MARZOUK v WESTPAC BANKING CORPORATION SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CLARKE, MEAGHER and SHELLER JJA 16, 17 July 1992, 14 October 1992 [1992] NSWCA 147 FACTS: Bank brings proceedings claiming possession of land jointly owned by appellants, and payment of $400,000.00 owing by them under guarantees of loans to company controlled by appellants' son. Father is a director/shareholder of the Company. Son lacked capital to start business and Bank agreed to provide money if mortgage over parents' land and guarantees were executed by parents. They claim guarantee was limited to $20,000.00 and seek declarations that mortgage and guarantee are void and unenforceable. HELD:(per curiam) (1) Once it was held below that father did not really believe that liability under the documents was limited, and that son had not misled him, allegations of unconscionable conduct and reliance on the various statutes must collapse. (2) The Bank's non disclosure to the parents of its previous refusal of a home loan to the son is not a matter of relevance to the appeal. (3) Although the mother relied entirely upon the advice of her husband, she knew what the substance and effect of the guarantee was, and Equity will not invalidate such a transaction. (4) The principle of Yerkey v Jones is of no assistance to the mother. It is restricted to transactions between husband and wife, particularly with dispositions of the wife in the husband's favour. Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447. Yerkey v Jones (1939) 63 CLR 649. European Asian of Australia Ltd v Kirland [1987] 8 NSWLR 192 Goodwin v National Bank of Australasia (1968) 114 CLR 173 West v AGC (Advances) Ltd (1986) 5 NSWLR 610. Baltic Shipping company v Dillon (1991) 22 NSWLR 1 Clarke JA I agree that the appeals should be dismissed with costs generally for the reasons given by Sheller JA. Meagher JA The respondent bank brought proceedings against the appellants, Dr and Mrs Marzouk, claiming possession of land jointly owned by them and on which their house is erected, and the payment by them of an amount of approximately $400,000.00 owing by them under guarantees of loans granted by the bank to a company called Sid-Marz Services Pty Ltd. The loans were secured by a mortgage over the land to which I have referred. One of their sons, Saaed, was the effective controller of the company. The background to the execution of the documents of mortgage and guarantee can be stated briefly. Mr Saaed Marzouk wished to acquire a company and start a business, but lacked the capital to do so. He procured the respondent bank to lend the money which would provide him with the needed capital, but only on condition that the mortgage and guarantee were executed. By their cross claim, Dr and Mrs Marzouk claimed declarations that the mortgage and guarantee were void and unenforceable, and consequential orders. Their claim is based alternatively on the doctrine of "unconscionable conduct" 2 UNREPORTED JUDGMENTS exemplified by Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447, and on the Contracts Review Act 1980, the Trade Practices Act 1974, and the Credit Act 1984. Hunt J dismissed the cross claim, and Mr and Mrs Marzouk are appealing from that decision. The central contention of the Marzouks below, and indeed on appeal, was that they were under the impression that their guarantee, and hence their mortgage, was limited to $20,000.00 For the sake of completeness, I should add three other facts. One is that Dr Marzouk was a director and shareholder of the borrowing company. One is the extreme unlikeliness of the Marzouk's story: a bank which is minded to lend hundreds of thousands of dollars on the strength of a guarantee is not likely to be content with a guarantee extending to less than one-tenth of the loan. One is that, by no stretch of the imagination, is Dr Marzouk a disadvantaged person. He is a former United Nations officer, he has a Ph.D from London University, he has studied under Sir Roy Allen, he has worked for the National Bank of Egypt, he has worked in various foreign countries, he has written books, and he is a lecturer in Economics at Macquarie University. He is also perfectly fluent in English and highly articulate. The trial judge found him to be astute and intelligent. Even on the Marzouk's case, it was not suggested that the Bank had misrepresented to them that the guarantee was limited, or indeed had made any misrepresentation. It was suggested that their son Saaed knowingly had made the misrepresentations and then defrauded his parents. It was not suggested by the Marzouks that their son's fraud was known, or should have been known to the Bank. His Honour found that neither Dr nor Mrs Marzouk believed, when they were executing the documents in question, that this liability was limited to $20,000 or any other figure. Indeed, they had initialled a prominent clause in the guarantee which made it plain that it was not limited. He found that their son Saaed was lying when he swore that he had misled his parents. His Honour found that Dr Marzouk was not a credible witness. All these are findings of fact, firmly based on the evidence, and partly based on demeanour as well. We cannot go behind them. On the hearing of the appeal, but not at first instance, the claims of Dr Marzouk and Mrs Marzouk were treated separately, and they were represented by different counsel. As far as Dr Marzouk was concerned, once it was held that he had not in fact suffered from the misapprehension which he alleged, his allegations of unconscionable conduct and his reliance on the various statutes must all, as his Honour said, collapse. On the appeal, the only factor on which strong reliance was placed was that the Bank never disclosed to the Marzouks the fact that a previous similar application of Saaed for a home loan had been refused by a different branch of the Bank. However, the evidence seems to disclose that the borrower's business was represented as very different in the two applications, and the security offered was different. I cannot see the relevance of this non-disclosure; I do not see on what grounds one can assume that a different result would have been entailed if disclosure had been made; and I cannot understand why the bank was not entitled to act on the assumption that the son had told his parents about the fate of his previous application. A good deal more argument concerned Mrs Marzouk's case. His Honour's findings about her should be set out in extenso. They are: URJ MARZOUK v WESTPAC BANKING CORPORATION (Meagher JA) 3 "Mrs Marzouk, on anyone's view, is quite naive in relation to business matters. That is not intended as criticism of her. She had never operated her own account, or borrowed any money on her own account. Everything was done jointly with her husband. It was he who decided all matters of finance. She never questioned his decision. I am, however, doubtful that Mrs Marzouk was so naive that she did not realise that her home was involved in the transaction with the plaintiff. Be that as it may, Mrs Marzouk executed the documents in question here because she was told by her husband and by her son that she should do so; she trusted them to have ensured that it was the right thing for her to do. She said that she gave no thought at all to what she was signing; she would have signed any document put in front of her if her husband was with her." This finding does not amount to a precise finding that she did not understand the documents, but I think the passage which I have quoted and certain later findings amount to this: 1) Mrs Marzouk knew that the documents represented a threat to her home; 2) she knew some sort of guarantee was involved; 3) she did not believe the guarantee was limited to $20,000.00; 4) in all matters she relied entirely on the advice of her husband, and 5) except as I have indicated, she did not know what she was doing. This, on any view, is not sufficient to invalidate in equity a transaction into which she entered. It is not the law that ignorance of a transaction of itself guarantees an equity in a married woman, any more than it does in a married man. Nor is it the law that no guarantee is safe unless the guarantors receive independent legal advice. Nor does a married woman who makes a rational decision to leave all her affairs in her husband's hands - a situation which is fairly common, although becoming increasingly less so - thereby, because of that fact, become entitled to disown transactions into which she enters. The law in Australia as settled by Commercial Bank of Australia v Amadio (Supra) is that if a person in Mrs Marzouk's position is at a disadvantage, then a person in the position of the Bank if he knows of that disadvantage and exploits it, will find that Equity may set aside the resultant bargain. In the present case, there is not a trace of the second and third elements, and hence no scope for the operation of Amadio's Case. Counsel for Mrs Marzouk then submitted that, even if Mrs Marzouk could not, so far as she was concerned, avoid the transaction on the principle enunciated in Amadio's case, she was entitled to do so because of the principles involved in Yerkey v Jones (1939) 63 CLR 649. However, as counsel for the Bank submitted, it is not easy to see how this submission is open. In my view, the submission is not open. What Hunt J below had to say on this matter is as follows: "T should add that no case was put forward in relation to Mrs Marzouk which was based upon her husband's influence over her (cf Yerkey v Jones (1939) 63 CLR 649)." The problem then arises that Yerkey v Jones (supra) deals not only with undue influence actually exercised, but also with certain "presumptions" which spring from the marital relationship. But, it seems fairly clear both from the pleadings and from his Honour's judgment that no case was made below based on one of the Yerkey v Jones presumptions. Hence I do not think we should entertain it, particularly as a real question would arise of whether the Bank would have wished to adopt a different course below if the position had been taken there. I might add that even if it was open to Mrs Marzouk to invoke Yerkey v Jones, it would have done her no good. In the present case we are concerned with a wife's guarantee of her son's indebtedness, not her husband's. In such a case Yerkey v Jones is of no relevance: see the decision of Rogers J in European Asian of 4 UNREPORTED JUDGMENTS Australia Ltd v Kurland [1987] 8 NSWLR 192 at 200. The principle of Yerkey v Jones deal with transactions between husband and wife, and more particularly with dispositions of the wife in the husband's favour. Nor is there any anomaly in so restricting Yerkey v Jones. One has a general rule relating all transactions of all persons, viz. the rule exemplified in Amadio's Case: in addition, one has a special rule relating to transactions affected by the marital relationship, a rule still lingering from the days when different social circumstances made it necessary. That disposes of Mrs Marzouk's claim for relief on equitable principles. Her claim for relief under the Trade Practices Act was not pressed; her claim for relief under the Credit Act was expressly abandoned. Her claim under the Contracts Review Act, however, was pressed with some vigour. With more vigour than effect, in my view. When a woman instigates the idea that she and her husband should help their son, what is "unjust" about suggesting that she should perform the promises she makes in the resultant legal documents, which she executes voluntarily, even if at the insistence of the husband whom she trusts and on whom she relies? The appeals of both Dr Marzouk and Mrs Marzouk should be dismissed with costs. Sheller Jaintroduction This is an appeal from a decision and orders of Hunt Jof 4 October 1990. I have had the benefit of reading the judgment of Meagher JA and agree that the appeal should be dismissed with costs. The dispute between Westpac Banking Corporation and the appellants arose out of the execution on 27 August 1985 by the appellants, Dr Girgis Marzouk and his wife, of an all-moneys guarantee and a mortgage of their home at 129 Francis Greenway Drive, Cherrybrook to the Bank. On its face the guarantee was in respect of moneys advanced or to be advanced by the Bank to a company called Sid-Marz Services Pty Ltd. Dr Marzouk was both a director and shareholder of Sid-Marz, but the appellant's son, Saeed, was the person principally involved in the company from time to time the Bank lent money to Sid-Marz, which on demand it failed to repay. CLAIM AND DEFENCE The Bank sued the appellants to obtain possession of the mortgaged land and on the guarantee. At the date of judgment approximately $400,000 was owing. The appellants filed a defence, which was subsequently amended, and a cross claim. They sought to avoid the guarantee and mortgage by claiming relief under the Contracts Review Act 1980 and by claiming that Westpac had engaged in unconscionable conduct. Defences based on the Trade Practices Act 1974 and the Credit Act 1984 were not pressed on the appeal. The defence and cross claim were based, in part, upon allegations that the appellants did not understand the effect either of the guarantee or of the mortgage. The particulars for each appellant were different. For Dr Marzouk it was said: "The first cross claimant believed at the time of the execution of the guarantee and of the mortgage that he and his wife were providing a guarantee and mortgage for the maximum amount of $20,000 to support a loan by the cross defendant to Sid-Marz Services Pty Ltd." For Mrs Marzouk it was said: "The second cross claimant believed at the time of the execution of the guarantee and mortgage that she and her husband were borrowing $20,000 to be lent to their sons Saeed and Phaon Marzouk to assist in starting the business of Sid-Marz's service station." URJ MARZOUK v WESTPAC BANKING CORPORATION (Sheller Jaintroduction) 5 Hunt J ordered the appellants, who were at the hearing before him represented by the same solicitors and counsel, to give the Bank possession of the land at Cherrybrook and to pay the Bank $407,729.21 together with interest pursuant to s94 of the Supreme Court Act. The appellants filed one notice of appeal but on the hearing of the appeal were separately represented. UNCONSCIONABLE CONDUCT The appellants claimed to have been induced by Saeed to believe that their maximum liability under the guarantee and mortgage was limited by the guarantee to $20,000, notwithstanding that they had each initialled CL8 of the guarantee, which provided that the guarantee was to be security for the whole of the moneys thereby secured. The clause as printed provided in part for a limitation of the liability to a fixed amount to be inserted. The limitation was deleted from the clause as initialled by the appellants. The appellants formally conceded that the Bank was not aware of any misrepresentation made to them by Saeed as to their maximum liability under the guarantee. The appellants argued, however, that the Bank had left it to Saeed to procure execution by them of the documents and had refrained from giving them any explanation of or advice about the documents. It was said that the Bank had constructive notice that Saeed had or could have influence over his parents and was bound by his conduct. Hunt J did not accept that the appellants were induced by Saeed to understand that their maximum liability under the guarantee could only be $20,000. Nor did he accept that such was, in fact, their understanding. His Honour found that the Bank was aware that Saeed had been its employee for a period of twelve or thirteen years, that he had been successful as such employee (rising to the position of manager's assistant), that he had left of his own accord and in good standing, and that he had steered his own clients in his financial consultancy to the Bank for finance. Notwithstanding the lack of capital invested in the service station business by Sid-Marz itself, the loan proposal was a routine one for which (on the face of the valuation supplied by its former trusted employee) there was adequate security and in which a supportive family was involved in assisting Saeed to set himself up in a straight forward type of business. His Honour said: "Tn those circumstances I am not satisfied that the plaintiff was put on inquiry as to the possibility that Saeed had exerted undue influence upon, or had committed some form of fraud or other unconscionable conduct against, his parents in order to have them give the guarantee which was obviously an essential prerequisite to the company's application. " Nor did his Honour accept, for the same reasons, the argument that, as the Bank had chosen to appoint Saeed to procure from his parents that essential guarantee, it should have been aware that the relationship between Saeed and the appellants was such that Saeed could be expected to exert unfair influence over them, with the result that, the appellants not having had independent advice, the Bank could not enforce the transaction. Saeed was not, in his Honour's opinion, in any way the Bank's agent. Counsel for Dr Marzouk attacked his Honour's findings. In particular it was pointed out that the learned trial judge in the course of his reasons made no reference to a conversation that Dr Marzouk said he had had with a Mr Jackson, an officer of the bank. This happened in 1987. Dr Marzouk's account of the conversation was as follows: 6 UNREPORTED JUDGMENTS "T said 'Would you like to have a drink?' He said 'Yes'. He came and sat, and he said 'The bank is worried that you haven't been told about the extent of your liabilities,' and I said 'Why? It is $20,000. There is 170 on the service station and 10 paid by Saeed." I said, 'Do you have also the house of Saeed there?' and he said 'Who is going to pay then the debts of Sgam?' which is the consultancy of Saeed. I said 'This is none of our business. My liability is 20' and he said - (sic) 5 minutes until he had the drink, it was very short, 5 or 10 minutes, and then he left and I went down to the garage and gave him the spare parts." Mr Jackson was not called to deny this conversation. Dr Marzouk in cross examination adhered to his evidence of it. Accordingly, we should accept that it occurred as described by Dr Marzouk. Hunt J did not expressly refer to this event. It does not follow that he did not take it into account. His Honour's findings that the appellants did not believe that their liability under the guarantee and mortgage was limited to $20,000 were based upon a series of compelling considerations. In the first place Westpac had, subsequent to execution of the documents, written two letters to the appellants, one dated 20 December 1985 and the other 23 December 1985. The earlier was directed to the appellants as mortgagors, the later as guarantors. His Honour found that Dr Marzouk received at least one if not both these letters which made plain that the Bank asserted that part of the security for extending lending facilities granted to Sid-Marz was the mortgage they had given and the guarantee they had given. The letters required the appellants to sign an enclosed Suretys Consent to Variation form "which is an acknowledgment from Mr and Mrs Marzouk that the above mentioned mortgage (guarantee) will be used to secure extended lending facilities." On 14 April 1986 the appellants as mortgagors signed such a document. His Honour said: "Dr Marzouk said that he recalled having received such a notification in relation to one of the two documents, although he could not remember which one. Whichever notification the defendants did in fact receive, even a cursory reading of it would have indicated that their liability was not limited to the amount of $20,000, if that is what they had originally thought. " His Honour was unable to accept Dr Marzouk's evidence that he looked only very rapidly at the notification because (as he put it) he was in his own mind committed to a liability of only $20,000 and he had not considered that the notification was very important. Further his Honour did not accept the evidence of Dr Marzouk and Saeed that the latter had assured the former that the contents of the notification did not affect the defendant's maximum liability under the guarantee. Referring to the document that the appellants signed in April 1986 his Honour said: "Dr Marzouk gave evidence that he and his wife signed that consent after Saeed had told them that it had 'no effect'. Dr Marzouk said that his own reading of the document confirmed what Saeed had told him, because he knew that their security was only part of the total security given to the plaintiff for the loans made to Saeed's company. That somewhat ingenuous explanation is, to my mind, a complete afterthought; I do not accept it. Dr Marzouk said that his wife signed the document after he suggested to her that they should. Their conduct in doing so was inconsistent with any belief that their liability under the guarantee was limited to $20,000." URJ MARZOUK v WESTPAC BANKING CORPORATION (Sheller Jaintroduction) 7 Secondly His Honour regarded it as significant that when the appellants and Saeed attended at the Bank on 27 August 1985 to sign documents, Saeed signed first and then left the room while his wife and the appellants signed. His Honour said: "Tf (as the defendants' case asserts) Saeed had deliberately misrepresented the extent of the liability which they were undertaking by executing these documents, he was taking an extraordinary risk that his father might in his absence read the documents (or enough of them to realise their true nature) when signing them - in particular the terms of CL8 of the guarantee (which would otherwise have limited their liability to a specific amount), when initialling the exclusion of that clause from the terms of the mortgage. " Thirdly CL8 of the printed form of guarantee provided that the guarantee was to be security for the whole of the moneys thereby secured and was initialled by each of the appellants with the printed words of limitation deleted. Dr Marzouk claimed that he was given no opportunity to look at the documents before he executed them. His former daughter-in-law gave evidence that he had his glasses (which he needed for reading) in his hand when he picked up the papers and that he looked at them saying to her: "My darling daughter, it is always a good idea to read before you sign." The Bank officer, however, then said, according to the daughter in-law: "Well, these are standard documents"; Dr Marzouk queried: "Sure?" to which the Bank officer replied: "Yes, standard documents", and Dr Marzouk executed them. His Honour remarked: "The fact that Dr Marzouk did not take advantage of the opportunity given to him to read the documents before signing them does not suggest that he had any particular concern that they could be imposing a liability other than he expected them to. It is true that Dr Marzouk sought to avoid such a conclusion by claiming to believe that a 'standard' bank guarantee is one which limits the maximum liability of the guarantor rather than one which covers all outstanding liability of the borrower. I regard that explanation as specious, and also as a deliberate afterthought. I certainly do not accept either the existence or the belief or the truth of that explanation. Obviously too much should not be made of this particular event, but it is a factor which I have taken into account." Fourthly, turning to Mrs Marzouk, his Honour said: "Mrs Marzouk, on anyone's view, is quite naive in relation to business matters. That is not intended as a criticism of her. She had never operated her own bank account, or borrowed any money on her own account. Everything was done jointly with her husband. It was he who decided all matter of finance. She never questioned his decision. I am, however, doubtful that Mrs Marzouk was so naive that she did not realise that her home was involved in the transaction with the plaintiff. Be that as it may, Mrs Marzouk executed the documents in question here because she was told by her husband and by her son that she should do so; she trusted them to have ensured that it was the right thing for her to do. She said that she gave no thought at all to what she was signing; she would have signed any document put in front of her if her husband was with her. In the light of this naivety of Mrs Marzouk, and of her deference in all such matters to her husband's wishes, I do not place much weight upon her evidence that Saeed had told them that their liability under the guarantee could be no more than $20,000. The prospect is remote that she would have had a clear understanding of what Saeed was saying." 8 UNREPORTED JUDGMENTS There is, in my opinion, no ground for disturbing his Honour's findings that neither of the appellants believed that their liability under the guarantee was no more than $20,000, induced by any misrepresentation by Saeed or otherwise. I agree with his Honour's conclusion. But this conclusion does not directly touch upon the particulars given of Mrs Marzouk's understanding of the effect of the guarantee and the mortgage. In evidence she said: "(Saeed) told me that they want to start a business and they were thinking about a service station and they found one which would cost them - which would cost them $170 - $170,000, I am sorry - and they needed money to start the business, they didn't have any money to start the business. He wanted his father's assistance and I asked him how much, and he told me, '$20,000', and I told him, "But you know he is a pensioner now and he can't pay back - pay the bank' and he said, 'No, the paying back of the 20,000 would be from the income of the service station"'. She was asked: "Q. When he said to you that he needed assistance, how did he say it to you? Could you please tell us exactly what he said? A. He said the bank will give them the 170,000 and, of course the guarantee would be the service station itself, but they needed 20,000 more to start the business, and we have to guarantee this 20,000." The evidence does not support the separate particulars of her belief. To the extent to which Mrs Marzouk's evidence depended upon any belief as to the limit of her liability under the guarantee, his Honour did not place much weight on it. In my opinion the evidence pointed ineluctably to the conclusion his Honour reached that neither of the appellants believed that their liability under the guarantee was limited to $20,000. With this conclusion their arguments based upon inducement and notice collapse. The appellants also argued that the Bank's failure to inform them of its rejection, unknown to them, of an earlier application by Sid-Marz to another branch of the Bank for a similar loan for a similar purpose was unconscionable conduct by the Bank. It was said that the rejection of this earlier application was an unusual feature of the transaction which should have been disclosed to the appellants as something not naturally to be expected by a surety; compare Goodwin v National Bank of Australasia Ltd (1968) 117 CLR 173 at 175. I do not agree. The transaction was not of a class calling for the fullest disclosure. It was not uberrimae fidei. The significance, if any, of the rejection of the earlier application related to the Bank's view as to Sid-Marz's credit worthiness. It is well established that a creditor taking a guarantee is not obliged to disclose to the surety matters affecting the credit of the customer. In Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 455-6 Gibbs CJ said: "A surety who guarantees a customer's account with a bank will not expect that the account has not been overdrawn or that the bank is satisfied with the customer's credit, for the probable reason why the bank requires the guarantee is that the customer has been overdrawing his account, and wishes to do so again, and that the bank is not satisfied with his credit: compare London General Omnibus Co Ltd v Holloway at 83. The general rule therefore is that a bank is not obliged to disclose to the surety matters affecting the credit of the customer: Wythes v Labouchere (1859) 3 DeG and J 593 at 609; 44 ER 1397 at 1404. Indeed, a bank might well commit a breach of the duty of confidence which it owes to its customer if it did disclose matters of that kind. It has been held that URJ MARZOUK v WESTPAC BANKING CORPORATION (Sheller Jaintroduction) 9 there is no duty of disclosure even when the customer has been suspected of fraud (National Provincial Bank of England Ltd v Glanusk (1913) 3 KB 335) or even when the customer's bankrupt husband was able to draw on her account, and cheques have been drawn on the account but orders had been given by the drawer not to pay them (Cooper v National Provincial Bank Ltd (1946) KB 1)." The earlier application made by Saeed or Sid-Marz for finance appears to contain information different and to offer security different from the later application. However this may be, there is nothing about them which required the Bank to disclose to the appellants the rejection of the earlier application. Indeed, for reasons touched upon by Gibbs CJ, the Bank may well have been subject to criticism if it had. CONTRACTS REVIEW ACT S7 (1) of the Contracts Review Act 1980 enables the Court, where it finds a contract or a provision of contract to be have been unjust in the circumstances relating to the contract at the time it was made, if it considers it just to do so, and for the purpose for avoiding as far as practicable an unjust consequence or result, amongst other things, to declare the contract void, in whole or in part. S9 (1) requires the Court, in determining whether a contract or a provision of a contract is unjust in the circumstances relating to the contract at the time it was made, to have regard to the public interest and to all the circumstances of the case including such consequences or results as those arising in the event of: (a) compliance with any or all of the provisions of the contract; or (b) non-compliance with, or contravention of, any or all of the provisions of the contract. S9 (2) sets out, without in any way affecting the generality of subs(1), certain matters which the Court must include in making the determination "to the extent that they are relevant to the circumstances". In West v AGC (Advances) Ltd (1986) 5 NSWLR 610 at 620, McHugh JA (as he then was) pointed out that various paragraphs in s9 (2) describe matters which may lead to the conclusion that the contract is unjust because its terms, consequences or effects are unjust (substantive injustice) or, on the other hand, because of the unfairness of the methods used to make it (procedural injustice). The various matters may be used in combination or alone in reaching the conclusion but only having regard to the public interest and to all the circumstances of the case. As Gleeson CJ pointed out in Baltic Shipping Company v Dillon (1991) 22 NSWLR 1 at 9: "The general policy of the law is that people should honour their contracts. That policy forms part of our idea of what is just". His Honour found and I agree that the appellants were under no misapprehension as to the unlimited nature of the guarantee. Further they were not, in my opinion, denied any information that the Bank should have given them. The appellants claimed before his Honour that matters set out in s9 (2) (a) to (i) and (j) (iii) of the Act had been established. The subsection provides: "(2) Without in any way affecting the generality of subs(1), the matters to which the Court shall have regard shall, to the extent that they are relevant to the circumstances, include the following: (a) whether or not there was any material inequality in bargaining power between the parties to the contract; (b) whether or not prior to or at the time the contract was made its provisions were the subject of negotiation; 10 UNREPORTED JUDGMENTS (c) whether or not it was reasonably practicable for the party seeking relief under this Act to negotiate for the alteration of or to reject any of the provisions of the contract; (d) whether or not any provisions of the contract impose conditions which are unreasonably difficult to comply with or not reasonably necessary for the protection of the legitimate interests of any party to the contract; (e) whether or not; (i) any party to the contract (other than a corporation) was not reasonably able to protect his interests; or (ii) any person who represented any of the parties to the contract was not reasonably able to protect the interests of any party whom he represented, because of his age or the state of his physical or mental capacity; (f) the relative economic circumstances, educational background and literacy of: (i) the parties to the contract (other than a corporation); and ii) any person who represented any of the parties to the contract; (g) where the contract is wholly or partly in writing, the physical form of the contract, and the intelligibility of the language in which it is expressed; (h) whether or not and when independent legal or other expert advice was obtained by the party seeking relief under this Act; (i) the extent (if any) to which the provisions of the contract and their legal and practical effect were accurately explained by any person to the party seeking relief under this Act, and whether or not that party understood the provisions and their effect; (j) whether any undue influence, unfair pressure or unfair tactics were exerted on or used against the party seeking relief under this Act: (iii) by any person to the knowledge (at the time the contract was made) or any other party to the contract or of any person acting or appearing or purporting to act for or on behalf of any other party to the contract;" On this basis they argued that his Honour should have determined the contract to have been unjust. His Honour was not satisfied that any of the matters referred to in para(d), para(e), para(f) or para(g) of the subsection had been made out. Certainly as far as Dr Marzouk is concerned, I agree. As to the other paragraphs his Honour acknowledged that the bargaining power of the parties was obviously unequal; para(a) of the subsection. The appellants were obliged to take the terms offered by the Bank if their son's company was to obtain the loan applied for. There were no negotiations between the Bank and the appellants over the terms of the two documents; para(b) of the subsection. There was no reasonably practical way in which the appellants could have negotiated for the alteration, or the rejection, of any of the provisions of the two documents in question; para(c) of the subsection. There was no opportunity for the appellants to obtain independent legal or other expert advice in relation to the provisions of the two contracts after they became available and before they were to be executed; para(h) of the subsection. This matter would have had greater significance if the appellants had been unaware of the unlimited nature of their liability. But his Honour had found that an opportunity was given to Dr Marzouk to read the document before he signed it and rejected his explanation for not taking advantage of that opportunity. "If he had read the documents, he would have discovered for himself that the liability was unlimited, and not limited to $20,000. The defendants did not need independent legal or other expert advice to tell them that. That is quite apart from my finding that the defendants were under no misunderstanding as to their URJ MARZOUK v WESTPAC BANKING CORPORATION (Sheller Jaintroduction) 11 maximum possible liability to the plaintiff." There was no evidence that the Bank officer present at the time of execution of the documents explained their legal and practical effect to the appellants; para(i) of the subsection. The appellants did not suggest that the Bank misrepresented the extent of their liability under the guarantee. A formal concession was made that the Bank was not aware of any misrepresentation made by Saeed to the appellants as to their maximum liability. In any event it is necessary to emphasise that the unlimited extent of the appellants' liability had not been shown to his Honour's satisfaction to have been the subject of misrepresentation to the appellants. His Honour was not satisfied that Saeed had, to the knowledge of the Bank, exerted or used any undue influence, unfair pressure or unfair tactics against the appellants. He said he was positively satisfied that the Bank did not know of any such conduct at the time when the contracts were made. This disposed of the appellants' reliance upon para(j) (iii) of the subsection. The appellants sought to show that the contract was unjust within the meaning of the Act because they did not have the capacity or the opportunity to make an informed or real choice as to whether they should enter into the contract. In the first place it was said that the Bank officer handling the matter had failed to comply with the Bank's own internal instructions or procedures to be followed when guarantees, third party mortgages or other security documents were being executed. These required the giving of an explanation of the general nature and effect of the document and the obligations which it involved. His Honour said that in the absence of any evidence that the required explanation was given to the appellants as to the general nature and effect of the two documents and notwithstanding some residual doubt that the appellants and their witnesses were telling the truth when they asserted that no such explanation was given, he felt obliged to find that the appellants had established that none was in fact given. However, his Honour came to the conclusion, with which I entirely agree, that the procedures laid down by the Bank were not designed for the protection of its customers or persons such as sureties, except in the most indirect manner, but rather for the Bank's own protection, in order to avoid allegations being made against it that sureties had misunderstood their obligations and in order to avoid applications being made against it for relief such as was being sought in the present case. His Honour was not satisfied that the Bank's failure to comply with its own internal procedures which required such an explanation amounted to conduct which was either unfair or such as to deprive the appellants of a real or informed choice. I am satisfied that the appellants were aware that they were executing an all-moneys guarantee unlimited in amount and accordingly, as the case was put, the want of such explanation had no significance. Alternatively it was submitted that the appellants were misled when the Bank officer told them that the documents were "standard documents". His Honour accepted that this was said. I agree there was nothing misleading in such a description. His Honour said: "It could only be misleading in effect (and not even then by intention) to a person who believed, as Dr Marzouk claimed that he believed, that a 'standard' Bank guarantee is one which limits the maximum liability of the guarantor rather than one which covers all outstanding liability of the borrower. I have already said that I do not accept that such was Dr Marzouk's belief. The document on its face was clearly a standard Bank guarantee. " His Honour did not accept Dr Marzouk's evidence that the Bank officer was hurrying the appellants through the execution of the documents and denying them the 12 UNREPORTED JUDGMENTS opportunity to read them. It was no part of the appellants' case that the Bank had induced their alleged belief that their liability under the mortgage and guarantee was restricted to $20,000. Subject to argument as to the special position of Mrs Marzouk, if that is to be looked at separately from that of her husband, his Honour's findings about the various matters in s9 (2) of the Act relied upon are unexceptionable and I agree with them. His Honour took account of those matters which were made out and was not, in the circumstances, prepared to grant any relief under the Contracts Review Act. MRS MARZOUK'S APPEAL Mrs Marzouk was separately represented on the appeal and the argument advanced was that her position, looked at independently from that of her husband, entitled her to relief either on grounds of unconscionability or alternatively under the Contracts Review Act. There is thus presented a problem on this appeal different from that with which Hunt J was concerned. While his Honour was not satisfied that Mrs Marzouk believed her liability was limited to $20,000 he accepted her business naivety and seemed inclined to believe that she executed the documents in question because she was told by her husband and by her son that she should do so. That led his Honour to say: "It is obvious, therefore, that it is really with Dr Marzouk's position that I am concerned. I should add that no case was put forward in relation to Mrs Marzouk which was based upon her husband's influence over her (compare Yerkey v Jones (1939) 63 CLR 649). Such a case was expressly denied by the defendants". I take his Honour to have meant that it was not suggested that Mrs Marzouk executed the documents as the result of any undue influence by her husband. So far as the Contracts Review Act is concerned I do not discern from his Honour's judgment that any argument was put that the contract should be set aside as being unjust to Mrs Marzouk looking at her position independently from that of her husband. Such a contention, if raised at first instance, would have required account to be taken of the trust Mrs Marzouk placed in her husband's advice to the point of allowing him to dictate what documents she should sign. The particular transaction entered into and the nature of her relationship with her husband might have led to the conclusion that the contract was, from her point of view, unjust or alternatively not unjust. But this was not raised at the trial and accordingly should not be raised here. Similar considerations apply to her separate claim based on unconscionability. For present purposes, it is, I think, sufficient to say that there is nothing in the evidence or the findings of his Honour to support the conclusion that the Bank made unconscientious use of its superior position or bargaining power to the detriment of Mrs Marzouk or that she suffered from some special disability or was placed in some special situation of disadvantage. His Honour's finding was that she was not misled by her son as to the limit of the guarantee (compare Amadio at 464). Moreover, her reliance was not upon him but upon her husband. If a wife agrees to become surety at the instance of her husband although she does not understand the effect of the document or the nature of the transaction, his neglect to inform her of the exact nature of that to which she is willing blindly, ignorantly, or mistakenly to assent may involve impropriety. In such case the amount of reliance placed by a creditor upon the husband for the purpose of informing his wife of what she was about must be of great importance in determining whether the creditor can enforce the terms of the document against her; see Yerkey v Jones at 685. For present purposes I assume such URJ MARZOUK v WESTPAC BANKING CORPORATION (Sheller Jaintroduction) 13 considerations apply even though the guarantee is not for the husband's indebtedness; compare Commercial Bank of Australia Ltd v Amadio at 475 and 486 and European Asian of Australia Ltd v Kurland (1987) 8 NSWLR 192 at 200. No reliance was put by Mrs Marzouk at first instance on Yerkey v Jones and his Honour's conclusions do not support any finding that to the extent to which she did not understand or misunderstood the contents of the documents, this was as a result of any impropriety of her husband. Even less could it be said that the Bank relied upon him for the purpose of informing her of what she was about. This was not a case of past or existing indebtedness with a Bank seeking, as in Amadio, to obtain a security to cover it, but a case where a would-be borrower, namely Sid-Marz, was seeking security in order to obtain a loan from the Bank. Appeal dismissed with costs. Counsel for the First Appellant: SN Galitsky/GPF Rundle Instructed by: Dean and Dean Counsel for the Respondent: MJ Beazley QC/PJ Dowdy Instructed by: Henry Davis York