7 The Dwyer Appeal: substance
From the trial judgement we move to the court of appeal,
presided over by Justices Sheller, Clarke and Handley (Dwyer v
Commonwealth Bank of Australia, 1995a; 1995b).
Counsel for Dwyer, R Dubler, argued that what took place at
the 1 August 1984 meeting, between bank officers Savell and Fuller and
borrower Dwyer and his solicitor Baird, was the crucial issue. Dubler was
claiming in tort both negligent mis-statement and negligent conduct in
failing to advise. Dubler claimed that Dwyer’s credibility had been tested
on other matters and His Honour had ruled against Dwyer’s credibility
in toto. Moreover, His Honour had made no judgment on the credibility
of bank officer representations. As Dubler
noted: ‘there is nothing in the judgement that indicates his Honour’s view
of the evidence of Mr Savell and Mr Fuller, bearing in mind their evidence
was one of [customary] practice’ (1995a: 29).
The only record of the 1 August meeting was the notes taken
by Baird, and Sackar devoted considerable time to persuade the bench that
the notes embodied conclusions different to Baird’s own recollections. The
bank officers’ testimony referred to customary practice, not to
recollections of the specific meeting, and even formal practice remains
hypothetical without supplementary confirmation.
The atmosphere was not assisted by the fact that, in
numerous interventions during the Appeal hearing, a judge would repeat the
inaccuracies written into the trial judgment. These were not corrected by
Dubler, and it was left to Dwyer, in a supplementary submission two weeks
later, to highlight the reproduction of the inaccuracies.
In the trial hearing, the Bank’s counsel had made much of
Dwyer’s earlier attempts to seek information on finance options, in the
course of which foreign currency loans were discussed. As a consequence,
it was argued that Dwyer ought to have been deeply familiar with their
character before he came into contact with the Commonwealth Bank.
His Honour found that Dwyer ‘down-played any knowledge he
received from other sources’. Dwyer’s claim, through Dubler, was that
‘[t]he thrust of his evidence was he received little advice of
significance from the other parties …’ (1995a: 24).
The appeal judges wanted to know why Dwyer was not more
assertive in questioning the bank officers. They were also inclined to
believe the trial judge’s assertion that, if Dwyer was not listening,
there could be no reliance for Dwyer’s subsequent behaviour on the
officers’ statements. Dubler’s counter-claim was that (1995a: 34):
“… if someone is receiving generalised warnings in the
terms that Mr Dwyer had heard before [namely, that there will be exchange
rate fluctuations, but their scale will be minor and insufficient to
offset the interest rate differential available from a foreign currency
loan] which is not remarkable nor fatal to the appellant’s case, that he
did not trouble himself to make great deal of note of
them. … had the warnings been given in clear terms inconsistent with the
beliefs of Messrs Dwyer and Baird at the meeting, would the appellant have
ignored them? We say that those findings of not paying attention or not
listening can only have bite and meaning if it can be clearly understood
what those warning (sic) were. … But it is the case of Mr Baird that what
was said was limited and that there was confirmation that negligible risk
was the likely result.”
Sackar’s counter-counter-claim is that Dwyer’s mind was
already made up – he was set on an offshore loan (1995a: 53). What might
or might not have been said at the Savell/Fuller meeting is ultimately
irrelevant because Dwyer was not listening. Said Sackar:
“The authority [the Court] does no more than simply advert
to the
possibility that there are such people in the community who will
wilfully and successfully pursue a particular course of conduct as
is best is best illustrated in Sutton v Thompson …”
Moreover, because Dwyer’s mind was made up, the bank does
not:
“… attract a duty to discuss in such as way as to permit of
an informed decision the pros and cons of offshore as opposed to
onshore generally in the circumstances here …”
Another contradiction arises in Sackar’s interpretation of
the 1 August meeting. A good deal of the trial hearing (and the fight over
Baird’s notes) involved the attempt by Sackar to claim that the Savell/Fuller
meeting provided Dwyer and Baird with an appropriate explanation of
attendant risks. This defence is accompanied by the strident claim that
the only function of the meeting was to outline the differences between
simulated and a direct offshore facility, although the meeting might have
gone beyond this point ‘… if [Savell] voluntarily assumed some
responsibility’.
The only consistent thread in Sackar’s various and less
than coherent defenses is that the Bank bears no responsibility for
subsequent events. The cognisance of, interpretation and lessons from the
graphs is another dimension of this circus. Sackar made much of Dwyer’s
seeming incapacity to learn from graphs presented at the meeting,
emphasising the lessons regarding potential exchange rate volatility. The
graphs are brought up again in
the appeal. The graphs at question were the ones typically shown to CBA
foreign currency borrowers, with the date span being 1980 to 1984. These
graphs were typically shown to present the case for relative stability of
the currencies (AUD, CHF, USD). The notion that these graphs presented
indubitable warnings regarding volatility is ludicrous. Witness an
exchange between minds versed in the law (1995a: 28):
“Dubler: But in particular some of these graphs do not go
back a great deal of time, but they tend to have …
Handley: … quite short term – there’s more than five per
cent on that page [his Honour makes one of many ill-informed
interventions, spontaneously joining the ‘volatility camp’]
Dubler: … that is corroborative of an averaging by the Luke
[read Looke] theory that there are fluctuations but within a band, and if
you wait long enough it will come back. … A lot of these cases will
revolve around graphs and it depends which currency you choose, which time
period and the like.
Our submission is, as is not uncommon, graphs can speak
many different things. It really needs the explanation to make it good,
that of all the currencies, for no matter what period you look at, have
essential instability in them and there can be no real trend. That is the
substance of any relevant advice.
The [Looke] theory was that there was a trend, particularly
for Swiss francs and Australian dollars of perceived instability, and it
went further, the perceived instability was something a borrower could
rely upon as being likely to continue. Something can be made of the graphs
one way or the other, and they were in cross-examination of Mr Dwyer,
along the lines your Honour has suggested, but the essential conflict is
that some of the graphs show different things and there was no clear
explanation of what a borrower should draw from the graphs. So we say it
is not correct to say, if it be the case that there was simply a
production of graphs at a meeting, that they necessarily meant the [Looke]
theory was being challenged.
The detached observer would have to conclude that counsel
has made a
salient point, drawn from rudimentary lessons in elementary statistics.
Yet Dwyer and his solicitor were damned by legal minds partly on the
strength of their ‘faulty’ understanding of these graphs. Moreover, here
is Sackar later in the Appeal hearing sticking to his last (p.57):
“… both of them were cross-examined on those graphs. Both
acknowledged they showed volatility … They are graphs Baird
conceded he saw …”
Lies, damned lies and statistics. It was not acknowledged
by Defence counsel nor by the bench that bank personnel and expert
economists were also having difficulty interpreting the graphs.
8 The tenor of the Appeal
There are notable features of the Appeal hearing that
elucidate the character of the judicial process. First, the appeal judges
carried on the trial judge’s neglect of bank documents as pertinent
evidence. Dubler’s reference to the adverse implications of several
discovered documents for the Bank’s credibility were ignored. In
particular, Dubler (1995a: 12) referred to a memo
dated 7 August 1984 (G46), a week after the Dwyer meeting (Long, 1984).
G46 comments on a 17 July memo (G44) on the expansion of foreign currency
loans (Edwards, 1984). The G46 memo highlights doubts raised by the
Chairman of the Bank’s Credit Committee ‘some weeks ago’ … “about the
desirability of lending to the smaller end of the market and in the
discussion which ensued it was agreed that care needs to be taken to
ensure that he inexperienced are not assisted or encouraged into a
situation they cannot handle. However my understanding of the discussion
is such that we were not instructed to hold back from F/C/Ls but merely to
lend judiciously.” (Text from the G documents are not included in the
Appeal transcript!)
The author of G46 claims that, in promulgating [an
expansionary F/C/L policy]
“… the following could be clearly conveyed:
F/C/Ls may be marketed to those clients … who would have
the capacity to manage their exposures or meet exchange losses which may
occur. F/C/Ls are not a facility for weaker clients. The terms on which
F/C/Ls may be offered. Specific comment on all aspects such a security,
margins etc is proposed. (The question of whether existing written
instructions are adequate will be reconsidered.) …”
This need for caution, expressed at senior level, was not
followed by loan officers; neither were the mooted conditions under which
the policy was to be effected. Yet this background proved to be of no
import to the presiding judges.
Second, there are myriad interventions by one or other of
the appeal judges, and joined by Sackar, making assertions on details of
foreign currencies that are inaccurate, diversionary or inconsequential.
The legal minds presume to display their informedness on a subject of
which they are ignorant. The interventions would be comic were it not for
the seriousness of the situation. Dubler had to remind them in summation
that ‘[the Dwyers] were putting on line their worldly assets on the notion
that the risk would be negligible’ (p.83). The judges were only risking
their reputation, but the absence of witnesses to such interventions
ensured that their Honours’ reputations would remain intact.
Third, Sackar’s defence continued to be manipulative and,
at times, liberal with the truth. Three examples are offered below. First,
Sackar returned to the matter of the origins of the CBA loan. Says Sackar
(1995a: 61):
“His Honour must have found that, that part of the evidence
was a complete invention. It is clear that Mr Gerathy arranged in some way
for Mr Dwyer to go and see Mr White [read Wyatt]. …
“So [Dwyer] said and swore on oath that prior to 20 July
the Commonwealth bank had told him via Mr Gerathy that the facility was in
place …
“That is his evidence. Is it any wonder his Honour rejected
that. In part Mr Gerathy was shown (a) not to have been at the bank at the
time, being retired some months earlier and (b) being overseas during the
time this conversation was said to have taken place and (c) the commercial
unreality of it.”
Geoff Dwyer and his mother were in the shop when Gerathy
called, and they have a common account of events. Gerathy differs on
timing and what was said. Regarding timing, Gerathy’s Statement has him
out of the country between May 4 and July 15, claiming Passport stamps as
evidence (it appears that the Passport was not presented to the Court).
Given that the Dwyers remember Gerathy coming into the shop after his
return from abroad, describing his experience in Alaska as memorable, the
trip does not loom as an insuperable obstacle to the Dwyer scenario.
Gerathy claims that he only offered (and subsequently carried out) to
arrange a meeting with Mr Robert Wyatt, Deputy Chief State Manager.
(Wyatt, in a brief Statement prepared for his employer’s defence on 4 June
1991, claims no memory of any process involving the Dwyer loan, though he
does acknowledge his signature or initials on Dwyer documentation.) Dwyer
and his mother claim that Gerathy told them that a loan had been arranged,
and that Westpac could be paid out. (As a reflection of her gratitude,
Gloria Dwyer gave Gerathy a Royal Worcestershire hand-painted fruit bowl,
valued at approximately $600. Such a gift is hardly compatible with a
transaction claimed by the Defence counsel to be merely one of the
transmission of information and the establishment of a contact.)
Says Sackar (p.62):
‘It may be his mother had given details of the amounts
outstanding in the letter she had shown Mr Gerathy. His Honour for good
reason refused to acknowledge that episode ever occurred and all that
occurred was that a contact was made and Mr Dwyer went and asked for a
loan’.
To repeat, the indisputable fact is that the loan process
was in train before the Bank had seen any paperwork. Dwyer’s solicitor
forwarded material on the 19 July, immediately prior to the 20 July
meeting, and the passage of that meeting is consistent with Dwyer’s view
as ‘a formality’. The loan was processed and approved within several days.
The process may reasonably be described as embodying a ‘commercial
unreality’. Sackar, through the power of language, hopes to turn fact into
fiction, a fiction supposedly residing only in the minds of the
plaintiffs. Their Honours were passive on this issue.
Second, Sackar also manipulates the situation regarding a
contemporaneous inquiry for a loan from Transcity. Sackar implies that the
inquiry was begun with Transcity after the exchange with Gerathy. This
presumed timing is then claimed to support the claim that the Dwyers knew
that no loan with the CBA had been arranged. One piece of manipulation
requires another. Yet the inquiry to Transcity through Baird was
contemporaneous. The CBA was informed at the 20 July meeting that Dwyer
was considering a Transcity loan. Transcity sent Baird an ‘indicative’
letter on 27 July (‘and now set out below the basis whereby Trans City
would be prepared to considered providing a multi-currency line of credit
…’). By the 27th, the paperwork had been processed at the CBA, and the
indicative letter was not pursued.
Sackar also claims that the Trans City inquiry proves that
Dwyer was hell bent on an offshore loan, which rendered void any
responsibility of the CBA to outline the associated risks. This issue is
pursued in the Conclusion.
Third, there is another incident of misrepresentation. John
Bamfield, an accountant hired by Dwyer after he had obtained the CBA loan,
produced a report on the relative merits of simulated loans versus foreign
currency loans. The three page January 1985 report is held by Sackar to
damn Baird (and Dwyer) because Baird presumably denies ever hearing the
word ‘loss’ used with respect to a foreign currency loan. According to
Sackar, the Bamfield report ‘talks about losses, exchange, gains and
losses’ (1995a: 56). Sackar returns to Bamfield again (p.71): ‘[Bamfield]
adverts to the fact that not only were [gains] possible but losses were
possible.’ However the report, natural product of an accountant’s
expertise, discusses the magic word ‘loss’ in an utterly pedestrian
manner. With respect to a foreign currency loan, Bamfield reports that
parity adjustments ‘will be necessary if the borrower is faced with an
exchange loss’ – familiar stuff. With respect to a simulated loan,
Bamfield offers an opinion on whether net exchange gains or losses, upon
repayment of the borrowing, would represent a return of capital or income.
There is nothing in the Bamfield report that conveys the impression that
Sackar hopes to convey to the bench. The report was offered to their
Honours, but did they read it? Sackar also claims that Baird’s supposed
dissembling on the Bamfield report was a critical element in his Honour,
in the trial judgment, declaring that Baird’s attachment to his prejudices
was ‘bordering on blind faith’ (p.72). Had
Acting Justice Staff read the short Bamfield report? Blindness is not a
trait monopolised by the borrowers, it seems.
Sackar rounds off his revisited demolition of the
credibility of Dwyer
and Baird with further abuse.
“That [Dwyer’s and Baird’s recollection of receipt of and
the
import of the graphs, as noted above] is but one piece of evidence
but not important (sic) because it does show the very indifference,
the very obdurate nature displayed by both people and which his
Honour clearly took into account. (p.57)
…
“This is a man [Dwyer] who was not prepared to make too many
concessions in the course of cross examination and almost at every
turn put his position at its most extreme. His Honours used the
word “fashioned”. That was clearly elegant to describe what this
witness was doing. It was quite appropriate to use a much more
perhaps inelegant and cruder description.” (p.63)
Sackar’s performance is met with rapturous applause by
Clarke J. (p.77):
“Mr Sackar, I think you have been able to put your case
orally with
great force and it is supplemented by very detailed notes. As far as
the Bench is concerned I do not think we need to hear you any
further. We understand precisely the point you make and I do not
think it would be advanced by any further argument.”
Given that Sackar had behind him the full resources of the
Commonwealth Bank, the availability of ‘very detailed notes’ is not
surprising. This pat on the back marks the end of the appeal and the end
of the Dwyers.
Clarke’s concluding words are (p.84):
‘The Court is indebted to counsel for very helpful
submission (sic) in what is, in the circumstances, a case with some
complexity and difficulty’.
This is a diplomatic phrase, but the previous interventions
belie the courtesies.
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