Razdan v Westpac [2014] NSWCA 126

This case involved a margin loan. The borrower claimed the bank officer told him that once the gearing on his loan reached 95% the bank would liquidate his holdings.

In October 2008 with the stock market in freefall, the bank and the borrower engaged in a series of agonised telephone calls. The upshot being that margin calls were repeatedly deferred or reduced. Eventually all the stock was sold and the borrower was left owing a shortfall of $452,000.

The bank sued and the borrower countered pointing back to the 95% representation as the basis for an Misleading or Deceptive conduct; Estoppel; Unconscionability defence.

The court held:

I am satisfied that no evidence was adduced, by any party, to establish that the Bank had reasonable grounds for making the 95% Representation. I am satisfied that the 95% Representation was a representation as to a future matter and that in the circumstances it is taken to be misleading

Nevertheless the court rejected his claim because it found that there was no reliance by the borrower on the 95% representation. This was because:

  1. He stated under cross-examination that he “did not take seriously” anything that the bank employee said.

  2. He did not mention the representation in his subsequent communications with the bank, even after it became clear that it was not accurate.

  3. He originally pleaded the representation as 90%, which was altered his claim to 95% after reviewing the transcripts of his audio recorded conversations with the bank.

In response to the borrower’s claim of unconscionability the court held:

The evidence clearly established that the Bank, did everything possible to meet the borrower’s wishes of saving his portfolio from liquidation. The Bank provided him with detailed and up-to-date information and suggested he seek independent advice. Under the terms of the Facility, it was the borrower’s obligation to monitor his account and manage his level of risk. It is therefore clear that, far from pressuring, tricking or misleading the appellant, the Bank made it clear that he was responsible for managing his own portfolio, encouraged him to seek advice on the best way to do that and provided him with information on the fluctuating and volatile market at that time. Furthermore it is clear that the appellant was not vulnerable, the borrower was educated and an experienced investor.

Click here to read the full judgment

Scroll to Top