8
Professional and Management Liability Gazette
Case Note
Razdan v Westpac Banking Corporation
[2014]
NSWCA 126
Financial Advisors and Accountants
Misrepresentation by a bank officer about the point at which there would be a margin call,
reliance, equitable remedies.
The facts
Mr Razden had margin loan with the Westpac Banking
Corporation (
Bank
), secured by a share portfolio.
The Bank had a system that tracked the value of the
share portfolio, and required Mr Razden to take certain
action if the value of the portfolio dropped below
a certain point (i.e. by repaying some of the loan or
providing additional security), failing which the Bank
was conferred the power to sell the shares.
In 2008, the global financial crisis significantly
diminished the value of Mr Razden’s portfolio, and
the Bank issued a margin call. During this period, Mr
Razden had numerous teleconferences with officers of
the Bank, who were attempting to assist him manage
his facility through the extraordinary circumstances of
the global financial crisis. All of these conversations
were recorded.
During one such conversation on 7 October 2008, an
officer of the Bank made a statement to the effect that
the Bank would sell his portfolio in the event that the
gearing, being the loan balance to security value ratio,
reached 95% (
95% representation
). This statement
was not factually accurate. Over the next few days, Mr
Razden sold a number of small share sales attempting
to keep his facility afloat.
However, the market continued to fall and a short time
later, the Bank sold down Mr Razden’s portfolio. Mr
Razden was unable to repay the outstanding amount
of the loan and the Bank commenced proceedings
against him. Mr Razden counterclaimed based on the
95% representation.
In essence, Mr Razden alleged that he acted in
reliance upon the belief that the Bank would force sell
when the gearing ratio reached 95%. By relying on the
alleged representation, Mr Razden argued that he was
denied the opportunity to sell more shares at an earlier
juncture.
Mr Razden originally pleaded reliance upon a so-called
90% misrepresentation (as opposed to 95%). He had
mistakenly pleaded the incorrect percentage of what
was actually said by the Bank’s officer.
Mr Razden attempted to amend his affidavit evidence
during his evidence-in-chief, having reviewed the
tape recordings of the conversations. This was highly
prejudicial to his case, as it put in doubt whether
Mr Razden could have relied upon the alleged
