Neale v Bank of Western Australia [2014] NSWSC 315

The bank sought possession and a monetary judgment for $31m. The borrower admitted the debt but claimed that the bank represented to him that it would ‘lend to him forever’ and that his financial problems were as a result of the bank withholding development funds it had promised.

The court was not satisfied that the bank said anything which the borrower could reasonably have understood as conveying that the bank ‘would lend forever’ or beyond expiry of his facility. The court found that the borrower did not establish that if the bank had advanced further funds, the borrower would have achieved development approval. The court said:

True it is that things did not go well, but the borrower has not established that anyone other than himself is to blame.

The court rejected the argument that by sending bank statements reflecting a roll over, the bank agreed or held out or that the borrower did or could reasonably have believed that the expiry date had been extended on the basis of the following:

  1. The bank offered by letter to extend the facility on certain conditions, which were not met;
  2. The borrower himself gave a signed acceptance conceding default and acknowledging the bank’s rights were reserved;
  3. Bank correspondence to the borrower made it clear that no extension had been granted;
  4. The internal extension was only approved for the purpose of considering the borrower’s formal applications for extension and to relieve the borrower of his obligation to pay default interest for the time being.

The court rejected that the loan was not repayable and found no misleading conduct on the part of bank.

The court found that the borrower did not establish that he was subject to, or the victim of, anything remotely approaching economic duress, with respect to his borrowing from bank or its terms. In no way did the Bank take advantage of him let alone by any unconscionable means.

The court also found no basis for the suggestion that the interest terms on default were not adequately disclosed or a penalty. The court noted that it is well established that an increase in interest rates which operates only from the date of default, will not be a penalty, but rather as compensation fixed and agreed upon for the lender being kept from his money. The court noted that even if the rates could be considered exorbitant (which was not established) this would not necessarily make them unconscionable.

The court found no breach of the Banking Code and said that the bank more than discharged its obligation to try and help the borrower. The bank took no enforcement action between expiry of the facility and its new facility offer letter. It was the borrower who did not comply with the conditions for the offer of an extension of the facility. Further, the bank refrained from charging interest at the overdue rate for a significant period.

The court found no unjustness in terms of the Contracts Review Act and said:

The borrower was, at the time, possessed of significant wealth. His commercial background and experience rendered him well able to reasonably protect his own interests, but in addition he had independent legal and other financial advice. The borrower well understood the nature, and indeed detail of the transaction. The transaction was in substance, a large commercial one, and the borrower was motivated by profit. There is no evidence to suggest that the commercial terms were in any way exceptional. No unfair pressure was applied to, or unfair tactics used against him.

The borrower sought to amend his claim to plead that the bank fraudulently procured low valuations of his mortgaged properties to put him in default and this formed part of the bank’s overall deliberate destruction strategy to seek the destruction of its subsidiary’s assets. The court refused leave to amend because the pleading was inadequate, objectionable, had no prospect of success, was made too late and the borrower lacked resources to pay the costs thrown away by an adjournment.

The court granted possession and a monetary judgment for the lender.

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