ZELL and ORS vy COMMONWEALTH BANK OF AUSTRALIA SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MASON P, HANDLEY and STEIN JJA 18 July 1997, 10 September 1997 [1997] NSWCA 359 Contracts Review Act 1980 (NSW) — unconscionable transactions — bank and farmers — whether contracts "unjust" — vulnerable position of wife — all moneys clauses Between 1971 and 1985 the appellants, the Zell family and their family settlement, acquired five rural properties in the Gilgandra District assisted by borrowing from the bank. At various stages each of the properties were mortgaged to the respondent, the Commonwealth Bank. The appellants were unable to make repayments to the respondent and sought relief under the Contracts Review Act 1980 (NSW) or alternatively, for unconscionability. Sperling J was not satisfied that the loan contracts or mortgages were unjust. The appellants challenge was directed to: 1. the lending arrangements for the purchase of the property "Bundally"; 2. the effectiveness of the all moneys clauses; 3. the refinancing in 1989 which resulted in the bank obtaining extra security; 4. Mrs Zell's special disability vis a vis the bank. Held: Appeal dismissed: 1. The bank's assessment of the viability of the transactions was dependent on the information and budgets provided by Mr Zell. Elders Rural Finance Ltd v Smith (1996) 41 NSWLR 296 distinguished. 2. Mrs Zell was not subject to undue influence or improper or unfair pressure from either the bank or Mr Zell. Mrs Zell was aware of the nature of the contracts she was entering into and was content to leave the family's business affairs to Mr Zell. 3. There is nothing unjust or unconscionable in the bank relying upon an earlier all moneys clause to secure a later indebtedness where the lender discloses its intention in the later security to rely upon the clause in the earlier security. Mason P The appellants challenge the trial judge's refusal to set aside contracts and mortgages which are said to be "unjust" within the meaning of the Contracts Review Act 1980 ("the.Act") and unconscionable within the principles of Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447. If the orders below remain undisturbed, all of the Zell family's pastoral and farming properties at Gilgandra will be sold up by the respondent Bank in exercise of its mortgagee powers. Over the years between 1971 and 1985 the Zell family acquired five virtually adjacent properties in the Gilgandra district: "Gowan Brae" (1971), "Widgerie" (1976), "Mount Pleasant" (1978), "Biddon" (1984) and "Bundally" (1985). The first three were purchased by the appellants Mr and Mrs Zell. "Bidden" was purchased by the third appellant Puku Pty Ltd ("Puku"), which is the trustee of a family settlement controlled by Mr and Mrs Zell for the benefit of themselves and their three sons. "Bundally" was purchased by their eldest son Ian in arrangement with Mr and Mrs Zell. In each case the acquisition of land and stock was largely financed by the respondent Bank ("the Bank") or by its related Commonwealth 2 UNREPORTED JUDGMENTS Development Bank ("CDB"). From time to time there were also overdraft arrangements and borrowings on hire purchase for plant acquisition. Mr and Mrs Zell have lived at "Gowan Brae" since 1962 (purchasing it from Mr Zell's father in 1971). Until Mrs Zell returned to her pre-marital calling as a school teacher in 1987, the only income to service the borrowings and to provide for farming and living expenses was that produced by the pastoral and grazing activities conducted on the various properties. In the main, the properties were run as a single venture, with plant and stock being pooled. Net returns were subject to the vagaries of nature, interest rates and commodity prices. In 1988-89 the parties agreed to a restructuring of the various loans. The Bank advanced $800,000 to Puku which used the advance to pay out the arrears of Mr and Mrs Zell's indebtedness, and to discharge the existing CDB Loan. The Bank retained its existing securities and took additional security over "Mount Pleasant" and "Biddon". For a time it seemed that family income would be sufficient to service the new loan. But. despite the forced sale of "Bundally" in 1992, Puku remained in fast ballooning default. Formal demands were made on all parties in 1995 and they have not been met. ISSUES IN THE APPEAL The appeal was argued on the basis that, with one exception, no relief was sought in relation to any dealing prior to 1985. In other words the appellants accepted that they could not lay at the Bank's door any responsibility for the position as it stood following the acquisition of "Biddon". Rather, it was argued that the transaction whereby the family committed themselves to purchase "Bundally" was the event which led to the crash of the family's fortunes. The Bank's conduct referable to the lending arrangements concerning "Bundally" was said to be unjust within the meaning of the Act or alternatively unconscionable within Amadio 's Case such that the Court would relieve the parties (Mrs Zell in particular) from the consequences of such injustice. The pre-1985 exception concerns the effect of the "all moneys" clause in the "Gowan Brae" and "Widgerie" mortgages. Mr and Mrs Zell argue that those clauses are not effective, either in their terms or because it is unconscionable to give them such effect, to charge those properties with the personal indebtedness of Mr and Mrs Zell arising in relation to the later acquisitions. The decision to make no general challenge based upon the Bank's dealings prior to 1985 reflects a realistic assessment of the evidence and of the findings (adverse to the appellants) relating to the Bank's involvement in the "Biddon" (1984) transaction. It is also relevant to note that the Act does not generally apply in respect of a contract made before 24 April 1980. As regards the 1989 refinancing exercise Mr and Mrs Zell's principal complaint is that the Bank took advantage of their lack of information by obtaining extra security to protect itself against what was by then an inevitable loss. The primary attack upon the judgment below comes from Mrs Zell. Through her counsel she submits that she was under a special disability and that the Bank failed to bring home to her that the acquisition of "Bundally" (in 1985) effectively put it beyond the family's capacity to service its borrowings. Mrs Zell contends that the Bank's superior capacity in assessing the risks inherent in the transaction taken together with the catastrophic consequences to the family of miscalculation meant that the loan and security contracts in 1985 and 1989 were URJ ZELL and ORS v COMMONWEALTH BANK OF AUSTRALIA (Mason P) 3 unjust and unconscionable. She complains that the Bank's practice of dealing almost exclusively with her husband meant that she was kept in the dark about the true risks, and that the Bank took advantage of her ignorance. Mr Zell also contends that the Bank should have recognised that the acquisition of "Bundally" was not viable, and that its failure to so inform him made the lending transaction unjust. He also challenges the 1989 transaction. The third appellant Puku makes no independent claim for relief, and recognises that the Act is not directly available to it (see s6(1)). THE POSITION AS IT STOOD IN 1985 Since the appellants challenge the Bank's dealings in 1985 and 1989, it is vital to see the position as it stood immediately before the critical acquisition of "Bundally" in 1985. The earlier dealings can be briefly summarised. (a) "Gowan Brae" (1971) In 1971 Mr and Mrs Zell purchased "Gowan Brae" for $62,402. The purchase was financed by a $20,000 loan from the Bank ("Farm Development Loan No 1") and a $45,000 secured term loan from the CDB. In 1973 the Zells gave a registered first Mortgage to the Bank dated 5 March 1973. That mortgage contains an "all moneys" clause. (b) "Widgerie" (1976) In 1976 Mr and Mrs Zell acquired this property, which was a Settlement Purchase Lease, for $60,904. $44,500 was lent by the Bank ("Farm Development Loan No 2") and was secured by a registered mortgage dated 24 March 1976. It too had an 'all moneys" clause. The CDB also assisted with the acquisition of this property and obtained a mortgage in 1976 which was renewed in 1978. (c) "Mount Pleasant" (1978) In 1978 Mr and Mrs Zell acquired "Mount Pleasant" for $92,997. The Bank advanced $20,000 ("Farm Development Loan No 3") relying expressly upon "the security already held by the Bank in connection with applicants' overdraft/farm development loans". The CDB advanced $50,000 to assist in the purchase of this property and took a second mortgage (subject to an outstanding first mortgage for $40,000 in favour of the vendor). The Zells married in 1962. They had three sons, Ian (born 1963, married in 1986 and died in 1991), Jamie (born 1965) and Andrew (born 1971). (Eventually all three boys decided to take up fanning.) "Gowan Brae" was and remains the family home. Throughout the 1970s farming and grazing activities were conducted on the three properties by Mr and Mrs Zell as partners. Each year a balance sheet and profit and loss account was prepared by their accountants and used as the basis of a partnership tax return. In 1978 Mr and Mrs Zell established a discretionary trust, known as the Colin Zell Family Settlement. The trustee was Puku and Mr and Mrs Zell were the directors. The beneficiaries included Mr and Mrs Zell and the children of the marriage. Thereafter the assets of the partnership were treated as assets of Puku and of the Trust, which traded as "CM and JA Zell". Trading stock and plant referable to the farming and grazing activities was shown as assets of the Trust. So too were the liabilities of Mr and Mrs Zell to the Bank. Precisely how this assignment came about does not appear on the evidence. 4 UNREPORTED JUDGMENTS (d) "Biddon" (1984) In 1984 the family decided to purchase "Biddon" for $200,000. The property was acquired by Puku with $213,000 advanced by the Bank ("Farm Development Loan No 4"), being $200,000 for the land and $13,000 for stock. The Loan Agreement, which was executed by Mr and Mrs Zell described the Bank's security as "security(ies) already held by the Bank in connection with advances and accommodation to" Mr and Mrs Zell. Presumably because of extant second mortgages in its favour over "Gowan Brae" and "Widgerie", the CDB agreed at this time to increase the priority in favour of the Bank over "Gowan Brae" and "Widgerie" to $290,000. Mr and Mrs Zell were informed accordingly in a letter dated 16 April 1984. The case at trial attacked both the 1984 acquisition of "Biddon" and the 1985 acquisition of "Bundally" treating them together as the effective cause of the financial downfall which followed. The combined acquisitions had added about 60% in area to the family holdings; but since the purchases were fully financed, even to the extent of additional borrowings for stock, the level of debt increased to a much greater extent than the increase in landholding. Sperling J held that the "Biddon" acquisition was probably reasonably safe on its own, and the appellants have not challenged this finding. They have concentrated the attack on the acquisition of "Bundally", relying upon the combination of "Biddon", and "Bundally" as the "bridge too far". The appellant's expert witness, Mr Ivey, calculated the family position as it stood immediately after the acquisition of "Biddon" as follows: ASSETS Property Gowan Brae 504,210 Widgerie 223,300 Mt Pleasant 282,530 Biddon 200,320 1,210,360 Plant and equipment 282,000 Stock - Wool 62,510 - Livestock 117,320 - Wheat pools and wheat in hand 5,250 - Other produce 56,400 241,480 Other assets - Life assurance 14,000 TOTAL ASSETS $1,747,840 URJ ZELL and ORS v COMMONWEALTH BANK OF AUSTRALIA (Mason P) 5 LIABILITIES Commonwealth Bank - Gowan Brae Loan 8,561 - Widgerie Loan 20,809 - Mt Pleasant Loan 14,103 - Biddon Loan 213,000 - Overdraft 3,802 Commonwealth Development Bank 65,000 - Rural Bank Drought Loan 1,815 - Baker Loan 25,000 - Stock firms 23,600 - Sundry creditors 7,066 382,757 NET ASSETS $1,365,083 EQUITY 78.1% Mr Ivey's conclusion was that an equity of 78% and liabilities of around $380,000 should have left the business in a viable position, even given the difficult cropping seasons that followed over the next 3 years. THE ACQUISITION OF "BUNDALLY" IN 1985 In late 1984 the Zells were unexpectedly presented with the opportunity to purchase "Bundally", a property of 1636 acres adjoining "Biddon'". On the advice of the family accountant, it was decided that Ian Zell should purchase "Bundally". The price was $335,553. By 'Farm Development Loan No 5" the Bank advanced $330,000 for land acquisition plus $20,000 for stock. The advance was made to Mr and Mrs Zell as "debtors". They and the mortgagor, Ian Zell, covenanted to observe the provisions of a standard Memorandum of Mortgage. Thus "Bundally" was mortgaged to its full value and the personal liability of Mr and Mrs Zell to repay the advance (with their son) secured upon "Gowan Brae" and "Widgerie" (assuming the validity of the "all moneys" clauses in the Bank's earlier mortgages over those properties). Mr and Mrs Zell had strong reasons for expanding as and when they did in 1984-85. They had three sons who were adult or adolescent and they were anxious to set them up as farmers and graziers. "Biddon" and "Bundally", which were close to the other three properties, had come on the market and might not have been available later. 1983 had been a good agricultural year. At least prior to the acquisition of "Biddon", the cost of the acquisition in the 1970s had been largely, but not fully absorbed. Economies of scale were anticipated from the pooling of land, stock and plant. As in the past, Mr Zell completed a detailed loan application which incorporated a forward estimate of income and expenditure for the calendar year 1985 on the assumption that "Bundally" was acquired with Bank finance. The figures were supplied by Mr Zell in a draft document prepared at home which was finalised in consultation with the relieving manager at that time (Mr Sunman). The trial judge held that the relevant information was provided by Mr Zell, and he rejected 6 UNREPORTED JUDGMENTS the submission that Mr Zell was influenced by any opinion of the relieving manager apparently supporting a further land acquisition. Contrary to Mr Zell's optimistic assessment, income from the expanded family enterprise proved insufficient to service the new level of borrowings. Things might have turned out otherwise. but the combined impact of a local frost in 1984-85, continuing drought, a sharp rise in interest rates (soaring to 20% in early 1986), decisions taken by Mr Zell to acquire additional stock in 1987 and to retain existing stock, and lower grain prices. meant that by the beginning of 1988 the situation had deteriorated rapidly. Mr Ivey summarised the position as follows as at 4 January 1988: ASSETS: Property - Gowan Brae 456,190 - Widgerie 203,000 - Mt Pleasant 267,660 - Biddon 187,800 - Bundally 294,480 $1,409,130 Plant and equipment 300,180 Stock 494,466 Life assurance 15,000 TOTAL ASSETS $2,218,776 LIABILITIES Commonwealth Bank 735,000 Overdraft 56,000 Commonwealth Development Bank 64,000 Baker loan 35,000 Stock firms 42,000 TOTAL LIABILITIES $ 932,000 NET ASSETS $1,286,776 EQUITY 58% THE REVIEW IN 1988-89 AND THE REFINANCING IN 1989 Due to the combination of adverse farming and economic factors the family's aggregate debt to the Bank rose quickly after 1985. Defaults and high interest rates compounded the situation. In February 1985 (immediately after the acquisition of "Bundally") the aggregate Bank debt exceeded $600,000. By the beginning of 1988 it was in the order of $800,000 even though Farm Loans Nos 1 ("Gowan Brae") and 2 ("Widgerie") were paid out in 1986 with $185,000 received by Mrs Zell from her mother's estate. (The Mortgages were not however discharged.) Farm Loans Nos URJ ZELL and ORS v COMMONWEALTH BANK OF AUSTRALIA (Mason P) 7 3, 4 and 5 (for "Mount Pleasant", "Biddon" and "Bundally") had not been paid out. Indeed the Zells were in substantial arrears. The idea of rationalising the family debts was first raised in a letter from the Bank to Mr and Mrs Zell in September 1986. In early 1988 Mr Zell and the Gilgandra manager Mr Bolt had several discussions about restructuring all of the existing loans (including those with CDB) into one large loan. Each were aware of the level of indebtedness as it stood at that time. The proposal was also discussed between the Bank and the Zells' accountants, whose preference (from a taxation perspective) was for borrowing being undertaken by Puku in its trustee capacity. The Bank proposed a single advance to Puku, which would be used (in part) to discharge the existing Farm Loans and replace them with a single borrowing by Puku, suitably secured. Current optimism (induced largely by Mr Zell's own representations) led the manager to consider that the plan was feasible. Nevertheless, in view of what the Bank recognised as "a significant slide in equity from 77% in 1982... to the present 58%" (Mr Bolt's Memorandum dated 24 February 1988) the Bank stipulated for additional security in the form of Mortgages over "Mount Pleasant" and "Biddon". On 15 April 1988 Mr Zell was informed that he was at liberty to make any repayment he wished on the existing Farm Loans. However, he told Mr Bolt that he would prefer to have all facilities rearranged before embarking on a fixed repayment programme. An inspection was carried out by the CDB's rural officer on 9 June 1988. During this and later meetings with Bank officers, Mr Zell expressed reluctance about offering "Biddon" as additional security. There were lengthy discussions between Mr Bolt and Mr Zell in July and August 1988. Mr Zell was adopting the position that he recognised the need to alleviate the substantial debt burden. He endeavoured to negotiate to exclude "Biddon", while Mr Bolt explained that additional security was required "if CBA is to continue to support him'. The Bank pressed him to consider the sale of livestock, but he resisted. Other terms of what became the Bank's formal offer were discussed. Ultimately the Bank confirmed approval for an advance of $800,000 to Puku. This was by letter to Mr and Mrs Zell. The terms of approval were set out in a loan application form which was sent to the Zells in October 1988 but not completed by them until May 1989. The term was 15 years, with half yearly instalments of $71,400 covering both principal and interest. The loan to Puku was to be guaranteed by Mr and Mrs Zell who would also mortgage "Mount Pleasant" (being a second mortgage that replaced the existing CDB second mortgage over that property) to secure Puku's indebtedness. They would also have to procure Puku to mortgage "Biddon" as additional security. For various reasons for which the Zells were responsible, eight months elapsed from the date of loan approval to the finalisation of the transaction. By July 1989 the aggregate debt exceeded one million dollars, the increase being due to various short term drawings and other transactions negotiated between the Bank and Mr Zell during the interim. Nevertheless, Mr and Mrs Zell executed the various loan and security documents which had been stipulated for by the Bank. The $800,000 advance which they received was used to pay out the CDB and the Bank's Farm Loans Numbers 3 ("Mt Pleasant") and 4 ("Biddon"). Farm Loan No 5 ("Bundally") was repaid in part. 8 UNREPORTED JUDGMENTS EVENTS AFTER 1989 The wool boom of 1988 and 1989 gave cause for optimism, but this was short-lived. Net assets fell very markedly after 1989. In March 1991 Ian Zell died. As well as being a terrible blow to his parents (not to mention his own immediate family), this event affected the whole family's capacity to maximise the farming potential of the combined holdings. Under pressure from the Bank, "Bundally" was sold in 1992. The proceeds of $340,000 were sufficient to meet the balance outstanding at that time under Farm Loan No 5 (for "Bundally"). But the Bank's rights to recover other debts under the "Bundally" security documents were reserved. In 1995 formal demands were made upon Puku and Mr and Mrs Zell. They were not met and these proceedings were commenced. By the date of trial in late 1996 the debt exceeded $ 1.4 million. THE TRIAL JUDGE'S REASONS The claims of unjust or unconscionable conduct were rejected by Sperling J, who entered judgment for the Bank. In my earlier recitation of facts I have incorporated many of his unchallenged findings. Those relevant to the issues in the appeal should now be summarised. (a) Mr Zell Without putting all their eggs into one basket, the appellants appear to have focussed their case below upon the dealings between Mr Zell and the Bank. Mr Zell was undoubtedly Mrs Zells' agent in those dealings and, had his case been accepted, then so too would Mrs Zell s. But it was not. This case was re-agitated upon appeal, but (for obvious reasons) it was not pressed strongly. Even if it fails, as it should, some of the findings referable to Mr Zell are critical to any assessment of the independent case mounted by Mrs Zell which was pressed in the appeal. Mr Zell was an experienced, competent and highly respected farmer and grazier in the Gilgandra district. His standing is illustrated by his roles as chairman of the local silo committee, steward of the show society, and chairman of the trustees of the showground. One Bank officer's assessment (in 1992) was that Mr Zell was regarded as "one of the best, if not the best property manager in the Gilgandra district that I have had anything to do with. He is a competent farmer and grazier and has also done very well trading in sheep" (Rural Officer's Inspection Report dated 12 January 1982). Another manager (Mr Sunman) described Mr Zell as "an astute Manager who keeps his finger on every aspect of the properties as well as local affairs" (Report dated 8 November 1984). As regards the capacity to handle the vagaries of agricultural life and to predict its fluctuations he held an undoubted advantage over the succession of managers and relieving managers at the Commonwealth Bank Gilgandra branch with whom he dealt over many years. The case advanced at trial was that the Bank assumed the role of financial adviser to the Zells in which it represented the viability of each of the ventures which it financed. This case focussed upon (a) the Bank's role in relation to the preparation of financial summaries written up for loan applications and bank reviews; and (b) specific conversations in which managers gave encouragement to Mr Zell. URJ ZELL and ORS v COMMONWEALTH BANK OF AUSTRALIA (Mason P) 9 Mr Zell's practice was to draft the financial summaries at home and then to complete them when having a fuller (typed) engrossment prepared with the assistance of the bank manager. The summaries contained detailed "snapshots" in the form of a balance sheet and a profit and loss statement, prepared (in the case of loan applications) on the basis of the requested advance having been made. All holdings were aggregated. There were estimates or predictions of stock and plant value, income and expenditure. The evidence of Mr Zell to the effect that the Bank managers made contributions of substance was important to fix the Bank with shared responsibility for the defects in these estimates of income and expenditure which the appellant's expert Mr Ivey detected in his role as a trial witness (discussed below); as well as to bolster the more general case of dependent reliance by the Zells upon the Bank in relation to the critical decisions in 1985 and 1989. Mr Zell also gave evidence about particular assurances by individual managers that there were "no risks". Most of these conversations were disputed, as was the evidence of reliance by Mr Zell. Sperling J made detailed and careful findings which need not be repeated in totality. His assessment involved consideration of the credibility of Mr Zell as well as the evidence and credibility of the various managers, most of whom were cross examined on their affidavit evidence. Important general findings are made at p29-p30, p35 and p41 of the judgment His Honour found that Mr Zell was very intelligent and that he had the capacity (which the managers lacked) to work out forward estimates of income based on intended farming activities, the areas of land applied to such activities, anticipated average yields and commodity price forecasts. It was also found that Mr Zell was able to estimate the expenses likely to be incurred to produce income. Repayments on borrowings and likely tax liabilities were readily ascertainable. The judge held that Mr Zell did not rely on the managers for such forward estimates except in minor and irrelevant respects. Mr Zell was held to be always aware of the true market value of the land from time to time. His evidence that he relied upon the contribution of the managers to the written data, or their statements of confidence and assurance was rejected. Key findings relevant to the acquisition of "Bundally" may be found at p45, p46 and p52-p54. His Honour found that Mr Zell was not influenced by any recommendation to acquire "Bundally" by the then relieving manager. As in the earlier transactions, he was the person able to make and who did in fact make the calculations on forward financial performance. Responding to Mr and Mrs Zell's evidence that they had assumed that in approving the loan the Bank had come to a well-informed and considered view that the underlying transaction, as financed, was safe for the customer, Sperling J found: "To the extent that Mr and Mrs Zell made that assumption, without doing the figure work for themselves - as Mr Zell had the capacity to do - they were careless of their own interests and, in my view, unreasonably so." As indicated earlier, the figures provided by Mr Zell referable to estimated income and expenditure after the financed "Bundally" purchase were quite adequate to service the borrowings, albeit that the objective and well-informed expert observer (Mr Ivey) could say - and be accepted by the judge - that it was quite unreasonable for both the Bank and borrower to have worked off those figures in the light of the 58% equity ratio calculation. But the case was not pleaded in negligence and would have failed had it been so, in the light of the findings on reliance and facts referable to duty of care. In those circumstances what was actually known to the respective parties about the accuracy of Mr Zell's 10 UNREPORTED JUDGMENTS estimated income and expenditure figures was vital (although not necessarily conclusive). The key finding (at p53-p54) about the 1985 transaction was in the following terms: "The disparity between the figures and a realistic forecast is substantial. That might have been due to carelessness on Mr Zell's part, but that is unlikely to be the explanation. I think Mr Zell is by nature a careful man and he certainly had the ability to get it right in my estimation. The errors are also too many and too gross to have been purely accidental. As I have said, I think Mr Zell was under a powerful motivation to expand at this time. He needed finance to do that, and to get finance he needed to show a capacity to serve the new loan. In concrete terms, he needed to show that the business, with "Bundally" and the new loan, could be operated at a profit. The estimates he provided showed that it could. They were wrong It could not. To what extent Mr Zell was aware that the estimates he provided were wrong I do not know. The motivation and its effect might have been subconscious or largely so. That does not seem to me to matter. The estimates Mr Zell supplied and which led Mr Sunman to believe the family could service the new loan, and to so advise his superiors, were - as I find the facts - Mr Zell 's estimates. The Bank could have alerted itself to the erroneous nature of the information by doing a simple equity ratio calculation, but it was under no legal duty to Mr Zell to do so. At most, it had a duty not to mislead Mr Zell and not to suffer him to mislead himself It did neither on the facts as I find them (That, of course, does not exhaust the question of whether the loan contract for "Bundally" was unjust. I shall come to that.) In relation to "Bundally" Mr Zell literally got what he asked for, no more and no less. The fart that the family could not afford the acquisition of "Bundally" was demonstrable from a reasonable projection of income and expenditure. That Mr Zell could readily have done and could readily have evaluated. He had the natural intelligence and he had the farming expertise. Instead of doing that - for understandable, human reasons - he appears to have contributed erroneous information to the Bank and to have refrained from completing for himself a rudimentary income and expenditure projection on realistic data, which would have demonstrated that the acquisition of "Bundally" was beyond the family 's means. The Bank acted on Mr Zell's projections. It could have avoided that error readily enough. It did not." As regards the period between 198S and 1989, the learned judge addressed Mr Zell's evidence that he had relied upon successive managers for advice as to how to run the business or as to what profits he might be able to make out of stock trading. These findings involved preference of the managers' evidence to that of Mr Zell. It was also held that Mr Zell was aware of the level of debt from time to time, and that "he had his finger firmly on the financial pulse of his business " (p68). He was monitoring the cash-flow situation. The information upon which the Bank made its decision to offer the refinancing arrangement in 1988 was, the judge held, supplied by Mr Zell. At the critical time the manager was Mr Bolt, who was (in my words) a "city slicker" whose farming expertise paled into insignificance compared to that of Mr Zell. The judge found that Mr Zell would not have placed any reliance upon assurances as to prospective viability from this source. URJ ZELL and ORS v COMMONWEALTH BANK OF AUSTRALIA (Mason P) 11 As regards Mr Zell's understanding of his true situation at the time when, in July 1989, he and his wife executed the security documents relating to the loan restructuring, the judge found that: "Mr Zell believed that, without variation of the loan arrangements on the Bank's terms, the Bank would not continue to fund the existing operation under the current arrangements, and that no other financial institution was likely to be willing to take over the loans as they stood. That would appear to have been an inescapable assessment of the situation. There were substantial arrears under existing arrangements." The manager Mr Bolt strongly urged the re-organisation. When he came to the branch in January 1988, he found a very unsatisfactory state of affairs in relation to the Zell accounts: existing borrowings in excess of the support value of the security held by the Bank, and a history of serious failure to meet the terms of borrowing arrangements since the acquisition of "Bundally" in 1984. The learned judge had no doubt that he urged a new arrangement on Mr Zell that would clean up the arrears and provide the Bank with adequate security at the customary margin. I will return to the Bank's perspective of the 1989 restructuring. Confining myself to the findings referable to.Mr Zell's position, the judge held that Mr Zell had contributed very substantially to the Bank's optimistic view by providing "wildly optimistic forecasts of prospective income and expenditure and by standing by those estimates when they were queried.... Mr Zell might well have believed that the estimates he provided were achievable. If he did, he fooled himself: And he certainly fooled the Bank - more likely than not unintentionally - but fooled them just the same" (p79). On my understanding, none of these findings referable to Mr Zell were challenged on appeal. If they were, they should stand because they represent a highly probable assessment based upon the trial judge's opportunity to observe the oral evidence of Mr Zell and the Bank managers. The real challenge in the appeal was mounted by Mrs Zell who sought (forensically) to distance herself from her husband. Alternatively, Mr and Mrs Zell relied strongly on the judge's conclusion that the Bank had been negligent in approving the 1985 transaction. To these separate matters I now turn. (b) Mrs Zell Mrs Zell was aware of the character of the documents which she signed, and their material terms, as well as the sums involved. Her case, essentially, was that the Bank should have done more to warn her of the risks involved and to counsel her against yielding to her husband s wild optimism. Mrs Zell had trained as an infants' school teacher. Between her marriage in 1962 and 1987, when she returned to paid employment as a secondary teacher (with an external Bachelor of Arts degree acquired in 1987), she was occupied fully in looking after the family and assisting with the farm work. She took no part in the financial aspects of the farming business, leaving those matters to her husband, her son Jan and the accountants who prepared for her signature annual financial statements and tax returns. This relatively detached stance was not a reflection of her inability or disinterest in the financial affairs of the family. (In her words, she "asked to be a co-signatory [of the cheque account] so I could have some idea of 12 UNREPORTED JUDGMENTS where the money was going".) She does not suggest that she did not know that discussions or negotiations about the various acquisitions were taking place or their broad terms. There was no suggestion of any conflict of interest between husband and wife in the evidence or in the way in which the trial and the appeal were conducted. Nor was it put that Mr Zell had exercised any pressure upon his wife or misled her in any way. There is every indication that the marriage between Mr and Mrs Zell has at all times been based on mutual care, support and trust. What clearly emerges is the picture of a mutually convenient division of labour, with Mrs Zell adopting the primary focus of attending to vital household matters, including the raising of the children; and Mr Zell making most decisions relating to fanning and financial activities. In 1983 and 1984 Mrs Zell was very occupied in caring for her frail mother who lived in Sydney. Mrs Zell was never invited to attend the Bank on the periodic reviews of the assets or to complete or discuss the detailed loan applications. Nor does she appear to have offered to attend. In the main, the Bank dealt with Mr Zell so far as receiving instructions, negotiating loans and pressing for payment. Nevertheless, letters and statements of account were sent by the Bank addressed to Mr and Mrs Zell jointly. The Zells chose to leave perusal of them to Mr Zell. Mrs Zell was aware that her husband did the paperwork relating to the business affairs of the family, including those referable to the Bank. The trial judge's assessment of Mrs Zell was that she was intelligent and articulate. He held that her incomplete knowledge of the family's farming business was due to the fact that she left that to Mr Zell. He concluded that, in so doing, "she conformed with the mores of her generation, particularly in the rural community "(p66). In July 1989, when (after seven month's delay from the time of loan approval) Mr Zell was ready to sign the documents relating to the reorganisation, Mrs Zell went to the Bank at her husband's request. Seeing the figure in the loan application she was shocked, although she had (in 1987) been told by a manager that he was not sure how the Zells were going to meet their commitments. She was not asked (by the Bank) whether she agreed with the loan before she signed, although she did not dispute that she understood her role as guarantor in broad terms. Her case did not involve the suggestion that she did not understand what she was signing, in her various capacities as joint owner of "Mount Pleasant", director of Puku, and personal guarantor. In evidence Mrs Zell said that, when she signed documents for the acquisition of properties and Bank loans, she relied on her husband's farming ability and on the support he received from a succession of managers of the Bank's Gilgandra branch. Sperling J held that she had believed that the Bank's willingness to lend on each occasion conveyed its expert opinion that the transaction would not be disadvantageous to the family; and that this belief contributed to her willingness to join in the transactions and to undertake the commitments to the Bank which she in fact undertook. His earlier findings referable to Mr Zell disclosed that this belief on Mrs Zell's part was unfounded. It should also be recorded that there is no finding that the Bank contributed to the belief. (c) The objective level of risk involved in the 1985 and 1989 transactions The appellants rely heavily upon the evidence of Mr Ivey, an agricultural and management consultant, who demonstrated to the trial judge's satisfaction that the data provided by Mr Zell in 1985 was unrealistically optimistic as an URJ ZELL and ORS v COMMONWEALTH BANK OF AUSTRALIA (Mason P) 13 indicator of an average year under the prospective regime; that projected operating expenses and personal drawings were unrealistically low; and that no allowance was made for essential plant improvement and machinery replacement over the life of the Bundally loan. Mr Ivey said that he did not know of a single case of a farming enterprise having survived commercially with an equity level of less than 70% as at 1984. It was his opinion that there was no chance of servicing the commitments undertaken at the time of acquisition of "Bundally". The effect of this evidence, which the judge accepted, was that the calculation of an equity ratio in relation to the prospective enterprise (including "Bundally") - ie by reference only to assets and liabilities, as distinct from income and expenditure - would have indicated what a realistic estimate of prospective income and expenditure would have demonstrated, namely, that the enterprise, with the addition of "Bundally" and the attendant debt to acquire it, was not financially viable. Mr Ivey concluded that both the Zells and the Bank were negligent in that they geared the 1985 transaction at an equity-asset ration below 70% which he regarded as the safe margin for mixed farming enterprises, especially those (like the Zells') which were in a less reliable region of the wheat belt and thus highly reliant on sheep and cropping. On Mr Zell's figures referable to the financial purchase of "Bundally" there would have been an equity ratio of 75.91% pre-acquisition and 57% post-acquisition. The former percentage was calculated by the Bank, the latter by Mr Ivey. It needs emphasis that this 70% benchmark is Mr Ivey's. It does not represent a Bank standard, and failure to observe it was in one sense fraught with as much risk for the lender as the borrower. Sperling J preferred Mr Ivey to an expert called by the Bank. He held (judgment p50): "\...Mr Ivey said that he did not know of a single case of farming enterprise having survived commercially with an equity level of less than 70% as at 1984.... Another way he put it was that there was, in his opinion, no chance of servicing commitments. The effect of this evidence, which I accept, is that the calculation of an equity ratio in relation to the prospective enterprise (including "Bundally") - ie by reference only to assets and liabilities, as distinct from income and expenditure - would have indicated what a realistic estimate of prospective income and expenditure demonstrated, namely, that the enterprise, with the addition of "Bundally" and the attendant debt to acquire it, was not financially viable." Mr Ivey's approach revealed objectively that Mr Zell's estimates in the "Bundally" loan documentation were unreliable and wrong. Mr Ivey concluded that, objectively speaking, the enterprise, with the addition of "Bundally" and the attendant debt to acquire it was not financially viable, and this evidence was accepted by the learned judge (p50). It followed, the judge held, that the Bank was careless in relying on what it had been told by Mr Zell. It should have challenged his unrealistic optimism. The fact that it did not was due to its managers having been lulled by Mr Zell's optimism. It is critical to the outcome of the appeal to observe that the judge made no finding that the Bank knew that the 1985 transaction was a high risk one. Distinguishing the present case from Elders Rural Finance Ltd v Smith (1996) 41 NSWLR 296 (special leave refused: see (1997) 9 Leg Rep SL3c), the judge emphasised that he did not find that the borrowers were financially unsophisticated in the way and to the extent that was found in Elders; nor did he find that the lending institution had a better awareness 14 UNREPORTED JUDGMENTS than the borrower of the financial implications of the transaction (p61). Counsel for the appellant does not dispute these findings as regards Mr Zell. Turning to the 1988-89 restructuring, the judge found that it was the perception of the manager (Mr Bolt) in January 1988 that the Zell's indebtedness exceeded the support value of security as recorded by the Bank that prompted the full review and "brought the situation to a head" (p75). The Bank was moved to press for the restructuring by its recognition of "a significant slide in equity for 77% in 1982... to the present 58%". As matters stood in early 1988, Bank borrowings were $855,000. Since, however, Mr Zell's valuation appeared acceptable at $1,400,000, the Banks' exposure remained "relatively safe", so the judge held. This was, of course, based on Mr Zell's figures. On Mr Ivey's 70% asset-equity yardstick, the writing was on the wall unless Mr Zell's optimism as represented in his proffered figures came good. Mr Ivey does not say that the figures were impossible to achieve. They might have been had there been years of plenty and not years of hardship after 1985. Mr Ivey's critical review of Mr Zell's forward estimates was more than borne out by the events of 1985 to 1987. The combined effect of crop failure (through frost) in 1984, prolonged drought, and a sharp rise in interest rates meant that little short of a miraculous turn around could have rescued the situation by 1989. That is not to say that things might not have been otherwise if the vagaries of rural existence had proved favourable. And it would have been open to the Zells to have reduced long term indebtedness by selling stock (as Mr Zell repeatedly promised the Bank he would), albeit at the cost of losing working capital that was vital in the long term to servicing the balance of the continuing indebtedness. The latter considerations are not conclusive, but they are relevant to a determination of what is "just" according to the calculus required by the Act. In relation to the 1988-89 reorganisation, Mr Ivey was critical of the financial summary dated 4 January 1988 which was a major source of information that led to the Bank's decision to approve the refinancing transaction. Drawing on balance sheets prepared by the Zells' accountants and accepted by the Zells for tax purposes, Mr Ivey estimated the equity ratio of the business at about 49% at that time, whereas the summary dated 4 January 1988 yielded a ratio of 58%. This contrasted with what Mr Ivey regarded as the minimum ratio for viability of 70%. Mr Ivey was also critical of Mr Zell's forward estimates of income and expenditure. He considered these to be quite inadequate. In his opinion, the best forward estimate for 1988/1989 in isolation would have been a deficit in cash-flow of about $20,000, and for an average year about $98,000. In summary, whether by reference to a simple equity ratio calculation or a more detailed cash-flow projection (properly done), the business could not, as at 1988, reasonably have been expected to survive, in Mr Ivey's opinion, without significant reduction in debt. That would necessarily have involved disposal of assets. The judge accepted Mr Ivey's evidence in this regard. DISPOSITON OF THE PRINCIPAL ISSUES AT TRIAL AND ON APPEAL Having found the relevant facts, the trial judge considered whether the two transactions were unjust in the light of the principles stated in Smith v Elders Rural Finance Ltd (1994) NSW Conv R55-727 (Bryson J) and, on appeal, Elders Rural Finance Ltd v Smith (1996) 41 NSWLR 296. It was not these principles, but their application, that were in issue on the appeal. As the judge recognised, URJ ZELL and ORS v COMMONWEALTH BANK OF AUSTRALIA (Mason P) 15 there were significant differences between the facts in Elders and those in the present case. Each case involved an underlying transaction, with attendant loan arrangements, which was found to have been objectively not viable. Nevertheless Elders was distinguishable from the present case, so the judge held, because the Zells were not financially unsophisticated in the way and to the extent that was found in Elders. Nor did Sperling J find that the lending institution had a better awareness than the borrower of the financial implications of the transaction; nor that there were collateral advantages to the lender of the kind that existed in Elders. His Honour considered the relevant items of the check-list offered in s9(1) of the Act in determining whether a contract is unjust. In the appellants' favour he recognised that there was inequality of bargaining power; that the loan was (objectively) impossible to comply with; that there was a substantial difference in the economic circumstances of the parties; that the Zells did not seek independent advice from their solicitors or accountants in relation to the relevant contracts; and that there was inequality of risk undertaken by the parties. On the other side of the equation his Honour noted the importance, in a general sense, of bargains being implemented and, if necessary, enforced; the fact that the Zells knew and understood the fundamental elements in the arrangements, both as to their legal and practical effect; the absence of undue influence, unfair pressure or unfair tactics exerted or used against the Zells; and the superior capacity of Mr Zell to estimate future income and farm-related expenditure. As to Mrs Zell, the judge recognised that she did not have her husband's experience and farming expertise, sufficient to fit her to make the same kind of forward assessment as her husband. He addressed her lack of involvement in the negotiations leading up to the 1985 transaction, holding that Mrs Zell had an incomplete knowledge of the family's farming business, leaving that to her husband. In that regard "she conformed with the mores of her generation, particularly in the rural community". His Honour found that Mrs Zell was later unaware of the family's deepening financial difficulties and of the true extent of those difficulties until they had reached very grave proportions. Nevertheless this lack of awareness was "a function of her role". There was, he held, no question of Mr Zell or the Bank having kept information from Mrs Zell against her will, or of having overborne her or kept her from participating in the arrangements made from time to time. "She did not want to know more than she was told, or if she did, she did not say so. And she did know, substantially, what liabilities were undertaken from time to time and what securities were provided". Having regard to the foregoing considerations his Honour held that he was not satisfied that the contracts relating to the "Bundally" purchase were unjust. There was no specific finding referable to the principles in Amadio's Case, because the parties were content at trial to rely upon their statutory rights in connection with the 1985 transaction. In approving the 1985 transaction, the Bank adopted and shared Mr Zell's optimism as to the borrower's capacity to repay. That optimism was fully justified if the Bank was entitled to rely solely upon the estimates of forward income and expenditure provided by Mr Zell. In dealing with the trial judge's assessment of Mr Zell, I have already drawn attention to presently incontestable findings that show that Mr Zell provided the relevant figures and that it was the Bank that relied upon Mr Zell, and not the converse, as to their accuracy. 16 UNREPORTED JUDGMENTS As regards 1989 financial reorganisation, the judge acknowledged that the transaction proceeded on a grossly incorrect assumption that the business had a reasonable prospect of surviving with its current level of debt. Nevertheless he declined to find that the contractual arrangements were unjust. His reasons were, first the finding that the Bank had (through its officers) honestly shared Mr Zell's optimism. The second, and principal factor, was the role of Mr Zell. Although Mr Zell's estimates were, the judge held, substantially at variance with past performance, Mr Zell defended his approach when taxed by the Bank officers. "What Mr Zell in fact chose to do was to see if he could tough it out in the hope that somehow things might come good. To do that he had to convince the Bank to continue to support him. Support meant meeting the Bank's terms, which involved the re-organisation of the borrowing arrangements and providing additional security. It also meant that he had to persuade the Bank that the business could service the new borrowing regime. That he did, but only by providing an estimate of future income and expenditure that was, in both respects, very substantially more optimistic than past performance, as he was aware, and by persuading the Bank that it was achievable. In this, Mr Zell took an enormous risk." In making that decision, Mr Zell was not significantly influenced by eulogistic observations coming from the Bank. Rather, he must have appreciated that the Bank's assessment of viability was dependent on his forward estimates in relation to farm-related items of income and expenditure. Sperling J held that the Bank was entitled to take the commercial position that, if the Zells needed additional accommodation in order to carry on as they were going (as they obviously did), that had to be on the Bank's terms, including absorption of arrears in a new arrangement and additional security. Applying these findings to the s9 check-list, it was held that the contracts relating to the financial reorganisation were not unjust in any respect in the circumstances relating to such contracts at the time they were made. In Younan v Beneficial Finance Corporation Ltd (Court of Appeal, unreported 21 November 1994) Mahoney JA (with whose reasons Sheller and Powell JJA agreed) said (at p11): "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 LS 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." Later (at p12) his Honour noted that the factors addressed in s9 of the Act include public interest factors, factors dealing with the burden of contract, factors derived from blame, factors going to the freedom of the parties in entering into the contract, and bargaining factors. The enumeration does not purport to be exclusive. URJ ZELL and ORS v COMMONWEALTH BANK OF AUSTRALIA (Mason P) 17 A decision to exercise the power given by the Act involves two stages: 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). The approach adopted by Sperling J involves no departure from these principles. In a judgment that is not said to involve any significant error of fact or failure to have regard to any significant fact, his Honour w as faced with the need to balance a range of competing factors, some of which tended in favour of the exercise of the statutory discretion, others of which looked in the opposite direction. In my view this Court would be contravening the proper limits of appellate review were it to hold that the discretion miscarried in relation to the 1985 or the 1989 transaction. There is nothing wrong in itself with a lender seeking additional security in return for committing itself from refraining from calling in an already overdue debt. This in essence is what happened 1988 and 1989. I wish to add a few remarks referable to the separate case of Mrs Zell that was pressed in the appeal. This w as a marriage in which husband and wife treated their assets and income as common funds. They undertook financial and other burdens, and the risks associated with them, in the context of a mutually supportive marriage where each had regard for the interests of the other and of their three growing sons. Each partner relied upon the assistance and judgment of the other, supplemented at times by the assistance of the family accountant. Mr Zell held the labouring oar with respect to the business affairs of the family, while Mrs Zell held the labouring oar with respect to the equally vital and taxing issues associated with what some dismissively describe as "home duties". Neither partner was held to have relied upon advice by the Bank to enter into the critical transactions. It is true that, in the case of Mrs Zell, she was influenced by the belief that the Bank was expressing an "expert" opinion that the loans were viable. But this belief had no foundation in fact, nor was the Bank responsible for having engendered it. Mrs Zell understood the legal nature of the contracts she was entering into. She was also aware of the sums of money involved in the borrowings. She was a co-signatory of cheques. On at least one occasion (September 1986) she called at the Bank to arrange loan repayments. To the (significant) extent that she was content to follow the lead of her husband, this was because she thought that this was in her own and her sons interests, as it had apparently proved to be in the past. There was no exercise of undue influence, or any improper or unfair pressure proceeding from Mr Zell to Mrs Zell, or from the Bank to Mrs Zell. This was not a case where a wife encumbered the matrimonial home to secure a business venture in which her husband alone had an interest. Rather, it was one in which Mr and Mrs Zell were equally committed as to both risk and anticipated profit at each step in the expansion of what was truly a "family business". They had the vision that their three sons would become joint participants and ultimate successors of the Zell family holdings which, from 1978 onwards were increasingly channelled through Puku, the family discretionary trust. Mrs Zell knew about the various acquisitions and doubtlessly discussed aspects of them with her husband and sons. The trial judge gave proper regard to the findings indicative of Mrs Zell's distinctive position vis a vis that of her husband. He also considered the justice of the contracts both from the perspective of Mr and Mrs Zell, and of the Bank. This too was a proper approach. 18 UNREPORTED JUDGMENTS It is also relevant to the calculus of determining whether there was "unjustness" in the contracts and whether it was "just" to do anything about it, to observe that the relief sought on the appeal by Mrs Zell referable to the 1989 transaction was an order relieving her interest in "Mount Pleasant" of the mortgage created in 1989. It is far from clear that this would provide any effective relief assuming that either or both of the 1985 or 1989 contracts were relevantly unjust. This is because the release of Mrs Zell's interest in "Mount Pleasant" from the burden of the final indebtedness would still leave her exposed to personal liability under her guarantee of Puku's indebtedness. Such indebtedness would almost certainly result in the attachment of her interest in "Mount Pleasant" through the processes of execution, if not bankruptcy. There is no basis on the facts for an independent attack on the judgment based on Amadio. Mrs Zell was in no position of special disability vis a vis her husband, nor was the Bank on notice of any conflict of interest (none in fact existed) between Mr and Mrs Zell. The Bank was entitled to deal with Mr Zell as the agent for both parties given that they chose him to represent them in most of the pre-contractual negotiations. THE EFFECT AND VALIDITY OF THE "ALL MONEYS" CLAUSES IN THE BANK'S EARLY MORTGAGES Each of the registered Mortgages granted to the Bank over "Gowan Brae" and "Widgerie" contained an extensive "all moneys" clause. Relevantly they secured repayment of "all moneys (including moneys advanced by way of loan for fixed term or provided by way of overdraft) now or hereafter", "all moneys which the Bank shall lend or pay... of which... the Mortgagor... has guaranteed or may hereafter guarantee to the Bank" and interest on the foregoing. Although the borrowed moneys referable to the respective purchases of "Gowan Brae" and "Widgerie" were repaid early in the piece, the Mortgages were not discharged. Nor were they intended to be, as evidenced by the references to the Bank's intention to rely on existing securities in the documents referable to Farm Loans 3 and 4. Counsel for the appellants submitted that the "all moneys" clauses in the "Gowan Brae" and "Widgerie" mortgages were not effective to pick up and secure Farm Development Loans Nos 3 and 4 which were taken out at the time of acquisition of "Mount Pleasant" and "Bidden". The clauses were said to be ineffective either as a matter of construction or because it would be unconscionable to give them that effect. The case was primarily put on the basis on unconscionability because the Act has no application in respect of a contract made before 1980 except to the extent that it was "varied" after the commencement of the Act: see Schedule 2. On the matter of construction of all moneys clauses we were referred to Smith v Australia & New Zealand Banking Group Ltd (1996) NSW Conv R55-774 and Re Bankrupt Estate of Murphy; Donnelly v Commonwealth Bank of Australia Ltd (1996) 140 ALR 46. See also Fountain v Bank of America National Trust and Savings Association (1992) 5 BPR 11,817. In the lastmentioned case Gleeson CJ stated that the critical question is whether, on the true construction of the mortgage and in the events which have occurred, the obligation of the mortgagor to repay was within the purview of the all moneys clause. The cases cited contain discussions about "guidelines" for construing all moneys clauses. In my view the clauses within the "Gowan Brae" and "Widgerie" mortgages are very clear in their operation in the present context. The passages quoted above indicate URJ ZELL and ORS v COMMONWEALTH BANK OF AUSTRALIA (Stein JA) 19 pellucidly that the mortgages secured later advances to Mr and Mrs Zell, whether by way of loan for fixed term or provided by way of overdraft, and obligations incurred by them by way of guarantee. It was not in issue that the principles relating to unconscionable transactions can apply with respect to a later transaction that engages an earlier "all moneys" clause. Indeed the contract relating to such later transaction may be challenged as "unjust" under the Act, so long as that contract was made after the commencement of the Act or varied a j contract that pre-dated the Act: see Parkes v Commonwealth Bank of Australia (1990) ASC 59,203. I would doubt whether the mere entry into a later contract, whether by way of loan or guarantee, which engages an earlier "all moneys" clause according to its terms constitutes a "variation" of the contract embodying the "all moneys" clause that pre-dates the Act. Nevertheless I shall, for present purposes, assume the contrary. I see nothing unjust or unconscionable in reliance upon an earlier all moneys clause to secure a later indebtedness where, as here, that later indebtedness was incurred in circumstances where the lender expressly disclosed its intention to rely upon that clause in the earlier security. This is what the Bank did at the time that the loans referable to the acquisition of "Mount Pleasant" and "Bidden" were taken out. In these circumstances it is hardly surprising that this issue did not trouble Sperling J. It follows that the "justice" of the 'Bundally" contracts and of the contracts referable to the 1989 re-organisation cannot be attacked on the basis that Mr and Mrs Zell had not at that stage encumbered "Gowan Brae" and "Widgerie" with the burden of their rising indebtedness. The appeal should be dismissed with costs. Handley JA I agree with Mason P. Stein JA I agree with Mason P. Appeal dismissed with costs. Counsel for the Appellant: A Street SC/M Condon Counsel for the Respondent: R G Forster SC Solicitors for the Appellant: Andrew P Quigley Solicitors for the Respondent: Cowley Hearne