New South Wales Supreme Court CITATION : Allan John Bakarich and Anthony George Bakarich as Executors of the Estate of the late Mary Patricia Bakarich & Ors v Commonwealth Bank of Australia [2004] NSWSC 283 HEARING DATE(S) : 10/11/03; 11/11/03; 12/11/03; 13/11/03; 14/11/03; 17/11/03; 18/11/03; 19/11/03; 20/11/03; 21/11/03; 24/11/03; 25/11/03; 27/11/03; 28/11/03; 01/12/03; 02/12/03; 03/12/03 JUDGMENT DATE : 20 April 2004 JUDGMENT OF : Nicholas J DECISION : Plaintiffs' claim dismissed. Judgment for the Defendant. CATCHWORDS : EQUITY - Equitable relief - Guarantees and mortgage for bank loans - claims for relief under s 52 Trade Practices Act 1974 (Cth) - whether Plaintiffs induced to provide securities for loan by bank's false and misleading conduct - whether transactions unconscionable - whether principle in Commercial Bank of Australia v Amadio (1983) 151 CLR 447 applies - whether variation of agreement discharged Plaintiffs from liability under the securities - whether principle in Ankar Pty Ltd v National Westminster Finance (Aust) Ltd (1987) 162 CLR 549 applies - whether guarantees and mortgage unjust under s 7(1) Contracts Review Act 1980 (NSW) - whether undue influence Contracts Review Act 1980 (NSW) ss 4(1); 7(1); 9(1); 9(2)(a) to (k); 15 LEGISLATION CITED : Real Property Act 1900 (NSW) s 57(2)(b) Trade Practices Act 1974 (Cth) s 52 Ankar Pty Ltd v National Westminster Finance (Aust) Ltd (1987) 162 CLR 549 Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd [2003] HCA 18; (2003) 77 ALJR 926 Baltic Shipping Company v Dillon (1991) 22 NSWLR 1 Blomley v Ryan (1956) 99 CLR 362 Commercial Bank of Australia v Amadio (1983) 151 CLR 447 Commonwealth Bank of Australia v McArthur [2003] VSC 31 Corumo Holdings Pty Ltd v C Itoh Ltd (1991) 24 NSWLR 370 CASES CITED : Cubillo v Commonwealth of Australia (2000) 174 ALR 97 Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413 Esanda Finance Corp Ltd v Tong (1997) 41 NSWLR 482 Falinski v Commonwealth Bank of Australia [Unreported, NSWCA, 6 February 1998] Radan v Commonwealth Bank of Australia (23 October 1998, BC9805707) State Bank of New South Wales Ltd v Chia & Anor (2000) 50 NSWLR 587 Watson v Foxman (1995) 49 NSWLR 315 at 318-319 West v AGC (Advances) Ltd (1986) 5 NSWLR 610 Westpac Banking Corporation v Robinson (1993) 30 NSWLR 668 Allan John Bakarich and Anthony George Bakarich as Executors of the Estate of the late Mary Patricia Bakarich - First Plaintiff Allan John Bakarich - Second Plaintiff PARTIES : Anthony George Bakarich - Third Plaintiff Vitlern Pty Limited - Fourth Plaintiff A Bakarich Industries Pty Limited - Fifth Plaintiff Commonwealth Bank of Australia - Defendant FILE NUMBER(S) : SC 5840/92 COUNSEL : B Coles QC, R J Powell SC, M R Tyson - Plaintiffs J R Sackar QC, M T McCulloch, T M Thawley - Defendant SOLICITORS : Bowring Stone - Plaintiffs Shaw McDonald - Defendant IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION Nicholas J 20 April 2004 5840/92 Allan John Bakarich and Anthony George Bakarich as Executors of the Estate of the late Mary Patricia Bakarich & Ors v Commonwealth Bank of Australia JUDGMENT 1 His Honour: On 19 September 1989 Commonwealth Bank of Australia (the Bank) advanced a trade lending facility in the sum of $2,650,000.00 to Demson Pty Ltd (Demson) to assist it to import air conditioners for sale. The Plaintiffs provided guarantees and mortgages to the Bank to secure the advance. 2 The claims for relief against the Bank are on grounds that: (i) The Plaintiffs were induced to provide the securities by false and misleading representations made to them by an officer of the Bank, in breach of s 52 Trade Practices Act 1974 (Cth) thereby entitling them to relief under that Act; (ii) The securities were provided to guarantee an agreement between the Bank and Demson to advance the trade lending facility on condition that funds would only be advanced upon the Bank sighting confirmed orders for air conditioners which agreement was subsequently varied so that funds would be advanced for which no confirmed orders had been sighted provided the value of the imported air conditioners did not exceed $300,000.00 per month. The variation was without the knowledge or consent of all or any of the Plaintiffs, by reason whereof the Plaintiffs were discharged from all liability to the Bank under the securities in accordance with the principle in Ankar Pty Limited v National Westminster Finance (Aust) Ltd (1987) 162 CLR 549; (iii) The circumstances in which the Plaintiffs agreed to provide the securities were such as to render the transactions unconscionable and/or unjust so as to entitle the Plaintiffs to equitable relief in accordance with the principles in Commonwealth Bank of Australia v Amadio (1983) 151 CLR 447 and/or to relief under the Contracts Review Act 1980 (NSW). 3 By consent, questions of relief and remedy were deferred pending determination of the issues of liability. Introduction 4 Anthony Bakarich (Anthony) and Mary Patricia Bakarich (Mary), now deceased, were the parents of Stephen, Allan John, and Anthony George Bakarich. The family home was on a 20 acre farm at Lot 3 Cowpasture Road, Hoxton Park (Lot 3) from which the business of growing and selling tomatoes was conducted. Anthony lived there with Mary until his death on 7 February 1989. 5 Mary became the registered proprietor of Lot 3 pursuant to a transmission application dated 11 September 1989. She died on 27 October 1997 aged 74 years. 6 Allan John Bakarich (Allan) is the Second Plaintiff. He was born on 19 July 1944, and lived with his parents at Lot 3 whilst they were alive. He worked on the farm picking and growing tomatoes. It was accepted that by reason of ill health he was unable to attend Court. In his affidavit sworn 19 June 1998, he described himself as mostly illiterate. He is totally incapacitated and is cared and provided for by his brother Anthony. 7 Anthony George Bakarich (Tony) is the Third Plaintiff, and with Allan is an executor of the estate of his late mother, the First Plaintiff. He was born on 16 May 1946. After completing the Leaving Certificate in 1964, and tertiary general and mechanical engineering courses, he left the family home in 1971. He was employed in the engineering industry for seven years. He was married on 19 August 1973 and has four children. He separated from his wife on 2 May 1986 and they were later divorced. 8 Vitlern Pty Ltd (Vitlern) the Fourth Plaintiff was established in 1986 as a property investment company by Anthony, Mary and Allan. At relevant times its directors were Allan and Mary. It was the owner of three home units at The Chateau, Surfers Paradise, Queensland. 9 On 27 October 1975 Tony established A Bakarich Industries Pty Ltd (ABI) the Fifth Plaintiff. At all relevant times he and Allan were its directors. He controlled its operations which were conducted as a family company which supported himself, Allan, and his parents. Mary was a director between 2 July 1993 and 27 October 1997. Its business was the manufacturing of tubular steel products and other light industrial activity. Tony said that at one stage it was the largest manufacturer of television stands in Australia. It owned property at Jedda Road, Lurnea (Jedda Road), Wirreecoo Road, Berrara and No 23 Burbank Avenue, East Hills which was Tony's residence. 10 Stephen Bakarich (Stephen) had been involved in the air conditioning business since leaving school. He and his wife, Rosanna, were directors of Celsius Air-Conditioning Pty Ltd (Celsius) which from about October 1982 sold and installed residential and commercial air conditioners. They were also directors of Rutisa Pty Ltd (Rutisa) which from about December 1987 carried on business as a property developer in Cabramatta. His business interests included residential development projects and a travel agency, Speedwise Travel Pty Ltd. 11 Mr Darryl William Aspinall (Mr Aspinall) was employed by the Bank between 1983 and 1993 as its assistant loans manager at its Liverpool branch (the branch). His principal function was to make recommendations as to loans and to approve those within his delegated authority. Under his supervision was Mr Michael Newton, the senior loans officer. He first met Stephen in about 1983 or 1984 and Stephen became a customer of the branch in about 1986. During 1987 and 1988 Mr Aspinall was involved in the provision of financial assistance by way of overdraft facilities and personal credit lines for Stephen, his wife, and their businesses. He first met Tony in about July 1988. His involvement with members of the family continued thereafter. 12 Mr Michael John Newton (Mr Newton) was employed between 1987 and 1992 by the Bank as its senior loans officer at the branch. His first contact with the Bakarich family was with Stephen in relation to an application for an overdraft facility to assist Celsius, apparently in about December 1987. His next involvement with members of the family was in relation to the purchase of Lot 34A Cowpasture Road, Hoxton Park (Lot 34A) in July 1989. His involvement continued thereafter. Witnesses 13 Tony was the only witness for the Plaintiffs. Allan was not required for cross-examination in respect of those parts of his affidavit sworn 19 June 1998 which were admitted into evidence. 14 For the Defendant, the witnesses were Messrs Aspinall, Newton and Ms Garland. Affidavits sworn by Bank officers Barry Robert Watson, Leslie James Rowe, and John Irwin, were read, and they were not required for cross-examination. Chronology of events between 1985 and 1994 15 The following narrative is of events which involved members of the Bakarich family and provides some background for the better understanding of the Plaintiffs' claims. Most of these matters were not in dispute and in any event there was ample evidence for the finding that each took place. 16 By the end of 1985 ABI was in serious financial difficulty and Tony was involved in divorce proceedings with his wife. By letter dated 4 December 1985 Stoikovich & Banfield, his solicitors, wrote to Beston & Riordan, solicitors acting for his wife. The letter advised of the need to auction the company's real estate to pay out its creditors and warned of the risk of its liquidation after February 1996 if the auctions did not take place. 17 On 16 June 1986 Tony's wife commenced proceedings in the Family Court of Australia seeking orders with respect, inter alia, to settlement of property and the winding up of ABI. 18 The situation deteriorated. By notice dated July 1986 signed by Tony and Allan, ABI's liabilities were estimated at $883,000.00 and its assets at $720,000.00. Its serious financial situation remained substantially the same during 1987. In his draft affidavit of 9 September 1987 for the Family Court proceedings Tony estimated that liabilities exceeded assets by about $120,000.00. He also described the adverse physical and mental affect upon his parents by reason of their concern that Lot 3 was in jeopardy. 19 Following the letter from National Australia Bank (NAB) to ABI of 6 May 1988 which complained of the unsatisfactory state of ABI's accounts Tony responded that the family might be prepared to sell the farm in order to assist ABI. Tony was sure they would have sold it if he asked them to do so. 20 On 9 May 1988 Tony signed an undertaking to the Family Court that as a shareholder and director of ABI he would not deal with or sell the properties at Burbank Avenue (his home) and Jedda Road. 21 On 1 June 1988 Tony, on behalf of ABI, agreed to sell Jedda Road to Pupuri Pty Ltd for $1,550,000.00. On 21 June 1988 he phoned Mr Banfield, his solicitor, and told him he had agreed to sell Jedda Road for $1,550,000.00. On 28 June 1988 he accepted a deposit for $155,000.00. He and Allan agreed to sell at this price because ABI's financial position necessitated sale, it having been decided to close the company down. 22 However, at about this time Tony told Stephen of the proposed sale and that he was providing vendor finance of $1,000,000.00 at 13% paid monthly, and that he planned to retire. Stephen's response was to ask him to reconsider, saying that if he invested $1,000,000.00 in the project to be undertaken through Rutisa at Cabramatta he could guarantee a return of not less than 26% and possibly 50%, and the Bank would support him. 23 On 4 July 1988 Tony phoned Mr Banfield and advised that he had definitely sold Jedda Road for $1,550,000.00, and asked whether he needed to tell his wife. 24 Stephen approached Tony and put a number of proposals for the sale and development of Jedda Road. They were not accepted. Ultimately on 25 August 1988 there was an exchange of contracts simultaneously with settlement when the property was sold for $1,250,000.00 to Pupuri Pty Ltd. Tony and Allan signed the contract on behalf of ABI as vendor. 25 On 25 August 1988 the sum of $999,438.54 was deposited by ABI with CBFC Limited. 26 Tony and Allan consented to their appointment as directors of Rutisa effective 20 September 1988, and became shareholders and directors on 29 September 1988. Stephen and his wife had been directors since 17 December 1987. 27 On 30 September 1988 the property at 132-139 John Street, Cabramatta (John Street) was transferred to Rutisa for the price of $410,000.00. 28 On 9 November 1988 NAB demanded payment from ABI of the total sum of $367,430.46 in respect of its overdraft and borrowings. 29 By contract dated 11 November 1988 Vitlern agreed to purchase residential units 41 and 42 at The Chateau, Surfers Paradise, Queensland for $270,000.00. The company already owned Unit 43. On 24 November 1988 the Bank provided $250,000.00 by way of a residential property investment loan to assist the purchase, security for which were mortgages over the three units. On 28 November 1988 relevant documents, including the mortgages, were signed by Allan and Mary for Vitlern, whose signatures were witnessed by Tony. 30 The Bank's diary note of 17 November 1988 records the recommendation of an application by Rutisa for a facility of $800,000.00 to assist in the construction of 11 townhouses at John Street, and 14 townhouses at 5/7 Thelma Street, Liverpool. On 30 November 1988 the facility was approved. On 9 December 1988 Tony and Stephen as Rutisa's directors signed the Bank's documents to enable drawdown. 31 On 13 January 1989 the solicitors for Tony's wife wrote to Mr Stoikovich seeking particulars of the sale of Jedda Road and of the disposal of its proceeds. By letter dated 1 March 1989 Mr Stoikovich, so far as is relevant, advised that of the net proceeds of $1,156,938.54 received by ABI the sum of $466,000.00 had been paid to sundry trade creditors, and that the balance of approximately $600,000.00 was lent to Rutisa to fund its development projects. 32 On 3 March 1989 Rutisa provided a mortgage to the Bank over the property at 5-7 Thelma Street, Liverpool. 33 On 20 March 1989 Stephen and Tony became directors of Demson. 34 From 22 April 1989 to 28 April 1989 Tony was in Singapore. During this time he visited Acma Electrical Industries Ltd (Acma), met those in charge and inspected the factory. Acma manufactured air conditioners and refrigerators which, at the time, Stephen was considering importing. 35 On 4 May 1989, Tony and Stephen signed Demson's lease for its premises. 36 On 28 June 1989 Vitlern completed the sale of Unit 43, The Chateau, for $170,000.00. The memorandum of transfer was signed by Allan and Mary and witnessed by Tony. On 3 July 1989 Vitlern's account with the Bank's branch at Liverpool was credited with the sum of $150,658.50. 37 On 3 July 1989 an application for financial accommodation for the purchase of Lot 34A, a property of 13.8 hectares, was prepared by Mr Newton. On 13 July 1989 arrangements were made for the purchase of Lot 34A, for the sum of $1,150,000.00 which was to be partially funded by a loan from the Bank of $800,000.00 secured by mortgage. The remaining funds came from the sale by Stephen and Rosanna of their property at Lot 309, Kelvin Park Road, Kelvin Park, the sale by Rutisa of the property at Thelma Street, Liverpool, and the sale by Vitlern of Unit 43. Lot 34A was bought as an investment in the expectation that it would be rezoned residential. The memorandum of transfer is dated 27 July 1989. The owners were Stephen and Rosanna as joint tenants as to one third share, and Allan, Tony and ABI as tenants in common of the two thirds share, being proportions agreed upon by Stephen and Tony. 38 On 5 July 1989 Stephen and Mr Koh of Acma met the Bank's representative, Mr Hateley, in Singapore to discuss the financing of Demson's importation of air conditioners for distribution in Australia. A documentary credit for $73,500.00 was established through the branch on 10 July 1989. 39 By letter dated 24 July 1989 NAB advised Stoikovich & Banfield that the amount required to discharge the mortgage of Lot 3 which supported the overdraft and loan facilities of ABI was the total sum of $360,340.87. 40 On 31 July 1989 there was a meeting with Stephen, Messrs Aspinall and Newton, and members of the Bank's trade lending group. Stephen was asked to provide cash flow projections and, to establish the viability of the enterprise, copies of confirmed orders and relevant contractual documentation to support Demson's estimated sales potential. The preparation of cash flows and ordering schedules would form the basis of a formal proposal for appropriate level of facilities. 41 Between 2 and 11 August 1989 Tony travelled to Singapore and Hong Kong. Mr Paul Cross accompanied him. The trip was for the purpose of Demson's business. 42 On 3 August 1989 Demson's accountants, Galluzzo Bros. & Partners, sent the Bank a cash flow budget as instructed by Stephen. The document was a spreadsheet in a standard form provided by the Bank. It is TB 399-400. 43 From about 4 August 1989, orders for Acma air conditioners were placed by retailers with Demson, and from about 8 August 1989 Acma began shipping air conditioners to Demson in Sydney, and invoicing for them. 44 On 8 August 1989 Acma issued invoices to Demson in respect of four shipments for a total of 957 air conditioners for the sum of SGD$689,340.00. 45 On 10 August 1989 Demson faxed to Mr Newton a copy of the confirmation from Norman Ross of a bulk order for 1,300 air conditioners. 46 By the memorandum dated 14 August 1989 Mr Newton submitted to the Bank's Southern Metropolitan Zone (Zone) an application for financial accommodation for Demson for consideration and approval. He recommended approval of a trade lending facility of $2,650,100.00 to finance the importation of air conditioners from Singapore. 47 The application contained a summary of the facilities already provided to related Bakarich accounts. Mr Newton's proposal for security was in the following terms: "1. A Guarantee (Unlimited as to amount) by Stephen, Rosanna Margaret, Allan John and Anthony George Bakarich partially supported by security held in their own names and A Bakarich Industries Pty Limited. 2. A Guarantee (Unlimited as to amount) by A Bakarich Industries Pty Limited, Vitlern Pty Limited, Rutisa Pty LImited (sic) & Demson Pty Limited. NB: This Guarantee is fully interlocking. 3. A registered equitable mortgage by Demson Pty Limited over all of its assets except freehold including uncalled capital. 4. A mortgage by Mary Patricia Bakarich over a 3ha rural property Lot 3 Cowpasture Road, Hoxton Park NSW". 48 Under a heading "BALANCE SHEET/PROFITABILITY" it said: "A newly incorporated company with no tangible assets. The directors however, anticipate a net profit of some $600,000 from current orders which should be completed by June 1990". 49 Details of Demson included the following information: "As previously mentioned Stephen Bakarich has been involved in the air-conditioning business, both sales and installation, since leaving school and has the expertise and knowledge to sell these products to Australian wholesalers/retailers. Discussions have been held with the Singapore supplier, Acma, over a period of 12 months to ensure that both of them have the ability and means to fulfil their share of the agreement. To date orders have been received for the supply of 4,385 room air-conditioners to distributers (sic) around Australia and such well known retailers as Norman Ross and Harvey Norman. Imports will be on a monthly basis with payment 90 days after FOB. The Australian wholesalers/retailers will pay either 30 days after delivery or by Letter of Credit payable 60 days after receipt. This safeguards Demson so that if any purchaser defaults or is late with payment no further orders are taken/delivered. … Current orders should be fulfilled by March 1990 with no further orders for air-conditioners expected until later that year. In the interim, Mr Bakarich is looking to import television sets from Hong Kong on a similar basis and continued documentary credit facilities will be required. At this time however, no other details are known. Cash flow budget for the import operation as prepared by the Group's accountant is attached. This was prepared along the lines suggested by George Emerson from Trade Lending and we are happy with its content. These people are extremely energetic and have a very much "hands on" approach. Stephen is a perfectionist and is known to ride unmercifully solicitors, accountants, employees, bankers and anybody else to ensure that matters are completed quickly and satisfactorily. In short, he gets things done". 50 The comments of the branch's chief manager, Mr John Irwin, were appended as follows: "As you are aware, this is the type of business which the branch is actively seeking to offset the mainly property development content of our present lending. The proposal is quite straight forward, security backstop is considered adequate and if the planned expansion is achieved, (and we share Bakarich's optimism) the connection will develop into a very worthwhile and lucrative one for the Bank". 51 I interpolate that Mr Aspinall said that it was likely that Stephen provided the information relating to Demson. He checked and fully supported the application, and wanted to see it granted by the Zone. He thought the transaction was subject to normal commercial risks. It was his understanding that Stephen and those in Demson involved with the importation of air conditioners knew what they were doing. I accept his evidence. 52 With the application were included a trading projection for year ending 30 June 1990, an order placed by Demson on Acma on 9 June 1989 for 7,635 units at a cost of SGD$5,885,850.00, a cash flow on the Bank's pro-forma document, and documents evidencing orders in place. 53 Events within the period 15 August to 19 September 1989 during which the guarantees and mortgage were signed are considered later in this judgment. 54 By fax dated 11 October 1989 Cony Electronics Products Ltd, Hong Kong, sent to Demson the final draft of an agreement whereby it granted Demson sole distribution rights in Australia for colour television sets manufactured by it. It was marked for Tony's attention. It requested him to bring bank guarantees, and to advise details of his visit so that accommodation for him might be arranged. It concluded by saying "Thank you for your kind attention and we look forward to seeing you soon in the Fair" (TB 804). 55 On 11 October 1989 Tony signed Demson's application to the Bank for a documentary credit in favour of Acma for SGD$156,040.00 which was established the same day. 56 Between 15 October and 22 October 1989 Tony travelled to Singapore and Hong Kong for the purpose of Demson's business. 57 On 26 and 27 October 1989 Tony and Stephen were in Melbourne for a meeting with Mr Paul Cross who was involved in establishing Demson's sales office there. Tony's detailed report of that meeting is dated 28 November 1989. 58 On 31 October 1989 Tony and Stephen and Mr John Stewart met to discuss the operations of Demson including its operations in Melbourne. 59 On 16 November 1989 Tony sent a memorandum to Stephen in respect of a proposed trip for Demson. He said he could not afford any time to go overseas as Demson needed too much time " … with fuc-all (sic) return". He suggested cancellation of his tickets, or cancellation of the trip until Demson " … gets in credit". He concluded by saying "Mum, myself and Al really have never been more ill at ease than now what for? And why". 60 On 26 November 1989 Tony travelled to Singapore, Hong Kong and Bangkok for the purpose of Demson's business, and returned to Australia on 10 December 1989. His detailed report of the trip is at TB 789B. 61 On 20 December 1989 Stephen sent a fax from Demson to Acma in which complaint was made about faulty air conditioners, resultant difficulties and expense in repairing them, and that dealers were reacting adversely to them. It also referred to a lack of quality control over Acma's production, and conveyed the view that there was a big problem with its plant. 62 On 4 January 1990 Stephen sent a fax from Demson to Acma in the following terms (TB 1097): "It appears we are going from bad to worse today, as this morning we have changed 2 more units. We have 9 units now in our store that do not work and 8 in Melbourne. We have just been faxed by the S.C.C. in Victoria, not to sell any 95, 180 and 180R units as these have not been yet approved. This has not helped with the situation. Paul Cross our General Manager in Melbourne has faxed us a letter how the situation now stands and is not very impressed. John Stewart made a phone call to Norman Ross yesterday, our single, largest purchaser with a very unpleasant result. They were to take about 380 units this month but due to the poor performance in quality control they will not be taking Acma units but have re-ordered from National, they had completely sold out of Lemair and National RAC's. Their Sale Staff were reluctant to sell Acma due to too many recalls, one shop replaced three 240R's and not one worked. Ivan and myself replaced it after testing 2 in our warehouse to find one to work. I still cannot comprehend how all this has happened. We are now both finding dealers in Melbourne, Perth and Sydney very apprehensive about purchasing your units due to bad quality control. After talking to Michael Koh and Heidi, we are going to check the units that we sell from now, only to see if they start on Cooling and Heating then re-pack, this will not 100% tell us that the unit will work properly. We are not prepared to repair the units that have been and will be returned to us, as I feel that after 3 lots of shipping we have unpacked, fixed certain faults and re-packed not knowing that there were other problems to come. It is a major job for us as our premises are not built to do major repairs. As I have said to Michael Koh and Heidi, what are Acma going to do? After a conference call with John and Paul this morning, we feel that it would be more realistic to send the containers back to Acma to be re-worked on their production line where there are all the facilities, as to do the lot here in Australia and certainly the ones that have no gas (probably due to leaks) would cost more than the units worth, noting that you will pay $65.00 per hour plus parts to re-gas. There are units here that there is no way on God's earth could have been tested, the evap supply fan is jammed in tight against the frame of the unit, the smart guy assembling the unit could not fit the supply fan on as the grub screw missed the shaft so he pushed the fan against housing to tighten screw thus fan cannot start, yet this was supposed to have been tested , there is not only one of these but a few. As I said we will be selective where we sell because of service and the rest as far as we are concerned should be returned to Acma. … We need these units to show face that we are not deserting the marketplace as a full withdrawal would be disastrous for future sales, which only time will tell anyway. … Our existence depends on Acma, we have at the present no other means of survival, we trusted Acma's performance, future looks very bleak ". 63 On 8 January 1990 Tony faxed to Stephen his letter dated 6 January 1990 which included the following: "I've had plenty of time to reconsider things and overall nothing you predicated (sic) really eventuated as explained. We could have comfortably existed on the interest and closed the business, now your (sic) got us into a position that this no longer is a possibility, anyway lets at least part with little argument. … (4) Commercial looks good but don't stuff it up as you & John did with ACMA both Paul & myself know you paid too much for the units besides the managerial Stuff up. Anyway you keep harping how you want to go – go – its all yours now, as long as some of your promises and indication as to how much was made is even close. (5) Believe me when I say I'm on the edge of exploding so don't push, just do the split properly with ACMA taking all stocks it shouldn't be too difficult to call it a day". 64 On 16 January 1990 Stephen sent a fax from Demson to Acma in the following terms: "As you are well aware we have a large problem with the R.A.C.'s, mainly 180's and 240's. We now have 4 large retailers that will probably never sell ACMA R.A.C.'s again, they have cancelled all outstanding orders and even one retailer has informed us that if any of their other 32 outlets ring for units that we are to tell them to ring Head Office and to take no orders. All this has eventuated from STUPID manufacturing mistakes and what has happened, ALL the units have now been tared (sic) with the same brush… [The faults were listed]. All the small problems become a disaster as one dealer said. Norman Ross installed 3 x 240 R's before one worked at Liverpool. Also 3 x 240 R's at Sydney and 2 x 240 R's at Mt Druitt. Now they simply send them back and install other brands. This company has cancelled 350 ACMA cooling only units because of this problem. Now we have them sitting on the floor, unable at the moment to sell them. Our Melbourne office has exactly the same problems. Retailers are returning the units and want credit on them. What an introduction to the marketplace? I cannot understand how ACMA could purchase the best equipment to go into a unit and have a very poor , lousy finish to their product. Lemair, which are the cheapest form of air conditioning equipment on the marketplace, with poor type of parts, sell clearer then (sic) we do because it appears they have a Q.C. and the cosmetic finish is excellent. Where does this then put ACMA? This is not their first year in production. I understand from my last trip to Singapore that the equipment to manufacture had not been ordered in time and this is the reason production was not on time (approx. 8 weeks late) and when parts did arrive it was in full urgent production which in my opinion did not help having a good Q.C. unit. My brother's trip (Tony) there last time, he arrived by himself, you told him how ACMA did let us down. If you recall you told me that the first shipment onwards would be on time. If you check your purchases orders for the part you required, I am sure you will find out they were not ordered on time. We have a problem now that as far as I am concerned the screw situation has still not been solved - … If ACMA cannot guarantee us that the units we have are at least 99% good it would be damaging to sell into the marketplace. Certainly if ACMA, as I hope they are looking at a long time (sic) future, because if we put them back into the marketplace and there are small problems a second time around we will go BANKRUPT without doubt. My opinion would be for ACMA to recall all unsold units in the warehouse, certainly the 180's and 240's and re-work the lot. This would be the only acceptable thing for long term future, then introduce them back to the marketplace without the drama we have now, because if we don't, I do not think that there will be a future for the R.A.C.'s because the confidence of the sale retailers is very low. As it stands at the moment I cannot see us taking the 6 containers still on the wharf due, that these containers have 240s in them and that every 240 will have to be re-worked. I would prefer if this was done, in Singapore as this would only cost about $26.00 to ship back-ways plus your cost for re-work, as labour alone here would cost much more as we do not have facilities to do this here. … I would like to know if ACMA are or could assist us in the units that have been cancelled by our retail outlets as this will be a very heavy burden on us to carry till next summer is (sic) not sold now, certainly the cooling only units. Also Melbourne has sold 400 R.A.C.'s and has had 35 units that that (sic) had break-downs, some returned to store and the rest service calls (8% recall). This is a joke. I have informed Demson-Melbourne not to sell or re-work anymore units until this is sorted out (only 240s) at this stage. 180's are still a problem. At the moment, as Michael Koh knows, we are the laughing stock of the industry. Martin when I was in Singapore last time my meeting with Heidi, with you present, I was told that I would have my 1 H.P., R/C, split installed before Xmas. I spoke to L.T. today to find out what has happened, he told me he'd chased the matter up only to be told this was not so. THIS IS DEFINITELY NOT TRUE. … I find out that every time I arrive there and have discussions with ACMA everything seems to be denied at a later date. This I find very disturbing. … My conclusion to the matter is that unless all units are 100% checked out the situation will only get worse, the reason being that if anyone takes 10 units and there are any problems it all will be very minor, the whole 10 will come back and there is no way ACMA will get into the marketplace next summer. I am prepared, if needed to come over this week at 1 day's notice to sort this mess out with you, only directly. We cannot go on hoping there will be no problems. This in my opinion would be a stupid road to take as there would be no future in this direction …". 65 On 22 January 1990 Tony sent a fax to Stephen in which he proposed terms for the separation and settlement of their respective business interests including cessation of involvement with Demson. 66 During February 1990 Tony wrote to Stephen and Mr Albert Macri, solicitor of Macri Stathis & Co, on a number of occasions on the subject of his investment in Rutisa and Demson, and with proposals for unravelling their various interests. In an undated letter to Mr Macri (TB 1192A-E) (probably written about 20 February 1990), he requested him to act as an arbitrator to resolve the disputes between Stephen and himself. It included the following: "I did as promised, discuss all the happenings openly with our mother and Allan as this is and has affected all of us. We are now starting to realise the enormity of Steves (sic) contempt and diceit (sic) towards our trust and believes (sic) as time (sic) go on this will only increase. When we think of how we trusted him and Rosanna with only personal verbal guarantees and agreements, where by using our $1,000,000.00 we were all to prosper especially Steve's (sic) and Rosanna's family as we were allready (sic) comfortable by the sale. Now what is coming to light is unbelievable and hurts that they could even think of some of these actions besides carry them out. What Steve and Rosanna must be told is that because Steve is our oldest brother, this does not give him the rights (sic) to our money nor does it allow him to be irresponsible with it and he is not judge and jury over it. All we seek is that we be allowed to put our case forward and then have it independently arbitrated on – honest – fair and just. … (6) Steve initially sought the purchase of 34 Cowpasture Road, we had no reason for it (sic) purchase but reconsidered when Steve assured me, Allan and our mother that he had $400,000 personally to inject from the sale of 5 acres and a business Cellcius. With this he guaranteed that RUTISA P/L was going to return no less than $360,000 profit and that Demson's Gross profit should exceed $1,000,000 because orders were allready (sic) on hand to confirm this claim. … Steve was quite aware of our financial position and to achieve funds gave personal guarantees to alter our minds. Anyway the NA Bank requested App $150,000 for them to release the deeds, Steve organised the funds imediately (sic) and from which account, it didn't matter, as it was in line with the funds from VITLERN P/L and as Steve pooled funds and operated either company from this pool it didn't cause a problem, and we were all well aware that with our investment and charges we were still in overall credit, and that's not even considering his personal guarantee of a minimum of 30% return on investment. … I hold Steve responsible for looses (sic) incurred by his malice, where he refused to act in the companies best interests and obide (sic) by agreements undertaken and agreed by all. I again point out that DEMSON – ACMA – UNI-AIR and CONTEC are all valuable assets of DEMSON P/L, even though, this has been eroded by Steve and Rosanna's actions, for this I hold them totally responsible for (sic)". 67 In accordance with the written agreement made on 7 March 1990 between Stephen, Rosanna and Tony the dispute in relation to Demson and Rutisa was settled. As a consequence, Stephen resigned as a director of Demson and Rutisa, Stephen and Rosanna transferred to Tony their shares in each, and Tony took over control of Demson and Rutisa. 68 Between 11 and 16 March 1990 Tony was in Singapore to visit Acma to discuss supplies for the following year. 69 In his letter to the Bank dated 15 June 1990 Tony wrote: "We sincerely thank the bank for the past consideration especially at these trying times. A. Bakarich Industries Pty Ltd, Anthony George Bakarich, Allan Bakarich, Mary Bakarich and Vitlern Pty Ltd, do at all times feel obligated for any debts that they may have incurred. The liability as to Demson Pty Ltd, is one where only 50% of this debt is initially our responsibility, the other 50% is Steve and Rosanna's responsibility, and should any misfortunate action occur, we would expect securities to be equally drawn against by the bank, as they were aware of the company structure prior to any loans organised. We do wish to make use of the loans organised by A Bakarich Industries Pty Ltd, but whilst Steve and Rosanna refuse to honour their undertakings, we insist that their total securities not be used elsewhere, as they have been exposed well in excess of their assets for the past few years, and unfairly exposing others for selfish means". 70 On 27 June 1990 Tony and ABI provided mortgages and guarantees to the Bank to secure additional accommodation for ABI. 71 On 15 October 1990 Tony, Allan and Mary each signed a letter to the Bank which stated: "I hereby acknowledge that the Bank has granted or may be granting from time to time to Demson Pty Limited accommodation and otherwise permitting the Debtor to incur liabilities to the Bank not exceeding an aggregate amount at any one time and from time to time of $2,677,249 (Net) against the security of my mortgages(s)/guarantee(s) to the Bank referred to in the Schedule below. I clearly understand that my mortgage(s)/guarantee(s) will also secure the payment to the Bank of interest and any costs charges and expenses with which the Bank shall be at liberty to debit and charge the account of the Debtor or for which I am liable under my mortgage(s)/guarantee(s)". 72 On the same day Tony and Allan on behalf of Demson, ABI, Vitlern and Rutsia signed a letter of request to the Bank in respect of facilities for Demson in the sum of $2,677,249.00. 73 On 26 October 1990 Tony wrote to the Bank requesting financial accommodation to enable cheques drawn to be met on presentation. The request was denied by the Bank on 31 October 1990. 74 By letter dated 12 December 1990 to the Bank Tony sought a letter of credit facility to enable the importation of a shipment of air conditioner units. He stated that Demson's actual sales to 30 November 1990 amounted to $307,910.00 and projected sales for the period December 1990 – March 1991 were for the amount of $1,776,000.00. The request was declined by the Bank on 17 December 1990. 75 By letter dated 21 February 1991 the Bank advised Demson of cancellation of the trade finance limit and that no more documentary credits would be established. It also advised of requirements for reduction and clearance of the bill for $462,000.00 by late April 1991 and thereafter " … meaningful reductions are to commence on the bill of $2,100,000 each 30 days pending full clearance to come from sale of land" (TB 1670). 76 Demson's income statement for the period ended 28 February 1991 recorded an operating loss of $269,649.40. 77 On 21 March 1991 Tony and Allan signed an authority for the Bank to complete mortgages and other documents for security for advances and accommodation granted or to be granted. 78 Pursuant to Transfer dated 28 March 1991 ABI acquired Stephen and Rosanna's one third share of Lot 34A. 79 The Bank's memorandum of 12 June 1991 records the discussion at a meeting with Tony, Mr Yule and bank officers Messrs Moran and Watson. It was proposed that clearance of the facilities provided to Demson, ABI, and Vitlern which then amounted to $2,931,216.00 would come from the sale of Lot 34A to Landcom for $3,000,000.00. It was noted that the rezoning of Lot 34A was expected to take place after a council meeting on 19 June 1991 and that it was Tony's intention to return to engineering with ABI and to continue selling air conditioners through Demson. 80 By letter dated 29 August 1991 to Demson the Bank advised that by reason of Demson's inability to meet roll-over costs on the matured bills facility for $2,100,000.00, the bill was transferred to a cash funded facility. 81 On 7 November 1991 Tony, Allan and Mary signed letters of acknowledgment to the Bank in respect of accommodation to Demson for up to the amount of $2,416,581.00 against the guarantees of 18 August 1989 and the mortgage of 12 September 1989. 82 On 11 November 1991 Demson applied for documentary credits for US$44,250.00 and SGD$207,920.00 which facilities were provided by the Bank on 12 November and 14 November 1991 respectively. By letter dated 13 November 1991 the Bank advised Demson of the drawdown of its bill discount facility for $312,000.00 83 On 29 January 1992 the Bank approved excesses on Demson's cheque account up to a maximum of $14,200.00 to cover payment of import duty on air conditioners. 84 On 8 May 1992 a meeting between Tony, Messrs Montgomery, Moran and Watson took place during which the Bank's concern about the non-performing conduct of various loans and the ongoing delay with negotiations for the sale of Lot 34A to Landcom was expressed. Mr Watson's memorandum of the meeting dated 11 May 1992 records the following (TB 8/1848): " … together with the fact that all the loans were now in bills matures (sic) account, the $2.1 million B/D/F was matured on 8/5/92, made it imperative that action was now taken to protect the banks (sic) position. I stated that I was seriously considering making demands on all parties. At this point Tony became quite emotional and pleaded for indulgence for another month by which time he was certain a contract would be available from the Department of Housing. He further undertook to extract a letter of intent from the Department concerning the purchase and provide us with a copy during week commencing 18/5. Mr Moran explained that the way the accounts were at present he must do something now which generated a fresh outburst of emotion from Tony during which he states that he was doing the best that he could and that the financial plight of the company was his brother's fault and that he could not be held to blame for the ongoing delay with the gazetting and sale of the land". 85 I interpolate that Tony said that Mr Watson's account was incorrect. Tony said he then also criticised the Bank for failing to honour its agreement to finance air conditioners and denied mentioning only Stephen as the cause of the financial plight of the company (T p 928). Mr Watson was not required for cross-examination. His account accords with the probabilities and I so find. 86 By letter dated 28 September 1992 to ABI, the Bank refused the request for finance to assist with the construction of stable blocks for the ACT Harness Racing Club. It also advised that the Bank was not prepared to provide further financial assistance and expected the current excess to be cleared from normal income failing which cheques would be returned unpaid. 87 On about 14 October 1992 Tony considered the draft of a letter prepared by Mr Banfield to be sent to the Bank on behalf of the Plaintiffs. The evidence is unclear as to whether in fact a letter in terms of the draft was sent. Relevantly it included the following passage of which Tony approved: "Because of the Notice served by the Commonwealth Bank dated 28 September, 1992, as Guarantors, we have reason to believe this to be unfair. Our investigations into how Demson Pty Ltd finished up in such a state as at January, 1990 shows that we have reason to believe the sole reason for this was due to the Bank's failure to abide by the conditions. As third party Guarantors – A Bakarich Industries Pty Ltd; Mary Bakarich, Vitlern Pty Ltd; Alan John Bakarich, Anthony George Bakarich, insisted that the Bank exercise control over Steve Bakarich and Demson Pty Ltd as we had no knowledge of Imports and the Air Conditioning Business. Steve's input (securities), into this project was relatively minor by comparison. Because of this and the Bank's concern, the Commonwealth Bank at Liverpool issued a letter dated 19 September 1989 (Copy enclosed) that they would only allow imports within certain constraints. It was only with such an assurance that our securities were ever offered…" 88 By letter dated 21 October 1992 Tony advised the Bank of an offer of $3,600,000.00 for Lot 34A subject to confirmation. 89 On 24 November 1992 the Statement of Claim in these proceedings was issued. 90 By notices dated 27 November 1992 to ABI the Bank made demands upon Tony, Allan, Mary, ABI and the various Bakarich companies for payment of various substantial amounts within 14 days, failing which recovery action was threatened. 91 By letter dated 2 February 1993 to each of ABI, Vitlern, and Mary, the Bank made demand for payment of amounts owing to it by Demson, ABI, Tony and Allan within 14 days failing which recovery action was threatened. 92 On 23 March 1993 the Bank gave notice to Tony pursuant to s 57(2)(b) Real Property Act 1900 (NSW) for payment of $3,260,410.89 within one month failing which the power of sale under the mortgage in respect of Lot 34A would be exercised. 93 By contract dated 26 March 1993, ABI, Tony and Allan agreed to sell Lot 34A to Landcom for the sum of $2,900,000.00. Settlement took place on 2 July 1993 resulting in payment to the Bank of $2,740,000.00 in reduction of Demson's debt to it. 94 On 22 October 1993 the sum of $1,042,701.80 was paid to the Bank by Mary in discharge of the indebtedness of the Plaintiffs to the Bank whereupon all remaining mortgages were discharged and the Plaintiffs were released from the guarantees. 95 Lot 3 was sold in about June 1994. The representations 96 The Plaintiffs rely upon conduct constituted by the aggregation of representations said to have been made by Mr Aspinall to Tony in about July 1988, November/December 1988, and mid-1989, which were misleading and deceptive and intended to be, and were, relayed by Tony to Allan and Mary. 97 In deciding the representation issues I had regard to the principles stated in Watson v Foxman (1995) 49 NSWLR 315 at 318-319 per McLelland CJ in Eq: "Where, in civil proceedings, a party alleges that the conduct of another was misleading or deceptive, or likely to mislead or deceive (which I will compendiously describe as "misleading") within the meaning of s 52 of the Trade Practices Act 1974 (Cth) (or s 42 of the Fair Trading Act ), it is ordinarily necessary for that party to prove to the reasonable satisfaction of the court: (1) what the alleged conduct was; and (2) circumstances which rendered the conduct misleading. Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience. Each element of the cause of action must be proved to the reasonable satisfaction of the court, which means that the court "must feel an actual persuasion of its occurrence or existence". Such satisfaction is "not ...attained or established independently of the nature and consequence of the fact or facts to be proved" including the "seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding": Helton v Allen (1940) 63 CLR 691 at 712. Considerations of the above kinds can pose serious difficulties of proof for a party relying upon spoken words as the foundation of a causes of action based on s 52 of the Trade Practices Act 1974 (Cth) (or s 42 of the Fair Trading Act ), in the absence of some reliable contemporaneous record or other satisfactory corroboration. ... What I have said above as to the cause of action based on s 52 of the Trade Practices Act 1974 (Cth) (or s 42 of the Fair Trading Act ) is equally applicable, mutatis mutandis, to the causes of action based on contract and on equitable estoppel (with the added requirements, in the case of contract that any consensus reached was capable of forming a binding contract and was intended by the parties to be legally binding, and in the case of equitable estoppel that any representation alleged was clear and unequivocal and was relied on to the substantial detriment of the representee)". Tony as a witness 98 Thus it is necessary for the Plaintiffs to prove to the reasonable satisfaction of the court in the sense explained that Mr Aspinall spoke the words alleged. They rely upon Tony's evidence to do so. It is appropriate at this point to state my findings about him as a witness. 99 In evaluating the extent to which reliance may be placed on Tony's evidence generally, and in particular of conversations, meetings and events, it is important to keep in mind that most of the relevant events were said to have taken place between June 1988 and March 1990. Tony kept no contemporaneous diary note or other record. His oral evidence was given in court during November and December 2003. 100 The versions of the conversations, meetings and events relied upon by the Plaintiffs first appear in Tony's affidavit sworn 19 June 1998. 101 Having regard to these considerations alone, absent satisfactory corroboration, the Plaintiffs were confronted with significant difficulties of proof of the representations sued upon. In any event, during the course of the hearing I came to the view that Tony was a witness upon whose evidence no reliance should be placed where it was contested unless it was corroborated by, or is consistent with, independent and accepted documentary or other evidence. 102 It is well-settled that a trial judge is entitled to believe part of the evidence given by a witness and to reject the rest. (A recent discussion of the cases is in Cubillo v Commonwealth of Australia (2000) 174 ALR 97 paras 118-123, O'Loughlin J). There is an important segment of Tony's evidence which was unchallenged and which I do accept. This was of his relationship with Mary and Allan to the effect that he always explained to them the nature and effect of mortgages signed by them to ensure that they understood the transactions in which they were involved. I elaborate on this evidence later in these reasons. 103 I observed him under cross-examination for many days. On occasions he became visibly upset, sometimes prevaricated, and many times endeavoured to avoid answering a question directly when he perceived that to do so might be harmful to his case. There were occasions on which he demonstrated confusion, lack of memory, or invention, or all of these, which generated doubt as to the reliability of his evidence as to detail. Examples include the concession that his memory is selective and mixed up as to dates (T p 201; p 637); the evidence as to reconciliation of para 42 of his affidavit of 19 June 1988 with para 15 of his affidavit of 26 September 2003 concerning the purchase of units by Vitlern (T p 366); and his evidence as to the contents of paras 60-64 of his affidavit sworn 19 June 1988 (T pp 631-648). My conclusion is that in the many intervening years since the claims were first made he has reconstructed events so as to accord with the several grounds for the claims he has decided to make. 104 Furthermore, with regard to a number of issues Tony gave and vigorously adhered to evidence which was patently false and/or implausible, or simply improbable, which generated grave doubts about the truthfulness of his evidence generally. 105 An example concerned the sale of Jedda Road. He denied that he had concealed from his wife the sale of Jedda Road and that the sale was in breach of his undertaking to the Family Court given 9 May 1988. His evidence was to the effect that she knew of, and consented to, the sale when it took place. This evidence was contradicted by documents which demonstrate that he sold Jedda Road in deceit of his wife and in breach of the undertaking. The documents include the file note of his conversation with his solicitor dated 4 July 1988, the letters from his wife's solicitors to his solicitors of 13 January 1989 and to NAB and the ANZ Bank of 24 January 1989, his wife's application in the Family Court for an interim junction filed 14 February 1989, her affidavit in support sworn 6 February 1989 and Terms of Settlement dated 23 February 1989. All support the finding, which I make, that she remained ignorant of the sale until mid-January 1989. I am satisfied that his evidence on this topic was false. His adherence to it in the teeth of these documents (which were put to him) served to undermine any standing he might have had as a credible and reliable witness on matters about which there was a contest. 106 Other examples were his evidence as to the events of 18 August and 12 September 1989 and as to the extent of his involvement in the operation of Demson prior to January 1990. My analysis of this evidence and resultant findings which lead to its rejection appear later in these reasons. Mr Aspinall as a witness 107 With respect to Mr Aspinall, I find that he was a truthful witness who gave his evidence honestly, to the extent that his recollection and reference to contemporaneous documents enabled him. 108 Unsurprisingly, he frankly acknowledged his lack of recall of conversations and events without reference to a contemporaneous record. However he was firm and unequivocal in denying that he made the statements which were relied upon as conveying the representations. He said, as was the fact, that it was not his function to discuss and express views about the merits of an investment, and that he was not, and was not qualified to be, a financial consultant. He explained that his duties were to take and handle loan applications for the Bank. He was unshaken in cross-examination. It was not probable that he would have made the statements as claimed. The July 1988 representations 109 The Plaintiffs allege that representations were made to Tony by Mr Aspinall at meetings on a day in about July 1988 one of which was at lunch at the Al-Fontana Restaurant, Liverpool, attended by Stephen. It is also alleged that it was Mr Aspinall's intention and purpose that Tony should relay the representations to Allan and Mary. 110 Evaluation of the evidence of Tony and Mr Aspinall as to the representations and surrounding circumstances requires an understanding of relevant events which led to the meeting. 111 In his affidavit of 19 June 1998, Tony said that Stephen introduced him to Mr Aspinall in about July 1988 and they then inspected the property at John Street, which Stephen proposed for development. Tony said that Mr Aspinall was laudatory of Stephen's success in business, encouraged him to invest $1,000,000.00 in Stephen's development project, guaranteed that he would at least double the 13% return from his purchaser, and assured him there was no risk in doing so. 112 Shortly thereafter he met Stephen and Mr Aspinall for lunch at the Al-Fontana Restaurant, Liverpool. Tony said that the conversation was to the following effect (affidavit 19 June 1998, para 23): "I thereafter attended a restaurant in Liverpool called the Al-Fontana. When I arrived Stephen and Aspinall had already been seated. We had a conversation to the following effect: Aspinall said: "Tony, you and the family don't have to do a thing, you don't even have to fill out a form. Because of Stephen's history the bank's 100% behind him. If you agree and help Steve with the deposit he's off and going and the loan is approved. Honestly he is the best operator I know. He knows the right people as I told you, I know the area personally. I'll guarantee that you'll more than double the 13%." Stephen said: "Tony I can easily run the air conditioners and look after a development. I'll be putting my $100,000.00 which I made from the last development with Carriotte. I am also selling my business Speedwise Travel and will hopefully put another $50,000.00 from those proceeds in as well. It's no different from what I've been doing with Frank. I'll get a licenced builder who'll keep an eye on things and I'll organise the contractors. Then I only need to do daily inspections. It's easy money. You don't need to do a thing. Do as you planned, retire, look after your children, do as you wish. If I have use of the $1,000,000.00 I'll make a fortune. Isn't that right Darryll?" Aspinall said: "What Steve says is right Tony. Steve's proven that he can do it; there's no risk. All you have to do is let it happen. Give your brother the benefit of the money. If you don't you must realise that you'll only be letting someone you don't even know have the use of the money. Give Steve that opportunity and I assure you he will give you a much bigger return." I said: "How long does something like this take to complete?" Stephen said: "Six to nine months. You can start taking your money back after three to four months as we can sell off the plan, that's right isn't it Darryll?" Aspinall said: "Yes that's right. Because of the position you are in I can arrange for you to start receiving funds immediately, but the longer you leave it the higher the return you will receive." I said: "OK I'll tell my parents and Allan of your assurances and what the bank has said. It might change their minds." Aspinall said: "Tony, should you all agree you only need to deposit the Jedda Road monies in the Commonwealth Bank's CBFC at Liverpool. It's on the Ground Floor at the Commonwealth Bank. It makes it easier for things to happen. You won't be required to do another thing." I said: "I understand what you are saying but I still need to discuss it with my family. Should we agree, I will have to ask the buyer to release us from financing him." Aspinall said: "That shouldn't be any problem Tony. There's similar finance rates around at the moment." I said: "If we go with the development, I still wish to clear up my mortgage with the National Australia Bank. It's the only other debt we have left. It falls due in six (6) months." Aspinall said: "Is it a home loan?" I said: "Yes on $200,000.00 we're paying it off at $3,550.00 per month." Aspinall said: "Tony, that's an excellent rate, don't pay it out. It's only six (6) months away. Let's get the development going. The home loan rate you're getting is much better than a development loan. You'll be throwing money away and that's what it is all about. Leave it until funds come in from the development and then we will clean it up." After this meeting and in reliance on Aspinall's assurances I made up my mind to become involved in the project discussed with Stephen and Aspinall instead of providing vendor finance to Combell if the family also agreed. 113 Tony was referred in cross-examination to his letter of 6 January 1990 to the bookkeeper, Bert, which outlined matters for settlement between him and Stephen. In explanation of an entry in respect of the monies advanced by ABI to Rutisa which reads "Return guaranteed 30%" he said: T p 303-304: "Q. Who guaranteed you a 30 per cent return? A. I was guaranteed minimum 26 and a maximum of 50, so I took 30 as being a good compromise. Q. Stopping you there, who was it who guaranteed you a range of return between 26 per cent and 50 per cent? A. Nobody. I was only officially guaranteed 26 per cent, but they said I could make as much as 50, so I put an extra 4 per cent on. Q. Stopping you there, are you saying when you used the word "they", if you can take the word "they" out of the equation for the moment, who precisely was it who told you that you would get a return of somewhere between 26 per cent and 50 per cent? A. Darryl Aspinall. Q. He told you that, did he? A. Exactly". And at T p 304, line 41: "Q. I want to suggest to you, Mr Bakarich, that what you just said a moment or two ago is a complete fabrication. A. No, it's not. Q. Nobody, including your own brother, I suggest, as you sit there on your oath, ever said to you at any time that you'd get a return of somewhere between 26 per cent and 50 per cent, that you've just made that up. A. I was guaranteed 26 per cent unconditionally by both. Q. I'm taking you up on the evidence you gave a few moments ago. It is false to suggest, isn't it, that anybody, including your own brother, ever promised you a return of a range of 26 per cent to 50 per cent? A. No-one promised me any more than 26 per cent. Q. It's false to suggest it, isn't it? A. Sorry? Q. It is false to suggest that anyone ever offered you a range of return of 26 per cent to 50 per cent? A. They guaranteed me 26 per cent and they said I could make as much -- Q. Mr Bakarich -- A. They said here that Steve made as much as 100 per cent. Q. I'll ask you the question again. If you don't understand it, I'll repeat it. It would be false to suggest, wouldn't it, that anyone - your brother, Mr Aspinall Mr Newton or anyone - at any time ever made any promise to you that a rate of return would be somewhere between 26 and 50 per cent? A. It is false, yes. Q. False? A. Yes. Q. Why did you say it a few minutes ago? A. I said because I allowed 4 per cent as consideration". And at T p 306, line 3: "Q. It is quite false to suggest you were guaranteed a range of 26 to 50, wasn't it? A. I thought there was 50 somewhere. Q. It's quite false to suggest it, isn't it? A. Sorry? Q. It is quite false to have suggested, as you did, that anyone ever offered you 26 per cent to 50 per cent? A. Yes, it is in that sense. Q. In any sense? A. Sorry? Q. In any sense it is false? A. To promise it, correct". 114 The Bank denies that any such statements or representations were made. 115 Mr Aspinall's evidence was that he remembered going to the John Street site with Tony and Stephen on an occasion in mid-1988. He accepted the likelihood that there were conversations with Tony and Stephen, and of lunches and other meetings, but had no recollection of the details. In cross-examination he denied that he said to Tony that by making his money available for the acquisition of John Street he could do better than leaving it out on interest at 13%. He said that he was not a financial consultant, and that his function concerned loan applications but not the giving of financial advice. He rejected the suggestion that he said Tony would get 26%. 116 The transcript (pp 1166–1173) records his clear denials of the statements alleged to have been made by him at the meeting prior to the lunch, and of those alleged to have been made at the lunch time meeting. He accepted the possibility that he suggested Tony might deposit the proceeds of sale of Jedda Road with CBFC, Liverpool. Finding 117 I have already held that Tony's evidence should not be accepted unless corroborated. The passages quoted in para 111 are examples of its unreliability, the more so when it is read with para (6) of his letter to Mr Macri of 20 February 1990 (para 67). I accept Mr Aspinall's denials in preference to Tony's assertions and find that he did not say the words attributed to him, that he was telling the truth, and Tony was not. 118 Also relevant to this conclusion is the lateness of any allegation of the making of these, or any other, misleading or deceptive misrepresentations. As indicated in the chronology, there were many obvious opportunities between January 1990 and October 1992 for Tony to complain or protest to the Bank had he believed he had been misled by anything Mr Aspinall had represented to him prior to his investment in Rutisa or involvement in Demson. As the unchallenged evidence of Mr Watson shows (affidavit 21 October 2003, paras 49, 50) he made no complaint. 119 The correspondence in January – February 1990 as to a commercial settlement with Stephen clearly attributes responsibility for his involvement in Rutisa to Stephen's representations as to guaranteed returns. (See, eg, his letter to Stephen dated 6 January 1990 (para 63); his letter to Mr Macri dated about 20 February 1990 (para 66); his letter to the Bank dated 15 June 1990 (para 69); his statements at the meeting with Bank officers on 8 May 1992 (paras 84, 85)). 120 The earliest evidence of complaint concerning the Bank's conduct was the (draft) letter of October 1992 (para 87), alleging failure to comply with the conditions in the letter of 19 September 1989. A Statement of Claim was filed on 24 November 1992, prior to which no complaint or protest had been made to the Bank by or on behalf of any of the Plaintiffs of the several sets of representations or of the conduct alleged therein. 121 Tony impressed me as a forthright person who would not hesitate to protest in blunt terms to the Bank, and to its officers with whom he dealt, if he truly thought he had been misled by them into involvement in transactions adverse to, or likely to jeopardise, his commercial interests or those of his mother or brother. That no such protest was made until so late is powerful support for the finding, which I make, that the alleged representations were never made. The effect of the documents to which I have referred contradicts the representation case he seeks to make and supports this finding. 122 The evidence satisfies me that no timely complaint was made by Tony that the financial difficulties caused to himself, Allan, Mary and their companies were attributable to Mr Aspinall's representations because he knew it was untrue. I do not doubt that he knew of the defective quality of the imported air conditioning units and of the cancellation of orders by retailers with resultant excess stock and loss of revenue as described in the letters of 4 January and 16 January 1990 from Demson to Acma (paras 62, 64). In short, Tony knew that, in truth, the source of the difficulties was the defective and unacceptable product and not the conduct of Mr Aspinall. 123 The evidence also establishes that the explanation for Tony's involvement in Rutisa is that in his judgment it was commercially advantageous for ABI to invest part of the proceeds from the sale of Jedda Road in it. At the time ABI was in a desperate financial situation and Tony was in dispute with his wife. Stephen put a proposal to him in mid-June 1988 which Tony, as an astute and experienced property developer and businessman, regarded as attractive and accepted. He did not prove that he was induced by, or relied upon, anything said by Mr Aspinall to make that investment. 124 For the above reasons Tony's evidence as to the statements attributed by him to Mr Aspinall in support of the July 1988 representations must be rejected. Accordingly I find that the alleged representations were not made. The November/December 1988 representations 125 The Plaintiffs allege that on an occasion in about November or December 1988 Tony, Stephen and Mr Aspinall met at the Al-Fontana restaurant. During the conversation Stephen spoke of importing air conditioners. It is alleged that Mr Aspinall assured Tony that the Rutisa development would be profitable despite interruptions from rain, and he made representations to the effect that Stephen had been successful in the air conditioning business, that the Bank had approved finance for Stephen to purchase imported air conditioners on terms that all air conditioners had to be pre-sold before the Bank would make such funds available. Tony said that matters of detail such as figures as to profitability, expected margins, or numbers of air conditioners were not discussed (T p 523). 126 In support of the representations Tony alleged (affidavit 19 June 1998 para 42) that Mr Aspinall said inter alia: "We only need the use of the existing security from Rutisa. It's completely safe…All we need is the security of the units which Rutisa are (sic) holding … If you agree Steve's presentation to the bank has already been approved, you don't need to do another thing". 127 Mr Aspinall accepted the possibility that there may have been a lunch during this period when the general concept of provision of assistance by the Bank to Demson was discussed. He denies making the statements or representations as claimed by Tony. He said that no application was made in respect of Demson until 14 August 1989, the preparation of which had been preceded by discussions over several weeks between himself and Mr Newton and Tony and Stephen. He stated that the presentation by Stephen had not happened by this time. Finding 128 The Plaintiffs submitted that statements in the Bank's internal documents support the likelihood that these representations and the mid-1989 representations were made. Examples referred to included Mr Aspinall's recommendation on 17 November 1988 to Zone of the application for an advance to Rutisa; Mr Newton's recommendation on 3 July 1989 to Zone of the application for an advance to Stephen, Rosanna, Allan, Tony and ABI to finance the purchase of Lot 34A; Mr Newton's recommendation on 14 August 1989 to Zone of the Demson application, the relevant passages of which are set out in paras 46-50 above. 129 The statements of Mr Aspinall and Mr Newton in the documents were said to demonstrate, inter alia, their confidence in Stephen's commercial skills and ventures, and that the development of a relationship between Demson and the Bank would provide lucrative benefits for the Bank, and open up a new line of business for the branch. The effect of the submission was that the documents evidenced their enthusiastic support for the Demson venture and a tendency to understate or overlook the commercial risks associated with it and put the most favourable "spin" on them in recommendations to their superiors. Thus it was probable that Mr Aspinall (consistent with "his gregarious personality with convivial inclinations") made representations to Tony laudatory of Stephen and his ventures, and encouraging involvement in Demson as risk free. 130 It is unnecessary to reproduce the text of the documents referred to in the submissions. In my opinion when the several passages relied upon are read in context, and the documents are read as a whole, they provide neither any basis for the submission nor any assistance in deciding whether the alleged representations were made. The submission must be rejected. 131 Consistent with Mr Aspinall's evidence I find that it was not until the application of 3 July 1989 for financial accommodation for Lot 34A was prepared by Mr Newton that an application for documentary letters of credit for Demson for the importation of air conditioners was foreshadowed. It included the following information: "This company has been formed for the importation of Air conditioners, white goods, T.V's etc from Singapore NSW. The first shipment of Air conditioners, worth approximately AUD$830,000 (which has already been pre sold) will arrive on the 1 September 1989. Irrevocable orders are in hand for the sale of $5.8M worth of air conditioners before March 1990 which will return the company gross some (sic) $1.3M and net them $600,000. With imports being paid by letters of credit this should generate good earnings for the CBA. Mrs Sherry Pye from the Zone has already discussed the proposition with the Directors and we are to consider this proposal more extensively and a formal application for the issue of documentary letters of credit is to be submitted in due course". 132 The first meeting between Bank officers and Stephen at which prospects of obtaining financial assistance for Demson were discussed was on 5 July 1989 as Mr Hately's record shows (TB 343). There was a meeting on 31 July 1989 between Stephen and Bank officers following which information to support an application was sent to the branch. It was not until 14 August 1989 that the branch submitted to Zone its recommendation of Demson's application. 133 I accept without reservation the denials of Mr Aspinall. I reject Tony's evidence of the conversation as untrue. It is negated by the documents and is inherently implausible. The documentary evidence to which I have referred shows that at the time of the conversation no presentation about air conditioners by Stephen had been made to, or had been approved by, the Bank and nothing supports the likelihood that Mr Aspinall would falsely represent to Tony that these things had happened. Accordingly, I find that the November/December 1988 representations were an invention, and were not made. The mid-1989 representations 134 Tony said that on an occasion in May or June 1989 he had lunch with Stephen and Mr Aspinall. In his affidavit of 19 June 1998, para 60, he described a lunchtime meeting between himself, Stephen and Mr Aspinall at the Gardina Court Restaurant, Liverpool, during which Mr Aspinall made representations concerning Demson. He stated that the meeting took place "…in around May 1989". In cross-examination he initially corrected this to "…in around May/June 1989" and later said that he wasn't exactly sure of the date but that "no way" could it have been as late as August (T p 539). 135 The conversation at the meeting was said by Tony to have proceeded as follows: "Aspinall said: "Tony we're obviously talking about a lot more airconditioning units than originally and its stretching the security a bit". Aspinall said: "All the airconditioning units referred to in the report have been sold and have reputable buyers for them". Steve said: "That's right. Tony they have all been pre-sold". Aspinall said: "To let it happen you only need to ask your mother to consent to a mortgage over Lot 3 Cowpasture Road. You can tell her that I assure her there is no risk. I personally have been looking into the overall project for some time now. The only orders that the bank will be assisting are orders in hand with Acma's three months interest free terms for products already sold. This run of units is being bought through Demson Pty Limited and they will receive payment before the Acma Bills were to be drawn on by the bank. Demson will show a gross profit by Christmas of well over $900,000.00". Stephen said: "The net profit will be much greater as the running expenses are already those existing with Rutisa". I said: "I really don't want to involve mum. She has been through enough with Dad dying. Anyhow, Probate is sometime away yet. We have asked our solicitors to institute proceedings to vary Dad's will. Steve got his five acres and it was Dad's wish that Allan and I also get five acres. Our accountants, solicitors and mum agree that we will ask the Court to have the will changed to reflect Dad's wishes. We have been told that it will take several months to finalise". Aspinall said: "Tony, nearly one million dollars clear by Christmas with no risk. You would be foolish to miss such an opportunity. Put pressure on your solicitor. They can do it much quicker if they have to". I said: "Mr Aspinall are you saying that a line of credit will only be issued by the bank for airconditioners which have already been sold? Are you assuring me that the bank is going to keep track of all the transactions and make sure they are in line with this schedule?" Aspinall said: "Definitely Tony, I promise. I will personally see to it. I have checked these figures myself in this presentation at length and no risks exist. I will personally see to it"". 136 In chief Tony said that Mr Aspinall showed him a spreadsheet of air conditioner sales and referred to a gross profit of about $900,000.00 and to a net profit of $600,000.00. Across the top of the spreadsheet were the words "Commonwealth Bank". In cross-examination he was shown the document at TB 399–400. He stated that it was the one which Mr Aspinall had shown him at the meeting and to which he had referred in his evidence. He said that Mr Aspinall had told him it had been prepared by the Bank. When challenged, he denied that his evidence was a fabrication. 137 This document is a spreadsheet across the top of which are the words "Commonwealth Bank of Australia", beneath which are the words "Cash Flow Budget For The Nine Months To 31.3.90". 138 Mr Aspinall said that he recalled having lunch with Stephen and Tony at the restaurant and saying "Tony we're obviously talking about a lot more air conditioning units than originally and it's stretching the security a bit". He denied the rest of the alleged conversation and said that he did not present any document assessing the air conditioning business. He was not shaken in cross-examination. I accept his evidence. Finding 139 The documents show that the spreadsheet was prepared, not by the Bank, but by Demson's accountants, Galluzzo Bros & Partners, and sent by them to the branch on 3 August 1989. It is clear that this happened following the meeting on 31 July 1989 between Stephen, Mr Aspinall and members of the Bank's trade lending group the memorandum of which (TB 386–387) concludes as follows: "Discussions concluded on the basis that Mr Bakarich would arrange preparations of cash flows and ordering schedules which would form the basis of a formal proposal for an appropriate level of facilities for Demson." 140 Another matter reinforces my conclusion. Mr Aspinall is alleged to have said "The only orders that the bank will be assessing are orders in hand with Acma's three months interest free terms for products already sold", and that he promised that a line of credit would only be issued by the Bank for air conditioners which had already been sold, and that the Bank would keep track of all the transactions to ensure that they were in line with the schedule. 141 In effect it is alleged that Mr Aspinall said at this time that the Bank had decided the conditions subject to which the facility would be provided, compliance with which he would personally ensure. The documents show, as I find for reasons later given, that approval was not given until 18 August 1989, the conditions for which are recorded in the memoranda dated 22 and 28 August 1989. 142 The documentary evidence to which I have referred proves that at the time of the conversation, and prior to August 1989, the spreadsheet identified by Tony did not exist and, in any event, was not prepared by the Bank. It also proves that at that time no application for financial assistance had been made to, or approved by, the Bank. It supports Mr Aspinall's evidence which I have said I accept. 143 I reject Tony's evidence of the conversation as untrue. Accordingly, I find that the mid-1989 representations were not made. Conclusion 144 I have found that Mr Aspinall did not make the representations which were alleged by the Plaintiffs as the basis of the claim for relief under the Trade Practices Act 1974 (Cth), and, accordingly, I reject all their claims that the Bank's conduct was misleading or deceptive in breach of s 52 of that Act. The claim that the security transactions were unconscionable or unjust 145 The claim that the security transactions be set aside requires consideration of the circumstances at the time the guarantees and mortgages were signed, as well as the attributes and capacity of Tony, Allan and Mary. 146 There is a dispute as to the dates on which the securities were signed by the plaintiffs. The Bank contends that the documents were signed on the date they bear, namely 18 August 1989, excepting the mortgage over Lot 3 which was signed by Mary on 12 September 1989. Tony denies that the documents were signed then. He maintains that all were signed on an occasion during the week of 18 September 1989 at a meeting with Mr Newton at the Bank's premises. The dates of signing are relevant to the issues and it is convenient to resolve the dispute about them at this point. 147 As there is no diary note or record of the occasions on which the documents were signed it is necessary to refer to background events in deciding the dates of them. The date of the guarantees 148 On 10 July 1989 a documentary letter of credit was established for Demson in favour of Acma for SGD$73,500.00 (A$52,398.94) for the purchase of air conditioners. 149 On 17 July 1989 (TB 367A) a request for the preparation of security documents in respect of future advances to Demson was sent from the branch to Branch Securities Office, Sydney. New securities to be obtained and prepared were an equitable mortgage from Demson, and unlimited guarantees from Rutisa, ABI, Vitlern and Demson which were to be fully interlocking. 150 With the memorandum dated 24 July 1989 Branch Securities sent to the branch the documents prepared as requested. Also sent was a shareholder resolution and section 230(8) Certificates to be obtained from each guarantor/mortgagor company. 151 Between 4 and 15 August 1989 Acma was shipping air conditioners to Demson and had issued invoices for them for the total sum of SGD$466,427.90. By 14 August 1989 when Mr Newton prepared the application for the trade lending facility for consideration by Zone, Demson's requirement for financial accommodation was urgent. 152 It appears that the application was received by fax by Zone on 17 August 1989. 153 A draft memorandum dated 22 August 1989 by Mr Edwards of Zone records a telephone conversation in which he informed Mr Newton of the approval of a documentary credit facility of $2,650,000.00 on certain conditions. The memorandum dated 28 August 1989 records, with some variation, the same conversation as follows: "We refer to our telephone conversation with Michael Newton and confirm a D/C-B/L/S (Trade Lending) facility of $2,650,000 taking total facilities to $4,188,140 has been approved on the following basis: · D/C's will only be established (within the maximum level approved) against firm orders in hand (that is, where you have sighted (sic) evidence, and not for orders on speculation). · For Australian wholesalers/retailers a satisfactory bank opinion being obtained to confirm they have the financial ability to meet the commitment. · Surplus funds from sale of townhouses (ie above our current "on completion" valuation) being retained on term deposit (or similar) as security. · Completely interlocking security position". 154 TB 544 C is the document headed "Action Sheet (New Approval) referable to the Demson facility". It records the date of approval as 18 August 1989. It includes a check list which refers to the documents sent to the branch on 24 July 1989. Mr Newton said it was the practice for such a document to be prepared after approval had been given for a facility, whether verbal or written, and its function was to provide a list of matters to be attended to in the course of documenting an approved loan. 155 With regard to the security documents, Mr Newton said in cross-examination that they were sent to him once they were ready for signature whereupon he spoke to Stephen to arrange for those concerned to call at the Bank to sign them as soon as possible. He saw the requirement to do so as urgent because he understood Stephen then needed documentary letters of credit. The urgency was associated with the fact that the Bank was actually lending money pursuant to a proposed facility before the securities had been signed. 156 Mr Newton, having reviewed the documents, said that he saw Tony, Allan and Mary at the branch on or about 18 August 1989 for the purpose of signing the security documents with the exception of the Lot 3 mortgage which had not been prepared. He could not recollect whether Stephen and Rosanna were there but thought they were. 157 On 21 August 1989 Demson applied for a documentary credit in favour of Acma for SGD$845,770.00. Mr Newton, having obtained Zone's approval, requested that it be issued urgently, and the Bank issued it the same day. 158 Tony's evidence, summarised, was that the documents were signed at the branch in the presence of Mr Newton on an occasion in the week of 18 September 1989. He emphatically denied that the documents were explained to him, Allan and Mary, and signed, on 18 August 1989. He refused to accept that he could be wrong or that either Allan or Mary would have gone to the Bank without him. He asserted the guarantees had been backdated by the Bank. Although his evidence is difficult to follow his position seemed to be that he would not have signed, and would not have persuaded his mother to sign, without first sighting written confirmation by the Bank that funds would be advanced to Demson only for confirmed orders. He fixes the occasion of the signing of the guarantees and mortgage as the day when he saw the letter of 19 September 1989 (para 256) which contained the confirmation he required. Finding 159 Mr Newton's evidence was consistent with that of the documents. I found him to be a truthful witness and I accept his evidence. He responded with care to the questions put to him to the extent his recollection permitted. He was emphatic and certain in denying Tony's version of conversations. He was firm that the documents were dated the day they were signed. Where his and Tony's evidence conflict I prefer his evidence. 160 The weight of the documentary evidence coupled with that of Mr Newton leaves me in no doubt that the securities were signed on 18 August 1989 on the occasion as described by Mr Newton, and I so find. It also supports the inference that had the securities not been provided beforehand the additional facility applied for on 21 August 1989 would not have been issued. It is also clear that there then remained outstanding the mortgage over Lot 3, which property was mortgaged to NAB. 161 In summary, therefore, I find that the sequence of events was that the approval recorded in the memoranda of 22 and 28 August 1989 was given on 18 August 1989 after which the action sheet was prepared. The documents were provided to Mr Newton who then spoke to Stephen and soon thereafter the meeting took place at which the documents were signed. 162 It follows that I reject Tony's evidence as to the occasion of the signing of the documents. It is unworthy of credence and is patently implausible, as the transcript of his cross-examination shows (e.g. T pp 546–554; 572; 668–676). The evidence outlined below as to the circumstances in which Lot 3 was transferred to Mary and the mortgage over it was signed, reinforces this criticism. The date of the mortgage 163 In respect of Lot 3 Mr Newton's diary note made about 1 September 1989 recorded that NAB refused to release Lot 3 and that discussions were under way. Also noted was the recommendation that approval of a new letter of credit be conditional upon the resolution of the matter with NAB and that all security be in place. 164 On 1 September 1989 the equitable mortgage from Demson was lodged for registration as a charge with the National Companies and Securities Commission. 165 On 4 September 1989 Tony, as executor of his late father's estate, requested his solicitor, Mr Banfield, to attend to the registration of a transmission application for Lot 3 as soon as possible. The next day he spoke to Mr Banfield whose note makes reference to a letter of credit, that the will was being contested, and that Tony wanted an early court hearing. 166 Mr Irwin's memorandum of 6 September 1989 (TB 600) records the following: "Mr Bakarich has now advised that following a reschedule of production by ACMA (Singapore supplier), of which he was unaware of before last weekend, shipments will now be leaving Singapore 10/9, 19/9 and 26/9 and would be in total worth approximately M$1. With our security incomplete, he has been advised that we are not prepared to commit the Bank for these shipments and he is now to have urgent discussions with the NAB in an effort to comply with our requirements". 167 I am satisfied that Tony was the Mr Bakarich referred to, he being the person whose activities in the ensuing days led to the transfer of Lot 3 to Mary and the provision by her of the mortgage to the Bank. This activity is evident from the following history. 168 Mr Banfield's file note of 6 September 1989 records Tony's instructions to transfer the property to him as executor, that he needed a letter of credit for $1,500,000.00, and that Mr Aspinall be called as a matter of urgency. 169 On 6 September 1989, obviously in accordance with those instructions, Mr Banfield wrote to Mr Aspinall. He advised that it was being arranged that Tony should become the registered proprietor of Lot 3 as the executor of his late father's estate. He also advised that agreement had been reached between Mary, Stephen, Allan, and Tony to seek a court order for the transfer of the property from them to be held jointly. It was suggested that if the Bank was to take a mortgage over the property it should obtain the consent of the beneficiaries. 170 On 8 September 1989 NAB discharged its mortgage over Lot 3. As noted in Mr Newton's memorandum to Zone of the same date, NAB released the deeds to the property, which completed the Bank's security requirements. However, Mr Newton sought confirmation as to proceeding with a mortgage from the executor. He noted that the Bank had provided facilities to Demson totalling $893,741.00 being an overdraft limit of $275,000.00 and letters of credit totalling $623,741.00, and that the security over Lot 3 was outstanding. 171 On 11 September 1989, at 9.05am, Mr Newton informed Mr Banfield of the Bank's preference to deal with the property in the name of the beneficiary named in the will, Mary. At 9.20am Tony gave instructions to prepare a transmission application to Mary. At 12.10pm Tony arranged to come to Mr Banfield's office with Mary to sign the transmission application, to take it and the original probate to the Stamp Duties Office for stamping, and then to return the documents to Mr Newton. That day the transmission application was signed by Mary in Mr Banfield's presence. The document records the payment of $10.00 stamp duty on that day. 172 Ms Rosemarie Garland gave evidence that in 1989 she was employed by Macri Stathis & Co, solicitors, as a paralegal whose duties included explaining mortgages and guarantees and witnessing signatures on them. She said that the mortgage was signed by Mary in her presence at the offices of these solicitors, at 260 Macquarie Street, Liverpool and that she witnessed Mary sign a form of acknowledgement. She said that on this occasion, in accordance with her usual practice, she gave an explanation to Mary of the effect of the mortgage, the sufficiency of which is considered later in these reasons. She could not recollect whether Mary attended alone, or with Tony or Stephen, and has no independent recollection of her. I found her to be a truthful witness whose evidence I accept entirely. 173 Tony asserted that Mary definitely did not attend Mr Macri's office to sign the mortgage on 12 September 1989. He maintained, as noted above, that he witnessed his mother sign the document in the week of 18 September 1989 in the presence of Allan and Mr Newton. His immediate response to the evidence that the guarantee was signed and witnessed as described by Ms Garland was to assert that it was a forgery. The effect of his evidence on this topic (T pp 150-156) is that the document falsely represented that on 12 September 1989 Ms Garland witnessed Mary's signature and also signed as the witness. His theory was that the document had been signed by Mary in front of Mr Newton and Mr Newton later arranged for Ms Garland to sign it as the witness. He said he could not accept that his mother would have signed the mortgage without his knowledge or in front of Ms Garland whom she did not know. Finding 174 Mr Newton's evidence was that he dealt with Tony in relation to the mortgage over Lot 3 and that the documents were taken away from the Bank and returned once signed. He denies Tony's version of the circumstances in which this mortgage and the other securities were signed. He said that he wrote the date 12 September 1989 on the mortgage and on the form of acknowledgment. He was firm in his assertion that he did so on the day the documents came back to him. I accept his evidence. 175 It is apparent from what I have already said that Tony's evidence as to the signing by Mary of the mortgage over Lot 3 must be rejected. The whole of the evidence contradicts his account and compels the finding that the mortgage was signed by Mary on 12 September 1989. It establishes that on 6 September 1989 Tony was advised that as the required security was incomplete funding for imminent shipments would not be forthcoming. This explains, as the incontrovertible evidence shows, Tony's direct involvement (which he denied) in the several steps necessary to be taken as a matter of urgency to enable Mary to become the registered proprietor of Lot 3, and to provide the mortgage over it to the Bank. His persistence with the case that the securities were provided on an occasion during the week of 18 September 1989 as described by him was, in the circumstances, perverse, as was his assertion of his belief that the document witnessed by Ms Garland was a forgery. His evidence on this topic was, in my opinion, the product of fantasy and must be rejected. 176 For the above reasons I find that the guarantees were signed on 18 August 1989 and the mortgage was signed on 12 September 1989. The challenge to the securities of 18 August 1989 and 12 September 1989 177 It is convenient to deal first with the securities signed on 18 August, and then with the mortgage signed on 12 September 1989. 178 The securities signed on 18 August 1989 under challenge are: (i) the unlimited guarantee from Stephen, Rosanna, Allan and Tony signed by each of them in respect of Demson as the debtor for all moneys then or thereafter owing or payable by it to the Bank. (ii) the unlimited guarantee from ABI, Vitlern, Rutisa and Demson in respect of all moneys, then or thereafter owing or payable by any of them to the Bank. Tony and Allan signed for ABI, Stephen and Rosanna for Rutisa, Stephen and Tony for Demson, and Allan and Mary for Vitlern. 179 The circumstances in which the securities were signed were described by Mr Newton. He deposed that his normal practice for third party securities was to inform a guarantor/mortgagor that by signing the documents he/she was securing the company's debts to the Bank, and to ask if that was understood. If informed of a lack of understanding, or if he doubted whether the obligations were properly understood, he would advise consultation with a solicitor. Where documents were signed at the Bank in his presence he would explain that they were to secure the loan to the third party. He would invite questions and try to answer them and, if unable to, would advise that independent legal advice be obtained. 180 He said that, consistent with his usual practice, he spoke the following: "Converting my usual practice to the circumstances of this case I say that the substance of the words spoken by me were to the following effect:- Newton: "The Bank has approved a loan of $2,65 million to help Demson import airconditioners with the debt to be cleared from the sale of the airconditioners. Security for the loan will be a registered equitable mortgage over Demson which is a charge over the company assets. There is to be a guarantee by each of A Bakarich Industries, Vitlern, Rutisa and Demson supporting the company's loans so that all these securities are interlocking. We will have guarantees from the directors being Steve, Rosanna, Allan and Anthony, so what that means is (at this stage I referred back to the file being the application behind Tab 18 in Exhibit MJN) and said: "we have a mortgage over Stephen and Rosanna's house, a mortgage over the townhouses at Cabramatta, a mortgage over the units at Surfers Paradise. We will take a mortgage over Mrs Bakarich's property at Lot 3 Cowpasture Road. So what we have got is all the properties which you people own supporting all of the loans. Here is a letter which relates to each of the documents you are about to sign and which describes them. You should read it before we proceed any further". 181 The letter to each of Allan and Tony was in common form. It included the following: "Your present maximum liability to the Bank under the document(s) is $2,650,000 plus interest, costs, charges and expenses as provided in the document(s). … Guarantee by you and Stephen Bakarich, Rosanna Margaret Bakarich and Allan John Bakarich, in respect of the indebtedness of Demson Pty Limited, liabilities under which are secured by mortgage by you and Stephen Bakarich, Rosanna Margaret Bakarich, Allan John Bakarich and A Bakarich Industries Pty Limited over property at 34A Cowpasture Road, Hoxton Park NSW". 182 Mr Newton deposed that after allowing them time to read the letter he asked if they understood. There was assent. He then asked for questions and there were none. He said that if they wanted to take the documents away and get advice they could do so before they signed. 183 Tony's evidence was to the effect that on the occasion on which he, Mary and Allan signed the documents Mr Newton gave no explanation and denied him the opportunity to read them through and to take copies. Nevertheless, he agreed that he understood and fully explained to Mary and Allan that the guarantees and the equitable mortgage were to support trading facilities for Demson for the regular importation of large quantities of air conditioners. 184 I have already rejected Tony's evidence as to the occasion of the signing of the documents and stated my preference for Mr Newton's evidence where it conflicts with his. I accept Mr Newton's evidence that he followed his usual practice and explained the documents in the way he said. 185 The mortgage of 12 September 1989 was explained to Mary by Ms Garland as described in her affidavit of 2 October 2003: "7. In respect of a "third party" mortgage it was my practice to say to the person who was giving the mortgage: "Your mortgage is guaranteeing the payments of (the debtor). If they fail to make the repayments the mortgagee can sell your property to satisfy the debt. This means that if the business fails you may lose your house. You must insure the property. You must keep it repaired". 8. It was my invariable practice next to refer to the acknowledgement of debt, such as that which is annexure "B" hereto and to say, before witnessing the signature on the acknowledgment as well as the mortgage documents: "By signing this form, you acknowledge to the bank that you understand what you are about to sign and that it has been explained to you. By signing it you are acknowledging that the bank is lending money to (the debtor) up to an amount (the maximum amount) and that your property is being offered as security. By signing it you acknowledge that you understand that you are guaranteeing the repayment by the debtor of any repayments required under the loan and the loan itself including interest and costs. You are giving the mortgage as security for your guarantee. So this means that, if as I have told you, the (name of debtor) fails to repay the loan or if the business fails and the loan has to be repaid in full that the bank can sell your property to satisfy the total amount owing including interest and costs. Do you understand this?" It was only after the person indicated that they understood what I had said that I would then indicate where they should sign and once they signed, I would witness their signature". 186 In cross-examination she said that she would have said that the power of sale was under the power of attorney given under the mortgage. 187 Ms Garland was unable to say whether she gave Mary a copy of the Memorandum T340042 but said it was her usual practice to do so if it was available. It was normal practice to make a copy of mortgage documents available to the client to take home and read, and to invite contact if there were matters not understood. 188 She also said that she would have read to Mary the letter of acknowledgement which included the following information: "NB Prior to signing the document(s) you should satisfy yourselves that you understand the full nature and effect of your liabilities to the Bank and obtain appropriate advice, legal or otherwise, if you are at all uncertain of your position. … I hereby acknowledge that the Bank has granted or may be granting from time to time to Demson Pty Limited accommodation and otherwise permitting the Debtor to incur liabilities to the Bank not exceeding an aggregate amount at any one time and from time to time of $2,650,000 against the security of my mortgages(s)/guarantee(s) to the Bank referred to in the Schedule below". 189 I accept Ms Garland's evidence that she followed her usual practice and explained the documents in the way she said. 190 With specific reference to this mortgage, Tony said that he fully explained to his mother that Lot 3 was required as additional security to support trading facilities and debts of Demson (T p 625; 670). It will be remembered that on 18 August 1989 Mr Newton had spoken to the same effect. The principles 191 For the Plaintiffs it was argued that the circumstances in which the securities were provided attracted the application of the principles in Commercial Bank of Australia v Amadio (1983) 151 CLR 447 with the consequence that the Court should intervene and set them aside. 192 In Amadio the relevant principle was said by Mason J at p 462 to be that a court of equity will set aside a transaction on the ground of unconscionable conduct: "… whenever one party by reason of some condition of circumstance is placed at a special disadvantage vis-à-vis another and unfair or unconscientious advantage is then taken of the opportunity thereby created. I qualify the word "disadvantage" by the adjective "special" in order to disavow any suggestion that the principle applies whenever there is some difference in the bargaining power of the parties and in order to emphasize that the disabling condition or circumstance is one which seriously affects the ability of the innocent party to make a judgment as to his own best interests, when the other party knows or ought to know of the existence of that condition or circumstance and of its effect on the innocent party". 193 Also, in Amadio, at p 474 Deane J said: "The jurisdiction is long established as extending generally to circumstances in which (i) a party to a transaction was under a special disability in dealing with the other party with the consequence that there was an absence of any reasonable degree of equality between them and (ii) that disability was sufficiently evident to the stronger party to make it prima facie unfair or "unconscientious" that he procure, or accept, the weaker party's assent to the impugned transaction in the circumstances in which he procured or accepted it". 194 In Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd [2003] HCA 18; (2003) 77 ALJR 926 the principles in Amadio were considered. Gleeson CJ (at para 12) observed that it was the inability of a party to judge his or her own best interests that was said by McTiernan J in Blomley v Ryan (1956) 99 CLR 362 at p 392, and again by Deane J in Amadio (p 476-477), to be the essence of the relevant weakness. Gummow and Hayne JJ (at para 46) explained that equity intervenes to set aside transactions where unconscientious advantage has been taken by one party of the disabling condition or circumstances of the other. In such situations intervention is not necessarily because the complainant has been deprived of an independent judgment and voluntary will, but because that party has been unable to make a worthwhile judgment as to what was in the best interests of that party. 195 With regard to the passage in the judgment of Mason J in Amadio quoted in para 190 above, their Honours (at para 55) noted the emphasis given to the need for a plaintiff seeking relief to establish the taking of unconscientious advantage of the plaintiff's disabling condition or circumstance. They said it was apparent that the special disadvantage of which Mason J spoke in this passage was one seriously affecting the ability of the innocent party to make a judgment as to that party's own best interests. 196 As it was submitted that the disabling condition or special disadvantage which affected the ability of Allan and Mary to judge where their best interests lay was their lack of understanding of the transactions and of the risks involved, it is useful to refer to the following passage from the judgment of Einstein J in State Bank of New South Wales Ltd v Chia & Anor (2000) 50 NSWLR 587, para 169: "The elements of the equity as identified by the majority joint judgment in Garcia v National Australia Bank (1998) 194 CLR 395 may be expanded upon seriatim. (1) The first requirement is that the wife does not understand the "purport and effect" (or, as it is put by Dixon J in Yerkey v Jones (at 689), the "general nature and effect") of the transaction. An understanding of the "purport and effect" of the transaction includes, at least, an understanding of the fact of liability, the general extent of liability and the possible consequences of default: Yerkey v Jones (at 689). However, it is not productive of an equity that the wife misunderstood or failed to appreciate the degree of risk associated in the transaction, or the improvidence or unwisdom of the uses to which the money so secured will be put: Yerkey v Jones (at 686). Further, the wife's misapprehension must be of a material matter: Bank of Victoria v Mueller (at 648); that is, material to the liability the creditor wishes to impose upon the wife". The submissions 197 In summary the Plaintiffs submit that the circumstances which render the contract unconscionable and unjust are, firstly, the personal situation and position of the guarantors, particularly Mary and Allan; secondly, the circumstances in which the documents came to be signed including the explanations given; and thirdly that the transaction guaranteed was improvident and provided no benefit to them. It was argued that Mary was unlikely to comprehend sophisticated commercial transactions and unfamiliar concepts such as the ramifications of a guarantee or mortgage, that she had not owned property prior to her husband's death, and had not granted a mortgage over real property. It was put that she relied upon family members, particularly Tony, for advice on important matters, but had not been involved in family dealings. It was submitted that she was left wholly ignorant of what she was letting herself in for. 198 The submissions as to the personal situations of the Plaintiffs were substantially confined to those of Mary and Allan. The situation of each was said to be similar to that of the other. 199 On behalf of the Defendant it was submitted that long before 1989 Tony, Mary and Allan were well aware of the nature and effect of mortgages and guarantees. Each had been involved in property dealings and were experienced in providing securities to support borrowings for them. They enjoyed a close relationship, and Tony assumed responsibility for the welfare of Allan and Mary, and ensured that each fully understood the transactions in which he or she was involved. The Defendant submitted that neither suffered any lack of understanding of the transactions of 18 August and 12 September 1989. Evidence and finding of general understanding 200 I now turn firstly to the evidence relevant to the position, capacity, and experience of Tony, Allan and Mary as at August and September 1989 when the securities were provided in support of the Demson facility. 201 There is no issue that Tony understood the nature and significance of a guarantee and a mortgage. He was involved in numerous transactions during the period 1969 to 1989 in which he gave mortgages and guarantees in support of financial accommodation. Many of these were given in support of the requirements of ABI. 202 Tony's evidence was that he regarded himself as experienced in, and made sound commercial judgments concerning, buying and selling real estate, and was an experienced investor who made money from property development and manufacturing. I accept this evidence. He impressed me as a shrewd and astute business man well aware of the likelihood of risk in any commercial undertaking. Available to him were his solicitors Mr Stoikovich and Mr Banfield, from whom he sought advice including explanation of the significance of documents such as mortgages, when desired. It is improbable that he would become involved in a transaction, particularly the provision of a guarantee or mortgage, without first being satisfied that it was in his best commercial interests to be so. 203 There can be no doubt on the evidence, and I find, that Tony's relationship with Mary and Allan was (and continues to be so with Allan) close and protective. He gave much evidence, which I accept, to the effect that he always explained to Allan and his mother the significance of the commitment undertaken upon the signing of a mortgage to ensure that each understood it. I also accept his evidence that he believed Mary to be an intelligent and sensible woman, who understood English although her native language was Croatian. 204 An example of his evidence is at T p 177: "Q One of the terms and conditions of the overdraft being given to Bakarich Industries was that your father, Anthony Bakarich, be prepared to provide Lot 3 Cowpasture Road as part of the security required? A. Yes, he did. Q. Before we get to the fact that he did, at that stage was it your belief that Lot 3 Cowpasture Road - forgive me for asking what you may think is obvious - was, if I may describe it as the farm where your mother and father resided. A. That's correct. Q. Do we take it that before you put your signature on that piece of paper and Allan his, you discussed with both your mother and father the question of the provision of Lot 3 Cowpasture Road to the bank as security? A. That's correct. Q. And you would have given both of your parents – not just your father - the courtesy of discussing with them jointly the concept of a mortgage? A. We spoke about everything. Q. I'm sorry? A. We spoke to each other about everything. Q. And we may assume that you would have given at least your parents the same understanding in relation to a mortgage that you had had from some years previously, and the importance of their providing what was effectively third party security to underpin your and Allan's company? A. That's correct. Q. Because, whilst you and Allan ran Bakarich Industries, your father having retired, your family, being a close one, always regarded Bakarich Industries effectively as a family company, including those people - I don't say this disrespectfully - it supported over the years which included your mother and your father until he died? A. That's correct". 205 Examples as to his parents' knowledge of the risk of loss of Lot 3 under a mortgage are at T p 182: "Q. However confident you were, Mr Bakarich, you regarded your family relations as such as requiring you to tell your parents candidly and explicitly, whether they got an explanation from anyone else, what the significance was for them in providing their farm as security for Bakarich Industries if something went wrong and you could not make the payments? A. Yes, definitely. Q. And you say that your family was closeknit to the point you shared no secrets, leaving Stephen out of the equation for the moment? A. That's correct. Q. You kept no secrets with your parents and you believed that you gave them a full and frank explanation of the possibility, although you believed unlikely possibility, that the family farm might be called, as it were, as security? A. That's correct". And at T p 191: "Q. Do you agree that it is likely, that is, the question of Lot 3, the farm, being placed under some risk if some claim of substance were made was likely to have been the topic of conversation between yourself, your mother and your father? A. The exposure that the farm was in, yes, my parents knew everything". 206 He also gave evidence of occasions on which Mr Stoikovich (who was from the same area in Yugoslavia as his parents and also spoke Croatian) explained to Allan, Mary and himself the significance of documents, including mortgages, which they were about to sign. 207 His evidence enables me to find that he was careful to ensure that, prior to them signing, Allan and Mary had a clear understanding of the ramifications of mortgages and guarantees which each provided from time to time to support a borrowing and, further, that he would not have permitted them to do so without such understanding. 208 Allan, also, was involved in the provision of mortgages in support of the requirements of ABI. The evidence is that he and Tony signed mortgages for ABI on 8 April 1980, 22 February 1982, 8 November 1984, 6 August 1986 and 18 August 1986. On 21 August 1986 he and Mary signed a mortgage for Vitlern, witnessed by Tony. On 28 November 1988 he and Mary signed a mortgage for Vitlern. On 13 July 1989 he signed for himself and for ABI a mortgage over Lot 34A. He had signed a personal guarantee for advances by NAB to ABI. On 8 May 1989 he signed a personal guarantee for a lease from CBFC Leasing Pty Ltd to ABI. 209 Mary signed similar documents as a witness or as a company officer. She signed as a witness the mortgage dated 8 November 1984 by Anthony over Lot 3 to secure an advance from NAB to ABI of $300,000.00. This was the security referred to in the evidence quoted in the next paragraph. On the same day she signed, as a witness, mortgages for ABI. On 21 August 1986 she and Allan signed a mortgage for Vitlern, witnessed by Tony in respect of the purchase of Unit 43 The Chateau, Surfers Paradise, Queensland. On 28 November 1988 she and Allan signed a mortgage and related Bank documents to secure for Vitlern a residential property loan of $250,000.00 for the purchase of Units 41 and 42, The Chateau, Surfers Paradise. Mr Stoikovich advised her in respect of it. 210 In his draft affidavit of 9 September 1987 for the Family Court proceedings Tony said that: "My Mother and Father have been greatly affected by the property arguments, as they allowed the company to use their property at Lot 3 Cowpasture Road Hoxton Park as colateral (sic) to bridge the gap in the companies (sic) assets and liabilities. My Father has had a stroke and three heart attacks and needs constant care from his wife, but my Mother over the past month has deteriorated greatly due to the wrong over the children and their life savings, as the deeds were unencumbered prior to letting A Bakarich Ind P/L use them". 211 Having regard to the above evidence as to explanation and experience, I find that by August 1989 Allan and Mary well understood the substance of the obligations they undertook pursuant to mortgages and guarantees. In the case of a third party mortgage such as that over Lot 3 I find that both understood that default by the borrower rendered them liable to recovery action including sale of the property. Tony's involvement in Demson 212 On many occasions during the hearing Tony sought to establish that prior to taking control of Demson in March 1990 he had minimal involvement in its management and day to day operations, and was but a silent partner. He denied interest in the pricing or quality of products and that he was aware of Demson's financial situation. He said that Stephen controlled the operations and would inform him of its situation on a month by month basis. He protested ignorance of the problems which confronted the company in October, November and December 1989 by reason of the defective quality of the air conditioners. 213 There is, however, much evidence as to events in 1989 which negates the impression Tony intended to convey. I accept that evidence and refer briefly to some of it. 214 Tony became a director on 20 March. From 22 to 28 April he visited Acma in Singapore, met those in charge and inspected the factory. Between 2 and 11 August he travelled to Singapore and Hong Kong with Mr Paul Cross on Demson's business, during which period orders for Acma air conditioners were placed, and the shipping of units to Sydney began. He negotiated an exclusive agreement with Cony Electronics Products Ltd, Hong Kong, for distribution rights in Australia for television sets. 215 In October he signed Demson's application to the Bank for a documentary credit, travelled to Singapore and Hong Kong on Demson's business, and attended meetings with Stephen, Mr Stewart and Mr Cross concerning Demson's operations. His record of the meeting in Melbourne on 26 and 27 October discloses discussion as to details of products and proposals for marketing, pricing, and management. His memorandum to Stephen dated 16 November shows knowledge that Demson was losing money and was in debit, and required too much time for no return. He travelled to Singapore, Hong Kong and Bangkok between 26 November and 10 December to negotiate better prices and trading arrangements, details of which are noted in his report of the trip (TB 789B). He said he obtained good results from Acma and Cony. 216 The weight of the evidence proves to me that, although maybe not on a day to day basis, Tony actively participated in the management of Demson which included involvement in decisions as to ordering, buying, importing and selling air conditioners, and was generally aware of its financial position. 217 Tony's suggestion that although a director he was ignorant of, indifferent to, or uninvolved in, the operations of Demson is implausible and quite inconsistent with the impression he gave me that he was an astute and experienced businessman. I have no doubt that he kept himself informed as to financial and other matters relevant to the success or failure of Demson. I find he well knew that Demson's difficulties were caused by the defective air conditioners which were supplied by Acma and rejected by retailers with large loss of revenue. 218 It may, of course, be accepted that Tony left it to Stephen to arrange with the Bank terms upon which financial accommodation would be provided. Nevertheless, in my opinion the likelihood is that whilst the facility was being negotiated he discussed the Bank's requirements with Stephen. The transaction was a matter of such crucial importance to Demson's future that, in my opinion, it would be highly improbable that Tony would not have sought and obtained information necessary to satisfy him that Demson should proceed and that the securities for it should be provided. I have no doubt that he was aware of the commercial risks of the venture yet judged that it was commercially advantageous to proceed with it. The challenged securities 219 As earlier mentioned the Plaintiffs submitted that Allan and Mary lacked any, or any sufficient, understanding of the transactions and that the information given by Mr Newton, and by Ms Garland to Mary, was inadequate to bring home to them the real significance of the transactions and of the importance of independent legal advice. 220 In particular it was submitted that Ms Garland had failed to adequately explain the significance of the mortgage to Mary and did not take her through the Memorandum T340042 to bring home to her the reality of the bargain which was necessary for the explanation to be sufficient. It was put that it was not enough merely to refer to the power of sale to be exercised if the debtor defaulted, and that her explanation was flawed because she said the power of sale resulted from the power of attorney under the mortgage. It was also put that Ms Garland should have pointed out all of the mortgagor's obligations and exposure and that acceptance of Ms Garland's explanation as adequate impermissibly assumed a degree of comprehension on Mary's part. Further, there was no independent solicitor to explain to Mary the legal effect of the documents. 221 It was also submitted that Allan and Mary were at an acute disadvantage by reason of their ignorance of the risks involved in the Demson venture. Reference was made to the comments of a Bank officer who considered the application for accommodation made on 14 August 1989. These noted that even if orders and sales could be achieved cash flow forecast was tight and if there were problems Demson would find itself owing all the money before sales were achieved. One comment was "Clients are going in big, but our fall-back position is not strong", and it was recommended that the application be declined unless further evidence of additional sales were sighted. It was put that there were risks associated with an inexperienced newcomer such as Demson in a seasonal market, and that it should have been pointed out that obtaining Mary's mortgage was fundamental to the project going forward. 222 Further, it was submitted that by reason of the failure of Mr Newton and Ms Garland to explain the commercial risks of Demson's venture for which the securities were provided, Mary and Allan lacked sufficient understanding of the transactions so that each was unable to make a judgment as to his or her own best interests. Finding 223 I have already found that Mary and Allan understood the ramifications and significance of guarantees and mortgages. The evidence as to the various property transactions in which they were involved over the years enables me to find that at all relevant times they were able to judge where their best interests lay. I find that, in the circumstances, the explanations given by Mr Newton and Ms Garland adequately informed them that by the documents signed on 18 August 1989 and 12 September 1989 they provided the Bank with security up to a maximum of $2,650,000.00 in respect of financial accommodation provided by the Bank to support Demson's future trading. 224 As well, they had access to legal advice from Stoikovich & Banfield if desired, and Mr Newton gave them the opportunity to seek it. It may be inferred that they chose not to take it because they did understand the effect of the documents they were signing. Indeed, I am satisfied that they well understood these matters prior to attending Mr Newton and/or Ms Garland and did not need the explanations that were, in fact, given. 225 I am satisfied on the evidence of their experience and of the explanations given by Tony, Mr Newton and Ms Garland that Allan and Mary were aware of the risk that if Demson defaulted each was liable to the Bank for the amount of default, rights of recovery of which included the power to sell Lot 3. In particular, I find that Mary well understood that Demson's default put her home at risk of sale. 226 As already noted, Tony's involvement with Demson was such that he knew of its commercial potential and of the risks in its operation. It is also a reasonable inference that, consistent with his usual practice, Tony informed Mary and Allan of these matters. He said himself that he explained to them Demson's requirement for advances from the Bank and that the guarantees and mortgage were necessary to secure them. I am also satisfied that Tony would not have involved himself and his family in providing security to support Demson if he thought that the venture was improvident or unlikely to succeed. 227 In summary I find that Allan and Mary understood the purport and effect of the securities provided by each of them including the fact of liability, the general extent of liability, and the possible consequences of default (Chia para 169(1)). 228 In circumstances where Allan and Mary had the understanding which I find they had, the fact that the Bank did not ensure that Demson's commercial risks were spelt out to them is, in my opinion, of little or no consequence. The risk important for their understanding was the consequence of Demson's default. Neither was mistaken about that. 229 In my opinion the Bank was under no duty to divulge to those providing the securities the comments concerning Demson which passed between its officers in the course of processing the application. At that time Demson was starting up its operations and had no commercial or banking history indicative of a likelihood of default with consequential risk to those providing security for its future borrowings. Even if there was such a history there would have been no duty of disclosure absent, perhaps, a representation to the contrary (Westpac Banking Corporation v Robinson (1993) 30 NSWLR 668 at pp 688-689, 696-698 per Clarke JA). The evidence did not establish a set of circumstances which, in accordance with the principles considered in Amadio by Gibbs CJ at pp 455-458, required disclosure. 230 I note also that there was no cross-examination of Mr Aspinall, Mr Newton or Ms Garland to establish knowledge that the relationship between Allan, Mary, Tony and Stephen was such as to put them on notice that Allan or Mary may have had less than a full knowledge of the nature and effect of the transactions. The evidence did not establish that, in the circumstances, the Bank knew or ought to have known that Allan or Mary lacked a full understanding of the nature and effect of the transactions. There was no evidence of a relevant disadvantage which was known to the Bank so as to make it unfair or unconscientious to procure the execution of the securities in the circumstances (Amadio, per Deane J, p 477). 231 It was also submitted that the circumstances of the relationship between Stephen and other family members, particularly Mary, was such as to raise the presumption that the transactions were procured by undue influence. It was put that the inference was available that Mary was persuaded by Stephen to provide the mortgage over Lot 3 in circumstances which demonstrated she was unable to judge for herself. The submission may be dealt with immediately: It is without evidentiary support and must be rejected. There was no evidence as to any communication or association at any relevant time between Stephen and Mary or Allan. The evidence did not denote an ascendancy by Stephen, or anybody else, over Mary or Allan such that the relevant transactions were not the free, voluntary, and independent act of each of them (Amadio at p 461, 474). As is apparent already, the whole of the evidence enables me to find that the conduct of Mary and Allan in providing the securities was free, voluntary and independent. 232 Having regard to the above, in my opinion the Plaintiffs have failed to establish that Allan or Mary were under a special disadvantage or special disability in dealing with the Bank, or that the Bank had taken some unfair or unconscientious advantage of the position of either of them in procuring the guarantees and mortgages from them. No case was established so as to attract the application of the principles in Amadio at p 462, 474. The evidence did not establish that it was, or would have been, unconscionable for the Bank to have exercised its rights pursuant to the guarantees and mortgages. The claim for relief under the Contracts Review Act 1980 (NSW) 233 For the Plaintiffs it was submitted that the guarantees and mortgage were unjust having regard to the circumstances relating to them at the times they were provided and that, accordingly, they were entitled to relief under s 7(1) Contracts Review Act 1980 (NSW) (the Act). 234 In s 4(1) of the Act "unjust" is defined to include "unconscionable, harsh or oppressive". Pursuant to s 7(1), relief may be granted "where the court finds a contract or a provision of a contract to have been unjust in the circumstances relating to the contract at the time it was made". By s 9(1) in determining whether a contract or a provision thereof is unjust in the circumstances relating to the contract at the time it was made, the Court is required to have regard to the public interest and to all the circumstances of the case. Without affecting the generality of subs (1), matters to which the Court shall have regard, to the extent to which they are relevant, are listed in s 9(2). Those matters include ones which may render a contract unjust because in the circumstances the claimant did not have the capacity or opportunity to make an informed or real choice as to whether he or she should enter into the contract e.g. 9(2)(a), (e), (f), (g), (i), and (j). (West v AGC (Advances) Ltd (1986) 5 NSWLR 610, McHugh JA p 620F). 235 Section 15 provides: "(15) In any proceedings in which relief under this Act is sought in relation to a contract, the Court may, if it thinks it proper to do so in the circumstances of the case, and it is of the opinion that the contract forms part of an arrangement consisting of an inter-related combination or series of contracts, have regard to any or all of those contracts and the arrangement constituted by them". 236 With regard to the application of the Act, in Baltic Shipping Company v Dillon (1991) 22 NSWLR 1 Gleeson CJ at p 9C said: "The general policy of the law is that people should honour their contracts. That policy forms part of our idea of what is just". 237 Principles as to the application of the Act were considered in West. Having referred to the several matters listed in s 9(2) of the Act McHugh JA said (p 620F): "More often, it will be a combination of the operation of the contract and the manner in which it was made that renders the contract or one of its provisions unjust in the circumstances. Thus a contract may be unjust under the Act because its terms, consequences or effects are unjust. This is substantive injustice. Or a contract may be unjust because of the unfairness of the methods used to make it. This is procedural injustice. Most unjust contracts will be the product of both procedural and substantive injustice." He went on to say (p 621D-F): "Indeed, notions of unfairness and unreasonableness will, I think, generally be present when a contract or any of its provisions is declared unjust. This will particularly be the case where procedural injustice is relied on. If a contract or one of its relevant provisions is neither unfair nor unreasonable so far as the applicant is concerned, it is difficult to see how the existence of inequality in bargaining power or lack of independent advice, for example, can render the contract or a provision of the contract unjust… If a defendant has not been engaged in conduct depriving the claimant of a real or informed choice to enter into a contract and the terms of the contract are reasonable as between the parties, I do not see how that contract can be considered unjust simply because it was not in the interest of the claimant to make the contract or because she had no independent advice". And at p 622A-B: "… under this Act, a contract will not be unjust as against a party unless the contract or one of its provisions is the product of unfair conduct on his part either in the terms which he has imposed or in the means which he has employed to make the contract". 238 In confirming West, Handley JA in Esanda Finance Corp Ltd v Tong (1997) 41 NSWLR 482 at p 491 said: "Moreover as this Court held in West … a contract is not unjust merely because it was not in someone's interest to enter into it, or because a person is unable to pay the debt when called upon to do so, or because its enforcement will lead to the loss of a home". (cf: Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413 para 78, Beazley JA). 239 In Radan v Commonwealth Bank of Australia (23 October 1998, BC9805707) at p 100, Lindgren J pointed out that the Act does not impose on a lending institution a duty to ensure that a decision to guarantee is prudent, or that the debtor is able to pay, or that the guarantor receives independent commercial advice, although if such advice is proffered the financier may become subject to a duty of care. 240 The Plaintiffs' submissions as to entitlement to relief under s 7(1) were essentially the same as those made in support of the claim for relief on the basis that the transactions were unconscionable. It was put that the effect of the mortgage and guarantees was that they were improvident and/or exposed the parties to great risk without benefit to them so that relief could only be denied where it was shown that they had a proper understanding and appreciation of the obligations imposed. However, it was not put that there was anything unfair in the securities as between the Bank and themselves. 241 The submission emphasised that relief should be available under the Act where the Court can see that the effect of a contract containing a mortgage or guarantee was never brought home to the mind of the party such that they never acquired an understanding or appreciation (in a real and not purely formal sense) of the obligations imposed by such instruments. 242 For the Defendant it was submitted that the transactions were not unjust under s 7(1). It was put that they were not procured by undue influence, unconscionable dealings, or some misrepresentation which occurred during the bargaining process; that Mary, Allan and Tony understood the nature and effect of the guarantees and mortgage; that Mary had received independent advice from Ms Garland; that there was no inequality of bargaining power; and that each stood to gain financially from the success of Demson. It was pointed out that there was no cross-examination of Bank witnesses as to the level of their knowledge of the matters said to be relevant to the case under the Act, or as to matters said to constitute an inequality of bargaining power. 243 In my opinion the Defendant's submissions must be accepted. The evidence does not establish either procedural or substantive injustice. It did not establish that the contracts were the product of unfair conduct in the sense considered in West, or at all. It is unnecessary to detail the evidence which tells against the claims made by the Plaintiffs under the Act because for the same reasons which led me to reject the claim that the transactions were unconscionable I am unable to find that they were unjust in the circumstances relating to them at the times they were made. 244 Additional support for the finding that the contracts were not unjust results from regard to the matters referred to in s 15 of the Act. The contracts may be taken to have formed part of an arrangement consisting of an interrelated combination or series of contracts which was required to secure Demson's advances as well as accommodation provided to ABI, Vitlern and Rutisa. The arrangement proceeded on the basis that it was what the Bank described as a completely interlocking security position in, for example, the application for Demson of 14 August 1989 (paras 46-50) and the letter dated 1 September 1989 (para 262). The connection between the companies, and the roles of Tony, Allan and Mary in their activities is described in paras 4-9 above. It is relevant to keep in mind that ABI was conducted as a family company which supported Tony, Allan and Mary, and Vitlern's business was property investment. The arrangement of which the securities were a part was entirely reasonable in the circumstances and one to which the Plaintiffs freely agreed. 245 By way of comment, the evidence for the Plaintiffs on the issue of the understanding of Allan and Mary necessarily was given by Tony. For them it was submitted that, generally, Tony's evidence should be accepted. Curiously the submissions as to the disability of Allan and Mary through lack of understanding or ignorance seemed to me to be in the teeth of the evidence given by Tony that they fully understood the transactions and he ensured that they did so. 246 Accordingly, I find that the Plaintiffs have failed to establish entitlement to relief under the Act. Discharge of the guarantees and mortgage by the letter of 19 September 1989 247 In the Third Amended Statement of Claim the Plaintiffs plead as follows: "7KA On or about 28 August 1989 the defendant agreed with Demson the principal debtor to supply a trade lending facility to Demson for the purchase of air-conditioners on condition that funds would only be advanced to Demson upon the defendant sighting confirmed orders for the air-conditioners. 7KB On or about 19 September 1989 the defendant agreed with the principal debtor Demson, in variation of the agreement referred to in 7KA, that instead funds would be advanced to Demson to import air-conditioners for which no confirmed orders had been sighted provided the value of the imported air-conditioners did not exceed $300,000 per month. 7KC The variation of agreement referred to in 7KB was without the knowledge or consent of all or any of the plaintiffs. 7KD By reason of the matters referred to in 7KA, 7KB and 7KC the plaintiffs are discharged from all liability to the defendant under the alleged guarantees". 248 In submissions it was put thus (T p 1426): "The proposition is this: the agreement made upon communication to Stephen Bakarich on or about 28 August was the agreement which the guarantors guaranteed. That was an agreement, an element of which was there should be confirmed orders for shipments. The agreement that was thereafter made on the variation to that agreement was a relaxation of that condition. … The point is that that was a variation in the arrangements between Demson and the bank which, unless the bank can show was advantageous to the sureties, or insubstantial to them, avoids the guarantee without more". And at T p 1716: "On the Bank's own documents, the conditions imposed on 28 August were notified to the borrower shortly therafterwards (sic) and the changes made not prior to 18 September and presumably notified in that letter of 19 September". 249 It was contended that the letter of 19 September 1989 from the Bank to Demson evidences a variation of the terms of the agreement upon which the facility was provided so that the obligations of the guarantors and of Mary as mortgagor of Lot 3 were discharged according to the principle in Ankar. 250 In Ankar consideration was given to "… the special principle, said to apply to a suretyship contract, that the surety is discharged from its obligations by the creditor's breach of that contract, so long at any rate as the breach materially prejudices the interests of the surety" (p 557). After analysis of the English cases their Honours (Mason ACJ, Wilson, Brennan, Dawson JJ) said that (p 599-560): "… the principle applies so as to discharge the surety when conduct on the part of the creditor has the effect of altering the surety's rights, unless the alteration is unsubstantial and not prejudicial to the surety. The rule does not permit the courts to inquire into the effect of the alteration. The consequence is that, to hold the surety to its bargain, the creditor must show that the nature of the alteration can be beneficial to the surety only or that by its nature it cannot in any circumstances increase the surety's risk, e.g., a reduction in the debtor's debt or in the interest payable by the surety. The mere possibility of detriment is enough to bring about the discharge of the surety. The foundation of the rule is that the creditor, by varying the principal contract or extending time, has altered the surety's rights without consulting it though the surety has an interest in the principal contract, and that the creditor cannot be permitted to do". Was there an agreement which included the conditions? 251 The first question for consideration is whether there was in existence an agreement between the Bank and Demson in the terms alleged prior to the signing of the guarantees and mortgage. 252 I have found that the application for the trade lending facility was approved on 18 August 1989 and that the guarantees were executed the same day. 253 No record was made by Mr Newton of the conversation with the Zone officer who advised of the fact or conditions of approval. It was, however, recorded in Mr Edwards's memorandum of 22 August 1989. Although Mr Newton has no recollection of the incident, he accepted that Mr Edwards or some other person at Zone could have informed him by telephone that the loan was approved and of the conditions as noted in the document. I have also found that such a conversation did take place on 18 August 1989 following which arrangements were made with Stephen for the members of the family to sign the securities as soon as possible. 254 The first written advice from Zone received by him of these conditions was the memorandum of 28 August 1989 the text of which is set out in para 153 above. 255 The Plaintiffs' case is that the agreement between the Bank and Demson included a condition to the effect of that contained in the memorandum which was in these terms: " D/C's will only be established (within the maximum level approved) against firm orders in hand (that is, where you have sighted evidence and not for orders on speculation)". 256 The letter of 19 September 1989, so far as is relevant said: "We are pleased to confirm that a Trade Lending Facility of $2,650,000 (Overdraft Limited and Documentary Credit – B/L/S Limit) to assist import air conditioners has been approved on the Bank's usual terms and conditions. … Approval is also subject to the following: … Prior to the issue of each Documentary Credit, we will need to sight the following: · confirmed orders · local letters of credit where applicable With regards to the larger wholesalers/retailers ie with orders of $100,000 or more, a satisfactory Bank Opinion will be required. In this regard, please contact Mr Newton at this office to arrange. Also with your dealer sales imports of no more than $300,000 per month will be permitted". 257 The crucial questions, so it seems to me, are whether, prior to signing, Stephen or Tony as directors of Demson were informed by Mr Newton or someone else from the Bank of the conditions, and whether provision of the trade lending facility subject to them was accepted by Demson, and whether these conditions were known to the guarantors and mortgagor when the securities were provided. 258 It will be remembered that the evidence of what was said to Stephen prior to the signing of the securities on 18 August 1989 is that of Mr Newton and was of his request to Stephen to arrange for all to attend. The evidence which I have accepted as to what was said to those present when the securities were signed was also that of Mr Newton, and was of his explanation of their nature and effect. 259 There was no evidence of any communication of the conditions of the approval by Mr Newton that day to Stephen or to anyone else. Mr Newton was asked what he said to those who attended that day and in response he spoke of the explanation already referred to. He was not cross-examined as to whether at any time prior to the signing of the documents he informed Stephen of the conditions, or as to whether he informed those who attended (including Tony whom he knew to be a director of Demson) of them. 260 In contrast was Mr Newton's evidence of the discussion he had with Stephen upon receiving the memorandum of 28 August 1989. He said that he would not have spoken to Stephen about the approval until he received it in writing. He agreed that, in accordance with normal bank practice, whether or not he had been told about some approval and some conditions it was necessary to have written confirmation before he communicated that information to customers. 261 Mr Newton said that Stephen then gave him to understand that he was importing air conditioners on a speculative basis, questioned him about the conditions, and asked that they be changed to enable Demson to trade. Mr Newton thought that a relaxation of the condition which required evidence of confirmed orders would be advantageous to both Demson and the Bank as it would enable air conditioners to be sold into a larger market, and thus more quickly clear the debt. 262 Mr Newton then prepared a diary note (TB 590(e)) for submission to senior management of the branch in order to seek some relaxation of the conditions. Dated 1 September 1989 it included the following: "The conditions contained within SMZ recent approval of the Trade Finance Facility of $2,650,000 raise certain questions which are as follows: · D/C's will only be established (within the maximum level approved) against firm orders in hand (that is, where you have sighted evidence, and not for orders on speculation). We have already issued two documentary credits for a total of AUD $623,741 with the company expected to request the issue of a third for approx AUD $255,180 within the next week. Firm orders have been sighted for the first two and will be confirmed prior to the issue of the third documentary credit. The next documentary credit will then be required around the end of September, and dependent upon Acma's ability to fill the order, should be worth approx AUD $1M. This shipment will include approx $200,000 worth of Air-Conditioners which are to be sold to local and Melbourne dealers (some 84 in all) for which they do not have firm orders. With these small dealers who only order between say 1-20 units, orders are only placed with the relative supplier (Demson) when the goods are available and can be delivered in 1-2 days. Therefore forward orders are placed only under exceptional circumstances. Whilst Demson is fully confident that these units will be sold promptly, should dealer response be slow, the units will be retained to fill the larger orders, Norman Ross etc with import orders to Acma in Singapore being reduced accordingly. In our application of 14/8/89, Demson anticipated dealer sales in excess of M$1.8, which would be sold progressively between now and March, and be dependent upon dealer reaction to the air-conditioners. Therefore, if dealer response is slow, orders to ACMA will be reduced accordingly; conversely if dealer response is substantial, shipments will need to be maintained and it is recommended that we allow them to proceed without firm orders to say a maximum of $300-400,000. · For Australian wholesales/retailers a satisfactory bank opinion being obtained to confirm they have the financial ability to meet the commitment. Majority of the Demson orders are coming from such well known retailers as Norman Ross and Harvey Norman Discounts, both well known and respected retailers in NSW and Camberwells, a large Victorian retailer. Payments are to be to Demson between 7 and 30 days after receipt of the goods. With the other not so well known distributers (sic), orders to ACMA will not be placed until local letters of credit have been arranged. Therefore the only "unknowns" will be payments made by the small dealers of which previously mentioned there are approx 84 (50 in Sydney and 34 in Melbourne). With the reputation that Norman Ross, Harvey Norman and Camberwells have in the market place, we do not consider that a Bank Opinion is warranted, and with the wholesalers paying by documentary credit, a Bank Opinion is not required. With regard to the small dealer sales, having to obtain some 84 opinions would appear most time consuming and unworkable. · Completely interlocking security position. As covered in our submission of 6/7/89, A Bakarich Industries banks with the NAB. Current facilities are approximately $315,000, secured by a mortgage over Tony's home, worth approx $5/600,000 and unbeknown to us, a mortgage over Mary Bakarichs' (sic) property. The NAB have refused to release Mrs Bakarichs' (sic) property, at this time but discussions are still underway. However, as previously mentioned, Demson is looking to issue a further documentary credit of approx $255,000 in the next few days which will take the Bakarich family total indebtedness to $2,875,342 (including excesses) against freehold security totalling $2,782,500 plus an R/E/M. Whilst we hold just less than $ for $ support for total commitments, sales of the Cabramatta units (5 sold), confirm that they are worth approximately M$1.6 against Bank's valuation of M$1.1 "on comp" and our security position is considered safe. It is therefore recommended that we approve issue of this new Letter of Credit. But this will be on the understanding that before the next order (D/C), which we understand will be for approx $1M towards the end of September is placed, that this matter with the NAB will have been resolved and that all our security will be in place. … As a matter of urgency, please confirm that the issue of the next documentary credit can proceed as proposed and other matters relating to the conditions of approval clarified". 263 Mr Newton sent to Zone a copy of this diary note with the memorandum dated 6 September 1989 and requested clarification of the conditions for firm orders and for obtaining Bank opinions. Thereafter until Mary signed the mortgage on 12 September 1989 there was correspondence, earlier referred to, between the Bank and those representing the Bakarich interests which concerned the availability of Lot 3 but made no reference to the conditions. 264 The clarification requested by Mr Newton was conveyed to him in Zone's memorandum of 18 September 1989. Upon receiving it he wrote the letter of 19 September 1989 which he said was a formal approval letter to give Demson and the guarantors confirmation of the terms and conditions of approval. Finding as to the agreement secured 265 In my opinion it is plain that the first time Stephen learnt of the conditions was on or very shortly after 28 August 1989. Mr Newton, whose evidence I accept, said as much when he said that he needed written confirmation before he communicated with customers. It is likely that had Stephen been so informed earlier he would have reacted in the same way as he did then and Mr Newton would have recorded the discussion. 266 Absent evidence that Demson knew of, and accepted, the conditions of approval it has not been established that there was an agreement between it and the Bank which incorporated these conditions when the guarantees were signed on 18 August 1989. I am satisfied that there was no such agreement and I so find. Furthermore, the evidence did not establish that any of those who provided the guarantees and mortgage were aware of these conditions, or even contemplated that the securities provided were conditional upon compliance with them, prior to learning of the contents of the letter of 19 September 1989. 267 In the circumstances the Bank's submission that the terms of the facility were not fixed until communicated to Demson on 19 September 1989 should, in my opinion, be accepted. Thereafter the Bank made advances pursuant to its terms which Demson accepted on those terms. Whether or not either party complied with them is not an issue I need to decide. 268 The Plaintiffs' submission requires that the letter of 19 September 1989 constituted a variation of the agreement between the creditor and debtor, an arrangement which discharged the guarantor in the absence of consent, or where its effect was not material and not beneficial to the guarantors (Ankar pp 559-560). 269 In my opinion the principles in Ankar are simply inapplicable because, for the reasons given, at the relevant times there was not in existence an agreement between the creditor and the debtor of which the letter of 19 September 1989 evidenced any variation. As the letter effected no variation of a principal contract there could be no discharge of the obligations of the guarantors and the mortgagor on the basis of the special principle recognised in Ankar. Alternatively, did the letter of 19 September 1989 discharge the securities? 270 If, contrary to my finding, the letter of 19 September 1989 evidenced a variation of the agreement between the Bank and Demson for the facility, it is appropriate to consider whether it operated to discharge the guarantees and mortgage according to the principle in Ankar. 271 The starting point is to determine whether the scope of the agreements made by the guarantors and by Mary with the Bank provides for such variation. 272 The guarantee from ABI, Vitlern, Rutisa and Demson in respect of the debts of each other to the Bank obliged each to guarantee to pay to the Bank on demand: "(a) all moneys (including moneys advanced by way of loan for fixed term or provided by way of overdraft) now or hereafter to become owing or payable to the Bank by the Debtor either alone or on joint or partnership account or on any other account whether as principal or surety; also … (c) all moneys which the Bank shall lend or pay or become liable to lend or pay or may have advanced or may advance the payment or repayment of which the Debtor has guaranteed or may hereafter guarantee to the Bank; also (d) all moneys which the Bank shall lend pay or advance or become in any way liable to lend pay or advance to for or on the credit or for the accommodation or otherwise on the account of the Debtor or to for or on account of any other person upon the order or request or under the authority of the Debtor; also" 273 ABI's shareholders' resolutions, which Tony as chairman certified were passed at a meeting on 18 August 1989, were as follows: "1. That for the purpose of securing to Commonwealth Bank of Australia inter alia the payment when demanded of all advances and accommodation granted and to be granted by the Bank to Stephen Bakarich, Rosanna Margaret Bakarich, Allan John Bakarich, Anthony George Bakarich, Rutisa Pty Limited, Demson Pty Limited, Vitlern Pty Limited and all other the indebtedness from time to time of each of them to the Bank this Company execute and favour of the Bank in the form presented to this Meeting; a Memorandum of Mortgage over the Company's freehold property therein described. Deed of Guarantee 2. That for the purpose aforesaid the Directors of this Company be and they are hereby authorised and empowered to affix the Common Seal of this Company to the document beforementioned". 274 The guarantee from Stephen, Rosanna, Allan, and Tony is, so far as is relevant, in the same terms as the guarantee provided by the companies but is in respect of the debts of Demson. 275 The letter of 18 August 1989 from the Bank to each guarantor advised that maximum liability to the Bank under the documents is $2,650,000.00 plus interest, costs, charges, and expenses as provided in the documents. 276 The mortgage of 12 September 1989 incorporated the provisions of Memorandum No. T340042. The Memorandum contained in Part A the following: "The Mortgagor will at such time or times and in such manner as may at any time and from time to time be agreed in writing between the Mortgagor and the Bank in the absence of any such agreement on demand pay to the Bank:- 1. All moneys (including moneys advanced by way of loan for fixed term or provided by way of overdraft) now or hereafter to become owing or payable to the Bank by the Debtor and the Mortgagor or either of them either alone or on joint or partnership account or on any other account whether as principal or surety;". 277 The Memorandum also included additional "all moneys" conditions in terms substantially similar to those in the guarantees. Part E included the following: "25. The Bank is under no obligation to hold or take any other or further security or guarantee for the payment of the moneys hereby secured and this mortgage shall be in addition to and independent of and shall not affect or be affected by any other or further security or guarantee now or hereafter held or taken by the Bank or by any arrangement or transaction between the Bank and the Debtor or any other person … or by any other act matter or thing whereby the Mortgagor if surety for the Debtor might be released or discharged from liability under those presents. … 27. The Bank may at any time and from time to time grant to the Debtor or to any other person any time or other indulgence or consideration and may compound with or release the Debtor … without discharging or affecting the liability of the Mortgagor under this Mortgage". 278 On 12 September 1989 Mary signed a letter of acknowledgement to the Bank wherein she stated: "I hereby acknowledge that the Bank has granted or may be granting from time to time to Demson Pty Limited accommodation and otherwise permitting the Debtor to incur liabilities to the Bank not exceeding an aggregate amount at any one time and from time to time of $2,650,000.00 against the security of my mortgages(s)/guarantee(s) to the Bank referred to in the Schedule below". 279 As earlier noted (para 157), upon receiving application from Demson on 21 August 1989 Mr Newton that day requested the Bank's Overseas Trade & Payments section to establish, as a matter of urgency, a documentary credit for Demson for SGD$845,770.00 in favour of Acma. It was established that day. None of the documentation refers to the conditions claimed by the Plaintiffs to be part of the agreement between the Bank and Demson. I find that this facility was provided pursuant to an arrangement which did not require compliance by Demson with the conditions set out in the memorandum of 28 August 1989. Findings as to the effect of the letter of 19 September 1989 280 Analysis of these terms of the guarantees and of the mortgage, and of the letters and the resolutions demonstrates that the parties specifically provided for future variations in the obligations of Demson to the Bank so that liability extended to advances made from time to time on different terms from those previously made. In my opinion these documents make plain that the parties contemplated and accepted liability for Demson's then and future indebtedness on any account up to the maximum of $2,650,000.00 irrespective of the terms and conditions upon which accommodation was provided to Demson from time to time. 281 The guarantees and the mortgage do not refer to any particular loan contract or arrangement. They contain what is generally known as "all moneys" clauses, exemplified by those to which I have referred. 282 In Commonwealth Bank of Australia v McArthur [2003] VSC 31 Dodds-Streeton J considered the application of the special principle in Ankar. I respectfully adopt her analysis in the following passage from her judgment: "192. In Ankar , the surety had secured the obligations of a lessee under a lease agreement. The surety agreement required the lessor to notify the surety of default under the lease or of the assignment of the lessee's interest. The lessor failed to fulfil those requirements. The High Court held that the breaches discharged the surety from liability. 193. In recognising the "special principle", the High Court majority construed the relevant requirements in the surety agreement as conditions, holding that the doctrine of strictissimi juris indicated that where there is doubt as to the status of a provision in a guarantee, it should be resolved in favour of the surety. 194. The special principle has application in cases where a particular liability is guaranteed, but it is altered or varied without consent, or the surety has certain contractual rights which are disregarded. 195. Limitations upon, or reservations concerning, the special principle endorsed in Ankar Pty Ltd v National Westminster Finance Australia Ltd have been applied. For example, in The Wardens and Commonality of the Mystery of the Mercers of the City of London v New Hampshire Insurance , Phillips J considered that the principle applies only in relation to obligations arising under a specific contract which are guaranteed and not to obligations arising from a future course of dealings. Accordingly, if there is a guarantee in respect of all loans without reference to any particular contract, the creditor and principal could conclude a new loan and proceed to vary its terms without that variation operating to discharge the guarantor. 196. A further exception to the variation principle is where the contract of guarantee or third party mortgage expressly permits variation. In the present case, the CBA mortgage by clause 9.12 expressly provided for the mortgagee's right to vary advances and accommodation. 197. Similarly, the principle has no application to a subsequent independent agreement, as distinct from the variation of the terms of a particular original agreement. Whilst discharge will result from variation of the terms of a particular agreement unless it is unsubstantial and unprejudicial or the guarantor consents, the guarantor will remain liable in relation to entirely independent contracts, provided that they are within the scope of the guarantee. 198. Therefore, where there is a widely drafted "all moneys" guarantee or mortgage clause, as in the present case, and as widely employed in modern commercial practice, a fresh advance or a subsequent loan would be within the scope of the guarantee. Moreover, a variation of a single agreement would also appear to be within the scope of such a guarantee. 199. Where an "all moneys" guarantee or mortgage is executed, the guarantor has undertaken to guarantee an indefinite number of liabilities without limit. In such a context, it is artificial to distinguish between original and subsequent independent agreements, on the one hand, and variations of a single agreement, on the other hand. In the absence of misrepresentation as to the effect of the "all moneys" guarantee or mortgage, or other vitiating factors, there appears to be no reason why equity should require the discharge of the guarantor's obligation in either case." 283 Her conclusion is consistent with, for example, the observations of Kirby J in Corumo Holdings Pty Ltd v C Itoh Ltd (1991) 24 NSWLR 370 at p 381 that guarantees and mortgages of this kind are intended to operate in a highly practical commercial setting and their scope should be determined with reality in mind. 284 As I have observed, the guarantees and mortgage provide for variations. If there was a variation to these principal contracts by the letter of 19 September 1989 in my opinion it was within the scope of their "all moneys" clauses and of clauses 25 and 27 of Part E of Memorandum T340042. Alternatively, if the letter evidenced an independent agreement for future advances it was within those provisions. 285 Accordingly, I am satisfied that the special principle recognised in Ankar does not apply and the Plaintiffs' submissions in reliance upon it must be rejected. Additional considerations 286 In further answer to the Plaintiffs' claims the Bank submitted that as a consequence of signing the letters of acknowledgement of 7 November 1991 (para 81), Tony, Mary and Allan are estopped from asserting that the guarantees and mortgage were ineffective. It was put that the situation was substantially similar to the circumstances concerning Mrs Falinski in Falinski v Commonwealth Bank of Australia [Unreported, NSWCA, 6 February 1998] in which the Court of Appeal upheld the proposition that a letter of acknowledgment in terms similar to the letters in this case gave rise to an estoppel precluding Mrs Falinski from disputing her liability for the amount recorded in it. 287 It is self-evident that the letters of acknowledgment signed on 7 November 1991 were intended to be relied upon by the Bank thereafter, and that future dealings with the Bank would be with regard to them. As a matter of fact the Bank provided additional substantial accommodation by way of documentary credits and a bill discount facility within days of the letters being provided (paras 82, 83). 288 In Falinski Sheller JA said: "The estoppel is founded not on a representation, but on an agreed statement of the relationship between the parties, the truth of which has been assumed, by their convention, as the basis upon which they will thereafter proceed. In the present case, in my opinion, as CBA submitted, that relationship was one which recognised the continuation of the guarantee Mrs Falinski signed in 1990. The effect of the doctrine is that she was estopped from denying that relationship and hence from denying her liability to CBA in accordance with the terms of the guarantee..…in these proceedings she was estopped from denying a continuing liability under the guarantee after she signed the letter of acknowledgment of 15 April 1993". In my opinion the submissions of the Bank should be accepted. I uphold the estoppel defence. 289 The Bank also submitted by way of an alternative defence that the payments made in discharge of all the various mortgages and guarantees, including those of 18 August and 12 September 1989 were made voluntarily with the consequence that, in the circumstances, the payments were irrecoverable. Since I have found that the Plaintiffs have failed on other grounds it is unnecessary to decide this question. General conclusion 290 The Plaintiffs have failed to establish any of their claims for relief. I therefore propose to order that in these proceedings their claims be dismissed and that there be judgment for the Bank. 291 In the circumstances it is appropriate that I direct the Defendant to bring in short minutes and to afford the parties the opportunity to address me in relation to costs. Arrangements should be made with my Associate by 28 April 2004 for the re-listing of the matter. ********** Last Modified: 04/29/2004 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.