CBA v Clapham; Byron Bay Holdings v CBA [2015] NSWSC 1714

The bank financed the purchase of Macadamia farms secured over the farms, a beach property and personal guarantees by the husband and wife. The borrower was the trustee of a family trust. The borrower defaulted and receivers were appointed to the trust properties and sold. The beneficiaries of the trust were the husband and wife. The bank sued the husband and wife on their personal guarantees. The husband and wife cross-claimed for damages on the basis that the lender made false and misleading representations about the macadamia industry, engaged in unconscionable conduct and claimed unjustness under the Contracts Review Act and that the bank was negligent in its role as advisor. The trustee of the family trust brought similar claims against the bank.

The court found that the bank did not make representations as to being a long term financial adviser to the macadamia industry and did not conduct itself as a financial adviser to clients but only looked at the client’s financial plans for the purpose of assessing loan applications. Further the court accepted the bank officer’s denial that he said that two farms should be purchased or forecast the price of nuts beyond the current season and gave an assurance that prices would not fall below a 15% drop as a worst case scenario. The court found that the husband was well aware of the possibility that prices could fall. The court found that the bank’s statements about the industry were accurate and it was not misleading to fail to disclose the bank’s concerns as to whether the venture was a satisfactory risk, because each party was acting in its own interests. The court found no misleading conduct in contravention of section 12DA of the ASIC Act.

The court said:

At no stage did CBA agree to give any advice concerning the viability of the proposed purchase. Indeed, [the bank] expressly declined verbal requests to advise on cashflow statements, or provide views concerning future prices. Moreover, [the borrower] had access to his own sources of advice and informed [the bank] of their existence.

The court found no duty of care on the part of the bank as an advisor and held that the bank was not obliged to warn the borrower about macadamia nut prices, risks in macadamia nut farming or other risks involved in the transaction. The claim in negligence was dismissed.

The unconscionable conduct and Contracts Review Act claims were also dismissed. The court noted that the borrower was an experienced businessman and conducted extensive research into the macadamia industry and prepared his own financial analysis with the assistance of other consultants. The court said:

In these circumstances, it is difficult to see how any special disability could be said to exist, or that the CBA took advantage of any such disability, or otherwise acted in a predatory or exploitative manner.

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