70.  Despite Mr  Quade 's single visit to head office in Sydney in October 1984,
the West Wyalong branch manager was the face of the bank to these appellants.
He was the person they trusted and looked to for direction and guidance.
People with the background, experiences and skills of the appellants
undoubtedly recognised the gap in knowledge and understanding of the relevant
subject matter between themselves and the bank. The fact that the bank
considered that an unhedged foreign currency loan was even feasible for them
would undoubtedly carry considerable weight. They would naturally put their
trust in its opinion on such a matter and the bank would undoubtedly be aware
of its influence on, and the vulnerabilities of, its clients in this area.
Their rural remoteness added to this reliance.

71.  Although minds can differ as to precisely how far the evidence here goes
in that direction, and the precise legal definition of such a relationship may
need further thought, in my opinion it was plainly insufficient for the bank
to have invited these appellants not to 'hesitate to ask questions' or to have
told them that they could hedge the loan whenever they wanted to. A bank which
has undertaken the task of advising an intending borrower on such matters is
under a duty to provide a prior full, honest and clear explanation of the
nature and effect of the transaction being negotiated: Cornish v Midland Bank
(1985) 3 ALL ER 513 at 520 and 521; Perry v Midland Bank (1987) FLR 237. The
standard of care increases with the seriousness of the risk if the duty is
breached: Northwest Utilities Ltd v London Guarantee and Accident Co Ltd
(1936) AC 108 at 186; Swinton v The China Mutual Steam Navigation Co Ltd
(1951) 83 CLR 553 at 556 and 567. In a completely different context, Kirby P
dissenting in Ellis v Wallsend District Hospital (1989) 17 NSWLR 553 said,
with evident correctness:
    The bigger the devastation of the possible risk, the
    greater is the obligation to lay it before the
    patient so that he or she can make an informed decision.

72.  Statements made and not made are to be viewed in the total context of the
negotiations: Pappas v Soulac Pty Ltd (1983) 50 ALR 231; Elders Trustees and
Executors Co Ltd v E.G. Reeves Pty Ltd (1987) 78 ALR 193 at 242; Foti and Ors
v Banque Nationale de Paris (1990) Australian Torts Reports 81-025 (p
67,835), a decision of a Full Court of the South Australian Supreme Court. In
the total context of the present case, the extent of the risk being undertaken
by the appellants when contracting this loan can hardly be overemphasised.

73.  In a lecture entitled "Developments in Foreign Currency Loan Litigation"
delivered to the Banking Law and Practice Conference in Melbourne on 24 May
1990, the respected Chief Judge of the Commercial Division of the Supreme
Court of New South Wales, Justice Andrew Rogers, drew a distinction between
the responsibilities of banks in transactions permeated by a risk element
where there is a fully informed client, and the conclusions which pertain when
"those who should be making the risk known to the customer and therefore
obtaining the customer's consent are insufficiently equipped to do so".

74.  His Honour summarised the factual setting that had arisen in many cases
as follows:
    1. The bank knew that such a borrowing was
    pregnant with the danger of large capital loss
    unless precautions were taken.
    2. The bank knew that its staff was ill-equipped
    to explain the risk to the borrower.
    3. The bank knew that its staff was ill-equipped
    to explain the nature of the available
    precautions to be taken.
    4. The bank was unwilling to accept the task of
    management even at a fee, and thereby undertake
    the task of implementing appropriate safety
    precautions as and when required.
    5. The customer was unaware of the extent of the
    possible risk and of the available precautions
    which could be taken and the techniques for
    implementing such precautions.
    6. The bank was aware of this lack of knowledge on
    the part of the customer.
    7. The customer relied on the fact that the bank
    gave no warning of any of the foregoing
    matters. By reason of the omission to warn of
    the extent of the risk the customer relied on
    the belief that any risk was limited or slight.

75.  Virtually all of these factual criteria apply in this case. As if
speaking on some of the problems which existed at the time the appellants'
loan was being negotiated and in contemplation, Justice Rogers sought a
definition of the bank's duty to advise in the light of this common set of
circumstances that existed in many of these loans at the time:
    First, the risk of depreciation of the Australian
    dollar against the foreign currency in which the
    liability of the borrower had to be repaid.
    Second, the inability and, therefore, unwillingness
    of the banks to manage customers' exposures to
    foreign currency fluctuations. That meant that
    customers were left to their own devices in meeting
    the admitted risk.
    Third, the bank's front-line staff up to and
    including branch managers were substantially
    innocent of any real knowledge of the difficulties
    attaching to foreign currency borrowings. Whilst
    charged by higher management with the task of
    promoting such loans they were not equipped to
    explain to borrowers either the risks attaching to
    such loans, or the measures that were available and
    required to contain the risk. Experience has shown
    that even when bank managers called in "experts"
    from regional offices the difficulties continued.
    Higher management was advised that true expertise
    was restricted to staff of the bank's International Branches.

76.  I agree with respect with his Honour that these matters are all
distinctly relevant to the definition and delineation of the general duty of
care. In my view, the respondent having undertaken to advise the appellants,
what was required in this case was:
    . for the appellants to be advised in plain language
    of the magnitude of the risks and consequences they faced
    . for the appellants to be informed what was needed to
    protect them from the risks and to remove or
    minimise the possible damage they might suffer,
    including a detailed explanation of how total or
    selective hedging works and how it may have such
    effects on the cost of the money being borrowed as
    to undermine the financial feasibility of the loan
    in the first place
    . for the bank to acquaint itself with all the
    personal and financial circumstances of the
    appellants relevant to their capacity to withstand
    or meet currency losses
    . for the bank to reveal its own commercial interest
    in the loan and its lack of real knowledge and
    experience in this area
    . for the bank to make clear what type of professional
    expertise was needed, at what times and intervals
    and on what subjects, and where it could be obtained
    . for the bank to advise the appellants that they were
    not really geared or suitable for a foreign currency
    loan, and should not contemplate it if they did not
    have access to and were unwilling to take and
    continue with the required outside advice
    . for the bank to satisfy itself that this advice was
    clearly understood before the loan was undertaken

77.  The 'G' documents lend support to the bank's understanding of what was
required, and the consequences for unsophisticated borrowers if certain
fundamental precautions were not taken. In other words, the risk not being
explained and the means of its minimisation by stated precautions not having
been identified, the 'G' documents permit a finding, not open at the trial
because the documents were not available then, that the appellants were put in
the completely deceived and false position of being effectively required to
accept the risk of loss. They may be used to show that the bank embarked on
and undertook a presentation which was manifestly incomplete, with the
consequence for the appellants that they entered the loan agreement under
false sense of security or direction. If, as the respondent suggests here,
there was no call for further explanation, it may be found that the incomplete
information proffered may well have been worse than no information at all. In
the absence of full and complete information and advice of this kind, the
conclusion is manifestly open that what was imparted significantly failed to
fulfil the obligation to advise which the respondent had willingly undertaken
and volunteered to perform.
4. Trade Practices Act

78.  As often occurs, there is considerable overlap between the question of
breach of section 52 and the question of negligence. Although, as I said
earlier, it was conceded that if the appellants fail on one, they will fail on
the other, it is useful to examine them separately. Was it misleading or
deceptive not to have undertaken the three objectives listed under the
previous heading of negligence?

79.  Of course intent and knowledge are unnecessary: Parkdale Custom Built
Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 per Gibbs C.J. at 197. But
with the 'G' documents accepted into evidence as they appear, this question
must be assessed in the context of the bank's policy to promote these loans,
their purpose for the bank of urgently improving its liquidity, its own lack
of the requisite knowledge and expertise, and the fact that it stood to make
considerable profits from their successful marketing. If the 'G' documents are
not successfully attacked or weakened, the bank's conduct will also fall to be
evaluated in the context of its patent and stark conflict of interest with the
appellants which was not even revealed let alone explained, and of the chasm
in knowledge between the bank and the appellants.

80.  The appellants did not even prepare their own loan application form,
which was done by a bank officer. This and other facts found by Morling J.
establish the bank's knowledge that the appellants were placing their trust in
its advice on the possibility of taking out such a loan. It seems clear that
the bank knew that the appellants were unlikely to have ready access to
sources other than itself for expert advice. No doubt because a floating
currency was so new to Australia, few independent people outside the banks
appear to have been readily available in Australia at the time for private
consultation who even had the level of knowledge or access to the facts
possessed by the bank. If there were such people, they are unlikely to have
lived in West Wyalong or conducted a home visiting service to rural areas, and
the capital city yellow pages may not readily have provided their names and
telephone numbers. In relation to these appellants, who else besides the bank
would know who and where these people were? If from their own efforts the
appellants had found a person who claimed to be able to advise, how would they
know that he/she possessed the necessary skills? What effect would the fees
payable to such a person and the costs of carrying out their advice have on
their loan costs and outgoings, and therefore its feasibility? It is quite
understandable that the appellants would simply choose to trust their own
banker, especially this respondent with its statutory accountability to the
Australian people: see Commonwealth Banks Act 1959 esp.ss. 9(2), 11(2), 32 and
121, and what they may well have viewed as its special even historical role in
the nation.

81.  In my opinion, the evidence at the trial, if supplemented by the
unsullied or unqualified 'G' documents, manifests a clear case of misleading
and deceptive conduct inducing the appellants to accept and enter the loan. It
does not seem to be disputed that their subsequent losses flowed from what
would then be a contravention of section 52.
Did Morling J. ask the right question?

82.  His Honour found that the appellants were aware of the risks and that
there was accordingly no breach by the respondent of section 52 or of the
common law duty of care. However, his Honour did not specifically find that
the appellants were informed of the true nature and extent of the risks and
then advised to manage the risk continuously with the benefit of qualified
expert outside assistance to ensure the best possible decisions throughout the
loan. This is where, with very great respect, I believe the trial was caused
to miscarry by the absence of the 'G' documents. They constitute these as the
true matters in issue and the questions to be addressed and answered. In my
view, there is only one answer provided for them by the evidence on appeal. It
is that if the 'G' documents are accepted as they appear on their face to be,
the respondent, having entered upon the task of giving advice to these
appellants, failed to ensure that the advice it gave was comprehensive,
adequate and accurate in the respects I have earlier outlined.
Conclusion

83.  I have read with care the views of Burchett J, and although in my view
there are grounds for concluding that the 'G' documents justify a finding that
the respondent's liability has been established, I have, like his Honour,
decided that a new trial is the appropriate result.

84.  In view of the conclusions reached on the other heads of claim, it is not
necessary to pass on any special effects wrought on these facts by the
Contracts Review Act 1980 (NSW). I agree with the orders proposed by Burchett
J. including those his Honour suggests as appropriate on the question of
costs.

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