Williams & Ors v Commonwealth Bank of Australia

Court of Appeal (NSW)|1999-02-19|Before: Mason P, Priestley JA, Bainton J

Background 7 As mentioned, the proceedings have their origin in a foreign exchange loan. The Australian dollar was floated on foreign exchange markets in the latter part of 1983. Throughout 1984 it retained, or improved upon, its pre-flotation relationship with the Swiss franc. This had varied from time to time but in the then recent past it had been of the order of two Swiss francs for each dollar. Numbers of people, amongst whom were the Williams and many of whom, like the Williams, were mortgagors of country properties, had observed or been informed of the performance of the Australian dollar over the year 1984. It appeared that for a year or so world currency markets had valued the dollar at or about its pre-flotation level. Regrettably the position was not to continue. The loan of $640,000 was drawn down towards the end of January 1985. Almost immediately thereafter there were signs that the dollar had begun to slide as against Swiss and other currencies. By the end of 1985 it was worth approximately one, instead of two, Swiss francs. Effectively, the loan of $640,000 made in Swiss francs had become a loan of $1,280,000. 8 A brief explanation of some aspects of foreign currency borrowing is required before an account of Mr Williams' evidence is given. The relevant documents evidencing the transaction into which the parties entered were not in evidence but there is no issue about their effect. The Williams were permitted to change currencies at the end of each period of six months following the drawdown of the loan in Swiss francs. The end of each six-monthly period was known as a "roll-over" date. In between roll-over dates the currency could not be changed. But, if there were concerns about the movement of the Australian dollar in relation to the currency in which the borrowing had been taken, a borrower could hedge. This was done by entering into a forward exchange contract. Such a contract could be taken out at any time. It was not necessary to await the end of a roll-over period. The taking of a hedge had the effect of fixing the amount of the loan at the amount owing in Australian dollars on the date of the forward exchange contract. Further deterioration of the value of the Australian dollar would not have the effect of increasing the indebtedness when converted to Australian dollars. Hedging involved a not insubstantial expense but the protection it could sometimes bring, especially if the period of it were comparatively short, outweighed any disadvantage associated with the cost of the exercise. Furthermore, there was no point in hedging for an overly long period. A hedge tended to place borrowers in the same position they would have been in had they borrowed in Australian dollars. But the advantage of a hedge in a transaction such as this was that it could be done in between roll-over dates enabling borrowers firstly to hedge and then to change currencies on the next roll-over date without incurring any further loss. 9 The reason for so many people being attracted to borrow in foreign currencies, more often than not Swiss francs, was because of the comparatively high interest rates which then prevailed in Australia. The rates in Switzerland were substantially lower. The subject transaction provided for an interest rate of seven per cent per annum. A borrowing in Australian dollars would have attracted a rate of about twelve per cent. But once the dollar fell in value and the indebtedness had effectively doubled, such advantage as there was in a lower interest rate was more than offset by the substantial increase in the indebtedness. By the end of 1985 the position had no doubt become quite disastrous. 10 Mr Williams was the family's spokesman. When he approached the bank for a foreign exchange loan, he was told that the bank would not lend otherwise than in sums of $500,000 or above. The Williams did not need $500,000 but decided to borrow $640,000 because of the perceived advantage of the transaction to them. The amount of the borrowing was allocated to the needs which made it necessary for them to borrow in the first place, to the purchase of two residential units in Byron Bay, to the setting aside of an amount for working capital and for investments in Australia which yielded them a high interest rate. The units in Byron Bay were originally part of the security taken by the bank but were eventually sold in order to reduce the amount of the indebtedness which continued to increase. 11 In 1990 the Williams commenced proceedings against the bank in the Common Law Division. They relied on a number of causes of action. They had two substantial complaints. One was that they had not been warned or competently advised by the bank about the risks of entering into foreign currency transactions. The other was that in the early part of 1985, not long after the loan had been drawn down, Mr Williams went to the Inverell branch of the bank to discuss his observation that the dollar had begun to fall as against the Swiss franc. It had been of the order of 2.2 Swiss francs for one dollar. When he saw the bank, it had fallen to 1.98 francs. Mr Williams' evidence was not accepted by his Honour but his Honour's findings of fact are challenged because it is claimed that the accumulation of factual errors in the judgment demonstrates that his Honour misused the advantage he had as the trial judge.

Mr Williams' Evidence 12 According to his evidence, Mr Williams told Mr Neale, a bank officer at the Inverell branch, that he wanted to take out a forward exchange contract. His intention was to hedge the loan to guard against further falls in the dollar affecting the amount which the Williams would eventually have to repay. Mr Neale was said to have told him that he could not take out a forward exchange contract because he could not change currencies except at the end of a roll-over period. Further, according to Mr Williams' evidence, Mr Neale spoke to the manager of the Inverell branch, Mr McGladrigan, who confirmed what Mr Neale thought was the position after the two bank officers had looked at the contractual documents. 13 The Williams' case was that they did not want to change the currency. They wanted to hedge. They allege that they were misled by Mr Neale's statement that they could not hedge between roll-over dates. There is a question whether the conversation with Mr Neale took place as early as February 1985. There is material in some of the bank's documents which suggests that it did occur during 1985 but whether as early as February or before July is not revealed. Documents produced by the bank on discovery tend to establish that there was at that time a fundamental misunderstanding by Mr Neale and others in the bank of the nature of a hedge and a forward exchange contract. 14 It is clear from a memorandum dated 6 June 1986 written by Mr McGladrigan to the Sydney office of the bank that in 1985 neither Mr McGladrigan nor Mr Neale understood the difference between the roll-over of a currency and a hedge. Mr McGladrigan's memorandum related to the then state of the Williams' account, that is in June 1986. The memorandum said: "We attach diary memos [apparently not tendered] over the past months commencing 22/11/85, when we undertook to advise borrowers of the Bank's attitude and decision regarding this loan. As can be seen from the contents in the memos, Branch staff have been left out on a limb. This is due to the lack of effective and detailed instructions/policy regarding Foreign Currency Loans, and the failure of our Administration and Group Treasury to answer questions raised in various memos which could have assisted us in our dealings with the customers. eg: We were aware of the Forward Exchange Contract, in the early stages of this loan, but understood they could only be utilised at rollover/maturity dates. We eventually were advised, by another of our F/C/L clients in February of this year, of the availability of the Forward Contract at any time during the term. This information was supplied quite readily by John O'Brien, Group Treasury. It is, to say the least, embarrassing when an institution like the bank is told by its customers what we have available in the way of facilities. It seems reasonable to state, had Group Treasury or Administration, knowing full well of this facility and its obvious advantages advised Mr Williams or ourselves, the present debt and the mental and physical strain placed on our customers may not have occurred. I appreciate the fact that our customer went into the loan, supposedly knowing the implications of such a loan. However, it would be foolish of us, as a bank to lay the blame entirely at their feet." 15 Mr McGladrigan may have been speaking tactfully but it is difficult to understand how he could have thought that the customers were in any way to blame. The response to this part of his memorandum was dated 24 June 1986 in which it was said: "Your comments relating to communication and instructions on F/C/L's, a relatively new and complex facility , are noted and steps are being introduced to overcome the problems." [emphasis added] 16 The response was thus not at all helpful either to the bank officers or the Williams. The problem raised by Mr McGladrigan was ignored. 17 Mr Williams' evidence was that he accepted Mr Neale's advice that there could be no forward exchange contract entered into until the end of the first roll-over period in July 1985. He said that by then the position had deteriorated so far that the Williams could not have afforded to bring the loan back on shore. 18 On the face of the material which there is, it seems likely, as the Williams contend, that, if a hedge had been taken out in February or March 1985, the Williams' position would have remained manageable. Mr McGladrigan seems to have been of the same opinion. What has been said depends on Mr Williams' evidence that the dollar had fallen only to 1.98 Swiss francs at the time he asked about a hedge. There must be a question, however, whether it is likely that he would then have sought a hedge The decline of the value of the dollar as against the Swiss franc was not drastic. This is a critical question because the Williams' case would depend for its success on their being able to show that a hedge taken out would have probably saved them from the financial disaster which overcame them later on. Much, therefore, depends on the date of the conversation Mr Williams had about the hedge. If it was substantially later than February, a hedge may not have been very attractive. Indeed that is the Williams' case because they say that a hedge taken out even as early as July would not have helped them. 19 Subject to those considerations, if a hedge had been taken out in February or March 1985, the indebtedness would have been frozen at whatever the amount was in Swiss francs at the time of the hedge. The amount was no doubt more than the original amount of the loan, $640,000, but it was not then out of hand. If the Williams had hedged and had brought the loan back at the end of the first roll-over period, they would have been faced with an increased indebtedness and the need to meet the very much higher Australian interest rates. But Mr Williams' evidence was that they would have had a chance of managing their affairs, something they could not have done if they had brought the loan back on shore at the end of July without the earlier protection of a hedge. 20 The matters of complaint to which we have referred were the principal matters upon which the Williams' 1990 case in the Common Law Division was based. 21 In 1992, the bank and the Williams agreed to submit their dispute to mediation by Sir Laurence Street. For the purpose of the mediation, each party submitted a position paper and statements of witnesses proposed to be called. Each of the statements submitted by the bank bore the endorsement, "Without Prejudice - for the Purpose of Mediation Only". None of the bank's statements was signed. The bank originally submitted three statements, those of Mr Fuller, Mr Dunbar and Mr Abbott. A statement from Mr Neale followed later. 22 The mediation was successful and led to the execution of the earlier mentioned deed between the parties. It was dated 26 November 1992. There were a number of recitals. It was said that the Williams were indebted to the bank in an amount of approximately $1,530,700. Reference was made to the mortgages and to the fact that the securities held by the bank were substantially less in value than the amount of the indebtedness. The Williams warranted that the value of their combined net assets did not exceed $90,000. The deed provided for the making of orders in terms of short minutes, a copy of which was annexed to the deed. There was a provision for a release, an acknowledgment by the Williams that they were indebted to the bank in an amount of $1,530,700, and a provision whereby the bank released the Williams from liability for so much of the debt as exceeded the sum of $475,000. The Williams promised to pay that sum to the bank on or before 26 November 1995, ie three years after the date of the deed. As mentioned, there was provision for a further advance of $115,000 and for further security including a stock mortgage and wool lien to replace the security which had been given to Elders. There were provisions contained in the earlier mentioned clause 11 whereby the parties acknowledged that the agreement reflected in the deed was not dependent upon misrepresentation, inducement or statement by any other party, and also that, in reaching the agreement, neither party had relied upon the truth or otherwise of any affidavit or statement filed in the proceedings nor upon the completeness or otherwise of the discovery provided by each party. There were some other provisions to which it is unnecessary to refer and then a provision concerning fraud. It said: "Without limiting the generality of the above in entering into this deed the Williams Parties (a) waive all rights to further and better discovery, (b) agree that, in the absence of fraud, if it should subsequently be ascertained as a fact that there were or are further documents that should have been discovered, agree not to seek to rely on such fact to vary or set aside the agreement reflected in this deed and further agree that this clause may be pleaded as a complete bar to any attempt to vary or set aside the agreement reflected in this deed or to commence fresh proceedings because of any failure to have fully listed and/or produced all potentially discoverable documents." 23 It may be observed that there is an express reference to fraud in relation to so much of clause 11 of the deed as deals with discovery but no mention of it in relation to the operation of the more general part of it. Nothing turns on this because, if there be fraud of a material kind, the deed will be avoided: see Halsbury's Laws of Australia vol 6 para [110-5017]. That matter was not in contest. 24 In due course orders were made in terms of the short minutes annexed to the deed. 25 That appeared to conclude the matter. But it did not. After their initial dealings in 1985, Mr Williams and Mr Neale became friends. They saw each other on a number of occasions in a social setting away from the bank and the business dealings which the two had had. Mr Williams felt that Mr Neale developed a sympathy for the Williams family because of their deteriorating financial position. It was the Williams' case and Mr Williams' evidence that it had been thought that Mr Neale would give the bank an account of his part in the matter which would bring out matters favourable to the Williams' case. But, when they saw his unsigned statement prepared for the purposes of the mediation, they concluded that it was not at all favourable to their position. 26 Mr Williams saw the statement a few days before the mediation. He deposed to being deeply shocked by its contents. He did not think it appropriate to speak to Mr Neale, he still being employed by the bank, and the parties still being involved in litigation. So the mediation went ahead. It was the Williams' case before Bainton J that the contents of Mr Neale's statement had persuaded them to settle their case more favourably to the bank than they would have been prepared to do if they had learnt of matters which subsequently came to their notice. 27 Shortly before Christmas 1992 (ie less than a month after the execution of the deed), Mr Williams met Mr Neale. They had a discussion in which it emerged, so Mr Williams said, and this was confirmed by Mr Neale in his evidence, that Mr Neale was in fact quite unhappy with the statement which had been obtained by the bank's solicitor and said that he had not signed it for this reason. We need to refer in due course to Mr Neale's evidence about this and also to the evidence of one of the bank's solicitors, Mr Jones, who took the statement from him. The impression Mr Neale gave Mr Williams was that, had he given evidence in the proceedings, his evidence would have been along the lines which Mr Williams expected. 28 It was submitted by counsel for the bank that Mr Neale had never made it clear precisely what it was that he had said or done in the early months of 1985. Some light is thrown on the matter by a handwritten memorandum which is endorsed on the second page of a document entitled, "Senior Manager's Comments". The memorandum was signed by Mr Harriss on 6 November 1991. He gave evidence in the bank's case Mr Harriss was a manager in "a cell" within a department of the bank known as Group Credit Policy and Control. The cell was developed to manage the administration of foreign currency loans in each State. Mr Harriss took up this position in 1986 and remained in it for seven years. Earlier in 1986 he had been seconded to conduct an internal review of the bank's foreign currency loans. Endorsed at the end of the memorandum of 6 November 1991 was a note which concluded with the word, "Approved". The note was dated 12 November 1991, six days after Mr Harriss signed his memorandum. The note began with the initials, "CGM". That was the person to whom it was addressed. The reference to "CGM" is a reference to the chief general manager. The last sentence of the note read, "reference to CGM for approval - to proceed". The date of the note was 11 November. It would appear that the approval referred to signed on 12 November 1991 was that of the chief general manager. 29 The handwritten note said that pursuit of the matter over a longer term seeking a better recovery seemed pointless as the capacity was "not there". "We have serious problems with a bank officer who said in effect, 'The client can only hedge at roll-over, and he has included this in his statement'". The following words are not entirely legible but amongst them appears the statement, "... but I don't know whether we will be successful in having ANZ $250,000 advanced prior to June 1992. (We can try.)". Subject to what follows about the reference to the chief general manager for approval, that concludes the note. 30 The statement made by Mr Neale for the purposes of the mediation did not expressly include words to the effect that the Williams could only hedge at roll-over. There is a question about the effect of the words which were used by Mr Neale in the statement. That led to there being an analysis of it and a comparison of it with what Mr Neale later said. We shall come to that in due course. For the moment it is enough to say that, on the basis that Mr Neale did not use words in the statement furnished for mediation purposes along the lines of those mentioned in the note, the note suggests that there must have been another statement which has not been produced. Neither the writer of the memorandum nor the chief general manager was called. Mr Harriss was. He said that the author of the handwritten note was, he believed, a Mr Jim Bradley, who, so Mr Harriss said, was the chief manager of "the cell" within which he worked. Mr Harriss could not remember when he had first seen the document. Specifically he could not remember whether he had seen it prior to the mediation. 31 Another matter that appears to be tolerably clear from Mr Harriss' evidence is that the reference to the ANZ bank and the sum of $250,000 was a reference to a hope that the ANZ could be induced to take over the Williams' indebtedness for the sum of $250,000. 32 In his memorandum, Mr Harriss explored the pros and cons of a compromise and concluded that, whilst the thought of writing off some $940,000 was unpalatable in the extreme, the prospects of achieving a better return were extremely unlikely in the foreseeable future even if the bank were to be successful in the eventual litigation which was not likely to be heard for some time. 33 Before completing this part of the judgment we should mention the delay between Mr Williams learning of Mr Neale's attitude to the statement attributed to him at the end of 1992 and the Williams' failure to take any action or to make any complaint about the matter until after the period of three years for the repayment of the sum of $475,000 had elapsed in 1995. In the meantime the Williams had had the benefit of the payment of $115,000 enabling them to discharge their liability to Elders, the greatly reduced amount of their indebtedness to the bank, the consequently reduced amount for interest and the ability to continue to run the two properties uninterrupted by demands from the bank for payment or for possession of the properties. These matters form the basis of one of the matters, namely, affirmation, relied on by the bank to establish that, whatever errors may appear in his Honour's judgment, the Williams' case was bound to fail. 34 There are some further aspects of Mr Williams' evidence yet to be referred to. We shall mention them as necessary when dealing with his Honour's judgment.

Mr Neale's evidence 35 Mr Neale's evidence needs to be considered against the background of the memorandum written by Mr McGladrigan to the Sydney office on 6 June 1986. This discloses that in 1985 neither Mr McGladrigan nor Mr Neale, or for that matter anyone else at the Inverell branch, knew that a hedge could be taken out at any time. Those at the branch thought that a hedge could only be taken out on a roll-over date. That was a fundamental misunderstanding. It is a misunderstanding under which Mr Neale must have laboured when he discussed the matter with Mr Williams. It must be remembered, however, that Mr Jones did not compile Mr Neale's statement for the purposes of the mediation until 1992. On the basis of what Mr McGladrigan wrote in the memorandum of 6 June 1986, he, Mr McGladrigan, must have known, from the early part of 1986, that it was possible to hedge between roll-over dates. It should be inferred that he would have communicated that knowledge to Mr Neale in 1986. It follows that neither of these bank officers was thereafter under the misapprehension under which they had been in 1985. Thus Mr Neale would not have had any misunderstanding of the position about hedging when he came to make his statement to Mr Jones. 36 The 1986 memoranda were discovered by the bank. They are listed in its list of documents filed in the 1990 proceedings on 22 July 1992, about five months before the mediation took place. It follows that Mr Jones must have been aware of the 1986 memoranda when he interviewed Mr Neale. 37 Another matter that needs to be mentioned at this stage is that Mr Jones, according to his evidence, was firmly of the belief that events after the draw down of the loan in January 1985 were not relevant to the mediation proceedings. At first this statement appears to be somewhat startling. But it is explained by the fact that Mr Jones insisted that he had made it clear to Mr Neale that the bank conceded so much of the Williams' case as was based on events transpiring after the drawdown to be correct. Mr Jones, so he said, made it clear more than once to Mr Neale that there was no issue about that part of the case. It seems not unlikely that Mr Jones said what he did because of material in the bank's possession which included the 1986 memoranda. 38 Mr Neale's evidence was comprised in the original statement prepared for the mediation, in an affidavit, in a further statement which was in reply to a statement made by Mr Jones, and in oral evidence which appears in the transcript. In paragraph 6 of the original unsigned statement Mr Neale is recorded as saying he had no recollection of Mr Williams being concerned about the fall in the exchange rate in February/March 1985. The paragraph continued: "I recall however at some stage being approached by Mr Williams requesting that the Bank arrange a forward exchange contract. After consultation with the Manager I told Mr Williams that it was not possible to change currencies except at rollover." 39 In his affidavit sworn on 6 March 1997, Mr Neale described his meeting with Mr Jones. A recording of the discussion was made on a tape recorder. Mr Neale eventually received a draft statement and said that he was shocked that it was so brief after he had spent "so many hours talking with Mr Jones". He did not consider that it was a true reflection of all that he had discussed. He told Mr Jones that he was not happy with the statement. He said he was not prepared to sign it to which Mr Jones is alleged to have replied "That's fine, that's no problem". Mr Neale said that Mr Jones did not ask him to explain any further why he was not prepared to sign the statement. 40 Mr Neale also said that, had it been necessary that he provide a signed statement, he would not have been prepared to do so unless the statement had generally contained material in a number of areas which he specified. Two of these were the various events that took place in relation to the Williams file and the foreign currency loan during the time he was involved with the file between 1985 and 1990 when he left the branch, and greater detail of the matters referred to in the unsigned statement. Mr Neale also said: "19 Paragraph 6 of the unsigned statement refers to an approach made by Mr Williams requesting that the bank arrange a forward exchange contract. My recollection about this subject is as set out in the following paragraphs, and I would have insisted that any statement I was being asked to sign contain a full account of the incident as set out below. 20 Quite soon after the loan had been drawn down in January 1985, perhaps within a month, John Williams was present at the counter of the Inverell branch of the bank. He said to me words to the effect, 'I have been looking at the currency exchange rates since we drew down the foreign currency loan and the rates have gone the way that was expected. I would like to take out a forward exchange contract to cover our exposure.' 21 I had previously read through the whole of the loan agreement, as I had not seen one before for a foreign currency loan and I had no idea what they were about. When John Williams asked about entering into the forward exchange contract, my first reaction was that he would not be able to do this until a rollover period because of the terms of the agreement." 41 Mr Neale went on to say that he looked at the branch file for the loan and read it. Having done so, he came to the conclusion that the effect of the agreement was that no forward exchange contract could be entered into until a roll-over date. He took the agreement to Mr McGladrigan and asked him about the matter. Mr McGladrigan agreed with his view. He communicated this to Mr Williams and Mr Williams said that he would have to accept that that was the position. 42 On 30 October 1997 Mr Neale made a further statement which was tendered in evidence. It was made in response to a statement of Mr Jones. It said that, had Mr Jones asked him if the initial statement were correct, he would have said, "What is in there is out of context and does not properly represent the full answer I gave you on the subjects in the statement." He said that he was not prepared to sign or approve a statement that did not have a full and proper account of even the limited subjects it dealt with. Mr Neale also said that Mr Jones had never said anything to him at the meeting or in the later conversation to the effect that he was only interested in discussing the events up to the draw down of the loan or that the bank was going to make a concession to the Williams family about the post draw down events. He said that the long conference he had had with Mr Jones was not confined to events before the draw down of the loan. A great deal of time had been spent discussing later events. Mr Neale also said that Mr Jones had not asked him how the statement could be changed so as to put it into a form that would have been acceptable to him. There had been no discussion about that matter. 43 The words of paragraph 6 of the unsigned statement prepared for the mediation leave one with the impression that Mr Williams had made a request for one thing, namely hedging and Mr Neale had responded by dealing with a different subject, namely a change of currency. That is the impression that anyone with a background in foreign currency transactions would have gained. But, once one realises that Mr Neale was under a misapprehension that a hedge could not be taken out in between roll-over dates, the statement may be understandable. Mr Neale may have used words to the effect attributed to him in para 6 of the unsigned statement because, until 1986, he thought that roll-overs and hedging were one and the same thing and were governed by the same considerations. If, of course, Mr Neale's account of his 1985 conversation with Mr Williams given in his affidavit of 6 March 1997 be correct, the conversation between the two was, as Mr Williams contends, very much more detailed than is indicated in para 6 of the unsigned statement. The substance may not differ very much but what is contained in Mr Neale's affidavit, if it were accepted, would provide substantial corroboration of Mr Williams' account of the conversation. 44 By the time Mr Neale came to make his statement to Mr Jones, both must have realised that Mr Neale was under a misapprehension at the time he spoke to Mr Williams about the hedge and that he misled him. That that was the case is borne out by the notes made by Mr Bradley on Mr Harriss' memorandum of November 1991. The note concedes the Williams' case that they were misled by a bank officer, namely Mr Neale, into thinking that they could not hedge between roll-over dates. Mr Harriss' memorandum does not appear in the bank's list of documents prepared for the 1990 proceedings. The memorandum is dated about eight months or so prior to the bank's affidavit and is a document which ought to have been discovered in the 1990 proceedings. We have searched the record from the Common Law Division in order to see whether a supplementary affidavit of discovery was filed, but we can find no record of any such affidavit. It may be that further documents were made available by the bank informally or that any further affidavit of discovery has been misplaced. On the other hand, there is a statement in Mr Jones' evidence that tends to suggest that he thought the memorandum and the notes on it were not discoverable. We shall refer to this in a moment but whether or not the Williams had access to the November 1991 memorandum, the objective fact is that the bank, at the highest level, was acknowledging, at least internally, that one of the bank officers employed by the bank had misled the Williams.

Mr Jones' evidence 45 In the first of two statements Mr Jones said that, early in November 1992, in anticipation of the mediation which was to take place, he prepared statements of Mr Neale, Mr Dunbar, Mr Abbott and Mr Fuller, all employees of the bank. Mr Jones said that it was intended that these statements be used to set out the bank's position in broad outline solely for the purpose of the mediation. It will be recalled that each of the bank's statements bore an endorsement that the statements were made solely for the purpose of the mediation. Mr Jones said that he did not intend that the statements would be verified or be in admissible form nor did he intend that any statements would contain all the evidence each witness was capable of giving. He also said that the evidence of the persons who made statements would not necessarily be the totality of the evidence called by the bank if the matter proceeded to a hearing. 46 Mr Jones said that he met with Mr Neale on 12 November 1992 in Sydney. All the bank's Inverell Branch files in relation to the loan were available for perusal by Mr Neale. He observed him reading the files at different times during the interview. Mr Jones said that he began to dictate a statement for Mr Neale using a tape recorder. As the interview lasted for some considerable time, he abandoned the tape recorder shortly after the commencement of the interview. The tape was not relied upon by Mr Jones in preparing the statement other than in relation to the first two paragraphs of it. The tape was not available at the time he made his statement. 47 Mr Jones' diary entry for 12 November 1992 shows that Mr Neale arrived at 11:15 am. The interview apparently proceeded for the balance of the morning. After "a couple of hours" a lunch break was taken. Mr Neale went away for about half an hour. During this time Mr Jones reflected on the information he had been given and "formed the view that his [Mr Neale's] involvement in the matter was not such as would have any substantial bearing on what I had anticipated would be the focus of the matters to be discussed at the mediation". Mr Jones said it was his understanding that the real issue to be dealt with at the mediation would be the circumstances leading up to the drawing down of the foreign currency loan rather than what subsequently occurred after it was drawn down. He said that, as the then debt to the bank exceeded the value of the security, the only real issue was what, if any, advice the Williams had been given prior to the entry into the foreign exchange loan. Mr Jones said, "Mr Neale's involvement was substantially limited to post draw down activities". 48 Mr Jones said that the meeting concluded shortly after Mr Neale's return from lunch. His records noted a conference of 2.7 hours. He said that that was consistent with his recollection. Later in the afternoon he prepared a draft statement in which he recorded what would be the only evidence that Mr Neale could be expected to give concerning the real issue in the proceedings, that is, the circumstances surrounding the entry into the loan. He could not recall how many drafts of the statement he prepared. This evidence is puzzling because the statement does deal with the conversation about hedging which, of course, took place after the loan was drawn down. Furthermore, Mr Neale had no dealings at all with any of the Williams before draw down. The only matters he could speak of occurred after the draw down. 49 Mr Jones said that, because of his view that Mr Neale's statement was not relevant for the purposes of the mediation, he did not include it amongst the statements forwarded to the Williams' solicitors on 17 November 1992. However, after some prompting from the Williams' solicitors, he sent Mr Neale a copy of the draft statement he had prepared. This occurred on 20 November 1992. The copy was sent by facsimile. Shortly afterwards Mr Neale and Mr Jones had a conversation. Mr Neale said that he was not happy with the statement. He said that it was not full and comprehensive. It did not deal with the matters that were discussed when he came to Sydney. He said he was not prepared to sign it. According to Mr Jones, he said, "You are not saying that the statement contains inaccuracies, are you?" Mr Neale responded that he was not and added, "It is just that you have left out a lot of things that I think should be included". Mr Jones, according to his statement, replied as follows: "That's fine. That's not a problem. At this stage, because of the value of the Williams' property, the bank is prepared to concede in the mediation the Williams' claims of what happened after the drawdown. So your comments about later on are not, strictly speaking, relevant." 50 Mr Jones then referred to the mediation which took place on 26 November and to the deed of settlement which eventuated as a consequence of it. 51 Mr Jones' second statement is dated 5 November 1997. In it Mr Jones described his usual practice when preparing statements either for use at a mediation or a hearing. The paragraph is not helpful for present purposes, although reference to Mr Jones' cross-examination discloses that a statement Mr Jones would prepare for evidentiary purposes would be more detailed and would be prepared in an admissible form. But he also said that he did not see any distinction between the two types of statement. He added, "… in the sense you can't put in a statement, for the purposes of mediation, something which is untrue or which upsets the position". 52 In the course of his cross-examination Mr Jones was referred to the memorandum dated 6 June 1986 written by Mr McGladrigan, the manager of the Inverell Branch to the "Branches Administration, Northern Division" of the bank in Sydney. This has been earlier referred to. Mr Jones agreed that it was likely that he would have come across this document in his review of the bank files. He thought he would have been aware of the contents of the memorandum when he came to draft Mr Neale's statement. He did not specifically recall whether this was the case but thought it was highly likely that it was. 53 Mr Jones was also asked about the memorandum of 6 November 1991. He was less certain whether he had read that memorandum before he prepared Mr Neale's statement. He conceded that it was possible that he had. He said that he could not recall reading it. He was referred to the notes on the second page of the memorandum. He then said that he thought it was unlikely that he had read the memorandum or the notes at the time of preparing the statement. But he added that he could not say this for certain. He said that he had been shown the document the night before he gave evidence. He was asked whether it then struck him as something he had no recollection of. He said that that was correct. Mr Jones was asked further questions about the memorandum. Eventually he expressed the view that the document was privileged. On what basis it could have been privileged from inspection we do not know. Mr Jones did not say and counsel for the bank did not intervene. Mr Jones' evidence in this regard leads us to think that the document was never discovered for the purposes of the 1990 proceedings. It should have been. It was directly relevant to important issues in the case and its absence from the list of documents made the discovery deficient. The document was discovered in the 1997 proceedings that is to say the proceedings the subject of this appeal. It was included in a bundle of documents prepared for the use of his Honour and counsel at the hearing. 54 Mr Jones said that he thought the bank's concern was that Mr Neale had told the Williams at some stage that they could not hedge the loan. They could only change currencies on a roll-over date. 55 Counsel for the Williams also asked Mr Jones whether there was not concern on the part of the bank about calling Mr Neale at all because of the possibility that he might give evidence adverse to the bank and also might make statements critical of its conduct in transactions of this kind. After a number of questions, Mr Jones said that he would have to agree that it was a possibility. Mr Jones' evidence in this regard strongly suggests that Mr Jones did not have the 1991 memorandum and the notes on it at the time he interviewed Mr Neale. Mr Neale was not shown it and did not have the benefit of looking at it before making his statement. This was, to say the least, unfortunate because, as was brought out in the cross-examination, the bank officer who gave the misleading information about hedging and who is referred to in Mr Bradley's note must have been Mr Neale. 56 On the other hand, the 1986 memoranda were discovered and Mr Williams would have had the opportunity of inspecting them. They are almost as damaging to the bank as Mr Bradley's note on the 1991 memorandum. Mr Williams inspected the documents at the bank's Sydney office and made copies of most of them. The evidence is not clear on the point but a reading of it suggests that Mr Williams must have read the 1986 memoranda prior to the mediation and must have been aware of their contents. Presumably the Williams' counsel and solicitor were also aware of them. It follows that when Mr Neale's draft statement prepared for the purposes of mediation was received by the Williams' solicitors, the significance of it must have been perceived. Puzzlement that might have been felt about the apparent inconsistency in that part of the statement in which Mr Neale is asked about the availability of one thing by Mr Williams and gives information about another may have been explained because of a realisation that in 1985 Mr Neale labored under the misapprehension that hedges could not be taken out between roll-over dates. If the 1991 memorandum and the notes on it had been produced on discovery as they should have been, the position would have been clear beyond question because Mr Neale's misapprehensions are expressly referred to by Mr Bradley in his note. 57 Although the explanation for what Mr Neale said is made clear by the 1986 memoranda, Mr Williams would not have had the benefit of them when he spoke to Mr Neale a year or so before the memoranda were sent. He would not have seen them until in 1992 he inspected the documents produced on discovery by the bank. At the same time, the bank, at least internally, was conceding that it, through Mr Neale, had made an incorrect statement material to one of the issues to be determined in the proceedings. 58 Considerations such as these may possibly provide the reason why Mr Jones may have taken the view that post-drawdown events were not important. They were not important because there was no issue about them. Mr Jones knew that Mr Neale had made a misleading statement and anyone who had seen the 1986 memoranda must have known that that part of the case could be established without question. That tends to detract from the Williams' concern at the form of Mr Neale's statement. It does not excuse Mr Jones for not having prepared a more comprehensive statement having regard to the documents that were in existence but there must be a question whether, upon the basis of the knowledge which the Williams and their advisers had, they could really have been misled by the Neale statement. Furthermore, the bank's realisation that Mr Neale had misled the Williams about hedging and the significance that had as revealed in Mr Bradley's note must have provided one of the reasons why the bank was prepared to settle on what then must have appeared to Mr Williams to be quite favourable terms, the settlement involving a reduction in the Williams' indebtedness of almost $1 million. Of course the other reason, and perhaps the more important reason, why the bank was prepared to settle was based upon reality arising from the Williams' difficult financial situation. Both of these matters, however, must have played a part in the bank's decision to accept such a substantial reduction in the amount owing to it. 59 Before we leave Mr Jones' evidence, there is one further matter to be mentioned. The Williams' assert that their figure for settlement was $266,000, not $475,000 which is the amount for which the action was settled. By the time the 1997 proceedings came on for hearing, the amount of the indebtedness had increased to $747,896.47. That amount no doubt included the $115,000 advanced to enable Elders to be paid out and accrued interest. So the difference between the parties was the difference between approximately $750,000 and $266,000. 60 In making their calculations both parties assumed that the indebtedness would have been hedged some time during 1985 and the amount of the loan converted to Australian dollars in July 1985 at the first roll-over date. Upon that basis, it may be said that the difference between the Williams' calculations and the bank's calculations arise from assumptions made as to when securities other than the properties and the house in Inverell would have been realised. These comprised the moneys on deposit and the two units at Byron Bay. The Williams' assumptions are that these securities would have been disposed of immediately after the hedging. The bank's assumptions are that they would have been disposed of when in fact they were. If that had been the case, the amount of the indebtedness, notwithstanding hedging and bringing the loan back on-shore, would have been very much higher. 61 Probably, as was discussed during the argument, the correct position lies between the two extremes. His Honour was said to be in error in accepting the bank's hypothesis and rejecting the Williams' hypothesis. The conclusion his Honour reached was open to him on the evidence. Nevertheless, if the Williams had hedged in February 1985 and come back on shore in July 1985, it seems unlikely that they would not have endeavoured to liquidate what they could in order to reduce the amount of the indebtedness. On the other hand, as counsel for the Williams conceded, the two figures, $266,00 and $747,000, separated as they are by a sum of approximately $500,000 provide a fair amount of scope for a judicial assessment which, if made afresh, might not be as favourable to the Williams as they would hope. If as they wish, this settlement is undone, everything will be at large. It is not inconceivable that a new trial of the action might lead to a situation in which the Williams are not as well off as they now are. That may be difficult for them to accept but it must be remembered that the bank did reduce a very large claim to $475,000 and, in addition, provided moneys to enable the Williams to pay off their indebtedness to Elders. A judicial determination of the matter may not yield as advantageous a result as the mediation achieved. What we are about to say is looking ahead. But if the Williams' were fortunate enough to win this appeal, they may eventually find themselves in a position less favourable than the settlement which was achieved at the mediation. That is a matter which a judge presiding over a new trial of matter, in which the Williams were successful, would be justified in taking into account in determining the appropriate order for costs. 62 It remains to say that a comparison of Mr Neale's and Mr Jones' evidence is that, subject to what has been said about para 6 of the statement prepared by Mr Jones, there is really no difference of any substance between them as to what was said by Mr Jones and Mr Neale in their conversation which took place after the statement was sent. Indeed Mr Jones' evidence is almost identical with that of Mr Neale. 63 As mentioned one of the causes of action is a cause of action in fraud. Except in one place in the cross-examination where Mr Jones is asked about whether something he did was deceitful - he vehemently denied this - there was no real assault on him to endeavour to ask questions which might have tended to deal with the question whether he had made the statements which he made knowing them to be false or was recklessly indifferent to whether they were true or false. Although asked about the 1986 and 1991 memoranda, he was not really tested on matters in them. The implications of them were not spelt out. He was not asked how he could possibly justify his apparent contention that the 1991 memorandum and the notes on it were not discoverable documents. Clearly they were material and, if they had in some way been privileged, they should have been specified in that part of the bank's list which dealt with documents in respect of which a claim for privilege was made. There are other matters which could be mentioned but our concern may be summarised by saying that we have reservations whether the cross-examiner made it clear to Mr Jones that his honesty was being impugned. Mr Jones is not a party to the proceedings but it is his conduct for which the bank would be responsible if it were found that he was guilty of fraud. Fairness to him and to the bank suggests that he should have been asked more directly about his state of mind.

The judgment appealed from and the factual errors within it 64 After some introductory paragraphs in which his Honour dealt with the nature of the case before him, the pleadings and the issues, he made a detailed analysis of the evidence of Mr Williams and Mr Neale. He rejected much of the evidence of both witnesses. The principal issue to which he addressed himself was, as has been mentioned, that of reliance on any representations made by the bank. We do not propose to refer to every aspect of the judgment. What we shall do is to refer to significant portions of it bearing in mind the submissions made by the Williams that the judgment contains a number of significant errors of fact. In the course of discussing the evidence of Mr Williams and Mr Neale, his Honour made reference to Mr McGladrigan's memorandum of 6 June 1986 in which he complained of bank staff not being kept aware of aspects of foreign currency dealing including the taking out of forward exchange contracts. There is no discussion of the significance that that memorandum might have for the case. Eventually his Honour said: "Had there been a document which would have corroborated the Williams contentions it would have been tendered, I am sure. No such document was tendered. The defendants contend that the reference was to an assertion by Neale that the Williams could hedge only at a rollover (wrongly if he did say this). I am not persuaded that he did. John Williams' statement of 24 October 1997 does not assert that he did. Nor does his statement of 3 November 1997. Neale however asserts that he told John Williams 'quite soon after the loan had been drawn down in January 1985' that he could not take out a forward exchange contract until the next rollover of the loan. But if he did, he did not record it in any document produced at this hearing. Had there been one in CBA's files it would have been produced. I accordingly do not accept the defendant's contention." 65 Our comment on this is that we would have thought that the memorandum of 6 June 1986, fell into the category of the sort of document which his Honour said was absent. There was, of course, a clearer document. It is to be found in the note sent by Mr Bradley to the Chief General Manager in November 1991 endorsed on the memorandum sent by Mr Harriss. That document was not available at the mediation because it would appear that it had not been discovered. So the Williams knew nothing of it then. But the document must have been discovered for the purposes of the 1997 proceedings. In any event, as mentioned, it was included in the bundle of documents made available to his Honour at the hearing. It was therefore before his Honour. In what Mr Bradley wrote there is a clear admission by the bank that a bank officer at Inverell - inferentially it must have been Mr Neale - told Mr Williams that he could not hedge between roll-over dates. For his Honour's purposes it did not matter that the document had not been discovered in the earlier proceedings. The important point is that it was available by the time the 1997 proceedings were heard. His Honour must have been aware of it. We have difficulty in understanding how his Honour could have reached his adverse conclusion about the reliability of Mr Williams' and Mr Neale's evidence without discussing the significance of the 1986 memoranda and Mr Bradley's 1991 note. 66 His Honour then discussed some internal memoranda passing between officers of the bank all of which showed that the position of the Williams had continued to deteriorate. There were apparently discussions between the parties about a possible way of settling the matter. We do not refer to the detail of these except to note that his Honour said, after his discussion of these various matters, that the situation "at the end of the day on 4 June 1992 can be best described, colloquially, as a Mexican stand-off." That was certainly the case. His Honour also said that no-one was then offering "to budge: it was a classical situation for mediation." Plainly enough that statement is also correct. 67 His Honour next referred to the agreement of the parties to submit the dispute to mediation. The steps taken to prepare for the mediation were described. His Honour referred to the statement of the Williams family as to their contentions. One of their contentions was that they had been told by the bank staff that they were not permitted to hedge until the next roll-over date. Mention was made of the fact that the Australian dollar was then worth approximately 1.98 Swiss francs. The statement of the Williams' contentions contains an analysis of what their financial position would have been had they then hedged. It is in consequence of the calculations appearing on that statement that their conclusion was that their liability would have been limited to $266,000. But, as earlier mentioned, that is on the basis that securities taken by the bank over assets other than the two properties and the house at Inverell would have been realised almost immediately and would have yielded $400,000. If that premise be wrong, then the calculation is wrong. 68 After referring to the calculation his Honour said that the first paragraph of the notice of contentions was absurd and the second paragraph untenable. He added: "... the Williams could have, but did not, hedge at the next roll-over date. They have no basis on which to attribute their decision not to do so to CBA (the bank), or perhaps more accurately, if they had such a basis they have not disclosed what it was." 69 We really do have great problems with this statement. It may be that his Honour's statement that there was no basis on which the Williams could attribute their decision not to hedge to the bank was founded on his earlier rejection of Mr Williams' evidence, particularly because there was no supporting document to corroborate what he said. But, as mentioned, that ignored the critical 1986 memoranda and Mr Bradley's note endorsed on the 1991 memorandum. With due respect we have difficulty in perceiving how the statement made by his Honour that, if the Williams had a basis for their decision, they had not disclosed what it was could be correct. The Williams' complaint was that they were misled into thinking that they could not hedge between roll-over dates. Their case was that it was critical for them to be able to do so because, by the time July 1985 arrived, it was too late. The dollar had fallen so far that their position had become unmanageable. Their whole case was that, if they had been able to hedge in the early months of 1985, they would have been able to control the situation. The misleading information given them by the bank led them not to hedge. That was their principal case. Contrary to his Honour's understanding of the evidence, there were documents in the bank's file, namely, the 1986 and 1991 documents, which lent some corroboration, perhaps substantial corroboration, to the Williams' evidence. 70 His Honour then referred to the evidence given by Mr Jones and to the statement he dictated after his interview with Mr Neale. The statement is set out in full in the judgment. As mentioned, the critical matters are to be found in para 6. That is where Mr Neale said that he recalled at some stage being approached by Mr Williams who requested that the bank arrange a forward exchange contract. Mr Neale said, according to the statement, "After consultation with the Manager I told Mr Williams that it was not possible to change currencies except at roll-over. 71 We have earlier discussed these words and the fact that the response made by Mr Neale was, at least at first sight, not a response relevant to the request which was made. All that, however, may be explained by the lack of knowledge of those in the Inverell branch about hedging and forward exchange contracts. 72 His Honour referred to Mr Jones' evidence, about his sending the statement to Mr Neale and Mr Neale's response. We have referred to this in dealing with Mr Jones' and Mr Neale's evidence. In the light of it, another feature of the statement from his Honour's judgment which we have quoted in paragraph 67 is that his Honour, at least in that paragraph, seems to have been under the impression similar to the impression under which Mr Neale laboured, namely that a hedge could not be taken out in between roll-over dates. His Honour was not in fact under that misapprehension because he makes it clear later in the judgment that he is well aware, as one would expect him to be, of the difference between a hedge and a change of currencies and of the fact that one could hedge in between roll-over dates. 73 His Honour referred to the diminishing value of the two properties which provided the principal security for the Williams' indebtedness and said that the only hope of survival the Williams had was to negotiate a commercial deal with the bank. Furthermore he said, correctly in our view, that that had to be one which "would take Elders out". He added that Mr Williams was in his view "sufficiently astute to have worked it out for himself, but if he had not I have no doubt whatever that Chippindall would have explained it to him. And we feel equally sure Sir Laurence Street would have made sure that Williams understood what problems he had, as well as those" which the bank had. Mr Chippindall was the Williams' counsel. He was earlier mentioned in the judgment in a paragraph in which his Honour had given some account of his career and the nature of his practice both as a solicitor and as a barrister. He referred also to his academic record and concluded, "That the Williams were competently represented at the mediation enables me to draw inferences in some of the matters in dispute that I may not have drawn if they had represented themselves." There is no doubt about his Honour's account of Mr Chippindall's career but the paragraph is an unusual one. From time to time it is not uncommon for judges to say that a party ought to be assumed to have received competent advice because he was represented by counsel and/or solicitor or by an experienced counsel or solicitor. Perhaps not too much should be made of what his Honour said in relation to Mr Chippindall but it is open to the suggestion that his Honour made the elaborate statement which he did because he felt defensive about his conclusion that he was able to draw inferences in some matters which he might not have drawn if the Williams had represented themselves. Clearly one of the matters his Honour had in mind is the matter just referred to, namely, that if the Williams had not been sufficiently astute to have understood the position for themselves, it would have been explained to them by Mr Chippindall. 74 His Honour referred to some further documents and to the fact that the mediation had taken place on 26 November 1992 and led to the execution of the deed of that date. The deed is set out in terms in the judgment. His Honour next referred to events after the execution of the deed including the payment to Elders of the amount owing to it and the release of its securities. He referred to the fact that the $475,000 payable by the Williams on 26 November 1995 had not been paid adding that, prior to that date, it had not been suggested by any of the Williams that they had been misled in any way at the time of the settlement by any of the assertions on which they relied in the proceedings which were before his Honour. 75 His Honour referred to further evidence given by Mr Williams including evidence of his reaction to Mr Neale's statement when he first saw it. We have dealt with this generally. We do not go to the detail of what appears in the judgment. In cross-examination Mr Williams had said: "... when I read it I didn't understand a lot of it because - because in it there were statements that I'd never ever had anything to do with so I read it and I just couldn't get over how brief it was. That's all about - that's all I can remember." 76 Later Mr Williams said that he thought Mr Neale had been gagged by the bank. The cross-examination brought out the fact that it was not what was in the statement that troubled Mr Williams. He did not so much complain about the form of para. 6. Rather, he complained of the fact that Mr Neale's statement was extremely short and had omitted a number of critical matters. But nowhere, so far as we can see, does he complain of the fact that para 6 of the statement is open to the interpretation that there was no relevant response to his request to hedge the indebtedness in February or March 1985. What he was told was that he could not change currencies until the next roll-over date. Subsequently, on the Williams' own case, they acted on the basis that they could not hedge between roll-over dates. That was one of their principal complaints in the 1990 proceedings. But the complaint which Mr Williams makes about Mr Neale's statement is not that it contains no explicit statement to this effect but because of omissions from it and its brevity. As will be seen, that is the way their case on fraud and for breach of the Trade Practices Act was pleaded. 77 Eventually his Honour said: "Neale's participation in the way asserted by Williams is essential to the case he presents in this action. The onus is on him to satisfy me that he had Neale's statement, as prepared by Jones, prior to the mediation, and that he relied on it in the way he asserts. I am frankly puzzled by this aspect of the dispute. I would not expect Jones to send an unsigned statement to Borthwick & Butler [the Williams' solicitors], when he was sending signed statements from other bank officers (Neale was at this stage still employed by the CBA) and I am not prepared to find that he did, or that Borthwick & Butler sent the unsigned document to Williams. On the balance of probabilities what happened is that it was by some oversight included in the bundle which was sent to Sir Laurence Street and to Chippindall and that John Williams did not become aware of it until a day or so before the mediation, at the earliest." 78 It is common ground that his Honour was in error in saying that the statements from the bank officers other than Mr Neale were signed. They were not. No statement prepared by the bank for the purposes of the mediation was signed by any person. Furthermore, Mr Neale's statement was sent to Borthwick & Butler by Mr Jones. His Honour's conclusion was that Mr Williams came into possession of the statement because it was included by an oversight in the bundle of documents sent to Sir Laurence Street and to Mr Chippindall. His Honour said in the paragraph that the onus was on Mr Williams to satisfy him that he had Mr Neale's statement, as prepared by Mr Jones, prior to the mediation. There is no question but that he did have it and that his Honour's conclusions and inferences in this paragraph are simply wrong. 79 His Honour's mistake continued to infect the judgment. A little later he said that he would expect anyone finding himself in the position Mr Williams said he was in to have inquired of his counsel what, if any, notice he should take of the absence of a signature to one statement when the others were signed and that he would have been told that the want of a signature to one statement when others were signed should lead him to ignore that statement. So his Honour's misapprehension about the remaining statements being signed lingered. It may not have been the principal factor which persuaded his Honour to reject Mr Williams' evidence but, on the face of the judgment, it appears to have played a not insignificant part. 80 His Honour's judgment continued: "The Williams case however is a little more Byzantine - it is that John Williams drew the conclusion that Neale was not going to assist him and that he drew that conclusion not because the statement was unsigned, but because of what was not in it . How he would thereby be worse off than if no statement at all from Neale had been produced has not been explained: he has never suggested that he was intending to obtain a statement from Neale and was put off by what he saw: nor is it apparent to me, particularly where no statement from Neale had been sent by CBA to Williams' solicitors, a fact of which I would expect them to have made John Williams aware and would expect to have caused him to contact Neale and ask him why he was not providing a statement, which John Williams did not do. The only conclusion consistent with these facts which can be drawn and which I do draw is that on the balance of probabilities is that John Williams' evidence relating to the Neale statement is fake. Subsequent events convert that balance of probabilities into near if not absolute certainty." 81 In that paragraph his Honour repeats his belief that no statement from Mr Neale had been sent by the bank to the Williams' solicitors. That, as we have said, was an error about which there is no issue. We have a further difficulty with the paragraph. It is that, if his Honour had been correct in thinking that no statement from Mr Neale had been sent to the Williams' solicitors, he would have expected Mr Williams to have contacted Mr Neale and asked him why he was not providing a statement. We find this extraordinary. The Williams were represented by solicitors. The bank was employing one of its in-house solicitors. The solicitors were in touch with each other. If the fact were that Mr Neale had not made a statement or that no statement made by Mr Neale had been sent, it would have been highly dangerous for Mr Williams himself to have raised the matter directly with Mr Neale or anyone else in the bank. The matter would have been taken up through his solicitors. In fact Mr Neale's statement did follow the other statements by the bank officers and appears to have done so after prompting by the Williams' solicitors. So the paragraph which we have just quoted contains the two errors which his Honour made and it was those considerations that led his Honour to say that the only conclusion consistent with the facts which could be drawn, and which he did draw, was that, on the balance of probabilities, Mr Williams' evidence relating to Mr Neale's statement was "fake". True it is he goes on to say that subsequent events converted that balance of probabilities into near, if not, absolute certainty. But on the basis of what he has said he has made a finding that Mr Williams' evidence was not only wrong or incorrect; it was dishonest. The word "fake" is used quite deliberately. There is no question about its meaning in this context. It means tampering with the evidence for the purpose of deception. There may be some later matters which lend support to his Honour's findings but those relied upon by him for his initial conclusions - really his starting point - are without foundation. Thus, his finding of dishonesty against Mr Williams should be set aside. There is no basis for its starting point. Yet his Honour's conclusion that Mr Williams was dishonest played a significant part in his reasoning process. 82 A little later in his judgment, his Honour said: "I repeat what I have earlier recorded, that while Neale was at the Inverell Branch of CBA he and John Williams had become personal friends. Had John Williams seen this Neale statement when he says he did, or even very shortly before the mediation day I would expect him to have done at least the following - his and his family's future largely depended on a favourable mediation - (a) contact Neale immediately to ask him how he came to say what is in his statement and why he left out matters which he, Williams, regarded as important.; (b) tell Chippindall his fears and ask his view about them and about the likely effect of what was not covered in Neale's statement upon what the mediator might suggest." 83 In relation to paragraph (a) of what his Honour said, there are the difficulties earlier referred to about a party, represented by solicitors, contacting a potential witness in the employ of the other party in circumstances such as applied in this case. There are questions of protocol and there are questions of judgment. If Mr Williams had contacted Mr Neale directly, the two would have had a conversation. Assuming both acted honestly, there was, nevertheless, the danger that their respective recollections of what was said might differ, the question whether Mr Neale would prove receptive or hostile to the enquiry and, in any event, the danger for each of them that, without any dishonesty, one might be said to have made some sort of admission as to some critical aspect of the case. Our own experience is that, if a legal adviser were to hear that a client proposed to contact a witness in the employ of the other party, he would very strongly advise the client not to do so. It follows that we do not think there is any substance in what his Honour said in paragraph (a). There is much more substance in what he said in paragraph (b). Mr Chippindall was not called to give evidence and this was a matter of comment by counsel for the bank both at the hearing at first instance and on appeal. The solicitor having charge of the Williams' case was called. We propose to refer to the detail of Mr Manuel's evidence a little later. When we have done so we shall come back to what is said in paragraph (b) of the paragraph quoted from his Honour's judgment. 84 The next paragraph of the judgment to which we refer has puzzled us. His Honour said: "Jones correctly discerned the Neale situation which a mediator would discern when grappling with the parties contentions before him when he said that the mediator would be concerned with the circumstances leading up to the drawing down of the FCL rather than what occurred after drawdown and that Neale's involvement was substantially limited to post drawdown activities. The only drawdown activity of any significance of which the Williams complained was telling him that he could hedge only at a rollover date. That was wrong and CBA did not dispute that it was wrong and for that CBA must bear any consequential loss to the Williams." 85 What surprises us about this paragraph is that it was quite clear to his Honour that it was wrong for Mr Williams to be told by a bank officer that he could not hedge between roll-over dates. This was followed by his Honour's acknowledgment that the bank was responsible for any consequential loss to the Williams. Earlier in his judgment, his Honour had taken the view that that loss would be of minimal proportions. But nevertheless, an essential ingredient of the Williams' 1990 case was that they had been misled by the bank. There is no apparent yielding by the bank on this point in any of the documents which were in existence prior to the mediation of the 1990 proceedings. It is true that Mr Jones claimed to have told Mr Neale that post drawdown events were not of importance because the bank proposed to concede that part of the case but Mr Neale did not say anything of this to the Williams. He had no relevant discussion with any of them prior to the mediation. It must have been clear to the bank, although perhaps not Mr Jones, that the bank had to concede this part of the case because of what was said by Mr Bradley in his note endorsed on the November 1991 memorandum. But the Williams did not know this nor did their legal advisers. The 1991 memorandum and the notes on it were not discovered. They may have had some indication of it from the 1986 memoranda but these do not spell it out as clearly as does Mr Bradley's note. So far as we can see on the face of the papers, the question of wrongful advice by the bank remained an issue during the period leading up to the mediation. Of course, there is no transcript of the mediation proceedings and it may well have been that, during the mediation, the matter of wrongful advice about hedging was conceded and thus known to the Williams thereafter. The language of the paragraph from the judgment which we have just quoted leaves one with the impression that his Honour thought that the bank had conceded that wrongful advice about hedging was given all along. But it is not apparent from his Honour's words or from the material available to the Williams at the time of the mediation that the bank's eventual position about hedging was clarified during the mediation. 86 It may be said, of course, that so much comes from paragraph 6 of Mr Neale's statement. But the statement is not clear on the point. It suggests that Mr Williams' request for a hedge was never specifically addressed. Furthermore, the bank, in contending that there was no misrepresentation in the statement, has relied on that very matter. 87 Because of considerations arising from the 1986 memoranda and the knowledge of them which the Williams and their advisers must have had and because Mr Williams had acted all along on the basis that he was wrongly advised, the mistakes which we think are manifest on the face of the paragraph of the judgment with which we are dealing may not have the ultimate significance which other errors do. But there are errors in the paragraph and they need to be taken into account along with the others to which we have referred. 88 His Honour said that the defences all started with one proposition which, if not established, left the bank entitled to maintain the settlement embodied in the deed of settlement dated 26 November 1992. His Honour then referred to events occurring after the mediation in relation to the implementation of the settlement. We have referred to these but, in summary, they are the release by the bank of all but $475,000 of the amount of over $1.5million owing by the Williams to the bank, the lending of the further sum of $115,000 to enable the indebtedness to Elders to be discharged, the consequent freeing of stock, wool, plant and machinery from the securities to which they had been subject, and the fact that, for three years, the Williams were left to conduct their primary production enterprise as they saw fit without either the bank or Elders endeavouring to intercept funds or taking proceedings to enforce securities. 89 His Honour commented that receipt of the demand must have released "a flood of John Williams' memories." He said that what he had assumed in this regard required some recapitulation of past events. 90 His Honour recorded these events in chronological sequence in the following paragraphs: "1 Mr Jones interviewed Neale in Sydney on 12 November 1992 and prepared his draft statement that day. 2 Borthwick & Butler enquired on 18 November 1992 whether a statement from Neale would be provided. 3 On 20 November Jones faxed to Neale at Goulburn a copy of his statement. This is the copy Neale says he got through CBA's internal postal transmission system; so he got it at least a couple of days after 20 November 1992. 4 John Williams asserts he had a copy of the draft statement prior to the mediation on 26 November 1992 but that he didn't ring Neale to ask him about it because he thought it would be the wrong thing to do! 5 He also asserts that he has no memory of raising his concern about this statement prior to or at the mediation with his solicitor Manuel or his counsel Chippindall. 6 There was, apparently, produced at the mediation the unsigned seven paragraph statement attributed to Neale. Whether or not there in fact was such a statement so produced is beside the present point. The critical factor is that John Williams asserts that it was. He asserts that he got a copy of it from his solicitors among the CBA's position papers and it caused him to say to his brother Peter "We are stuffed … the bank has gagged Peter Neale … we have lost our key witness …" Ex A, para 28-34. 7 John Williams asserts that he did speak to Neale about his statement "just prior to Christmas when he phoned him to wish him Merry Christmas". That presumably was Christmas 1992, just over four years before he propounds this complaint in his present case. Peter Williams evidence was to much the same effect, except that he was somewhat less positive than his brother. That is probably because he substantially left the conduct of this litigation to his brother. 8 Neale says that he phoned Jones almost immediately after he received a copy of his draft statement, but he conceded that Jones told him that CBA was conceding in the mediation what happened in respect of the FCL after drawdown. That left nothing that Neale could usefully contribute because any relevant connection he had with this facility commenced after drawdown." 91 His Honour said that the facts which he had recounted required him to reach a number of conclusions. Those conclusions were: "1 John Williams' assertion that he would not, and therefore his family would not, have agreed to the mediated settlement embodied in the 26 November 1992 deed but for the view he formed that Neale had been "got at" cannot be accepted. It has been produced for the first time on 7 July 1997 in paragraphs 11-16 of the points of defence filed 20 March 1997, after CBA has complied with the settlement deed on its part to be performed. It is a last resort. 2 It is inherently improbable that an intelligent borrower (John Williams fits that description) would form the conclusion that John Williams says he formed without contacting Neale and discussing it with him. John Williams has not asserted that he did not know where Neale was or how to contact him, yet he did not do so. 3 John Williams evidence, if I believed it, would require me to conclude that faced with a mediation and an unsigned "statement" by his friend Neale, he went ahead with that mediation without discussing that unsigned statement with his Counsel Chippindall. In other words he abandoned his "defence" without seeking expert advice as to its efficacy. There can be but one or other of two explanations for that, either that his expressed fears as to the consequences of this unsigned statement are false, or that his evidence that he did not raise either with his solicitor or his counsel is false. Had he done so he would have been told that what Neale was alleged to have said in his statement was evidence that could and would have been exacted from him had he given evidence, were it relevant, and that what Williams says he expected to have him give would not have been able to be given unless it was relevant. Little if any of it would have been relevant in the Common Law proceedings because of the concession which CBA was prepared to make for the purpose of those proceedings. 5 When there is added to 1-4 above a realisation that these complaints are, as I have described them, a last resort asserted for the first time after their proponent had enjoyed the benefit of full performance by the other party to the agreement their credibility diminishes to the point of vanishing. 6 My conclusion is that the evidence of John Williams on which the cross claims in this litigation depend was false, and false to his knowledge. I add that it was done not simply for his own benefit, but also for that of his parents, his wife and his brother and his brother's wife, which may be some moral exculpation but does not cause me to doubt my finding that John Williams gave knowingly false evidence." 92 His Honour said that the cross-claims all depended upon his acceptance of evidence which he had reviewed and rejected. The cross-claims thus failed and he made the orders which are appealed from. 93 The errors in the judgment which we consider to be established are those to which we have referred together with two further matters not yet mentioned. In summary they are:

(a) His Honour's statement that there was no document from the bank supporting the Williams' case. There were two sets of documents. They consisted of the 1986 memoranda and Mr Bradley's note on the 1991 memorandum signed by Mr Harriss. These documents were part of the evidence before his Honour. Each fits the description of a document said by his Honour to be necessary to persuade him to accept Mr Williams' evidence.

(b) The statement made by his Honour that Mr Neale's statement was the only unsigned statement sent by the bank for the purposes of the mediation. In fact each of the bank's statements was unsigned.

(c) The inferences drawn by his Honour as to how Mr Williams came to be in possession of a copy of Mr Neale's statement. All these are erroneous because the statement was sent formally to the Williams' solicitors. They gave a copy of the statement to Mr Neale. Although it arrived after the other statements made by bank officers, it was furnished to Mr Williams in the same way as copies of the other statements had been furnished.

(d) His Honour's conclusion that it would have been reasonable to expect Mr Williams, in the absence of the statement from Mr Neale, to have contacted Mr Neale directly. With all respect we think this runs counter to reality. In a sense this is not of great moment because the statement was in fact received by Mr Williams in the way that was described. His Honour's speculation was thus unnecessary and irrelevant but it reflects an approach to his Honour's treatment of the evidence which shows that he was under a misconception. His Honour used his misconception as a factor in the reasoning process which led him to reject Mr Williams' evidence.

(e) The same considerations apply to the criticisms made of Mr Williams for failing to make direct contact with Mr Neale about the form of his statement. We have yet to deal with his Honour's comment concerning Mr Chippindall.

(f) His Honour's conclusion that a mediator would not be concerned about post drawdown activities. He would not be concerned with the misleading advice which the Williams had received because there was no dispute that it had been given. So far as we can tell on the face of the material that there is, there was no concession about that matter until at least the mediation and it is not clear that there was a concession made even then. We have yet to refer to Mr Manuel's evidence. In due course it will be seen that, if his evidence were accepted, it would tend to establish that the question whether Mr Neale had misled the Williams about hedging was a live issue even during the mediation.

(g) In his conclusions his Honour said that Mr Neale conceded that Mr Jones told him that the bank was conceding in the mediation what happened after drawdown. This was incorrect. Mr Neale made it clear in his oral evidence that he refuted Mr Jones' statement that he had told Mr Neale that the bank would make such a concession in the mediation. There was thus a significant conflict between the evidence of the two witnesses. This conflict was not resolved by his Honour no doubt because he was under the impression that there was no issue between the two.

(h) His Honour said that Mr Williams' statement of 24 October 1997 did not assert that Mr Neale said that the Williams could hedge only at a roll-over date. His Honour said that he was not persuaded that Mr Neale had said this. It is difficult to comprehend this finding in the light of the bank's documents to which we have just referred. Furthermore, the finding is erroneous because para 35 of Mr Williams' statement of 24 October 1997 says that in February 1985 he went to the bank and asked to take out a hedge of the loan. This suggests that his Honour did not properly comprehend Mr Williams' evidence. 94 Before we reach our conclusions in relation to the significance that these various errors should have in this appeal, we need to refer briefly to Mr Manuel's evidence, and the fact that Mr Chippindall was not called to give evidence.

The significance of the Williams' failure to call Mr Chippindall and Mr Manuel's evidence 95 It will be recalled that one of the matters his Honour thought was significant was the failure of the Williams to call their counsel, Mr Chippindall. His Honour said that, had Mr Williams seen Mr Neale's statement even shortly before the mediation (as indeed he did) he would have expected him to have told Mr Chippindall his fears and have asked his view about them and about the likely effect of what was not covered in Mr Neale's statement upon what the mediator might suggest. Counsel for the appellants submitted that his Honour's criticism of the Williams' failure to call Mr Chippindall was not warranted. That is a matter with which we said we would deal after we had dealt with the various errors of fact claimed to be contained in the judgment. 96 A submission by one party that the absence of a legal representative from the witness box in circumstances such as this would entitle the Court to conclude that nothing that witness could say would be of assistance to his client's case, raises in one's mind questions about legal professional privilege. But, on reflection, we are of opinion that there may be situations - and this is contended to be one of them - where the absence of the legal adviser from the witness box will provide the other party with a justifiable comment. We have not investigated whether the existence of legal professional privilege here would have provided an answer to the criticism. There was a faint suggestion from counsel for the Williams that it would. But the privilege, if it existed, was waived because the Williams called in their case the solicitor, Mr Manuel, who had acted for them at the time of the mediation. There is no explanation of why, that having been done, Mr Chippindall was not also called. 97 Mr Manuel was present throughout the mediation and advised the Williams from time to time on various aspects of what was occurring. Importantly he took them through the deed of settlement before it was signed and explained various aspects of it to them. 98 In his statement prepared for the purpose of his evidence, Mr Manuel dealt with matters occurring after the mediation in late 1992. He said that he had no recollection of any specific discussion with Mr Williams or any other member of the family about Mr Neale's refusal to sign the document put forward as his statement in the mediation. But he added that he certainly became aware at some stage that Mr Neale had refused to sign it. He said that he assumed Mr Williams had told him this. He did not remember when it was. It may have been earlier than 1996 but he was not sure. In due course it will be seen that Mr Manuel's statement was intended to be relevant to the defence of affirmation and not to the more general issues in the case. We shall need to say more about it when we come to deal with affirmation. 99 Mr Manuel said that he had never been instructed by Mr Williams to advise about the legal consequences of Mr Neale's refusal to sign the statement nor did he give Mr Williams or any other member of the family any legal advice about that matter. 100 In the run of his cross-examination Mr Manuel became a lot more specific. It seems likely that his recollection about the events which transpired was refreshed by questions he was asked and by the reference which was made to documents which were in evidence. He recalled Mr Neale's statement did not arrive with the statements of other bank officers and that he had written inquiring as to whether there would be a statement from Mr Neale. He was aware that Mr Williams had a lot of faith in Mr Neale. He had a conversation with Mr Williams after he received the statement which Mr Neale did send. He did not recall the specific words of what was said but his recollection was that Mr Williams was concerned that the content of the statement was not in any way as full as he had anticipated it would have been. 101 Mr Williams' evidence was that the lack of detail in the statement was one of the things which concerned him. Mr Manuel remembered this. Mr Manuel was asked several questions concerning matters which were omitted from Mr Neale's statement. The suggestion put to him was that, if a matter dealt with in one of the Williams' statements was not dealt with in Mr Neale's statement, Mr Neale should have been taken to have accepted what the Williams said about it. That was the way Mr Jones approached matters of this kind. He only included in statements from witnesses material which it was necessary to include in order to indicate that the witness had a different view of matters or facts dealt with in the statement which had been received from the other party. We say in passing that we appreciate that this was Mr Jones' practice and that it may be the practice of some other solicitors. Nevertheless, we think it has its dangers. It may, in some circumstances, operate unfairly to the witness whose statement it is. And it may have the effect of misleading those who read the statement in that they may be uncertain whether the statement is intended to be comprehensive or selective. 102 Mr Manuel said that he did not recall raising the matter of the brevity of Mr Neale's statement with Mr Chippindall. He agreed that, if the matter had been of some importance, it would be likely that he would have raised it with him. 103 Later Mr Manuel emphasised that it was the brevity of the statement which caused Mr Williams concern. Mr Manuel's evidence proceeded as follows: "HIS HONOUR: Q. Could you give us an example of the matters that you were being told were of concern because this statement didn't mention them at all? A: Yes, the specific matter that came up earlier in Mr Williams' dealings with Mr Neale, and as were referred to in Mr Williams' statement, the question of when or the allowability of hedging was something that was of great importance to Mr Williams. In that, my recollection was that Mr Williams alleged that Mr Neale had informed him at a certain time that it wasn't possible to hedge and as a result, Mr Williams alleged that he had asked whether he could hedge and he was told that he couldn't. The end result was that by not being able to do that, the overall loss in value was much greater." 104 The specificity of this evidence is surprising in the light of the terms of the written statement which Mr Manuel made for the purposes of giving his evidence. It may be thought that what he said to his Honour would have been highlighted in that statement. 105 Mr Manuel was asked whether he had any recollection whether Mr Neale dealt with the matter of hedging in his statement. He said that he had not. He said that he had read the statement but his recollection was that the matter was not something that was dealt with. His Honour referred Mr Manuel to para 6 of Mr Neale's statement. Paragraph 6 is the paragraph which, on its face, suggests that Mr Neale did not deal with Mr Williams' request for a hedge but dealt instead with a change of currency. Mr Neale said that he recalled being approached by Mr Williams requesting that the bank arrange a forward exchange contract. After consultation with the Manager, Mr Neale told him it was not possible to change currencies. Paragraph 6 cries out for an explanation. The fact that it is in the form in which it is, is perhaps a reflection of Mr Jones' practice in taking statements. But, without an explanation, one is left in a quandary as to whether the bare words were said or whether there was more to it. 106 Of course, the bank's internal documents reveal that it was not until 1986 that Mr Neale and other officers of the Inverell Branch became aware that it was possible to hedge between roll-over dates. But since the statement is dated six years later in November 1992, that was a matter of which Mr Neale, at the time he made the statement, must have been well aware. The whole matter is most unsatisfactory. 107 Mr Manuel was asked about his understanding of whether Mr Neale, if the proceedings had gone ahead and he had given evidence, could have been cross-examined to bring out the matters which were omitted from the statement. Mr Manuel said that he agreed but added, "As to what the final result of the cross-examination would be, I wouldn't know." Mr Manuel has made a wise comment. Cross-examination on a matter of this kind on the blind would have been a very dangerous exercise. As Mr Manuel later said, he would not have been confident that the end result would be that the cross-examination of Mr Neale would necessarily have been successful. He added, "In other words, that I'm not in any way suggesting that Mr Neale was a dishonest person or would not have been completely truthful with the court. However, I was sufficiently sceptical to perhaps raise the thought that perhaps the statement that Mr Neale was putting forward - was not fully in accordance with Mr Williams' version of the truth and that that may or may not be the end result of a hearing later, that that conclusion would be achieved." That is an answer which is very realistic and would have been the answer of many experienced advocates if they had been asked the same question in similar circumstances. 108 Later Mr Manuel referred to Mr Williams' disappointment at the contents of Mr Neale's statement. He said that Mr Williams felt that it put him in a less advantageous position with the bank. It came down to cutting losses and attempting for the rest of the day to get down to the dollars and cents. That evidence, if accepted, would provide substantial corroboration for the Williams' case at least insofar as concerned their own reactions to Mr Neale's statement. It is perhaps the more compelling corroboration because, for whatever reason, nothing of the kind appears in the statement which comprised Mr Manuel's evidence in chief. Nor was he asked questions by the Williams' counsel about that matter. His confirmation of the Williams' concern is brought out firstly by a question asked by the judge and secondly by further questions asked in cross-examination. 109 To reinforce the position, Mr Manuel also said: "It was important to me so far as again I was hoping to - that the document would have been a - a full statement by Mr Neale of everything and obviously it would have been much easier if at the initial discussion, so far as the legal aspects before everyone broke up, if we would have been able to say: Well, look here, there's a statement there from Mr Neale that clearly shows that the bank had problems on this point and there wasn't such a statement." 110 Such evidence as Mr Manuel was able to give about the matter of Mr Neale's statement having been raised with Mr Chippindall is extremely vague and uncertain. It cannot be said that Mr Manuel has any real recollection about that matter. Subject to the criticisms made of his Honour's judgment in the paragraphs in which his comments about Mr Chippindall's absence from the witness box is made, we do not think that his Honour's criticism was otherwise unwarranted or unjustified. The matter was opened up in the Williams' case with the calling of Mr Manuel. Mr Chippindall was a witness who, in those circumstances, one would have expected would have been called in the Williams' case. We agree with his Honour in thinking that parties in the position of the Williams worried by the form of a statement such as was received from the bank in relation to Mr Neale, would have raised the matter with their legal advisers. It is almost unthinkable that they would not have discussed the matter both with Mr Chippindall and with Mr Manuel. There is no apparent reason why that very usual course would not have been taken. The fact that Mr Chippindall was not called in the Williams' case suggests very strongly that nothing he could have said would have been of assistance to that case. But, although his Honour's comment on Mr Chippindall's absence from the witness box was well justified, we do not consider that it can overcome the cumulative effect of the errors of fact which are to be found in the judgment.

Conclusions on significance of errors of fact in judgment 111 We need next to express some views about the overall significance of the accumulation of errors of fact to be found in the judgment. What are the consequences of those errors? The correct way to approach the problem is to consider the effect of the accumulation of the errors rather than to look at the effect of each sequentially. Counsel for the bank submitted that none of the errors, whether considered singly or together, warranted the conclusion that his Honour's findings about the credibility of Mr Williams and Mr Neale should be disturbed. Counsel said that his Honour's findings were made as the result of his Honour's observation of the witnesses in the witness box and should not be interfered with. But it is clear that in most, if not all, cases his Honour's reasons disclose reliance on his undoubted mistakes about the state of the evidence. Thus he used his misapprehension about all the bank's statements, except that of Mr Neale, being signed as a reason why he should not accept particular aspects of Mr Williams' evidence. He said that Mr Williams had made no mention in his evidence of his claim that Mr Neale told him that he could not hedge between roll-over dates. In fact Mr Williams' evidence in this regard is to be found in paragraph 35 of his statement of 24 October 1997. There is no purpose to be gained by going over the ground covered in the exposure of the various errors in the judgment. Plainly they all had an effect in persuading his Honour that he should reject the evidence. Demeanour may have come into the exercise but it is impossible to say that, absent the errors, the findings would nevertheless have been the same. In our opinion they infect the whole judgment with error. It is a case where his Honour has misused the advantage he had as the trial judge. Subject to the various matters each of which, so counsel for the bank contends, requires the Court to conclude that the Williams' case must fail in any event, the judgment appealed from should be set aside and an order made for a new trial. We now deal with those various matters.

Misrepresentation 112 We deal first with the question whether there was a misrepresentation. If there was, it will be necessary to determine whether it was made fraudulently and, whether or not it was, whether the making of it constituted misleading or deceptive conduct within the meaning of s52 of the Trade Practices Act. An understanding of the Williams' case needs to commence with the relevant paragraphs of the pleadings. 113 The cross-claim was amended twice. In paragraph 5 of the last amended cross-claim under the heading, "Cross Claimants' Contentions", it is said that the cross-claimants, ie the Williams, repeat the matters set out in their points of defence. Paragraphs 18, 19 and 20 of the points of defence are as follows: "18 In November 1992 the parties conducted a mediation ('the Mediation') before Sir Laurence Street in respect of the defendants' claims against the plaintiff in the Supreme Court of New South Wales being proceedings No 16736 of 1990 in the Common Law Division of this Honourable Court (the '1990 Proceedings'). 19 For the purposes of the Mediation the plaintiff forwarded to the defendants various unsigned statements for use in the Mediation including an unsigned statement of Mr Peter Neale. 20 By reason of the conduct referred to in paragraph 9 above, the plaintiff represented to the defendants that the statement of Peter Neale: (a) had been approved by him as his statement; and (b) was not a statement that Peter Neale had rejected or refused to sign as a statement of his evidence." 114 The succeeding paragraphs go on to allege falsity, reliance, misleading or deceptive conduct and fraud. 115 In the relevant part of its reply to the points of defence, the bank joined issue on these paragraphs thus putting in question the various matters alleged in the paragraphs of the points of defence to which we have referred. 116 It is to be observed that the Williams' allegations are that Mr Neale's statement, forwarded by the bank's solicitor for the purpose of the mediation, represented to the Williams that Mr Neale's statement had been approved by him as his statement and was not a statement which he had rejected or refused to sign as a statement of his evidence. That is the case which the Williams sought to make out at the trial. Importantly they did not allege that there was a false representation in paragraph 6 of Mr Neale's statement in that the statement did not say in terms that Mr Neale had told Mr Williams in February 1985 or thereabouts that he could not hedge between roll-over dates. That allegation was central to the 1990 proceedings. It was not central to the 1997 proceedings. What the Williams complain about in these proceedings is the sending of a statement which, in their contention, was brief in the extreme and which left them with the impression that Mr Neale was not prepared to say a number of things which he had communicated to Mr Williams in his private conversations with him in the period following the draw down of the loan. The Williams claimed to have been led into thinking that Mr Neale's evidence would not be favourable to them because, in their minds, he had been "gagged" by the bank. They also say that they were led to believe that the statement was one which Mr Neale would be prepared to sign and which would form the basis of the evidence he would give at any hearing of the matter. They were not aware, and this is probably the most serious of their complaints, that he had refused to sign the statement as a statement of his evidence. These various matters induced them to conclude that they could not rely on favourable evidence from Mr Neale and, that being the case, that they should settle on the most favourable terms they could obtain. 117 Submissions were made on behalf of the bank to the effect that Mr Neale's statement was made for the purposes of the mediation and did not necessarily reflect the evidence which he might give at any hearing of the matter. Counsel for the bank stressed the words endorsed at the top of the statement which emphasised that the statement was made for the purposes of the mediation. Implicit in the submissions was the proposition that the statement should have been seen as providing only a general indication of the matters with which Mr Neale would deal in any evidence which he gave. Moreover, the parties were in negotiation in an endeavour to settle the whole matter. The decision to agree to a mediation of their dispute was a step in that negotiating process. In those circumstances, so it was submitted, the Williams were not justified in treating the statement as indicative of all the evidence which Mr Neale might eventually give if the matter proceeded to hearing. Counsel did not go so far as to say so expressly, but it did seem as though he was endeavouring to maintain a position in which the statement should not be seen as anything more than a negotiating document giving a bare outline of what might be said by Mr Neale in his evidence. 118 Authorities under s52 of the Trade Practices Act dealing with claimed misrepresentations made in the course of settlement negotiations whether in an ordinary commercial context or in the context of a litigious process indicate that the courts are well aware of the need not to be over zealous in interfering with settlement processes because of the public interest which there is in negotiations leading to agreement. 119 Thus, in Lam v Ausintel Investments Australia Pty Limited (1989) 97 FLR 458, Gleeson CJ said (at 475): "Where parties are dealing at arms' length in a commercial situation in which they have conflicting interests it will often be the case that one party will be aware of information which, if known to the other, would or might cause that other party to take a different negotiating stance. This does not in itself impose any obligation on the first party to bring the information to the attention of the other party, and failure to do so would not, without more, ordinarily be regarded as dishonesty or even sharp practice". 120 And Burchett J said in Poseidon Ltd v Adelaide Petroleum NL (1991) 105 ALR 25 at 26: "I do not think it has ever been suggested that s 52 strikes at the traditional secretiveness and obliquity of the bargaining process. Traditional bargaining may be hard, without being in the statutory sense misleading or deceptive. No one expects all the cards to be on the table. But the bargaining process is not therefore to be seen as a licence to deceive." 121 The process of mediation which is here involved is not properly categorised as a process of negotiation alone. Certainly the mediation was entered upon in an attempt to assist the process of negotiation which had been proceeding but, to use his Honour's expression, had reached a "Mexican standoff". The mediation was part of a process designed to bring about the settlement of a long-standing dispute which was the subject of pending litigation which had proved intractable to settlement. That made it likely that, if the matter were to be settled, the settlement would only be achieved with the assistance which a mediator could give. The primary purpose of the preparation of the statements of both parties was to send them to the mediator to assist him to understand their respective cases. Copies of statements to be relied upon by each party were given to the other so that there would be a degree of common ground between them. Differences in the evidence likely to be given by witnesses called by each of the parties would be disclosed. The extent to which there was a factual dispute would be ascertained. This would enable the mediator to perceive strengths and weaknesses in the cases of the parties and to point out factors which might tell for or against one party or the other or which might be such as to show that there was substantial uncertainty about critical facts so that the likely outcome of the litigation, if it depended on factual findings, was uncertain. 122 The point we make is that the principal purpose of the statements was to inform the mediator of the nature of the cases of the parties in sufficient detail to enable the fundamental issues in the case to be identified. But the exercise would not have been likely to be productive of settlement unless there were the same degree of disclosure by each of the parties to the other. Otherwise the mediator would have had the statements of both parties but each party would have been in the dark as to the other's likely evidence. We do not say that it would not be possible to conduct a mediation in these circumstances but it would lack the common ground which would seem to be more likely to form the basis of a successful outcome. It follows, contrary to the submissions made by counsel for the bank, that the sending of the bank's statements to the Williams, notwithstanding the primary purpose for which the statements were prepared, did constitute a representation by the bank to the Williams that the statements although brief in form, were an accurate indication, albeit in broad outline, of the evidence which the bank would be likely to have at its disposal. 123 A consideration of the evidence of Mr Jones shows that he was well aware that the statements that he prepared needed to be accurate even though they might not have been comprehensive. Certainly they ought not to have contained misleading statements. And, importantly for present purposes, a statement if disclaimed by the person to whom it is attributed - that is the Williams' case here - should either not have been sent or should have been sent with a statement to the effect that, although the witness was not prepared to sign the statement, it was nevertheless an outline of the evidence which the witness was expected to give. If the statement were sent along with a number of other statements which were signed - that was what his Honour thought the position was - the position may have been different. But that was not the case. The statement, although sent after the other statements to be relied upon by the bank, was sent in the same form and in the same way as the earlier ones had been. 124 Of course the sending of the statement of any witness did not involve the bank in undertaking to call that witness nor did the furnishing of four statements mean that, if the proceedings went on, the bank would be unable to call additional witnesses. What it did mean was that the bank, in sending the statements, was representing that, in substance, they reflected the nature of the evidence each of the witnesses was willing and able to give. In reaching this conclusion we have taken into account the cautionary words appearing at the top of each statement making it clear that the statements were prepared solely for the purposes of the mediation. But, if the exercise were to have any meaning, the Williams were entitled to think that each statement contained a fair representation of the substance of the evidence to be relied on in the bank's case and that each of the witnesses was in agreement with the form of the statement which was sent. 125 The representations relied upon in the Williams' points of defence were that Mr Neale's statement had been approved by him as his statement and was not a statement that he had rejected or refused to sign as a statement of his evidence. The evidence led in the Williams' case is, in our opinion, capable of establishing the making by the bank of each of the representations on which the Williams rely. But, the trial having miscarried, there are no findings which we can adopt or accept. We are not in a position to make findings ourselves. This can only be done by a judge who hears the evidence afresh and reaches conclusions not tainted with the errors to be found in the judgment appealed from.

Whether the representations made by the bank were, objectively speaking, false 126 The evidence is tolerably clear that Mr Neale made it plain to Mr Jones that he was unwilling to sign the statement because he regarded it as incomplete. He thought that there was much more evidence he could give relevant to the case. Without this being included in the statement, it was incomplete with the consequence that he indicated that he was not prepared to sign it. According to his evidence, Mr Jones asked Mr Neale whether the statement was accurate so far as it went. He said that it was. So Mr Jones sent the statement to the mediator and the Williams on the basis it contained a fair indication of the evidence Mr Neale would be likely to give in relation to the matters with which the statement dealt. But the Williams say that, when he sent the statement, Mr Jones knew that Mr Neale would not have signed it had he been asked to do so and that for the reason that it omitted a number of matters which Mr Neale considered to be material. 127 It is helpful at this point to refer to the comparison made by counsel for the Williams of Mr Neale's unsigned statement with what he said in his evidence he would have required the statement to contain. That part of the statement which is dealt with is para 6 which, as previously indicated, is the critical paragraph of it. In relation to that paragraph Mr Neale said that he would have wished the statement to contain additional matters. We have referred to his evidence earlier, but set it out again so that this part of the judgment will be comprehensive. Mr Neale said "Quite soon after the loan had been drawn down in January 1985, perhaps within a month, John Williams was present at the counter of the Inverell branch of the bank, he said to me words to the effect: 'I have been looking at the currency exchange rate since we drew down the foreign currency loan and the rates have not gone the way that was expected. I would like to take out a forward exchange contract to cover our exposure'." 128 The analysis then refers to so much of para 6 of the unsigned statement as says that, after consultation with the manager, Mr McGladrigan, Mr Neale told Mr Williams that it was not possible to change currencies except at roll-over. We have earlier indicated our difficulty with paragraph 6 and we do not repeat what we have said. In his evidence Mr Neale said that he wished his statement to contain the following words: "I had previously read through the whole of the loan agreement as I had not seen one before for a foreign currency loan and I had no idea what they were about. When John Williams asked about entering into the forward exchange contract, my first reaction was that he would not be able to do this until a rollover period because of the terms of the agreement. I went and got the branch file for the loan. I located on the file the foreign currency loan agreement between the customers and the Bank. I read it again and came to the conclusion that the effect of the agreement was that no forward exchange contract could be entered into until a rollover date. At that stage, I believed that a forward exchange contract had the effect of changing currency. I took the agreement into the Branch Manager, Robert McGladrigan, and I said to him words to the effect: 'I think that these provisions in the loan agreement mean that John Williams cannot take out a forward exchange contract until the next rollover of the loan'. He said to me: 'I agree with you.' I then returned to the counter and spoke to John Williams and I said to him words to the effect: 'John under the documentation, you cannot take a forward exchange contract until the next rollover of the loan. I have discussed it with Bob and he agrees'. I was in no doubt that John Williams would have arranged a forward exchange contract in the Bank on that day had I informed him that this could have been done." 129 Mr Neale's evidence is to the same effect as paragraph 35 of Mr Williams' statement of 24 October 1997 earlier referred to. Some corroboration of both Mr Williams' and Mr Neale's evidence in this regard is to be found in Mr Manuel's evidence earlier referred to (paragraph 103 above). 130 The evidence of Mr Neale quoted in paragraph 128 makes more sense of the conversation than does the version attributed to him in para 6 of the statement. It is cohesive and lacks the vagueness of para 6 because it does not contain a statement by Mr Neale in answer to Mr Williams' request for a hedge to the effect that currencies could not be changed between roll-over dates. Nevertheless, this Court could not itself make a finding that Mr Neale's evidence should be accepted or rejected. His Honour did not deal with this question because he disposed of the case on the basis of a lack of reliance on any misrepresentations. 131 But, whatever view is ultimately taken of the reliability of Mr Neale's evidence of his conversation with Mr Williams in February 1985, it cannot be determinative of the question now being considered, namely the falsity of the representations pleaded in paragraph 20 of the Williams' points of defence. The question is whether Mr Neale told Mr Jones that he had informed Mr Williams that he could not hedge between roll-overs or whether he used more general words to condemn the inadequacy of the statement. On a new trial it may not matter which of these alternatives is correct. It is enough for us to conclude, as we do conclude, that, in either case, there will be evidence of falsity which, if accepted, would establish the Williams' case in this regard. All will depend on the findings to be made by the judge who presides over any new trial.

Fraud 132 Counsel for the bank submitted that there was no evidence of fraud and that, whatever the outcome of the Williams' cause of action based on breach of s52 of the Trade Practices Act, there was no warrant for a new trial on the issue of fraud. Mr Jones, whose conduct was the only relevant conduct to be considered, had not been shown to have acted dishonestly in the sense of making any statement or engaging in any conduct knowing that what he was saying or representing was false nor had he acted recklessly in the sense of not caring whether what he said or did was true or false. The principal problem we have with this is that the point upon which counsel relies is a no evidence point and again there are no findings. Undoubtedly Mr Jones knew that Mr Neale was unhappy with the draft statement and would not sign it. Those matters were not communicated to the mediator or the Williams. If it should be found that the bank, through Mr Jones, did represent that Mr Neale had approved the statement as his statement when he had not, it is difficult to say that the case insofar as it is based on fraud must fail. 133 In dealing with fraud, one of course needs to be conscious of the serious implications of a finding that fraud has occurred cf s140 of the Evidence Act 1995, particularly subs(2)(c) thereof. See also Briginshaw v Briginshaw (1938) 60 CLR 336 at 361-2. A matter such as this must be approached with a degree of caution. Findings of fraud are not lightly made. But it is one thing to emphasise that matter; it is quite another to find no evidence of fraud at all. 134 There is another matter which needs to be considered. It would not seem to be likely to have involved Mr Jones. It is the apparent failure of the bank to discover in the 1990 proceedings the 1991 memorandum and Mr Bradley's note written on it. The note tends to establish so much of the Williams' case as depended on their being told that they could not hedge between roll-over dates. Why the document was not discovered is not disclosed by the evidence. Perhaps it was overlooked but this seems unlikely. Plainly it was relevant to an important issue in the case but no mention of it is to be found anywhere in the bank's list and, if Mr Jones' recollection be correct, it was not shown to him until shortly before he gave evidence in the 1997 proceedings. There may well be explanations for all this. But this Court is quite unable to deal with the matter. There can be no conclusive finding on the question of fraud until there is a new trial. 135 Accordingly, we reject the submission of counsel for the bank that the Williams' case on fraud must inevitably fail.

Misleading or deceptive conduct 136 Precisely the same considerations apply in relation to the cause of action based on s.52 of the Trade Practices Act. Subject to the outcome of the bank's submissions on the limitation provisions contained in s82 and s87 of the Act and, of course, the question of affirmation, the Williams' case on misleading or deceptive conduct must be retried.

Reliance 137 This Court cannot deal with reliance by the Williams on the representations upon which they have sued. That is the issue dealt with by his Honour. His findings on that matter ought to be set aside. This Court is not in a position to substitute any view it may have for that of his Honour. The bank's submission was that any reliance by the Williams on representations upon which they sue was unreasonable in all the circumstances. We reject the submission.

Trade Practices Act - Limitation Provisions 138 As mentioned, the two limitation provisions in question are to be found respectively in s82(2) and s87(1CA)(b) of the Trade Practices Act. Section 82 confers rights on persons who have suffered loss in consequence of breaches of the Act to sue for damages and s87 confers rights on such persons to claim a broad range of relief depending on the circumstances of the case. There is a distinction in the language used in the two sections. Section 82(1) provides that a person who "suffers loss or damage" by conduct of another person that was done in contravention, inter alia, of a provision of Part V of the Act may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention. Section 82(2) provides that such an action may be commenced at any time within three years after the date on which the cause of action accrued. 139 The section has been construed to mean that the cause of action will not accrue until loss or damage has actually been suffered; cf Wardley Australia Limited v The State of Western Australia 1992) 175 CLR 514, or until the disadvantageous character of the transaction which is in question has become manifest; Karedis Enterprises Pty Limited v Antoniou (1995) 59 FCR 35. In Troulis v Vamvoukakis (27 February 1998, Court of Appeal, unreported), Gleeson CJ dealing with the comparable provisions of s68(2) of the Fair Trading Act 1987 said that, in the case under consideration, it was far from clear that there ever was any substance in the limitation point. His Honour continued: "The decisions of the High Court in Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 and the Full Court of the Federal Court in Karedis Enterprises Pty Ltd v Antoniou (1995) 137 ALR 544 provide strong support for an argument that, in the present case, the cause of action sued upon did not accrue until it was reasonably ascertainable by Mr Vamvoukakis that the representations relied upon by him were false and, therefore, the business he acquired was worth less than he agreed to pay for it." 140 Wardley was an action on an indemnity and it was held that the indemnifier suffered no loss until the contingency upon which the indemnity depended was fulfilled. Time did not thus begin to run until that event occurred. 141 Section 87(1) provides that the court may make such order or orders as it thinks appropriate against a person who engaged in conduct, including conduct in breach of s52 of the Act, if the court considers that the order or orders will compensate in whole or in part for the loss or damage or will prevent or will reduce the loss or damage. Earlier s87(1) provides that, where the court finds that a person "has suffered, or is likely to suffer, loss or damage by conduct of another person that was engaged in in contravention, inter alia, of a provision of Part V of the Act, the court may grant relief". Similar language is used in ss87(1A) and 87(1B) The words "or is likely to suffer loss or damage" do not appear in s82. As mentioned, the limitation provisions of s87 are provided for in s87(1CA)(b) of the Act. The same three year period is provided for as is provided in s82. But the words "or is likely to suffer loss or damage" may make it more difficult for an applicant for relief to avoid the operation of the limitation provision in s87. 142 In the submission of counsel for the bank, the Williams' claim in the present case under both s82 and s87 is barred. On the facts of the case such difference as there was in the language of the two provisions was not material. In counsel's submissions, whether one had regard to the provisions of s82 or s87 the causes of action under the Trade Practices Act relied upon by the Williams were barred by the statute. 143 Counsel said that the obligation to pay the reduced amount of principal of $475,000 and the sum of $115,000 together with interest thereon under the deed was not a contingent obligation nor was there any difficulty, let alone impossibility, in being able to ascertain at the time of its execution whether or not those amounts would ever come to be payable or whether or not the execution of the deed would result in the Williams suffering loss or damage. The liability under the deed to pay the amounts came into existence in an absolute and unqualified form immediately upon its execution on 26 November 1992. Alternatively counsel said that the Williams' liability arose no later than the date when the sum of $115,000 was paid, namely, 22 February 1993. It was either on 26 November 1992 or 23 February 1993 that the Williams became unconditionally bound to pay to the bank the two sums of $475,000 and $115,000. Although these obligations were not required to be met until November 1995, they were unconditional. They could only be extinguished or varied if the bank agreed to a variation of the deed or if the deed was set aside. That being the case, it was submitted by counsel for the bank that, if the Williams' case of misleading or deceptive conduct under s52 of the Trade Practices Act were made out, the Williams had suffered loss or damage because of their having undertaken the absolute and unqualified obligations to pay the two sums and also to pay interest in the meantime. Their action was barred by the two statutory provisions because their cross-claim was not instituted until 5 June 1997, well over three years after the accrual of their causes of action. 144 Furthermore, so counsel submitted, if it were relevant, the Williams had become aware of the fact that the conduct engaged in by the bank either through Mr Jones or otherwise was misleading or deceptive when Mr Williams had his conversation with Mr Neale within a month or so of the mediation taking place. 145 Counsel for the Williams drew our attention to the well known passage in the joint judgment of Mason CJ and Dawson, Gaudron and McHugh JJ in Wardley where their Honours said (at 533): "We should, however, state in the plainest of terms that we regard it as undesirable that limitation questions of the kind under consideration should be decided in interlocutory proceedings in advance of the hearing of the action, except in the clearest of cases. Generally speaking, in such proceedings, insufficient is known of the damage sustained by the plaintiff and the circumstances in which it was sustained to justify a confident answer to the question."

Their Honours referred to Magman International Limited v Westpac Banking Corporation (1991) 32 FCR 1 with which they agreed. They said (at 534) that the case illustrated the problems which could arise, particularly in a case involving foreign loans. 146 What the judges of the High Court said in Wardley was applied by Von Doussa J in Chapman v Luminis Pty Ltd (1998) 86 FCR 513. The application dealt with by Von Doussa J was an application for leave to add a party to an application. In relation to a submission based on limitation provisions including those in s82 and s87 of the Trade Practices Act, his Honour, after referring to the passage quoted from the judgment in Wardley, said (at 523): "In my opinion that observation applies in this case. It would be inappropriate to refuse the joinder of Binalong, or if joined, to order that the proceedings against Binalong in respect of the causes of action alleged under the TP Act be struck out, at an interlocutory stage, on the basis that the claims are statute barred. Until evidence is received about the nature of the losses, it is not possible to reach a confident conclusion as to when the relevant causes of action accrued. 147 The caution expressed in Wardley needs to be heeded, but this is not an interlocutory proceeding. It is a full appeal brought after the trial of the action. On the other hand, the trial has miscarried. None of the findings of fact on matters that were contentious can stand. That may make it difficult to deal with the limitation point in advance of any new trial which, subject to the outcome of the affirmation point, must take place at least on the issue of fraud. 148 Counsel for the Williams sought to overcome the problems which confronted him by emphasising that the amount of $475,000 represented a reduction in the amount originally owed to the bank. He said the Williams' entry into the deed brought about by the misrepresentation on which they relied would only have occasioned loss to them if their case in the 1990 proceedings would be worth more than the amount they would have to pay if the settlement stood. What we have understood counsel to be submitting is that the setting aside of the deed and the judgment entered pursuant to its terms may result in the Williams being placed in a more favourable position than they would have been had the settlement not taken place or a less favourable position. In that sense, it was contended that there was a contingency and the case was not distinguishable from Wardley. 149 We confess to having had difficulty in understanding this submission. We are not certain that we have put it as clearly as counsel would wish. What is clear is that the Williams' case depends on their establishing that misleading or deceptive conduct on the part of the bank led the Williams to enter into the deed which the Williams now regard as disadvantageous to them. The deed crystallised the Williams' liability at $475,000 together with the additional $115,000 which was advanced to enable the Elders' indebtedness to be paid out. It obliged them to make periodical payments of interest. It is clear that the Williams were better off under the settlement than they would have been had it not been achieved and their 1990 proceedings had been lost. But their claim in the present proceedings is that the deed still left them worse off than they would have been had they realised before they executed the deed that Mr Neale would have given evidence favourable to their case if it had proceeded . They firmly believe that they would have been liable for no more than $266,000 instead of the $475,000 which the deed obliged them to pay. This has been earlier discussed. What they really seek from this case is a further reduction in the indebtedness to $266,000. This could be achieved by an order for damages or an order setting aside the deed and the trial of the 1990 proceedings which they would expect to result in a more advantageous outcome than the settlement achieved in November 1992. 150 However one looks at the matter, one gets back to an action under s82 and s87 of the Trade Practices Act in which the Williams complained of having been deceived by the misleading or deceptive conduct of the bank or of those for whom it is responsible. As counsel for the bank has submitted, on 26 November 1992, the Williams became unconditionally bound to pay the sums for which the deed provided in November 1995. That being the position, there is much to be said for the proposition that the claims are barred. Particularly is that so in the case of the cause of action based on s87. That is because of the words "is likely to suffer loss or damage". But it is difficult to conclude that, in the circumstances of this case, the position under s82 of the Act would be any different. 151 We think that the question whether the Court should decide the matter now or leave it for the decision of the judge who presides over any new trial is not without difficulty. The submissions relied upon by counsel for the bank are compelling. But there is an aspect of the matter, not relied upon in argument, which persuades us that the safer course is to leave the matter to the new trial to be decided on all the evidence which is then led and upon the relevant findings of fact made by the trial judge. Our concern stems from the lack of any acceptable finding of what it was that Mr Neale said to Mr Williams when they spoke a few weeks after the mediation. As mentioned, their evidence of what they say was said during their conversation in February 1985 is clear and consistent. But an examination of the evidence of what was said by Mr Neale to Mr Williams in December 1992 reveals that the evidence is quite vague. The detail of it has been earlier referred to and will be referred to again when we deal with affirmation. We do not go over it again. It is possible that the Williams could escape the consequences of the limitation provisions because, although Mr Neale told Mr Williams that he had disowned the statement which Mr Jones had prepared, what Mr Neale said did not sufficiently inform Mr Williams of matters which would have made it clear to him that the proffering of the statement by the bank shortly before the mediation was conduct which was misleading or deceptive. If that be the case, the position may be governed by what Gleeson CJ said in Troulis, namely that Wardley and Karedis provide strong support for an argument that the cause of action sued upon in Troulis did not accrue until it was reasonably ascertainable by the applicant that the representations relied upon by him by false. In saying what we have, we emphasise that it may be that the words used by the Chief Justice have been taken out of context. That is possible in the light of the different circumstances with which the High Court and the Federal Court were concerned in Wardley and Karedis and in Troulis itself. 152 In these circumstances, we think the preferable course is not to deal with the limitation point but to leave it to be dealt with at any new trial. We are mindful that such an outcome may raise expectations on the Williams' part which will not eventually be realised. They ought not to be sanguine about their prospects of success on the point. But in the light of the unsatisfactory trial of the matter, they are entitled to have the point decided on the evidence led in a fresh hearing.

Affirmation 153 In brief the bank's submission in relation to this matter is that the Williams, although they were aware soon after the deed of 26 November 1992 was entered into, that Mr Neale had disowned his unsigned statement, by their conduct thereafter affirmed the contract. In other words, so the submission said, although the Williams had grounds for rescinding the contract as early as the end of 1992, they kept it on foot. The bank acted to its detriment when it advanced the further sum of $115,000 to enable the indebtedness to Elders to be discharged and the Williams ought not be allowed to resile from their election to keep the contract on foot. 154 It is necessary to refer to some evidence which bears on the matter. In the first of his statements made on 24 October 1997 Mr Williams said that he did not speak to Mr Neale about his statement until some time after the settlement with the bank. He rang him a few days before Christmas in 1992 and asked him why he had not given "a truthful statement" at the mediation. Mr Williams said that Mr Neale replied, "That was not my statement. It does not have my signature on it. I received that statement from the bank's solicitors who had prepared it and I was asked to sign it. I refused." Mr Williams said that he was very unhappy but believed that, as he had signed the deed of settlement it could not be overturned. In his affidavit sworn on 6 March 1997, Mr Neale confirmed the general purport of Mr Williams' evidence. He said that either in December 1992 or January 1993 but possibly before Christmas 1992, Mr Williams telephoned him and asked him why he had given the statement he gave. He said that the statement had not been signed and that as a consequence it was not his statement. Mr Williams told him that he had been very disappointed with Mr Neale's statement. Mr Neale said to him that he had been down to see Mr Jones in Sydney. He had spent many hours with him in which he had told him the full story. He added, "He then sent me this very brief statement and I told him that I was not prepared to sign it". 155 In his second statement made on 3 November 1997, Mr Williams said that early in 1993 he spoke to his solicitor, Mr Manuel. He said words to the effect that Mr Neale had told him that he had refused to sign the statement the bank had sent him. He added, "The bank still put it forward in the mediation as his statement. I am very angry about it." Mr Manuel replied, "It's all over now anyway. The matter has been settled." Mr Williams said that he did not take the matter further with Mr Manuel or any other legal adviser until 1996. He had a conversation with a Mr Fisher of an organisation known as the Foreign Currency Borrowers' Association who suggested that, if what he said was right, he would have the right to take the bank to court for fraud. 156 Afterwards Mr Williams picked up a copy of the deed from Mr Manuel. He asked him if he could have the deed of settlement set aside if he could prove fraud. Mr Manuel said that if he could prove it he "probably" could. 157 In 1996 there was a mediation under the Farm Debt Mediation Act 1994. It was unsuccessful. Mr Williams' then solicitor raised the allegation of fraud in relation to the unsigned statement attributed to Mr Neale. This was done in the presence of the bank. A week or two later Mr Williams had a conference with a barrister who was instructed by a new solicitor the Williams had retained. He said that this was the first occasion on which he had received detailed legal advice about the matter. 158 In the course of his oral evidence Mr Neale was asked about a handwritten statement in which he had set out his version of events. The document covers four pages and is one of the documents in the bundle of documents prepared for his Honour's use at the trial. The statement was dated 25 August 1996. The contents of the statement were confirmed by Mr Neale to be correct. He described how the document came into existence. He said he had had a telephone call from Mr Williams. Mr Williams again asked him why he had not signed the statement used in the mediation in November 1992. Mr Neale said that the statement was not a true and correct "detail" of the discussion he had had with Mr Jones and that there was a lot of information that had been discussed or spoken about that was not in the statement. Mr Williams asked whether he was in a position to expand a "little" on the contents of the statement. As a consequence the document of 25 August 1996 was written and sent to Mr Williams. 159 We do not refer to the detail of the document but it is generally consistent with Mr Neale's evidence given at the trial. 160 In his statement, Mr Manuel said that he had no recollection of any specific discussion with Mr Williams or any other member of the Williams family about Mr Neale's refusal to sign the statement put forward as his statement by the bank in the mediation. He said, however, that he had become aware at some stage that Mr Neale had refused to sign the statement. He assumed that Mr Williams told him this. He did not recall when this was but said that it might have been earlier than 1996. He was not sure. He said that he had never been instructed by Mr Williams to advise about the legal consequences of Mr Neale's refusal to sign the statement and he did not give Mr Williams or any other member of the family any legal advice about that matter. Mr Williams' evidence was that the first time he thought that he might have a right to challenge the deed was in 1996, not 1993. 161 None of the evidence referred to is the subject of findings except insofar as there is an indication in his Honour's reasons that he regarded both Mr Williams and Mr Neale as unreliable witnesses. In the light of the factual errors appearing in the judgment his Honour's findings in this regard cannot stand. That makes it very difficult for this Court to decide on this appeal whether Mr Williams did or did not affirm the deed. 162 Nevertheless, because some reference was made by counsel to authorities, we propose to say something about them. The principal authority relied upon by counsel for the bank was the decision of the High Court in Sargent v ASL Developments Limited (1974) 131 CLR 634. The Bench consisted of McTiernan ACJ and Stephen and Mason JJ. McTiernan ACJ substantially agreed in the reasons given by Stephen J. Stephen J and Mason J reached the same conclusion but there is some difference in the relevant detail of what they said. Stephen J said (at 642) that, for the doctrine of election to operate, there must be both an element of knowledge on the part of the elector and words or conduct sufficient to amount to the making of an election as between the two inconsistent rights which the elector possesses. He added that the nature of the knowledge which an elector must possess was a matter upon which the authorities were "somewhat" at variance. But he said that an elector must at least know of the facts which give rise to the legal rights as between which an election must be made. Without that knowledge the doctrine would not be available to make irrevocable the elector's choice of one particular right. He said that the extent of knowledge of relevant facts necessary for the doctrine to apply had been described as "full knowledge of the material facts". He referred to Bennett v L. & W. Whitehead Limited [1926] 2 KB 380 at 410 and to Elder's Trustee & Executor Co Limited v Commonwealth Homes & Investment Co Limited (1941) 65 CLR 603 where (at 617) it was said that there had to be a knowledge of circumstances such as would provide information from which the decisive fact giving rise to the legal right was a clear, if not, unnecessary influence. Later his Honour said (at 643-4): "In this Court, in the Elder's Trustee Case (supra), their Honours dealt with this question in some detail and after referring to the judgment of Jordan C.J. in O'Connor v S.P. Bray Ltd (1938) 36 SR (NSW) 248 and to Mr J. S. Ewart's book on the subject, both of which sources deny the need for more than knowledge of the facts giving rise to the legal right, expressed a clear preference for this view in those cases in which the conduct of the elector is unequivocal, as where, despite knowledge of a breach going to the root of the contract, he exercises rights by virtue of the contract which rights would not exist unless that contract remained in force. Only where the conduct is not so unequivocal, amounting to no more than some evidence of election to affirm, will knowledge of the right of election be relevant and then only because, viewed in its light, his conduct may, as a matter of 'natural inference' , be regarded as constituting an affirmation of the contract." 163 The reference to Mr JS Ewart's book is a reference to a book written by the late Mr Ewart entitled Waiver Distributed among the Departments Election, Estoppel, Contract, Release. His Honour then referred to the decision of the Full Court of the Supreme Court of Victoria in Coastal Estates Pty Limited v Melevende [1965] VR 433, a case discussed in argument in the present matter. We do not propose to refer to the detail of it. 164 After his reference to Coastal Estates, his Honour continued (at 644): "The present appeals are concerned with the vendors' choice between rescission of the contracts under cl16 and affirmation of the contract. The right of rescission here in issue is, therefore, quite different from that under consideration in the Coastal Estates Case (at 433), a distinction made by Herring CJ who refers to the view of Mr Ewart concerning an express right of rescission conferred by the contract and concludes that in such a case 'the parties to a contract are to be deemed aware of the elections that the terms of their contract give them or at any rate are to be precluded from denying knowledge of them' (at 435).

Not only is this distinction, with respect, well founded, but it provides a measure of reconciliation of conflicting authority as well as resolving the matter so far as concerns the present appeals. Where election is in question between contracting parties and, as in those appeals, the contract itself confers the inconsistent rights there can be no question whether a party had knowledge of his choice of rights. He is deemed to know the terms of his own contract and the rights it confers, at all events he cannot take advantage of his own ignorance." 165 His Honour then emphasised that the case with which he was dealing was a case involving a choice between contractually conferred rights. He was not concerned with other instances of election where such a choice was not in question. In a case such as he had all that was necessary was the establishment of knowledge by the vendors of the facts giving rise to inconsistent legal rights. The appellants were to be taken to know of their right of rescission conferred by clause 16 and, of course, of their right to enforce the contracts according to their terms (see at 645). 166 This is not a case where there is a contractual right to rescind. The right to rescind will only arise if the Williams make out their case in fraud. It follows that what Stephen J said about knowledge has no application to the present case. 167 Mason J said (at 656) that the central problem lay in determining, what in the eye of the law, were the elements essential to the making of a binding election. In particular was knowledge of the existence of the alternative right a prerequisite in the party against whom election was alleged? He said that the question was complicated because in some instances election might take place as a matter of conscious choice with knowledge of the existence of the alternative right and in other cases it might occur when the law attributed the character of an election to the conduct of a party. After discussion of a number of authorities Mason J said (at 658): "If a party to a contract, aware of a breach going to the root of the contract, or of other circumstances entitling him to terminate the contract, though unaware of the existence of the right to terminate the contract, exercises rights under the contract, he must be held to have made a binding election to affirm. Such conduct is justifiable only on the footing that an election has been made to affirm the contract; the conduct is adverse to the other party and may therefore be considered unequivocal in its effect. The justification for imputing to the affirming party a binding election in these circumstances, though he be unaware of his alternative right, is that, having a knowledge of the facts sufficient to alert him to the possibility of the existence of his alternative right, he has acted adversely to the other party and that, by so doing, he has induced the other party to believe that performance of the contract is insisted upon. It is with these considerations in mind that the law attributes to the party the making of a choice, though he be ignorant of his alternative right. For reasons stated earlier the affirming party cannot be permitted to change his position once he has elected." 168 Mason J added (at 658): "Whether any distinction should be drawn between this class of case and fraudulent misrepresentation, as Herring CJ (in Coastal Estates) suggested, need not be determined. However, it should be kept firmly in mind that the doctrine of election is of general application and that no good purpose is to be served by drawing distinctions in its various applications unless considerations of justice make it necessary or expedient so to do." 169 To the extent that there is a difference in the reasoning of the two judges it lies in the question whether there is the distinction which Stephen J thought existed or whether it is immaterial whether the right to rescind arises from contract or otherwise. As counsel for the Williams pointed out, it was with Stephen J's judgment that McTiernan ACJ agreed. To the extent that there is a question of what the case decides, it is appropriate for this Court to follow the approach of Stephen J. 170 The High Court came back to deal with this matter in Immer (No.145) Pty Limited v The Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26. In their joint judgment Deane, Toohey, Gaudron and McHugh JJ emphasised the fact that the case with which they were concerned involved a right which was a continuing one. They held that the abandonment of the right to rescind was more readily inferred where the choice arose once and for all than in cases where the right was continuing. Their Honours said (at 41-42): "If a party to a contract, faced with the choice of terminating the contract or keeping it on foot, terminates the contract that party will ordinarily have acted in a way that leaves no doubt as to the choice made. And that choice will be clearly inconsistent with the exercise of the right to keep the contract on foot because the contract no longer exists. But where, as here, the situation is the converse the question is not answered so readily. Immer was proceeding on the footing that the Council had approved the transfer of air space rights and that completion of the transfer was possible. Mr. Dixon-Smith wrote the letter of 26 June 1989 in that belief. But it was not the case. Not only was it not the case but Mrs. Dale would have been aware at the time she received the letter that it was not the case and that restoration and refurbishment of Pilgrim House was still a condition of that approval being obtained. As Spencer Bower and Turner point out in the passage quoted earlier (at 41), at the heart of the election is the idea of confrontation which in turn produces the necessity of making a choice. But in a case such as the present case, the choice is not merely one of affirming the agreement; it involves as well the abandonment of the right to rescind. Abandonment is more readily inferred in some circumstances, for instance, where the choice arises once and for all. Here, by reason of cl.7 of the deed, Immer was entitled at any time after 1 April 1989 to rescind the deed. There is of course a danger of circularity here because the Uniting Church says: 'Yes, so long as Immer did not elect not to rescind.' The point is that where the right to rescind is a continuing one, it is not so readily concluded that the party entitled to rescind has abandoned that right completely as opposed to taking no action to exercise the right at the time in question." 171 The judges referred to what Mason J had said in Sargent's case (at 646) to the effect that the question was complicated because in some instances election might take place as a matter of conscious choice with knowledge of the existence of the alternative right and in other cases it might occur when the law attributed the character of an election to the conduct of a party. Their Honours commented (at 42-3): "But, in drawing this distinction, Mason J. was focusing on the dichotomy between awareness of the right to rescind and awareness of the facts giving rise to the right. We do not read the passage from his Honour's judgment as implying that a party to a contract who is aware of the right to rescind or of facts giving rise to a right to rescind will necessarily be held to have elected to affirm a contract if he or she acts on the basis that the contract remains on foot. Such an implication is at odds with the notion of being confronted with the necessity of making a choice. In the present case it cannot truly be said that Immer was confronted with the necessity of making a choice at the time the letter in question was written, even less than it was abandoning for all time its rights under cl.7 of the deed." 172 This case is not in the same category as Immer but, in our opinion, it involves some of the same considerations. The question of what, in the present circumstances, will amount to an election or affirmation of the contract is not capable of a precise answer unless the facts have been plainly found. Here they have not. Accordingly, we do not think it appropriate for this Court to express a view about the matter of affirmation relied upon by the bank. Instead it will need to be dealt with on any retrial of the action after relevant findings of fact have been made.

Conclusions 173 We have now dealt with each of the submissions made by the parties. Our conclusion is that the appeal should be allowed and that there should be a new trial of the proceedings. We do not mention affirmation or the limitation issue under the Trade Practices Act specifically but the intention is that all issues relevant to the determination whether the Williams should succeed in fraud or under the Trade Practices Act are to be determined on the new trial. The orders we make are as follows:

(2) The respondent pay the appellant's costs of the appeal.

(3) The judgment of Bainton J dated 20 May 1998 be set aside.

(4) There be a new trial of the action and the cross-claim.

(5) The costs of the first trial be in the discretion of the judge who disposes of the second trial. 174 We conclude what we have to say in this matter by referring to the substantial measure of success which the Williams have had. It should be understood, however, that the result which they have achieved is a new trial. The trial, if it takes place, will be on the same issues as were decided in the first trial which miscarried. Nothing that we have said in any part of the judgment is intended to indicate to the Williams or the bank that, in our opinion, they have, or have not, a substantial likelihood of success in the new trial. It will all depend on the view taken of the evidence by the trial judge and on the outcome of the various points of law which have been discussed when considered in the light of the factual findings that will be made. Moreover, if the Williams succeed in having the deed and the judgment set aside, they will be back to the position in which they were before the mediation took place. In other words, the 1990 proceedings will be revived and their rights and obligations will depend upon the outcome of those proceedings which, in default of there being a further successful mediation, will have to be heard. If the remedy they succeed in obtaining is damages, there will not be the need to hear the 1990 proceedings, but, in that event, the remarks made earlier in this judgment about the advantage of the settlement achieved at the mediation, notwithstanding the problems concerning Mr Neale's statement, apply. In many respects, the settlement, looked at objectively and without the overtones of the problems that arose as a consequence of the way Mr Neale's statement was dealt with and the miscarriage of the first trial, may have been thought to have been a satisfactory outcome for both parties. We make these remarks in the hope that both parties may bring to bear on the matter objective consideration with a view to reaching a compromise which may save both continuing delay and uncertainty and much expense.

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.

Trade Practices Act 1974(Cth)

New South Wales Court of Appeal CITATION : Williams & Ors v Commonwealth Bank of Australia [1999] NSWCA 345 FILE NUMBER(S) : CA 40401/98 HEARING DATE(S) : 18-19 February 1999 JUDGMENT DATE : 27 September 1999

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