Pilot says bank 'conned' him

by Chris Griffith
Published 26 November 1995 in The Sunday Mail


my face


Another victim of Westpac's foreign currency loans catastrophe yesterday accused the bank of "conning" him out of damages.

The claim followed the tabling in Federal Parliament last week of sensitive legal documents about the case.

Fifteen years ago, Brisbane pilot Lionel Potts was a successful, well-off Australian Airlines Captain. He had been a TAA pilot since 1957, flying everything from Fokker Friendships to Boeing 727s, and he was looking forward to a comfortable retirement.

Today the 66-year-old's life is a nightmare. He has no money, no house, no regular job, and no assets. His pilot's superannuation is exhausted, and he and his wife are supported by their daughter whom they live with.

The story of the Potts's dream turned sour began in 1981, when Mr Potts purchased $400,000 of land in Holland Park to develop as a retirement earner. In 1982 he accepted bank advice and took out a Westpac foreign currency loan of A$507,000 initially in Japanese Yen.

But the loan immediately sustained losses -- A$120,000 in the first 12 months as the Australian dollar dipped. By 1987 Mr Potts owed Westpac A$1.7 million.

In 1990, Mr Potts took Westpac to the Queensland Supreme Court and won. He was awarded $600,000 damages plus costs, but in April 1992 Westpac successfully had the $600,000 struck out in the Queensland Full Court.

The court ruled trade practices law required a damages claim to be served within three years of Mr Pott's loan in 1982, otherwise no damages were payable.

However Mr Potts became aware of a July 1991 WA Full Court decision on trade practices law which indicated he was entitled to his damages. The WA decision was later confirmed by the High Court in October 1992.

Westpac reacted by writing to Mr Potts, saying it would subject itself to a legally binding out-of-court "expert determination" of his case by retired NSW Chief Justice Sir Laurence Street, provided both parties agreed in writing that the determination was "final and binding".

Believing the bank to be genuine, and believing Sir Laurance would decide the issue of damages, Mr Potts signed the agreement in February 1994, effectively foregoing any right to later legal action.

But Sir Laurance's agreement did not allow him to decide damages.

According to documents obtained by The Sunday Mail last week, Westpac wrote to Sir Laurance in September 1994, saying the agreement "does not invite or require any reconsideration of the question of quantum [damages]", a point Mr Potts said was never made clear to him at the time.

A month later, Sir Laurence ruled that the Full Court indeed was wrong to deny Mr Potts his damages, but as Westpac had advised, he did not decide the amount.

Mr Potts said that after Sir Laurance's determination, he expected Westpac would offer to negotiate a figure with him.

However Westpac wrote to him and offered only $193,333, in a take-it-or-leave-it settlement. Mr Potts advice by accountants Hall Chadwick had indicated he should be entitled to $2m.

In its letter to Mr Potts dated 31 October 1994, Westpac scathingly criticised Sir Laurance Street's determination, even though the bank had also agreed in writing to be bound by whatever Sir Laurance decided.

The letter said Sir Laurance had "gone beyond what he was asked to determine", that he "appears to have misinterpreted what the Court of Appeal said", and that there was "a flaw in the reasoning" in his interpretation of trade practices law.

Mr Potts, however, did not accept the bank's offer. He said he would accept a settlement as decided by the original trial judge: $600,000 damages, $200,000 costs, and associated interest, as a compromise.

Mr Potts said the bank had since withdrawn its offer, as no agreement could be reached.

He said Westpac had not only "conned" him into accepting a determination that never offered a fair financial settlement, it had attempted to disarm him of future legal avenues because he had signed the agreement.

"We have lost everything I ever worked for. I even retired early so I could use my superannuation funds to get me out of trouble with this loan -- that went as well."