9
Professional and Management Liability Gazette
representation, given he could not
even recall what was actually said.
At first instance, the Bank was
successful in obtaining judgment. Mr
Razden appealed.
Issues
• Whether an oral (and untrue)
representation about the point
at which there would be a
margin call was a misleading
representation about a future
matter in contravention of s 51A
of the former
Trade Practices Act
1974
(Cth) (
TPA
).
• Whether there was reliance on
the misrepresentation.
• Whether other equitable remedies were available.
Decision
The Court of Appeal unanimously dismissed the
appeal on all grounds.
Misrepresentation
Interestingly, the Court of Appeal came to different
conclusions as to whether the 95% representation
was in fact a misleading representation as to a future
matter within the ambit of s 51A of the TPA.
The leading judgment of Bergin CJ concluded that
the 95% representation was a representation as to
a future matter, and was in the circumstances taken
to be misleading. The Bank alleged that there were
reasonable grounds for making the statement, as
it was made within a context where Mr Razden had
commonly been subject to margin calls.
Further, it was suggested that the Bank’s officer was
trying desperately to assist Mr Razden in holding off
the intervention of another department of the Bank,
who was responsible for effecting the forced sale.
Bergin CJ disagreed and concluded that there were no
reasonable grounds for making the statement.
Macfarlan JA and McColl JA, on the other hand, found
that the statement was not calculated to induce Mr
Razden’s reliance, and it was accepted that there was
nothing promissory or cast-iron about the statement.
Indeed, it was
‘a passing, spontaneous prediction
made in the flow of one of many
discussions.’
In any case, the majority agreed that
Mr Razden had not relied upon the
statement. Aside from his incorrect
recollection of the particulars of the
statement, it was also significant
that Mr Razden made no further
mention of the statement after it
was made in his dealings with the
Bank. Indeed, one week later during
another conversation with the same
bank officer, the officer said words to
the effect that if the gearing ratio gets
close to 100%, the bank would force
sell.
The Court of Appeal observed that if
Mr Razden had relied upon the 95% representation,
he would undoubtedly have raised the issue in protest
during this later conversation.
Estoppel
The Court of Appeal affirmed the findings of the trial
judge that the 95% representation was not the kind of
assertion which could found an estoppel. Further, and
consistently with the findings on misrepresentation,
there was no evidence of reliance.
Breach of an implied term and
unconscionable conduct
Mr Razden alleged that there was an implied term of
reasonableness and good faith in the Bank’s margin
lending facility. On the assumption that there was an
implied term of reasonableness, Bergin CJ observed
that there was no evidence that the Bank acted
unreasonably or not in good faith and that the events
took place within the extraordinary circumstances of
significant falls in global financial markets. Indeed, Her
Honour observed:
‘There was overwhelming evidence that far from
acting unreasonably or conducting itself with a lack
of good faith, the bank tried to assist the appellant
to retain his portfolio in the hope of the market
turning around.’
Insofar as Mr Razden alleged unconscionable conduct
on the part of the Bank, Bergin CJ observed that the
Bank had in fact provided detailed and up to date
information, often suggesting to him that he seek
independent advice.
‘The majority
found that the
statement was
not calculated
to induce Mr
Razden’s
reliance, and it
was accepted that
there was nothing
promissory or
cast-iron about
the statement.’
