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Aldous’ statement has all the hallmarks of a contrivance, and is
essentially without substance. John Salmon, Brisbane-based retired NAB
branch manager and longtime banking malpractice consultant, has examined
the available Walter v National Australia Bank litigation documentation.
Salmon is thoroughly conversant with the shadow ledger phenomenon. It is
his contention that the Aldous Certificate has been designed to confuse
the court. Aldous’ ‘computer’ (a word mentioned 8 times) is not that of
the bank’s mainframe computer which processes all ‘for value’ transactions
for the bank’s customers and for the bank itself. Any amount can be
plucked out of thin air, as indeed it was, and typed into Aldous’ computer
for printing.
The legerdemain of the Legal Services Manager may have been superfluous.
The learned judge has declined to insist on the convention that Aldous
must swear that he has checked the contents and found them to be correct.
Dodds-Streeton J was content to allow the bank full discretion in its
paperwork (National Australia Bank v Walter, 2004: par.264):
I
am satisfied that the differences between the monthly statements and the
bad debt memorandum account cards are explicable by legitimate internal
recordkeeping and accounting requirements of the NAB. The differences
identified by the Walters do not constitute evidence of absence of
consideration, inaccuracy, deception or other illegality or impropriety.
There is no basis for the allegation that the NAB was "deliberately
misleading to conceal a willful (sic) deceit of
13
Bank discovered document labeled D35, dated 12 June 2003.
the real transactions to the detriment of the Walter Family and their
associated Trust or Company".
Fiduciary duty and the allegiance of the receiver
The Walters claimed breach of fiduciary duty by the NAB with respect to
the sale of the property. Judge Dodds-Streeton devoted over six pages of
judgment transcript to outlining why the Walters had no case. Part of the
judgment depended on Dodds-Streeton denying that the sale was under value
(based on her claims of Sutherland as an ‘insolvency expert’, a properly-organised
auction sale, and the purchaser declaring that ‘the price he paid was
higher than he anticipated’).
On
the issue of general duty of care to the borrower by bank and/or receiver,
Her Honour proceeded on a less than coherent discourse through relevant
law and precedent, disclosing ultimately that law and precedent left us
only with ambivalence as to what was legitimate practice on the part of
the bank and the receiver (pars.277ff.).
Ambivalent law and precedent placed aside, Her Honour (accompanied by the
presumption that the sale was not under value) proceeded to deliberate
over to whom the receiver was responsible in his actions. The fact is that
the bank conventionally appoints the receiver and that the receiver acts
according to the bank’s instructions. The law says otherwise. The law says
that the receiver is an agent of the mortgagor (the borrower). This
connection was said to be entrenched following Muirhead v the Commonwealth
Bank (1996). Here the divergence of law and practice has led to the law
being conveniently interpreted to further the power of the powerful. The
receiver is legally beholden to the borrower; if the borrower found fault
with the receiver the borrower should then litigate against the receiver.
Nothing the receiver did, therefore, could reverberate on the bank even
though the receiver acted on the bank’s instructions.
Further, the fact that the bank (the mortgagee) might have appointed and
instructed the receiver did not change this principal-agent relation,
because the bank itself is held to be an agent for the mortgagor.
According to McPherson J in the failed Muirhead appeal against the adverse
Trial court judgment (1996: no pagination):
… [the mortgagee] who in exercising the power is expressed by the bill
of mortgage to be acting as agent for the mortgagor.
So
delighted has been the NAB by this artful line of judicial reasoning that
the NAB has incorporated the strictures in the wording of its facilities.
The debenture of the Walters’ operating company, Palatinat, provides:
Every Receiver appointed under or by virtue of this Deed is deemed at
all times and for all purposes to be the agent of the Mortgagor and the
Mortgagor is solely responsible for the Receiver's acts and defaults …
and the exercise of any right, power of remedy by the Receiver do not
render, or deem the Bank liable, as a mortgagee in possession.
A
similar clause attaches to the mortgage that the bank possessed on the
Walter property. Her Honour dutifully reminded the court of the substance
of these clauses in the Walter facilities (par.86ff.).
This attribution of agency for the receiver to the Mortgagor constitutes
an extraordinary sleight of hand, reproduced
ad nauseam
by
the cream of our judiciary. It is pertinent to quote Justice Spender in
the Queensland Federal Court of Appeal, who confronts the
conundrum in NAB v Freeman (2002).
Spender first highlights the curiosity that the bank is held to be the
agent of the borrower by virtue of the borrower having signed a mortgage
deed. Notes Spender, this argument depends on ‘the somewhat artificial
meaning of agreement when a mortgagor is presented by a mortgagee with a
mortgage to sign’ (par.20). Quite. But Spender has borrowed the language
of Thomas J from the Trial court Muirhead hearing (Commonwealth Bank of
Australia v Muirhead, 1995: no pagination):
The bank is entitled to take advantage of the somewhat artificial, but
well known legal consequence that a receiver pursuant to instruments
such as those signed in this case must be treated as the agent of the
defendants.
Thomas drew on a 1943 judgment, so his ‘well-known legal consequence’ was
no understatement. The ‘somewhat artificial’ arrangement has been
paradoxically entrenched as its opposite. Spender nudges a long locked
door ajar (2002: par.21):
The unreality of that situation in fact is a matter which has troubled
me on a number of occasions, but the authorities to which I will refer
make it plain that I ought to accept that the contractual term is
effective, so that the receiver appointed by the mortgagee, exercising
the power expressed in the bill of mortgage, is acting as agent for the
mortgagor. Notwithstanding what might be thought the unreality of the
situation, the legal position is that, if there was negligence in the
conduct of the sale, Mr Freeman would have an action against the
receiver. Almost certainly, the receiver will have received an indemnity
from the bank, but the legal characterisation of his rights in respect
of any claimed sale at an undervalue is legally a claim against the
receiver and not against the bank.
This paragraph is of extraordinary significance in the matter of
receivership authority, and it is powerfully instructive on the dexterity
of the legal mind. Spender J acknowledges the artificiality, the
‘unreality of the situation’ entrenched in the law, and that this
situation ‘has troubled me’, but he proceeds to replicate that legally
entrenched unsatisfactory interpretation of the law and to find against
Freeman.
There is a small potential ‘out’ for the borrower, and that rests on
whether the mortgagee has ‘interfered’ with the receiver’s actions.
Dodds-Streeton finds no interference, so the Walters are lost from then
on. The fact that at all times the receiver has been an instrument of the
bank and that the mortgagor is a hapless captive in the process has been
neatly swept under the legalistic carpet.
Under the current arrangement, the bank indemnity bestowed on the receiver
allows the receiver complete discretion to engage in any activity
disadvantageous to the defaulted customer, benefiting the bank or receiver
or both.14
This structure for asset
14
It is not inconsequential that Walter, Muirhead and Freeman all alleged
sale under value, but all are equally denied consideration on the
indemnity of the receiver.
expropriation is a fool-proof system. The bank knows it, the receiver
knows it, and the judiciary facilitates what is essentially a racket.
Potential apprehended bias
Judge Dodds-Streeton disclosed belatedly in the hearing that she was the
beneficiary of 8,000 shares in the NAB. Her Honour prefaced the opening of
the court case with the acknowledgment of share ownership, but had to
correct the details on the second day, altering total share ownership from
3,000 to 8,000 shares. At the then price of $30 a share, that holding
would have been worth a not inconsiderable quarter of a million dollars.
Her Honour also informed the Walter family that she held a personal bank
customer relationship with the NAB. Her Honour declined to disqualify
herself, declaiming that ‘a fair-minded observer with knowledge of the
material facts would not reasonably apprehend that I might not bring an
impartial mind to the resolution of the questions to be decided in the
proceedings’ (par.199).15
Carmen Walter then took Dodds-Streeton herself to court in April 2004
claiming that she:16
… acted oppressively when interested by wilfully and perversely
exercising federal jurisdiction … in a matter in which she has a
personal interest by virtue of her substantial shareholding and
indebtedness to the National Australia Bank Ltd, which bank was party to
the matter before Her Honour. Her Honour refused to stand down dispite
(sic) objection.
The transcript of the hearing is a masterpiece of comedy (Walter v
Dodds-Streeton, 2004). The Defendant declined to appear. The magistrate
demonstrated incompetence regarding his brief. He asked to see a copy of
the Crimes Act to check section 34 1B under which Ms Walter had brought
charges (which refers to the administration of justice).
However, the hearing was henceforth taken over by a representative of the
Commonwealth Director of Public Prosecutions. The DPP’s factotum, a Mr.
Sharp, instructed the magistrate that the Act under which the DPP operates
allows the DPP to take over proceedings without needing to seek leave –
‘pursuant to Section 9 subsection 5 of the Commonwealth Director of Public
Prosecutions Act 1983’ (p.3). The DPP thence appropriated the proceedings
and closed the case. Mr Factotum also instructed the magistrate that ‘the
legislation does not require the Director to give reasons for taking over
and decline to further proceed with matters’ (p.8).
15
As a long-time member of NAB staff, John Salmon sighted in 1962-63 a
confidential memo from the Queensland State Manager to the Manager of
the NAB Brisbane branch. The memo noted that there had been a recent
appointment to the Supreme Court of Queensland bench. The State Manager
instructed the Brisbane manager to make discrete inquiries to the new
judge, offering him, as a potential favoured customer, ‘concessional
banking arrangements’. The prospect that this under the table corruption
was merely a past and occasional practice was disabused by the account
of a comparable practice to Salmon in 2005 by a solicitor for a
medium-sized Brisbane legal firm. The solicitor confessed to Salmon that
she was personally embarrassed at the extent of concessional
arrangements that the NAB was prepared to give to members of her firm.
It is not impossible that Dodds-Streeton J has been the beneficiary of
‘concessional banking arrangements’ from the NAB.
16
Charge and Summons, executed by Carmen Walter, 26 March 2004.
Ms
Walter noted that the letter that she received from the DPP claimed that
the case was being closed because of lack of evidence. Ms Walter points
out to the magistrate that the DPP has not yet been privy to any evidence,
so how would he know? The factotum then claimed that the jurisdiction at
issue is a State not a federal one and that the case must be stuck out on
that ground.
The Judge’s counsel demanded costs, demanded the eradication of the
hearing and material from the public record, and noted that (p.14):
… the defendants status is a Justice of the Supreme Court of Victoria
the allegations made are scandalous in as much as that they allege
serious impropriety in the course of her judicial duties.
Precisely the point. The Judge’s counsel has an
a
priori
presumption that a Supreme Court Justice is above human foibles. The
propriety of the 8,000 share ownership and personal banking relationship
with a party under the Judge’s jurisdiction, not to mention sloppy
reasoning through the Walter judgment, has disappeared from the ledger.
In
2005, the Walters sought a stay of proceedings in the Victorian Court of
Appeal against The Dodds-Streeton judgment, which was denied. In turn,
they sought leave of the High Court to intervene, which was denied in
March 2006 (Walter v National Australia Bank, 2006). Those steps mark the
completion of a long series of litigation of a self-representing litigant
against a major bank.
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