Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Gooley v NSW Rural Assistance Authority [2020] NSWCA 156 Hearing dates: 1, 2 July 2020; further written submissions received on 21 July 2020 Date of orders: 24 July 2020 Decision date: 24 July 2020 Before: Macfarlan JA at [1] Meagher JA at [2] White JA at [99] Decision: Appeal dismissed with costs. Catchwords: CONTRACTS – variation – whether term of credit facility varied – whether variation supported by adequate consideration – where difference in obligations capable of benefiting either party – contract effectively varied – whether bank repudiated contract in maintaining that term varied. BANKING AND FINANCE – Australian Securities and Investments Commission Act 2001 (Cth), ss 12CB and 12DA – whether in varying term of credit facility bank engaged in misleading or deceptive or unconscionable conduct – whether in making loan bank engaged in unconscionable conduct – no question of principle. BANKING AND FINANCE – Code of Banking Practice, cll 2.2, 25.1 and 25.2 – whether breach of obligation to exercise care and skill of a diligent and prudent banker – whether breach of obligation to try to help borrower to overcome financial difficulties with a credit facility – no question of principle. BANKING AND FINANCE – National Credit Code – whether loan "unjust" credit contract within s 76(1) – whether bank failed to respond to hardship notices as required by s 72(4) – whether National Credit Code applied – where the predominant purpose for which credit was provided or was intended to be provided was not a Code purpose – no question of principle. PRIMARY INDUSTRY – Farm Debt Mediation Act 1994 (NSW) – whether enforcement action taken in contravention of Act – no question of principle. Legislation Cited: Australian Securities and Investment Commission Act 2001 (Cth), s 12CB, 12CC, 12DA Farm Debt Mediation Act 1994 (NSW), ss 4, 8, 9, 11 National Consumer Credit Protection Act 2009 (Cth), s 3 National Credit Code, ss 72, 76 Cases Cited: Australian Securities and Investments Commission v Kobelt [2019] HCA 18; (2019) 93 ALJR 743 Cellarit Pty Ltd v Cawarrah Holdings Pty Ltd [2018] NSWCA 213 Doggett v Commonwealth Bank of Australia (2015) 47 VR 302 Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 Gooley v NSW Rural Assistance Authority (No 2) [2018] NSWSC 1049 Paccioco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199 Perpetual Company v Khoshaba [2006] NSWCA 41; 14 BPR 26,369 Waller v Hargraves (2012) 245 CLR 311; [2012] HCA 4 Texts Cited: JD Heydon, Heydon on Contract (Lawbook Co, 2019) Category: Principal judgment Parties: Paul Gooley (First Appellant) Susan Gooley (Second Appellant) NSW Rural Assistance Authority (First Respondent) Commonwealth Bank of Australia (Second Respondent) Bank of Western Australia (Third Respondent) Representation: Counsel: P E King and D Toohey (Appellants) T D Castle (Second and Third Respondent) Solicitors: McKell's Solicitors (Appellants) Dentons (Second and Third Respondents) File Number(s): 2019/326527 Publication restriction: Nil Decision under appeal Court or tribunal: Supreme Court Jurisdiction: Equity Division Citation: [2019] NSWSC 1314 Date of Decision: 30 September 2019 Before: Parker J File Number(s): 2016/279614 [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Judgment 1. MACFARLAN JA: I agree with Meagher JA. 2. MEAGHER JA: Between October 2004 and May 2018, the appellants, Mr and Mrs Gooley, operated a farming business in partnership on two properties near Casino – 'Clovass', consisting of five parcels of land, and 'Dyraaba', which was purchased in June 2011. In late 2007 they transferred their banking facilities to the Bank of Western Australia (BankWest), whose assets and liabilities were transferred to the Commonwealth Bank of Australia (CBA) as from 1 October 2012. The present proceedings were commenced by Mr and Mrs Gooley against the NSW Rural Assistance Authority (RAA) and CBA in September 2016 seeking a declaration that the RAA had acted wrongfully in issuing a certificate under Farm Debt Mediation Act 1994 (NSW) (FDM Act), s 11 permitting CBA to commence enforcement proceedings against them. In response CBA filed a cross-claim for judgment for the amount then outstanding and for possession of the Clovass and Dyraaba properties. By a second cross-claim Mr and Mrs Gooley sought damages and compensation for breaches of contract and contraventions of federal consumer and credit laws by BankWest and subsequently CBA. This appeal is from the primary judge's orders dismissing that second cross-claim: Gooley v NSW Rural Assistance Authority (No 3) [2019] NSWSC 1314. Background facts 1. BankWest first provided lending facilities to Mr and Mrs Gooley in December 2007. The principal facility was a $1.2 million fixed interest commercial loan, referred to as a FICL. That facility was for a term of 15 years, the rate of interest fixed and the borrowers' obligation to pay interest only during the first five years, with monthly repayments of principal and payments of interest to be made during the remaining 10 years. The FICL was drawn down on 12 December 2007. There was also a fixed interest term loan, described as a Business Edge loan, of $150,000 repayable as to principal and interest over a period of five years (J[144], [145]). 2. In early January 2008 there was major flooding of Clovass. Mr and Mrs Gooley sought assistance from RAA. That assistance was forthcoming and an amount of $130,000 was to be advanced, secured by a second mortgage. The granting of that mortgage required the consent of BankWest. That consent was given with the bank's agreement that the amount secured by its mortgage was limited to $1.65 million. In July 2008 a variation letter and varied Facility Terms were drawn up and, on the bank's case, the varied Facility Terms were signed and returned. They provided for the reduction in the term of the FICL to five years interest only with the principal to be repaid on 12 December 2012 (J[149], [151], [152]). In the period to December 2012 there were further variations to the bank facilities. Each was effected by the return of a signed copy of varied Facility Terms. With the exception of two variations relating to overdraft limits, each Facility Terms document purported to record the terms of all of the then current facilities. 3. Mr and Mrs Gooley sold a part of the Clovass property (the Patton land) in August 2009. The proceeds of that sale were used to pay out the Business Edge loan and to reduce the FICL by $150,000 to $1,050,000. Varied Facility Terms were signed on 18 September 2009. In April 2010 a new five year term loan of $100,000 was made. The varied Facility Terms were signed on 22 April 2010. In August 2010 the existing overdraft facility was temporarily increased by $100,000 to $400,000 until 31 January 2011, and Facility Terms recording that variation only were signed by Mr and Mrs Gooley on 20 August 2010. 4. In February 2011 BankWest agreed to advance a further $550,000 to the Gooleys. $400,000 of that amount was for the purchase of Dyraaba ($240,000) and a smaller adjoining property ($130,000) and the funding of repairs to infrastructure and the residence on Dyraaba ($30,000). The balance of $150,000 was to be used as working capital to purchase cattle. That loan was interest only for a term of two years. Dyraaba was previously owned by Mrs Gooley and her brother and operated by them in partnership. It was agreed that Mrs Gooley should buy out her brother with the intention that her parents, retired dairy farmers, continue to live in the residence (J[168], [182]). On 8 February 2011, Facility Terms were signed recording the permanent increase in the overdraft limit to $400,000. The varied Facility Terms for the Dyraaba loan were signed on 3 June 2011 and that loan was advanced in early July 2011. 5. In February 2012 Mr and Mrs Gooley gave consideration to the further restructuring of their business. One option was selling the cropping land at Clovass and refinancing Dyraaba. Another was to sell all the remaining land at Clovass, move the cattle operation to the Northern Tablelands, and retain Dyraaba (J[187], [188]). 6. In April 2012 the bank learned for the first time of the Gooleys' then indebtedness to a local stock and station agent, George & Fuhrmann (G&F) of approximately $400,000. In May, Mr and Mrs Gooley sought a "carry on" loan to pay their other creditors (J[194]). That loan was declined. At this time, management of their accounts was transferred to the BankWest department responsible for doubtful debts, Credit and Asset Management (CAM). On 14 November 2012 the Gooleys were advised by email that the FICL ($1,050,000) was to be repaid on 12 December 2012. At that time Mr Gooley enlisted the assistance of a finance broker, Mr Richardson. In January 2013 an informal arrangement was made under which Mr and Mrs Gooley continued to make interest only payments to the bank totalling $10,500 per month, $7000 in relation to the expired FICL and $3500 in relation to the still current Dyraaba loan (J[224]). 7. During this period they attempted to make repayment arrangements with their trade creditors, including G&F ($342,000) and a local transport firm ($115,000). The Clovass property was offered for sale. A possibility of refinancing with Suncorp did not proceed (J[237]). In July 2013 the Dyraaba loan expired and went into default (J[251]). G&F commenced recovery proceedings in October 2013. In early 2014 Mr and Mrs Gooley stopped making monthly payments to the bank. The Financial Ombudsman Service (FOS) to whom they had made a complaint in June 2014 dismissed that complaint in May 2015. This complaint to the FOS was made with the assistance of Mr Bundy, who specialised in representing borrowers in their dealings with financial institutions (J[241]). In November 2015 G&F obtained a default judgment for $400,000 (J[250]). A farm debt mediation between Mr and Mrs Gooley and CBA was unsuccessful, and in June 2016 RAA issued a certificate under FDM Act, s 11 permitting CBA to commence proceedings to enforce its securities (J[279]). 8. In April and May 2017 the Clovass and Dyraaba properties were relisted for sale. By May 2018 Mr and Mrs Gooley had sold those properties. After payment of monies owed to CBA, RAA and G&F there was a surplus of $610,000. Claims to that amount were the subject of orders made by Stevenson J on 10 August 2018 following his Honour's judgment in Gooley v NSW Rural Assistance Authority (No 2) [2018] NSWSC 1049. That amount was apportioned between CBA and G&F, with the balance ($27,000) paid to Mr and Mrs Gooley. In these circumstances the only claims remaining to be dealt with in the proceedings were those made by the second cross-claim. The claims made by Mr and Mrs Gooley 1. Mr and Mrs Gooley's principal claims to damages and compensation were directed to what they contended would have happened at three different points in time but for the bank's breaches of contract, misleading or deceptive conduct, unconscionable conduct or enforcement action taken in contravention of the FDM Act. Those points in time were July 2008 when the term of the FICL was varied from 15 to five years, February 2011 when the bank agreed to make the Dyraaba loan and from December 2012 when the bank sought repayment of the FICL. At J[527] the primary judge recorded that this damages case "developed over the course of the proceedings. It did not assume its final form until part way through the trial, when it was summarised in an affidavit sworn by Mrs Gooley on 10 April 2019." 2. As finally maintained the first of those claims was that had Mr and Mrs Gooley become aware in July 2008 that the term of the FICL had been reduced to five years they would have sold Clovass and moved their beef fattening operation to the "Northern Tablelands", describing an area in the Armidale, Guyra, Glen Innes and Inverell districts. The damages claimed on the basis that they did not do so, were $13 million (J[21], [35], [528]). Secondly it was claimed that if in early 2011 BankWest had declined to make the Dyraaba loan, Mr and Mrs Gooley would have sold Clovass and moved their operations to the Tablelands in July 2011. The damages claimed for their not having done so were $10.4 million (J[31], [35], [529]). Thirdly, it was claimed that had the bank not repudiated the 15 year FICL in December 2012 Mr and Mrs Gooley would have retained Clovass and Dyraaba and traded out of their difficulties with the benefit of that facility. The damages claimed for wrongful repudiation were $8.3 million (J[36], [530]). In the alternative to this last claim, Mr and Mrs Gooley challenged the bank's entitlement to charge interest at contractual rates between January 2013 and May 2018, as well as its right to recover various legal and other costs under the facilities; and alleged contraventions from April 2012 of the FDM Act and National Credit Code as well as breaches of the Code of Banking Practice, which in turn were said to constitute breaches of contract. The primary judge's conclusions 1. At J[722] the primary judge summarised his conclusions with respect to these claims: (1) the variation in the Facility Terms made in July 2008, and confirmed in September 2009, April 2010 and June 2011, which rendered the principal amount advanced under the FICL repayable in December 2012, was contractually effective; (2) the Bank's conduct in effecting the variation did not give rise to an estoppel, nor was it misleading or deceptive or unconscionable; (3) the Bank's conduct in making the Dyraaba loan did not involve any breach of the Banking Code of Practice nor was it unconscionable; (4) nor did the Bank's conduct from 2012 onwards involve a breach of the Code of Practice or unconscionable conduct; (5) in any event, the Gooleys have failed, on the probabilities, to make out an entitlement to damages for the Bank's alleged breaches; (6) the Bank was entitled to charge interest at contractual rates after December 2012 and no interest refund is due to the Gooleys. The issues in the appeal 1. There are 10 grounds of appeal. Many of them do not comply with the requirement that they specify the relevant error: Uniform Civil Procedure Rules, r 51.18(1). Grounds which assert unidentified errors in the "construction and application" of the Code of Banking Practice or Australian Securities and Investment Commission Act 2001 (Cth) (ASIC Act) and/or National Credit Code (grounds 1 and 2) or that there was error "in assessing the significant losses" suffered by the appellants and whether or not those losses "were caused and/or contributed to by the financial misconduct" of the bank (ground 4) plainly do not comply with that requirement. Nor in an appeal where substantive challenges are made to findings of fact is it sufficient for the grounds of appeal merely to assert error in holding that a loan has been varied (grounds 5 and 9), especially where no separate statement of the findings challenged is included in the written submissions as required by UCPR r 51.36(2). 2. That said, Mr and Mrs Gooley's written submissions address three subjects: (1) the efficacy of any variation of the FICL facility in July 2008; (2) the Dyraaba advances totalling $550,000; and (3) the bank's conduct in and from April 2012. CBA's submissions respond to the issues raised in relation to those subjects notwithstanding that they "do not fully align" with the grounds of appeal. At the outset of the oral argument the Court indicated to counsel for Mr and Mrs Gooley that their case on appeal would be treated as "defined and circumscribed" by their written submissions. Although it is unsatisfactory that the legal and significant factual issues in the appeal are not specified by the grounds of appeal, as the UCPR provide, in this case the course adopted allowed the appeal to be argued and determined without further delay and cost. 3. So proceeding, the following are the principal issues in the appeal: 1. As to the (alleged) variation of the FICL in July 2008: 1. Whether the term of this loan was reduced to five years, interest only. 2. Whether BankWest provided consideration for that variation. 3. Whether in making that variation, and subsequent variations, BankWest engaged in misleading or deceptive or unconscionable conduct contrary to ASIC Act ss 12CB or 12DA. 4. Whether BankWest, by that subsequent conduct, was estopped from maintaining that the term of that loan had been varied. 1. As to the Dyraaba loan: 1. Whether the making of this loan involved a breach of cl 25.1 of the Code of Banking Practice and a breach of contract. 2. Whether in making this loan BankWest engaged in unconscionable conduct contravening ASIC Act, s 12CB. 3. Whether in making this loan the bank contravened National Credit Code, s 76(2). 1. As to conduct in and from November 2012: 1. Whether in maintaining that the FICL expired in December 2012 the bank repudiated that agreement, and if so, whether that repudiation was accepted by Mr and Mrs Gooley. 2. Whether the bank breached cll 2.2 and 25.2 of the Code of Banking Practice by leaving it "to [the Gooleys] to deal with their trade creditors" after April 2012. 3. Whether the bank contravened FDM Act, s 8 by taking "enforcement action", including by seeking that Mr and Mrs Gooley execute a deed of forbearance. 1. In oral argument the second of these subjects was dealt with first. Did the making of the Dyraaba loan involve any breach of contract or actionable misconduct Clause 25.1 of the Code of Banking Practice 1. Clause 25.1 of this Code provided: 25.1 Before we offer or give you a credit facility (or increase an existing credit facility), we will exercise the care and skill of a diligent and prudent banker in selecting and applying our credit assessment methods and in forming our opinion about your ability to repay it. 1. The terms and conditions on which each loan facility was made available included BankWest's General Terms for Business Lending. As at February 2011 the current version of those conditions was the December 2007 edition. It was conceded that the effect of cl 20 of those General Terms was that the provisions of the Code were incorporated into Mr and Mrs Gooley's contract or contracts with the bank. Mr and Mrs Gooley's loan application 1. The circumstances in which the application for this loan was made in January 2011 are set out at J[168]-[173] and J[401]-[421] and summarised at [6] above. 2. As the primary judge observed at J[171] this proposal reflected a modification to Mr and Mrs Gooley's farming strategy by increasing their beef fattening operations which unlike cropping were not so vulnerable to wet conditions and flooding. It included selling the Patton land, acquired in March 2005, so as to reduce their reliance on cropping. Mr Gooley's letter dated 14 January 2011 in support of the application enclosed an "information package" and included a lengthy narrative describing the "revised farming strategy". The financial information provided included – * Current trading results to 30 October 2010 and budget forecasts for the remaining period to 30 June 2011 which assumed the acquisition of Dyraaba from 1 March 2011. * Budget forecasts adopting two scenarios for the "transitional" year 1 July 2011 to 30 June 2012, one retaining the Patton land and the other selling it. * "Full potential" budget forecasts for the year 1 July 2012 to 30 June 2013, adopting the same two scenarios. 1. In the case of each of the full year forecasts the underlying cropping and cattle stock assumptions were spelled out as were the interest and principal repayments and financial charges to be paid under the assumed BankWest facilities, an existing RAA loan, an existing home loan and existing hire purchase contracts and chattel leases. Those assumptions for the year ended 30 June 2013 included that the FICL loan (by this time reduced to $1,050,000) would continue with interest only payments beyond December 2012 and that no repayment of principal would be required in relation to the Dyraaba loan which would continue beyond March 2013 as an interest only loan. Mr Gooley's letter concluded by reference to a 2013/2014 financial year forecast, which assumed the sale of the Patton land and elimination of equipment financing contracts, that their "ability to service our debts" is demonstrated, "our EBIT being 2.5 times our financing commitments". BankWest's assessment 1. As the primary judge found, the credit risk assessment (CRS) prepared by the relevant bank officer, Mr Mitchell, and dated 27 January 2011 was "resubmitted" on 3 February and approved on 4 February 2011 (J[402]-[406]). At that time a varied Facility Terms document addressing only a temporary increase in the existing overdraft facility was signed and returned by Mr and Mrs Gooley. A further CRS was prepared on 13 April 2011 and the varied Facility Terms document with respect to the Dyraaba facility was signed by Mr and Mrs Gooley on 3 June 2011. Contrary to the primary judge's observation at J[413] it is apparent that the 27 January 2011 CRS in evidence was the resubmitted version. It is also apparent from a further CRS dated 29 April 2011 that BankWest's assessment of their "capacity to repay" remained the same during the whole of this period. The figures making up that assessment are extracted by the primary judge at J[412]: 30/6/10 30/6/11 30/6/13 CAFDS $296 $207.6 $556 Bank payments $183.7 $183.7 $248.9 HP/Lease payments $71.9 $61.8 $12.3 Total debt service $255.6 $245.5 $261.2 Debt service ratio 1.2x 0.85x 2.1x 1. For the year ended 30 June 2013, this analysis shows assuming bank debt of $2.1 million (the limit of the existing and proposed facilities including the Dyraaba loan) for a term of 15 years at an interest rate of 8.55% that the annual principal and interest payments would be $248,900. Taking account of Mr and Mrs Gooley's projected net cash after operations (CAFDS) of $556,000 per annum (which includes Mrs Gooley's annual salary of $77,000) and projected hire-purchase and lease payment obligations of $12,300 per annum, the net cash available was 2.1 times their projected annual debt servicing obligation of $261,200. Primary judge's conclusion 1. The primary judge addresses Mr and Mrs Gooley's claim that there was a breach of cl 25.1 at J[663]-[682]. Their case was that when determining whether to approve the Dyraaba facility the bank failed to exercise the skill and care of a prudent and diligent banker in applying its credit assessment methods, and in forming an opinion as to their ability to repay their existing and proposed facilities. It was contended that had the bank performed that obligation it would not have advanced the additional funds sought with the result that they would have sold Clovass and moved their cattle operations to the Northern Tablelands. To make good that case Mr and Mrs Gooley were required to establish that had the bank exercised the care and skill of a diligent and prudent banker in selecting and applying its credit assessment methods, and in forming its opinion about their ability to repay, more probably than not the Dyraaba loan would not have been made. 2. As the Victorian Court of Appeal held in Doggett v Commonwealth Bank of Australia (2015) 47 VR 302 at [8] (Whelan JA), [163] (McLeish JA), [218] (Garde AJA) the obligation under cl 25.1 requires care in the selection and application of credit assessment methods and in the formation of an opinion as to the borrower's ability to repay. It does not presuppose or require a bank to conclude that the borrower has the capacity to repay before deciding to offer a loan. In that case the Court divided on the factual question whether, the bank having breached that obligation, the hypothetical "reworked" and careful assessment would have resulted in the loan not proceeding at all. 3. The primary judge construed cl 25.1 as requiring that the bank exercise care in forming an opinion as to the borrowers' ability to repay the proposed loan at the end of the two years. Commencing with a reference to the "capacity to pay" assessment at J[412], his Honour concluded at J[676]: In my view, whatever value the fifteen year assessment may have had to the Bank, it did not discharge the Bank's obligation under cl 25.1. The Bank's analysis established that the Gooleys would be able to make the interest payments (indeed it more than established this, because the Bank's assumptions included two years of principal instalment repayments as well). But there is simply no evidence that the Bank asked itself whether the Gooleys would be able to repay the principal (or the remainder of the principal, on the Bank's assumption) on maturity. 1. On its face this analysis does not take account of the possibility of repayment of the existing and proposed facilities by refinancing, either with the bank or with some other financier. Had his Honour's analysis done so the reason for the bank's "fifteen year" assessment may have become more apparent. Instead, considering that there had been a breach of the bank's obligation under cl 25.1 in "failing to consider whether they would be able to repay the Dyraaba loan" (J[677]), his Honour continued: But the analysis does not end there. The Gooleys must establish that the Bank breached its contract in making the loan. For that purpose they must establish that, had the analysis been properly undertaken, the Bank would have concluded that the Gooleys could not repay it. (Emphasis added.) 1. As will shortly become apparent his Honour later (and I interpolate, correctly) reformulated what the Gooleys must establish as being whether the breach found caused the bank to make a loan it would not otherwise have made. Focussing on that question, the primary judge was not satisfied that had the bank considered whether the Gooleys would be able to repay the facilities on maturity, either by refinancing or from the sale of all or any of the properties, it would not have proceeded with the loan. Accordingly he held that their claim to damages was not made out. Disposition of appeal from rejection of damages claim for breach of cl 25.1 1. In the appeal each party takes issue with the primary judge's analysis. Mr and Mrs Gooley contend that having found a breach of cl 25.1, his Honour also should have concluded that they were entitled to substantial damages. That contention does not accept that such an entitlement depends on their first establishing that had the bank performed its obligations under cl 25.1 the Dyraaba loan would not have been made. At J[682] the primary judge acknowledged that his earlier conclusion that Mr and Mrs Gooley had "failed to establish that the bank breached its obligations by making the Dyraaba loan" could equally have been expressed "in terms of causation" with the same result, namely that their claim failed. For the reasons which follow, it is my view that the primary judge did not err in not being satisfied that any breach of the Code of Banking Practice caused loss and damage to Mr and Mrs Gooley. 2. By ground 1 of its amended notice of contention the bank contends that the primary judge erred in concluding that it had breached its obligation under cl 25.1 by failing to consider whether the Gooleys could repay the Dyraaba loan. In my view this contention should be upheld. 3. A borrower's ability to repay principal at the end of a loan period describes the capacity to do so by refinancing as well as directly from the borrower's own resources, which may require the disposal of assets. Each is a means of providing funds to enable repayment; and that remains so irrespective of whether the refinancing is with the same or another lender. The 'credit assessment analysis' extracted by the primary judge at J[412] established by reference to the budget forecast period ending 30 June 2013 that Mr and Mrs Gooley had the capacity to make principal and interest repayments assuming that in that period the whole of their bank debt was refinanced over 15 years. That was the financial period in which the existing FICL and proposed Dyraaba loan would expire, the former in December 2012 and the latter in March 2013. The bank's analysis showed that the debt service ratio, adopting the assumptions in its analysis, would be 2.1 times. It is not suggested those assumptions were not reasonable. 4. Taking account of that evidence the primary judge could not have been satisfied (Mr and Mrs Gooley bearing the onus of establishing breach) that the bank had not applied its selected credit assessment method and formed the view on the basis of Mr and Mrs Gooley's forecasts and its workings that they could afford to refinance the existing facilities. The same analysis confirms the correctness of the primary judge's conclusion that even if there had been a breach of cl 25.1 it did not follow that had the bank adequately assessed Mr and Mrs Gooley's ability to repay, it would not have made the Dyraaba loan. Effect of any error in adopting Mr Gooley's forecasts 1. This conclusion is not affected by any asserted error on the part of Mr Mitchell, or some other employee of the bank, in analysing the forecasts provided by Mr Gooley. In the course of oral argument it was submitted that an error had been made in calculating the forecast EBIT figure ($130,600) for the year ended 30 June 2011 which in turn resulted in the CAFDS figure for that year being overstated by $77,000. If such an error was made, it was not material to the analysis in [23] above, which was directed to the borrowers' capacity to pay in and from the year ended 30 June 2013. The equivalent analysis for the year ended 30 June 2011 addresses the borrowers' capacity to repay total bank debt of $1.837 million assuming it was repayable by principal and interest payments over 15 years. Adjusting for the asserted error, the net cash after operations would have been $130,600 reducing the debt service ratio for that debt at that time to 0.53 times, rather than 0.85 times as shown in the table. Mr and Mrs Gooley did not at any stage of the proceedings at first instance plead or contend that this analysis for the financial year ended 30 June 2011, either as appears in the resubmitted CRS or after taking account of this apparent error, provided a basis for an allegation of breach of cl 25.1 of the Banking Code of Practice. Nor was that a ground of appeal or raised in their written submissions in the appeal. Disposition of appeal from finding of no unconscionable conduct in contravention of s 12CB 1. BankWest's conduct in making the Dyraaba loan was also alleged to constitute unconscionable conduct in contravention of ASIC Act, s 12CB. Specifically it was said to be an example of "asset lending" being lending "without regard to the ability of the borrower to repay by instalments under the contract, in the knowledge that adequate security is available in the event of default". In such a case the lender is taken to be indifferent to the inevitable liquidation of the borrower's assets provided that their value assures that there is no risk of loss to the lender: see Perpetual Company v Khoshaba [2006] NSWCA 41; 14 BPR 26,369 at [128] (Basten JA). 2. The proscription in s 12CB(1) is of conduct that assessed objectively may be characterised as "unconscionable" thus applying a normative standard of conscience against which the conduct complained of it to be measured. That standard is informed by the values and norms recognized by the terms and context of the legislation, and especially the considerations identified in s 12CC: Paccioco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199 at [296] (Allsop CJ). Those values and norms include honesty, the absence of trickery or sharp practice, fairness when dealing with customers, and the protection of those who are vulnerable to victimisation, unconscientious conduct, or exploitation. At the same time that standard is not confined to describing conduct that is remediable by a court exercising jurisdiction in equity. The content and application of that normative standard is most recently addressed in Australian Securities and Investments Commission v Kobelt [2019] HCA 18; (2019) 93 ALJR 743 at [14], [15] (Kiefel CJ and Bell J), [84], [87] (Gageler J), [118], [120] (Keane J), [144], [153] (Nettle and Gordon JJ) and [295] (Edelman J). To the extent there are differences of substance in these expositions of that standard and how its content is informed and determined in particular circumstances, they are not material to the outcome of this appeal. 3. The principal respects in which the bank's conduct in making the Dyraaba loan was alleged to be unconscionable were (1) that between early 2008 and early 2011 Mr and Mrs Gooley had "suffered years of major floods and excessively wet seasons in a row which was highly unusual and placed them in a position of disadvantage" in bargaining with the bank of which the bank was aware; (2) that between March and May 2011 the bank by Mr Mitchell represented to the Gooleys "that the loan product of $550,000 secured on [their] residential premises … was 'suitable' for [them] and 'will allow you to expand your farming business' at a time when … Mrs Gooley was purchasing her brothers interest in Dyraaba"; and (3) that instead of exercising care and skill in selecting and applying its credit assessment methods the bank proceeded "instead by a form of asset lending including by arranging security over all the [Gooleys'] real estate properties and farming enterprise". 4. The primary judge dismissed these claims at J[659]-[662]: On my findings the Bank was a reluctant lender. Mr Mitchell was a supporter of the proposal, but the originator was Mr Gooley. It was Mr Gooley who produced the budgets which underpinned the application. It was also Mr Gooley who failed to disclose to the Bank his credit arrangements with G&F. And it was the Gooleys together who decided to press on with the purchase of Dyraaba following another disastrous season and despite the delays in the Haywards' finance. The Bank's officers, and Mr Mitchell in particular, may have been guilty of errors of judgment in failing to treat the Gooleys' application, and the budgets on which it was based, with more scepticism. But there was nothing predatory about the Bank's behaviour. The Gooleys' case comes down to saying that the Bank should have saved them from themselves. The Gooleys were well aware that the loan was repayable in two years. Neither they, nor the Bank, can possibly have thought that they would be able to repay the principal out of earnings over the two year term. Both the Gooleys and the Bank must have appreciated that the loan could only be repaid out of a refinancing or the sale of the property. Indeed on Mr Gooley's own evidence, the plan was to give the Dyraaba acquisition two years to work, and if it did not it would be sold. Mr Gooley and Mr Mitchell may both have expected that if the venture was a success the Gooleys would be able to refinance with the Bank. But no undertaking was given by the Bank in this regard. It would, or at least should, have been obvious to the Gooleys that they bore the refinancing risk. Mr Gooley was an apparently experienced and competent farmer. The Bank had no reason to think that default was inevitable. In my view there was no unconscionable conduct by the Bank in proceeding with the loan. 1. In my view his Honour did not err in so concluding. 2. Each of the appellants was educated, literate and numerate. Between them they had considerable farming and management experience and were well versed in book keeping and financial analysis (J[95]-[100], [107]-[110]). 3. Mr Gooley's letter of 14 January 2011 explained their revised business strategy and the reasons why they had decided additional finance was required: We have held many discussions with you regarding our lack of financial performance which has been largely out of our control and due to adversely wet seasonal conditions. … With the uncertainty in commodity markets and the risk that adverse weather events play on our farming operation we have reaffirmed that a diversified farming operation will serve us best, but with a lesser reliance on cropping. We have no doubt that the farming enterprises that we operate in are correct for our balance of land holding that we hold. Beef Cattle, Cropping, Fodder Sales and Contracting fulfils our objective for a diversified business however the scale of the cropping enterprise has left us exposed to wet weather. … The attached budgets demonstrate that in a normal season this strategy to reduce our cropping area will only reduce the operating cash surplus by $17,453 while improving our loan to value ratio from 64.3% to 62.96% after we have accessed a further $ 150,000 in working capital. We have also discussed with you the purchase of … [Dyraaba] which is approximately 20 kilometres west of Casino. Susan has an equity interest in this property and her family's farming partnership ... The partnership has recently relinquished its interests in dairying. A Deed of Dissolution is being prepared to finalise the partnership. Concurrently, her brother James is seeking to purchase an adjoining property ... Given that James is able to raise finance for that property purchase we will be seeking to purchase James' share of the family property ... We are also proposing to purchase 50 acres that is part of the adjoining property ... Value of this land is $130,000. We will also be seeking a minimum of $30,000 funding for repairs to the existing infrastructure at [Dyraaba] with most being to update the residence occupied by Susan's parents ... … The purchase of 140 acres … and the adjoining the adjoining 50 acre Bennett property satisfies our objective to purchase some country with a hill aspect. … We are making a strategic move from a crop focussed fanning operation to a cattle focussed operation. As mentioned above it is our intention to sell 130 acres of our properly at Clovass. We would hope to realise $495,000 for the property sale. … 1. The financial forecasts submitted with this letter provided for the servicing of the whole of the bank debt from business revenue, and not from the sale of assets. At the same time it was proposed that significant asset sales occur. The transaction had its origins in the reorganisation of Mrs Gooley's family arrangements. The purpose of the borrowing was to permit the scaling up of the business, by allowing the conduct of cattle fattening operations from two properties, one of which would not be prone to flooding because it had a hill aspect. At the time the loan was taken Mr and Mrs Gooley were well aware that it was repayable in two years and that it could only be repaid by refinancing or the sale of property, likely the Patton land and perhaps Dyraaba. Indeed as the primary judge found (J[661]) Mr Gooley's evidence was that the plan was "to give the Dyraaba acquisition two years to work, and if it did not it would be sold". 2. In no sense were Mr and Mrs Gooley in a position where they could not make free, informed and considered decisions as to what they judged to be in their own best interests. There was no trickery or sharp practice or dishonesty on the part of the bank in relation to its consideration, or the making, of a loan which did not involve "asset lending". Mr and Mrs Gooley's capacity to meet their existing and proposed obligations, and to refinance those obligations was demonstrated by the forecasts they produced and relied on; and it was recognised by them from the outset that they might have to sell Dyraaba if the revised farming strategy did not work. Contravention of National Credit Code, s 76(2) 1. The Dyraaba loan is also alleged, at least by the written submissions in the appeal, to have been an "unjust" credit contract within s 76(1) of the National Credit Code which has effect as a law of the Commonwealth by National Consumer Credit Protection Act 2009 (Cth), s 3. That Code applies "to the provision of credit (and to the credit contract and related matters) if when the credit contract is entered into… or is proposed to be entered into the debtor is a natural person and the credit is "provided or intended to be provided wholly or predominantly for personal, domestic or household purposes or to purchase, renovate or improve residential property for investment purposes" (s 5(1)). The "predominant purpose for which credit is provided" is "the purpose for which more than half of the credit is intended to be used" (s 5(4)). 2. Although $30,000 was sought to fund repairs to the farming infrastructure and residence on Dyraaba that amount was not treated as a separate borrowing and as subject to a separate credit contract, either as between the bank and Mr and Mrs Gooley or for the purpose of this aspect of their claim. 3. As Mr Gooley's letter of 14 January 2011 makes plain, almost all of the funds advanced under the Dyraaba facility were intended to be used in the farming partnership for acquiring land and stock. If it be relevant at this point to consider the existing as well as proposed facilities, in determining whether the Code applies, the predominant purpose of the existing facilities also was the financing the farming partnership. Accordingly the Code did not apply. Had it applied, for the reasons given above, none of the matters relied on as making the bank's conduct "unconscionable" had the consequence that the Dyraaba loan was unjust in the circumstances relating to that credit contract at the time it was entered into. Was the FICL varied in July 2008 Disposition of appeal from judge's finding that terms of FICL varied in July 2008 1. It is not controversial that the loan facilities as originally agreed included what was described in the Facility Terms signed by Mr and Mrs Gooley in October 2007 as a Fixed Interest Rate Loan which was in turn referred to in the letter confirming drawdown on 14 December 2007 as the Fixed Interest Commercial Loan or FICL. That facility was a loan of up to $1.2 million to be repaid 15 years from the Initial Drawdown date. For the first five of those years interest only was payable and after that period principal and interest was payable over the remaining term. The terms of the contract for the provision of that and other facilities were contained in the "offer letter, the Facility Terms and the General Terms". In July 2008 those General Terms included that the agreement of which they formed part could be varied, novated or replaced in accordance with the general law (cll 1.1(b), 23.1(d)). 2. The bank's letter of offer dated 3 July 2008 stated that it had agreed to vary the Gooleys' existing facility. It enclosed "new" Facility Terms and invited the Gooleys to accept its offer to vary their existing facilities "by signing and returning the enclosed copy of the Facility Terms". The bank's case was that the letter and Facility Terms were sent to Mr and Mrs Gooley and that the enclosed copy of the varied Facility Terms was signed on its last page by Mr and Mrs Gooley and returned to the bank in early July 2008. Neither of those signatures was witnessed and each had signed in the place provided for the other to sign. However it is not suggested that meant that the return of the signed varied Facility Terms was not in fact an acceptance of the bank's offer. 3. Rather, Mr and Mrs Gooley denied that they had signed and returned the Facility Terms as the letter invited. Their case was that the last page only of the Facility Terms, being the signature page, was presented to them by Mr Mitchell on 2 July 2008 at their farm and that when they signed it Mr Mitchell said that "this is just to set up the priority for the RAA and will not affect anything else regarding your loans with the bank" (J[347]-[351]). They also gave evidence that when the next varied Facility Terms document was signed in September 2009 there were discussions with Mr Mitchell in which he agreed that notwithstanding the reference in the bank's letter to an earlier offer letter of 3 July 2008 and the reference in the Facility Terms to a loan period of "60 months", the earlier variation related only to the deed of priority in favour of RAA, and that nothing had changed in relation to the 15 year period of the loan (J[355]-[362]). Separately Mr Gooley gave evidence that he had similar exchanges with Mr Mitchell at the time the April 2010 and June 2011 varied Facility Terms were signed (J[363]-[366]). 4. These same conversations were relied on as unconscionable conduct in contravention of ASIC Act, s 12CB; misleading or deceptive conduct in contravention of s 12DA; and as constituting representations relied on by Mr and Mrs Gooley which estopped the bank from maintaining that the term of the FICL had been reduced to five years. 5. The primary judge did not accept this evidence as credible or reliable concluding that Mr and Mrs Gooley had "tailored their evidence so as to create the impression that in some way the Facility Terms had been misrepresented to them" (J[390]). In so concluding his Honour took into account: (1) his general assessment of the reliability and credibility of Mr and Mrs Gooley and Mr Mitchell as witnesses; (2) his conclusion that the bank's internal and contemporaneous records were not consistent with Mr and Mrs Gooley's evidence that the meeting and signing had taken place on 2 July 2008; (3) his conclusion that the subsequent conduct of Mr and Mrs Gooley was not consistent with their believing that the term of the FICL had not been varied; and (4) that there were later internal and external bank communications which continued to record the term of the FICL as extending until 2022. 6. In his general observations of the witnesses the primary judge concluded that Mr Gooley's evidence "on contentious issues in the case is generally unsafe to rely on. I have treated his evidence with great caution" (J[106]). In relation to Mrs Gooley his Honour said that the "same general comments … apply also to Mrs Gooley's [evidence]. As with Mr Gooley, Mrs Gooley was giving evidence based on unaided recollection long after the event and in a litigation context. Regrettably, also, her account included embroidered details which are highly suspect. As with Mr Gooley, I have approached her evidence with caution." (J[113]). With respect to Mr Mitchell the primary judge concluded that he had little, if any, recollection of the details of his dealings with the Gooleys but that none of his evidence was "consciously or deliberately false" (J[122], [124]). 7. In resolving the issue as to the signing of the varied Facility Terms in July 2008 the primary judge rightly regarded the critical documents as being those prepared at the time of and in relation to the proposed variation. Those documents supported a conclusion that the letter of offer and varied Facility Terms were prepared and available to be signed on and from 3 July 2008. 8. Specifically, on 30 June 2008 Mr Avery and Mr Mitchell completed a Credit Risk Facility Amendment form (CRFA) which proposed a change in the FICL particulars, namely the amendment of the repayment date to "5 years fixed I/O then subject to renegotiation" (J[317], [318]). Mr Mitchell's evidence was that this change was included to comply with requirements imposed by BankWest (J[319]). On 2 July 2008 the second version of that CRFA which showed Mr and Mrs Gooley's internal bank credit rating as 6- rather than 5+ was approved by Ms McCarthy. On 3 July 2008 Mr Avery completed a "Work Request – For Document Preparation" form which included the comment that "LOV to be completed". The relevant letter of variation or offer letter and Facility Terms were dated 3 July 2008. The form of the Facility Terms document was generated by a specialist section of the bank and not by staff at the Lismore branch. Presumably, however, it could be printed at that branch when prepared. In these circumstances, the primary judge rejected as implausible the suggestion that Mr Mitchell "would have created an informal set of loan documents" and signed Mr and Mrs Gooley up on 2 July 2008 (J[326]). For that reason he did not accept as correct their evidence that the meeting and signing had taken place on 2 July when the last page only was executed. 9. In doing so the primary judge also took account of the following matters as inconsistent with the Gooleys believing and being told thereafter that the term of the FICL had not been amended: (1) The later varied Facility Terms signed by Mr and Ms Gooley on 18 September 2009, 19 April 2010 and 31 May 2011 described the Facility Expiry Date as "60 months after Initial Drawdown date" (J[311]). The only documents sent by the bank to Mr and Mrs Gooley after 2008 which continued to show the FICL as having a term extending until 2022 were computer generated letters sent in late December 2012, more than five years after the loan was drawn down (J[336]); (2) Mr Gooley's forecasts and budget estimates prepared in early 2011 treated the FICL as permitting interest only payments after December 2012, rather than requiring principal and interest repayments as provided for in the original Facility Terms; (3) The absence of any support for Mr Gooley's evidence that he had written "15 years" on the varied Facility Terms signed in September 2009 to record what he had been told by Mr Mitchell (J[382]); (4) After Ms Mulligan's advice in mid-November 2012 that the FICL expired on 12 December 2012, Mr Gooley did not assert that there was no need for an extension because the facility had not expired. And on 26 November 2012 Mr Gooley sought an extension of the FICL facility until the end of February 2013 (J[214]); (5) After Ms Mulligan explained in early January 2013 that the computer-generated letters were "incorrect" and that the facilities had expired, neither Mr Gooley nor Mr Richardson challenged that assertion (J[213], [214], [224], [494]); (6) The complaint lodged with the FOS in June 2014 did not include an allegation that the term of the FICL had not been varied or that Mr Mitchell had made statements to that effect. The complaint that the facility had not been varied was first made in the second half of July and on the basis of internal bank documents obtained in the FOS procedure; (7) In support of that claim made on the basis of the bank's internal documents Mr Gooley wrote to Mr Bundy in March 2015 suggesting that a typographical error had been made in the July 2008 varied Facility Terms in which the Facility Expiry Date was described as "5 years" from drawdown. He suggested the numeral "1" had been omitted in error so as to change it from 15 years to "5 years". At that time Mr Gooley made no reference to the circumstances in which he later maintained that document had been signed (J[339]-[346]). 10. The primary judge acknowledged that some internal bank documents created after July 2008 referred to the term of the FICL as being "60 + 120" or to its expiry date being "5 year then P/I over 10 yrs". The former was expressed in documents dated 29 April 2011 and 31 May 2011. The latter was included in a credit risk review dated 1 June 2009 and a CRFA form dated 3 September 2009. In addition on 18 September 2009 the bank wrote to RAA providing details of its facilities with Mr and Mrs Gooley, including the FICL which was described as having an expiry date "12/12/2022". The primary judge considered these internal documents and the communication with RAA between J[329]-[333] concluding at J[653]: As I have already pointed out, the terms of the various Facility Terms variations were quite unambiguous. It is true that the Bank's internal documents (and its communications with the RAA) were to some extent inconsistent with the Facility Terms, but the Gooleys did not see those internal documents or communications at the time; they only got them through the FOS process. The only documents issued by the Bank to the Gooleys after 2008 which showed the FICL having a term extending until 2022 were the computer-generated letters which the Gooleys received after Christmas 2012, when the FICL had expired (see [486] above). 1. As has already been noted, in mid-January 2013 Ms Mulligan advised Mr Richardson by email that those two letters were "incorrect". Mr Richardson responded on 14 January 2013 and did not by that letter or subsequently take issue with the bank's position. None of these internal documents or the three letters provides a basis for concluding that his Honour erred in rejecting the evidence of Mr and Mrs Gooley. 2. Rather what this analysis shows is that the primary judge's conclusions, based in part on credibility findings, are not glaringly improbable, or inconsistent with uncontested evidence or incontrovertible facts. Those findings take account of the contemporaneous documents and the probabilities in light of Mr and Mrs Gooley's subsequent conduct: Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [28], [29] (Gleeson CJ, Gummow and Kirby JJ). Subject to the question of consideration addressed below, the primary judge did not err in holding that the FICL was varied in July 2008. Consideration for the July 2008 variation 1. It is contended that there was no sufficient consideration for this variation. The primary judge dealt with this argument at J[640]-[649] holding that the variation of the existing rights and obligations of the parties was capable of benefiting either party (J[649]). That conclusion involved no error. The variation extinguished the parties' rights and obligations with respect to the repayment of principal and payment of interest for the period of 10 years commencing 12 December 2012 and replaced them with an obligation to pay and right to receive repayment of the principal amount on 12 December 2012. Viewed prospectively, that variation was capable of benefiting either party depending on their or its financial circumstances at that time in light of the then current economic conditions: see JD Heydon, Heydon on Contract (Lawbook Co, 2019) at [5.520] citing Cellarit Pty Ltd v Cawarrah Holdings Pty Ltd [2018] NSWCA 213 at [232] (McColl AP, Macfarlan and Leeming JJA agreeing). It allowed Mr and Mrs Gooley the opportunity to refinance as from December 2012 on a different and more favourable basis, and gave the bank the opportunity to apply those funds in some more profitable or less risky way. 2. This conclusion makes it unnecessary to consider ground 2(b) of the amended notice of contention, which depended on the evidence establishing that the binding promise made by the bank was or included that it would consent to the secured loan made by RAA and enter into a deed of priority. The bank's alternative formulation in ground 2(a) of the mutual consideration provided by the parties as being the "replacement of pre-existing obligations" does not differ in substance from the consideration found by the primary judge and described above. A postscript: reversal of onus 1. Mr and Mrs Gooley contend that in relation to this issue of variation the primary judge's analysis treated them as having the onus of proving that the term of the FICL had not been varied. That is not correct. In its defence to the allegation that the FICL was for a term of 15 years the bank admitted that was the position "at the time of entry into the credit contract", but alleged that "the term of the FICL was varied by agreement [on and after July 2008] … to a five year term expiring on 12 December 2012". 2. The original of the letter of offer dated 3 July 2008 and attached Facility Terms, which included the last page signed by Mr and Mrs Gooley as produced from the bank's custody was tendered by their counsel. Evidence was also led as to Mr Mitchell having signed that letter in duplicate on 3 July 2008 and as to his usual practice in then contacting the borrower to have the varied Facility Terms executed and returned. Notwithstanding the Gooleys' evidence that they only saw and signed the last page of that document, his Honour found that the document was signed "in July 2008 in the form which is now in evidence". It followed that the Gooleys had signed and returned the varied Facility Terms. From that time that document recorded the terms and conditions of their existing facilities (until further varied). 3. None of this involved any reversal of the onus, and the Gooleys' reliance on the primary judge's comment at J[639] as suggesting otherwise is misconceived. His Honour's reference in that context to the "reversal of the onus" was to the Gooleys' onus to prove their allegations of misleading or deceptive conduct or unconscionable conduct on the part of the bank. In doing so his Honour adverted to a consequence of the objective theory of contract being that even if Mrs Gooley was not "consciously aware that the revised Facility Terms provided for the repayment of the FICL in December 2012" she signed the document knowing that it set out the terms of the bank's offer and accordingly was bound by those terms "whether she read them or not" (J[638]). No misleading or deceptive conduct or unconscionable conduct or estoppel in relation to July 2008 variation 1. The primary judge dealt with these issues shortly at J[652]-[655]. Each of these claims depends on the acceptance of the evidence of Mr and Mrs Gooley as to what was said by Mr Mitchell about the variation of the FICL, both in and after July 2008. The primary judge did not accept that evidence and, relevantly for any damages claim and estoppel, was not satisfied that "the Gooleys actually believed … that the Facility Terms from October 2007 had not been varied" in July 2008 (J[655]). As the challenge to his Honour's conclusions in those respects is dismissed, the challenges to the rejection of these claims must also be dismissed. Conduct in and from April 2012 Whether the FICL was terminated following the bank's repudiatory conduct in December 2012 1. Mr and Mrs Gooley claimed damages for loss of the benefit of the 15 year FICL as a result of the bank's repudiatory conduct. They also contend that the bank was not entitled to charge interest at contractual rates after December 2012 because its assertion that the FICL had expired was a repudiation which they accepted, thereby bringing that loan contract to an end. The primary judge rejected this argument concluding that there was no repudiation, the term of the FICL having been varied, and that in any event Mr and Mrs Gooley had not accepted any such repudiation. Instead they made an informal arrangement to continue pay the bank interest after late December 2012 at rates negotiated by Mr Richardson (J[707]-[715]). In this Court his Honour's finding that there was no repudiation is challenged. 2. At J[650] the primary judge found that irrespective of whether the July 2008 varied Facility Terms were contractually effective, later Terms, and in particular the varied Facility Terms signed on 31 May 2011, were effective to limit the term of the FICL to five years. In this Court it was contended that this later and "operative" variation did not amend what was said to be the "second part" of the FICL, which provided for the repayment of the principal outstanding under the "first part" over 10 years by monthly payments of principal and interest. 3. This argument is to be resolved by reference to the construction of that letter of offer and the varied Facility Terms. The letter of offer dated 31 May 2011 relevantly provided: We are pleased to advise that we have agreed to provide additional Facilities to you/vary your existing Facilities. Please find attached new Facility Terms which, once you have accepted it, will replace the Agreement. From the date of acceptance of this Offer Letter, the terms and conditions for all additional Facilities provided to you under this Offer Letter, and the terms and conditions for all existing Facilities are set out in: This Offer Letter and the attached Facility Terms; and Our General Terms for Business Lending Dated December 2007… (Emphasis added.) 1. The varied Facility Terms included under the heading "3 Facilities", a subheading "3.2 Existing Fixed Interest Rate Loan". The Facility Expiry Date for that loan was stated to be "12/12/2012" with Repayment due on that date. 2. It is contended that the facility originally made available was a "Fixed Interest Commercial Loan" consisting of a five year fixed interest loan and a further 10 year loan requiring repayment of principal and interest. That description of that facility does not appear in the first letter of offer or Facility Terms. Each refers to the facility as a "Fixed Interest Rate Loan". That same description, preceded by the word "Existing", is consistently used in the varied Facility Terms signed in July 2008, September 2009, April 2010 and May 2011. However in the drawdown settlement letter dated 14 December 2007 the loan is referred to as a "Fixed Interest Commercial Loan". 3. The difference between this description of the loan and the description used in the Facility Terms is seized on as indicating that the letter dealt only with the "first", or fixed interest, part of the loan, leaving the remaining part of the loan both in existence and unamended. 4. This argument does not take account of the plain language of these documents. The initial Facility Terms, under the description "Fixed Interest Rate Loan" describe a 15 year facility, referring to an expiry date of 15 years from drawdown and providing for payment of interest only for five years reverting then to principal and interest over the remaining 10 year term. Each of the letters accompanying the subsequent varied Terms, including the letter of 31 May 2011, makes clear that the terms and conditions in the attached Terms are for all existing facilities. In each version of those Facility Terms – the first and later versions – the $1.2 million facility is consistently described as a Fixed Interest Rate Loan. It follows that the facility described in the 31 May 2011 version of the Facility Terms under the description "Existing Fixed Interest Rate Loan" is the facility originally agreed to be for 15 years but subsequently varied. Accordingly there was no breach of contract, or repudiatory conduct, on the part of the bank in correctly insisting that loan had expired on 12 December 2012. Contravention of FDM Act, s 8 by taking enforcement action 1. It was argued before the primary judge that conduct of the bank after April 2012 constituted "enforcement action" taken in contravention of the FDM Act. Those actions were said to include accruing penalty interest on statements of account; "requiring" that Mr and Mrs Gooley sell assets; "insisting" that proceeds from the granting of an easement be applied in repayment of principal rather than ongoing interest; "requiring" a deed of forbearance be executed failing which the bank would issue notices under the FDM Act so as to enable formal recovery action; serving a formal notice of default and demand in June 2015; and serving a notice under FDM Act, s 9 in December 2015. 2. Considering this argument in relation to the proposed deed of forbearance the primary judge concluded at J[719]: In my view, the term "enforcement action" connotes some sort of unilateral action by the lender. All the Bank did was ask the Gooleys to enter into a contractual commitment to dispose of the properties by 30 September and repay the debt. The Bank could not unilaterally require the Gooleys to agree to this and they did not. In my view, the Bank's conduct in asking for the Gooleys to sign a deed of forbearance was not "enforcement" for the purposes of the FDMA. 1. At the relevant time, FDM Act, s 8(1) provided that a creditor "to whom money under a farm mortgage is owed by a farmer" must not take enforcement action against the farmer in respect of the farm mortgage until at least 21 days have elapsed after the creditor has given a notice to the farmer under that section, unless a certificate was in force under section 11 in respect of that mortgage. Section 6 provided that "[e]nforcement action taken by a creditor to whom this Act applies otherwise than in compliance with this Act is void." Here a s 11 certificate was issued in June 2016. 2. "Enforcement Action" was defined in s 4: enforcement action, in relation to a farm mortgage, means taking possession of property under the mortgage or any other action to enforce the mortgage, including the giving of any statutory enforcement notice, or the continuation of any action to that end already commenced, but does not include: (a) the completion of the sale of property held under the mortgage in respect of which contracts were exchanged before the commencement of this Act, or (b) the enforcement of a judgment that was obtained before the commencement of this Act. 1. In their written submissions in this Court Mr and Mrs Gooley identify 16 so called instances of impermissible "enforcement action". Their submissions in reply identify a further three instances; and at the conclusion of the hearing a "schedule of enforcement action" was produced. Of the 10 actions referred to in that schedule, three had not been dealt with in the earlier submissions. 2. Almost all of the 22 actions relied on can be dealt with shortly. Five occurred after the issue of the s 11 certificate and accordingly are wholly irrelevant. Two describe steps expressly provided for by the FDM Act, including the service by Mr and Mrs Gooley on the bank of a notice under s 9. Four actions describe something done by someone other than the Bank, specifically the issue by RAA of the certificate under s 11, an email from Mr Richardson to the bank, and letters sent by Mr and Mrs Gooley's solicitors to the bank advising of completion of the sales of properties (which had been effected by them). The analysis so far accounts for 11 of the 22 of the actions relied on. 3. Two actions describe internal communications between bank officers and another involved Mr and Mrs Gooley's complaint that the bank had ignored an asserted hardship notice given by them. None of these constitutes the taking of enforcement action. Three actions were informal negotiations between the bank and Mr and Mrs Gooley as to the making of ad-hoc arrangements after the facilities were in default. They include the negotiations for the execution of a deed of forbearance. None amounted to enforcement action as defined. 4. Three of the remaining actions mischaracterise what occurred. The first asserts that an email from Ms Mulligan to Mr Richardson in which she said that she was looking forward to his "proposal [seeking] formal approval to allow Mr Gooley time to sell down his assets" was a "requirement" on the part of the bank that the Gooleys sell their assets. The second relied on an RAA file note which recorded the bank having told Mr and Mrs Gooley "to sell or refinance and were given until September 2014: clients said timeframe wasn't long enough + it was extended to November 2014 if account was retained in order". That file note was said to be evidence "confirming that the Gooleys were instructed to sell their assets". The third describes an email from Ms Mulligan to Mr Gooley allegedly "calling in the loan" which was said to be a "financially crippling and callous notice… clearly [in] reliance on the farm mortgage: cl 3.1". In fact by that email of 14 November 2011 Ms Mulligan confirmed earlier telephone advice that the facility must be repaid in full by mid-December. None of these actions involved enforcement action. 5. Two actions remain. On 23 June 2015 Gadens Lawyers served a formal notice of default and demand on Mr and Mrs Gooley on behalf of the bank. The notice demanded repayment and indicated that unless it was complied with "the bank will take action under the contract and/or under the securities referred to in the Second Schedule". Those securities included a mortgage of the farm properties. The service of that notice was not enforcement action. The notice was not served to satisfy any condition precedent to the enforcement of any right under the mortgage: cf Waller v Hargraves (2012) 245 CLR 311; [2012] HCA 4 at [66] Heydon J, with whom French CJ, Crennan and Kiefel JJ agreed at [4]. 6. Finally, from 13 December 2012 the Bank accrued interest at default rates and that was reflected in statements of account issued to Mr and Mrs Gooley. Those entries were reversed in March or April 2013 following an informal agreement with Mr Gooley for the ongoing payment of interest. Ultimately the bank never received or sought to enforce any obligation to pay interest at default rates. None of this involved taking action to enforce covenants in a farm mortgage (J[259], [709]). 7. The consequence of taking enforcement action would have been that the action was void. The arguments made on Mr and Mrs Gooley's behalf with respect to the alleged instances of enforcement action did not extend to explaining the consequences for their damages or other claims of such action of the bank being rendered void by FDM Act, s 6. However, no such questions arise. Breaches of the Code of Banking Practice, cll 2.2 and 25.2 1. Clause 2.2 of this Code provides that the bank "will act fairly and reasonably towards you in a consistent and ethical manner. In doing so we will consider your conduct, our conduct, and the contract between us." 2. Clause 25.2 provides: With your agreement, we will try to help you overcome your financial difficulties with any credit facility you have with us. We could, for example, work with you to develop a repayment plan. If, at the time, the hardship variation provisions of the Uniform Consumer Credit Code could apply to your circumstances, we will inform you about them. 1. Mr and Mrs Gooley alleged that the bank breached cl 25.2: (1) by not considering their application of April 2012 for a further loan of $200,000; (2) by advising in November 2012 that the FICL terminated in December 2012; (3) by charging penalty rates on interest rates on their account from 13 December 2012; (4) by "requiring" them to sell assets between 2013 and 2018; and (5) by not assisting or cooperating with them in and from December 2012 to refinance so that they could relocate to the Tablelands. 2. The primary judge dealt with these and similar complaints between J[683] and [695]. His Honour rejected the contention that there was any breach of these provisions in the bank not making a further loan of $200,000 or extending further financial accommodation (J[687], [688]); or in taking the position that the FICL was repayable in December 2012 (J[691]); or in leaving it to Mr and Mrs Gooley to deal with their trade creditors after April 2012 (J[690]); or in seeking to fix, by the proposed deed of forbearance, the final date by which the Gooleys had to repay their debt before enforcement action was to be taken (J[693]-[694]). 3. His Honour did not err in concluding that the there was no substance to these complaints for the reasons he gave. The bank did not in any sense "require" the Gooleys to sell assets and his Honour's findings show that in the period from late November 2012 Mr Gooley had the benefit of the assistance of Mr Richardson, and later Mr Bundy, each of whom acted on his behalf in relation to Mr and Mrs Gooley's dealings with the bank and their other creditors. Contravention of National Credit Code, s 72(4) 1. The National Credit Code, s 72, provides that a debtor who considers that he or she is or will be unable to meet his or her obligations under a credit contract may give the credit provider notice of the debtor's inability to meet obligations under that contract, thereby providing an opportunity for them to agree to vary that contract to allow the debtor to meet those obligations. That notice, whether formal or informal, is referred to as a "hardship notice" (s 72(1)). The credit provider must, within a period of not less than 21 days, then give the debtor a notice which either records the fact that the credit provider and debtor have agreed to a change of the credit contract, or states that they have not so agreed and the reasons why they have not agreed. 2. Mr and Mrs Gooley alleged that the National Credit Code applied to their borrowings from the bank. In their written submissions they maintained that they had given two hardship notices, the first an informal notice given in April or May 2012 and the second a formal notice given on 5 August 2016. In the second cross claim only the giving of the first of these notices was pleaded. Nevertheless in their written submissions in the appeal Mr and Mrs Gooley maintained that the bank had failed to respond to each of those notices as required by s 72(4) and that in each case its failure to do so was a breach of cl 2.2 and/or 25.2 of the Code of Banking Practice, and accordingly of their facility agreement. 3. The primary judge did not address either of these claims, which were both pressed in the appeal, until after the Court reserved its decision. At that time in the course of an exchange of short written submissions, the claim in respect of the second notice was withdrawn, no doubt for reason that it was not pleaded or argued before the primary judge. Nevertheless for completeness that withdrawn claim is dealt with below. 4. As to the first, an informal hardship notice was said to have been given by Mr Gooley to Ms Campbell at some stage in late April or early May 2012. At a meeting on 3 May 2012, Mr Gooley requested a $200,000 "carry on loan" to pay "some creditors that are becoming agitated". Shortly after Mr Gooley provided draft financial statements of the partnership. Those statements, disclosed, from the bank's perspective for the first time, an amount of $400,000 owing to the local stock and station agent, G&F. 5. In response to the request for further finance Ms Campbell advised that a decision "has been deferred pending [a] full review of file". There was a further meeting with Mr Gooley on 31 May 2012, following which Ms Campbell sent an internal email dated 4 June 2012 in which she reported: Mr Gooley continues to meet his ongoing obligations to the bank and will seek to do so. Pending further review of funding request and strategy to firm up viability I have suggested Mr Gooley look to work with creditors. 1. As to the second notice, the letter of 5 August 2016 enclosing that notice is in evidence. The enclosed hardship notice is not. 2. The bank's primary response to this claim is that the National Credit Code did not apply to the facilities at any time because their predominant purpose was the conduct by the partnership of the farming business. Accordingly the credit was not provided or intended to be provided wholly or predominantly for personal, domestic or household purposes: s 5(1)(b). 3. Secondly, it is submitted that the evidence does not show that in late April or early May 2012 Mr Gooley gave any notice of the partnership's inability to meet its obligations to the bank. Rather, in the exchanges relating to the further advance sought Mr Gooley indicated that the funding was required to enable the payment of creditors other than the bank, and in that context, that he and Mrs Gooley would continue to meet their ongoing obligations to the bank. 4. For similar reasons to those given above at [44]-[46] the bank's primary submission on this point must be accepted. The evidence establishes that the ongoing loan of $1.2 million and the Dyraaba loan were wholly or predominantly for business purposes. Accordingly the presumption in s 13(1) of the Code is rebutted and the Code did not apply to those facilities. Had it applied I am not satisfied that any informal hardship notice was given in April or May 2012. The evidence (including paras 269-270 of Mr Gooley's affidavit of 13 February 2018) does not establish that he notified of the partnership's inability to meet its obligations to the bank. As to the second notice, its contents are not known. It was given at a time when the bank was entitled to commence recovery action under the FDM Act. And the letter enclosing it advised that Mr and Mrs Gooley proposed to commence proceedings for damages against the bank. The written submissions to this Court did not explain how the bank's failure to respond to the second notice involved any breach of cl 2.2 or 25.2 of the Code of Banking Practice so as to be a breach of their contract with the bank. The claim as pressed must be dismissed. Conclusion 1. The foregoing reasons deal with the issues raised by Mr and Mrs Gooley's submissions in the appeal which in turn address the general subject matter covered by grounds of appeal 1-6 and 8-10. There remains ground of appeal 7 which asserts that the proceedings miscarried because of the failure of the bank to provide sufficient and timely discovery of its paper and electronic files. That ground has not been the subject of written or oral argument and is to be treated either as abandoned, or not made out. 2. In the result the appeal should be dismissed with costs. 3. WHITE JA: I agree with Meagher JA. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 24 July 2020