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ANZ Bank (Samoa) Ltd v Wilson [2007] WSSC 44 (25 May 2007)

IN THE SUPREME COURT OF SAMOA
HELD AT APIA

BETWEEN

ANZ BANK (SAMOA) LTD
formerly the BANK OF WESTERN SAMOA
a duly incorporated company carrying on business in Samoa
Plaintiff

AND

TAGALOA LEAFA WILSON
and LETASIANO WILSON
of Tuloto
Defendant

Counsels: G Latu for Plaintiff
T K Enari for Defendant (Ms Wilson)

Hearing: 16 January 2007
Submission: 6 February 2007
Decision: 25 May 2007

JUDGMENT OF THE COURT

In this judgment I will refer to the first named defendant as Ms Wilson and the second named defendant as Mr Wilson. Ms Wilson is the mother of Mr Wilson who operated a company called Wilex Cocoa and Coconut Products (WCCP), a customer of the plaintiff bank which for several years granted WCCP loans and overdrafts to assist WCCP with its operations. In March 1999 the plaintiff approved a further $150,000 facility to WCCP to be secured by personal guarantees of both defendants as well as a first mortgage over a parcel of land jointly owned by the defendants at Togafuafua and upon which Ms Wilson resided. At the time the $150,000 overdraft was approved the two defendants were not the registered owners of the Togafuafua land although Ms Wilson has been living on the land for a number of years. She believed that her grandmother paid for the land by instalments to the Roman Catholic Church; a belief which was obviously mistaken as the Togafuafua land was conveyed to Ms Wilson and Mr Wilson after $60,000 from the $150,000 overdraft was paid by Mr Wilson through his solicitor to the Roman Catholic Church in March 1999. Unknown to Ms Wilson the $60,000 came from the $150,000 overdraft facility granted to WCCP so that while Ms Wilson, her mother and grandmother may have built and resided on the Roman Catholic land for many years the land was not conveyed by the Catholic Church until March 1999.

Security documents for the overdraft were prepared by Mr Faaiuaso, solicitor for Mr Wilson and WCCP. ON the 19th March 1999 Mr Faaiuaso gave to the plaintiff bank a solicitor’s certificate certifying that both Mr Wilson and Ms Wilson have executed the deed of mortgage and pending stamping and registration of the deed it was in order to release the $150,000. Upon release of the funds to WCCP, Mr Wilson gave Mr Faaiuaso $60,000 to complete the purchase of the Togafuafua land; Mr Faaiuaso then engrossed and prepared the deed of conveyance for the land for execution by the Roman Catholic Church. Both Mr Wilson and Ms Wilson executed the mortgage over the Togafuafua property as well as their personal guarantees and the signatures on both documents were witnessed by Mr Faaiuaso. But Ms Wilson told the court that she did not sign any documents before Mr Faaiuaso; she does not know Mr Faaiuaso, has never seen Mr Faaiuaso or attended the office of Mr Faaiuaso and the contents of the documents she executed were not explained to her by Mr Faaiuaso who allegedly witnessed her signature. Ms Wilson however conceded that the signatures on the mortgage and the guarantee were hers but she did sign them at home when her son handed her the documents. She knew the documents she executed in the presence of her son were for her son’s business; her son told her so. Mr Wilson confirmed the testimony of his mother. Due to his elderly mother’s difficulty in mobility and because of the mutual trust between him and his solicitor, Mr Wilson said he took the documents home for his mother to execute and returned them to Mr Faaiuaso to sign as the witnessing solicitor.

In 2000 WCCP started to default in its loan repayments. In 2004 when the plaintiff issued default notices on the defendants Ms Wilson for the first time discovered that WCCP failed to honour its repayment commitments to the plaintiff which has opted to exercise its power of sale under the mortgage. But Ms Wilson refused to vacate the land prompting the plaintiff in this action to seek an order of eviction. Ms Wilson refused to vacate the land on several grounds namely:

(a) the mortgage and guarantee she executed was security only for the monies advanced by the plaintiff to complete the purchase price of the Togafuafua land. That mortgage was repaid and the mortgage should therefore be discharged.

(b) it was not explained to her that the mortgage and guarantee she executed was to provide security for the debts of WCCP so that her signature on the mortgage and guarantee was obtained without her full understanding of the meaning and implications of such signature.

It must be emphasised that the plaintiff in this action is pursuing only its right as a mortgagee under the mortgage executed by Mr Wilson and Ms Wilson and this judgment will accordingly be confined to that issue. As to the first ground it is difficult to accept that Ms Wilson executed the mortgage to secure monies loaned from the plaintiff to complete the purchase price of the land because that is not what Ms Wilson told the court. She said the land was bought by instalments from the church; it was paid by her grandmother and no money came from the bank to buy the land. If that was her belief, then it cannot be accepted that when she executed the mortgage it was to secure an advance to purchase the same land. Indeed under cross examination she conceded she signed documents to assist her son’s business; she was not fully aware of the details as her son did all the paper work and all was well until the fire in 2003 completely destroyed the son’s business. Mr Wilson who testified for Ms Wilson also told the court under cross examination that he told his mother at the time she signed the mortgage that the documents were necessary for the business. By her own evidence it cannot be accepted that when she signed the mortgage it was to secure monies borrowed to complete the purchase price for the Togafuafua land. Neither can she argue that the mortgage debt has been paid simply because she did not make the repayments, Mr Wilson who was responsible for the repayments did not tell the court that the mortgage has been paid, and in any event the repayment by WCCP of its loans and advances went into arrears in 2000 and continued to deteriorate.

As to the second ground, Ms Wilson was firmly of the view she did not go to the office of the lawyer; it was her son who brought the document home and the documents were executed by her at home without been told of the meaning of and the implications of the contents of the documents. She was adamant she has never seen Mr Faaiuaso before and has never been spoken to Mr Faaiuaso before. If Ms Wilson’s evidence is to be believed her counsel argued that the mortgage signed by Ms Wilson should be impugned or set aside as unconscionable since Ms Wilson was ignorant as to the meaning of the documents she executed. The short simple answer to Ms Wilson’s counsel argument is that Mr Faaiuaso’s alleged neglect in explaining the contents of the mortgage deed cannot under the general law be a valid ground to set aside the mortgage as Mr Faaiuaso was not the agent of the plaintiff bank; in fact Mr Faaiuaso was solicitor for the WCCP and the documents were sent by the plaintiff bank to Mr Faaiuaso on instructions of Mr Wilson. If indeed Mr Faaiuaso neglected to provide the necessary explanations then Mr Faaiuaso is answerable to Ms Wilson for his neglect but Ms Wilson cannot claim vicarious liability against the bank.

The principles upon court of equity will grant relief against unconscionable dealing are clear and extends to circumstances in which:

(a) a party to a transaction was under on special disability in dealing with the other party to the transaction with the consequence that there was an absence of any reasonable degree of equality between them; and:

(b) that special disability was sufficiently evident to the other party to make it prima-facie unfair or unconscionable that that other party procure accept or retain the benefit of the disadvantaged party’s assent to the impugned transaction in the circumstances in which he or she procured or accepted it. See Greg v Tasmanian Trustees Ltd [1997] FCA 128; (1997) 73 FCR 91; Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447; Fry v Lane [1888] UKLawRpCh 178; (1889) 40 ChD 312; Karam v ANZ Banking Group Ltd & Others (2001) NSW SC 709.

Ms Wilson had no direct dealing with the bank; it was her son Mr Wilson; she knew the documents she signed were for her son’s business; her son did all the paper work; she did not bother about the contents of the documents as her son told her the documents were for the business and the documents were indeed to secure the advance to WCCP. She cannot claim to be under a disability because she was not a party to the transaction between Mr Wilson (for WCCP) and the bank and in any event she had independent legal advice before she executed the mortgage. Her insistence that she did not attend and has never attended to the office of the lawyer, has never seen the lawyer before, and the documents were signed by her at home in the absence of the lawyer cannot be accepted. Her son did tell the court that he did once accompany his mother to the lawyer’s office and they were attended to by Mr Faaiuaso at the car park where Ms Wilson signed documents in the car. Mr Faaiuaso’s evidence that he did attend to Ms Wilson at his office car park is therefore confirmed by Mr Wilson’s evidence.

Alternatively it is argued by Ms Wilson’s counsel that WCCP was technically insolvent in March 1999 when the plaintiff granted the $150,000 overdraft and the plaintiff was under a duty to bring such matters to the attention of Ms Wilson. In response to the submission there is simply no evidence that WCCP was insolvent in March; it is pleaded in the statement of claim that WCCP repayment of its loan commenced to go into arrears in 2000 and Ms Wilson in her statement of defence neither denied nor admitted it. All that was said to the court is that the company had problems when its premises was engulfed by fire in 2003. The contention therefore that the company was technically insolvent in March 1999 when the advance was made has no foundation and it would be difficult to accept that a financial institution like the plaintiff would grant a further advance (making total advances to WCCP in excess of $1 million) with full knowledge that it was technically insolvent. The submission cannot succeed.

It is further contended for Ms Wilson that the plaintiff provided no consideration for the mortgage and guarantee given by Ms Wilson. This issue was not raised in the amended statement of defence neither was it suggested during the trial and counsel for the plaintiff understandably did not address it in his submissions. I shall nevertheless deal with it very briefly. If the mortgage has the force and effect of a deed then no consideration is required. A document does not have to be expressed as a deed to have the force and effect of a deed. In Re Wilson’s Settlement (1972) NZLR 13 Quilliam J discussed the nature of a deed and for the purpose of New Zealand law he described a deed at page 22:

"A deed is a writing on paper or parchment signed and attested in the manner required by S4 of the Property Law Act 1952 whereby an interest, right or property passes, or an obligation binding on some person is created or which is in affirmance of some act whereby an interest, right or property has passed".

The mortgage executed by Ms Wilson on the March 1999 is a Deed of Mortgage and not only does it comply with our Section 4 Property Law Act (NZ) the inclusion in the mortgage document of the normal indicia of a deed such as Now this deed witnesses, and, the mortgagor hereby covenants, indeed makes the mortgage a deed and accordingly provides its own consideration and the submission cannot succeed.

Lastly it is further contended by Ms Wilson’s counsel that despite the fact that Ms Wilson executed the documents before Mr Faaiuaso the plaintiff was nevertheless under a duty to explain and inform Ms Wilson that the borrower WCCP was in a grave financial position and that the mortgage also secured the earlier advances to WCCP. It has already been considered earlier that there is no evidence to support the notion that WCCP was in financial difficulties in 1999 when the $150,000 advance was made. Ms Wilson herself was convinced that it was only after the fire in 2003 that WCCP faced difficulties and Mr Wilson throughout his testimony did not in anyway hint that WCCP was in financial difficulties in 1999 and on that basis alone the submission must also fail. In any event the extent to which a bank as creditor is bound to make a disclosure to an intending surety was stated by Lord Cambell in 1845 in the House of Lords decision in Hamilton v Watson [1845] EngR 568; (1845) 12 Cl & Fin 109 at 119:

"I should think that this might be considered as the criterion whether the disclosure ought to be made voluntarily, namely, whether there is anything that might not naturally be expected to take place between the parties who are concerned in the transaction, that is, whether there be a contract between the debtor and the creditor, to the effect that his position shall be different from that which the surety is to see whether that is disclosed to him. But if there be nothing which these parties, then, if the surety would guard against particular perils, he must put the question, and he must gain the information which he requires."

The proposition by Lord Campbell was simplified by Tipping J in the New Zealand High Court in Shivas v Bank of NZ [1989] NZHC 862; (1990) 2 NZLR 327, at 363:

"Put more simply the proposition is that a bank as creditor is bound to disclose to the intending surety only something which has taken place between the bank and its customer which would not normally be expected."

The same proposition although expressed in various ways were applied by the High Court of Australia in Godwin v National Bank of Australasia Ltd [1968] HCA 30; (1968) 42 ALJR 110 and Commercial Bank of Australia v Amadio [1983] HCA 14; 151 CLR 447 and by Hardie Boys J in Westpac v McCreaner (1990) 1 NZLR 580 and they all put beyond doubt the nature of the fiduciary duty which a bank owes to an intended guarantor in relation to voluntary disclosure namely that the duty is no more than to inform the guarantor of anything which has taken place between the bank and the customer which affect the customer’s liability and which would not normally be expected. There is no duty to disclose facts affecting the risk but if asked however the bank must disclose matters affecting the customers credit. Ms Wilson had no reason to doubt WCCP and Mr Wilson’s ability to service the loan, she had no reason to doubt her son’s judgment in running and managing WCCP and accordingly she did not direct her attention to the financial status of WCCP or about any unusual features of its account with the plaintiff. The submission must fail and judgment must therefore be given for the plaintiff.

The defendant Ms Wilson, her family and agents are ordered to vacate the land within 3 months. She is also ordered to pay the plaintiff’s costs of $2,000.

JUSTICE VAAI

Solicitors
Latu Ey Law Firm for plaintiff
Kruse Enari & Barlow Lawyers for defendant