New South Wales Supreme Court CITATION : STATE BANK OF NSW -V- DAVID WHITE & ANOR DS & L WHITE CARRYING PTY. LTD -V- DAVID WHITE & ANOR [2001] NSWSC 1068 FILE NUMBER(S) : SC 013264/96; 020139/00 HEARING DATE(S) : 6,7,8,9,12,13,14,15,16 November 2001 JUDGMENT DATE : 23 November 2001 013264/96 STATE BANK OF NSW - Plaintiff DAVID WHITE - First Defendant LESLEIGH WHITE - Second Defendant/Cross Claimant PARTIES : 020139/00 DS & L WHITE CARRYING PTY LTD - Plaintiff DAVID S WHITE - First Defendant STATE BANK OF NSW - Second Defendant JUDGMENT OF : Cooper AJ COUNSEL : Mr. P. Dowdy - Plaintiff Mr. A McQuillen - Defendant In 013264/96 Abbott Tout Solicitors - Plaintiff SOLICITORS : McKell's Solicitors - 2nd Defendant/Cross Claim In 020139/00 McKell's Solicitors - Plaintiff Abbott Tout Solicitors - 2nd Defendant CATCHWORDS : Mortgage, Guarantee, Director's misconduct LEGISLATION CITED : Contracts Review Act Companies (NSW) Code S.229(1)(2) Buckeridge v Mercantile Credits 147 CLR 654 CASES CITED : Westpac Corp v Prelea 28 NSW LR 481 Drummond v NAB Butt. Prop. Rep 14985 Williams v State Bank unrep. 7.4.93 DECISION : In 013264/1996 Judgment for Plaintiff In 021391/2000 Judgment for Defendants - 34 - THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION COOPER A J 23 November, 2001. 13264/96 STATE BANK OF NSW LTS - v - D S WHITE & L WHITE 20139/00 D S & L WHITE CARRYING PTY. LTD. - v - D WHITE AND STATE BANK OF NSW LIMITED REASONS FOR JUDGMENT Introduction 1 Before this Court are two actions in respect of which is has been ordered by consent that they be heard together and that the evidence in one be deemed to be evidence in the other subject to such evidence being otherwise admissible. 2 In the first action the State Bank of NSW Limited (referred to as State Bank) sues David Stewart White and Lesleigh White (referred to as Mr & Mrs White respectively) pursuant to the terms of Real Property Act Mortgage dated 19 July 1989 registered number Y519021 incorporating the terms of Memorandum number X208233 over the property known 23 Shand Close, Illawong owned by Mr & Mrs White and granted to secure advances made by State Bank to D S & L White Carrying Pty Ltd (referred to as The Company). 3 In this action State Bank claims the balance due under the mortgage and possession of the property the subject of the mortgage plus other relief. 4 It should be noted here that in about 1995 Mr & Mrs White separated and have since divorced. Mr White appeared unrepresented for part of the hearing and, apart from giving evidence took no further part in the proceedings. Mrs White has been separately represented and is the primary litigant in opposition to State Bank's claims for relief. 5 Both defendants concede that they have not paid monies pursuant to the mortgage but deny any liability so to do. 6 Mrs White in her amended defence and cross claim, raises a number defences which will be dealt with in detail later, but they include an allegation that the provisions of the mortgage are unenforceable or ought not to be enforced against her pursuant to the Contracts Review Act. In paragraph 18 of her defence she alleges that without her knowledge or consent State Bank at the request of Mr White transferred $200,000 being part of the money on Fixed Term Deposit standing to the credit of the Company to a third party namely Gregory J White Pty Ltd. Consequently, her liability is reduced by the difference between the value of the security before the release of the $200,000.00, and the value of the security after release of that money. She also pleads to the whole of the Statement of Claim by saying that without her knowledge or consent the plaintiff released and surrendered $200,000.00 of funds then standing on Fixed Term Deposit in the name of the Company to Gregory J White Pty Ltd on 5 Fe3bruary, 1990 and that she is therefore discharged from liability under the terms of any guarantee on and from that date. 7 She also cross claims for damages on the same grounds and also cross claims for relief under the Contracts Review Act. 8 It is not necessary at this stage to set out further details of her lengthy defence and cross claim. 9 In the second action the Company sues Mr White and State Bank. By its Statement of Claim the Company alleges that at all material times its directors were Mr & Mrs White and that Mr White owed duties to the Company to exercise his powers and discharge his duties bona fide and for the benefit of the Company and to exercise a reasonable degree of diligence and care in the exercise of those powers and in the discharge of his duties as set out in Section 229(1)(2) of the Companies (NSW) Code. There was a further duty not to make improper use of his position as an officer of the Company to gain directly or indirectly an advantage for any person or to cause detriment to the Company and not to use or permit the funds of the Company to be used other than for the purposes of the Company. (See Section 229(4) of the Code). 10 The Statement of Claim then alleges that in February 1990, Mr White caused the Company to obtain from State Bank a partial release of a Fixed Term Deposit in the name of the Company for the purpose of the transfer by the State Bank to Gregory J White Pty Ltd. This conduct is alleged to be a breach by Mr White of his duties to the Company. 11 The Statement of Claim further or alternatively alleges that State Bank knowingly participated in a dishonest and fraudulent scheme by Mr White to advantage Gregory J White Pty Ltd and/or State Bank and as a consequence State Bank is liable to compensate the Company for the amount of loss or damage suffered by the Company by reason of the improper use to which the funds on Fixed Term Deposits in the name of the Company were applied. 12 The Statement of Claim also alleges that the State Bank aided, abetted, counselled or procured or was directly or indirectly knowingly concerned in or a party to the breach of duty by Mr White as an officer of the Company and by reason of Section 38(1) of the Companies and Securities (Interpretation and Miscellaneous Provision)(NSW) Code is deemed to have contravened Section 229(1),(2) and (4) of the Code. 13 The Company then claims against each of the defendants in this action an order that they pay to the Company the sum of $200,000.00 and further that the State Bank account to the plaintiff for all profits derived by it from receipt of that money from the date of receipt. 14 Before going to the specific issues raised in this case it is necessary to set out some of the background facts which are not in dispute. In the course of this I shall be referring to documents in exhibits B1 and B2 by the page numbers appearing thereon. The Background 15 In about 1979 the Company was incorporated with Mr & Mrs White as the sole directors and shareholders and that has remained the position ever since. Initially the Company carried on the business of delivering computer equipment. 16 In about August 1986 the Company purchased a newsagency business at 121A Anzac Avenue, Engadine and obtained the lease of the premises. 17 At about the same time the Company obtained a loan from National Australia Bank (NAB) for the purpose of having working capital as well as purchasing the business. 18 The security for that loan included a guarantee by Mr & Mrs White which was secured by registered first mortgage over their then home at 83 Sylvan Ridge Drive, Illawong. 19 By mid 1988 the Company was experiencing difficulties in maintaining the repayments of principal and interest under the loan. 20 It was suggested by Mr White's brother, Gregory White, that they approach his bank, the State Bank at Riverwood, for a more satisfactory form of accommodation. 21 On about 9 August 1988, the Company opened an account with the Riverwood branch of State Bank. A Request For Banking Facilities in the name of the Company trading as West Engadine Newsagency appears at page 20 Exhibit B1. Under the terms of this document either Mr & Mrs White could operate on the bank facilities. 22 By 5 September 1988, the Company had applied to State Bank to re finance and pay out the loan to NAB. (Exhibit B page 22). Their house was valued on behalf of the bank at $420,000.00. (Exhibit B1 pages 22 and 29). 23 A formal offer dated 11 October 1988 for a fixed term loan for 3 years for $363,000.00 was made to the Company. (Exhibit B1 Page 33). 24 This offer provides for an extra fee should the principal sum or any part thereof be repaid prior to the date of maturity. The security required by the bank comprised a first third party mortgage over the home of Mr & Mrs White, a first equitable mortgage and floating charge over the assets of the Company and a first mortgage over the leasehold of the West Engadine Newsagency at 121A Anzac Avenue, Engadine. The signatures of Mr & Mrs White with the common seal of the Company appear at the bottom of the offer under the words:- "The above terms and conditions are accepted for and on behalf D S & L White Carrying Pty Ltd., trading as West Engadine Newsagency." (Exhibit B1 page 44). 25 On 22 November 1988 an authority to State Bank to fill in blanks in the equitable mortgage and floating charge from the Company to the bank and in the mortgage of lease from the Company to the bank was signed with the common seal of the Company and the signatures of Mr & Mrs White. (Exhibit B1 page 82) 26 On 22 November 1988, Mr & Mrs White signed an acknowledgment and consent of guarantor. This document recites that State Bank proposes to grant certain credit advances and/or accommodation and/or other banking facilities to the Company and that the advance is secured inter alia by a first mortgage over their land from the guarantor to the bank and it is understood that the advance comprises various facilities to the Company totalling $363,000.00 with the option to the bank to extend the advance at the bank's discretion. It is further understood that the advance may also include any future liability of the Company to the bank either actual or contingent or whether alone or jointly with any other persons. (Exhibit B1 page 86) 27 At this stage Bruce A Swane and Co., solicitors, were acting for Mr and Mrs White in respect of all documentation including the mortgage over their home. (Exhibit B1 page 102) 28 The mortgage of the lease over the newsagency was executed with the common seal of the Company on 29 December 1988. 29 On a date which is not clear in the copy appearing in Exhibit B1 page 109 but which appears to be 29 December 1988, Mr & Mrs White executed the mortgage over their house to the State Bank. That mortgage incorporates the covenants in Memorandum Number X208233. 30 The Common Seal of the Company was also affixed to a notation on a copy of Memorandum X208233 indicating that it had been made available to the Company which had been given the opportunity of inspecting it and taking independent legal advice on its contents at its discretion. 31 Of particular relevance to this case are the provisions of Clauses 5.1.2 and following of the memorandum (Exhibit B1 pages 111 and 118) which will be set out later. 32 A further copy of Memorandum X208233 containing the above clauses was signed by Mr & Mrs White under the words:- "The enclosed memorandum has been made available to me and I have been given the opportunity of inspecting it and taking independent legal advice on its contents at my discretion." 33 By letter dated 30 December 1988 the amount of the advance to the Company from the bank was increased by $18,000.00 to $356,000.00. (Exhibit B1 page 168) 34 On 9 January 1989 the Company executed the equitable mortgage and floating charge over its assets. 35 On 10 January 1989, the NAB was paid out with the loan obtained from State Bank. (Exhibit B1 page 214). 36 In about March 1989 Mr & Mrs White sold their then home at Sylvan Close for approximately $450,000.00 and purchased a new home at 23 Shand Close, Illawong, for approximately $250,000.00. 37 State Bank discharged the mortgage over the former property and in its place a new mortgage was taken over the property at Shand Close. Bruce A Swane and Co., solicitors, acted for Mr & Mrs White on the sale and purchase and in relation to the mortgages. Settlement of the sale and purchase took place on about 9 May 1989. 38 The funds for purchase of the new home were derived from the net proceeds of sale of the former property plus a loan from Mr White's father. Mr. And Mrs. White executed the mortgage over 23 Shand Close for the purpose of satisfying the State Bank's requirements for security for the guarantee given by them in respect of the Company's liability to it. 39 The mortgage Y519021 (exhibit A page 283) from Mr & Mrs White to State Bank is dated 11 July 1989. In all material respects it is identical with the earlier mortgage to State Bank and includes a covenant by the mortgagors that:- "The mortgagor will observe the provisions which are deemed to be incorporated herein and which are set forth in the Memorandum filed in the Lands Titles Office as Number X208233." 40 By late July 1989 the Company had sold the newsagency business. The mortgage over the lease was discharged. The net proceeds of the sale namely approximately $356,000.00 was deposited with the State Bank as a Fixed Term Deposit. This sum was approximately equivalent to the amount of total borrowings by the Company from State Bank. 41 The proceeds of sale of the newsagency business were not applied to pay out the loan monies secured by the guarantee of Mr & Mrs White and the first mortgage over their house for the following reasons:- 1. Early re payment of the loan attracted a penalty of approximately $15,000.00. 2. The rate of interest paid by State Bank to them on the deposit was slightly higher than the rate of interest the Company was obliged to pay on the loan monies. 3. They were taking their time to look around for a possible further business. 42 Thus, at this stage, the amount of the Company's borrowing's from State Bank were fully secured and covered by the amount in the Fixed Term Deposit. Furthermore the interest payable by the Company on the loan was satisfied by the interest received from State Bank on the sum deposited. Accordingly, under this arrangement their liability under the guarantee and the safety of their house under the mortgage were protected. 43 Between August and November 1989, neither Mr nor Mrs White were engaged in employment. Mr White commenced employment in November 1989 earning approximately $35,000.00 gross per annum. 44 At that stage Mrs White had the care of 4 young children whose ages were 12, 10, 9 and a fourth child born in September 1988. 45 On 7 September 1989, Mr & Mrs White executed a security over the Fixed Term Deposit with the State Bank. The depositors and the customers are described as "D S & L White Carrying Pty Ltd, West Engadine Newsagency trading as". (Exhibit B1 page 321). Clause 2(a)(vii) of this document contains terms having a similar effect to the terms of clauses 5.2.1. and following of Memorandum X208233. 46 By letters dated 30 November 1989 and 15 December 1989 signed by Mr & Mrs White the manager of the Riverwood branch of State Bank was asked to transfer the balance of account and any other documents to the Fairfield branch. (Exhibit B1 pages 326 and 328). Those documents were received by the Fairfield branch, according to the date stamp, on 3rd January 1990. (Exhibit B1 page 333). 47 A letter dated 2 February 1990 to Mr F Brooks, State Bank, Riverwood, signed by Mr White for D S & L White Carrying Pty Ltd, reads:- "I hereby authorise you to release $200,000.00 from the fixed deposit that you are holding in the name of DS & L White Carrying Pty Ltd to Gregory J White Pty Ltd and to invest the balance at the maximum interest rate." 48 The circumstances surrounding the sending of this letter and the knowledge or lack of it on the part of Mrs White will receive more detailed consideration later. 49 By debit notes signed by officers of the bank dated 5 February 1990, a total of $200,000.00 was taken from the Fixed Term Deposit account of DS & L White Pty Ltd and credited to the account of Gregory White Pty Ltd. (Exhibit 3 and Exhibit B1 pages 345 to 346) 50 On 13 February 1990, the senior manager of the Fairfield branch of the State bank sent a letter addressed to "Mr & Mrs DS White, DS & L White Carrying Pty Ltd, 121 Anzac Avenue, Engadine". (Exhibit B - page 347. This letter will be considered in more detail later. 51 The evidence of Mrs White is that it was only upon receipt of this letter that she learnt for the first time of the release of the $200,000.00 out of the Fixed Term Deposit and that at no time did she give her consent or permission to either Mr White or to State Bank to transfer any part of the funds standing to the credit of the Company with the State Bank to Gregory J White Pty Ltd or to Gregory White personally. This evidence will be considered in more detail later. 52 The evidence of Mr White is that a verbal agreement was made between him on behalf of the Company and Mr Gregory White on behalf of his company that Gregory J White Pty Ltd would pay the totality of the interest due by the Company to State Bank and in addition pay to the Company a premium equivalent to 10% on top of the amount which the Company had to pay to the bank. 53 Whilst Gregory White or his company did make some payments of interest and premium during 1990 it was considerably in default of its promise during 1991. As a result the liability of the Company to State Bank increased considerably because of non payment of interest. 54 The Company had no income other than the interest on the diminished amount standing in the Fixed Term Deposit and the income of Mr White of $35,000.00 per annum which was considerably less than the amount of interest payable on the loan. 55 By a letter dated 14 September 1990 from the Bank to the Company Mr & Mrs White were asked to call in so that a full review could be carried out on the term loan and over draft facilities. The letter states:- "The main reason for the review is that the bank wishes to ascertain the Companies repayment capacity to meet its commitments." 56 A further letter dated 2nd October 1990 in the same terms was sent. (Exhibit B1 - page 405) 57 Shortly after this, Mrs White called the bank by telephone saying that she was unable to call in personally and that the loan was for her brother in law, Greg White. (Exhibit B - page 406). 58 On 8 January 1991, the Bank wrote to the Secretary of the Company asking them to call in for a review of the account and pointing out:- "As a consequence of the above principal reduction the balance of the term loan should now be maintained as $206,000.00 in lieu of $356,000.00. Due to unpaid interest the term loan is currently in excess of this revised limit and early adjustment is essential." 59 Later in the letter appears the following: " We do acknowledge receipt of brief financial details faxed to us on 28 December, but unfortunately the information provided falls well short of that needed for a comprehensive review. The inference that monthly interest payments are to be paid by G White appears to be irrelevant. Our loan arrangement are with D S & L White Carrying Pty. Ltd., as borrower and David and Lesleigh White as security providers." 60 Thereafter there were negotiations between Mr & Mrs White and State Bank regarding repayments of the interest due on he loan. 61 On 12 December 1991 Gregory White signed a guarantee in favour of DS & L White Carrying Pty Ltd guaranteeing the repayment of $209,000.00 advanced by the Company to it. 62 As at March 1993 one of Gregory White's companies was Village Projects Pty Ltd which appeared to be the owner of a large shopping centre and to have more substance than Gregory J White Pty Ltd to whom the $200,000.00 had initially been advanced. 63 On 22 March 1993 Village Projects wrote to Mrs White, DS & L White Carrying Pty Ltd (exhibit B2 page 673) saying:- "I refer to our recent conversations and confirm that you have agreed to loan $300,000.00 to Village Projects Pty. Ltd., for a maximum term of 5 years at an interest rate to be agreed. The debt will be secured by a second floating charge over Village Projects Pty. Ltd., subject to the approval of the Commonwealth Bank. I confirm that you will be taking independent legal advice." 64 At about the same time Village Projects wrote (exhibit B page 674) to Mr B Brittain of the Commonwealth Bank, Kenmore, Queensland a letter reading:- "I refer to our conversation today and confirm my request to the bank to pay a cheque for $300,000.00 drawn on Village Projects Pty. Ltd., into an account in the name of Gregory J White Pty. Ltd., pay a cheque for $300,000.00 drawn on Gregory J White Pty. Ltd., into an account in the name of D S & L White Carrying Pty. Ltd., and arrange for a cheque for $300,000.00 drawn on D S & L White Carrying Pty. Ltd., to be paid through your branch at Greenacre into the account in the name of Village Projects Pty. Ltd." 65 On 16 March 1995 Village Projects Pty Ltd was placed in voluntary administration. 66 Mrs White received notice of a meeting of creditors. On about 22 March 1995, the Company signed a Statement of Claim for the purpose of voting at the meetings of creditors of Village Projects Pty Ltd in the sum of $300,000.00. She also signed a proxy for Mr Winchester to attend the meeting and also a formal proof of debt for $300,000.00 plus interest dated 21 March 1995. (Exhibit B2 - page 843) 67 The list of creditors of Village Projects Pty Ltd show that the debt of $300,000.00 owing to the Company was the largest debt and the next largest was to the State Bank for $75,000.00. The total debts were $385,000.00. 68 At some stage Mr Gregory White went bankrupt. 69 In 1996 the State Bank set in train the current proceedings. 70 From 1991 through to 1995 State Bank desisted from enforcing the security against Mr & Mrs White on their home. Instead it was trying to get the money from Gregory White or one of his companies. The Defences of Mrs. White 71 I now pass to a consideration of the defences of Mrs White to the action of State Bank. 72 In paragraph 15 of her amended defence Mrs White relies on the Contracts Review Act and claims that the provisions of the mortgage are unenforceable or ought not to be enforced against her by reason that they are unjust in the circumstances relating to them at the time they were entered into. 73 In paragraph 16 Mrs White claims that she was in a position of special disadvantage at or about the time of execution of the mortgage which position was known or ought to have been known by the bank and in the premises it is unfair and unconscientious for the bank to rely on the said mortgage. 74 Although these defences appear to relate to the totality of the mortgage, in the course of final addresses counsel for Mrs White limited his client's claim for relief to seeking an order that State Bank should not be entitled to rely upon the clauses 5.1.2 to 5.1.2.2 included in memorandum number X208233 which are set out above. Prior to this, counsel for State Bank had indicated that he was relying upon these clauses as a complete answer to the allegations of Mrs White that in releasing $200,000 from the fixed deposit on 5 February 1990, the bank was guilty of any wrongful act. I shall return to this later. Paragraph 17 of the Defence 75 It is, however, convenient at this stage to deal with the defence raised in paragraph 17 of the defence which says that on or about 2 August 1989 the bank represented to her and her husband that its security by way of registered first mortgage for advances made to the Company in respect of the newsagency business was substituted by taking security over the Term Deposit funds amounting to approximately $350,000.00. 76 In particulars Mrs White identifies the representation as contained in a letter dated 2 August 1989. 77 The terms of that letter (exhibit B1 page 316) from the Manager of the Riverwood branch of State Bank to the Proprietor, West Engadine Newsagency are as follows:- "We refer to your Fixed Rate Term Loan of $356,000.00 and advise that security over the Newsagency has been substituted by security over Term Deposit funds. We have attached your receipt for funds lodged on Term Deposit on the sale of the newsagency. It would be appreciated if you could sign and return the Security over Deposit to complete our records." 78 To understand this letter it must be born in mind that whilst the Company owned the newsagency business the loan was secured by a mortgage over the leasehold of the premises in which the business was conducted. That business was sold and thus the asset was converted into money amounting to approximately $356,000.00. This letter clearly refers to the fact that with the discharge of the mortgage over the lease of the premises where the newsagency was conducted in order to enable the sale to take place, the security was then transferred from that leasehold to the actual cash on Fixed Term Deposit. In no way can it be said that this letter amounts to a representation that the security by way of registered first mortgage over the land of Mr & Mrs White had been substituted or in any way waived. 79 The matters raised in paragraphs 18 to 26 of the defence will be dealt with together with the cross claim. The Second Defendant's Cross Claim 80 By her cross claim Mrs White alleges that on or about 2 February 1990 the bank without her authority caused $200,000.00 to be transferred from the Fixed Term Deposit to an account in the name of Gregory J White Pty Ltd with State Bank and that State Bank had no authority to release the funds and is thereby liable to repay the amount wrongfully released. 81 In paragraph 10 she alleges that Mr White owed duties to the Company and that he was in breach of those duties by causing the $200,000.00 to be paid out of the Fixed Term Deposit. She further alleges that State Bank knowingly participated in a dishonest and fraudulent scheme by Mr White to advantage Gregory J White Pty Ltd and State Bank and as a consequence the bank is liable to compensate the Company and/or herself for the amount of loss or damage suffered by the Company and/or herself by reason of the improper use to which the monies were applied. 82 To these claims State Bank replies, inter alia, that any action for detriment to the Company must be brought by the Company itself. It is in this context that in the second action (20139 of 2000) the Company sues Mr White and the bank. The Statement of Claim alleges that Mr White owed duties to the Company and he acted in breach of those duties; further, that in causing the Company to obtain a partial release of funds for the same to be paid into the account of Gregory J White Pty Ltd with State Bank, the bank breached its duties. It makes similar allegations in this action as in the cross claim. Submissions on behalf of Mrs. White 83 Unfortunately, the address of counsel for Mrs White after the close of evidence raised matters which were not foreshadowed in cross examination and conceded matters which were disputed during cross examination. He did not furnish the Court with written submissions and the oral submissions were somewhat disjointed. However, as I understand it, the submissions may be summarised as set out in the following paragraphs. 84 The Bank sacrificed or impaired the security for the loan to the Company by agreeing to pay out $200,000.00 from the money on Fixed Term Deposit to Gregory J White Pty Ltd. Consequently Mrs White is entitled in equity to be credited with the deficiency in reduction of her liability. 85 Reliance was placed upon what was said by Brennan J, in Buckeridge -v- Mercantile Credits Ltd, 147 CLR, 654 at 675:- "In a case where the act of a creditor does not discharge the surety, but the creditor has nonetheless sacrificed or impaired a security, or by his neglect or default allowed it to be lost or diminished, the surety is entitled in equity to be credited with the deficiency in reduction of his liability." 86 Here the security was the sum of $356.000.00 on Fixed Term Deposit with the benefit of the interest payable on the loan being set off against the interest received by the Company from the bank. The payment out of $200,000.00 diminished the security and this was done without the consent or approval of one of the guarantors namely Mrs White and consequently her liability under the guarantee is reduced by the extent to which the security was diminished. 87 The submission continues that the Company did not have the absolute right on its own to release $200,000.00 from the deposit because that deposit was in fact assigned to State Bank as security under the document appearing in exhibit B pages 321 to 323. This document recites that the consideration is the bank making advances to the Company and is security for all monies payable or to become payable to the bank. Under clause 1(a) the bank is directed to hold the monies in the name the Company and is authorised to deduct and retain from the monies deposited such amounts as may be come due to the bank. Clause 1(b) assigns to the bank the sums now owing or at any times hereafter to become owing or payable in respect of the deposits to hold unto the bank as security for the due payment to the bank of all monies hereby secured. 88 Accordingly, the money could not be paid from the Fixed Term Deposit without the consent of State Bank. By so consenting without the approval of Mrs White in her capacity as a guarantor the bank acted contrary to the principles outlined above in Buckeridge. The Competing Submissions 89 In answer to this claim State Bank, whilst not conceding that it did improperly impair the security, relies upon clause 5.1.2 to clause 5.1.2.2 of Memorandum X208233 incorporated in the mortgage which are in the following terms:- "5.1.2 (Surety) where the Mortgagor is a surety under the terms and conditions of this mortgage:- 5.1.2.1 The Mortgagor shall not be released, nor shall the Mortgagor's liability hereunder be affected by any act, omission, matter, fact or thing whatsoever, whereby the Mortgagor would, under the law relating to suretyship, have been so released and/or his obligations under this Mortgage affected but for this provision; and 5.1.2.2 Without in any way limiting the generality of the preceding sub-clause the Mortgagor shall not be released, nor his liability hereunder affected, by any want of contractual capacity on the part of the Customer and/or debtor to the Mortgagee or by any other thing whatsoever, but shall extend to cover and be a security for all moneys at any time due or owing to the Mortgagee by the Customer and/or said debtor notwithstanding any payment or settlement of account, want of contractual capacity on the part of the Customer and/or said debtor, or any other matter or thing whatsoever." 90 On the face of it this clause is a complete answer to the claim by Mrs White. See Westpac Banking Corporation Ltd-v-Prelea, 28NSW LR 481, at 486. 91 Furthermore in Buckeridge -v- Mercantile Credits, Brennan CJ at 675 points out that the surety's entitlement is lost if he bargains away his right to complain of the act which occasions the deficiency. The words of Clauses 5.1.2 and following clearly bargain away the right to complain of the acts which Mrs White alleges to have occasioned the deficiency of which she complains. The Contracts Review Act 92 In response to this, counsel for Mrs White submits that the provisions of these clauses were unjust in the circumstances relating to the contract at the time it was made and therefore the Court ought to refuse to enforce them in accordance with Section 7 of the Contracts Review Act. 93 In reply to this, counsel for State Bank points that there is no pleaded claim by Mrs White to set aside a particular part of the mortgage such as these clauses. This issue was not raised in opening by counsel for Mrs White and at no stage prior to the final address did he indicate that part of his client's claim was not setting aside the mortgage in whole but only clauses 5.1.2 to 5.1.2.2 thereof. Furthermore Mrs White gave no evidence orally or in her affidavits to the effect that if these clauses had been pointed out to her at the time she would not have signed the mortgage. Mrs White was asked no questions to that effect by her counsel during the course of evidence. It is further submitted by counsel for the bank that if the issue had been raised during the course of evidence or in the pleadings, as it ought to have been, the bank would have conducted its case in a different way. It is likely that it would have called evidence as to the practice of the finance and banking industry and how common such a provision is in bank documents. It is also likely that the bank would present evidence from an expert in the banking and finance industry to indicate the nature and the scope, problems and difficulties that banks and lending institutions would suffer if clauses of this type were susceptible of being retrospectively struck out. 94 I have no hesitation in accepting these submissions of counsel for State Bank. No attack was made on clauses 5.1.2 and following in the pleadings or in addresses or in evidence until the final address after all evidence had been given. I accept that if due notice of this had been given it is probable that State Bank would have conducted its case differently. I also note that in Drummond-v-National Australia Bank Ltd, Butterworth's Property Reports page 14985 at pages 14990 and following, a clause in similar terms was considered by the Court of Appeal of this State. At page 14993 the Court says:- "However, such contractual conditions have been the subject of numberless judicial decisions over many years. A sampling of such cases dating from the 1930s until today is given in J O'Donovan and J C Philips, 'T he Modern Contract Of Guarantee' at pages 350 to 352. The fact that such conditions have regularly appeared in guarantees for such a long period as to have become part of regular commercial usage, in our view makes it impossible to say that they are of a character requiring explanation to a competent intending guarantor." 95 It should also be noted that Mrs White had solicitors acting for her at the time she, as a guarantor, entered into the mortgage. Furthermore, the subject mortgage was the second she had executed as guarantor in favour of State Bank. 96 Accordingly, her claim under the Contracts Review Act fails. The Construction of Clauses 5.2.1. and Following 97 Alternatively to the claim under the Contracts Review Act, Mrs White also relies upon the contention that on its true construction these clauses cannot apply to the present situation. In my view on the face of it they clearly do. No matter how one may wish to read the terms of the above clauses down their clear and unambiguous terms prevent Mrs. White succeeding on this point. The Allegations of Dishonest and Improper Conduct 98 A further challenge to the applicability of clauses 5.2.1 and following is based on the allegation that State Bank acted fraudulently, dishonestly and improperly in releasing the $200,000.00 from the Fixed Term Deposit and therefore acted in a way that these clauses do not protect. At this stage it is necessary to look closely at the facts leading up to and surrounding the release of the money to Gregory J White Pty Ltd. 99 Mr White had a brother, Gregory, who, at the relevant time (namely from July 1989 up to and including February, 1990) had all the outward manifestations of being a very successful and wealthy businessman. He had developed a large and impressive shopping centre. He lived in an opulent house and he drove a Mercedes Benz motor car. Indeed on one occasion he took Mr White to the Motor Show where he bought a new Mercedez Benz car. As far as Mr White was concerned his brother was extremely successful and wealthy. 100 Not long after the Company received the $356,000.00 into the Fixed Term Deposit, Gregory White suggested to Mr White that Mr White or his Company should lend him the totality of the money on deposit and, in return, he or his company, Gregory J White Pty Ltd, would make the payments of interest due on the Company's loan plus a premium of 10% of that interest to the Company and repay the total amount of principal when it became due by the Company to State Bank. Mr White regarded this as a very good business venture. It would give extra money to the Company (of which he and Mrs White were sole shareholders and directors) and thereby better enable the Company to support his family. 101 Mr White told his wife of the offer. She felt that it would be a good idea but only if Gregory White or his company gave some form of security for the loan. He regarded security as unnecessary. She, according to his evidence, regarded security as quite necessary. 102 Unbeknown to Mr & Mrs White, the Manager of the Fairfield branch of State Bank wrote to Gregory J White Pty Ltd on 21 July 1989 advising that the Company overdraft then had a limit of $310,000.00. 103 At some stage before Mr White started work in November 1989, he and Gregory went to see Ms Churchward, the Manager of the Riverwood branch of the State Bank where the Company had its bank account. In his presence, Gregory told Ms Churchward that he wanted to borrow the total amount then in the Company's Fixed Term Deposit. To this suggestion Ms Churchward responded:- "There is no possible way you could borrow the money because you would have no securities left in the system to cover the money." 104 The State Bank had the right to refuse to release any part of the Fixed Term Deposit money by reason of the security given over it by the Company. The probabilities, as I find them, are that she appreciated that the Company did not have the income to pay the interest on the balance of the loan unless Gregory J White Pty Ltd honoured its obligation to pay the promised amounts to the Company. She was in possession of information which raised some doubts in her mind as to whether Gregory J White Pty Ltd could meet those obligations. It is clear that Mr Gregory White became quite angry and left the interview with Mr David White. 105 Thereafter Gregory White suggested to Mr White that he transfer his account from the Riverwood branch to the Fairfield branch where Gregory White had his and his company's accounts. The inducement for this was that the Company would get a better deal from the Fairfield branch. 106 Mr White discussed this with Mrs White and she agreed to the transfer because she thought that they could get a better deal at that branch. On 30 November, 1989, Mr and Mrs White signed a letter addressed to the Manager of the Riverwood branch asking for the balance of accounts and all other documents to be transferred to Fairfield branch. It appears that this letter became mislaid because an identical one dated 15 December 1989 was sent. 107 On 22 December 1989, the Fairfield branch of State Bank sent a letter to the Secretary, Gregory J White Pty Ltd giving information as to penalties payable on early repayment of a Fixed Interest Term Loan and also of the interest rates charged. The letter concludes:- "Please also note that once your brother's accounts are fully established and his relevant files are in our hands, we will then be able to sit down together and work out the necessary transactions to finalise the matter. Please bear with us and once the information is to hand, I will contact you to arrange a mutual time to discuss the matter with your brother." 108 From this it is clear that officers at that branch of State Bank were aware that some arrangements were being made between Mr White and Gregory White or their respective companies. 109 The documents and accounts of the Company were transferred from Riverwood to Fairfield under cover of a letter dated 27 December 1989 and, according to the date stamp, were received at Fairfield branch on 3 January 1990. 110 On 12 January 1990, the Manager of the Fairfield branch prepared an internal memorandum regarding the Company. It states "customer has recently transferred accounts from Riverwood branch" and "Mr. White has requested release of $250,000.00 from cash funds held on deposit." It then looks at the value of the securities held by State Bank to cover the loan to the Company but not at the ability of the company to meet the interest payments. 111 The submission in the memorandum was for approval to release $195,000, part of the security (being the Fixed Term Deposit) held on deposit subject to:- A Remaining existing security B Interest rates on FRT L to remain at interest rates on ODL (1) to be increased to 22% being 1.5 % above reference rate C Review due 12/1/90 for overdraft not carried out when due by Riverwood branch to be now noted as satisfactory. D Application fee $200.00; inspection fee $100; E Loan quality rating shall remain LD2 F Amend interest collection to monthly in arrears commencing 26 February 1990 for ease of administration. 112 At the foot of the memorandum appears:- "NB. Customer to be advised conditions to be accepted before release of funds." 113 The customer was not Mr. or Mrs. White. It was the Company DS & L White Carrying Pty. Ltd. 114 The submission was signed by F. R. Brookes, Senior Manager on 12 January, 1990. 115 It is worthy of note that whilst this review concludes quite accurately that the bank held securities in excess of the amount to be released from the Fixed Term Deposit, it did not consider the capacity of the Company to pay the interest due on the amount of loan outstanding. 116 Having regard to the terms of the letter from State Bank to Gregory J White Pty Ltd of 22 December, 1989 (referred to above) coupled with the terms of the Internal Memorandum as well as the evidence of Mr White, I am satisfied on the balance of probabilities that State Bank was aware of the agreement between Mr White and his brother or his brother's company. But the bank made no suggestion to Mr. White or to the Company that either of them ought to obtain some form of security from Gregory J White Pty Ltd or Gregory White to cover the eventuality of these entities defaulting on the agreement with D. S. & l. White Carrying Pty. Ltd.. 117 It ought to have been known (if it was not in fact known) by officers of the Fairfield branch of State Bank that the Company had no business and no income to meet the interest which would become due. 118 In his affidavit Mr White says:- "On or about 2 February 1990, my brother Gregory White telephoned me at home and asked me to attend at his home that afternoon. When I arrived at Greg's home he handed me a document…. I took the document from Greg, read it and then signed it is his presence. At the time of receiving the document handed to me by Greg, Greg said words to the effect "it's all fixed. All you have to do now is sign this letter and I'll send it off to Frank Brooks at the bank." 119 The letter was addressed to Mr. F. Brooks, State Bank, and was signed be Mr White "for D S & L White Carrying Pty. Ltd." It said:- "I hereby authorise you to release $200,000.00 from the fixed deposits that you are holding in the name of D S & L White Carrying Pty. Ltd., to Gregory J. White Pty. Ltd., and to invest the balance at the maximum interest rate." 120 In exhibit B1 at pages 345, 346 are State Bank debit notes from the account of D S & L White Pty. Ltd., totalling $200,000.00 and a credit note into the account of Greg White Pty. Ltd., for $200,000.00 all dated 5 February 1990. The originals are exhibit 3. 121 The bank statement of Gregory J White Pty. Ltd., (exhibit B1 page 364) shows that on 5 February 1990, there was a deposit of $200,000.00 from "D S & L White" which reduced the debit on the former account from $570,329.17 to $370,329.17 which was still above the overdraft limit of $310,000.00 referred to earlier. 122 The evidence of both Mr and Mrs White is that Mr White did not advise his then wife at any time before the funds of $200,000.00 were transferred out of the Company's Fixed Term Deposit account to the account of Gregory J White Pty Ltd of any of the steps to effect such transfer. Mr White says he deliberately kept his wife in the dark as he believed that if he had told her beforehand she would have objected to such transfer. 123 Mrs White gives similar evidence. It was suggested somewhat diffidently by State Bank in cross examination that there was some form of collusion on this point between Mr and Mrs White. In view of the fact that they separated in about 1995 and were divorced in 1998 and have kept apart with Mr White now living in Queensland I am not satisfied that there was any such collusion between them. 124 Exhibit B1 page 347 is a letter dated 13 February 1990 signed by Frank Brookes, Senior Manager, Fairfield branch, addressed to "Mr & Mrs D S White, D S & L White Carrying Pty. Ltd., 121 Anzac Avenue, Engadine". This was the address of the newsagency which they had sold some six months beforehand. However, it appears to have been forwarded or picked up some time later by Mr White when he was working casually at that newsagency delivering papers. It was received back by State Bank, according to the date stamp, on 16 March 1990. The letter is addressed to Mr & Mrs White and in its relevant parts states:- "We refer to our previous discussions regarding partial release of term deposit funds and now advise the following:- As authorised $200,000.00 has been given to the company of Gregory White Pty. Ltd., with the remaining funds of $145,654.00 being held on term deposit for 30 days at the current rate of 16.85%. As previously advised, your interest to be charged on your fixed rate term loan will now be monthly in arrears and a payment of $4,600.00 will commence from 26 February 1990 and thereafter on the 26th monthly. It would be appreciated if you could provide that sum to enable collection in the company trading account." 125 The letter then sets out the fees in relation to this transaction which have been charged to the Company's account totalling $312.47. The letter concludes:- "It would be appreciated if you could acknowledge receipt of this letter on the duplicate provided and as previously stated, should you have any inquiries please do not hesitate to contact the writer We hereby acknowledge receipt of letter dated 13/2/90" 126 It is signed by both D S White and L White. 127 On behalf of State Bank it is submitted that this letter constitutes an agreement and consent by Mrs White to the release of the $200,000.00. The response of Mrs White is that her signature does not signify consent to the transaction. It merely acknowledges that she received the letter. Furthermore, she says that she was not aware that she could reverse the transaction and so she did not complain. 128 In fact I am satisfied that she could not reverse the transaction at that stage. The Request for Banking Facilities (exhibit B1 page 20) given by the Company to the bank provided for either director to sign the document of 2nd February 1990. Indeed, counsel for Mrs White concedes that that document was sufficient authority from the Company to State Bank to do what it did. 129 However, on behalf of Mrs. White it was submitted that because this transfer diminished the security and thereby exposed Mrs White in her capacity as a guarantor to extra risk, her consent should have been obtained before the transfer of the money. On behalf of Mrs White a number of acts of impropriety of the bank are alleged, namely: (a) In its assessment made on 12 January 1990, it assesses the capital value of the security but not the ability of the Company to pay the interest. (b) In the submission in that assessment the author sought approval for the release of $195,500.00 yet $200,000.00 was released. (c ) In that assessment there were conditions that the customers had to be notified before the money was released. The Company which was the customer was notified, and Mr White in his capacity as director and a co guarantor was notified but not Mrs White in her capacity as guarantor. (d) The Manager of the Fairfield branch knew that the account of Gregory J White Pty Ltd was overdrawn and therefore ought to have appreciated that there was a real probability that it would unable to meet the substantial payments of interest ($4,600 per month) plus the premium to the Company as promised. (e) Within the information available to the Manager of the Fairfield branch was the notation appearing at Exhibit B1, page 286, which noted that the customer would not be repaying the fixed rate loan but would be using the cash from the settlement of the sale of the newsagency to secure the loan. (f) By transferring the money over to the account of Gregory J White Pty Ltd the exposure of the bank to the overdrawn account of that company was considerably reduced and thereby the Manager preferred the interests of Gregory J White Pty Ltd to those of its other customer DS & L White Carrying Pty Ltd. (g) Thus the bank improved its position at the expense of the guarantors including Mrs White. (h) Whilst the bank would be precluded by its obligation of confidentiality from revealing the state of the account of Gregory J White Pty Ltd to Mr or Mrs White nonetheless it had the right of veto over the proposed transfer of the $200,000.00 to Gregory J White Pty Ltd. By refusing to exercise its power of veto in all the circumstances it acted dishonestly. (i) In these circumstances the bank was under an obligation to ensure that both guarantors gave their prior approval to any transaction which diminished the value of the security given by the Company to the bank. (j) The consent of Mrs White had to be obtained before the release of the money because after the event, in her capacity as guarantor, she has no power to reverse the release of the funds. Also in her capacity as director of the Company she could not reverse it because her husband had the actual and ostensible authority to authorise the payment on behalf of the Company. (k) Accordingly, she was presented with fait accompli and had to do the best she could. Consequently her conduct after the event is not evidence of consent to the release of the funds nor is it evidence of consent to the release of the funds given before the event. (l) This type of conduct is not envisaged in clauses 5.1.2 and following on their true construction. (m) The receipt of a cheque for $300,000.00 from Gregory J White Pty Ltd followed by the immediate outlay by the Company's cheque for $300,000.00 to Village Projects Pty Ltd was not a repayment of the loan from Gregory J White Pty Ltd nor was it a novation. It is submitted that this was merely an attempt by the Company to mitigate its losses caused by the wrongful acts of State Bank - albeit an unsuccessful attempt. Is Mrs. White Entitled to Relief? 130 It is now necessary to consider whether the above facts entitle Mrs White to any defence to the bank's claims. 131 In the case of a banker and customer the bank is under a duty of disclosure only where there is a special arrangement between the bank and the customer of a kind which the surety would not expect. (See Per Gibbs CJ in Commercial Bank of Australia Ltd-v-Amadio 151CLR 447 at 456.) 132 I am satisfied on the balance of probabilities that in this particular case a surety would expect that a person or company such as Mr Gregory White or Gregory J White Pty Ltd would have an overdraft arrangement with the bank. There was nothing special about the arrangement. Accordingly, it was not of the type which the bank was under a duty to disclose to Mr or Mrs White or C J Carrying Pty Ltd. 133 Notwithstanding the criticisms of the conduct of the Manager of the Fairfield branch of State Bank, I am far from being satisfied on the balance of probabilities that the transaction as a whole can be said to be one which gave one customer of the bank preference over another customer. From the view point of Mr White and the Company the arrangement with Gregory J White Pty Ltd appeared to be beneficial. It gave the Company extra income. It is true that the agreement between the Company and Gregory J White Pty Ltd was not initially in writing but at no stage did Gregory J White or Gregory White ever deny that such a contract was made. Indeed, it was subsequently confirmed by the guarantee in favour of the Company dated 12 December, 1991 (exhibit B2 pages 547 to 550). 134 Whilst it is true that the payment of the $200,000.00 to Gregory J White Pty Ltd substantially reduced the exposure of the bank to its indebtedness, State Bank did not thereupon close the overdraft account. Indeed the bank statements in evidence demonstrate that the bank permitted Gregory J White Pty Ltd to continue to operate on the overdraft account so that it was in debit to an even greater extent than the amount standing at the time of receipt of the $200,000.00. The evidence falls far short of satisfying the court on the balance of probabilities that officers of the State Bank held a belief at that time that Gregory White or his company were insolvent. 135 Accordingly, Mrs White has failed to satisfy the Court on the balance of probabilities that either the bank or the Company or Mr White was guilty of any dishonesty, fraud or improper conduct. 136 She has also failed to satisfy the Court that clauses 5.1.2 and following set out above do not, on their true construction, provide an answer to the cross claims. 137 Paragraph 16 of Mrs White's defence alleges that she was in position of special disadvantage at or about the time of execution of the mortgage which position of special disadvantage was known or ought to have been known by State Bank and in the premises it is unfair and unconscientious for the bank to rely on the said mortgage. 138 The evidence falls far short of satisfying the Court on the balance of probabilities that Mrs White was in fact in a position of special disadvantage at about the time of execution of mortgage. She was then represented by a Solicitor namely Mr Swane and the mortgage contains normal commercial terms. Furthermore, the mortgage sued upon was the second she had joined in granting to State Bank. 139 Paragraph 9 of Mrs White's cross claim alleges that the bank had no authority to release the funds by virtue of the letter of 2 February 1990. In the course of his address after the close of evidence, counsel for Mrs White conceded that the letter of 2nd February 1990 was sufficient authority on behalf of the Company to release the funds. 140 Paragraph 10 of the cross claim alleges that Mr White owed duties to the Company to exercise his power and discharge his duties bona fide and for the benefit of the Company and to exercise a reasonable degree of care and diligence in the exercise of his powers and the discharge of his duties. It then alleges a breach of those duties by effecting the release of the funds on 2 February 1990. 141 Viewed with the benefit of eleven years of hindsight it can be said that Mr White made a wrong decision. However, in the light of the information then available to him in February 1990 I am not satisfied that he was guilty of failure to exercise a reasonable degree of care and diligence in the exercise of his powers and the discharge of his duties. I am further not satisfied that he failed to exercise his powers and discharge his duties bona fide and for the benefit of the Company. The arrangement he made was clearly for the benefit of the Company and for the Company only. It was the one to receive the benefits of the promise of Gregory J White Pty Ltd. As mentioned earlier, at that stage Gregory White exhibited all the indicia of a successful and wealthy businessman. Mr. White had every reason to believe that his brother would keep his promises. Indeed, State Bank itself was prepared at that point of time to extend considerable financial accommodation to Gregory White and/or his company. 142 Paragraph 14 of the cross claim alleges that State Bank knowingly participated in a dishonest and fraudulent scheme by Mr White to advantage Gregory J White Pty Ltd. 143 The evidence falls far short of satisfying me on the balance of probabilities that the conduct of Mr White constitutes a dishonest and fraudulent scheme to advantage Gregory J White Pty Ltd and or the bank. The evidence as a whole comfortably satisfies me that the conduct of Mr. White was motivated only by his desire to benefit the Company and through the Company his wife and children. It follows that Mrs White has failed to satisfy me on the balance of probabilities that either Mr White or State Bank knowingly participated in such a scheme. 144 I have been referred by both counsel to a large number of authorities all of which have been considered. I have only referred to those which I consider to be of special relevance. 145 It is however necessary to refer to the case of Williams - v - State Bank of New South Wales an unreported judgment of Young J of 7 April 1993. 146 At page 4 of the judgment Young J says:- "I would have thought, and I would have been forgiven for so thinking, that it is absolutely extraordinary that in this day and age a bank which has a mortgage over a home owned by two people can proceed to make a loan to one of those persons without the others knowledge and it is even more extraordinary when the bank knows the money is going to be on lent to another person whose credit rating is so low that the bank will not lend it directly itself. The bank appears to have taken the view that merely because it had an all moneys mortgage from Mr & Mrs Williams at an earlier date that it was free to lend more to one party without the consent of the other. It may have been sadly mistaken in this." 147 His Honour went on to say:- "If there is an all money mortgage the bank will not be able to claim it is secured to a debt that neither party could sensibly say as at the date of the time the mortgage was taken it was contemplate it should be included in the wide words." 148 At page 5 His Honour says:- "However, the case involving Mrs Williams can be dealt with far more simply. If a person borrows money on the basis of a guarantee or other security given by his wife then he must, at the very least, give his wife full information. It does not matter at all whether the wife is to sign a new guarantee or whether a guarantee previously given by her is to be extended. If the wife gets no substantial benefit under the guarantee, then the evidentiary onus is moved to the bank to show why the transaction should be enforced against her….In my view the principle applies whether or not the security provided by the wife is a guarantee in the strict sense or as was provided in the present case." 149 In my view this case is clearly distinguishable from the present one. In the first place there is no suggestion in the judgment of the existence in the mortgage of clauses similar to clause 5.1.2 and following as is incorporated in the mortgage the subject of this action. Secondly, that was a case where one party to a mortgage without the knowledge of the other increased liability under the mortgage without the knowledge or approval of the other. The present case is not one of increasing the amount of loan under the mortgage. The present case is one of releasing part of a security. Thirdly, this is not a case where State Bank was refusing to lend money to Gregory J White Pty. Ltd. The evidence is that it continued to lend such money well after February 1990. Fourthly, in this case Mrs. White as a shareholder and director of the Company was entitled to share in the benefits of the agreement between it an Gregory J White Pty Ltd. 150 To summarise:- a. The release of the $200,000 from the Fixed Term Deposit of the Company was duly authorised by the letter of 2 February, 1990 signed by Mr. White on its behalf. b. The motivation of Mr. White for such release was not for the benefit of Gregory White or of Gregory J White Pty Ltd or of State Bank. It was for the benefit of D. S. & L. White Carrying Pty Ltd and thereby for the benefit of Mrs White and himself as sole directors and shareholders. c. Mr White was not guilty of any breach of his duty as a director or of any failure to take reasonable care in releasing the $200,000. d. Mrs. White was aware of the negotiations for the release of the money and approved in principle subject to the loan to Gregory J White Pty Ltd being secured. e. This is not a case of a guaranteed loan fund being further debited to benefit only a third party without the knowledge or consent of one of the guarantors. Rather it is a case of the guaranteed loan fund being further debited for the benefit of the Company of which the guarantors were the sole directors and shareholders and, therefore, the sole beneficiaries. Action 20139 of 2000 151 I now proceed to a consideration of action 20139 of 2000 in which the Company is the plaintiff and Mr White and the bank are defendants. 152 This action must fail because the Company has failed to satisfy the Court on the balance of probabilities that Mr White failed to exercise his powers and discharge his duties as a director of the Company bona fide and for the benefit of the Company and that he failed to exercise a reasonable degree of care and diligence in the exercise of those powers and the discharge of those duties. The plaintiff has also failed to satisfy the Court that in causing the bank to release $200,000.00 he was in breach of any duty owed by him to the Company. The plaintiff has also failed to satisfy the Court on the balance of probabilities that the bank knowingly participated in a dishonest and fraudulent scheme by Mr White to advantage Gregory J White and/or the bank. In fact the Court is satisfied, as explained above, that the arrangement made by Mr White was made purely and only for the benefit of the Company bona fide and, in the light of the circumstances then existing, with the exercise of due care and diligence. 153 It follows that plaintiff has failed to satisfy the Court that the bank aided, abetted, counselled or procured or was directly or indirectly knowingly concerned in or a party to any breach of duty by Mr White as an officer of DS & L White Carrying Pty Ltd. Orders 154 Accordingly, in action No. 20139 of 2000 the following orders are made: 1. Verdict and judgment for the defendants. 2. The plaintiff is to pay the defendants costs. 155 In action 13264 of 1996 the following orders are made:- 1. Judgment in favour of the plaintiff against both defendants in the sum of $894,497.68 together with interest thereon accruing at the daily rate of $355.23 from 5 November, 2001. 2. Judgment for possession of the property being the whole of the land and improvements contained in Certificate of Title Folio Identifier 15/02410 being the property known as 23 Shand Close Illawong. 3. Judgment in favour of the plaintiff on the defendants' cross claims. 4. The defendants are to pay the plaintiff's costs of the action and cross claims. 5. I invite submissions from the parties as to stay of execution of the order for possession. I certify that this and the preceding 33 pages is a true copy of reasons for Judgment herein of the Honourable Acting Justice Cooper. Associate to Acting Justice Cooper: ……………………………………………. Last Modified: 12/05/2001 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.