The Quade Appeal on Decision vs CBA

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Given that I'm not a lawyer, this case has a strange status. The Quades went before the full bench of the Federal Court to seek
leave to appeal against a single judge Federal Court judgment against the Quades and in favour of the Commonwealth Bank.

The full bench in this three person  judgment unanimously found that the Quades had cause (non-discovery of documents, but in general, an inadequate judgment) and found in favour of the Quades right to appeal the judgment before a full bench.

From my understanding the Bank caved in and settled after this judgment to give the Quade's the right to appeal.

About three months later, the Dwyer case was argued and the same counsel for Commonwealth Bank of Australia, Mr. Sarkan, bullied and blustered his way to flim flam the judge while neither Mr. Dwyer's counsel nor the Judge took notice of the Quade decision nor of the new documentation revealed belatedly in the discovery process that had similarly been left "undiscovered" in the Dwyer case.

The quality of the decision in the Dwyer case was noticeably substandard.

Re: THOMAS  QUADE ; MARY  QUADE ; SHAWN THOMAS  QUADE  and GERARD WILLIAM  QUADE  And: THE COMMONWEALTH BANK OF AUSTRALIA No. N G734 of 1989 FED No. 24

(1991) 13 ATPR 41-093  
99 ALR 567  
27 FCR 569

COURT
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Neaves(1), Burchett(2) and Einfeld(3) JJ.
HRNG
SYDNEY
#DATE 14:2:1991

  Counsel for the Appellants:    Mr M.L.D. Einfeld QC with
                                 Mr J. Chippindall

  Solicitors for the Appellants: Messrs Ferrier and Associates

  Counsel for the Respondent:    Mr J.R. Sackar QC with
                                 Mr J. Marshall

  Solicitor for the Respondent:  Mr L.E. Taylor

ORDER
  The Court receive the fresh evidence tendered on the hearing of the appeal.

  The appeal be allowed; the orders of the learned trial judge made 12 October
1989 be set aside; and a new trial of the action be granted.

  The respondent pay the appellants' costs of the trial, of the motion to 
receive fresh evidence, and of the appeal.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal
Court Rules.
JUDGE1
  The circumstances which gave rise to the claim by the appellants against the
respondent for damages for negligent mis-statements and for relief under s.52
of the Trade Practices Act 1974 (Cth) and under the Contracts Review Act 1980
(N.S.W.) are fully set out in the judgment of the learned primary judge and
are outlined in the judgment to be delivered by Burchett J. There is,
therefore, no necessity to repeat them in this judgment.

2.  I am satisfied that there was ample evidence before the primary judge
justifying the conclusions of fact at which he arrived. No basis has been
established upon which this Court would be justified in interfering with those
findings. Nor has it been demonstrated that his Honour fell into any error of
law in concluding that the claim should be dismissed.

3.  The appellants, however, also seek a new trial based on additional
documentary material which was not produced by the respondent on discovery but
was made available to the appellants after the matter had been heard and
determined by the primary judge. I have had the advantage of reading and
considering what has been written by Burchett J. on this aspect of the matter.
I am persuaded, though not without considerable hesitation, that the
additional material is such as to warrant the granting of a new trial. I,
therefore, agree in the orders proposed by Burchett J.

JUDGE2
  This is an appeal at the hearing of which the appellants also moved the
court to receive further evidence pursuant to s.27 of the Federal Court of
Australia Act 1976 and Order 52 r.36 of the Rules. It is convenient to
commence these reasons by outlining the nature of the case, and then to look
at the question of fresh evidence. The appellants, by their action, sought
damages for negligent mis-statements, and sought also relief under s. 52 of
the Trade Practices Act 1974 and under the Contracts Review Act 1980 (NSW).
These claims arose out of a foreign currency borrowing, drawn down on 6
February 1985, of the equivalent in Swiss francs of $600,000. The loan was
negotiated during the latter half of 1984; offered by the bank and accepted by
the appellants at the end of October 1984; and made the subject of a formal
agreement of loan executed on 15 January 1985. Because of the virtual collapse
of the Australian currency against the Swiss franc between February 1985 and
February 1988, when the loan was brought back on-shore, the appellants now
face financial ruin, the amount of their debt, as measured in Australian
dollars, having more than doubled.

2.  The foreign currency loan was negotiated in order to enable the 
appellants, who were successful farmers and graziers in the West Wyalong area,
to acquire an additional property at a price of $410,000, together with
additional farming equipment, while making a contingency provision in respect
of increases of interest and other payments which might be incurred by reason
of movements in the exchange rate. The contingency provision built into the
borrowing was in the sum of $100,000. The appellant Thomas  Quade , who is the
husband of Mary  Quade  and the father of the other appellants, was the moving
force in the arranging of the loan. He knew his own financial position to be
such that a borrowing at the then domestic rate of interest of perhaps 15% per
annum would be very difficult to service. He went to his bank manager to seek
information about borrowing overseas. He was given to understand that there
was some element of risk associated with a borrowing in a foreign currency,
and was probably told that such a borrowing was "a punt on the foreign
exchange". That was on 23 July 1984.

3.  On 14 September 1984, Mr  Quade  met the new manager of the bank's West
Wyalong branch, a Mr Plumb, who said he knew nothing about foreign currency
loans. It was at that time that the suggestion was made of a borrowing of an
additional $100,000 to cover currency fluctuations, particularly in respect of
interest payments. Also, Mr  Quade  then arranged to go to Sydney to talk to the
bank's experts. In the meantime, Mr Plumb gave Mr  Quade  a copy of a document
entitled "Foreign Currency Borrowing", to assist his thinking and provide some
basis of information on which he could build in Sydney. The document warned
that "there is always the risk that the currency concerned will be stronger
against the Australian dollar at the time of repayment than at the time of
drawdown. As discussed, in such circumstances you will need more Australian
dollars than were initially borrowed to purchase the required foreign currency
amount to repay the loan." It also stated that this risk could be eliminated
or quantified by hedging, although the mechanism of hedging was not really
explained. The document then reiterated: "It is more important that you fully
understand the potential risks involved in borrowing in a foreign currency on
an unhedged basis." There were other warnings to similar effect. Although Mr
 Quade  may not have fully understood each statement, the trial Judge held "he
must have had a general appreciation, if he had read it, that there were risks
in borrowing in a foreign currency."

4.  On 16 October 1984 Mr  Quade , with four of his neighbours, Messrs Connell,
M. Staniforth, K. Staniforth and Tull, conferred in Sydney with two officers
of the bank, Messrs Herden and Bennett. Mr  Quade 's account of this conference
makes it plain that the bank officers indicated there was a risk of currency
fluctuations; but his case was his attention was not drawn to any risk that
the Australian dollar could fall in value by a significant amount, nor to the
catastrophic effect such a fall could have on interest payments and on the
principal of the loan. It was not suggested he should hedge the loan, and it
was pointed out that hedging would take away any advantage of borrowing
off-shore, by increasing the costs of the loan to the equivalent of domestic
interest rates. He said he was led to believe there was no great risk
involved. There was a suggestion that the exchange rate might vary by about 5%
or 10%, "but", it was said, "it recovers over a period". This evidence was
confirmed by Mr M. Staniforth, who recalled they were told the Swiss franc
"varies a few cents either way but it moves back". According to him, one of
the bank officers said it was a "good proposition". Mr Connell and Mr Tull
also confirmed Mr  Quade 's account.

5.  The learned trial judge rejected this evidence in the following terms: "I
am confident that neither Herden nor Bennett stated that the (variations in)
exchange rates were as limited as the applicants' witnesses claim they said
they were." His Honour did not suggest there was anything about the witnesses,
or the manner of their giving their evidence, to lead to this conclusion;
rather, he based it on his own analysis of documents which appear to have been
available at the meeting. Properly understood, those documents did show that
"borrowing in Swiss francs was a risky exercise". It seems to me, with
respect, that the trial judge's approach to the question whether the bank
officers had in fact made the statements alleged was unexceptionable. The
documents should have led the bank officers to be cautious, and in the absence
of sufficient evidence to the contrary, it was appropriate to decide the
question, on the probabilities, on the footing that the bank officers had
expressed the natural conclusions to which their documents led, or, at least,
had not expressed plainly contradictory conclusions. His Honour said:
    "I am satisfied on the whole of the evidence that
    neither Herden nor Bennett conveyed to those
    attending the meeting on 16 October that currency
    fluctuations in the future would be as limited as is
    suggested by the applicants' witnesses. The written
    material, which was produced at the meeting, showed
    quite plainly that currency fluctuations might be
    quite considerable. Neither Herden nor Bennett had
    any reason to represent that future currency
    movements would not be great. The fact that an
    example was given of an effective interest rate of
    50% per annum, admittedly over a short period, is
    quite inconsistent with the bank officers
    representing that a borrower could safely assume
    that future currency variations would not be great.
    I do not accept that the officers led  Quade  to
    believe that there was no great risk in foreign
    currency loans."

6.  In the absence of anything of the nature of fraud (which was never
suggested), to have reached a different conclusion would have involved taking
the view that the bank officers were blinded by optimism or by the unconscious
influence of some strong motivation to endeavour to sell foreign currency
loans to customers such as Mr  Quade . There was simply no evidence before his
Honour to justify either of these conclusions.

7.  But it now appears that there is evidence to suggest the bank was, at the
time, actively promoting foreign currency loans as a matter of policy, so that
its officers would in fact have had strong conscious and subconscious
motivation to put the best complexion on the exchange situation. Furthermore,
the bank seems to have been promoting such loans to customers who were
inadequately informed on the subject, so that its own senior management had
expressed a number of concerns, including concern about the level of
understanding of the complex issues involved shown by loans officers and bank
managers. In particular, it is plain that the appellants did not nearly meet
the criteria set by the bank itself for borrowers who could safely venture
into the foreign exchange market. Only extreme optimism could have thought
otherwise. Even assuming the appellants had met those criteria, the bank's own
expert assessment was that it would have been necessary for them to have had
the loan constantly monitored, so that at any time it could have been promptly
"hedged" in order to anticipate or contain any adverse movement of the
exchange rate. If this material had been before the court, in the wealth of
detail that is now available, it would not have been possible for his Honour
to have said that "neither Herden nor Bennett had any reason to represent that
future currency movements would not be great". They had the reason that the
bank was actively marketing this particular type of loan, and the fact was
that some of their colleagues did appear to have succumbed to the temptation
involved of promoting loans inappropriately. Had the evidence been considered
free of any a priori presumption of the unlikelihood of the bank officers
mis-stating the position, Mr  Quade 's evidence, supported as it was by a number
of relatively independent witnesses, might have carried the day.

8.  Some brief (not at all exhaustive) examination should be made of the
documents now available (which I shall call "the new documents"). They are
bank documents produced, after the conclusion of the hearing, in recognition
of the fact that they had been wrongly omitted from the bank's affidavit of
documents filed and served in purported compliance with an order for
discovery. A fairly small proportion of them consists of documents that were
also produced after the hearing in David Securities Pty Ltd v. Commonwealth
Bank of Australia (1990) 93 ALR 271, although there no formal discovery had
taken place. The documents comprise a somewhat heterogeneous collection, from
which the following points may be noted:
.   A memorandum for the general manager, stamped with the
    date 16 March 1982 and headed "FOREIGN CURRENCY LENDING
    TO AUSTRALIAN CUSTOMERS", speaks of the "considerable
    difficulty" of the bank in meeting borrowing requirements
    from domestic funds, which gave importance to lending not
    similarly constrained. It also speaks of the importance
    of "match(ing) the competition". It discusses the
    desirability of the bank making more use of its own
    overseas assets, and of directing "to the small and
    medium size business area" foreign exchange loans which
    would be very profitable for the bank. It makes fairly
    scant mention of the foreign exchange risk, commenting
    "it is now possible to use the hedge market to cover the
    risk which should mean that all-up costs should broadly
    match the cost of AUD finance." The conclusion is
    reached: "There should be greater consideration given to
    this source of finance (i.e. foreign currency lending) as
    a means of satisfying customers' requirements."
.   A document dated 17 March 1982, headed "CHIEF MANAGER'S
    COMMENTS", appears to deal with the subject of the last
    mentioned memorandum. It describes as "urgent" the
    taking of a number of steps "to make several moves now to
    try and promote the full range of foreign currency
    lending". It recommends that "now (this week)", among
    other things, there be "a spirited promotion" of foreign
    currency lending as a way of beating lending quota
    restrictions. It speaks of the bank's "critical
    liquidity position" as making such action urgent.
.   A memorandum dated 2 April 1982, signed by the bank's
    assistant general manager, headed "FOREIGN CURRENCY
    FACILITIES FOR AUSTRALIAN CUSTOMERS", speaks of thought
    being given to "how the CTB can make greater use of
    foreign currency facilities to satisfy the needs of its
    customers". It describes foreign currency lending as "an
    underdeveloped segment of the CTB's lending services" and
    concludes: "(T)here would seem to be considerable
    advantage in present circumstances in giving this type of
    business more emphasis."
.   A further memorandum on the subject of foreign currency
    loans to Australian borrowers, dated 15 April 1982, sets
    out an objective as follows:
      "In a total foreign currency asset book of some
      AUD 1,700m, a reasonable objective for loans to
      Australian borrowers (other than large
      corporates, project finance and
      semi-government) would be AUD 100m. This should be
      capable of achievement within a 12 month period."
    Specific State by State target figures, aiming at this
    total, are then set out.
.   A head office memorandum for the general manager dated 6
    May 1982, a signatory to which was a Mr Knezevic, who
    played some part personally in the present matter, refers
    to "the promotional drive" in respect of foreign currency
    facilities for Australian customers and suggests an
    object "to expose as many people as possible to this type
    of lending". It points out that foreign currency loans
    provided "a way of meeting domestic loans which may
    otherwise be declined because of A$ lending constraints".
    It notes that
      "it is highly unlikely clients would readily 
      accept foreign currency loans ... unless they
      and the CTB are prepared to allow the facility
      to proceed on an unhedged basis. The statement
      is regularly made that the cost of hedged
      foreign currency loans is approximately equal
      to the cost of borrowing funds in Australia.
      ... However, there would be occasions where a
      client would be prepared to accept foreign
      currency loans on an unhedged basis ... and
      applications of this type should not
      necessarily be discouraged."  

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History of Banking Fraud: The Coming Battle By  M. W. WALBERT 

 The Coming Battle documents from Congressional records, newspaper reports and writings by the founding fathers and others a chronology of events long forgotten that shaped our fledgling nation from 1776 to 1899. Read about the manipulation of our money and its supply, the intentional creation of recessions, depressions and panics, manipulation of the stock markets, and the demonetization of silver.

Secrets of the Federal Reserve by Eustace Mullins

Eustace Mullins' carefully researched and documented treatise picks up from Walbert's expose' and brings it to the mid 1980's