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Iyer v NAB and Rao v CBA (Civil Claims) [2008] VCAT 109 (23 January 2008)

Last Updated: 31 January 2008

VICTORIAN CIVIL AND ADMINISTRATIVE TRIBUNAL

CIVIL DIVISION

ORDERS

1. Application No. C564/2007 – Iyer v National Australia Bank

(1) Application pursuant to s.75 of the Victorian Civil and Administrative Tribunal Act 1998 upheld. Application No. C564/2007 dismissed.

(2) No order as to costs.

(3) Liberty to apply, and, as I am informed that Mr Iyer is overseas as at this date, liberty to apply is specifically reserved on the question of whether his application should be dismissed or struck out.

2. Application No. C556/2007 – Rao v Commonwealth Bank of Australia

(1) Application pursuant to s.75 of the Victorian Civil and Administrative Tribunal Act 1998 upheld. Application No. C556/2007 dismissed.

(2) No order as to costs.

(3) Liberty to apply.

APPEARANCES:

REASONS FOR DECISIONS

GENERAL BACKGROUND

1. These matters are closely related. Indeed, they were heard within 2 days of each other and involve closely related arguments. The Plaintiff Hari Haran Iyer (“Mr Iyer”) has brought an application against the National Australia Bank (“the NAB”). Praveen Rao (“Mr Rao”) has brought an application against the Commonwealth Bank of Australia (“the CBA”). To the best of my recollection, each Plaintiff was present during the presentation of the other’s case, and Mr Iyer in fact sat at the bar table with Mr Rao during Mr Rao’s application. Mr Iyer assisted Mr Rao with his submissions and in fact advanced some arguments on behalf of Mr Rao. The initiating applications also bear a striking similarity. Mr Iyer and Mr Rao gave the impression of having been friends for some time.
2. In each instance, the dispute concerns the calculation of interest by the respective banks. In each instance, a very large amount of exemplary damages is claimed in addition to compensation, and a declaration is also sought. As stated, there was a marked similarly in relation to the arguments advanced by the respective Plaintiffs. Accordingly, what I shall now do is deal firstly with the application of Mr Iyer against the NAB. Much of the reasoning applicable to that application need not then be repeated in relation to the matter of Mr Rao and the CBA. Any additional material or arguments can be dealt with separately.

1. IYER –V- THE NAB

(a) Presentation of the Case

3. In this application Mr Iyer represented himself. Mr C.M. Archibald of counsel appeared on behalf of the NAB. No oral evidence was adduced. The matter proceeded by way of reference to documentary material and submissions.

(b) The Present Application and its Factual Background

4. On 6^th February 2007 Mr Iyer issued an application against the NAB out of this Tribunal pursuant to the provisions of the Fair Trading Act 1999 (“the FTA”). Whilst there has been a large amount of material subsequently provided, and the basis of the application has been spelt out at considerable length, essentially the basis of the application is that the NAB, in relation to a loan, charged Mr Iyer interest compounding monthly rather than simple interest. The initial loan was one of $120,000.00 and was a Variable Rate Home Loan. There is no argument but that the loan contract, executed by Mr Iyer, consists of two related documents – the Facility Agreement Details and the Facility Agreement General Terms. Together they constitute “the loan contract”. The loan contract was executed on 27^th February 2002. Mr Iyer alleges that the NAB did not disclose to him that he would be charged compound interest in the manner in which it was so charged. He also alleges that the payments which he made were routinely allocated initially towards unpaid interest with only the remainder being used to reduce the principal of the debt. The NAB denies that it has breached any obligation which it owes to Mr Iyer, and asserts that the basis upon which interest would be charged was disclosed in the loan contract.
5. The NAB has now brought an application pursuant to ss.75 and 77 of the Victorian Civil and Administrative Tribunal Act1998 (“the VCAT Act”), this application being issued on 12^th April 2007. Whilst nominally reliance was placed on each of those sections, in fact the application essentially proceeded as one pursuant to s.75 of the VCAT Act. In other words, in essence the NAB alleges that Mr Iyer’s application should be summarily dismissed or struck out on the basis that it is frivolous, vexatious, misconceived, lacking in substance, or an abuse of process. It being the NAB’s application, it had conduct of the matter. In determining it, I shall apply those principles which are relevant to applications for summary dismissal, many of which are set out in Norman v Australian Red Cross Society (1998) 14 VAR 243, which in turn reflects many of the principles discussed in decisions of the superior courts. Before striking out or dismissing Mr Iyer’s application, I should be satisfied that it is obviously hopeless, obviously unsustainable in fact or in law, can on no reasonable view justify relief, be bound to fail, or that the NAB has a defence which so completely answers the claim that the claim is manifestly hopeless and untenable. The NAB bears the burden of so satisfying me.

(c) The Submissions on Behalf of the Parties

6. I shall now summarise the cases as advanced by the parties.

(i) The Case on behalf of the NAB

7. The case on behalf of the NAB as presented by Mr Archibald could be summarised as follows.
8. The nub of the dispute is that Mr Iyer complains that he has been charged compound interest instead of simple interest on his home loan, and that this was not disclosed to him. There is no dispute as to the calculation of the interest. It is agreed that interest has been compounding on a monthly basis. Thus, the actual numbers and details are not of concern, but rather the dispute centres upon whether the method of calculation was disclosed. The loan has in fact now been repaid, although a line of credit still exists. Whilst the original application and subsequent documentation refers to a claim by Mr Iyer of just under $1 billion, the amount of what could be described as extra interest paid by Mr Iyer as a result of being charged compound interest rather than simple interest is $4,797.18. This is according to Mr Iyer’s own calculations as contained in his material, and the NAB does not quarrel with it. Apart from filing fees and the like, the balance of the claim – close to $1 billion – is by way of exemplary damages. In addition, in the original application a declaration is sought to the effect that the disclosure of the charging of compound interest is mandatory. Thus, in essence there is an application for compensation and legal costs for an amount of just over $5,300.00; an application for exemplary damages of close to $1 billion; and an application for a declaration. Each of these elements of the application is without foundation and cannot succeed, or is an abuse of process.
9. Dealing firstly with the claim for compensation relating to excess interest, the NAB’s defence is that the terms of the loan contract were disclosed. Clause 8.2 of the Facility Agreement General Terms states clearly that the interest charges accrue daily and are debited on the last banking day of each month. In other words, it is apparent that the interest accrues daily but is debited monthly. How the interest accrues on a daily basis is set out clearly in Clause 8.1 of the Facility Agreement General Terms. Similarly, the meaning of “balance owing on the account” is defined in the agreement. Thus, the method by which interest is charged on this account is disclosed. Accordingly, the claim for compensation based on non-disclosure should be dismissed.
10. Insofar as it is relevant, the Banking and Financial Services Ombudsman, to whom Mr Iyer complained, also found that the disclosure provided in the loan contract by the NAB was sufficient to comply with its obligations. This is raised not because it is in any way suggested that a finding by the Ombudsman is binding upon this Tribunal, but because, in support of his claim for exemplary damages, Mr Iyer seems to be suggesting that the NAB failed to comply with an order of the Ombudsman – see Mr Iyer’s summary of his claim contained in his letter of 22^nd March 2007.
11. The loan contract also disclosed that compound interest would be payable by setting out that, over the total period of the loan (25 years), the total amount repayable would be in excess of $230,000.00 in respect of a loan of $120,000.00. In summary, the uncontested evidence in relation to the documents reveals that disclosure was made. In relation to the claim for exemplary damages, Mr Iyer’s summary of the 22^nd March 2007 contains an admission that the large amount claimed for exemplary damages was inserted, basically, so that the NAB would be interested in the matter and would attend at the Tribunal in order to give an explanation. Thus, the claim for exemplary damages is vexatious. Furthermore, the affidavits and the material placed before the Tribunal show that Mr Iyer’s complaints were treated seriously by the NAB and responses were given to him. There is no basis for claiming exemplary damages. The amount claimed by way of exemplary damages is vexatious in that it is totally disproportionate to the amounts otherwise in dispute. In addition, there is no suggestion that an officer of the bank attempted to mask the nature of the interest to be charged or gave misleading representations. The exemplary damages claim, in whatever amount, must fail and is an abuse of process. Alternatively, if the claim for exemplary damages in the amount currently specified is not struck out or dismissed, the quantum is such that the application should be referred to the Supreme Court pursuant to s.77.
12. In relation to the declaration sought, such would be pointless. In the present case, Mr Iyer is now aware of the method by which interest is charged. If it is sought in the general sense, the requirement of disclosure is already contained in the Uniform Consumer Credit Code. In any event, the obligation has been fulfilled in this particular case and there is no reasonable basis upon which the proceeding for a declaration could be maintained.
13. In summary, the application pursuant to s.75 by the NAB should be upheld and Mr Iyer’s application dismissed or struck out.

(ii) The Case on Behalf of Mr Iyer

14. The submissions advanced by Mr Iyer on his own behalf could be summarised as follows.
15. He was given no explanation or illustration by the NAB as to how it charged its interest. Indeed, how banks charge their interest is a mystery to everyone. In order for there to be proper and genuine disclosure, the relevant information must be transmitted in language which can be understood. It is not just a question of understanding English. Despite being an accountant and a teacher of accountancy, Mr Iyer does still not understand what is meant by the word “debit” concerning which there is no satisfactory definition. The words “debit” and “credit” are confusing even to accountants. Thus, confusion is created by the use of the word “debited” in the loan contract and Mr Iyer did not understand that this would lead to the charging of compound interest. It would have been quite simple to say that what was being charged was compound interest, or interest upon interest.
16. However, an examination of the bank statements reveal that this is what has been done in the present case. Interest, calculated daily on the balance then existing, is added together at the end of the month, debited to the account, and the balance then owing increases accordingly. Daily interest is then payable upon the increased amount. Thus, interest upon interest is being charged. This is not explained in simple language in the loan contract, and this failure is true of the banking industry generally in addition to the NAB. As a detailed examination of the NAB’s statements of account shows, interest is being paid not just on the amount of money advanced, but that amount plus compounding interest, even if the regular payments are being made as required. Even if interest, calculated daily, were debited quarterly, there is a marked difference. The difference is even more significant if interest was debited on a half-yearly basis. For example, a letter has been placed before the Tribunal indicating that the ANZ Bank debits interest on a six-monthly basis. These distinctions are not disclosed in a meaningful way in the loan contract. When the difference between compound interest and simple interest is extended over the full period of the loan, the excess is in the order of 42 percent more than the amount which should be required to be repaid. As this was not explained in clear and intelligible language, the NAB has misled Mr Iyer. The interest rate is expressed as a certain amount per annum. That means annual interest. There are no additional words in the loan contract indicating that the interest is compounded monthly, quarterly, or in any other way. The right to charge compounding interest is not challenged. However, the borrower is entitled to know how interest will be calculated.
17. The NAB and its officers have never given a satisfactory explanation of their behaviour, and have attempted to fob off Mr Iyer at every opportunity. Mr Iyer has had an account with the NAB for a long time, and cannot understand why it did not explain to him, in clear terms, what was happening.
18. In addition, the amount of interest being charged, when examined closely, is incorrect. If, for example, the quoted rate per annum is 7 percent, with interest compounding monthly, the rate per annum is in fact 12.25 percent.
19. In addition, the interest rate for short-term loans, such as 5 years, is normally higher than for long-term loans, such as 25 years. The effect of the manner in which the NAB charges interest pursuant to the loan contract is that the rate is in fact higher for the long-term loan. For example, a 5-year loan at the quoted rate of 7 percent per annum, but compounding monthly, would result in the effective payment of interest at 8.46 percent, whereas a 25-year loan at the quoted rate of 7 percent per annum would in fact result in payment of interest at the rate of 12.25 percent.
20. Reference is made to Regulation 33F of Consumer Credit Regulation 1995 in the State of Queensland, where it is set out that the comparison rate must be calculated as a nominal rate per annum, together with the compounding frequency.
21. In relation to his claim for exemplary damages of almost $1 billion, Mr Iyer stated that he was entitled to be reimbursed for all the time and effort which he had put into preparing this case and in tracing the way in which the banking industry charges interest at undisclosed and unfair rates. He stated that he was entitled to a “prize” for what he had discovered in relation to bank practices. The banks have to be taught a lesson. The figure for exemplary damages which has been put is not meaningless. There is some substance behind it. It is compounding interest which has caused many people to become defaulters and brought them before the courts. This results in repossessions and insolvency. It is also misleading to describe the loan as a principal and interest loan given the manner in which instalment payments made are applied to interest. Nowhere is it set out clearly which proportion of instalments goes to interest and which to principal.
22. The loan contract makes it clear that the interest rate can be varied according to market conditions. If, for example, interest rates climb to 14 percent, and Mr Iyer continued to pay instalments at the rate fixed by the contract, the end result would be that the amount owing pursuant to the contract would in fact increase despite the payments. The currency which he had paid to the bank would in fact be worthless. Mr Iyer, as borrower, would in effect be working solely to give money to the NAB.

(iii) The Reply on Behalf of the NAB

23. The reply of Mr Archibald on behalf of the NAB could be summarised as follows.
24. The relevant assertions of Mr Iyer continue to be those based upon non-disclosure. The arguments he has advanced concern the monthly addition of interest amounts to the outstanding balance is precisely what is disclosed in the loan contract. Furthermore, the projected total cost in the event of the loan running for the agreed period is also set out precisely in the loan contract. The grounds advanced in argument in support of the claim for exemplary damages are not grounds which justify the awarding of such damages, and that part of the claim is also bound to fail.

(iv) Further Reply on Behalf of Mr Iyer

25. With leave, Mr Iyer advanced the following further argument.
26. As set out in s.8 of the FTA, the wording of documents of this nature should be such as to enable ordinary people to understand the effect of such documents. The NAB did not give one example of how the calculation of interest would be made so as to make the relevant portions of the contract understandable. The NAB did not want to disclose how it calculated interest. In relation to the total amount payable, the customer is entitled to know, and should be told, how much of that total amount is interest, and how much is interest upon interest. Mere disclosure of the total amount which is payable if the contract runs for the full period does not assist. In relation to exemplary damages, Mr Iyer stated that he needed a reward for capturing a culprit. In fact, it is more in the nature of punitive damages in that the NAB should be punished for cheating the community for so many years.

RULING

27. At the outset, I must thank the parties (and, in the case of the NAB, those representing it) for the very civil and instructive way in which this application was presented. Mr Iyer had obviously done an enormous amount of work in preparing his submissions. Whilst clearly having passionate and committed beliefs concerning the NAB and banking institutions generally, he then advanced those submissions in a most polite, respectful and orderly fashion. While some of his arguments may not have been to the point, he had obviously done a large amount of research, some of it quite technical, but was nevertheless able to express quite complicated accounting and mathematical propositions in terms which could be understood. I am grateful for his assistance, and also that of Mr Archibald. Appearing as counsel against a self-represented litigant can sometimes be difficult. I also compliment Mr Archibald on the calm, detached and well-reasoned manner in which he advanced the cause of the NAB. The civility and mutual respect demonstrated at the bar table was exemplary.
28. I appreciate that Mr Iyer is deeply committed to this cause. It may also be that his grievances in relation to the banking industry, based upon the calculations which he has made in relation to interest rates, is understandable and has some foundation. However, the sad fact is that, despite the enormous amount of time and energy which he has put into this action, in my opinion it is absolutely bound to fail. The defences outlined by Mr Archibald on behalf of the NAB are such that the claim is answered completely and is rendered hopeless and untenable. In other words, I am of the view that the NAB has discharged the very heavy burden which it bears.
29. Whilst I can understand the submissions advanced by Mr Iyer concerning his grievances with the banking system, a consideration of the salient undisputed facts and the documentary material made available leads me to the irresistible conclusion that his claim is hopeless, and unsustainable in fact and law. It is bound to fail.
30. The NAB’s application pursuant to s.75 of the VCAT Act is successful. In those circumstances, its application pursuant to s.77 does not require consideration, although, as I indicated from the bench, its arguments in that regard, based as they are on quantum, are arguments that have not previously met with great success before me.
31. In considering why the NAB succeeds and Mr Iyer’s application is bound to fail, the following agreed or uncontested facts should be considered.

(i) There is no dispute but that, on approximately 27^th February 2002, Mr Iyer entered into and executed the loan contract, described as a Variable Rate Home Loan National Choice Package Home Loan, with the NAB. That loan was in the amount of $120,000.00, with a variable interest rate of 6.06 percent, and to be repaid by the making of 300 monthly principal and interest repayments.

(ii) Whilst the amount loaned by the NAB was $120,000.00, the contract specifies that the total amount to be repaid by means of the 300 consecutive monthly repayments is $232,143.01.

(iii) In executing the loan contract, Mr Iyer specifically accepted the offer set out in the Facility Agreement Details which incorporated the material contained in the Facility Agreement General Terms.

(iv) In executing the contract, Mr Iyer specifically acknowledged that he had received and read a copy of the Facility Agreement General Terms.

(v) The Facility Agreement Details contain a specific warning as follows:-

“Do not sign this contract document if there is anything you do not understand.”

(vi) Other warnings, such as “Once you sign this contract document, you will be bound by it”, are set out immediately above the place where Mr Iyer signed as borrower.

(vii) The Facility Agreement General Terms contain the following specific provisions under the heading:-

“8. Interest Charges”:-

“Obligation to Pay

8.1 For each loan amount, you must pay us interest charges for each day on its balance owing on the account for the end of that day. Interest charges are calculated daily at the interest rate applying to that loan amount for that day on the basis of a 365 day year (including in a leap year).

When Debited

8.2 The interest charges for a loan amount accrue daily from and including the settlement date and are debited on:-

(a) the last banking day of each month; and

(b) on the day when all money owing under this agreement in connection with the loan amount is finally paid.”

The terms in italics are defined in clause 37.

(viii) There is no argument but that the NAB charged interest accruing on a daily basis and debited (or added to the amount of outstanding indebtedness) on a monthly basis. No argument exists as to the figures, nor as to the fact that Mr Iyer paid this interest. There is also no argument but that, commendably, he discharged this indebtedness rapidly and well within the term of 300 consecutive repayments.

(ix) There is also no argument but that the NAB was charging compound interest, or interest upon interest. I accept that, by reason of this, Mr Iyer paid an amount of interest in the sum of $4,797.18 over and above the amount which he would have paid if he were paying simple interest.

32. I agree with Mr Archibald that the real issue is whether, in relation to the loan contract which was undoubtedly executed by Mr Iyer, there has been proper disclosure of its terms. In relation to the operation of the FTA, has Mr Iyer been able to understand documents relating to the supply of services?
33. In my opinion there has been clear, proper and adequate disclosure of the terms. This would be so whether the “purchaser” of the services, to employ the terminology used in s.8 of the FTA, was the man in the street or, as Mr Iyer is, someone who lectures in accountancy. It is spelt out in the Facility Agreement General Terms as part of the loan contract, that Mr Iyer must pay interest charges “for each day on its balance owing on the account for the end of that day”, as referred to in clause 8.1 set out above. It is also spelt out that “the interest charges for a loan amount accrue daily from and including the settlement date and are debited on the last banking day of each month” – clause 8.2.
34. Despite Mr Iyer’s submissions, I am of the view that these provisions are quite clear. Interest will be charged on a daily basis, and debited to the account on a monthly basis. Mr Iyer has submitted that words such as “debit” are meaningless, even to accountants. Nevertheless, in the many examples which he put before me, he seemed to have a clear grasp on the concept that a debit is added to, or increases, the total amount owing. The terminology seems clear to me and, when all was said and done, seems to me to have been reasonably clear to him. The concept of paying compound interest may be repugnant. That this is what the loan contract provided seems to me to be abundantly clear. Furthermore, the total amount to be repaid should the contract run its full distance of 25 years is specifically spelt out.
35. In summary, Mr Iyer’s claim pursuant to the FTA for all heads of relief claimed – compensation, exemplary or punitive damages, and a declaration – is based upon the absence of any, or any understandable, disclosure of the manner in which interest would be charged. The defence of the NAB is, inter alia, that there has been full and understandable disclosure of the manner in which interest will accrue and the regularity with which amounts of interest will be debited. The total amount payable is also set out. In my view this defence completely answers the claim so that the claim is manifestly hopeless and untenable. On no reasonable view can it justify relief. It is bound to fail. There is no argument but that the contract includes the conditions set out in the Facility Agreement General Terms. Those terms set out explicitly that interest charges accrue daily and are debited on the last banking day of each month. I fail to see even a hint of ambiguity in these conditions, much less the degree of unintelligibility that might be required. As previously stated, Mr Iyer’s arguments concerning the uncertainty of meaning of the word “debited” are unpersuasive, and indeed, the calculations prepared by him and displayed in his spread sheets demonstrate an application of the relevant conditions in exactly the manner which one would expect.
36. In the case of Mr Rao and the CBA, some additional arguments were raised based upon provisions of the FTA such as ss.32W and 32Y, in addition to s.8. Whilst other sections of the FTA were not raised specifically in Mr Iyer’s case, had they been argued they would not have caused me to alter the conclusion at which I have arrived. Without entering into any discussion as to the applicability of ss.32W and 32Y, it does not seem to me that the terms under consideration are unfair terms within the meaning of the sections. As stated many times, they are clear terms specifying the manner in which interest is to be repaid. They do not cause a significant imbalance in the parties’ rights and obligations to the detriment of the consumer within the meaning of the relevant section.
37. There are additional grounds for upholding the NAB’s applications in relation to the claims for exemplary or punitive damages and for a declaration.
38. In relation to exemplary damages (or punitive damages as they were later described by Mr Iyer) the Tribunal is specifically empowered to order these pursuant to s.108(2)(b)(ii) of the FTA. This power exists in the context of a consumer and trader dispute. Assuming that Mr Iyer’s application could be so categorised – and it is not really the way in which it was presented although it could be so described – that dispute has now been determined by me against Mr Iyer. His entitlement to any damages, much less exemplary damages, has been denied. In any event, the awarding of exemplary damages is meant to be an exceptional remedy – see the discussion in the decision of the High Court of Australia in Gray v Motor Accident Commission [1998] HCA 70; (1998) 196 CLR 1. Of course, as a matter of general principle punitive or exemplary damages are not recoverable for a breach of contract, although it may be argued that consumer and trader disputes normally involve contracts and the FTA specifically permits the granting of exemplary damages. Apart from being a remedy only available in exceptional circumstances, other conditions must be satisfied before exemplary damages are awarded. There should be an offence of sufficient enormity committed by the wrongdoer as to justify the awarding of damages by way of punishment and the deterrence of others. No such offence has been committed by the NAB in the present case. I do not regard alleged tardiness or lateness in complying with an order of the Ombudsman as constituting such behaviour. The NAB has treated Mr Iyer’s complaint seriously and responded to them. It has not behaved in a contumelious or highhanded fashion. Even if Mr Iyer was not bound to fail in his application for compensatory damages (which he is), he would be bound to fail in relation to a claim for exemplary damages. I might add that it is apparent that Mr Iyer was in fact claiming such damages and not merely raising the issue so as to provoke interest on the part of the NAB. This seems to me to be apparent from the conclusion of his summary in this regard, but, in any event, it was also emphasised by him in his submissions.
39. The same propositions hold true in relation to the application for a declaration. Once what could be described as the principal action is dismissed, no dispute remains to attract the making of a declaration. This Tribunal certainly possesses the power to make declarations, but general common law principles also apply – see s.124 of the VCAT Act and the annotations following it in Pizer’s Annotated VCAT Act, Third Edition, paragraph 4410 and following. The declaration sought by Mr Iyer is that “compound interest disclosure mandatory”. In the present case, I have found that such disclosure did occur. In addition, as pointed out by Mr Archibald, the Uniform Consumer Credit Code already requires this. Thus, whether one looks at this particular case or at banking practices generally, no practical purpose is to be served by the making of such a declaration. In particular, there remains no dispute in relation to which the declaration could be of assistance. In ASC v Ampolex Limited (1995) 38 NSW LR 504, Kirby P referred to the greater willingness of courts to provide declaratory relief as being “... a beneficial development, at least where there is a real, practical question in controversy, in being or in potential, which the intervention of the court may help to resolve”.
40. Given the findings which I have made, those circumstances do not prevail in the present case and, even if I could be persuaded that a general declaration of the type sought could be made (and, bearing in mind general principles and the wording of s.124 of the VCAT Act, I am far from so persuaded) it would only be repeating what is contained in the Uniform Consumer Credit Code.
41. In summary, the NAB is successful in every respect in relation to its application pursuant to s.75 of the VCAT Act. That being so, the appropriate order seems to me to be a dismissal of Mr Iyer’s application, but I shall hear any further submissions in relation to this. I shall also hear submissions as to any ancillary orders that may be required.

2. RAO -V- CBA

(a) Presentation of the Case

42. This application which, as stated, bears marked similarities to that of Mr Iyer, is brought by Mr Rao against the CBA. This application was heard separately some two days after the application of Mr Iyer against the NAB. Mr Rao, assisted by Mr Iyer, appeared on his own behalf. Mr Pan appeared as solicitor for the CBA. Again, this matter proceeded by way of submissions and reference to documentary material, and no oral evidence was adduced.

(b) Factual Background

43. As in Mr Iyer’s application, Mr Rao’s application is brought pursuant to the FTA, and was issued out of this Tribunal on 31^st January 2007. The amount of damages sought in that initial application is $5,805,500.00; mandatory disclosure of compound interest and the rate of interest is also sought; there is a reference to misleading or deceptive conduct; and the particulars supplied relate to the CBA charging compound interest debited monthly, this allegedly not being clearly shown in the loan contract. As in Mr Iyer’s application, summaries and submissions containing far greater detail were forwarded subsequently. Again, a great deal of work has been put into the preparation of the case. Again, there is little argument but that a contract was entered into by the parties, and there is no dispute concerning the actual payment of interest or the mathematical calculation of same. Alleged non-disclosure in an intelligible form of the conditions relating to interest payments is at the heart of the dispute.
44. There is no argument but that the loan contract, executed by Mr Rao, consisted of two related documents – the Consumer Credit Contract Schedule and the Usual Terms and Conditions for Consumer Lending. Together they constitute “the loan contract”. The contract was executed on 7^th November 2002.

(c) Submissions on Behalf of the Parties

45. I shall now summarise the submissions advanced on behalf of the parties. The CBA carry that heavy burden of proof which I have referred to in Mr Iyer’s application, and presented its submissions before those of Mr Rao.

(i) The Case on Behalf of the CBA

46. The submissions of Mr Pan on behalf of the CBA could be summarised as follows.
47. Whilst Mr Rao’s initial claim was for approximately $5.8 million, subsequently he amended this to a claim for almost $1 billion, however, later correspondence again indicates that the figure claimed may be approximately $5.5 million. The situation is unclear.
48. Mr Rao’s original claim, pursuant to the loan contract of 7^th November 2002 was for $250,000.00. The loan contract was in effect constituted by a Consumer Credit Contract together with a copy of the CBA’s Usual Terms and Conditions. In the Consumer Credit Contract Schedule, the total amount of repayments is set out as being $541,214.89, the loan being for a period of 30 years. The usual Terms and Conditions, which form part of the loan contract, set out, in clause 6, that interest accrues daily calculated on the unpaid daily balance. It is then clear, by referring back from clause 6.3 to item (H) in the Consumer Credit Contract Schedule, that the frequency with which interest is debited to the loan account is monthly. It is not alleged by Mr Rao that he was not provided with these documents at the time of executing the contract. It is not suggested that there were any verbal representations made which had some effect upon his entering into the contract. He does not suggest that the Consumer Credit Contract Schedule and the Usual Terms and Conditions do not constitute the whole of the contract.
49. The calculations advanced by Mr Rao as to how simple interest would be calculated contain flaws. The CBA has made a careful explanation of how interest is calculated. It has sent several letters to Mr Rao setting out how its calculations are made. An example of this is its letter to Mr Rao of 22^nd January 2007.
50. Mr Rao’s claim is an abuse of process, misconceived and lacking in substance. In this regard, reliance is placed upon the judgment of Ormiston JA in State Electricity Commission of Victoria v Rabel [1998] 1 VR 102 at 109. Whether Mr Rao’s claim is for $5.8 million or almost $1 billion, it cannot succeed. For example, it is totally disproportionate to the amount of the loan and the amount in dispute.
51. The CBA submits that the application pursuant to s.75 of the VCAT Act should succeed, but, should it fail in that application, it then seeks, pursuant to s.77 of the VCAT Act, that the matter be referred to the Supreme Court where the appropriate rules of procedure would be of assistance.

(ii) The Case on behalf of Mr Rao

52. The submissions advanced by Mr Rao on his own behalf, and with the assistance of Mr Iyer, could be summarised as follows.
53. Mr Rao stated that he was an electronics engineer with an employment record going back over 20 years in positions of very considerable authority and responsibility. His top-level work in quality control has caused him to develop a keen interest in and appreciation of compliance with government and industry standards and regulations.
54. In September 2006, Mr Iyer alerted Mr Rao to the fact that banks were charging compound interest. Mr Rao found this difficult to accept and was certainly not aware of it. Even when he examined his own loan contract, executed in 2002, he was not convinced that compound interest was being charged. He was uncertain, and decided to raise the issue with the CBA. He sought copy documents from the CBA, and was prepared to pay for these, but was told he could not have them. The documents sought related to the interest that he has been charged and the repayments which he had made. When the CBA was not being helpful, Mr Rao took the matter to the Banking and Financial Services Ombudsman. He also asked the CBA for an answer to the basic question as to whether the interest charged was compound interest or simple interest. The initial response which he obtained from an officer of the CBA was that such officer was not sure, but would make enquiries. Ultimately he got a response saying that it was simple interest. This caused further confusion. It was later confirmed that simple interest was what was being charged. However, in response to a letter from Mr Iyer, the CBA said that it charged compound interest on such loans. The failure to disclose that at least some of the interest is charged on a compound basis is deceptive. The fact that there is misleading and deceptive conduct is emphasised by the fact that the bank staff themselves do not know whether it is simple or compound interest that is being charged.
55. Further, material obtained from the CBA website refers to the power of compounding returns in relation to term deposits. There is a reference to compound interest in the setting out of rates for term deposits. However, when what is under consideration is a home loan or a personal loan, there is no reference to compounding. CBA’s explanations in this regard cannot be understood. Reference is made to s.8(2)(c) of the FTA.
56. Mr Rao stated that he had been a faithful customer of the CBA for many years, and had never defaulted on a payment. However, he had been given the “run around” in relation to this matter. CBA has been only too happy to secure the business, such as the loan, rapidly, but has then been obstructive and delaying in relation to the explanation of the methodology of charging interest. The reason for claiming punitive damages is to deter the bank from charging compound interest in the future without there being proper disclosure and because it has acted in a high-handed manner. In relation to the FTA, reliance is also placed on s.32I(2), s.32W and s.8.
57. I then permitted Mr Iyer to make some submissions on Mr Rao’s behalf in relation to the more technical and legal aspects of the application. Whilst this may be seen as slightly irregular, in the particular circumstances of this application it seemed to me to be a fair and reasonable step to take. It was mentioned to Mr Iyer, and understood by him, that there was no need for him to repeat exactly the same submissions as had been put to me when he was conducting his own case. On this occasion, Mr Iyer also referred to texts of which he is the author. In order to demonstrate the confusion and lack of certainty that may surround some accounting practices, balance sheets and the like (particularly if terminology is not clear), Mr Iyer referred to a theoretical problem which he had posed to a number of accountants and got differing answers or results. However, all of the answers provided could be certified as being true and fair. The same difficulty can be encountered, for example, in trying to advise a client as to exactly how much profit an enterprise of the client made in a particular year. Such an estimate is based upon various presumptions and interpretations. Furthermore, even when different accountants arrive at the same ultimate figure, sometimes they have arrived there despite adopting different approaches and on the basis of different understandings or interpretations.
58. Mr Iyer then referred me to ss.97 and 98 of the VCAT Act and to my decision in Zeus & Ra Pty Ltd v Nicolaou [2002] VCAT 1041. He also referred me to other authorities including such cases as Uren v John Fairfax & Sons Pty Ltd [1966] HCA 40; (1966) 117 CLR 118 on the issue of exemplary damages. To seek back from the CBA (or the NAB) only that portion of the interest which has been overcharged, and not seek exemplary damages, would be like ordering a thief to merely return stolen goods but not impose any other penalty. There must be some deterrence. In the present case, there has been a contumelious disregard of Mr Rao’s rights. This is particularly so give that one party is much more powerful than the other – reference is again made to Uren’s case at page 130. Reference is also made to State of Queensland v Pioneer Concrete (QLD) Pty Ltd [1999] FCA 499.
59. There is a keen public interest in this issue, but the CBA has treated Mr Rao in a high-handed fashion. It is again emphasised that reliance is placed upon s.32W of the FTA. The relevant terms in the loan contract are unfair. The Tribunal’s attention was also directed to s.32Y. A declaration is also sought that there be proper and understandable disclosure of the fact that interest is charged on a compounding basis in contracts such as these.
60. It should also be pointed out that Mr Pan had been present during Mr Iyer’s application against the NAB. During Mr Iyer’s submissions on behalf of Mr Rao, he very fairly and properly asked whether he should explain again, for Mr Pan’s benefit, the calculations and the like which he had advanced during his own application. Mr Pan stated that, as he had been present, and had understood what was being put, he did not need them to be repeated.

(iii) The Reply on Behalf of the CBA

61. The reply of Mr Pan on behalf of the CBA could be summarised as follows.
62. Mr Rao stated that he first became aware of the compound interest situation in September 2007. One cannot be misled after the event. All relevant documentation as to interest rates was before him when he executed the contract. There is no suggestion that there was any verbal representation prior to the execution of the contract that induced him to enter into it. Correspondence between the banks and Mr Iyer are not relevant to Mr Rao’s application.
63. It is true that words like “simple interest” and “compound interest” are not contained in the Schedule which forms part of the loan contract. Rather than using a label, the methodology or procedure by which interest will be charged is disclosed. The actual figures of repayment have been disclosed in very clear terms. Both the method to be adopted and the actual figures are set out. It is also denied that Mr Rao received the “run-around”. Attempts were made to explain in clear terms the CBA’s position.
64. The criteria for punitive or exemplary damages have not been met. Some of the cases to which Mr Iyer referred are not relevant to the present application.

(iv) Further Reply on behalf of Mr Rao

65. Mr Iyer was then permitted to make a further reply on behalf of Mr Rao. This was to the effect that, if enquiries are made concerning the terms of a contract at a later date, there remains an obligation to give clear disclosure. The correspondence with other banks placed before me was so as to demonstrate that this is a problem throughout the banking industry. In particular, the letter from the CBA to Mr Iyer is a general letter referring to the use of compound interest.

RULING

66. I need not repeat the criteria in relation to summary dismissals as set out in Norman’s case and referred to in the decisions of superior courts. As in Mr Iyer’s application, the burden placed upon the party seeking the summary dismissal is a heavy one.
67. As in Mr Iyer’s application, that heavy burden has been discharged, and for many of the reasons previously stated in relation to it.
68. There is no argument as to the fact that Mr Rao entered into a loan contract with the CBA, and that the contract is constituted by a Consumer Credit Contract Schedule and the Usual Terms and Conditions for Consumer Lending. Paragraph (b) of the Schedule sets out the amount of the loan at $250,000.00. Paragraph (e) sets out the amounts to be repaid monthly over 30 years and the total amount of those repayments, namely $541,214.89. Paragraph 6.1 of the Usual Terms and Conditions specifies that interest accrues daily. Paragraph 6.3, under the heading “Debiting of Loan Interest and Default Interest”, states that the Loan Account will be debited with the frequency stated at item H. Item H states “Frequency with which interest is debited to the Loan Account Monthly”. Thus, as in Mr Iyer’s application against the NAB, the contract clearly spells out that interest accrues daily and is debited to the Loan Account on a monthly basis. The amount of each monthly repayment is specified, and the total that will be repaid over 30 years is set out with precision. The defence of the CBA to the allegations of non-disclosure, unconscionable conduct, misleading and deceptive conduct or unfair terms seems to me to completely answer the claim to the extent that the claim is manifestly hopeless and untenable. There is no suggestion of any oral representations of a misleading or deceptive nature which influenced Mr Rao into executing the contract. As I have previously stated in relation to Mr Iyer’s application, s.32W and related sections do not assist Mr Rao or lead me to the conclusion that the application with the CBA should not succeed.
69. Whilst each case must be viewed separately, the similarity between what has occurred and what is set out in the loan contracts is so striking and complete that many of the observations contained in the ruling relating to Mr Iyer are applicable in the present case and need not be repeated. I would repeat that Mr Rao, like Mr Iyer, presented his case in a most polite and helpful way, and I appreciate that he too feels a genuine grievance in relation to the banking industry and the CBA in particular. I should add that Mr Pan also presented the case on behalf of the CBA in a similarly helpful manner. Whilst I do not doubt that Mr Rao, like Mr Iyer, feels genuinely aggrieved and has gone to a lot of trouble in the preparation of his application, the fact remains that it is obviously hopeless, unsustainable in fact and law, cannot on any reasonable view justify relief, and is bound to fail. The material provided and the defence of the CBA lead irresistibly to this conclusion.
70. These observations, and those that are made in relation to Mr Iyer’s case, hold true for the application for compensation, the application for exemplary or punitive damages, and the application for a declaration. The reasons previously expressed in Mr Iyer’s application are equally applicable in Mr Rao’s application in respect of each head of relief sought.
71. The application by the CBA is successful. As in Mr Iyer’s application, the appropriate order seems to me to be one of dismissal, the original application failing in its entirety, but if necessary I will hear argument in relation to this. I will also hear submissions as to any ancillary orders which may be sought.