Reported Decision: (2007) Aust Contract Reports 90-264 New South Wales Court of Appeal CITATION: Bakarich & Ors. v. Commonwealth Bank of Australia [2007] NSWCA 169 HEARING DATE(S): 17, 18 and 19 April 2007 JUDGMENT DATE: 13 July 2007 JUDGMENT OF: Hodgson JA at 1; Santow JA at 160; Campbell JA at 161 DECISION: 1. Direct that any submissions by the appellants to the effect that there should be an enquiry be provided within 21 days. 2. If such submissions are provided within 21 days, direct that any submissions in response be provided within a further 21 days. 3. If the appellant does not provide submissions within 21 days, appeal dismissed with costs. CATCHWORDS: CONTRACTS - Guarantees - Discharge of guarantors by dealings with principal debtor - Unjust contracts under the Contracts Review Act 1980 - Whether guarantees unjust because liability not limited to advances in compliance with lender's contract with the principal debtor - Relevance of "all monies" clause - Whether lender's conduct unconscionable - Whether Contracts Review Act, Schedule 1 cl.3, authorises orders protecting corporate co-guarantors from increased liability. LEGISLATION CITED: Contracts Review Act 1980 (NSW) ss.4, 6, 7-9, 15, 17, Schedule 1 Ankar Pty Limited v National Westminster Finance (Australia) Limited (1987) 162 CLR 549 Beneficial Finance Corp v Karavas (1991) 23 NSWLR 256 Bridgewater v Leahy (1998) 194 CLR 457 Commercial Bank of Australia v Amadio (1983) 151 CLR 447 Commercial Bank of Australia v. Amadio (1983) 151 CLR 447 David Securities Pty. Limited v. Commonwealth Bank of Australia (1992) 175 CLR 353 Elders Rural Finance Limited v. Smith (1996) 41 NSWLR 296 CASES CITED: Elkofairi v Permanent Trustee Co. Limited [2002] NSWCA 413 Falinski v. Commonwealth Bank of Australia NSWCA 6/2/98 Garcia v National Australia Bank Limited (1998) 194 CLR 395 McKay v. National Australia Bank [1998] 4 VR 677 Perpetual Trustee Co. Limited v. Khoshaba [2006] NSWCA 41 State Bank of NSW v. Muir (1997) NSW Conv R 55-823 The Commonwealth v. Verwayen (1990) 170 CLR 394 Westpac Banking Corporation v Robinson (1993) NSWLR 668 Allan John Bakarich and Anthony George Bakarich as executors of the Estate of the Late Mary Patricia Bakarich - 1st and 2nd appellants Allan John Bakarich - 3rd appellant PARTIES: Anthony George Bakarich - 4th appellant Viltern Pty. Limited - 5th appellant A. Bakarich Industries Pty. Limited - 6th appellant Commonwealth Bank of Australia - respondent FILE NUMBER(S): CA 40442/05 COUNSEL: Dr. C.J. Birch SC with Mr. F. Loofs for the appellants Mr. J. Sackar QC with Mr. T. Thawley and Mr. D. Thomas for the respondent SOLICITORS: Brenton Banfield, Campbelltown for appellants J.K. O'Sullivan, Sydney for respondent LOWER COURT JURISDICTION: Supreme Court - Equity Division LOWER COURT FILE NUMBER(S): 5840/92 LOWER COURT JUDICIAL OFFICER: Nicholas J LOWER COURT DATE OF DECISION: 20 April 2004 LOWER COURT MEDIUM NEUTRAL CITATION: [2004] NSWSC 283 IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40442/05 SC 5840/92 HODGSON JA SANTOW JA CAMPBELL JA Friday 13 July 2007 BAKARICH & ORS v. COMMONWEALTH BANK OF AUSTRALIA Judgment 1 HODGSON JA: On 20 April 2004, Nicholas J gave judgment in proceedings in which the appellants had sought relief against the respondent (the Bank) in respect of certain guarantees and a mortgage, seeking damages and/or equitable compensation and/or other relief. In that judgment, the primary judge had found that the appellants had failed to establish any of their claims for relief; and on 3 May 2005, the primary judge ordered that there be judgment for the Bank and ordered the appellants to pay the Bank's costs on an indemnity basis. 2 The appellants have appealed from those orders. CIRCUMSTANCES 3 The issues raised by the appeal centre on circumstances surrounding the giving of certain guarantees and a mortgage by members of the Bakarich family and associated companies to the Bank in August and September 1989. 4 Relevantly, the Bakarich family comprised Anthony Bakarich (Anthony), who died on 7 February 1989, his wife Mary Bakarich (Mary), who died on 27 October 1997, and their children Stephen, Allan (who has died since the first instance proceedings) and Anthony George (Tony). 5 The guarantees in question in this appeal were guarantees of the debts of Demson Pty. Limited (Demson), a company involved in the importation and sale of air conditioners, given to the Bank by Tony, Allan, A. Bakarich Industries Pty. Limited (ABI) and Vitlern Pty. Limited (Vitlern); and the mortgage was a mortgage given to the Bank by Mary securing the debts of Demson. 6 The Bakarich family home was 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; and Mary became the registered proprietor of Lot 3 pursuant to a transmission application dated 11 September 1989. Allan also lived at Lot 3 with his parents while they were alive, and he worked on the farm picking and growing tomatoes. He had limited education. 7 Tony had since 1975 controlled the operations of ABI, which manufactured tubular steel products. At all relevant times, Tony and Allan were directors of ABI, and for a period of about four years, Mary was also a director of this company. ABI owned property at Jedda Road, Lurneah, Wirreecoo Road, Berrara, and 23 Burbank Avenue, East Hills (Tony's residence). 8 Vitlern was established in 1986 by Anthony, Mary and Allan. It was the owner of home units at Surfers Paradise, Queensland. 9 Stephen had been involved in the air conditioning business since leaving school. He and his wife Rosanna were directors of Celsius Air-Conditioning Pty. Limited (Celsius) which from about October 1982 sold and installed air conditioners. They were also directors of Rutisa Pty. Limited (Rutisa) which from about December 1987 carried on business as a property developer in Cabramatta. 10 The two persons at the Bank most involved in the transactions were Darryl Aspinall, Assistant Loans Manager at the Liverpool Branch (the Branch), and Michael Newton, Senior Loans Officer, who worked under Mr. Aspinall's supervision. 11 Mr. Aspinall first met Stephen in about 1983, and Stephen became a customer of the Branch in about 1986. Mr. Aspinall was involved in the provision of financial facilities for Stephen, his wife and their businesses in 1987 and 1988. He first met Tony in about July 1988. 12 Mr. Newton's first contact with the family was in relation to an overdraft facility to assist Celsius in about December 1987; and his next involvement was in relation to the purchase of Lot 34A Cowpasture Road, Hoxton Park (Lot 34A) in July 1989. 13 From about 1985, Tony was involved in divorce proceedings; and it appears that ABI was in financial difficulty. This was to some extent alleviated in 1988 when the Jedda Road property was sold. 14 In September 1988, Tony and Allan became directors of Rutisa, along with Stephen and Rosanna, and Rutisa acquired some property at Cabramatta. In November 1988, the Bank approved finance of $800,000.00 to Rutisa to assist in its development activities. 15 Meanwhile, in about mid-1988, Stephen had conceived the idea of importing and selling air conditioners, and Demson was registered in July 1988. 16 In about November or December 1988, there was a meeting between Stephen, Tony and Mr. Aspinall at a restaurant at which Demson's proposed venture was discussed. Tony's evidence was that, at that meeting, Mr. Aspinall said that Stephen's application for a trade lending facility for Demson had been approved and that Stephen only intended to import air conditioners that were pre-sold. Mr. Aspinall denied making those representations, and the primary judge rejected Tony's evidence on that matter. 17 On 20 March 1989, Stephen and Tony became directors of Demson; and in April 1989, Tony was in Singapore for six days. During that time, he went to see the factory of Acma Electrical Industries Limited (Acma), the manufacturers of the air conditioners that Demson was proposing to import. Tony had lunch with those in charge of that enterprise. 18 On 4 May 1989, Stephen and Tony signed Demson's lease of commercial premises. 19 On 3 July 1989, Mr. Newton prepared an application for finance for the purchase of Lot 34A on behalf of Stephen, Rosanna, Tony, Allan and ABI. The application contained the following material concerning Demson: 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 $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. 20 This application was sent for approval from the Branch to the Bank's Southern Metropolitan (NSW) Zone (the Zone) on 6 July 1989, under cover of a memorandum signed on behalf of Mr. Irwin, the Chief Manager of the Branch. The copy of the memorandum in evidence has a hand-written note, apparently placed there by someone at the Zone supporting approval of the application in relation to Lot 34A, and continuing: New Deal Sherry Pye has already talked to Demson – apparently $4M AUD will be required in the short term – a saturated market area is involved and applicants will be up against big players with little equity – also outside core business …the proposed new business is decidedly speculative. Branch has been requested to contact SMZ before proceeding further. 21 Meanwhile, on 5 July 1989, Stephen and Mr. Koh of Acma met the Bank's representative Mr. Hateley in Singapore to discuss the procedure for establishing trade facilities for payment for air conditioners. 22 On 7 July 1989, the Branch sent a memorandum to the Bank's Overseas Trade & Payments Department at Pitt Street and Market Street (Overseas Trade) requesting establishment of a documentary credit for Demson, and such a credit was issued on 10 July 1989 for $73,500 (probably Singapore dollars (SGD)). It was established with Acma's bank in Singapore on 11 July 1989. 23 On 12 July 1989, a memorandum to the Branch from the Zone, signed by its General Manager Mr. Edwards and also bearing the initials of another bank officer Brad Fowler, approved the application in relation to Lot 34A, and added the following in relation to Demson: We note the intention of borrowers to embark on import of air conditioners, white goods etc, and that the first shipment is to arrive on 1/9/89. It is therefore likely that some further support will be proposed in the short term to enable establishment of the necessary D/C's and to finance the very rapid growth contemplated. Should such increase be sought prior to receipt of funds from asset sales, then exposure would be reaching levels where we would not be all that comfortable on the level of security we perceive as being available. When putting together any application please therefore ensure that we are informed of the current status of asset sales and that the necessary thorough investigation takes place of the move into importing, in an area we see as being extremely competitive. Also would you comment on your views as to whether we should be see king a completely interlocking security position. 24 It appears that the first batch of 100 air conditioners was shipped from Singapore on about 20 July 1989. An invoice dated 17 July 1989 from Acma to Demson records this, giving a price of SGD$73,500 and stating that this was to be drawn under a credit provided by the Bank. 25 The next Bank document in evidence is one dated 17 July 1989, headed "Investigation of Conflict of Interest/Special Preparation of Documents" and signed by Mr. Newton, apparently relating to an application by Demson for a facility of about $2.5 million. 26 It appears that in about mid-July, further air conditioners were ordered from Acma. On 20 July 1989, Acma issued an invoice to Demson, for the attention of Stephen, for just under 1,000 air conditioners for a price of SGD $701,750.00. The invoice remarked that delivery was to be "end Aug. to early Sept. 1989". 27 It appears that, although no application for Demson's facility had yet been received or prepared, the Branch was taking steps to have documents securing such a facility prepared for execution. It appears that such documents were prepared by the Bank's NSW Branch's Administration (Branch Securities): a memorandum to the Branch from Branch Securities dated 24 July 1989 records the following: Conflict of Interest, which arose in taking the guarantee and will arise in taking the mortgage and interlocking guarantee, is overcome by the Articles of Association of Rutisa Pty Limited, Demson Pty Limited and Vitlern Pty Ltd, however, is not overcome by the Articles of Association of A. Bakarich Industries Pty Limited. We have prepared and enclose a Shareholders Resolution to be passed at a General Meeting of the company prior to execution of the mortgage and interlocking guarantee. A Section 230(8) Certificate (C/I 25/45 A2 refers) is to be obtained from each guarantor/mortgagor company prior to execution of documents. To clearly demonstrate that this requirement has been met, s.230 Certificates should not post-date the security document(s) to which they relate. We have prepared and enclose an Equitable Mortgage together with ancillary documents, as requested. Please ensure all documents, including the company copy, are signed and returned (along with the prime security for the advance) as soon as possible following execution, as they must be stamped and registered within 45 days of that date. We have prepared and enclose an unlimited interlocking guarantee for execution by the respective parties. 28 On 31 July 1989, there was a meeting at the Branch between Stephen, Mr. Aspinall, Mr. Newton and members of the Bank's trade lending group. One of the latter, Mr. Emerson, prepared the following memorandum of the meeting: DEMSON PTY LTD - LIVERPOOL NSW BRANCH At the request of the Manager Loans Trade Lending Group attended an in-branch interview with the Managing Director of the above company Mr Steve Bakarich. CBA staff present were:- Messrs Darryl Aspinall - Manager Loans Michael Newton - Senior Loans Officer George Emerson - Trade Lending Group Stuart Rafferty -Trade Lending Group Background to the Bakarich family group of companies is contained in the recent branch submission for increased accommodation for their group. Demson has been recently formed to capatilise (sic) on a perceived window of opportunity for the import and distribution of ACMA air-conditioners from Singapore. According to the company profile confirmed order of $5.8m deliverable within the period to March 1990 are held. While orders are spread through an unknown number of distributors and dealers some $2.2m worth are said to have been ordered by the following document chains. Norman Ross Discounts Harvey Norman Discounts Camberwell Electric - Vic To ascertain level of facilities required and the security support required. TLG sought cash flow projections and schedule of L/C establishments. In addition, to establish the viability of the new enterprise Mr Bakarich was asked to produce copies of confirmed orders together with any of the relevant contractual documentation supporting the companys (sic) estimated sales potential. Subject to the availability of such data Mr Bakarich was informed that the CBA could provide various trade lending and related services which could reduce his financing costs and exchange value exposure therefits of the following lending options and trade services were discussed: Overdraft; DC-BLS; Bills Discount; AUD Refinancing; Foreign Currency Refinancing; and 24 hour market watch. Discussions concluded on the basis that Mr Bakarich would arrange preparations of cash flows and ordering schedules which would form the basis of formal proposal for an appropriate level of facilities for Demson. 29 The documentary credit established on 11 July 1989 was drawn on 2 August 1989, apparently in payment for the first 100 air conditioners referred to in the invoice of 17 July 1989. A Bank document of 2 August 1989 records an Australian equivalent of $52,529.94 to be collected from Demson, due on 26 October 1989. 30 A Bank diary note of the same day, signed by Mr. Newton, records a debit balance for Demson of $16,588.00, and in relation to Demson states the following: With regards to Demson Pty Ltd we are waiting production of a cash flow budget etc to determine the companies D/C requirements before formulating a fresh application which should be in the near future. 31 Between 2 and 11 August 1989, Tony travelled to Singapore and Hong Kong for the purpose of Demson's business. Apparently, he went to Hong Kong to look into the possibility of importing television sets. 32 On 3 August 1989, Demson's accountant sent the Bank the cash flow budget requested at the 31 July meeting. 33 It appears that in early August further air conditioners were ordered from Acma. On 8 August 1989, Acma issued invoices to Demson, to the attention of Stephen, for 516 air conditioners at a price of SGD $360,360.00 to be shipped on about 15 August 1989, and for 220 air conditioners at a price of SGD $171,400.00, to be shipped on about 28 August 1989. Further invoices were issued on 15 August 1989, for 114 air conditioners at a price of SGD $80,620.00, to be shipped on about 15 August 1989, and for 516 air conditioners at a price of SGD $385,807.00, to be shipped on about 15 August 1989. It appears therefore that a substantial number of air conditioners were shipped from Singapore on about 15 August 1989. 34 On 10 August 1989, John Stewart of Demson sent to Mr. Newton by facsimile a copy of a Norman Ross order for 1,300 air conditioners. 35 On 14 August 1989, an application prepared by Mr. Newton and signed by Mr. Irwin was submitted to the Zone for accommodation for Demson, in the form of a trade lending facility for $2.65 million. The security proposed included guarantees by Stephen, Rosanna, Allan and Tony, and also ABI and Vitlern, and a mortgage by Mary over Lot 3. This application included the following comments: 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. George Emerson, Manager Trade Finance, Corporate & International, has also held discussions with Mr Bakarich regarding his trade finance requirements. Acma are prepared to accept documentary credits and will charge Demson interest on the 90 day terms at the current Singapore interest rate of 6%. Therefore documentary credit refinancing in Australia is not competitive. To protect applicant company against large currency fluctuations a 24 hour market watch will be established with a stop loss agreement to be negotiated with Group Treasury. Should the Australian dollar fall, this Agreement will be triggered and the order brought on shore. This arrangement also has the added benefit that should the Australian dollar rise the stop loss agreement can be adjusted upwards and allow applicant company to increase profits by currency fluctuations whilst not being subject to losses. 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. This is evidenced by the fact that when he was certain that this deal with Acma was proceeding he moved very quickly to dispose of surplus freehold so as to clear the way for what he regards as a golden opportunity. In addition to disposal of the freeholds, he also sold his air conditioning business for the dual reasons of having more capital and to allow him to devote the whole of his energy to this new enterprise. Demson is operating out of a leased industrial unit at Hoxton Park and has already constructed additional office space therein to accommodate Michael Coe (Acma's Australian representative) and an acceptable showroom. The proposal has been discussed at length with management at this office and specialist trade lending officers and both the applicants and ourselves have done our level best to present an acceptable proposal. 36 The application was received by the Zone on about 17 August, and the following comments on it were prepared by Brad Fowler: · Demson holds orders (which we have seen evidence of and includes copies of orders from Demson to Acma and showing consignment of order to distributors) of 3505. Demson claims to have verbal agreement for 550 units with Harvey Norman. The balance he says he has sales in train for. Branch advise that Demson will only import what they have firm orders for. However, as we can see from application Demson has lodged an order for 7635. · Even if number of orders/sales can be achieved, cash flow forecast is tight. Any problems and Demson would find themselves owing all the money before they achieve sales. · Clients are going in big, but our fall-back position is not strong. · Unless we can sight further evidence of additional sales recommend we decline. 37 The guarantees in question in these proceedings and a number of associated documents are dated 18 August 1989 (a Friday); but there is a dispute as to whether they were executed on that day. 38 One of the guarantees is a Deed in which Stephen, Rosanna, Allan and Tony guarantee to the Bank the debts of Demson in quite general terms, including wide "all monies" clauses. The Deed recites that "the Bank has granted or agreed to grant" to Demson at the request of the guarantors "certain advances and accommodation". There is another guarantee in similar terms executed by ABI, Vitlern, Rutisa and Demson guaranteeing to the Bank the debts of the same four companies. Both the guarantees are witnessed by Mr. Newton. 39 Other documents dated 18 August 1989 are: (1) Certificates by directors of the four companies that each was an exempt proprietary company (one being executed by Mary). (2) A shareholder's resolution of ABI authorising the execution of guarantees and other documents. (3) Letters from the Bank to each individual and company purporting to enclose documents (including guarantees) for signature, and stating among other things "your present maximum liability to the Bank under the documents is $2,650,000 plus interest, costs, charges and expenses as provided in the documents". (4) An equitable mortgage of all its assets by Demson to the Bank. 40 It appears there were also real estate mortgages executed, including one by Stephen and Rosanna. 41 There are a number of documents bearing date 21 August 1989 (a Monday) about which it would seem there can be no dispute. 42 In particular, there is a telex transmission from the Bank to DBS Bank Limited Singapore, apparently sent at 16.34 on that day, acknowledging the issue of a documentary credit on the application of Demson in favour of Acma in the sum of SGD $845,770.00. That appears to have been sent in response to an application for that credit, received by the Branch on 21 August 1989, signed by Stephen, and a hand-written memorandum dated 21 August 1989 from Mr. Newton to Overseas Trade requesting the establishment of that credit. There is also in evidence a Bank record of that documentary credit showing 21 August 1989 as the date of issue. 43 There are three other Bank documents brought into existence at about this time in relation to the approval of accommodation for Demson: (1) A draft memorandum dated 22 August 1989 purporting to be from the Zone to the Branch. As originally typed, this draft memorandum was as follows: APPLICATION FOR ACCOMMODATION DEMSON PTY. LIMITED We refer to our telephone conversation with Michael Newton, and confirm we have approved a DLC of AUD $2,650,000 taking total facilities to $4,188,140 on the following basis: · We will only issue DLCs (within the maximum level approved) against firm orders in hand (that is, where we have sighted evidence, and not for order on speculation). · For Australian wholesalers/retailers not supplying a Letter of Credit, a satisfactory bank opinion being obtained to confirm they have the financial ability to meet the commitments. · 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. We note normal fees in terms of C/I 8/1 (f) will apply. This draft memorandum bears the signature of Mr. Edwards, as Zone General Manager. There are hand-written alterations which changed the opening words and the first dot point so that they read as follows: We refer to our telephone conversation with Michael Newton, and confirm a D/C-B/L/S (Trade Lending) 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 have sighted evidence, and not for orders on speculation). In the next dot point, the words "not supplying a Letter of Credit" are struck out. At the bottom of the page someone, perhaps Mr. Edwards, has written the words "Brad. Do we need to establish a trading forex limit to enable the market watch to take place", under which Mr. Fowler has written "Discussed with Sherry Pye. This is not necessary". (2) An internal memorandum dated 22 August 1989 from the Zone to Overseas Trade, in the following terms: We refer to our telephone conversation with Paul McMartin, and confirm it is in order to issue a DLC for approximately SGD 850,000 on behalf of Demson Pty Limited. Copy of our approval letter to Liverpool Branch is attached. This memorandum is signed by Mr. Fowler. (3) An action sheet re new approval for Demson, showing the date of approval as 18 August 1989, and the amount as $270,000 O/D. On the top of the sheet the words "Trade Lending Facility of $2,650,000" are hand-written. 44 There is a letter dated 23 August 1989 from the Bank to Demson reporting the establishment of a documentary credit for SGD $845,770.00. A memorandum of the same day concerning the Bakarich group has indecipherable comments concerning Demson. 45 There is also in evidence an application for accommodation to the Bank by Demson, dated 25 August 1989, and signed by Stephen and Tony. 46 It appears that written approval of the accommodation went from the Zone to the Branch for the first time on 28 August 1989, by means of a memorandum bearing that date in the following terms: 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 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. It is also clear from the cashflows provided that a temporary overdraft will be necessary (albeit the combined balance of any overdraft and D/C's outstanding will not exceed the approved limit of $2,650,000). We understand it is your intention to charge an establishment fee of $1,000 for this facility. We also note that normal fees in terms of C/I 8/1(f) will apply. 47 There is in evidence an internal memorandum from the Branch to Branch Securities dated 29 August 1989, attaching documents for registration and stamping, stating that documents concerning Demson were to be stamped to $527,300.00. These documents include two documents identified as T/LS14(U) dated 18 August 1989. I note that that identification appears towards the top left-hand corner of each of the two guarantees which bear the date 18 August 1989. 48 It appears that between 28 August 1989 and 1 September 1989, Mr. Newton contacted Stephen and notified him of the terms of approval of the memorandum of 28 August 1989. It appears that Stephen was not happy about the condition limiting the extension of credit to payment for air conditioners for which Demson had orders. 49 As a result of this conversation between Mr. Newton and Stephen, Mr. Newton prepared a document headed "Diary Note" on or before 1 September 1989, which appears was submitted to the Zone. In relation to Demson, this diary note identified the security as "R/E/M + G/- (2) + F/H (OUTSTANDING)". The diary note continued with two and a half pages of comments about the Demson facility, and the copy of it which is in evidence contains some hand-written alterations to those comments and also a number of additional hand-written comments. I set out below the type-written comments, incorporating the hand-written amendments to them: The conditions contained within SMZ recent approval of the Trade Finance Facility of $2,650,000 raise certain questions which are as follows: (1) 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. The 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 – on speculation!! With these small dealers, who only order between say 1-20 units, orders are only placed with the relative supplier (in this case 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, Normal 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 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. (2) 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. (3) 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. With regards to the townhouse development (Rutisa Pty Ltd) at Cabramatta NSW, it is now complete with the Linen Plan expected to issue in the next 1-2 days. With contracts exchanged for the sale of 5 of the units, the company will receive approx $720,000 net and an additional bill of $200,000 net for 30 days was sought to pay outstanding creditors. In view of the short term nature of this request, it was approved by the Chief Manager. 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. 50 This note bears Mr. Newton's signature, and there are a number of hand-written comments, the authors of which are not identified. At the bottom of the paragraphs on the first dot point, there appears the following hand-written comment: A change in plans already but not unexpected AND reasonable. Speculation "Limit" of $300,000 MAXIMUM would be realistic having regard to proposed orders of $5.85M & is supported. 51 At the end of the diary note, there are two hand-written comments. The first is: I can accept & support the foregoing but no further changes lest we lose control. Copy of this D/N to Zone for information & clarification of points raised [and then there is reference to the first two dot points]. 52 Then there is a further hand-written note: It is indeed disappointing that changes from the original submission should be proposed so shortly after its implementation & that the security position should not be in place. Nevertheless, the position is considered safe – the above recommendations carry my full support & are approved. That note appears to be signed by Mr. Irwin. 53 This diary note was sent from the Branch to the Zone under cover of a memorandum dated 6 September 1989, signed by Mr. Irwin, in the following terms: We attach a copy of our recent Diary Note. Please clarify the points raised therein viz 1 & 2. 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. As discussed with Mr Fowler, we have now issued 2 missing Bills of Lading Guarantees totalling AUD $318,000. 54 The charge given by Demson over its assets was entered in the NCSC register on 1 September 1989. 55 One matter holding up the execution by Mary of the required mortgage over Lot 3 was the delay in finalisation of matters concerning the estate of her late husband Anthony. On 6 September 1989, Mr. Banfield, the solicitor acting for the executor of that estate, wrote a letter to Mr. Aspinall at the Branch, concerning "Estate of the late Anthony Bakarich", advising the Bank that they had been instructed to arrange for the registration of a transmission application at the Land Titles Office to make Tony the registered proprietor of the Lot 3; that they had been further instructed by Tony that agreement had been reached between Mary, Stephen, Allan and Tony to commence proceedings in the Equity Division of the Supreme Court for an order under the Family Provision Act 1982 to transfer 5% of the estate to Stephen and the balance equally to Mary, Allan and Tony; and that should the Bank take a mortgage over the property, it should obtain consent from each of the beneficiaries/potential beneficiaries. 56 The other matter holding up the grant of that mortgage was the security over Lot 3 given to the National Australia Bank. By 8 September 1989, the National Australia Bank had agreed to release the security, and a memorandum of that date from the Branch to the Zone contained the following: The National Australia Bank have now agreed to release the deeds to Mrs Bakarich's property which will complete our security requirements. This property, however, is part of a deceased estate and we should be pleased if you would confirm that it is in order to proceed with a mortgage by the executor. We will of course obtain the necessary consents from all of the Bakarich family. Enclosed is a copy of correspondence from their solicitor, probate and the will. With regards to continuing excesses on A Bakarich Industries Pty Ltd, clearance was to come from the collection of one debtor by the 4/9/89 which has not occurred. Legal action has commenced to recover this money. Clearance is now expected within the next two weeks from the collection of other debtors. 57 There is in evidence a mortgage over Lot 3 in favour of the Bank signed by Mary and bearing the date 12 August 1989. Mary's signature is witnessed by a para-legal employed by a solicitor Mr. Macri, namely Mrs. Garland. Mary also signed an acknowledgement, in the following terms: 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. 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). 58 There are in evidence also consents to the mortgage signed by Stephen, Allan and Tony. 59 An internal memorandum dated 12 September 1989 from the Branch to Branch Securities attached documents for registration and stamping, including a document identified as T/LS4 (in dup) dated 12/9/89. The identification T/LS4 appears on the top left corner of the first page of the mortgage. Other documents referred to in the memorandum are the relevant Certificate of Title, a Discharge of Mortgage, a Transmission Application and a Probate. 60 The Zone responded to the diary note of 1 September 1989, which had been sent to it under cover of the memorandum of 6 September 1989, by a memorandum dated 18 September 1989 signed by Mr. Fowler, in the following terms: We refer to our telephone conversation with Mr Newton. It is our understanding that Bakarich's (sic) are no longer pursuing court action to contest the will. On this basis they have provided you with certified copy of probate, transmission application and mortgage signed by Mrs Bakarich senior, which you have onforwarded to Branch Securities for lodgement. In respect to your memorandum under reference, we have no objection to a speculative order limit of $300,000 as proposed (within the overall facility limit). It will, of course, be necessary for you to devise suitable controls to ensure this limit is respected (such as, say, regular visits to warehouse for stock-takes and comparison to orders). The idea always is to ensure that if items aren't being sold that subsequent orders are reduced accordingly. Our original approval letter of 28 August 1989 also requested satisfactory bank opinions be obtained on wholesalers/retailers. At that time, the smaller dealer situation and the numbers of these involved was not envisaged. We have no objection therefore to foregoing a banker's opinion for orders of less than $100,000. We note your comments regarding the perceived standing of the larger buyers, Norman Ross, Harvey Norman and Camberwells, but it seems that it would be merely prudent of us (and our customers) to seek such opinions. There could be quite a long period between placing of order and receipt of funds (up to say 90 days), and therefore the banker's opinion should seek specifically whether the company is considered reliable for $? payable in whatever number of days is appropriate. 61 Mr. Irwin then sent a letter of approval dated 19 September 1989 to Stephen, in the following terms: We are pleased to confirm that a Trade lending Facility of $2,650,000 (Overdraft Limit and Documentary Credit - B/L/S Limit) to assist import air conditioners has been approved on the Bank's usual terms and conditions. Total facilities now current are as follows: DEMSON PTY LIMITED Trade lending Facility $2,650,000 RUTISA PTY LIMITED Bills Discount Facility $1,084,000 Bank Guarantee $ 5,000 BAKARICH S, RM, AJ, AG & A BAKARICH INDUSTRIES PTY LIMITED Bills Discount Facility $ 365,000 VITLERN PTY LIMITED Residential Property Investment Loan $ 209,590 $4,313,590 Approval is also subject to the fallowing: · Establishment Fee of $1,000 (paid 5 September 1989). OVERDRAFT LIMIT · An interest rate of 22.5% per annum reducible will apply, it is variable and is subject to change without notice in line with the movement in interest rates generally. Interest is charged in March, June, September and December each year and on repayment of the advance. · An Overdraft Line Fee will also apply in respect of the Overdraft Limit. 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. · Security is to be to the Bank's satisfaction and is to comprise: A Guarantee (unlimited as to amount) by Stephen, Rosanna Margaret, Allan John and Anthony George Bakarich. A Guarantee (Unlimited as to amount) by A Bakarich Industries Pty Ltd, Vitlern Pty Limited and Demson Pty Limited. A registered equitable mortgage by Demson Pty Limited. A mortgage by Mary Patricia Bakarich over Lot 3 Cowpasture Road, Hoxton Park NSW. · This Trade Finance Facility is to be cleared from sales by the end of June 1990. We are pleased to have been able to assist you on this occasion. Should you have any enquiries regarding the abovementioned do not hesitate to contact this office. 62 The further history of the matter is recorded in pars.[54]-[95] of the primary judge's judgment, as follows: 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 (sic) 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 (sic) 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 (sic) 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. 63 One matter not mentioned in the primary judge's judgment was that there was evidence before him to the effect that the total prices paid for air conditioners imported by Demson for which there were not orders, in each of the months from August 1989 to December 1989 inclusive, were as follows: August 1989 $164,918.00 September 1989 $406,539.00 October 1989 $121,199.00 November 1989 $533,655.00 December 1989 $415,169.00 DECISION OF PRIMARY JUDGE 64 Before the primary judge, the appellants contended: (1) The guarantees were signed, not on 18 August 1989, but in or about the week commencing 18 September 1989, with Mary's mortgage being signed at the same time. (2) The Bank represented to Tony (and through Tony, to Allan and Mary) that financial accommodation to Demson was given on condition that air conditioners imported with the Bank's financial assistance were imported on terms that all air conditioners were pre-sold prior to the Bank making funds available. (3) The Bank engaged in misleading conduct. (4) The letter of 19 September 1989 was a variation by the Bank of the terms on which financial accommodation was provided to Demson, and the guarantors were thereby discharged. (5) The guarantees and Mary's mortgage were unjust contracts within the meaning of the Contracts Review Act and were unconscionable. 65 Tony was the only witness who gave oral evidence for the appellants. Allan made an affidavit, parts of which were read, but was too ill to attend for cross-examination. 66 For the Bank, Mr. Newton, Mr. Aspinall and Ms. Garland gave oral evidence. 67 The primary judge found that Tony was a witness upon whose evidence no reliance should be placed where it was contested, unless it was corroborated by or was consistent with independent and accepted evidence. The primary judge found Mr. Newton and Mr. Aspinall to be honest witnesses. 68 The primary judge found that the guarantees were executed on 18 August 1989, and that Mary executed the mortgage of Lot 3 on 12 September 1989. He found that Tony, Allan and Mary understood the ramifications and significance of the guarantees and the mortgage, that there was no unconscionable conduct by the Bank, and that the contracts were not unjust within the meaning of the Contracts Review Act. 69 The primary judge found that there was no agreement when the guarantees and the mortgage were signed that money would be advanced only in respect of pre-sold air conditioners, and that there was no communication of any such condition to Tony, Allan or Mary; and that in any event, the removal of such a condition would not have discharged the guarantees, because the guarantees and the mortgage permitted variations of the terms of the principal contracts. 70 The primary judge also found that the letters of 7 November 1991, together with the further facilities subsequently provided by the Bank in November 1991, estopped the appellants from asserting that the guarantees and the mortgage were ineffective. ISSUES ON APPEAL 71 The appeal as argued raised the following issues: (1) Whether the primary judge was in error in concluding that the guarantees were executed on 18 August 1989 and the mortgage on 12 September 1989. (2) Whether the primary judge was in error in not finding that the Bank had represented to Tony that commercial risks would be managed by the Bank by only making finance available on confirmed orders and/or in finding that Tony was aware of the commercial risks of the operation (particularly in so far as they were affected by whether or not credit was limited to confined orders) and/or in finding that Allan and Mary were aware of these risks. (3) Whether the primary judge was in error in finding against the appellants on the question of the Bank's misleading conduct. (4) Whether the primary judge was in error in finding against the appellants on the question of discharge of the guarantees, this involving the sub-issues of: (a) whether the terms of the principal contracts were changed, and (b) if so, whether the Bank was protected by terms in the guarantees and the mortgage permitting such changes. (5) The question of unconscionability and the Contracts Review Act. (6) The question whether the appellants were precluded from challenging the guarantees and the mortgage because of the acknowledgement dated 7 November 1991. (7) Whether the payment actually made by the appellants were voluntary payments and thus irrecoverable. (8) In the event that relief was given to the personal appellants pursuant to the Contracts Review Act, what should be the form of that relief, and in particular whether ancillary orders could and should be made relating to the liability of the companies under their guarantee. TIMING OF EXECUTION OF GUARANTEES AND MORTGAGE Submissions 72 Dr. Birch SC for the appellants submitted that the following circumstances indicated that the guarantees were not executed on 18 August 1989, but much later as alleged by Tony: (1) There was no Bank document referring to the occasion of execution. (2) The written approval of the facility was not sent to the Branch from the Zone until 28 August 1989. (3) Mr. Newton's evidence was that, when the guarantees were signed, he said to the guarantors that the Bank had approved a loan of $2.65 million to help Demson import air conditioners, and that was not true until 28 August 1989. (4) Mr. Newton also gave evidence (6 Black 1451) that he would not have spoken to Stephen about the approval until he had it in writing. 73 Dr. Birch submitted that those circumstances outweighed any indications to the contrary: (1) The action sheet document showing the date of approval as 18 August 1989 showed the amount as $270,000.00 O/D. (2) The grant of the facility for SGD $845,770.00 on 21 August 1989 occurred before the mortgage over Lot 3 was in place, so may also have occurred before the guarantees were executed. (3) The company charge given by Demson was registered on 1 September 1989, but this may have been executed on a different occasion from the guarantees. Decision 74 In my opinion, it is clear that the guarantees had been executed by 29 August 1989 at the very latest; and while they may not have been executed on 18 August 1989 as found by the primary judge, this is immaterial. 75 A substantial number of air conditioners had already been shipped from Singapore on about 15 August 1989, and it is reasonable to infer that Stephen was urgently seeking the establishment of a documentary credit to pay for them. This credit was in fact established on 21 August 1989. The preparation of security documents by Branch Securities was progressing as early as 24 July 1989. The draft memorandum of 22 August 1989 indicates that, at least by that date, a verbal approval had been conveyed by the Zone to the Branch. The guarantees were initially stamped to $527,000.00, and on 29 August 1989 two documents dated 18 August 1989 were sent by the Branch to Branch Securities to be stamped to $527,000.00: these two documents were identified as T/LS14(U), an identification which appears on the guarantees. Mr. Newton's diary note, prepared on or before 1 September 1989, strongly suggests that, of the required securities, only Mary's mortgage was outstanding. 76 These matters make an overwhelming case that the guarantees had been executed by 29 August 1989 at the latest; and it is highly probable that they were executed some days before then. It does seem likely that corners were being cut, at least by Demson, since it entered into commitments before it had the finance; and I accept there is some improbability in everything being approved and ready for execution on 18 August 1989, in circumstances where the formal application was only received by the Zone on 17 August 1989, when it attracted adverse comments. However, the Bank gave a credit for SGD $845,770.00 on 21 August 1989, and the Branch did have verbal approval by 22 August 1989 at the latest; and in my opinion, all this makes it more probable than not that the guarantees were executed by about 21 or 22 August 1989. 77 This does raise a question about what Mr Newton would have said to the guarantors when the guarantees were executed at that time, particularly in the light of his evidence that he would not have spoken to Stephen about the approval until he had it in writing; but this matter was not explored in cross-examination below or the subject of any direct submissions to the primary judge. REPRESENTATIONS AND AWARENESS OF RISKS Submissions 78 Dr. Birch submitted it was overwhelmingly probable that the Bank represented to Tony that commercial risks would be managed by the Bank by only making finance available on confirmed orders, for the following reasons: (1) Stephen had been negotiating arrangements with Acma for 12 months prior to August 1989. (2) At the lunch in May/June 1989, Mr. Aspinall accepts that there was discussion of the importance of providing further security for the importation of air conditioners. (3) By July 1989, Stephen was being asked by the Bank to provide evidence of confirmed orders, this being a significant topic of internal discussion by Bank officers. (4) The confirmed orders condition was a most important matter affecting commercial risk. (5) This was recognised by the Bank in making it a condition of approval. (6) As the primary judge found, Tony was likely to have sought to satisfy himself concerning the commercial risks of the venture, in order to make a judgment whether he, Mary and Allan should support it. 79 The primary judge found that while the facility was being negotiated Tony discussed the Bank's requirements with Stephen, and was aware of the commercial risks of the venture yet judged it was commercially advantageous to proceed; and Dr. Birch submitted that this made it likely that he was aware of conditions that the Bank was imposing in order to control the risks. If he was not so aware, Dr. Birch submitted, then it would have to follow that he was not in any realistic sense aware of the commercial risks of the venture. 80 Dr. Birch submitted that the primary judge's finding that Mary and Allan were made aware of the commercial risks of the venture by Tony was erroneous. The only evidence on that matter was to the effect that Tony told them of the representations made by Mr. Aspinall, and the primary judge had found that no such representations were made. Alternatively, Dr. Birch submitted, his findings as to the awareness of Mary and Allan were subject to the same submissions as his findings as to the awareness of Tony. Decision 81 In my opinion, the factors referred to by Dr. Birch are insufficient to justify setting aside the primary judge's finding that no representation was made by Mr. Aspinall to Tony; and there is in fact no allegation or evidence of any other representations relevantly made by the Bank to Tony. 82 In my opinion also, the primary judge was justified in drawing the inference that Tony passed on his apprehension of the risks of the venture to Mary and Allan. Although the primary judge rejected the precise content of the advice given to Mary and Allan as suggested by Tony in his evidence, Tony's evidence did support the view that his relationship with Mary and Allan was such that he would have passed on to them his apprehension of the risks. 83 The primary judge's finding that Tony was aware of the commercial risks of the venture did not address the question of whether or not this awareness was on the basis that finance to Demson would be limited to confirmed orders. Having regard to the way the case was conducted below, focusing on Tony's allegation of representations by the Bank, it could not be an error by the primary judge not to have made such a determination; and it was not suggested by Dr. Birch for the appellants that it was. In my opinion, this means that neither side can rely in this Court on a finding that specifically addresses this issue. 84 Subject to this comment, in my opinion Dr. Birch's submissions are insufficient to set aside the primary judge's finding that Tony, and therefore Mary and Allan, were aware of the commercial risks of the venture. MISLEADING CONDUCT 85 In circumstances where the primary judge's findings as to the only representations alleged to have been made by the Bank are not displaced, there is in my opinion no basis on which the Bank could be liable for misleading conduct. I do not understood the contrary to have been submitted. DISCHARGE OF GUARANTORS 86 I have said that in my opinion it is probable that the guarantees had been executed by 22 August, that is, before the condition concerning limitations to credit to confirmed orders had been imposed. In those circumstances, there is no question of the alteration of a contract between Demson and the Bank such as could discharge the guarantors. 87 The position is a little different in relation to Mary's mortgage. I accept it was executed on 12 September. At that time, the Branch had received the Zone's approval of 28 August, and Mr. Newton had spoken to Stephen about the limitations the Bank's approval had specified. However, Stephen had objected to those limitations, and on 6 September the Branch had passed on to the Zone an application to have the limitations varied. 88 In those circumstances, in my opinion it is clear that there was not in place, as at 12 September 1989, a contract between the Bank and Demson, having the effect that credit would be granted in the future only in relation to pre-ordered air conditioners. Accordingly, there is no question of discharge of Mary by reason of a material variation of the contract between the creditor and the principal debtor. CONTRACTS REVIEW ACT AND UNCONSCIONABILITY 89 I will focus on questions arising under the Contracts Review Act 1980, because it seems clear that the threshold for relief is lower under that Act than is the case in relation to unconscionability at general law. 90 The relevant provisions of the Act are the definition of "unjust" in s.4(1), s.6, s.7(1), s.8, s.9, s.15, s.17 and Schedule 1. Those provisions are as follows: unjust includes unconscionable, harsh or oppressive, and injustice shall be construed in a corresponding manner. 6 Certain restrictions on grant of relief (1) The Crown, a public or local authority or a corporation may not be granted relief under this Act. (2) A person may not be granted relief under this Act in relation to a contract so far as the contract was entered into in the course of or for the purpose of a trade, business or profession carried on by the person or proposed to be carried on by the person, other than a farming undertaking (including, but not limited to, an agricultural, pastoral, horticultural, orcharding or viticultural undertaking) carried on by the person or proposed to be carried on by the person wholly or principally in New South Wales. 7 Principal relief (1) 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, the Court may, if it considers it just to do so, and for the purpose of avoiding as far as practicable an unjust consequence or result, do any one or more of the following: (a) it may decide to refuse to enforce any or all of the provisions of the contract, (b) it may make an order declaring the contract void, in whole or in part, (c) it may make an order varying, in whole or in part, any provision of the contract, (d) it may, in relation to a land instrument, make an order for or with respect to requiring the execution of an instrument that: (i) varies, or has the effect of varying, the provisions of the land instrument, or (ii) terminates or otherwise affects, or has the effect of terminating or otherwise affecting, the operation or effect of the land instrument. 8 Ancillary relief Schedule 1 has effect with respect to the ancillary relief that may be granted by the Court in relation to an application for relief under this Act. 9 Matters to be considered by Court (1) In determining whether a contract or a provision of a contract is unjust in the circumstances relating to the contract at the time it was made, the Court shall have regard to the public interest and to all the circumstances of the case, including such consequences or results as those arising in the event of: (a) compliance with any or all of the provisions of the contract, or (b) non-compliance with, or contravention of, any or all of the provisions of the contract. (2) Without in any way affecting the generality of subsection (1), the matters to which the Court shall have regard shall, to the extent that they are relevant to the circumstances, include the following: (a) whether or not there was any material inequality in bargaining power between the parties to the contract, (b) whether or not prior to or at the time the contract was made its provisions were the subject of negotiation, (c) whether or not it was reasonably practicable for the party seeking relief under this Act to negotiate for the alteration of or to reject any of the provisions of the contract, (d) whether or not any provisions of the contract impose conditions which are unreasonably difficult to comply with or not reasonably necessary for the protection of the legitimate interests of any party to the contract, (e) whether or not: (i) any party to the contract (other than a corporation) was not reasonably able to protect his or her interests, or (ii) any person who represented any of the parties to the contract was not reasonably able to protect the interests of any party whom he or she represented, (f) the relative economic circumstances, educational background and literacy of: (i) the parties to the contract (other than a corporation), and (ii) any person who represented any of the parties to the contract, (g) where the contract is wholly or partly in writing, the physical form of the contract, and the intelligibility of the language in which it is expressed, (h) whether or not and when independent legal or other expert advice was obtained by the party seeking relief under this Act, (i) the extent (if any) to which the provisions of the contract and their legal and practical effect were accurately explained by any person to the party seeking relief under this Act, and whether or not that party understood the provisions and their effect, (j) whether any undue influence, unfair pressure or unfair tactics were exerted on or used against the party seeking relief under this Act: (i) by any other party to the contract, (ii) by any person acting or appearing or purporting to act for or on behalf of any other party to the contract, or (iii) by any person to the knowledge (at the time the contract was made) of any other party to the contract or of any person acting or appearing or purporting to act for or on behalf of any other party to the contract, (k) the conduct of the parties to the proceedings in relation to similar contracts or courses of dealing to which any of them has been a party, and (l) the commercial or other setting, purpose and effect of the contract. (3) For the purposes of subsection (2), a person shall be deemed to have represented a party to a contract if the person represented the party, or assisted the party to a significant degree, in negotiations prior to or at the time the contract was made. (4) In determining whether a contract or a provision of a contract is unjust, the Court shall not have regard to any injustice arising from circumstances that were not reasonably foreseeable at the time the contract was made. (5) In determining whether it is just to grant relief in respect of a contract or a provision of a contract that is found to be unjust, the Court may have regard to the conduct of the parties to the proceedings in relation to the performance of the contract since it was made. 15 Arrangements 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. 17 Effect of this Act not limited by agreements etc (1) A person is not competent to waive his or her rights under this Act, and any provision of a contract is void to the extent that: (a) it purports to exclude, restrict or modify the application of this Act to the contract, or (b) it would, but for this subsection, have the effect of excluding, restricting or modifying the application of this Act to the contract. (2) A person is not prevented from seeking relief under this Act by: (a) any acknowledgment, statement or representation, or (b) any affirmation of the contract or any action taken with a view to performing any obligation arising under the contract. (3) This Act applies to and in relation to a contract only if: (a) the law of the State is the proper law of the contract, (b) the proper law of the contract would, but for a term that it should be the law of some other place or a term to the like effect, be the law of the State, or (c) the proper law of the contract would, but for a term that purports to substitute, or has the effect of substituting, provisions of the law of some other place for all or any of the provisions of this Act, be the law of the State. (4) This Act does not apply to a contract under which a person agrees to withdraw, or not to prosecute, a claim for relief under this Act if: (a) the contract is a genuine compromise of the claim, and (b) the claim was asserted before the making of the contract. (5) Without affecting the generality of subsection (1), the Court may exercise its powers under this Act in relation to a contract notwithstanding that the contract itself provides: (a) that disputes or claims arising out of, or in relation to, the contract are to be referred to arbitration, or (b) that legal proceedings arising out of, or in relation to, the contract are justiciable only by the courts of some other place. Schedule 1 Ancillary relief 1 Where the Court makes a decision or order under section 7, it may also make such orders as may be just in the circumstances for or with respect to any consequential or related matter, including orders for or with respect to: (a) the making of any disposition of property, (b) the payment of money (whether or not by way of compensation) to a party to the contract, (c) the compensation of a person who is not a party to the contract and whose interest might otherwise be prejudiced by a decision or order under this Act, (d) the supply or repair of goods, (e) the supply of services, (f) the sale or other realisation of property, (g) the disposal of the proceeds of sale or other realisation of property, (h) the creation of a charge on property in favour of any person, (i) the enforcement of a charge so created, (j) the appointment and regulation of the proceedings of a receiver of property, and (k) the rescission or variation of any order of the Court under this clause, and such orders in connection with the proceedings as may be just in the circumstances. 2 The Court may make orders under this Schedule on such terms and conditions (if any) as the Court thinks fit. 3 Nothing in section 6 limits the powers of the Court under this Schedule. 4 In this Schedule: disposition of property includes: (a) a conveyance, transfer, assignment, appointment, settlement, mortgage, delivery, payment, lease, bailment, reconveyance or discharge of mortgage, (b) the creation of a trust, (c) the release or surrender of any property, and (d) the grant of a power in respect of property, whether having effect at law or in equity. property includes real and personal property and any estate or interest in property real or personal, and money, and any debt, and any cause of action for damages (including damages for personal injury), and any other chose in action, and any other right or interest. 91 The primary judge's findings on the Contracts Review Act are set out in pars.[240]-[246] of his judgment, as follows: 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. 92 Those reasons refer back to the primary judge's decision on unconscionability, which appears in pars.[223]-[232] of his judgment, as follows: 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. Submissions 93 The appellants' written submissions put their claim of unconscionability on two bases. 94 First, they submitted that should the Court find that Tony must have known of the intention on the Bank's part to insist on a condition of confirmed sales, that this was material to his decision to support the transaction and that he relayed this to Allan and Mary, then it was unconscionable for the Bank to seek to enforce the guarantees and mortgages after it dispensed with that condition. They submitted that irrespective of whether this change amounted to a variation of the underlying contract sufficient to attract the rule in Ankar Pty Limited v National Westminster Finance (Australia) Limited (1987) 162 CLR 549, such a change in the conditions of credit brings on the Bank a duty to disclose. They cited Westpac Banking Corporation v Robinson (1993) NSWLR 668, at 689 as authority for this proposition. 95 Secondly and quite independently of the first submission, the appellants submitted that the Bank had knowledge of a host of objective features which indicated that Tony, Allan and Mary were not in a position to know and understand the risk they were undertaking as guarantors for Demson, including that the Bank was clearly aware that the proposed business venture was decidedly speculative, that the Zone initially rejected the application, that there were devised controls to minimise risks, that the Zone altered the conditions of the loan to permit some speculative orders in September 1989, that the Bank failed to police not only the original conditions but also the modified September conditions, and that the Bank actually breached the conditions by extending credit over the set limit. 96 Further, they submitted that it was a disabling condition for Allan and Mary, within the meaning of that term under the doctrine of unconscionability, that the Bank took no steps to ensure that either of them had any knowledge, let alone a proper understanding, of the proposed business of Demson. In support of this the appellants referred to the authorities of Commercial Bank of Australia v Amadio (1983) 151 CLR 447, especially at 461-462, 467, 476-477, 479 and 481, Bridgewater v Leahy (1998) 194 CLR 457, in particular at 478-479 and 490-493 and Garcia v National Australia Bank Limited (1998) 194 CLR 395, particularly at 406-409. 97 They submitted that, despite the primary judge having found Allan and Mary to have understood the nature of the obligations because they had a previously signed mortgage documents to secure advances to Bakarich Industries, neither of them had explained to them the business of Demson. Moreover, they submitted that there was no basis for the respondent's argument, accepted by the primary judge, that Tony obtained a sufficient understanding of the commercial risks involved and conveyed that full understanding to each of Allan and Mary. 98 Finally, the appellants submitted that alternative relief was available to them under the Contracts Review Act. They submitted that a contract may be unjust within the meaning of that Act to justify relief if a party understands the nature of the legal obligation on them but does not appreciate the nature of the commercial risk, and that this is especially so in circumstances where the other party has detailed information allowing it to assess those commercial risks but gives the first party no indication of the existence of those risks, and has reason to believe that the first party has not or could not have independently acquired such information regarding those risks. They referred to Beneficial Finance Corp v Karavas (1991) 23 NSWLR 256, at 277 ff. 99 In oral submissions, Dr. Birch submitted that the primary judge's reasons disclosed error, in particular in par.[228] where the primary judge said that the risk important for the understanding of Allan and Mary was the consequence of Demson's default; and in par.[229], where he put the issue in terms of a question whether the Bank was under a duty to divulge to those providing securities the comments concerning Demson which passed between its officers. Dr. Birch submitted that the risk that was important for the guarantors was the risk, plainly identified by the Bank, that gave rise to the condition limiting the facility to air conditioners for which Demson had orders (both before and after the relaxation of that condition); and that the Bank had options other than divulging its communications, for example, to obtain guarantees limited to the contract that the Bank considered appropriate for the Bank itself to make with the principal debtor. 100 Dr. Birch referred to the following discussion of the term "unjust" in the Contracts Review Act by Mahoney JA in Elders Rural Finance Limited v. Smith (1996) 41 NSWLR 296 at 298-299: Without limiting the ambit of the term - what I say should not be seen as a paraphrase of it - regard may be had in the application of it to the present facts to matters such as the following. The contract had a potential "at the time it was made" to result in the future in the imposition on the plaintiffs of great burdens and, perhaps, benefits of significant dimensions. The likelihood, at that time, of its doing so - particularly the likelihood of its imposing burdens - and the possibility that the burdens would be heavy was substantial. The capacity of the plaintiffs to appreciate these possibilities, to assess them, and to determine whether they should be accepted and with what safeguards, was limited. The position of the parties, particularly their financial position, and accordingly their capacity to bear the burdens which might result from the contract, was a matter of importance. It was important that, if the contract proved to be burdensome rather than beneficial, the plaintiffs might well be financially destroyed. It was relevant in considering the justice of the contract in the circumstances in which it was made that one of the parties, Elders, knew and appreciated the extent of the risks and what might happen to the plaintiffs and that the other party, the plaintiffs, did not understand this or the real implications of it. And I think that, knowing what they did, Elders were under a duty, not legal but in justice, to ensure that the plaintiffs appreciated the extent of the burdens which might fall upon them and the likelihood that they would. I do not mean by this that there was, in law or in judging the justice of the contract, a duty on Elders to dissuade the plaintiffs from the contract. The judge held that the figures and the significance of them were discussed with some of the plaintiffs and the projections were made in consultation with them. But Elders were much more pessimistic of the outcome of the matter than the plaintiffs and they were so because they understood better the reasons for their pessimism. I do not mean that business is, within the contemplation of the Act, to be conducted upon the basis of compassion or even charity. But the Act requires that the Court is to look at the justice of a contract which results from its conduct. In determining what is just, it is in my opinion proper to have regard to what one person knew and the other did not of the potential consequences of the contract. 101 Dr. Birch referred to references to that passage in Elkofairi v Permanent Trustee Co. Limited [2002] NSWCA 413 at [71] and Perpetual Trustee Co. Limited v. Khoshaba [2006] NSWCA 41 at [127]. 102 Dr. Birch submitted that in circumstances where the Bank participated with Stephen in putting the deal together, knew of the risks highlighted in Mr. Fowler's note of about 17 August 1989, and knew that Stephen did not have the orders he had initially claimed to have, the Bank could not assume that Tony who was not active in the business, knew of the risks, much less that Allan and Mary did so. 103 The Bank in its written submissions contended that none of Tony, Allan or Mary were in a relevant position of disadvantage, to make out an action under the doctrine of unconscionability. Tony was experienced in business, having been involved in a number of transactions involving ABI and Rutisa since 1975. Moreover, his solicitor had been with him for many years and always explained documents to him and also to Allan and Mary. In relation to Allan, the Bank submitted that he knew what a guarantee and a mortgage were, and whilst he may have had difficulties in reading, there was no suggestion that he was simple, as supported by his apparent ability to swear and understand the affidavit filed in the proceedings, his ability to swear and understand the affidavit verifying the pleading and his acting as managing director of ABI. The Bank also submitted that Mary was an intelligent woman who had no problem understanding the nature of a mortgage and a guarantee. Moreover, she had been both director and secretary of a number of the companies from time to time. In relation to both Allan and Mary, it was submitted that Tony always took responsibility for explaining documents and commercial concepts to them. 104 On the issue of the relief sought under the Contracts Review Act, the Bank made two alternative submissions. First, that the claims made in relation to the identified mortgages are barred by s. 6 of that Act and that the obligations were secured by the guarantees of 18 August 1989 which are not sought to be set aside on the grounds of unconscionability or the Contracts Review Act. Secondly, the bank submitted that the contracts were not relevantly unjust since: (a) The contracts were not procured by undue influence, unconscionable dealing or some misrepresentation which occurred during the bargaining process. (b) Mary, Allan and Tony each knew what a guarantee was and what a mortgage was. Tony was well versed in such matters and always explained documents to his mother and Allan. Mary received independent advice from Ms Garland. (c) There was no significant inequality of bargaining power. Each of Mary, Allan and Tony wanted to secure advances for business purposes. Each of them stood to gain from a successful business. The fact that the business ultimately failed is not a relevant matter as it was not a circumstance which existed at the time the contract was made: Teachers Health Investments Ply Ltd v Wynne (1996) NSW Con R 55-785. (d) It was in the interests of each of Mary, Allan and Tony to enter into the agreements. Each stood to reap financial gain if the business was successful. In any event, as Handley JA observed in Esanda Finances Corp Ltd v Tong (1997) 41 NSWLR 482 at 491: Moreover as this Court held in West v AGC (Advances) Ltd (1986) 5 NSWLR 610, 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. 105 In oral submissions for the Bank, Mr. Sackar QC submitted that, at the time the transactions between the Bank and Demson were being negotiated, the whole family was involved together in a number of business activities, including the property development activities on Rutisa at Cabramatta. Further, the primary judge had rejected Tony's contention that he was not substantially involved in the running of the company. Stephen had been in the air conditioning business for many years, Tony was an engineer having run a successful business, and the two brothers were working together. The company had obtained financial projections from its accountant. Plainly, Tony had formed the view that the project was not high-risk, because he was prepared to involve Allan and Mary in the giving of guarantees. Tony was involved in the business to the extent of visiting Acma in Singapore and investigating the importation of televisions from Hong Kong. 106 In those circumstances, Mr. Sackar asked, what should the Bank have done at the time the guarantees were obtained? If it should have given advice, what advice should it have given? The assessment made by the Bank was for its own lending purposes, and was not something it was obliged to share with anyone else; especially because this assessment was a subjective judgment about which minds could reasonably differ. Certainly, he submitted, it was not enough to justify the Bank intervening so as to alert Stephen's family to check up on what Stephen was doing. 107 The risk of over-ordering was only one risk of the business. There were risks depending on price, quality, delivery and personal relationships. In fact, the evidence indicated that there were many such factors that led ultimately to the failure of the business and the calling of the guarantees. 108 As regards unconscionability, Mr. Sackar submitted that there was no special disability in this case, of the kind discussed in Commercial Bank of Australia v. Amadio (1983) 151 CLR 447. Decision 109 In my opinion, the crucial question is whether the guarantees and mortgage can be considered unjust because they are not limited to guaranteeing Demson's performance of a contract having the terms of the contract as finally made between the Bank and Demson. 110 The explanation given by Mr. Newton to the guarantors was, on the findings of the primary judge, to the effect that the Bank had approved a loan of $2.65 million to help Demson import air conditioners, and that the Bank was to have guarantees including interlocking guarantees by the four companies, and mortgages including Mary's mortgage of Lot 3. The explanation did say that all of the properties support all of the loans; but the letter given to the guarantors stated that the present liability to the Bank was limited to $2,650,000.00 plus interest, costs, charges and expenses, thereby linking the guarantees to the loan to Demson. 111 One problem with this explanation is that strictly, at the time the guarantees were signed, the Bank had not approved a loan to Demson for $2.65 million, because the Bank did not determine the terms for any such loan until 28 August 1989, and final terms of the loan were not officially communicated to Demson until 19 September 1989. 112 The true situation was that the Bank was in the process of granting a credit of SGD $845,770.00 to Demson, had decided that it would offer a loan of up to $2.65 million to Demson, and was considering the terms on which it would do so. It was because there were, at the time the guarantees were signed, no settled terms on which the Bank would advance $2.65 million, that the guarantors' case concerning material alteration to the principal contract had to fail. 113 The Zone's assessment of the matter at all material times was that there were risks in the venture such that there needed to be a condition in place to the effect that money would not be advanced to Demson except to pay for air conditioners in respect of which Demson held orders, originally without exception and later with a limited exception. And it was the Zone's assessment that was authoritative, so far as the Bank was concerned. 114 In the result, the guarantors were not guaranteeing a loan to Demson on the terms ultimately determined by the Bank, but guaranteeing whatever loan the Bank might make to Demson up to the limit of $2.65 million. Of course, this was in any event the effect of the "all monies" clause in the guarantees, and of the term in the guarantees maintaining the liability of the guarantors in the event of variations in the contract between the Bank and Demson. The question is whether, in circumstances where the Bank perceived risks and imposed conditions to deal with them, this makes the guarantees unjust. 115 Similar comments apply to the mortgage signed by Mary. It does not appear that the explanation given by Mrs. Garland referred explicitly to the purpose of the loan to Demson that was being guaranteed, but the acknowledgement that Mary signed does refer to the limit of $2.65 million. 116 It is clear that there can be circumstances in which the Contracts Review Act can be relied on so as to prevent a creditor taking advantage of an "all monies" clause so as to impose liability on a guarantor. A case that illustrates this is State Bank of NSW v. Muir (1997) NSW Conv R 55-823. 117 In that case, a husband and wife were the joint owners of a home in Sydney, and they gave a mortgage to secure a housing loan of $350,000.00. This mortgage contained an "all monies" clause. The husband had an overdraft account with the same bank which ultimately became overdrawn to the extent of $200,000.00. The bank sought to rely on the all monies clause to charge the wife's interest in the family home with amounts owing to it under the husband's overdraft account. McClelland CJ in Eq. made orders pursuant to the Contracts Review Act limiting the extent to which the bank could rely on the all monies clause for that purpose. 118 At pp.56,436-37, McClelland CJ in Eq. said this: The prospect that one of two joint borrowers under a housing loan from a bank would, by joining in the home mortgage, become potentially liable, or cause the home to become security, for unrelated individual debts of the other joint borrower is likely to be quite remote from the reasonable contemplation of the ordinary housing loan borrower, and the inclusion in a housing loan mortgage of an "all moneys" clause having this effect could hardly be said to be reasonably necessary to protect the legitimate interests of the lender in respect of that transaction. The imposition, under the umbrella of a housing loan mortgage, of potential liability on one of two joint mortgagors for the debts of the other arising from other transactions, may properly be characterised as a potential trap for all but the unusually commercially sophisticated or well advised borrower. Where, as in the present case, the execution of such a mortgage by a borrower lacking unusual commercial sophistication, and without independent advice, is procured by an agent of the bank who does not take reasonable or adequate steps to ensure that the borrower is fully conscious of the nature and extent of the risk, the mortgage is likely to be held to be "unjust" within the meaning of s.7 of the Contracts Review Act 1980. At any rate, that is the conclusion which I reach in the circumstances of the present case. 119 Plainly, that was a stronger case for the guarantor than the present. 120 So far as Tony is concerned, there is no finding one way or the other whether or not his understanding of the risks was based on an assumption that finance would be limited to air conditioners for which orders were held. However, he was a director of Demson and had taken some part in Demson's business activities, so there is much force in the consideration that, whatever the true position was about his actual understanding, the Bank could not be expected to alert him to be concerned that his brother and fellow director Stephen might acquire air conditioners for which there were no orders. In relation to Tony, in my opinion the guarantee is not shown to be unjust in that it is not limited to guaranteeing Demson's liabilities for advances in relation to air conditioners for which orders were held, or in any other respect. 121 In relation to Mary and Allan, there are different considerations. It does not appear that they had any interest in Demson, or any involvement in its affairs. Mary was recently widowed, and her mortgage was of the family home. Allan was apparently not well-educated or experienced in business. Their appreciation of the risks of the venture depended on what Tony had told them; and while I have accepted the primary judge's finding that Tony passed on to them his apprehension of the risks of the venture, there is no finding as to whether or not this understanding was based on an assumption that finance would be limited to air conditioners for which orders were held. In those circumstances, while I am not satisfied that their understanding of the risks was based on a belief that finance would be so limited, nor am I satisfied that it was not based on such a belief. 122 Mary and Allan were respectively Stephen's and Tony's mother and brother, but such family members are often the very ones who are imposed on when guarantees of debts of a business are obtained. While the Bank may reasonably have proceeded on the basis that Tony, as a director of the company having some involvement in its business, sufficiently appreciated the true risks, I do not think it could do so with Mary and Allan. 123 Mary and Allan could not give evidence at the hearing. Mary was already deceased, and Allan was very ill. Some only of an affidavit of Allan was admitted into evidence. It cannot be inferred that their evidence about their understanding would not have assisted their case. 124 At the time Allan's guarantee was obtained, and at the time Mary's mortgage was obtained, the Bank was for its own protection proposing to impose limits on what it would advance to Demson because of its perception of the risks of the venture, and it did subsequently determine upon such limits. That raises the question whether it was reasonable for the Bank to obtain guarantees from Mary and Allan that would extend to advances made by the Bank in breach of the limits it was proposing for its own protection. In my opinion, it is reasonable to infer that Mary and Allan did not know that this was what the Bank was doing, and that if they had known this and been in a position to protect their interests, they would have requested that their guarantee be limited to repayment of advances that the Bank proposed to make in accordance with its own terms. 125 I think it would generally be unreasonable for a bank to take a guarantee of a company's liability to the bank from a family member of directors who is not otherwise associated with the business of the company, where the bank imposes explicit and readily enforceable contractual limits on the advances it is to make to the company but obtains a guarantee which extends to liabilities of the company going beyond those limits, unless the bank takes reasonable steps to ensure that the guarantor understands that this is what the bank is doing and assents to it. Indeed, if in such a case the bank represented to the guarantor that the bank had agreed to provide finance to the principal creditor, and that the guarantee was of repayment of money provided pursuant to that agreement, the representation would be misleading. In the present case, the limits were not determined until after the guarantees were obtained; but since the Bank intended to impose limits of that kind at the time the guarantee and the mortgage were signed, I do not think that makes a material difference. Certainly, the Bank took no steps to ensure that Mary and Allan understood that this is what the Bank was doing. 126 In my opinion, the primary judge was in error in treating the consequences of Demson's default as being the risk important for the understanding of Mary and Allan, and in not taking into account the matters I have been discussing. In my opinion, the contracts made with Mary and Allan were unjust in the circumstances in which they were made, to the extent that they imposed liability beyond that which the Bank determined to be appropriate limits for Demson. A question arises as to whether those limits are the ones determined by the Zone in its memoranda to the Branch of 28 August 1989 and 18 September 1989, or those set out in the Branch's letter to Demson of 19 September 1989. Since it is the Zone's decision that was authoritative so far as the Bank was concerned, and since the Branch's departure from the Zone's decision in the letter of 19 September 1989 is not in substance any different from its further departures in issuing credits in breach of the Zone's limits, in my opinion it is the Zone's limits that are relevant. 127 Prima facie, this would justify an order adjusting the liability of Mary and Allan to what it would have been if their contracts had been limited to guaranteeing repayments of advances made by the Bank to Demson in accordance with the limits determined by the Bank. However, further issues needed to be considered before the question of remedy can be decided. 128 I do not think the conduct of the Bank can be considered unconscionable, so as to justify relief on the basis discussed in Amadio in relation to any of the appellants. In particular, I do not think that any of the appellants have established a special disadvantage precluding an informed judgment as to their interests, such as infirmity of body or mind or some particular need for assistance or explanation, or that it has been shown that the Bank's conduct amounted to an unconscientious exploitation of any disadvantage of that kind. This was not a case where the Bank was obtaining security for existing indebtedness, as was Amadio, but one where it was obtaining security for new advances. The factors that have led me to find the contract unjust in a particular respect are not, in my judgment, sufficient to justify a conclusion that the Bank has acted unconscionably. 129 Since relief cannot be granted to corporations under the Contracts Review Act (see s.6(1)), this means that the appeals by ABI and Vitlern must fail, as well as that by Tony. THE ACKNOWLEDGEMENT AND ESTOPPEL 130 In finding that the appellants were estopped from asserting that the guarantees and mortgage were ineffective, the primary judge relied on Falinski v. Commonwealth Bank of Australia NSWCA 6/2/98. 131 In that case, Mrs. Falinski had signed a guarantee securing moneys payable to the Bank by a company operated by her husband; and the Bank sued her pursuant to that guarantee. Mrs. Falinski defended, relying among other things on the Contracts Review Act and Amadio, and also alleging she had given a notice to the Bank that had the effect, pursuant to the terms of the guarantee, of relieving her of liability in respect of liabilities subsequently incurred by the company. However, subsequently to giving that notice, Mrs. Falinski had signed an acknowledgement that the Bank may grant accommodation to the company against the security of her guarantee, and thereafter the Bank advanced further money to the company. 132 The Court of Appeal agreed with the primary judge in that case that Mrs. Falinski failed to demonstrate that she was entitled to relief under the Contracts Review Act or that the Bank had acted unconscionably; that the notice was not effectual; and also that even if the notice would otherwise have been effectual, Mrs. Falinski was estopped from denying a continuing liability under the guarantee after she signed the acknowledgement and the Bank acted on it. Submissions 133 Dr. Birch submitted that estoppel of the kind considered in Falinski could not preclude relief under the Contracts Review Act, because estoppel was not available against the statute and because of the express terms of s.17(2) of the Contracts Review Act. He submitted that the Court of Appeal in Falinski did not decide otherwise, applying estoppel only to Mrs. Falinski's claim in relation to the notice purporting to terminate liability. At most, he submitted, the giving of the acknowledgement could be taken into account in deciding what relief to give. 134 Dr. Birch submitted that in this case there was in any event no finding that the Bank relied on the acknowledgement in granting further accommodation. At most, any reliance could justify moulding relief so that the Bank was not disadvantaged by any further advances. 135 Mr. Sackar submitted that the primary judge did in substance find reliance and was justified in doing so. He submitted that the effect of the estoppel was to prevent the appellants from asserting to the contrary of the acknowledgement. He submitted that even if s.17(2) affected estoppel by representation, it did not affect conventional estoppel, that being the relevant category in the case. Decision 136 In my opinion, the primary judge did in substance find reliance, as submitted by Mr. Sackar, and was justified in doing so. However, since the only basis on which the appellants may be entitled to relief is under the Contracts Review Act, it is not necessary to decide whether the acknowledgement gave rise to an estoppel that would operate against relief at general law or under the Trade Practices Act. 137 It is clear that in some cases estoppel can affect rights which a party may otherwise have pursuant to a statute, for example rights under limitation statutes. The Commonwealth v. Verwayen (1990) 170 CLR 394, on one view of that case, is an example. But in my opinion, s.17(2) of the Contracts Review Act makes it clear that estoppel based on any statement or representation does not preclude relief. 138 However, the circumstance that the acknowledgement was made and relied on is a factor relevant to consideration of what, if any, relief should be granted. I will return to it when I come to consider the question of relief. VOLUNTARY PAYMENTS Submissions 139 Mr. Sackar submitted that in any event the payments made in 1993 were voluntary and so irrecoverable. 140 Mr. Sackar submitted that money is not recoverable if it is paid under a mistaken belief that it is payable under a particular contract, when in fact it is payable under another contract: cf. David Securities Pty. Limited v. Commonwealth Bank of Australia (1992) 175 CLR 353 at 376. Further, the payments were made for good consideration, including to secure the release of other mortgages and guarantees under which the payments would have been recoverable. Further, he submitted that the payments were not recoverable, for the reasons discussed in McKay v. National Australia Bank [1998] 4 VR 677, at 686. He pointed particularly to the statement at that page that "there will, ordinarily, be no compulsion of the sort which the law requires if payment cannot be enforced except through legal action which the person called upon can resist". Decision 141 In my opinion, the circumstance that some of sum of about $3.8 million paid to the Bank in 1993 may have been in respect of debts unaffected by the issues in these proceedings does not mean that the whole of the payments were made for good consideration. It is not suggested that there was any element of compromise in these payments, and the Bakarich interests were entitled to a discharge of any other debts upon payment of what was in fact owing. There was thus no consideration for any payment in excess of this. 142 In my opinion also, any payments in excess of what was truly owing were not voluntary. The Bank was not merely threatening legal action to recover money owing, it was threatening the exercise of a power of sale under the mortgage over Lot 34A. 143 In any event, if the Court grants relief under the Contracts Review Act, it has power to order re-payment of money, even if payments had been made voluntarily. RELIEF 144 The appellants sought to be relieved altogether of liability under the guarantees and Mary's mortgage. However, in my view at most Mary and Allan are entitled to no more than an adjustment of their liability down to what it would have been if their contracts had been limited to guaranteeing repayment of advances made by the Bank to Demson complying with the limits determined by the Zone. 145 On the figures put by the appellants, the Bank financed importation of air conditioners for which orders were not held to the extent of $1,641,480.00, that is, $1,341,480.00 more than would have been the case if the limit specified by the Zone had been adhered to. That would not translate directly to a reduction by that amount of what the guarantors owed to the Bank, because those air conditioners may have been disposed of for some consideration. Prima facie, the enquiry required would be as to what the ultimate indebtedness of Demson to the Bank would have been, but for excess advances of $1,341,480.00; and how much of the difference between that figure and the actual ultimate indebtedness can be regarded as caused by the Bank's breaches of its conditions. Then, there would be a proportionate reduction of the shares of Mary and Allan, to reflect a reduction by this amount. 146 There are a number of considerations relied on by the Bank that could count against this adjustment. 147 One general point made is that the failure of Demson was not due to the excess air conditioners imported, but rather other factors such as problems with the quality of the goods and delivery, as shown by the 1990 letters set out in the primary judge's reasons. 148 That is a factor to be taken into account in deciding questions as to the difference that compliance by the Bank with its own terms would have made, and how much of that difference should be considered as caused by the Bank's breaches of its own terms; but in circumstances where it is not suggested that this is zero, this point is not sufficient to justify refusal of relief. 149 Next, there is the acknowledgement and the Bank's making further advances. In my opinion, so long as making further advances is not considered as being caused by the Bank's earlier breaches of its own terms, the Bank will not be adversely affected by this in the result. 150 This leads to a significant question, namely, how should the "share" of Mary and Allan be calculated, and what if anything should be done about the liability of other guarantors to make up to the Bank any deficiency caused by a reduction in their shares. 151 I am not aware if the evidence discloses whether the guarantors apart from the appellants made any contribution to the discharge of Demson's liabilities. Originally, there were eight guarantors in all, four individuals and three companies in the two guarantees, and Mary by her mortgage. It is not clear to me if that ever changed, or whether the two individuals and one company not included in this appeal have made and/or are capable of making any contribution. If the number of guarantors did not change, and if the other three have not made any contribution and cannot do so, it would appear that the contributions required from each of Mary and Allan would reduce by one-fifth of the amount arrived at as having been caused by the Bank's breaches of its own terms. 152 The question then would be whether the Bank should bear that loss, or be able to make it up from the other guarantors, and in particular from Tony, AGI and Vitlern. Their guarantees contained terms to the effect that their liability is not affected by discharge of other guarantors, so the question is whether the Court can and should grant ancillary relief to them under Schedule 1 of the Contracts Review Act, noting that cl.3 of Schedule 1 provides that the limitations of s.6 do not apply to such relief. 153 Clause 1 of Schedule 1 empowers the Court to "make such order as may be just in the circumstances for or with respect to any consequential or related matter", including among other things the compensation of a person whose interest may otherwise be prejudiced. In my opinion, the power would extend to protecting co-guarantors from increased liability, in the event that some guarantors are released from liability or have some limit placed on their liability. 154 This gives rise to the question whether the Bank on the one hand, or Tony, ABI and Vitlern on the other, should bear the ultimate loss, if Mary and Allan are relieved of part of their liability. 155 It is clear that Tony did pay an active part in the business during the period August 1989 to December 1989, when the ordering of excess air conditioners occurred. According to the findings of the primary judge, he signed Demson's application for a documentary credit on 11 October 1989, and travelled to Singapore in both October and November 1989. The primary judge did not make any finding favourable to Tony as to his ignorance of Stephen's ordering of air conditioners. As noted earlier, Tony eventually took over the whole business and attempted to continue it for some time. 156 Having regard to these considerations, I have come to the view that no order should be made limiting Tony's liability on his guarantee. Tony is the person mainly responsible for the control of ABI and Vitlern, and I am of the view that those companies also should not have the benefit of an ancillary order. CONCLUSION 157 The question arises whether there is any utility in ordering an enquiry which could result in a refund of money to Mary's estate and Allan's estate, in circumstances where Tony, ABI and Vitlern would have to make up any such amount. Mary and Allan are both deceased, and it would appear likely that Tony has a substantial interest in their estates. It seems quite likely therefore that there would be no point in ordering an enquiry, because there would be no ultimate detriment to the Bank or benefit to the appellants. 158 However, this point was not directly addressed, so the Court should give the appellants an opportunity of submitting either that material before the Court of Appeal show that there would be utility in such an enquiry, or that there is sufficient in those materials to justify remitting the matter to a single judge to determine whether such an enquiry would have any utility. I would direct that any such submissions be provided within 21 days, in which case submissions in response could be provided within a further 21 days. 159 I propose the following orders: 1. Direct that any submissions by the appellants to the effect that there should be an enquiry be provided within 21 days. 2. If such submissions are provided within 21 days, direct that any submissions in response be provided within a further 21 days. 3. If the appellant does not provide submissions within 21 days, appeal dismissed with costs. 160 SANTOW JA: I agree with Hodgson JA. 161 CAMPBELL JA: I agree with Hodgson JA ********** 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.