It Is Conclusive: How A Lender Can Prove The Existence And Quantum Of Debt -

This week's TGIF considers the recent case of Collopy v Commonwealth Bank of Australia [2019] WASCA 97. This Western Australian Court of Appeal decision confirms the value of conclusive evidence clauses.

Background

In 2002, Ms Lavanter (Borrower) and her husband entered into two loan agreements with the Commonwealth Bank of Australia Ltd (Bank) secured by existing mortgages over two properties. In 2003, the Borrower's husband entered into a third loan agreement. The Borrower signed a guarantee and indemnity, and the loan was secured by the mortgages. The facility limits for each facility were later increased, with corresponding increases in liability under the guarantees.

In 2007, the Borrower's husband died and she became the administrator of his estate. She sold one property to partially repay the advances made under the loan agreements but later redrew and eventually defaulted. Some of the further re-drawings were used to reduce the indebtedness on the other facilities. In March 2018, the Bank obtained judgment for $1,346,973.91 and possession of the remaining property.

Appeal

The Borrower appealed to the Western Australian Court of Appeal. She maintained that the Bank never advanced funds to her or her husband. The Borrower argued that the Bank had failed to prove that it had because:

it could not state the date, amount, recipient and form of each advance; and
its evidence included computer screenshots, which she argued were inadmissible.

The primary question on appeal was whether screen shots extracted from the Bank's internal system recording transaction and disbursal history for customer accounts were 'genuine business records' for the purposes of the Evidence Act 1906 (WA). The screen shots had been prepared by a Bank officer for the purposes of the proceeding and, therefore, were said not to be evidence of the underlying transactions.

Decision

The Court said that the Bank bore the onus of proving that advances were made and the total amount outstanding but did not agree that the Bank needed to provide details for each advance. It was sufficient for the Bank to prove:

that it had advanced funds under the loan agreements; and
the total amount advanced.

Bank statements going back to the time the accounts were opened were unavailable due to the Bank's routine data archiving and purging policy.

To prove that it had advanced funds, the Bank relied on the screenshots of its internal system showing disbursals to the Borrower and her husband. The Borrower argued that these were inadmissible as evidence as they were not business records and their authenticity had not been proved. The Court disagreed: the screenshots were derived from the Bank's electronic business records and accompanied by an affidavit explaining how they were created. They were therefore admissible and showed that advances were made.

To prove the amount, the Court found that the Bank was entitled to rely on conclusive evidence clauses in the loan agreements, mortgage and guarantee. These clauses allowed the Bank to issue a certificate that would be "sufficient evidence" of the amount payable "unless proved to be incorrect". The High Court has previously upheld the validity of such clauses in the well-known decision is Dobbs v Bank of Australasia Ltd. As the Bank had issued a certificate and the Borrower did not disprove it, the Court found that the Bank had proved the amount payable.

Separately, the Court commented that the Borrower's lack of appreciation of her financial arrangements prior to her husband's death did not deny the existence of her legal liability to the Bank.

Comment

This decision demonstrates the value of conclusive evidence clauses. These clauses provide certainty, discourage disputes and (if a dispute does arise, as in this case) shift the onus of proof away from the lender.

It also emphasises the importance of careful drafting. The Court stressed that conclusive evidence clauses mean what they say and therefore honed in on the text of the clause. These clauses must be carefully drafted to ensure that the certificates later relied on will prove exactly what they are intended to prove.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.