YOUNAN and ANOR v BENEFICIAL FINANCE CORPORATION LTD SUPREME COURT OF NEW SOUTH WALES COMMERCIAL DIVISION MAHONEY JA, SHELLER and POWELL JJA 4 February 1994, 21 November 1994 [1994] NSWCA 370 Guarantees — Contracts Review Act — Consideration of structure and effect — Meaning of terms — Relevance of personal position of guarantors Appeal from Equity Division — Guarantee over home given by elderly lady for son-in-law's business — Guarantee given by wife of son-in-law — Business failed — Call on guarantee. CONTRACTS REVIEW ACT — Consideration of its structure and effect — Meaning of terms, "unjust", etc — "Public interest" in enforcement of contracts — Relevance of personal position of guarantors — Discretionary jurisdiction of the Court. ORDERS Appeals and cross appeals dismissed with costs. Mahoney JA In October 1988 two transactions took place between Beneficial Finance Corporation Ltd ("BF") and (as I shall describe them) members of the Bechara family. One involved a loan of about $3,000,000 to TAB Constructions Pty Ltd: that transaction is not now in question. The other involved the grant of a facility of some $672,750 to Dimah Developments Pty Ltd: it is that transaction which is here in question. Mrs Younan gave a guarantee of the Dimah transaction indebtedness, supported by a mortgage of her home. Mrs Bechara, her daughter, also gave a guarantee of the Dimah transaction, supported by a second mortgage of a property which she held as an investment. Default occurred. In the present proceedings, BF has sought to enforce the mortgage and guarantee given by Mrs Younan and the guarantee given by Mrs Bechara. The proceedings, as originally framed, were brought also against other members of the Bechara family. The Court is now concerned only with the proceedings against Mrs Younan and Mrs Bechara. The two ladies have defended the proceedings, claiming that the guarantees were void, voidable or unenforceable on one or more of a number of equitable grounds or should be avoided by the grant of relief under the Contracts Review Act 1980. It is not necessary for present purposes to go to the detail of the defences as framed. The trial judge found for BF on all of the defences and made orders that, inter alia, leave be given to issue a writ of possession in relation to Mrs Younan's home. Both Mrs Younan and Mrs Bechara have appealed to this Court against his Honour's orders. The proceedings are of some complication. As originally constituted they occupied some five days in hearing before Giles J. The appeal papers, insofar as they are before this Court, comprise five volumes contained more than 1500 pages of material. The judge's judgment extends over some forty-eight pages. The Court has been furnished with detailed written submissions. However, as there is, subject to what I shall say, no substantial contest as to the facts, I shall state the relevant facts and findings by reference to his Honour's judgment. 2 UNREPORTED JUDGMENTS Five male members of the Bechara family and their sister were interested in the business transactions of their group. Mrs May Bechara is the wife of one of the male members Mr John Bechara and Mrs Younan is Mrs Bechara's mother. The Bechara companies included the Dimah company and TAB Constructions Pty Ltd "TAB"). In 1986, BF provided substantial finance to the Dimah company. The repayment of Dimah's obligations was guaranteed by Messrs Albert and Michael Bechara. In 1988, the "facility" was increased to $672,750, the guarantee previously given by Mr Michael Bechara was released, and repayment was guaranteed by Mr Samir Bechara, Mrs May Bechara and Mrs Younan. The ladies gave security over the properties to which I have referred. Most of the loan made by BF was used to repay a debt owed to Australia and New Zealand Banking Group Ltd by another Bechara company and the balance was paid into the Dimah bank account. In 1989, BF lent $3,050,000 to TAB upon security then arranged. Default occurred both in respect of the TAB and the Dimah transactions. All of the mortgaged properties other than Mrs Younan's property were sold but neither loan was fully repaid from the proceeds of sale. BF has claimed, inter alia, against Mrs Bechara and Mrs Younan under their guarantees and has sought possession of Mrs Younan's property. Mrs Bechara was born in Lebanon and came to Australia with her family in 1959 at the age of eleven years. She married Mr John Bechara in 1970. She claimed that business matters were conducted by Mr John Bechara and properties were purchased using savings from her work and money left to her by her father. In 1978 and thereafter a number of properties were purchased in her name, alone or with others. His Honour said: "One may wonder whether John Bechara's income or other family income also went into the purchase of properties in May Bechara's name, but on the evidence before me I could not find otherwise than that the seven properties were truly properties of May or May and Antoinette Bechara. The property 2/7 Boronia Street, Wollstonecraft was one of the seven properties. In relation to the Dimah transaction, his Honour concluded that Mrs Bechara gave her guarantee and mortgage after having it explained to her by a Mr Dominello, a solicitor who acted for the Bechara family. Mrs Younan gave the guarantee and the mortgage on her part at the same time. His Honour did not accept as credible the evidence given by Mr John Bechara or Mrs Bechara. His Honour concluded: May Bechara agreed that she knew her property was going to be mortgaged to a bank or a finance company and knew that it was a mortgage which she signed before Mr Dominello (this being extracted after what I could only describe as attempts to evade the question), and that she signed other documents before Mr Dominello and knew she was being asked to sign a guarantee. This last answer was almost straight away retracted on the ground, in my estimation an excuse, that May Bechara had been confused. Although my observation was only short, I thought that May Bechara was an intelligent person who was pretending inexperience, ignorance and confusion, in the course of which she gave many answers which were patently ridiculous." Mrs Bechara had no difficulty in understanding English and accordingly in understanding what was said to her by Mr Dominello. Mr Dominello described in detail what, according to his practice, was said and what he said included a statement that Mrs Bechara was "providing a personal guarantee even though not receiving the funds". His Honour said: "Cross-examination of Mr Dominello, URYOUNAN and ANOR v BENEFICIAL FINANCE CORPORATION LTD (Mahoney JA) 3 including on behalf of May Bechara and Mrs Younan, amplified what he said would have been explained according to his practice. It elicited that in relation to CL19 of the memorandum he would have said that the liability was for the full amount of the debt unless it was in some way limited, and that he would have said that while the property was first and foremost at risk the liability might extend beyond that in certain circumstances." At the time Mr Dominello executed a solicitor's certificate stating that he had "explained the contents and the effect of the various documents and that in his opinion those to whom he gave the explanation were aware of and fully understood their terms and the obligations thereof". His Honour accepted Mr Dominello's evidence that he had met Mrs Bechara on a number of occasions, professionally and semi-socially, and "that he had found her to be articulate and knowledgeable, and had found that she had a knowledge of the family business and spoke of the family being over-committed and of high interest rates". His Honour concluded that the explanation given by Mr Dominello to Mrs Bechara was an adequate explanation to make known to her, "to the extent that she did not already know from the numerous dealings which she had earlier had" that she was given a mortgage. She knew what a mortgage was, "she had signed a mortgage at least twenty-seven times prior to October 1988 (sometimes as co-mortgagor with Antoinette Bechara), including before Mr Dominello". His Honour concluded that the explanation:... was adequate to, and did, make known to May Bechara that she was undertaking a liability for the whole of the Dimah loan. I cannot accept that May Bechara was ignorant that as mortgagee she undertook liability for the relevant debt. I have already referred to her agreement that she knew she was being asked to sign a guarantee on the occasion in question. In my opinion she well knew that she was undertaking that liability, and she and John Bechara sought to mislead the court in relation to the circumstances of her becoming involved in the Dimah loan and the extent of her understanding." His Honour rejected the defence of undue influence. He said: "May Bechara knew what she was doing and was content to do what John Bechara said, because, I would infer, she thought it was in her own interests (as it had apparently proved to be in the past). She signed the guarantee after explanation by Mr Dominello in the absence of John Bechara." His Honour rejected the defence that there were "unusual features in the transaction not necessarily to be expected by her". There was no evidence that "Dimah was in a precarious financial position or that the Dimah loan was particularly risky, and there was no evidence that Beneficial knew any material feature which May Bechara did not know". Reliance was placed at the trial and, I think, before this Court upon the fact that BF stipulated that certificates of independent advice should be obtained from solicitors in respect of each of the secured guarantees. On this basis, Mr Dominello saw himself as acting for the guarantors and his partner Mr Mattick was to act for Dimah. It was submitted that the stipulation for these certificates involved an effective admission by BF that the guarantors were or might be in a disadvantageous position or under the influence of John Bechara. His Honour saw "no reason to regard it as more than conventional prudence unprovoked by grounds for concern in the particular case". 4 UNREPORTED JUDGMENTS Faced with these findings in relation to Mrs Bechara, Mr Ireland QC, with his usual frankness, accepted that if her appeal was to succeed, it was necessary for him to overturn the findings of fact which the judge made as to her knowledge of the transaction. For this purpose, he took the court to the detail of the evidence and in particular the detail of the evidence given by Mr Dominello as to what was said to the two guarantors. Notwithstanding Mr Ireland's detailed examination of the evidence, I am satisfied that it was open to the judge to find, and that he found correctly, what was explained to Mrs Bechara and that she was sufficiently aware of what she was doing. The main, or one of the main, submissions made by Mr Ireland in this regard was that, whilst Mr Dominello's evidence might establish that Mrs Bechara was advised as to the nature of the security given, she was not advised that, as the result of the transaction, she could be called upon, as on a personal liability, to repay the whole of the indebtedness derived from the Dimah transaction. I do not think that that submission should be accepted. From her experience in property matters and from what she said in evidence, his Honour may well have inferred that she understood what a guarantee of that kind involved. Insofar as it may be relevant, I would so infer. But in addition the evidence given by Mr Dominello, in his evidence in chief and in cross-examination, provided a basis for the conclusion that she was sufficiently aware of the liabilities which she was undertaking. In saying this, I do not infer that it was necessary for BF to bring home to her a particular degree of knowledge of the detail of the transaction and of the obligations undertaken: that is a matter on which it is not necessary to express an opinion. For present purposes, it would be sufficient to infer that she knew that, if the company did not pay, she would be liable under her guarantee to pay what it did not pay. It is enough, for the purpose of dealing with the submissions made in,these proceedings, to conclude that the finding of fact made by the judge was warranted and accurate. Therefore, I am of opinion that the appeal by Mrs Bechara must be dismissed with costs. I come now to the appeal by Mrs Younan. This raises problems of more complexity. Mrs Younan was born in Lebanon in about 1922, was educated only to about the age of twelve, and came to Australia when she was about thirty-seven years old. She was not employed in Australia but was engaged in caring for her eight children, some born in Lebanon and some in Australia. She and her husband lived in the subject property in Guildford until his death in 1983. She inherited the property from him. It was "essentially her only asset and she had no income other than her pension". In relation to her his Honour found: "It is plain that following the death of her husband Mrs Younan relied upon the Bechara family and in particular on John Bechara. In 1988 John Bechara was tutor in philosophy at a university, he was clearly the most highly educated of the Bechara family, and although he may not have held formal office in the family companies had a significant input as adviser in relation to the family business ventures. Mrs Younan was unversed in matters of finance and inexperienced in business, and without explanation would have had difficulty in appreciating the consequences of the mortgage of 334 Woodville Road, Guildford. She received no explanation from John Bechara. He said that he was her adviser, that she trusted him, and that he tried to do the best he could for her; he also said that he saw no benefit to her in mortgaging her property but he saw 'a benefit to us', meaning 'myself and the brothers who were involved in the company', because 'we were using her mortgage to borrow money advancing URYOUNAN and ANOR v BENEFICIAL FINANCE CORPORATION LTD (Mahoney JA) 5 the cause of the business'. While at first asserting that there was no risk to Mrs 'Younan, John Bechara was constrained to agree that there was what he described as an 'almost negligible' risk to her. It must be said that Mrs Younan's trust was abused and she was shamefully treated by John Bechara and any other members of the family who knew what was occurring. Mrs Younan's first language was Arabic and she certainly had a limited command of English, but it was not as limited as Albert and John Bechara suggested in their evidence. Some English was spoken at home whilst the children were being educated in Australia, as would be expected. Although Mrs Younan generally gave her evidence through an interpreter, on quite a number of occasions she answered questions immediately, without translation, and answered them in English. Anything of complexity would have taxed Mrs Younan's understanding of English, but having seen her I accept that she could appear to understand an explanation of the documents which she signed and to indicate an understanding in a fairly confined discussion in English." His Honour held that Mrs Younan, despite what she said in evidence, signed the documents "after an explanation of the kind earlier described, but I am satisfied that, however it may have appeared to Mr Dominello, Mrs Younan gained only a limited understanding of what she was undertaking". His Honour pointed out that, on an earlier occasion, she had signed a mortgage to the ANZ Bank and that there was in evidence a document from a solicitor Mr Dockrill to the effect that he had "explained to Mrs Younan that the mortgage was granted to secure monies owing to the Bank by the company Malpet Pty Ltd" and stating that he had "explained to Mrs Younan the implications of signing the mortgage". His Honour's conclusion was that Mr Dominello's explanation did not "enhance Mrs Younan's limited understanding". He accepted that Mr Dominello believed that it had but his Honour's opinion was that: "Mrs Younan was aware that by signing documents she was making her property available in a way which meant that if money was not repaid it might be taken away from her, and to that extent knew that her property was at risk, but she had no more sophisticated understanding and was not aware that she was undertaking a personal liability." His Honour held that she did what she did "as a result of undue influence by John Bechara" in the sense that "there was an all-pervading compliance with John Bechara's wishes which the explanation given by Mr Dominello did not overcome". But he concluded that "there was a remarkable dearth of evidence concerning whether Beneficial should have appreciated that Mrs Younan might be subject to John Bechara's influence" and: there was nothing to show that Beneficial knew at the time that Mrs Younan was an elderly widow, was John Bechara's mother-in-law, trusted and relied on John Bechara, had no significant assets other than 334 Woodville Road, Guildford, stood to gain nothing from the transaction, or an g of like kind. All of this one would have thought might have been explored." For reasons of this kind the judge held that BF was not responsible for such undue influence as was exercised by Mr John Bechara and that for that reason that defence failed. His Honour then considered the facts relevant to the Contracts Review Act. He said: "Looked at from Mrs Younan's point of view, the contracts constituted by her mortgage and guarantee gave her no benefit at all but exposed her to loss of her home and every other asset she had. They came about because she had misplaced trust in John Bechara which I do not think Mr Dominello's explanation overcame. While the contracts were entered into with a rudimentary 6 UNREPORTED JUDGMENTS understanding of a mortgage, Mrs Younan had no appreciation of the transaction of which her mortgage and guarantee were part and was not aware that she was undertaking a personal liability. Still looked at from Mrs Younan's point of view, the contracts were unjust." But his Honour refused relief under the Act. He summarised his reasons as follows: "In the present case from the perspective of Mrs Younan it would be just to grant relief, but from the perspective of Beneficial it would not. Taking up matters already brought out in these reasons, Beneficial was not shown to have knowledge of Mrs Younan's disadvantageous position; if anything it might have thought that she was simply undertaking obligations to Beneficial for the benefit of the Bechara family in place of like obligations to ANZ; and it required and received a solicitor's certificate from which it appeared that the contracts were understood and freely entered into. There was nothing on which it could be found that Beneficial was aware of particular risk to Mrs Younan - so far as appears, at the time the Dimah loan was seen as commercially prudent, and in this respect as with respect to knowledge of the position of Mrs Younan the present facts are very different from those in cases such as... There is nothing wrong as such with a lender seeking a guarantee or security from a third party, and it seems to me that even if it were appropriate to find that the mortgage and guarantee were unjust it would not be just to grant relief in favour of Mrs Younan. His Honour then referred to the use which had been made of part of the loan, $494,938,92, to discharge the existing Malpet loan. His conclusion was that if relief were to be granted "it would have to be on terms which as a practical matter would make it unavailable to Mrs Younan". His Honour's view was that any relief, in equity or under the Act, "would be on terms that Mrs Younan was liable for at least that amount and 334 Woodville Road, Guildford was charged to secure at least that amount". The property was, of course, "worth much less than" that amount and Mrs Younan "had no way of paying that sum". The findings of fact made by the learned judge have not been the subject of substantial contest - at least insofar as they have been, I am of opinion that they are correct. But the question to be determined is whether, on the findings of primary fact which the judge made, relief should be granted under the Contracts Review Act. I shall confine what I say to matters relevant to that Act. His Honour's conclusion was to the effect that if Mrs Younan's position were to be considered alone, relief should be granted; but because of the factors to which he referred in relation to BF, that relief should not be granted. Essentially, those matters were that BF did not have knowledge of her disadvantageous position, that there was nothing in the transaction to alert it to special considerations, and that "it required and received a solicitor's certificate from which it appeared that the contracts were understood and freely entered into". I shall consider the effect of the Contracts Review Act and the effect of these findings upon the operation of it. The power given to the court to interfere with contractual arrangements made by parties is, if given effect according to the terms of the Act, a far-reaching power. The court must not substitute paraphrases or verbal formulae for the terms of the Act. However, in order to understand the nature and extent of the provision, it is of assistance to examine the terms of the Act and the scheme of their operation. To do this is of assistance in understanding what was done b y the trial judge in this case and in,considering the submissions which have been made in relation to his findings. URYOUNAN and ANOR v BENEFICIAL FINANCE CORPORATION LTD (Mahoney JA) 7 There are, amongst others, four things which may be said about the power given by the Act and the scheme of the operation of it. First, the test for determining whether the power exists and whether it should be exercised in the particular case is a normative test ("unjust in the circumstances relating to the contract at the time it was made" and "considers it just to do so": cf s7(1)). Second, the Act indicates various factors or classes of factors which are to be taken into account in "deciding whether a contract or a portion of a contract is unjust...": s9(1). Third, the test laid down by the Act involves a high rather than a low standard. And, fourth, the decision of the court that the power exists and that it should be exercised is of its nature a discretionary decision and accordingly an appellate court should not set it aside except by reference to the principles illustrated by or derived from cases such as House v The King (1936) 55 CLR 499. A decision to exercise the power given by the Act involves two things: a decision that the contract or a portion of it was "unjust"; and a decision that, this being so, it is "just" to do "one or more of the" things referred to in s7(1). "Unjust" and its cognates include "unconscionable, harsh or oppressive". Terms such as "just" and "unjust" have been used not infrequently to indicate the nature and extent of a power given to a court or a quasi-judicial body: see generally R v Commonwealth Industrial Court, ex parte Amalgamated Engineering Union Australian S (1960) 103 CLR 368; Kakis v Government of Cyrpus (1978) 1 WLR 779; Ex parte Sampson; Re the Governor of Her Majesty's Penitentiary at Malabar (1966) 84 WN Ptl (NSW) 197; Ingram v Attorney General for the Commonwealth (1980) 1 NSWLR 190. The use of such terms gives some indication of the nature of the power given and, in a sense, of the parameters of it. A power might be granted in terms which indicate that, in a proper case, it must be exercised or merely that it may be exercised: see Ward v Williams (1954) 92 CLR 496 at 594 et seq. A power granted by words such as "may" ordinarily involves that the court determine, from the scope and purpose of the legislation, what are the factors relevant to the exercise of the discretion: see O' Sullivan v Farrer (1989) 168 CLR 210 at 216 and the cases there referred to; Re Coldham; Ex parte Brideson (1989) 166 CLR 338 at 347; and that it then determine which of those factors exists, what weight is to be given to each of them, and whether, on balance, the power should be exercised. Ordinarily, a discretion conditioned by such terms as "just" and "unjust" is in one sense limited. In such a case, that which is merely inconvenient or inexpedient or which is merely "not in the public interest" will not be relevant; at least, that which renders the situation inconvenient, inexpedient or not in the public interest will not, as such, make it unjust that the situation exists. Terms referring to justice look primarily to the balance between the competing parties and "justice" in this sense, involves the Justinian concept of giving to every person his due: see generally John Rawls, A Theory of Justice, p 150 et seq. In the present Act the terms of it indicate (subject to what I shall say) that the court is to form a view as to what in the circumstances the interests of each party are and the extent to which the concept of injustice requires that one be preferred to the other. However, s9(1) provides that in determining whether a contract or provision is unjust, "the Court shall have regard to the public interest and to all the circumstances of the case" including the matters there referred to. It is therefore formally open to a court to determine that, as between the parties, there is no injustice but that the public interest warrants the conclusion that a contract 8 UNREPORTED JUDGMENTS or provision is unjust. The circumstances in which the court can and should interfere with a contract which, in that sense, is just between the parties does not appear. In s9 and in particular in s9(2), the Act indicates, in a non-exclusive fashion, factors to which the court "shall have regard" in deciding whether a contract or a provision is unjust. Without limiting the factors which, expressly or by implication, the statute treats as relevant, it is to be noted that the Act refers to (as I shall describe them for brevity) public interest factors: s9(1); factors dealing with the burden of the contract: s9(2)(f); factors derived from blame: s9(2)0); factors going to the freedom of the parties in entering into the contract: s9(2)(a) and (c); and bargaining factors: s9(2)(a), (b) and (e). It would be wrong to attempt to rationalise all of the provisions of the Act and, a fortiori, to limit the operation of any of the provisions by reference to an attempt at rationalisation of all of them. As I have indicated elsewhere, it is my view that the Act must be given effect according to its terms. However, it is of assistance, in applying it to particular cases, to understand the relationship which appears to exist between its various parts. Thus, the test of whether the court should interfere is related to the injustice of the contract or its provisions. However, in deciding whether it is unjust, the court is to have regard, eg, to how the contract came to be made, the intelligibility of its language: s9(2)(g); the explanation given of its provisions: s9(2)(i) and the bargaining power of the parties: s9(2)(e). It might be thought that how the contract came to be made does not determine or affect a judgment as to whether that which has been agreed to is unjust. But however that be such matters may, perhaps, be taken into account in that they assist in indicating whether insistence on the terms of the contract amounts to oppression or the like. Second, and, I think, of more importance in the present case, it was in my opinion the intention of the legislature that a contract might be interfered with for reasons not limited to or comparable to those which, under the general law, would warrant interfering with its operation. The grounds on which the law had provided for review of contracts is illustrated by cases such as: Blomley v Ryan (1956) 99 CLR 362; Commercial Bank of Australia Lid v Amadio (1983) 151 CLR 447; Louth v Diprose (1992) 175 CLR 621. The effect of the Contracts Review Act is, in my opinion, not to be limited to what could be done under the principles established by these cases. However, it is proper to have regard to the state of the law prior to the Act in deciding what may or should be done in reliance upon the terms of it. But it does not follow from this that a contract is to be interfered with lightly or for ideosyncratic reasons. The definition of "unjust" includes terms involving a high level of injustice. To an extent, that confirms, I that the reason which will justify interference must be of significant weight. But, that having been said, it is injustice which is the basis of what may be done. Third, it does not follow from the fact that any one or more of the grounds specified in, eg, s9(2) is established that the court can or should find that the contract was unjust. S9 specifies factors to which regard may be had for this purpose. In some cases, such factors may be relevant only in negativing the injustice of the contract, by showing that appropriate care was taken when it was made. Fourth, the court may, as I have said, have regard to "the public interest" in deciding the justice of the contract. Accordingly, it may consider, for example, the effect upon the conduct of affairs of the fact that contracts properly made may be put aside under the Act. One of the difficulties resulting from legislation of this URYOUNAN and ANOR v BENEFICIAL FINANCE CORPORATION LTD (Mahoney JA) 9 kind is that it creates an atmosphere of uncertainty as to the extent to which, under contracts legally made, money lent may be recovered or promises may be enforced. Reference has been made to such matters in cases decided under the Act: see what has been said in, eg, Gough v Commonwealth Bank of Australia (Court of Appeal, 31 May 1994, not yet reported); as to the precautions which must or should prudently be taken if money lent is to be recovered in accordance with the terms of the loan. It is, in a commercial sense, plainly undesirable that uncertainty be introduced into expectations as to the enforceability of contracts regularly made. But, whatever be the effect of the existence of the jurisdiction given by the Act, that jurisdiction must be exercised according to the terms of the grant of it. That leads to consideration of the matters which influenced the trial judge in holding that in this case the contract should be enforced against Mrs Younan according to its terms. I have referred to relevant portions of the judge's decision. What his Honour said must be read in its entirety. But his Honour referred in particular to the fact that BF had no knowledge of Mrs Younan's disadvantageous position and that it required and received a solicitors certificate from which it appeared that the contract had been understood and freely entered into. BF was not aware of the particular risks to Mrs Younan which in fact were involved. Were I determining the matter at trial level, there are two matters to which, in particular, I would in this regard give weight. First, I would have regard to what, in the circumstances, justice required that BF do in relation to Mrs Younan's position. Little if anything was done to show what BF knew about Mrs Younan, her position and her circumstances. Had it been intended to rely upon a case of this kind, it was to be expected that those acting for Mrs Younan would have explored the matter in detail. As Giles J said: "All of this one would have thought might have been explored". It was not. And, in the passage to which I have referred, his Honour held that there was nothing to show that BF knew any of the relevant matters concerning the lady. Were the matter to be decided by reference to the general law and without reference to the Contracts Review Act, it would be necessary to consider more closely the extent to which there was an obligation upon BF to investigate Mrs Younan's position. (I use "obligation" not merely in the sense of that which is correlative with a right, but in the broader sense of something from the breach of which consequences or inferences may flow). In Gough v Commonwealth Bank of Australia (Court of Appeal 31 May 1994, not yet reported) and more recently in Akins v National Australia Bank (Court of Appeal, 5 August 1994, not yet reported) this Court has considered this or associated questions. In Akins this Court held, I think, that the fact that a guarantee has been given by a wife does not put the creditor on inquiry as to her circumstances or fix the creditor with the consequences of the husbands improper or unfair dealing with her. The Court said: "That principle has been much criticised upon the basis that it fails to pay regard to the advance in the status and education of women, the increasing role of women (including wives) in business and commercial affairs and the variety of personal relationships today...". However, where it appears that a guarantor, of whatever gender, is "under a special disability" in the transaction and "that disability was sufficiently evident to the stronger party to make it prima facie unfair or 'unconscientious' that he procure, or accept, the weaker party's assent to the impugned transaction in the circumstances in which he procured or accepted it", then relief may be available 10 UNREPORTED JUDGMENTS under the general law: see Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 474, per Deane J. But I do not think that this Court is bound to hold, or should hold, that there is under the general law a duty upon a creditor, even in the broad sense, to seek out the details of the, position of a guarantor where there is, on the material in the ordinary course available to it, nothing to indicate "'a special disability" or the like. The position of a creditor under the Contracts Review Act raises problems of more difficulty. As I have said, that Act requires the exercise of a two stage discretionary judgment: the court must determine whether the contract or provision is unjust; and (if it is) it must determine whether "it considers it just to" do any of the things referred to in s7(1). There is little doubt that a number of the matters affecting Mrs Younan, though unknown to BF, are of relevance in determining whether, in the statutory sense, the guarantee arrangement is unjust. She plainly would fall within some of the matters specified in s9(2) notwithstanding that the fact that she did was not known to BF. Giles J concluded that, from the standpoint of Mrs Younan, not merely was the contract unjust but it would be "just to grant relief". But that leaves undetermined the relevance and (if relevant) the effect of BF's failure, of its own motion, to initiate enquiries as to her position. (I shall subsequently refer to what it did in requiring a certificate as to independent advice and the like). I do not think that it can be said that the fact that the creditor has not, on its own initiative, investigated the position of a guarantor is as such irrelevant. It would, in my opinion, be wrong to narrow the scope of the considerations relevant in determining the justice or otherwise of a contract for the purposes of the Act. But the fact that such enquiries have not been initiated by the creditor does not determine that the contract is unjust or, a fortiori, that it should be interfered with pursuant to s7(1). In the end, the fact that the creditor made no enquiries is a factor but not a determinative factor in the exercise of the statutory discretion. In Gough v Commonwealth Bank of Australia, reference was made to matters generally of this kind. In considering the position of a lady, who with her husband owned the shares in the debtor company and who had given a guarantee, I said: "It is not necessary to pursue the terms of the Contracts Review Act in detail. Notwithstanding that literally applied they confer upon a judge a far-reaching and ill-defined discretion to set aside or qualify transactions, they should, in my opinion, be given effect according to their ordinary meaning. In an area of social regulation such as this, what otherwise would be the operation of legislation is not to be qualified because it is suggested to be, eg, ill-advised, too widely drafted, or apt to interfere with perfectly proper transactions and to increase the cost of them to the consumer. It is necessary to consider whether the fact that a financier who does not ensure that a woman in this situation has independent advice is, in the relevant sense, acting unconscionably. To conclude that a financier must so act 'ordinarily', 'as a general rule' or 'in the ordinary case' would, in my respectful opinion, be wrong. It would involve something of stereotyping of those described as 'housewife' or the like. It would involve something of an assumption that what for their own purposes may have been agreed between husband and wife was not in her interest and that it was the intention of the legislators that the financier must question the propriety of agreements between husband and wife in such a case. In my opinion, there are no presumptions or general rules in this regard. Each case must be dealt with URYOUNAN and ANOR v BENEFICIAL FINANCE CORPORATION LTD (Mahoney JA) 11 upon its own facts. But to say that does not, of course, deal with the practical or, perhaps, the conceptual problems which the Act poses to parties about to enter into transactions." Subsequently, I said: "Assume that in such a case a financier who lends money is open to lose its money or the benefits of it by reason of circumstances arising from the relationship between husband and wife of which it has no knowledge. Assume its only safeguard lies in persuading the Court, in its discretion, not to make an order which is to its detriment. A prudent financier would, before contracting, have to investigate the matrimonial relationship. It would, prudently, investigate the state of affairs between them and how far, for example, the husband had led the wife into a contract which she should, in her economic interests, not have made. Or tell her and her husband that an independent adviser should assess such things. It would have to decide when it should make that requirement of prospective married borrowers and what should be seen as sufficient to prompt what might be an unjustified intrusion into their privacy. As the observations which Kirby P has made in other cases suggest, it may in a practical sense be necessary for the financier to do this in many (or most) cases, as an insurance against the Court's discretion. I suspect that such an intrusion was not intended by the legislators. But when a financier will do this and what it will do must remain a matter for its judgment. A financier will, no doubt, have in minds the terms of the Act and the way in which a transaction which is in fact unconscionable may be set aside or qualified to its disadvantage. It will no doubt prudently do what is necessary to ensure that the transaction is unlikely to be held, in the relevant sense, unconscionable. But in my opinion it is not to be assumed by the Court that every transaction in which a wife gives financial assistance to her husband - or a husband to a wife - is likely to be of this character." In this sense, it is in the present case proper to take into account that BF did not initiate enquiries of the relevant kind. It is a matter to be taken into account in determining each of the two discretionary issues. The second matter to which, at first instance, I would have particular regard is the fact that the steps taken by BF to procure that its guarantor was safeguarded by independent examination and advice did not achieve their purpose. I mean by this that, to the extent to which the judge referred, what was done by Mr Dominello, the solicitor, left Mrs Younan, to the extent to which the judge referred, under the influence of her son-in-law and not fully aware of the nature and effect of the guarantee she was asked to give. I confess to feeling in this regard that there is or may be something of unreality in the considerations which ordinarily influence courts in this area of the law. I have referred to Mrs Younan's education, history and background. She was, it may be, pressed by Mr Bechara and her daughter to give the guarantee and I suspect it would be difficult indeed for any solicitor, however careful, to procure that when she decided whether or not to give the guarantee, she did not act by reason of their influence. I suspect also that, as she indicated, she wanted to give the guarantee for reasons which to her were sufficient and that she would have done so notwithstanding that she knew fully the risk that she ran. And having regard to her background, I doubt that a careful solicitor could have made her understand, except in broad outline, what the guarantee involved and what she might lose if it were enforced against her. There are some persons who are so deficient in understanding who, in a practical sense, cannot give a guarantee: they are in such a position of disadvantage or disability that to enter into a transaction 12 UNREPORTED JUDGMENTS with them Or to enforce a transaction against them would constitute oppression against which equity would relieve. It was not argued that she was such a person - at least, the judge did not so find. I shall deal with the matter on that basis. However this be, his Honour made findings as to the extent to which what Mr Dominello did fell short of what ideally his advice should have achieved. The matter is, in my opinion, to be dealt with upon the basis of those findings. Various matters arise in this regard. It is not clear whether, in what he did, Mr Dominello acted as the agent of BF or whether, to the extent that he did, BF is deemed to have Mr Dominello's knowledge of the circumstances of Mrs Younan. It was not, I think, argued - at least, I do not accept - that Mr Dominello was the agent of BF. The proper view of the transaction is, I think, that BF stipulated, as a term of its willingness to lend. that the debtors should furnish to BF a certificate of the relevant kind given by a solicitor and that the solicitor acted for them in seeking to obtain it. It is, therefore, necessary to consider the significance of that, and the result of it, in deciding the two discretionary issues posed by the Act. The significant thing in this regard is that, to the extent referred to, the solicitor failed in what he was to do. Insofar as it is to be weighed against BF that it did not itself do what the solicitor was asked to do, it must also be weighed against it that the solicitor failed, to the, extent that he did, in what he was to do. How are these matters to be weighed in an initial determination of the discretionary issues? I have referred to what the judge held having regard to Mrs Younan's position alone. If the justice or injustice of the contract is to be determined taking into account the factors for and against each side, I would, I form the judgment that the contract was not "unjust" in the sense referred to in the Act. As I have indicated, in the circumstances I do not think that it can be held against BF that it did not, of its own motion, initiate enquiries as to the circumstances of Mrs Younan. I do not think that it knew matters concerning her which warranted holding against it that it did not do so. If that be so, the fact that it acted to the extent of requiring the certificate for which it stipulated and that what it did did not achieve its effect, does not as such mean that the contract which resulted was unjust. Weighing the interest of each party, the public interest in the stability of transactions and the protection of those who require protection, and the other matters comprehended by the Act, I think the balance falls in favour of BF. The vice of the transaction derived in the main from the actions of Mrs Younan's son-in-law and what she did was intended by her as a benefit for him. Insofar as doing what she did bore heavily upon her, that resulted from matters which were, as it were, on her side of the scale. There is one further matter to which the judge referred. In a practical sense, the grant of substantial relief to Mrs Younan would involve that BF would lose that portion of its loan represented by the value of her property. It was indicated during argument, I think, that, with the benefit of her property, BF would still suffer a deficit upon the transaction. To that extent, relief for her would, in a practical sense, be at the expense of BF. The judge held that he would grant relief only if conditions could be imposed and the conditions he contemplated could not have been satisfied by Mrs Younan. Accordingly, even if, on a balance between both parties, the contract was "unjust" his Honour, within s7(1) did not "consider it just to" do what s7(1) authorised to be done. That is a conclusion to which, at first instance, I would have come. But, as was contended for BF, the matter does not remain there. His Honour's judgment was, as I have indicated, a discretionary judgment. It is proper to interfere with it only if, on accepted principles, it is assailable. His Honour did URJYOUNAN and ANOR v BENEFICIAL FINANCE CORPORATION LTD (Powell JA) 13 not, in terms, refer to the two factors to which I have paid attention: the obligation of a creditor to inquire as to the position of a guarantor; and the consequence of the failure by Mr Dominello effectively to do what ideally the certificate procedure was designed to achieve. But I am not satisfied that his Honour did not take 'into account such matters. It is not necessary for a trial judge to itemise the factors to which he has regard; indeed, ordinarily it would be impossible for him to do so. Whether he has failed to take into account a relevant factor in a case such as this can, I think, be judged only by the impression overall of what he has said and done. I do not think that any ground exists for interfering with the judge's discretion. Were I to exercise it afresh, I would arrive at the same result. Before parting with this appeal, it is proper to add two observations. First, I have in considering Mrs Younan's position dealt with the matter upon the basis that her circumstances were effectively put before the judge and appropriately investigated for the purpose. I am not satisfied that this was so. Were I to have concluded that an order should be made affecting the guarantee, I would have felt it necessary to consider to what extent, having regard to the way in which her position was investigated and the proceeding conducted, it was open to me to do so. Her position was, to an extent, the subject of investigation and consideration. But, as the judge indicated, that extent was limited. It would have been necessary to determine how far, against BF, a finding should be made in such circumstances. Second, a court cannot but feel sympathy for a person who, by reason of a commercial failure, has lost her fortune or her home. Particularly is this so when the person is of the age and circumstances of Mrs Younan. I have accepted that it was within the discretion of the judge to intervene on behalf of Mrs Younan. The Contracts Review Act has held out to her, and those advising her, the possibility of relief. If this Court were determining what charity rather than justice required, the balance would no doubt be weighed more heavily in her favour. But, in my opinion, notwithstanding the scope of the powers given by the Act, that which the court is to do is to decide what justice requires. Tempered though it may be by other virtues, I am not satisfied that that justice warrants interference in the present case. The cross appeals therefore need not be pursued. The appeals and cross appeals should be dismissed with costs. Sheller JA I agree with Mahoney JA. Powell JA I agree with Mahoney JA. Appeals and cross appeals dismissed with costs. COUNSEL: Appellants: JM IRELAND QC Respondent/Cross Appellant: RG FORSTER Cross Respondent: DL DAVIES SOLICITORS: Appellants: NICHOLAS EDDY AND COMPANY Respondent/Cross Appellant: KEMP STRANG AND CHIPPINDALL 14 UNREPORTED JUDGMENTS Cross Respondent: PHILLIPS FOX