A Matter of Opinion

 

A MATTER OF OPINION

(Melbourne and Singapore 1986)

 

I.THE BRIEF AND BANK REFERENCE

 

          The brief respecting the action of Maurice Vollar against the M. Bank landed on my desk just a few weeks before my wife and I migrated back to Singapore. It was the first interesting case referred for my opinion during my nine years in Australia. I was also pleased that it had been sent to me at the advice of Jack Wilson, a former student of my days in Wellington, who was to be the lead Counsel in the case.

It pleased me to accept the brief. Still, I had to ask that all the documents respecting the case be sent to my new address in Singapore. I promised Jack Wilson that, upon my arrival at my destination, the case would be given my full attention.

            The bundles of documents that waited for me in Singapore made me gasp. It would take any legal consultant a few weeks to peruse it meticulously. Strange to say, though, the basic facts were simple. Vollar had retired from his real estate business in Bruges and settled with his family in West Australia. Being too young to opt for full retirement he looked around for suitable business which he could acquire in full or in part. He went through local papers and eventually came across an advertisement of a ‘general business’ that looked for an investor and partner.

Vollar asked his own bank to obtain a reference on that business’ standing. That bank, in turn, sought a reference from that business’  bank  and asked that it be  conveyed  directly to the enquirer. 

The reference, composed by the relevant branch manager, and read out to Vollar by a clerk stated:

The [business’] main outlet is a small department store with a fast foods counter. It is situated in a popular location and has suitable off street parking. It is owned by East European migrants, who  are competent managers, run the shop  effectively and are patronized by a regular clientele. They have been our customers for some three years and usually have kept well within the limit of the facilities granted to them. We consider them good customers.

 

            I read the reference several times. Its general tone was, no doubt, favourable. Still, a few significant details were missing. No advice was given as regards the capital or funding of the business or that it was run profitably. Further, the reference suggested that, from time to time, cheques were drawn for amounts beyond the approved overdraft limit. An additional point made me raise my eyes. The business had maintained its account with  the relevant bank for just three years. When had the business been established?

            If I had received a reference of this type about a business in which I considered investing a substantial amount, I would have consulted an accountant or a business adviser. In any event, banks usually communicated their reference orally and disclaimed liability. Did the relevant bank do so in the instant case? After all, the bank rendered the service involved without levying a charge.

            A perusal of the pleadings and legal correspondence gave me a clearer comprehension of the issues. The clerk, who had read out the reference, left the bank a few months later and got married. She gave birth to two sons and became a full time housewife. She had no recollection of the case in question. Still, her own notes agreed with Vollar’s except on one point. Vollar maintained that no exemption of liability had been communicated to him. The clerk stated that it was her practice to add at the end of any reference a formula emphasizing that the reference  was given gratuitously and without responsibility on the bank’s part.

The branch manager, Bruce Smith, affirmed that he composed the reference from notes readily available to him from the files. He had not investigated the business’ records and maintained, unequivocally, that this was in accord with the bank’s regular practice.

Vollar asserted that he relied on the reference as if it were given by a Belgian bank. Further, on the basis of its favourable tone he had seen no need to consult an accountant or business adviser. He went on to allege that the bank had deceived him. He had not been informed that the owners of the business had been declared bankrupts in South Australia and that one of them – the husband – was imprisoned for contravening Western Australian law. When he had filled in and submitted the local Business Registration Form he had hid the fact that he was an undischarged bankrupt. His wife escaped conviction on a technical ground.

A further perusal of the documents submitted to me indicated that the branch manager, Bruce Smith, had dealt mainly with the 'female owner', Rena Katz. There was no shred of evidence to affirm that he – or, indeed, any other of the bank's employees – was aware of the 'male owner's' – Yuri Katz's – conviction and imprisonment.

These facts made me reflect. What  was the basis of the count respecting deceit? Vollar's lawyers alleged that Bruce's failure to investigate  the business' position at the time he composed the reference involved gross negligence. Such behaviour was – at law – tantamount to deceit. The Bank denied the allegation and disputed Bruce's duty to investigate. The Bank went on to emphasise that the reference was given without responsibility.

I concluded that the issues had crystallised. Any further exchange of pleadings would be a waste of time. All the same I was perturbed by one element that emerged from the bundle of documents forwarded to me. Both Vollar's and Bruce's communications were marked by  bitterness and anger. In one of his early emails Bruce had told Vollar: “You harp on the nature of bank references in Belgium. I know nothing about those but have followed local practice. You have resided here for some five years. You should have known!” Vollar replied: “I thought Australian banks cared for their customers [sic] as much as Belgian banks.  You should have told me that you did not care about my interests.”

This objectionable correspondence – an some revolting messages – went on and on  for weeks. I was not surprised that Vollar's last note read: “Mr. Smith: I have now placed the matter in the hands of my legal advisers.”

The acrimonious tone of these exchanges appeared unusual for seasoned men of business. Both Bruce Smith and Vollar had been trained to control their tempers and words. Why had they lost control in this case? I decided to get to the bottom of it. Naturally, this could not be done from the perusal of documents received in Singapore. I hoped to get a  clearer pictures when, a few weeks after my arrival in the City of the Lion, I flew over the Perth.

 

II. THE FACTS CRYSTALLISE

 

My first advice to Jack Wilson, the bank's lead Counsel, was to investigate the hidden facts. I further suggested that he get an opinion about the Belgian law in point. It turned out that, just as in Australia, a Belgian bank reference was not considered a business advice based on detailed research. This was particularly so if the reference was given without responsibility. Under Belgian law, such a disclaimer was effective. Another point emphasised in our Belgian legal opinion was that, as a matter of fact, the person who received the reference was entitled to bring an action to recover his losses only if he was able to establish that he had relied on the reference. 

Turning back to our pleadings, I was relieved to note that, technically, the Bank had denied Vollar's reliance on the reference and had added that, in any event, Vollar was not entitled to treat it as the basis for the investment he was planning to make. Indeed, he had not disclosed the object of his enquiry in his request for information. Bruce Smith had no reason to surmise that, pending his reference, Vollar was proposing to inject a substantial amount in the business or assume the role of a partner. Further, Vollar was not a customer of our bank. Why, then, had he harked in his salvos on breaches of a duty allegedly owed to him?

 

Having digested the information, I attended a meeting of the Bank’s management. I was not surprised to find out that the case became of major importance. The good faith of one of the Bank’s branch managers was put in question. Vollar had pleaded fraudulent misrepresentation and deceit as well as a breach of a duty of care owed to him by the Bank. Effectively, the bank's good name was at risk.  The CEO, who had flown over from Sydney, put it succinctly: “The hell with money. What matters is our reputation. That fellow, Vollar, says we are a bunch of sharks. I want him to eat his words!!! The blasted beggar.”

 

III. VOLLAR’S EVIDENCE AT THE TRIAL

 

An attempt to mediate appeared futile. Accordingly, the trial commenced at the prescribed date. As anticipated, Vollar took the stand as soon as his Counsel completed his opening address.

Under the rules of procedure then applicable in Western Australia, his Counsel took him through the facts of the case. It became clear that the business had failed and that Vollar had lost his investment and had made no earnings for months. In that regard, I felt considerable sympathy for him. Still, as the facts unfolded, I kept wondering why he had not taken professional advice before his injected his funds into the business. It was clear from the reference that, on occasions, the business exceeded the limits of its overdraft. 

What was Vollar’s motivation in acquiring part of the business? Further, was he really entitled to put full reliance on the lukewarm reference. In reply to a question put by the Judge, he had conceded that he had not been a customer of our Bank, let alone of the branch involved. Did our bank really owe him a duty to investigate?

 

The Judge, a portly Gentleman in his mid-fifties, announced a 40 minutes recess. Obviously, he needed a tea break. As we mulled out of the stuffy court room, I took note of two policemen who were accompanying a middle-aged man waiting in the ante-room. His right hand was cuffed to one of the policemen’s left hand.  A well dressed and groomed woman in her mid thirties was sitting beside the man. I sensed instinctively that they were the original owners of the business, Yuri and Rena Katz.

One of the legal assistants explained to me that the Katzs had been served subpoenas in case one of the parties decided to call either of them. Obviously, the wife had been deprived of her husband’s company while he languid in prison. Had she found solace in someone else’s arms out of sheer boredom or, perhaps, out of need? The legal assistant’s wry smile indicated that he was aware of my reflections.

“Where does Bruce Smith live?” I asked

“Some ten minutes walk from the business” the legal assistant replied. Then, without further questions on my part he added conspiratorially, “Vollar lives a few blocks further away. His wife often returns to Belgium to visit her family.”

“Is Bruce Smith, too, often on his own?”

“I don’t know. But I hear that he has a stormy marriage.”

 

When court resumed, Jack Wilson, rose to cross-examine. I had last seen him during his last year in Victoria University of Wellington. He had since grown into a man in his early middle age, self assured and, I sensed, cautious.

His first few questions related to Vollar’s career in Belgium. The Judge started to look bored, when Jack turned to the issue that concerned all of us.

“Mr. Vollar, as a Belgian real estate agent, did you find that purchasers rely on bank references?”

“Up to a point. Usually, they obtained valuations prepared by the personnel of their own bank.”

“What then was the purpose of a bank’s reference?”

“To gauge whether or not to proceed and to get some assessment of the standing of the counter party.”

“So, the bank reference would be a first step – nothing more?”

  “True”, conceded Vollar with ill grace. He then added in haste: “But of course a Belgian would expect that a reference would be honest. I also believe that he is entitled to rely on a duty of care owed to him as a customer.”

Everyone present knew he had walked into a trap. Hastily, his own Counsel rose to point out that he had not called Vollar as an expert on Belgian banking law or practice. He had no objection to the exclusion of the second sentence from the record. Jack Wilson countered that the  that he had no objection to the answer being accepted. He then turned back to Vollar, who was patently agitated, and asked pointedly:

“Mr. Vollar, were you at any time a customer of my clients. Did you have an account with them or any other dealings?”

“I thought they owed a duty of care to any member of the public.”

“That is a point to be argued by Counsel,” interceded the Judge. “Please answer the question put to you. Were you at any time the Defendants’ customer?”

“Not really, Your Honour.”

“Did you have any dealings with them except as regards this reference?” pressed Jack Wilson.

“No, I did not.”

 

Jack Wilson suppressed a grin. It was now established that Vollar had never been our Bank’s customer. Any point concerning the Bank’s duty to a member of the public was a point of law. Referring to it in the cross-examination would have been a gross error. Jack was too smart to make any legal point at this stage. Instead, he grilled Vollar on the contents of what he had been told.

            “Mr. Vollar, did you read the reference carefully?”

            “I did indeed.”

            “It mentions that, occasionally, the business exceeded that limits of the overdraft granted to it.”

            “I concluded from this that the business required a cash injection.”

            “Did the reference revert to this point?”

            “It did no. It was my own conclusion.”

            “Based on your own assessment?”

            “And on what Yuri Katz told me.”

            “So, you knew Mr. and Mrs. Katz before you went ahead with the investment?”

            “Actually, I had met them before I saw their advertisement in the papers. I had a talk with Mr. Katz next day.”

            “You just went to the business for a chat?”

            “Actually, I had known them for a quite sometime. I often had a snack at their counter.”

            “Why then did you need a reference?”

            “To make sure my assessment was correct. And the reference encouraged me.”

            “Although you were told that the business had gone beyond the limits of their facilities?”

            “The general tone of the reference was favourable.”

            “But did the reference tell you the business was profitable?”

            “My talks with the Katzs suggested it was.”

 

I looked at Jack anxiously. He was treading on thin ice. He had laid his foundation that Vollar had gone ahead with open eyes. What more was he hoping to establish at this stage?

            Jack must have taken the same view. After a short reflection he adjusted his gown and turned to the final –  perhaps even crucial –  point.

“And, Mr. Vollar, this reference was given to you on the clear understanding that the Bank assumed no liability?”

“I disagree.”

“I put it to you that a disclaimer of liability had been read out to you!”

“It was not,” protested Vollar, “not according to my notes”!

“But you have not produced your notes, Mr. Vollar. The reference spelt out in your Statement of Claim is based on a sheet of paper produced by you!”

“It is the typed version composed from the notes I took when the clerk read me out the reference.”

“And you did not leave out anything?”

“I did not!”

“How then did you know the reference was composed by the branch manager?”

“The clerk told me so when she read out the reference.”

“Why then does her advice on this point not appear in your printed version of her communication?”

“I thought the point was mundane or standard,” answered a much deflated Vollar.

“So, you left it out!”

“I did. I saw no point in reproducing it.”

“And the same applies to any term except to the substance of what you were told, doesn't it?!”

 

Vollar did not reply. Before his Counsel had the chance to raise an objection, Jack Wilson shrugged his shoulders, said he had no further questions and resumed his seat. Vollar’s Counsel tried to clear the record by asking whether Vollar would have referred in his notes to any disclaimer read out to him. Vollar assured the Judge he would have recorded it. The Judge looked at him narrowly. He then rose for the lunch break.

 

 

IV. ACHAT WITH RENA KATZ DURING TH BREAK

 

            I had lunch with Jack Wilson in the court's cafeteria. The sandwiches were fresh but, all in all, the establishment was ramshackle and the tables, which could have done with mats or table clothes, looked egalitarian rather than inviting. In comparison with it, the  restaurant of Singapore's High Court was elegant.

            Throughout the break I watched Jack Wilson. From a starry eyed student, he had developed in to a fine courtroom advocate. Still, it was only natural that he wanted his old teacher's post mortem on his performance. It gave me pleasure to assure him that that in my eyes he had carried the day. A lot, though, would depend on his own witnesses: Bruce Smith and the clerk who had read out the reference.

 

            As the Judge returned to his courtroom after the break, Jack's opponent announced that he was not calling any other witnesses. He then requested that expert witnesses be barred from attending the examination of the defendants' evidence. Jack Wilson agreed and   I was told by the Judge that I should not be present during the afternoon session.

            I was about to leave the courthouse when my eye rested on Yuri, Rena and the two policemen. They were enjoying a late lunch of sandwiches and pickles. Rena had just fetched mugs of hot coffee from the canteen. Yuri grinned at her proudly. I was facing a husband much in love with and highly appreciative of his intelligent wife. Was he aware of her escapades? His admiring expression evidenced that, even if he did,  he continued to trust her.

            As an expert witness, I had no interest in the hidden facts. Curiosity, though, is known to have killed the cat. Why then should a mere human resist the urge? Rena had spotted my glances.

            “Would you like a cup?” she wanted to know.

            “Many thanks. But I just had one over lunch, Mrs. Katz.”

            “Just call me Rena. And tell me, what do you think of the cafeteria?”

            “Rena,” interceded Yuri, “we better be grateful they have takeaways.”

            “Rubbish! This way they make more money, Yuri. They are not doing us a favour!” Turning to me she repeated firmly: “Well, what do you think of it?”

            “It could do with a face uplift. And the menu is somewhat limited.”

            “Somewhat limited ...” she mimicked. “Lousy!!! Even no sandwich toaster. You should have seen my business. We even had doner kebab. It was a lovely business! Yuri was the chef. Customers came just to have a really good coffee and toast.”

            “What went wrong?” I asked indiscreetly.

            “You Mr. Vollar ...”

            “Rena,” protested Yuri. “Such thing must not say. Mr. Vollar was our partner. He is nice man.”

            Rena ignored the rebuke. “He  greedy man.  Wanted to make 10 per cent! How can?”

            “I don't understand,” I conceded.

            “Look, Mr. ...”

            “... 'Peter' will do...”

            “Cafeteria in courthouse, you want to come back.”

            “Not really,” and then I saw light. As might be expected, Rena confirmed the point.

            “Cafeteria in courthouse always has business. People must come court and they not want  go out. So, they go cafeteria even if not so nice. We are in street. It has also other places. So, I think better  make our business really nice. I mean even somebody drive past, he remember and if  come one time he want come again. So, we must have nice tables, the doner kebab and many types of coffee and toasted sandwiches. Business can bring in good  money. But must wait ...”

            “ … be patient ...” I muttered.

            “Yes,” she confirmed. “If one months  lot of rain business not so good. Even regular customers stay at home. So, we not make much. But never mind:  we make more next month when weather good. Like you say, Peter, in business must be patient. But Mr. Vollar  not patient. He says if his money stay in  bank,  he make 7 per cent. So, he draws out money: every month. And he does not work in business and never bring new customers. So, in the end we bust. And Yuri too soft when Mr. Vollar ask for money. He say: 'To partner must listen'. So, now you understand!”

            “I do. Like all migrants you were under-capitalised …”

            “… yes” she interposed. “We escape with nothing. So, we always short of capital. And overdraft difficult to get from banks.”

 

V. BRUCE STANDS HIS GROUND

 

            A few hours later, Bruce Smith asked me out for dinner. Over an excellent meal in an elegant sea food restaurant by the Swan River, he told me what had taken place in court during the afternoon. 

            Bruce had been subjected to a searching cross examination. Vollar's Counsel tried to establish that, when Bruce composed he reference, he had hidden facts known to him, such as the Katz’ bankruptcy in South Australia. Bruce insisted that the reference revealed all material facts known to him and that he followed the Bank's standard practice when he composed it. He had not written out the disclaimer because it would be read out to an enquirer such as Vollar as a matter of practice.

            “Your subsequent correspondence with Vollar is not too pleasant,” I told him.

            “What do you meant?” he asked startled.

            “The emails of both parties revealed anger. They were antagonistic.”

            “So they were. But them, Vollar accused me of fraud and misrepresentation. These are serious allegations. I was not prepared to take them lightly. And Vollar was plain rude from the start.”  

            The only other witness of fact called by Jack Wilson was the clerk who had rung  Vollar. She admitted that she had no recollection of the relevant reference but insisted that the disclaimer was read out by her as a matter of practice. She insisted she had never departed from the Bank’s instructions set out in its manual. She was not shaken when told that Vollar was certain no disclaimer had been communicated to him. Standing her ground, she assured the Judge that Vollar was wrong.

 

 

 

V. MY EXPERT EVIDENCE

 

            Next morning It was my turn to step into the witness box.  As was to be expected, witnesses of  facts (and potential witnesses  like Yuri) were no longer in attendance or in the ante-room. Further, Vollar’s expert-witness had withdrawn in the last minute. My duty of objectivity imposed on me as an expert of banking practice was, accordingly, undisputable.

            Jack Wilson started his examination-in-chief by presenting my report and by asking if I felt the need to change it in any regards. I responded that I felt no reason to do so. Jack concluded that I was aware that my principal duty was to assist the court. Stepping in, the Judge emphasised the special duty of objectivity imposed on me as the single expert called as a witness.

            Vollar’s Counsel then rose to cross-examine. He was  not surprised when I affirmed that the practice of banks in Australia, the United kingdom, in New Zealand and in Singapore was to disclaim liability when they gave a reference.

            “Who would communicated the disclaimer to the enquirer?”

            “The employee charged with the reading out of the reference.”

            “You agree that such a person might, occasionally, forget to read out the disclaimer.”

            “Such an event can happen,” I agreed.

            “Is this a common slip?” asked the Judge.

            “Not in my experience, Your Honour.”

            “Do Belgian banks disclaim liability?”

            “I cannot answer the question. You Honour, I am unfamiliar with Belgian banking practice.”

            Counsel turned to the issue concerning the composition of the reference. I had anticipated that line of enquiry and was prepared.

            “You Honour,” I turned to the Judge, “the persons who rights the reference is usually the branch manager or the relationship-manager in charge of the account, the enquiry’s subject. He is not expected to investigate extra issues and is entitled to compose his reference on the basis of his general knowledge of the account. He must, of course be careful not to disclose details subject to the bank’s duty of secrecy.”

            “Such as?” asked the Judge.

            “For instance, that each months they have to make a deduction of maintenance to be remitted to a separated wife or even deduction related to payment of rentals made by the customer. Actually, Your Honour, in some countries a reference is communicated only after it has been approved by the customer. The practice does not apply in Australia.”

            “So, the composer of a reference respecting me would not disclose that, every month, I remit a  fees to my piano teacher,” jested the Judge.

            Leaving this line of questions, Counsel raised an unexpected point. He wanted to know if the object of the enquiry would be disclosed to the composer of the reference. Noting my discomfort Jack Smith raised an objection. This issue had not been raised in the pleadings and was accordingly irrelevant. During the heated exchanges between him and Vollar’s Counsel I had the time to formulate my reply. As soon as my expression regained its earlier aura of confidence, Jack withdrew his objection subject to a right to recall witnesses depending on my reply. The Judge nodded approvingly. He was keen to get to the bottom of things.

            “Your Honour, as far as I know there is no uniformity of practice. The request for a reference is usually communicated by the enquirer to his own bankers. These transmit it to the bank which provides the information. The latter will be told about the object of the enquiry only if it is revealed by the enquirer to his own bankers. In the case of potential take-over bids, for instance, the enquirer may not wish to disclose the object of his enquiry. He may describe it as a ‘general enquiry’.”

            “But for what reason? Would he not be reassured by the doctrine of bank secrecy?” asked the Judge.

            “The doctrine is, of course, applicable, Your Honour. But it is unlikely to prevent bank employees from gossiping, for instance, about X’s intention  of taking over Y, or of his interest of entering into a joint venture with him.”

            The Judge was about to raise another point, when Vollar’s Counsel advised that he had just received a note from his client. It confirmed that Vollar had described his request for a reference as a ‘general enquiry’ about the Katz’s business.

            “Then the issue just raised  in respect of banking practice is irrelevant here,” concluded the Judge. Jack Wilson nodded.

            “No further questions,” advised Vollar’s Counsel.

 

            After a short reflection, the Judge suggested written submissions. When both Counsel  nodded their approval, he rose.

 

 

VI. OUTCOME

 

            Next morning I returned to Singapore. Some six weeks later, Jack sent me a copy of the judgment in favour of the Bank. To my knowledge, Vollar did not appeal.

 

            After a few years, I took a break, traveling to Perth with my wife. We took a pleasant trip up the Swan River. When we embarked at the end station, we decided to have a light lunch. To my utter surprise, the cafeteria was run by the Katzs.

            It was a pleasant spot and the standard menu was excellent. When we finished, Rena – who recognised me – came over for a chat.

            “You do have a fine  canteen, Rena. I’m glad you brought your ship home,” I told her. “Please tell me what happened.”

            “It’s good to see you, Peter. You see, we had luck. After Yuri was discharged, we managed to get a loan from an investor, introduced by Bruce. We pay 5 per cent interest and never ask for a receipt. I think, he does not pay income tax. But this is not my business. And we make good money.”

            “I’m really glad, Rena. I started my life as a refugee during the Second World War. I worked hard. And I am sure that so did Yri and you. And, you know, your English has improved!”

            “Well, Bruce  teaches me. And he is a good teacher.”