Leonie Wood Sydney Morning Herald June 4, 2012
The Victorian Supreme Court has sharply criticised the conduct of Bankwest in allowing the wife of a businessman to sign multiple documents in support of $18 million of loans when she had next-to-no business knowledge and no advice or warnings about what she was signing.
In a decision that was intended to answer procedural questions in a case brought by Bankwest against Naseem Abdul and his wife, Theresa, the court said it would be unconscionable for the bank to pursue a claim against Mrs Abdul.
Justice Clyde Croft said when Bankwest allowed Mrs Abdul to sign various loan guarantee documents in 2007, the bank ‘‘ignored all of the safeguards that should have been in place’’ and its actions were ‘‘at odds’’ with the Code of Banking Practice generally followed by the industry.
Justice Croft said it was ‘‘quite extraordinary that Bankwest would have allowed [Mrs Abdul] to sign any of these documents without insisting that she obtain independent legal advice in addition to assuring itself that she was fully cognisant of the nature of the transaction and her personal risk’’.
‘‘None of these steps were taken,’’ he said.
Justice Croft said the evidence indicated Bankwest ‘‘never gave any consideration’’ to the ability of Mrs Abdul, as a joint guarantor, to service the debt.
He said even putting aside the banking industry’s code of practice, ‘‘one would expect that the ordinary diligence and prudence of bankers would mean that great care would have been taken to ensure that [Mrs Abdul] was aware of the nature of the transaction and understood the potential consequences in terms of her personal liability ...’’
The Abduls and companies controlled by Mr Abdul borrowed about $18 million from the bank in May 2007 to finance the operations of aged-care and child-care facilities. The companies are now in liquidation and the bank is seeking to enforce guarantees against the Abduls.
An associate judge of the Supreme Court last year declined to grant Bankwest summary judgment, and Bankwest appealed.
Justice Croft said the process of having Mrs Abdul sign the documents supporting the multi-million dollar loans was ‘‘somewhat disturbing, having regard to the magnitude of the sums secured’’.
‘‘Bankwest took no steps to ensure that documents sent to the second defendant, complete with warnings, were sent to her personally,’’ he said.
‘‘Nor, it appears, did Bankwest ensure that the second defendant had adequate time to read the documents, much less understand them and have the opportunity to take independent legal or financial advice.’’