profit was $93,833. 18Mr Lumb explained in oral evidence why the Bank used the Company's financial statements to assess the serviceability of the loan to Mrs Robinson as follows: In the case of an individual that is self-employed and sole director the financials of the company are sought because that sole director and borrower in this case can influence the income from the company either upwards or downwards. 19There was a significant delay in advancing the loan application. The Bank required Mrs Robinson to provide up-to-date financial statements and tax returns from the Company. The documents for the year ended 30 June 2005 had not been prepared. The Bank required two years' financial statements and tax returns for the companies of potential borrowers, such as Mrs Robinson, who were, effectively, self-employed and controlled a company from which they derived their income. Mrs Robinson had accounts for the Company for the financial year ended 30 June 2004 but the accounts for the following year had not been prepared when she filled in the loan application. 20In January 2006, Mrs Robinson went to Tasmania to nurse her mother who was ill and stayed there until after she died on 5 March 2006. Mrs Robinson was her mother's sole beneficiary. Her principal asset was a unit in a retirement village in Tasmania. At that time Mrs Robinson expected that she would receive about $200,000 for the unit. 21As the date for completion of the purchase of the Property drew near, Mrs Robinson prepared various documents setting out the trading performance of the Company. By facsimile dated 16 March 2006, she provided these documents to the Bank in support of her loan application as well as a copy of her late mother's will, together with the Certificate of Title and a current rates notice for the unit. 22Mr Lumb made various proposals to the Bank's credit department on behalf of Mrs Robinson as follows: Date of proposal Structure of loan and amount Security Prior to 15.3.06 Loan of $420,000 for 15 years and loan of $60,000 for 6 months to be repaid from refund of $60,000 GST The Property 15.3.06 Loan of $500,000 (over 15 years) The Property and the retirement village unit in Tasmania which Mrs Robinson was to inherit. 23.3.06 Loan of $420,000 (over 15 years) and loan of $80,000 for 6 months (to be repaid from sale of retirement unit in Tasmania) The Property

23The proposal made on 15 March 2006 was a change from the previous one and took account of Mrs Robinson's inheritance of her mother's unit in Tasmania. The proposal made on 23 March 2006 reflected the need to sell the unit since, as Mrs Robinson could not become the legal owner (since she was below the minimum age for entry), it could not be used as security for the loan. This third proposal became the subject of the first agreement referred to below. 24In support of the third proposal, Mrs Robinson instructed a firm known as "FKP" in Brisbane to send a facsimile to Mr Lumb concerning the sale of her mother's unit. The letter read in part: Mrs. Carol Robinson is attending to the sale of her mother's unit at the above address. The Retirement unit is currently on the market for $210,000 neg. and we anticipate realising a sale within the range of $200,000 - $210,000. We do have a waiting list and settlement can take 60-90 days from signing of contracts. As the unit has spectacular views, we anticipate a sale in the not too distant future. 25Mrs Robinson could not recall seeing the letter. I am, however, satisfied that it was written and sent on her instructions.

The Bank's offers of finance 26On 24 March 2006 the Bank approved Mrs Robinson's application for a loan and, on 30 March 2006, it made an offer to Mrs Robinson which she accepted, as a result of which the Bank entered into an agreement with Mrs Robinson (the March agreement) whereby it would lend a total of $500,000 to Mrs Robinson as follows: (1) $420,000 to be repaid over 15 years; and (2) $80,000 to be repaid within 6 months. 27The March agreement was expressed to be subject to the following condition: Conditions of Approval Precedent The Bank will need to be provided with a valuation, acceptable to the Bank from a valuer selected and instructed by the Bank, of the property at 16 Hargraves Street, The Entrance North. The cost of the valuation is to be paid by you. 28The rationale for the loan structure in the March agreement was that as the purchase price was $600,000, the Bank was able, within its lending guidelines, to lend $420,000 (70% of $600,000) subject to a valuation. The Bank was also prepared to lend an amount of $80,000 to be repaid in full within 6 months, on the basis of Mrs Robinson's expectation that the proceeds of the unit and the GST refund would be available to her within the six-month period. 29On 5 April 2006 Mrs Robinson provided a valuation of the Property to the Bank which had been performed by Robertson & Robertson, who were on the Bank's approved panel. They valued the Property at $525,000. As the firm had already valued the Property in October 2005, it used the same photographs. The report contained the following note under the heading, "Improvements": "Note: All photographs below are dated October 2005 however there have been no material changes in the improvements that would affect the valuation." 30On 11 April 2006, the Bank declined to advance funds pursuant to the March agreement on the basis that the condition of an acceptable valuation had not been fulfilled. 31As soon as Mr Lumb learned that the loan was not acceptable, he rang Mrs Robinson to discuss how the loan could be restructured in order to bring it within the Bank's lending requirements and to provide Mrs Robinson with sufficient funds to complete the purchase by 24 April 2006. 32Mr Lumb worked out a new proposal (set out below), which he discussed with Mrs Robinson before submitting it to the Bank's credit department. As soon as he learned that the loan had been approved, Mr Lumb telephoned Mrs Robinson. This conversation occurred at the latest on 20 April 2006.

The April 2006 offer that led to the loan agreement between the Bank and Mrs Robinson 33On 21 April 2006 the Bank made a revised offer of finance to Mrs Robinson as follows: (1) $367,500 for 15 years (Facility 175); (2) $70,000 for 6 months (Facility 183); (3) $60,000 for 3 months (Facility 837). 34It was contemplated that the loan in Facility 183 would be repaid from the proceeds of Mrs Robinson's late mother's unit and Facility 837 would be repaid from the GST refund. The amount of Facility 175 was 70% of the amount of the valuation, $525,000, and accordingly fell within the Bank's lending guidelines for business loans for commercial property. 35At around this time, Mrs Robinson learned that the full amount of the GST of $60,000 would not be refunded since part of the Property was used for the business and part as her residence. Mrs Robinson could not recall whether she learned of this before or after she agreed to borrow the funds from the Bank. An assessment of the split in use was made by the Australian Taxation Office (ATO), as a result of which she ultimately received a refund of $36,000.

The disputed conversation between Mrs Robinson and Mr Lumb about combining Facilities 175 and 183 36There is a dispute about a conversation that Mrs Robinson says that she had with Mr Lumb prior to her acceptance of the revised offer on 21 April 2006. Mrs Robinson gave evidence that Mr Lumb told her that after 6 months Facilities 175 and 183 would be consolidated and that, accordingly, Facility 183 would not need to be repaid within six months of the initial advance. Her evidence on affidavit of the conversation is: [37] After some bantering between Shaun [Mrs Robinson's husband] and Greg [Mr Lumb, the Bank officer], Greg said "If you pay out the short term loan and make all other payments on time, in 6 months we can combine the two remaining loans and look at restructuring the payment to be principal and interest. You must make all payments on time though." 37Mr Lumb denied that he had ever made the statement attributed to him. I accept his evidence. For reasons given in more detail below, I consider him to be a careful and circumspect Bank manager who was careful not to raise expectations that could not be fulfilled. He knew that the 70% loan to value ratio was applicable and that no alteration would be possible without the written approval of the credit department of the Bank. I accept his evidence that he was wary of Mr Robinson whom he believed would hear only what he wanted to hear and was particularly careful when speaking to Mrs Robinson for that reason. 38I do not accept Mrs Robinson's evidence that Mr Lumb made any such statement. At that time, she hoped that she would receive in the order of $210,000 for her mother's unit, since she knew that units of a similar size in the same retirement village had been sold for such amounts. She had, however, some reservations about whether her mother's unit would fetch such a price since, unlike other units in the centre, had not been refurbished in recent years. She did not, however, inform the Bank of her reservations. 39Even if she did not receive $210,000 for her mother's unit and even if the GST refund was not the whole amount of $60,000, there was no reason either for her or for Mr Lumb to consider the possibility that she would default in repayment of Facility 183 such that it would need to be consolidated with Facility 175. 40Furthermore, she knew that Mr Lumb did not have authority to approve any loan or any variation of a loan since the proposal had to be submitted to the Bank's credit department for its decision. Mr Lumb had, by that time, been an officer of the Bank for about 36 years. I accept his evidence that he did not usually raise possible changes to loan structures with clients because he did not want to give the wrong impression that such changes would be approved. 41Although I am not satisfied that a conversation to the effect that Mrs Robinson deposed took place, I consider that there may have been some discussion between them about the possibility of the loans being restructured at some time in the future. Although Mrs Robinson did not envisage that she would not be in a position to repay the two short-term loans, she also needed cash since the Company's business was growing. She must have known that the Company had a significant unpaid tax debt, the quantum of which was then unknown because the Company was behind in preparing its accounts. She knew that she would receive a substantial sum from her mother's estate and would have preferred to apply it (as she ultimately did) to the working capital of the Company or to pay the Company's tax debt, rather than to repay her debt to the Bank.

The advance of the funds on 24 April 2006 42Mrs Robinson accepted the Bank's revised offer set out above and agreed to the facilities referred to above on terms set out in the documentation (the April agreement), which she executed on Friday 21 April 2006. She explained in her affidavit that: [39] At this late stage, with a penalty clause attached to the contract of forfeiture of the $150,000 deposit, most of which had already been paid directly to the cash poor vendor, I had no other option but to sign. 43It is common ground that the monies were advanced on 24 April 2006. Accordingly, Facility 837 had to be repaid on 24 July 2006 and Facility 183 had to be repaid on 24 October 2006. 44The terms of the April agreement need not be referred to specifically since they are not in dispute and nothing turns on their precise terms. The Bank specifically relied on clause D7 which provides: RIGHTS AND POWERS SEPARATE The Lender can, but need not, do anything under a Document, even after a delay, and may do it more than once. . . . If the Lender does not do something when it is entitled to, that does not mean it is giving up that right and cannot do it later." 45The Bank provided monthly statements to Mrs Robinson until about 2011 that recorded the opening balance, the closing balance, the applicable interest rate and the limit of the loan. The statements relating to Facility 175 showed the diminishing principal and the diminishing limit, which reflected the change in status of the loan from interest only in the first five months from the time of the advance, to principal and interest for the balance of the term.

Mrs Robinson's inheritance 46In June 2006, Mrs Robinson accepted the retirement centre's offer of $165,000 for her mother's unit. Probate of the will was granted on 3 July 2006. After deductions for management fees and other liabilities, she received a total of about $119,000 in two tranches: the first payment of $75,000 was made on 24 July 2006 and the balance of $44,515.77 a few days later. She used $24,000 of this sum to repay Facility 837, of which $36,000 had already been paid when she received the refund of GST associated with the purchase of the Property. 47It does not emerge from the evidence what Mrs Robinson did with her inheritance, apart from the $24,000 referred to above which was used to repay Facility 837. However, she did not use it to repay the Bank, notwithstanding that this was the basis on which the Bank provided Facility 183. 48Between September 2006 and 22 May 2007, the Company paid $85,000 of what Mrs Robinson described as "back tax". The Bank was unaware of this until the following year when she sought to explain why she had not repaid Facility 183.

The default in repayment of Facility 183 49Mrs Robinson did not pay Facility 183 within 6 months and was therefore in default as at 24 October 2006. I accept Mr Lumb's evidence that at about that time he received a call from the Bank's loan centre to inform him of the default. Shortly afterwards, he visited Mr and Mrs Robinson and had the following conversation: I said: "Why hasn't the $70,000 loan be [sic] repaid. What happened to the money from your mother's inheritance?" She said: "I put it back in the business. It's not available to repay the loan." I said: "What are you going to do about it now? The Bank can sell the property. I don't want that to happen. You need to give me some ammunition to go to the Bank with in regard to a proposal to clear the debt backed by strong financials or something like that." 50In November 2006 Mr Lumb documented a further proposal that the $70,000 loan (Facility 183) would be repayable over five years. He noted in the "Client Rationale" section of the Bank's records the difficulties the Company had been experiencing as well as its tax liability. As Mrs Robinson did not provide the Bank with up-to-date financial statements for the Company, the proposal was not advanced. 51At the end of January 2007 Mr Lumb went on long service leave for six months. He returned to a different position at the Bank at the end of the leave. Before he went on leave he visited Mrs Robinson and delivered a statement of position for her to fill in. The following day, 30 January 2007, he sent her an email to inform her that during his absence Gai Smith, who was also a Manager of Business Banking, would be the point of contact and asked her to ring Ms Smith when the financial statements were available and the statement of position had been filled in. I reject Mrs Robinson's evidence that Mr Lumb was "forced" to go on long service leave. I also reject her insinuation that either his absence or his return to a different position had anything to do with his conduct with respect to her loans. 52Ms Smith tried to contact Mrs Robinson about Facility 183, which had been in default since 24 October 2006. On one occasion she spoke with Mr Robinson who offered to speak to her on Mrs Robinson's behalf about the loan. However, Ms Smith declined to speak to Mr Robinson about Mrs Robinson's financial position. On 23 March 2007 Ms Smith eventually spoke with Mrs Robinson about Facility 183. Mrs Robinson does not recall the conversation. I accept that it took place and that Ms Smith's file note as set out below is an accurate record of the conversation: Spoke with Carol Robinson today (after many attempts to contact her over the past month) in regards to the position of clearance of account 032191 271183 $70k which expired on 30/10/2006 & clearance to come from sale of mothers deceased estate ppty. Carol advised that 2005 & 2006 financials are still not with the accountant & will be done in approx 2 weeks, Carol has been advising the bank they will be available since letter sent by PBBM Greg Lumb on 27/11/06. I then asked Carol for an update on the deceased estate ppty to which Carol advised that this had been sold July last year & funds were utilised in her business (would not elaborate) & they do not have the funds to repay the debt & requested a further extension of facility. I advised Carol, that as previously requested since Nov 06 it is critical that we obtain her 05 & 06 financials for a full picture of her financial position & to avoid her file being placed in the hands of AMG. 53I find that there was no discussion in the course of this conversation of a proposal that Mrs Robinson consolidate all her loans with the Bank.

The transfer of Mrs Robinson's accounts to the Loans Management Area 54In May 2007 Mrs Robinson's accounts were transferred to Michael Chaperon in the Loans Management Area of the Bank. By email dated 4 May 2007 Mr Chaperon sought a proposal from her as to how the loan would be cleared, the latest financials for the Company and certification as to the Company's statutory requirements. The subject line of the email reads: "Carol Ann Robinson & Bead and Crystal Heaven Pty Limited ("the Debtors")" 55Mrs Robinson took exception, in the proceedings, to the description of the Company as a "debtor" and contended that the Company was not, in fact, a debtor of the Bank since all relevant borrowings had been in her name. She relied on the email to support the proposition that the Bank had represented to her that there was a "cross-guarantee" of her debts by the Company. It is common ground that no guarantee of her debts was given to the Bank by the Company. Indeed, as Mr Lumb explained, there was no need for such a guarantee since the borrowings and the Property were in her name. Mrs Robinson knew, as sole director of the Company, that she had never executed a guarantee on behalf of the Company of her debts, or vice versa. Although the subject of the email was potentially misleading to someone who did not know the facts, it was addressed to Mrs Robinson, who did. I do not accept that she was misled by the subject heading of the email. 56Mr Chaperon explained in cross-examination why he had described Mrs Robinson and the Company in that way in the header of the email as follows: At the time of transfer to me - just as a bit of background, Westpac, we have a grouping system, so you may have a loan in your own right and you have a company who also has a loan. They might be distinct, but they are placed under the same grouping and that is called a connection. So the whole connection was transferred across to me and, as you would be aware, Bead and Crystal Heaven had a lease, a leasing account with the bank, a debtor account with the bank. 57In a further email exchange the Bank reiterated its request for financial statements. 58Mrs Robinson, by letter dated 22 May 2007 on the Company's letterhead, wrote to Mr Chaperon to request that Facilities 175 and 183 be consolidated. The letter contained the following paragraph: As previously explained, we have been focusing for the last 6 months on massively reducing our debt. We admit our accounts were a mess, and we have been working to rectify this also. Back in September last year, we made an arrangement with the ATO to submit returns, knowing that they weren't 100%, but to lodge figures and go forward. A paydown arrangement was made, which has just been reviewed, and current BAS statements have been paid as due. Since September last year, we have paid over $85,000 of back tax. On the current arrangement, we will have our total debt paid to the ATO in under 2 years. 59Mrs Robinson attached to the letter a statement of her assets and liabilities and those of the Company. The statement showed that the Company had, as at 21 May 2007, a tax debt of $146,901. 60By letter dated 12 July 2007, Mr Chaperon wrote to Mrs Robinson again and noted that she had not yet provided the Bank with the Company's full financial results for the financial years ending 30 June 2005 and 2006. He declined her request to consolidate Facilities 175 and 183. Having outlined the current repayments to be made, Mr Chaperon wrote: General Notwithstanding the current defaults, on the basis that you are able to meet the PIF [principal, interest and fees] repayment and continue to meet the interest on the expired loan when due, the Bank intends to carry out another review of your Company's financial performance to give further consideration to your request to consolidate your debt. To assist with the review, please provide the Bank with the following by no later than 31 August 2007: ● Signed off Balance Sheet, Profit & Loss financial year ending June 2005 and 2006. ● Copies of tax return (personal and business) for financial year ending June 2005 and 2006. ● Draft financial results for year ending June 2007 together with a corresponding aged Creditor listing. ● Certification from the director as to the status of the Company's statutory obligations accompanied by appropriate comments where arrangements are already in place. ● Any other information and documentation you believe may assist the Bank with its review. 61In August 2007 Mrs Robinson sought refinance from the Commonwealth Bank and the ANZ Bank. She disclosed that she was in default to the Bank. The Commonwealth Bank sought financial statements of the Company but Mrs Robinson was not in a position to provide them. The evidence does not disclose the ANZ's response but it is common ground that she was unable to refinance the debt. 62On 4 April 2008 Mrs Robinson failed to maintain Facility 175 within its allowable limit which had reduced from $367,500 since 5 July 2007 such that it was $359,791 on 4 April 2008. 63On 18 April 2008 Mrs Robinson signed the tax return for the Company for the year ended 30 June 2005, to which was attached the Company's financial statements for that financial year.

The winding up of the Company 64A statutory demand dated 21 April 2008 for $200,977.29 was served on the Company on behalf of the Deputy Commissioner of Taxation, together with an affidavit of debt. The Company failed to comply with the statutory demand. 65On 24 July 2008, the Deputy Commissioner of Taxation filed an originating process in the Federal Court for an order that the Company be wound up in insolvency. The order was made on 24 September 2008. 66It was not until July 2008 that Mrs Robinson provided the Bank with tax returns and financial statements for the Company for the 2005 and 2006 financial years. 67In about December 2008 Mr Robinson informed the Bank that the family was moving to the United States for personal reasons for about two years. The winding up of the Company was completed on 1 November 2010. 68Regular repayments of Facility 175 stopped in June 2009. The only payments made after June 2009 on Facility 175 were $2,775 on 28 January 2010, $2,650 on 8 March 2010 and $900 on 15 March 2010.

The events preceding the commencement of the proceedings 69In about 2010, Mrs Robinson made a complaint about the Bank to the Financial Services Ombudsman. The investigation and the report took about two years, from early 2010 until 2012, in the course of which the Bank was prevented from enforcing its mortgage or the loan contracts. 70On 7 June 2012 the Bank served on Mrs Robinson a demand dated 5 June 2012 for payment of $572,458.27. This demand was not met. 71By letter dated 15 June 2012 the Bank issued a notice to Mrs Robinson pursuant to s 57(2)(b) of the Real Property Act 1900 (NSW). The notice was served on 19 June 2012. 72The Bank filed the statement of claim on 27 July 2012.

Credibility of witnesses 73There are few contests of credit in the present case. The most significant arises in the context of the conversation that Mrs Robinson alleges she had with Mr Lumb prior to the April agreement being entered into, which he denies. I have resolved the contest in favour of Mr Lumb as set out above in my factual findings. 74I found Mr Lumb to be a reliable and honest witness. He was prepared to make concessions and readily admitted when he did not recall what was being put to him. Far from there being any animosity between him and Mrs Robinson arising from what she had said about him in her affidavit, he seemed to harbour no ill feeling and, indeed, to be fond of her. He had obviously tried to do his best to process the loan in sufficient time to enable her to complete the contract for the purchase of the Property. He had not acted in any way in breach of the Bank's guidelines but had managed to structure a loan which would meet Mrs Robinson's requirements, as well as the Bank's guidelines. He was not defensive about any alleged lack of file notes or documentation and appeared to do his best to decipher the Bank's documents for Mrs Robinson in the course of his cross-examination. 75He appeared to be disinterested in the forensic effect of his answers. This may be explained by his retirement which meant he had no interest in the outcome of the proceedings since it could not affect his career. However, he may simply be an honest witness who was concerned only to give truthful answers to the best of his recollection, irrespective of his own interest. 76Although I consider that Mrs Robinson was endeavouring to give an honest account of what occurred and readily admitted that she did not recall certain matters, it was my impression that her substantial self-interest not only in the outcome of the proceedings, but also in defending her business, investment and personal decisions, made her a somewhat unreliable witness. Her recollection appeared to be a reconstruction of events that suited her case. She was anxious to blame the Bank for her predicament and reluctant to take responsibility for her own decisions. She was, at times, unable to reconcile her evidence with contemporaneous documents. She readily conceded that the proceedings concerned events that occurred in an eventful period of her life and sought to explain her lack of recollection by referring to the following circumstances. In 2004 she entered into a contract to buy the Property and moved both her home and her business there pursuant to a lease pending completion of the contract. She married and had a baby in 2005 as well as running the business 7 days a week with the help of 13 staff. She spent the first quarter of 2006 nursing her dying mother, who died in March 2006. She then had to raise finance urgently to complete the purchase of the Property. At that time she was also expecting another baby. 77I consider that, in the context of the proceedings, Mrs Robinson convinced herself that she had reached an "understanding" with the Bank that Facility 183 would be combined with Facility 175 and would not need to be repaid by 24 October 2006. However, that was not, as I have found, what occurred. Nor do I consider it to have been her understanding at the time. Had she believed it to be the case at the time, she would have raised the "understanding" with either Mr Lumb, Ms Smith or Mr Chaperon as a reason why the apparent default in the facility was not, in fact, a default. Instead it emerged much later as a justification for her using the money from her mother's inheritance for other purposes (which may have included paying the ATO since it was the more pressing creditor and had already garnisheed the Company's bank account). Whether her flawed recollection is the result of dishonesty, self-interest or any other reason does not need to be decided. 78Where there is a conflict between her evidence and that of Mr Lumb, I prefer that of Mr Lumb.

The Bank's claim 79I am satisfied that the Bank has, subject to determination of the defence and cross-claim, established its right to an order for possession and judgment of the amount outstanding.

The defence and cross-claim 80In these proceedings Mrs Robinson claims that she be returned to the position in which she would have been had the Bank not lent her the money. She has enumerated several amounts for which she alleges the Bank is liable including the deposit on the Property, valuation fees and bank fees, as well as debts for which she was left personally liable on liquidation of the Company. She also seeks compensation of the following items: a) loss of a business that had a turnover of over $1 million and held at that time around $750,000 worth of stock; b) loss of goodwill from any future sale of business and website; c) loss of income from my job as Director; d) loss of fringe benefits which included costs born by business, electricity, telephone, motor vehicle repairs, petrol, and costs of nanny for children paid by the business; e) reinstatement of the company and payment of all debts including liquidators costs; and f) Reimbursement for improvements to building of $50,000. 81Mrs Robinson claims to be entitled to relief on the following bases:

1. The Bank was guilty of obtaining financial advantage by deception when: (a)Mr Lumb included the Company's financial circumstances in the loan application; (b)Mr Lumb recorded that there was a cross-guarantee between the Company and Mrs Robinson; (c)Mr Chaperon misled Mrs Robinson by representing that the Company had guaranteed Mrs Robinson's debts, which contributed to the Company's liquidation; and (d)The Bank obtained a financial advantage by charging premium interest rates and penalty interest rates.
2. The Bank acted unconscionably when it replaced the March agreement with the April agreement.
3. The April agreement was signed under duress as she stood to lose the $150,000 deposit if the contract for the purchase of the Property was not completed by 24 April 2006.
4. The Bank's conduct was unconscionable and the April agreement was unjust because of her lack of bargaining power.
5. By entering into the April agreement, the Bank engaged in "imprudent lending practices" and facilitated asset lending when it lent over 90% of the value of the Property.
6. The April agreement was unjust because the first offer of finance in the March agreement was withdrawn on the basis of the valuation but the valuation was not a full valuation, but only a drive-by valuation. The use of a drive-by valuation also constituted misleading and deceptive conduct.
7. The Bank engaged in misleading and deceptive conduct by using the financial statements of the Company in support of Mrs Robinson's application for a loan.
8. The Bank engaged in misleading and deceptive conduct by alleging that Mrs Robinson had given a personal guarantee of the Company's debts.
9. The Bank, through Mr Lumb, engaged in misleading and deceptive conduct by representing to Mrs Robinson that Facility 183 would be combined with Facility 175 as long as Facility 837 was paid out in full on time and all interest payments for the three facilities were paid on time.
10. The conduct referred to in (9) above also amounted to a contract, which was breached by the Bank when it refused to combine the facilities although Facility 837 had been paid out on 24 July 2006 and all interest payments to 24 October 2006 for Facilities 175 and 183 had been made on time.
11. The Bank, through Mr Chaperon, from May 2007 misled and deceived her by representing that the Company was in default of its loan obligations and that the Company had guaranteed Mrs Robinson's debts.
12. By reason of Mr Chaperon's conduct, the Company went into liquidation, which substantially affected Mrs Robinson's capacity to repay the loans.
13. The Bank acted outside the Code of Banking Practice, section 25.1, by not taking into account Mrs Robinson's ability to repay the loan. 82In addition to the matters set out in the previous paragraph, Mrs Robinson relied on the following matters in oral submissions:
14. The Bank had a practice of "grouping" accounts which was misleading and deceptive and was unconscionable in the sense considered by the Full Federal Court in Australian Competition and Consumer Commission v Lux Distributors Pty Ltd [2013] FCAFC 90.
15. Mr Lumb had shown himself to be able to make things happen and therefore Mrs Robinson had a reasonable expectation that he would be able to arrange for Facility 183 to be combined with Facility 175 even though it did not fall within the Bank's guidelines. Mrs Robinson instanced the revised loan made in April 2006, a car loan and a credit card.
16. The Bank was in breach of its duty to act in Mrs Robinson's interests. Mrs Robinson relied on Pendlebury v Colonial Mutual Life Assurance Society Ltd [1912] HCA 9; (1912) 13 CLR 676 (Pendlebury).
17. The Bank was responsible for her losses and those of the Company because it should have taken possession of the Property in October or November 2006 at the time of the first default, when her exposure was more limited than it is presently. 83I reject each of these claims for relief for the following reasons.

The Bank's conduct concerning the March and April agreements 84Mrs Robinson alleged that there was something untoward, or unconscionable, about the Bank restructuring the loan as a result of the valuation. It appears that the principal basis for this allegation is that the valuation was not a "full" valuation. 85In my view, the allegations based on the fact that the valuation was not a "full" valuation and was merely a "drive by" valuation have not been made out. The valuation report prepared by Robertson & Robertson in March 2006 used the same photographs as had been taken when the property was valued by the same firm in October 2005. As there was no change to the improvements, there was no need, in my view, for a further inspection to occur. The date on which the photographs were taken was disclosed in the report. It was, in my view, reasonable for the Bank to rely on the valuation report in assessing whether the condition in the March agreement had been fulfilled, and to decide, upon consideration of that report, that it had not been. 86In so far as the Bank's conduct in making a new loan offer, which became the April agreement, is concerned, I do not consider there to be any basis for criticism, much less legal redress. The Bank was entitled to set and adhere to its own guidelines as to an acceptable loan to value ratio for commercial business loans. It was not obliged to accept that the price paid by its customer for a property was its market value and was entitled to require an independent valuation by a valuer it had approved. It was entitled to adhere to the March agreement and, when the condition as to valuation was not fulfilled, it was entitled to make a different offer to Mrs Robinson. I do not consider there to be any arguable basis to support the allegation that the Bank acted unjustly or unconscionably towards Mrs Robinson in this (or indeed any other) respect. In particular, the Bank was entitled to distinguish between Facilities 183 and 837 on the one hand, which were short-term interest-only loans which were repayable in full within a short period, and Facility 175 on the other which, after an initial period, was a principal and interest loan payable over a period of 15 years. There was nothing unjust or unconscionable in the Bank charging increased interest rates on short term loans or on a facility which was in default.

The allegation concerning the combining of Facilities 183 and 175 87I have rejected, for the reasons set out above, the proposition that there was an agreement that the Bank would combine Facilities 183 and 175 on 24 October 2006. Such an agreement is not made out on the evidence. Even had I accepted Mrs Robinson's evidence, the agreement would have failed in any event for want of consideration. It could not amount to a collateral agreement because it is inconsistent with the April agreement: Hoyt's Proprietary Limited v Spencer [1919] HCA 64; (1919) 27 CLR 133. 88Nor could any representation by Mr Lumb that he would try to restructure the loans in October 2006 amount to an estoppel. First, the representation was not sufficiently clear to found an estoppel. Secondly, he did not have the authority to make such a representation on behalf of the Bank, as Mrs Robinson well knew. Thirdly, it was not reasonable for her, in the circumstances, to rely on the representation, if made, when she knew that any agreement between her and the Bank would have to be in writing following approval by the Bank's credit department. Fourthly, she did not in fact rely on it: she would have entered into the April agreement in any event since she had decided to do so rather than lose her home, her business premises and the $150,000 deposit she had already paid. There was no unconscionable conduct on the part of the Bank that would found a promissory estoppel arising from the conversation between Mr Lumb and Mrs Robinson prior to her signing the April agreement. In any event, if there was any representation, it was fulfilled in November 2006 when Mr Lumb endeavoured, on Mrs Robinson's behalf, to obtain an extension of Facility 183 for five years. This proposal could not go ahead without the Company's financial statements which only Mrs Robinson could provide. 89Mrs Robinson made a submission to the effect that Mr Lumb had managed to obtain approval for everything she wanted and that it was therefore unconscionable for him not to be able to gain approval for the facilities to be combined in October 2006. This submission was "supported" by her evidence such as the following: "Mr Lumb made things happen. You know, he could come up with one document, it didn't work, he came up with another document, that was approved." 90That Mr Lumb was able to gain approval from the credit department for a loan of sufficient size to enable Mrs Robinson to complete the purchase of the Property may be testament to his knowledge of the Bank's guidelines and his dedication to the interests of the Bank's customers. It is incapable of founding any basis for relief for his inability to obtain approval for a restructuring of loans which depended on the production of the Company's financial statements which Mrs Robinson was either unable, or unwilling, to provide in a timely manner. 91However, even if there was any such agreement, Mrs Robinson has failed to prove that its breach caused her any loss. The loss she suffered was, in substance, that the Company went into liquidation and was no longer able to pay the rent of $1,000 per week for the Property as well as providing her with an income. The evidence established that the Company was unable to pay the rent because of unpaid tax liabilities and could not raise any finance itself since its only substantial asset was the jewellery stock. 92Even if Mrs Robinson did not appreciate as at 24 October 2006 that she was in default because she believed that Mr Lumb would be able to persuade the credit department to restructure the loan, I do not consider that anything turns on that. As I have found, Mr Lumb told her relatively soon after it occurred that she was in default, endeavoured to obtain an extension for her in November 2006 and was thwarted by the lack of financial statements.

The allegation of duress 93Mrs Robinson correctly acknowledged in the following exchange in her cross-examination that she had a choice whether to sign the April agreement: Q. And you knew before signing the loan agreement that you actually did have a choice about when you signed it. It is just that if you did not sign it, you would lose the property and you would lose $150,000 that you had paid on it? A. Correct. Q. You wanted to go ahead with the purchase of that property, didn't you? A. Yes. Q. And so you chose to sign the loan agreement? A. Yes. 94The allegation of "duress" cannot be made out. Mrs Robinson has failed to establish the requisite degree of compulsion: Smith v William Charlick Limited (1924) 34 CLR 38 at 56 per Isaacs J. Mrs Robinson was undoubtedly under considerable pressure to obtain the finance before 24 April 2006. However, none of the pressure was of the Bank's making. She had put herself in a position of contracting to purchase the Property for on 24 September 2004. She aggravated that pressure by paying an additional $120,000 to the vendor by way of deposit and by agreeing on 18 October 2005 to forfeit the sum of $150,000 if she did not complete by 24 April 2006. It cannot be said that the Bank took advantage of the pressure she was under. It acted in accordance with its own lending guidelines. The short-term loans under Facilities 183 and 837 were made on the basis of Mrs Robinson's representations about the sums that would be paid to her in the short-term, from her mother's unit and from a refund of GST. The remaining facility, Facility 175, was advanced consistently with the Bank's self-imposed ratio of lending no more than 70% of valuation by an approved valuer. Further, even if, contrary to my findings above, "duress" were made out, the remedy is restitutionary not compensatory: Smith v William Charlick Limited at 56 per Isaacs J. In the circumstances of the instant case, restitution is not feasible.

The allegation of "fraud": the assessment of suitability of the loan by reference to the financial position of the Company 95The allegation of "fraud" does not, in my view, warrant the use of the word, which conveys dishonesty. What is, in substance, alleged against the Bank is that it ought not to have used the Company's financial position in assessing the serviceability of the loan. 96The Bank accepts that it used the Company's financial position to assess the serviceability of the loans as its serviceability work sheets show. 97It is difficult to see any rational basis for the suggestion that it was wrong of the Bank to take into account the financial position of the Company in circumstances where Mrs Robinson, the borrower, controlled the Company, was its sole director and shareholder and received most, if not all, of her income from it. It provided her with her sole employment. Indeed, Mrs Robinson, at the time she applied for the loan, supported her loan application by providing Mr Lumb with the Company's financial statements. Furthermore, the Company was to lease the Property from Mrs Robinson and therefore the rent would be another source of income for her which, in turn, would be used to meet her obligations under the various Facilities. Since the Company was not an arms-length lessee, its financial position was also germane to the Bank's assessment of Mrs Robinson's financial position. 98Mrs Robinson submitted that she was in breach of s 182 and s 183 of the Corporations Act 2001 (Cth) in that she used her position as a director of the Company to gain an advantage or cause detriment to it. She also submitted that she used the Company's financial information to gain an advantage for herself in breach of s 182. 99I reject the submission that Mrs Robinson was in breach of her statutory duties to the Company under s 182 and s 182 of the Corporations Act or that any such breaches could found a basis for relief against the Bank. She purchased the Property in her own name and the loan was in her name. The Company was obliged to meet rental payments of $1,000 per week for the Property but there is no evidence to indicate that the rental was excessive or that, if it was, the Bank was implicated in it, or that its security ought be impugned because of it.

The allegation of "asset lending" 100The next allegation is that the Bank engaged in "asset lending". This is not a term of art but is generally used to describe loans where the sole, or principal, consideration is the value of the asset provided as security and no, or insufficient, regard is had to the borrower's capacity to repay the loan. As I understand Mrs Robinson's submission, it is that, if the Company's financial position is disregarded, she did not have any capacity to service the loan. Although Mrs Robinson appeared to concede in final submissions that she did not press this allegation, she did make the oral submission that: "a person earning $42,000 should not have been allowed to get a loan approved". I understand her to accept that, if the Company's financial position is taken into account, she did have such capacity. In any event, the Company's financial statements establish the serviceability of the loans. 101For the reasons given above, and also for the reasons given by Mr Lumb in his evidence, I consider that the Bank was entitled to assess the serviceability of the loans by reference to the Company's financial position since it was the source of Mrs Robinson's income and she was in control of the Company. Accordingly, she ought not be regarded as "a person earning $42,000" since this amount merely happened to be what she chose to pay herself as income from the Company's funds at any given time. I do not regard the Bank as having engaged in imprudent lending practices. 102Mrs Robinson made a further submission that Westpac should never have lent her the money because it should have lent the money to the Company. She submitted that, had it done so, she would not have been personally affected when it went into liquidation. This submission is rejected. Mrs Robinson applied for the loan in her own name. It was not for the Bank to nominate the identity of the borrower. In any event, had the Company been the borrower, the Bank would inevitably have required a personal guarantee from Mrs Robinson which would have put her in a similar position, although in that event the liquidator would have dealt with the Bank concerning the Property.

The allegation based on Pendlebury 103Pendlebury established that a mortgagee owes certain duties to a mortgagor when exercising the power of sale. These duties arise because the conduct of the mortgagee affects the mortgagor who has an interest in the balance of the proceeds of sale, if any, after the debt secured by the mortgage has been paid. It does not have any bearing on the present case. The Bank was entitled to act in its own interests and was not obliged to act in Mrs Robinson's interests or in the interests of the Company. 104As I understood Mrs Robinson's submissions, she relied on Pendlebury in support of the proposition that the Bank ought to have sold the Property in November 2006 because, had it done so, she would have been in a better position. This submission must be rejected. First, she was and remains the registered proprietor of the Property and is in possession. Accordingly it was within her power to sell the Property at any time. By contrast, although the Bank could have sold the Property, once it had served appropriate statutory notices, it could not have sold the Property with vacant possession, since Mrs Robinson was not prepared, and is still not prepared, to yield her possession to the Bank. Until an order for possession is made by this Court and a writ of possession issued, the Bank cannot sell the Property with vacant possession. Secondly, there is no evidence that the Bank has been dilatory in seeking to enforce its legal rights. It was prohibited from enforcing the mortgage while the matter was being investigated by the Financial Services Ombudsman. This process took about two years. When the investigation had concluded the Bank served demands and, when such demands were not complied with, it commenced proceedings. 105Mrs Robinson submitted that she had foregone the rent of the Property for the period after the Company was wound up because she did not think it responsible to lease the Property while the Bank maintained its entitlement to possession. This does not found any basis for damages against the Bank. 106Mrs Robinson also submitted that the Bank ought to have put a caveat on her mother's retirement unit in Tasmania to ensure that Facility 183 was paid in accordance with its terms and there was no default. I do not understand the basis for such submission and I reject it. Mrs Robinson could not be registered as the proprietor of the unit. The Bank had no equitable interest in the unit such as would have entitled it to lodge a caveat on it.

The allegation concerning a cross-guarantee 107The basis for the allegation appears to be confined to two emails from Mr Chaperon to Mrs Robinson in which Mrs Robinson and the Company were referred to collectively as "the Debtors". It is common ground that there was no cross-guarantee. The emails do not suggest that there was. There was no need for one since Mrs Robinson was borrower, registered proprietor and mortgagor. There is no basis in my view for Mrs Robinson's submission that this amounted to wrongful conduct by the Bank or could in any way be responsible for the loss she or her Company suffered.

The allegation concerning "grouping" 108Mrs Robinson alleged that it was wrong of the Bank to "group" her accounts with that of the Company. As referred to above she relied on ACCC v Lux for the proposition that a practice can involve unconscionable conduct. The proposition has no application in the present case. The Bank was entitled to "group" accounts for its own administrative reasons. It is not suggested that the grouping was contrary to any term of the Bank's agreements with its customers. Mrs Robinson's submission appears to be based on the misapprehension that the Bank is not entitled to take into account its commercial interests.

The allegation that the April agreement was unjust 109The bases on which Mrs Robinson alleged that April agreement was unjust have been separately considered above. She has failed to persuade me that there is any basis for a finding that the contract was "unjust" within the meaning of the Contracts Review Act. As Gleeson CJ said in Baltic Shipping Co v Dillon "Mikhail Lermontov" (1991) 22 NSWLR 1 at 9: "The general policy of the law is that people should honour their contracts. That policy forms part of our idea of what is just." 110The Bank acted in its own commercial interests, as it was entitled to do. Mrs Robinson acted in what she perceived at the time to be her own commercial interests. That her plans did not turn out as she would have wished is not the result of any wrongdoing on the part of the Bank or any injustice associated with her agreements with it.

Causation of loss 111As referred to above the Bank has established that the reason the Company could no longer provide Mrs Robinson with the funds to service the loans was because of its unpaid tax debts. This was the cause of Mrs Robinson's default, not any inability of the Company otherwise to meet its rental commitments or provide Mrs Robinson with income from its business. 112Mrs Robinson has failed to establish that the Bank was responsible for her inability to refinance her debt with the Commonwealth Bank or the ANZ Bank. The evidence established that the Commonwealth Bank required up-to-date financial statements of the Company before it could consider refinancing. Such statements were not available until mid-2008, at about the time the Company was wound up. Although Mrs Robinson suggested that it was the assertion of a cross-guarantee that compromised her capacity to refinance, the evidence does not establish that. The Bank did not, in any event, ever assert that there was a cross-guarantee. 113Mrs Robinson alleged that she and the Company suffered loss because of the Bank's "grouping" of their accounts. She has not established this proposition. It may be accepted that her capacity to service the loan was substantially dependent on the Company's capacity to make its rental payments; however this arose from the commercial structure that she had put in place, as opposed to any "grouping" by the Bank.

Conclusion 114Mrs Robinson has failed to establish any defence to the Bank's claim for judgment for possession or for the amounts outstanding under Facilities 183 and 175. She has not established any claim for restitution or damages against the Bank.

Mrs Robinson's self-representation 115At the outset of the proceedings, Mr Robinson sought to appear on his wife's behalf. I refused that application. Mrs Robinson conducted the proceedings herself with some assistance from her husband whom I permitted to sit beside her at the bar table. She impressed me as an articulate woman who was familiar with the documents in the proceedings and was able to ask questions or and put propositions to the Bank's witnesses where she challenged their evidence or sought to obtain evidence in support of her own case. She made submissions both orally and in writing. At times she submitted that she was at a disadvantage because she represented herself. However, I did not consider there to be any available defence or claim that could have been put on her behalf, which was not put.

Orders 116I make the following orders: (1) Judgment for the plaintiff for possession of the land contained in Certificate of Title Folio Identifier 1/412147, being the land situated at and known as 16 Hargraves Street, The Entrance North in the State of New South Wales (the Property). (2) Judgment in the sum of $710,802.75 plus any further amounts that have become due since 28 April 2014. (3) Order that the plaintiff have leave to issue a writ of possession forthwith in respect of the Property. (4) Subject to any party making an application for a different costs order in writing to my Associate within 7 days, order the defendant to pay the plaintiff's costs of the proceedings. (5) Direct the parties to send short minutes of order to my Associate stipulating the judgment sum calculated by reference to (2) above.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 13 May 2014