Supreme Court New South Wales Medium Neutral Citation: International Skin Care Suppliers Pty Ltd v Commonwealth Bank of Australia; Commonwealth Bank of Australia v Scott William Michaelson; Commonwealth Bank of Australia v Stephen John Ruskin; Commonwealth Bank of Australia v Scott William Michaelson [2013] NSWSC 1768 Hearing dates: 26, 27, 28, 29, 30 August, 2, 3, 4, 9, 10, 11, 12, 16, 17, 18, 30 September and 1, 2, 3, 8, 9, 10 October 2013 Decision date: 29 November 2013 Jurisdiction: Equity Division - Commercial List Before: Hammerschlag J Decision: Plaintiffs' claims dismissed. Bank entitled to judgment against each of the cross-defendants. Bank entitled to judgment against each of the female guarantors. Bank entitled to orders for possession of Seaforth and Allambie Heights. Catchwords: FINANCIAL SERVICES - ss 12CA and 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) - whether bank misleadingly or deceptively represented that it would not regard appointment of voluntary administrators as an Event of Default under a loan facility - whether bank unconscionably procured and relies on releases and bars in a Deed of Forbearance - whether loss suffered by appointment of receivers to properties which were security under the facility and guarantees - whether quantum is established - CONTRACTS - s 7(1) of the Contracts Review Act 1980 (NSW) - whether personal guarantees were unjust in the circumstances relating to them at the time they were made - whether it is unconscionable under the general law to enforce them Legislation Cited: Australian Securities and Investments Commission Act 2001 Financial Sector (Business Transfer and Group Restructure) Act 1999 (Cth) Category: Principal judgment Parties: Proceedings 2010/326659 International Skin Care Suppliers Pty Ltd ACN 134 156 004 - First Plaintiff Mascot Property Group Pty Ltd - Second Plaintiff Eminence Pty Ltd - Third Plaintiff Sunlovers Partners Pty Ltd - Fourth Plaintiff Tanning Systems Australia Pty Ltd - Fifth Plaintiff Barun Concepts Pty Ltd as Trustee of The Macintosh Unit Trust - Sixth Plaintiff CPL Australasia Pty Limited (subject to Deed of Company Arrangement) - Seventh Plaintiff Commonwealth Bank of Australia - Defendant Proceedings 2011/139468 Commonwealth Bank of Australia - Plaintiff/ Cross-Defendant Scott William Michaelson - First Defendant/First Cross-Claimant Suzanna Michaelson - Second Defendant/Second Cross-Claimant Proceedings 2011/260157 Commonwealth Bank of Australia - Plaintiff/ Cross-Defendant Stephen John Ruskin - First Defendant/ First Cross-Claimant Simone Nanette Ruskin - Second Defendant/Second Cross-Claimant Proceedings 2011/260163 Commonwealth Bank of Australia - Plaintiff/Cross- Defendant Scott William Michaelson - First Defendant/ First Cross-Claimant Suzanna Michaelson - Second Defendant/Second Cross-Claimant Kimberley Gay Whyte - Third Defendant/ Third Cross-Claimant Gay Elizabeth Daly - Fourth Defendant/ Fourth Cross-Claimant Representation: Counsel: F.M. Douglas QC [days 1 and 2] with D.E. Baran with D. Robertson [days 1 to 19] - Plaintiffs/Cross-Defendants A. Leopold SC with J.E. Hynes and T.L. Wong [days1, 20 and 21] - Defendants/Cross-Claimants F.F.F. Salama - Related Proceedings Guarantors Solicitors: McCabes - Plaintiffs/Cross-Defendants Henry Davis York - Defendants/Cross-Claimants Birchgrove Legal - Related Proceedings Guarantors File Number(s): 2010/326659; 2011/139468; 2011/260157; 2011/260163 INDEX INTRODUCTION........................................................................... [1] BACKGROUND............................................................................ [17] The early days.............................................................................. [17] Introduction of BankWest and the first facilities.................................... [32] The salient terms of the facility......................................................... [36] Execution of the guarantees............................................................ [39] The conception of the restructure..................................................... [78] The voluntary administration of CPL.................................................. [162] Events immediately after the voluntary administration........................... [189] The DOCA and the Deed of Forbearance........................................... [235] The non-refinancing....................................................................... [277] The Equiset offers......................................................................... [289] The receivership and subsequent events............................................ [306] THE PROCEEDINGS..................................................................... [323] THE WITNESSES......................................................................... [331] Michaelson and Ruskin................................................................... [332] Kalogerou.................................................................................... [336] Wise........................................................................................... [337] Smith.......................................................................................... [341] Hornstra...................................................................................... [342] ISC'S CLAIM IN THE PRINCIPAL PROCEEDINGS [343] The relevant statutory enactments.................................................... [343] The issues................................................................................... [349] The misleading and deceptive conduct............................................... [362] The Deed of Forbearance............................................................... [398] Loss and damage.......................................................................... [437] Loss........................................................................................... [441] Quantum..................................................................................... [484] THE GUARANTORS...................................................................... [512] The Contracts Review Act............................................................... [529] The Banking Code of Conduct......................................................... [538] Consideration............................................................................... [547] THE ABANDONED CASES............................................................. [577] The clawback arrangement claim...................................................... [578] The Singleton-Prudential misleading conduct claim.............................. [606] THE NON-SET-OFF DEDUCTION POINT.......................................... [611] CONCLUSION.............................................................................. [614] JUDGMENT INTRODUCTION 1HIS HONOUR: Before the Court are four sets of proceedings being heard together. 2In the principal proceedings, seven corporate plaintiffs aver that the Bank of Western Australia Ltd ("BankWest" or "BWA") engaged in misleading or deceptive, or unconscionable, conduct during 2008 and 2009 in relation to financial services in contravention of ss 12CA and 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) ("the Act"). 3The plaintiffs are: * International Skin Care Suppliers Pty Ltd (referred to variously as "ISC", "Indio Skin" or "Indio") * Mascot Property Group Pty Ltd ("Mascot") * Eminence Pty Ltd ("Eminence") * Sunlovers Partners Pty Ltd ("Sunlovers") * Tanning Systems Australia Pty Ltd ("Tanning") * Barun Concepts Pty Ltd * CPL Australasia Pty Ltd ("CPL") 4All except Barun Concepts Pty Ltd are in receivership. Directors and shareholders bring these proceedings on behalf of those in receivership with leave. 5Only ISC claims that it suffered loss by the conduct complained of. 6With effect from 19 December 2008, the Commonwealth Bank of Australia acquired BankWest from the Halifax Bank of Scotland ("HBOS"). BankWest's business, and all its rights and obligations, were transferred to the Commonwealth Bank on 1 October 2012 under a certificate of transfer pursuant to the Financial Sector (Business Transfer and Group Restructure) Act 1999 (Cth). Unless it is necessary to distinguish between them, references to the Bank include references to the Commonwealth Bank and BankWest. 7The Bank cross-claims against each of the plaintiffs (except Barun Concepts Pty Ltd) in debt or under guarantees. Its claims are not disputed. It is entitled to judgment against each of the plaintiffs in the amount of $7,672,545.94 plus interest from 27 November 2012. 8In the three other proceedings, the Bank sues personal mortgagors and guarantors. It seeks orders for possession of two properties mortgaged to it as security. 9ISC's claim fails at every hurdle. 10First, no conduct on the part of the Bank has been shown to be misleading or deceptive or unconscionable. 11Secondly, by solemn Deed of Forbearance made by ISC and the Bank on 14 May 2009 ISC further released and discharged the Bank from the claim now made. 12Thirdly, ISC has failed to establish that even if the conduct complained of occurred, it suffered any damage by it. 13Fourthly, if it suffered any damage it has failed sufficiently to establish the quantum of it. 14Various demonstrably untenable claims were brought by the plaintiffs and abandoned during the course of the hearing, some in final submissions. 15Unsupportable and indeed irresponsible allegations of dishonesty and misconduct on the part of the Bank and its officers were made and promoted, but then abandoned. 16The Bank's claim against the mortgagors and guarantors succeeds and it is entitled to orders for possession as prayed. BACKGROUND The early days 17Scott William Michaelson ("Michaelson") worked in the film and television industry for some years as an actor and manager. In 1995 he became involved in the skin care industry. 18Stephen John Ruskin ("Ruskin") is an accountant with experience in buying, selling and developing commercial properties. 19The two went into business together. They incorporated a number of companies. Initially they focused on skin tanning, including renting solarium equipment to fitness clubs and servicing and maintaining it. 20Michaelson took responsibility for marketing, brand development, customer relations and developing the future vision of the group. Ruskin was head of accounting. 21In 2004 they incorporated CPL to sell skin care products and equipment. Ruskin became more of a general manager. Michaelson's mother Gay Daly ("Gay") was in charge of administration and Michaelson's sister, Kimberley Whyte ("Kimberley"), undertook general administrative duties. Both Gay and Kimberley hold shares in CPL. 22In 2004 Mascot and Eminence acquired a rundown warehouse at 410-412 Botany Road, Alexandria ("Botany Road"), which they refurbished. It is a large two storey building with significant street exposure. It became their headquarters. 23In April 2007 Sunlovers and Eminence (as trustees for a unit trust), bought a property at 12-14 MacIntosh Street, Mascot ("MacIntosh Street"). The purchase was financed with a loan from Suncorp Bank. 24Michaelson and Sunlovers acquired a further property at 580 City Road, South Melbourne, Victoria ("City Road"). 25CPL and other entities controlled by Michaelson and Ruskin from time to time were commonly described as "the CPL Group". 26From January 2008 CPL began manufacturing skin care products branded "Indio", connoting "industry only". Indio was not available to retail customers through department stores or pharmacies, but only through beauty salons. By all accounts, Michaelson devoted significant effort to developing and selling high quality skincare products. 27A primary source of CPL's products was an Israeli company, Holy Land Cosmetics Ltd ("Holy Land"), represented by Zvi Dekel ("Dekel"). At first, Holy Land supplied bulk product to CPL which CPL packaged. 28Dekel apparently came to Australia in about April 2008, at which time he informed Michaelson that Holy Land's prices were to increase. Michaelson says that in June 2008 Dekel told him in a telephone conversation that Holy Land could no longer supply bulk product but that Dekel would re-examine things after they had signed an exclusive supply agreement. Michaelson says that through May and June 2008 Dekel would not take phone calls or respond to basic product requirements. He says that a formal contract under which CPL agreed that Holy Land would be its exclusive supplier was signed in about June 2008. An unsigned instrument entitled "Private Label Agreement" is in evidence. It has a minimum period of five years. 29As at early 2008 the CPL Group had loan facilities with the National Australia Bank ("NAB"). 30Michaelson and his wife, Suzanna Michaelson ("Suzanna") (together "the Michaelsons"), had a home loan with NAB secured by a mortgage over their property at 21 Seaforth Road, Seaforth ("Seaforth"), which is owned by them as tenants-in-common as to three-quarters and one-quarter respectively. 31Simone Ruskin ("Simone"), Ruskin's wife (together "the Ruskins"), had a home loan with NAB secured by a mortgage over her property at 6 Derna Crescent, Allambie Heights ("Allambie Heights"). Introduction of BankWest and the first facilities 32Michaelson and Ruskin were apparently dissatisfied with NAB and wished to refinance. Kelvin (Kel) Smith ("Smith"), a finance broker whose services they had previously used, introduced them to Deborah Lea Wise ("Wise"), a business development manager at BankWest. Wise reported to Martin (Marty) Lee ("Lee"), Senior Manager Credit Sanctioning. 33As at early May 2008, the total borrowings of the CPL Group and associated individuals was $12.153 M. In a Credit Risk Submission dated 5 May 2008, Wise recommended that the Bank provide accommodation to the CPL Group and associated individuals. Wise became the day-to-day manager of the CPL Group's accounts and over time undoubtedly acquired knowledge of its affairs. 34As part of the wider refinancing, by letter dated 14 May 2008, the Bank offered a facility to CPL ("the facility") of $2.8 M comprising $2 M to assist with the refinance of the NAB facilities and $800,000 for working capital and general purposes. The Bank's offer was accepted by no later than 19 May 2008. The facility was governed by the Bank's General Terms for Business Lending version December 2007. 35The wider refinancing included refinancing of a loan of approximately $2.6M from NAB to Mascot and Eminence in connection with Botany Road, refinancing of a loan of approximately $2.6 M from Suncorp Bank to Sunlovers and Eminence in connection with MacIntosh Street, a loan of $350,000 to Tanning Systems, refinancing of the Michaelsons' home loan and mortgage over Seaforth for approximately $2.24 M and refinancing Simone's home loan and mortgage in respect of Allambie Heights for approximately $400,000. The salient terms of the facility 36Clause 16.1 of the facility provides, relevantly, that: An "Event of Default" occurs, whether or not it is in your power to prevent it, if: (a) you do not pay on time any amount payable by you under any Facility Document in the manner required under it; (o) you are or become Insolvent or steps are taken to make you Insolvent; (p) an event described in this clause occurs in respect of any Guarantor, any Related Entity of you or any Related Entity of a Guarantor. 37Clause 16.2(b)(i) of the facility provides, relevantly, that: If an Event of Default has occurred we may at any time: [...] give you notice declaring the Total Outstanding Amount is [...] payable on demand. 38Clause 22 of the facility provides, relevantly, that: Insolvent, in respect of a person, means the happening of any of these events: (b) the person has had a controller (as defined in the Corporations Act) appointed over any of its property, are in liquidation, [...] under administration or wound up; (d) an application or order has been made (and, in the case of an application, it is not stayed, withdrawn or dismissed within 30 days), resolution passed, proposal put forward, or any other action taken, in each case in connection with the person, which is preparatory to or could result in any of the things referred to above; (e) the person is taken (under section 459F of the Corporations Act) to have failed to comply with a statutory demand. Outstanding Amount means, at any time, in respect of a Facility, the total of all amounts which you owe us or which you may owe us under or in connection with that Facility... Execution of the guarantees 39Mr Steven Pirintji ("Pirintji") is a solicitor who practices under the name Populaw Legal Services. In about March 2008 Michaelson had approached Pirintji, who was selected as the new lawyer for entities associated with Michaelson. The first substantial matter for which he was retained was the proposed refinance. He understood that Suzanna, Simone, Gay and Kimberley (to whom I shall refer collectively as "the female guarantors") would be guarantors for the group. 40Pirintji was asked to act for the borrowers as well as all guarantors. He formed the view that there was a potential conflict of interest between the borrowers and the guarantors and that he could only act for both groups with the informed consent of both. He initially told Michaelson or Ruskin that the female guarantors would need to get independent legal advice from another solicitor. 41From 22 May 2008 Pirintji was in contact with Mr Murray-Nobbs of Kemp Strang, solicitors acting for the Bank on the refinancing. 42In an affidavit sworn 19 October 2012, Wise gave evidence that during the evening of 14 May 2008 she prepared, with the assistance of her assistant, guarantor packs, staying at work late to get the material prepared. She says she prepared letters to be sent, amongst others, to the Michaelsons, the Ruskins, Gay and Kimberley, CPL, Mascot, Eminence, Sunlovers and Tanning. With respect to the personal guarantors, she says she made copies of documents to be included with the letters, put them in A4 envelopes, and wrote the addressees' names on them. She says she put the envelopes for Suzanna and Simone in the postal out-tray for delivery the following day. She says that she personally delivered the packages for Gay, Kimberley, Michaelson and Ruskin at Botany Road on 15 May 2008. The guarantees, which she identified as being in the pack, describe the Guaranteed agreement as "[a]greement between the debtor and us constituted by acceptance of an offer from us dated 14 May 2008 and Variation Letter dated 29 May 2008". Self-evidently, the variation letter was not in existence at 14 May 2008. Wise readily accepted this and revised her evidence, maintaining that, while she was mistaken about the date, the events she described took place, but rather on the evening of 29 May 2008 and during the day on 30 May 2008. 43The facility was varied on 29 May 2008 by including a condition that by 31 December 2008 certain proceeds to be received from the sale of City Road were to be applied to permanent debt reduction. 44In her affidavit sworn 13 July 2012, Suzanna does not deal with the question of whether she received a guarantor pack prior to 4 June 2008. In her affidavit sworn 13 July 2012, Simone says to the best of her recollection, she had not previously been provided with disclosure documents but may have been provided with them at the offices of Kemp Strang on 4 June 2008. She cannot recall. In her affidavit sworn 13 July 2012, Gay does not deal with the question of whether she received a guarantor pack prior to 4 June 2008. In her affidavit sworn 13 July 2012, Kimberley does not deal with the question of whether she received a guarantor pack prior to 4 June 2008. Under cross-examination, Kimberley agreed that she received a guarantor pack before signing, but not before 4 June 2008. 45On 4 June 2008 the following securities, all cross-collateralised, were executed in favour of the Bank: (a)Mascot and Eminence executed guarantees and a mortgage over Botany Road; (b)Sunlovers and Eminence executed guarantees and a mortgage over MacIntosh Street; (c)Michaelson executed guarantees for the obligations of each of CPL (limited to $2.8 M plus interest, fees, costs and other expenses), Mascot and Eminence (limited to $2.675 M plus interest, fees, costs and other expenses), Sunlovers and Eminence (limited to $2.64 M plus interest, fees, costs and other expenses) and Tanning (limited to $350,000 plus interest, fees, costs and other expenses); (d)Suzanna executed guarantees for the obligations of each of CPL (limited to $2.56 M plus interest, fees, costs and other expenses), Mascot and Eminence (limited to $2.56 M plus interest, fees, costs and other expenses), Sunlovers and Eminence (limited to $2.56 M plus interest, fees, costs and other expenses) and Tanning (limited to $350,000 plus interest, fees, costs and other expenses); (e)Ruskin executed guarantees for the obligations of each of CPL (limited to $2.8 M plus interest, fees, costs and other expenses), Mascot and Eminence (limited to $2.675 M plus interest, fees, costs and other expenses), Sunlovers and Eminence (limited to $2.64 M plus interest, fees, costs and other expenses) and Tanning (limited to $350,000 plus interest, fees, costs and other expenses); (f)Simone executed guarantees for the obligations of each of CPL (limited to $1.12 M plus interest, fees, costs and other expenses), Mascot and Eminence (limited to $1.12 M plus interest, fees, costs and other expenses), Sunlovers and Eminence (limited to $1.12 M plus interest, fees, costs and other expenses) and Tanning (limited to $350,000 plus interest, fees, costs and other expenses); and (g)Gay executed guarantees for the obligations of each of CPL (limited to $2.8 M plus interest, fees, costs and other expenses), Mascot and Eminence (limited to $2.675 M plus interest, fees, costs and other expenses), Sunlovers and Eminence (limited to $2.64 M plus interest, fees, costs and other expenses) and Tanning (limited to $350,000 plus interest, fees, costs and other expenses; and (h)Kimberley executed guarantees for the obligations of each of CPL (limited to $2.8 M plus interest, fees, costs and other expenses), Mascot and Eminence (limited to $2.675 M plus interest, fees, costs and other expenses), Sunlovers and Eminence (limited to $2.64 M plus interest, fees, costs and other expenses) and Tanning (limited to $350,000 plus interest, fees, costs and other expenses). 46Pirintji gave evidence that on 4 June 2008 he attended a meeting at Kemp Strang's offices, having been earlier informed that the transaction documents would be available for review by him. 47He says he was shown into a meeting room where present were Michaelson, Ruskin and the female guarantors. One of the female guarantors had a toddler in a pusher. On the table were various piles of documents, each approximately the thickness of a couple of telephone books. On the top of each pile was a covering letter from Kemp Strang addressed to the individual guarantor referring to the documents to be executed. He cannot recall the specific details of his initial conversation, but he says that he asked each female guarantor to tell him her name and her relationship to the CPL Group. 48Pirintji had with him a copy of Rule 45 of the Solicitors' Rules which concerns solicitors advising on loan or security documents. The rule says that a solicitor should advise the proposed signatory of those matters that the solicitor, in exercising the professional skill and judgment called for in the circumstances of the particular case, considers appropriate, but goes on to describe a number of matters of which a solicitor, where necessary, should advise. In evidence is a copy of the rule that Pirintji took with him, on which appears ticks made by him adjacent to individual matters stated in the rule as appropriate for advice. 49The rule also contains as Schedule 5 a form of consent by guarantors to legal advice from a solicitor after having been informed that the interests of the parties to the transaction may conflict and the solicitor may only act for more than one such party with the informed consent in writing of those parties to the solicitor acting for them. 50Pirintji says that he said words to the effect: I can't advise any of you individually. I am acting for the companies. You need to take these documents away and see another solicitor and get advice before you sign them as there is a potential conflict of interest. 51One of the female guarantors, to the best of his recollection Gay, said words to the effect: We can't it's urgent. We are all in the same boat. We do not want to go and seek legal advice from someone else. 52He says the other female guarantors nodded and he said words to the effect: If you are not going to see another solicitor, I will need you to sign a form which acknowledges that you have decided to waive your right to seek independent legal advice. 53Each of the female guarantors either said words to the effect of "ok" or nodded. 54During the course of the meeting, Michaelson and Ruskin were walking in and out of the meeting often speaking on their mobile phones. 55Following the initial discussion, Pirintji sat down with Michaelson and Ruskin and ran through the documents which he understood to be relevant to them, namely, loan documents, security documents, the corporate guarantees and the guarantees given by Michaelson and Ruskin themselves. Thereafter, they signed those documents in his presence. 56He says that he then dealt with each of the female guarantors in turn, although he does not now recall in which precise order. Each in turn provided him with identification. Following identification, he sat with that female guarantor for approximately 15 to 20 minutes. 57He says that his invariable practice when advising guarantors, following identification, is to run through and explain all aspects of each individual document that he considers to be salient to their interests, particularly the risks for them that he perceives. 58Although he cannot recall the specific details of his conversation with each female guarantor, he says he ran through with each female guarantor in turn a form of document giving consent to him giving them advice. In his presence, each signed the form. 59Once each female guarantor had signed the form, in accordance with his invariable practice, he went through the salient features of the loan documents and guarantees with each female guarantor prior to each signing. At the conclusion of that process, each female guarantor signed the guarantees and related documents, including a declaration of having received independent legal advice and an acknowledgement of having received disclosure documents prior to signing. 60Simone holds degrees in education and teaching. She worked as a teacher for a short time and then in a succession of marketing and public relation roles and presently works as a marketing assistant for a coffee company. She says she had no involvement in or understanding of the commercial operations of the CPL Group. She says that Ruskin told her she needed to guarantee the new facilities and give the Bank a mortgage over their house. She says that she asked him whether the guarantee would be capped at the value of the house and that he answered that that was all they had to offer and that is all the Bank could claim back. 61She gave evidence of attending the meetings on 4 June 2008 and of Pirintji explaining to her and the others the importance and seriousness of becoming a guarantor of the obligations of the CPL Group. She says she assumed that Pirintji was acting on behalf of all guarantors. She understood that the Bank would not lend the money to the CPL Group if she did not guarantee its obligations. 62Under cross-examination she agreed that Pirintji spent around 15 to 20 minutes with her. She understood that it was an important and serious matter that she was undertaking in becoming a guarantor of the obligations of the CPL Group. 63Suzanna gave affidavit evidence that on 4 June 2008 Michaelson told her she needed to go into the city to sign some documents for the refinancing. She left Seaforth and went to an office in the city to sign the documents. She had her son Ollie with her at the time. She remembers having to wait for a while before she was taken into a large boardroom. Pirintji was sitting at one end of the table. There were piles and piles of documents on the table. Gay and Kimberley may have been there and Simone arrived later. They were not all there at the same time. Michaelson was not there. She remembers having to wait for a while before she was given a number of documents to sign. 64She says this was the first time that she had seen the documents. She understood that she would have to sign contracts as part of the refinancing and knew that the documents related to the refinancing but she could not read the documents properly as there were so many of them. She signed the documents and her signature was witnessed by Pirintji. She believes that she left and came back again at some point for a reason which she cannot now recall. She cannot recall any specific conversations that she had whilst in the boardroom or when she was signing the documents. She knew at the time that as part of the documents she was signing she was signing guarantees for the CPL Group. Whilst she now understands what a guarantee is, it was not so clear to her at the time. 65She says that at the time, she did not fully understand the limit of the guarantees and did not know the value of the loans, businesses or properties which formed part of the refinance which she was guaranteeing. She understood that she was required to sign the documents because she was Michaelson's wife, and that their home was being used as security for the refinance. She signed the documents to do with the refinance because she wanted to support her husband and she believed in the CPL Group. She did not believe it would fail. 66Under cross-examination she gave evidence that she formed the belief that there was not a significant risk associated with the guarantees having regard to what she knew about the businesses and the brands associated with them, Indio in particular. Under cross-examination she agreed that she was prepared to put at risk everything she had. 67Although she did not say so in her affidavit, under cross-examination she gave evidence that she was of the understanding that she was guaranteeing her home as security and not the full exposure of the loan because her home was all she had to offer apart from a business (in which she was the sole trader) which was worth nothing. 68She did not recall Pirintji giving specific numbers as to what the exposure was and does not know what the full amount of the exposure was. 69She denied that at any point Pirintji spoke to her one on one. It was put to her that Pirintji spoke to her on a range of matters over 15 to 20 minutes relating to her obligations and her risks under guarantees. Her response was that she did not recall. 70Gay gave affidavit evidence of working in the business of the CPL Group as an office administrator responsible for paying bills, ensuring orders were dispatched on time, paying accounts and entering data in the MYOB system. 71She gave affidavit evidence of undergoing medical treatment after mid 2009 and that she has since suffered some memory loss. She says she only recalls having to sign documents at Kemp Strang once, that she thought she was signing something for the business and understood that it had to be done fairly quickly but cannot recall the reason for any urgency. 72She had no recollection of spending time individually with Pirintji. She cannot remember meetings on 4 June 2008. 73Kimberley gave affidavit evidence of her employment history. Her roles have generally been of an administrative nature and she has not been involved in management or in substantial or complex financial transactions. She became involved in the Michaelson family business in about 1997, then known as Eminence, subsequently known as the CPL Group. She was told about the refinancing in April or May 2008 and that she needed to sign some documents in connection with it. She assumed that BankWest would provide more favourable commercial terms than the prior bank. 74As to the 4 June 2008 meeting, her affidavit evidence was that Pirintji was not acting in her interests and that his role was to obtain her signature for the refinancing of the CPL Group. She says that she thought her signature was a formality to give effect to the loan facilities for the benefit of the family business. She says that at the time she signed the guarantees no one took any steps whatsoever to explain how the guarantees worked and what the nature and effect of her obligations under them were. She says she agreed to sign the guarantees because it was for the benefit of the CPL Group which was the family business and it was needed to move forward. She totally believed in the products and the brand and did not actually believe there was a risk being a guarantor because she did not believe that the family business had any chance of failing. She says that whilst at the office of Kemp Strang on 4 June 2008, she was not offered the opportunity to obtain legal advice and did not observe her mother being afforded such an opportunity. She says that neither her mother nor her were asked by anyone whether they had received legal advice or wished to receive any and that when she signed the declarations she had not received any legal advice regarding the guarantees or the commercial terms of the facilities she had guaranteed. 75The facility was varied by letter dated 11 June 2008 signed on behalf of the CPL Group and by all guarantors on 12 June 2008 in a manner which is not material. 76On 13 June 2008 Simone executed a mortgage in favour of the Bank over Allambie Heights securing her obligations as direct borrower on the refinanced home loan and under the guarantees she had given. 77On 13 June 2008 the Michaelsons executed a mortgage in favour of the Bank over their interests in Seaforth, securing their direct obligations to the Bank under their home loan and their obligations under the guarantees given by them. The conception of the restructure 78The CPL Group operated at least three accounts with the Bank. 79Almost immediately from the inception of the relationship between the Bank and the CPL Group, the CPL Group's accounts were out of order. This became a common state of affairs thereafter. On various occasions Wise arranged increases in facility limits and additional facilities ex post facto to assuage the irregularities. From time to time Wise exhorted Michaelson and Ruskin to take steps to regularise the accounts. 80By the middle of 2008 CPL was having cash flow difficulties. A significant contributing factor was said to be interruptions to supply and increases in prices attributable in part to Holy Land no longer supplying in bulk. Michaelson says that Dekel of Holy Land wanted a contract in place to protect Holy Land's exclusive position. 81Michaelson gave evidence that Holy Land wanted an exclusive supply arrangement, and to ensure supply, in June 2008, he signed a formal five year exclusive arrangement with Holy Land. But he says that he did so without any intention of continuing with the sale of its products and when it was intended to obtain supply elsewhere, albeit indirectly, through another entity. Somewhat remarkably, the extensive Court Book contains no contemporaneous communication between CPL and Holy Land on any subject, including negotiations, supply and pricing. 82Michaelson and Ruskin also say they feared that CPL might be sued by users of tanning equipment it sold, asserting that use of it caused cancer. 83On 30 June 2008 Michaelson resigned as a director of CPL, leaving Ruskin as the sole director. 84On 5 July 2008, at the invitation of Wise, Michaelson and Ruskin attended an Australian Rules football game at ANZ Stadium, Homebush. Michaelson and Ruskin say that Wise raised concerns about their ability to hit their sales budgets and meet their loan commitments. They say that Michaelson told Wise that they were having serious problems with Holy Land and that due to the onerous sole supplier agreement with Holy Land they needed to consider a new structure with multiple suppliers. They anticipated buying new bulk products through new suppliers which would allow increased cash flow with them becoming more profitable. 85Wise denies, amongst others, that Michaelson informed her at this time of difficulties the CPL Group was having with Holy Land, of any other matters concerning Holy Land or CPL's contracts with it, of a new way of sourcing suppliers which would supply in bulk, or of any need for CPL Group to consider a new structure to ensure that CPL was able to meet its loan repayments. 86In July 2008 CPL requested a temporary overdraft of $180,000 to be repaid out of the released deposit of City Road, which money had earlier been designated for permanent debt reduction. The Bank approved the temporary overdraft on 14 July 2008. 87In early August 2008 the Michaelsons advised the Bank that they wanted to sell Seaforth and intended to spend money on improvements to obtain a premium price. On 7 August 2008 the Bank approved an additional $235,000 temporary home loan facility for the Michaelsons to fund renovations. 88In August 2008 Michaelson and Ruskin were introduced by Smith to an accountant, Mr Tony Kalogerou ("Kalogerou"). They retained Kalogerou as a business advisor. 89On about 9 August 2008 Michaelson, together with Wise and Kalogerou, attended Smith's wedding at the Grappa restaurant in Leichhardt. Michaelson says that they later went on to the Piano Room in King's Cross, where he says a conversation took place which included him telling Wise about the progress of their transition to having new supply lines, that on expert advice they would need to set up a new company to trade separately from CPL because of its exclusive relationship with Holy Land and that they were in a holding pattern to ensure that they looked after their current loyal clients. He says that Wise said she was happy to help them because she believed in them and their products, and would give them the funding and the support that they needed, and that they needed to have other options apart from Holy Land. 90Wise does not recall being seated near Michaelson or having any specific conversations with him at the restaurant. She does not recall whether she went to the Piano Room. She says it is possible that Michaelson spoke to her during the evening but does not recall this occurring. She denies, amongst others, that Michaelson discussed with her setting up a new company to trade separately from CPL because of its exclusive arrangement with Holy Land. She denies having said that she was happy to help because she believed in him and his products, that she would give them the funding and the support that they needed, or that they needed to have other options apart from Holy Land. 91Michaelson says he went to Israel in August to source other supplies and to follow up an appointment to see another manufacturer, Anna Lotan. 92According to Ruskin, he and Michaelson met with Kalogerou on about 4 September 2008, when they told Kalogerou that their difficulties with Holy Land's refusal to supply bulk product and increased prices were causing cash flow problems. Ruskin says that they asked Kalogerou what solutions he could provide. He says that Kalogerou suggested that they could substitute CPL for another company that would trade in its place and then place CPL into voluntary administration ("VA") and that Kalogerou said that he had a wealth of experience in the area. Ruskin says that Kalogerou said he could provide them with restructure options to consider, that he was well regarded within the Bank, had a great relationship with Wise and could manage "the VA process". 93In early to mid September 2008 there was correspondence between Wise and Michaelson and Ruskin concerning the problematic cash flow position of the CPL Group and in relation to its accounts being irregular. 94From about September 2008, on the advice of Kalogerou, Ruskin and Michaelson embarked on what might euphemistically be called a restructure. In its ultimate emanation this restructure entailed setting up a new company to replace CPL as the trading entity, putting CPL into voluntary administration (which ultimately happened on 3 February 2009) and transferring CPL's business (except for its contract with Holy Land) to the new entity by way of a deed of company arrangement ("DOCA"). 95Kalogerou introduced Mr John Vouris ("Vouris") of Lawler Partners Chartered Accountants, a registered liquidator, as the proposed voluntary administrator and DOCA administrator. 96Somewhat presciently, on 5 September 2008, Smith wrote to Ruskin of the proposed restructure: This is a big decision and handled correctly will be fine. Handled poorly could be fatal. 97It turned out to be fatal. 98Later that day Kalogerou sent Smith an email asking him to tell Ruskin to set up a company and call it "Indio". Somewhat intriguingly, he added: Do not set up the company yet. Do not email him this. Tell him over the phone. 99On 15 September 2008 Ruskin sent Wise a strategy paper which referred to the price increase from their sole supplier and its refusal to supply bulk. The paper included, amongst others, statements that: It was always our strategy to diminish the very considerable control our supplier had over us so we have recently chosen to appoint 2 other main suppliers in order to provide indio products and to source the ingredients for our indio products so as to be ready to market from November onwards. [...] In the short term we plan to continue to order 6 products from our original sole supplier until we can better organize our stock. 100On about 17 September 2008 Smith, Michaelson and Ruskin attended a boardroom lunch with Wise at the BankWest head office in Sydney. They say Kalogerou was present. Michaelson says that at the lunch he told Wise of proposed new suppliers to CPL. He says that he spoke of the challenges they had had in moving away from Holy Land and reducing its role as their exclusive supplier. They spoke of being in a holding pattern and about their strategy being on course. They said they were moving towards a more profitable structure which would increase their cash flow dramatically. 101Wise says that she sat next to another client of hers and did not have the opportunity to speak with Michaelson, during the presentation, about any substantive matters relating to his business or the CPL Group. She denies the conversations which Michaelson says took place on this occasion. 102Michaelson and Ruskin say they met with Kalogerou again on 7 October 2008, together with Smith and Vouris. Vouris had been invited by Kalogerou as the person who would be the administrator of CPL and would organise the DOCA. Michaelson says that Kalogerou spoke of substituting a new company for CPL which would replace all obligations and responsibilities of CPL, except for the Holy Land agreement. He says that Vouris said he would arrange for the VA through a company and that it would not be a problem once CPL ceased trading. He attributes to Smith statements that BankWest would not have a problem once the new entity was doing all the trading and CPL ceased to trade, and that they would then transfer the loans. He attributes to Smith a statement that he and Kalogerou would meet with Wise when the time was right and that there would not be a problem as the Bank was fully protected. Smith denies having said that the Bank would have no problem. 103CPL was at this time undoubtedly under pressure from its creditors and suffering significant cash flow problems. It had a number of trade creditors with claims outstanding for over 90 days. 104In evidence is a document entitled "Minutes of Indio Director's Meeting held at Boardroom at 11AM Monday, November 3, 2008", which records as being present Ruskin, Michaelson, Gay, Kimberley and Matt Harold. The minutes record, amongst others, the following: * The name Indio Incorporated is not available to use. * Therefore, Indio Skin Care Pty. Ltd. to replace CPL Australasia Pty. Ltd. * Matt Harold to have a 20% shareholding with an anticipated injection of $200K from Matt Harold. * CPL Australasia Pty. Ltd. is no longer viable due to Holyland's non-supply of bulk product, their increase in pricing and large minimum orders now required. Freight costs are also prohibitive. * New supplier's products being very well received into the marketplace. 105On 11 November 2008 Wise prepared a Credit Review Facility Amendment report ("CRFA"). In relation to Seaforth she recorded that there had been various cost overruns and time delays and that Michaelson had requested an extension of the Seaforth bridging finance loan facility, granted in August 2008, to the end of April 2009. The Bank approved this on 12 November 2008. 106On 13 November 2008 ISC was incorporated to be the new entity. 107On the same day, Rite Pak (Aust) Pty Ltd dispatched to CPL, by ordinary post, a creditor's statutory demand claiming $63,657.40 for packaging services provided in January 2008. The demand was sent to CPL's registered office, care of its accountants, in South Melbourne. There is some issue as to the date of actual receipt because the copy of the covering letter in evidence has a stamp on it "03 DEC 2008". The circumstances in which the stamp came to be affixed are not explained by any admissible evidence sufficient to rebut the statutory presumption of receipt by CPL on the fourth working day after posting (see s 160(1) of the Evidence Act 2008 (Vic)) but nothing ultimately turns on this. 108On 17 November 2008 the sale of City Road was completed for $2.4 M. Proceeds of approximately $2 M were appropriated to permanent reduction of the CPL Group's debt to the Bank. 109On the afternoon of 19 November 2008 Michaelson, Ruskin and Smith met Wise at Sabia restaurant at Brighton-le-Sands. The meeting was preceded by an email from Smith to Michaelson and Ruskin, copies to Vouris and Kalogerou, with suggestions for the anticipated discussion. The email included the following: CPL Future It would look bad to not at least hint at this and then spring it on Deb when Tony and I meet with her next Monday. This will be the Mantra from you guys - The contractual arrangement with Holyland was done under much duress and as is detrimental to your business it will be rectified - You are taking advise from Tony Kalogerou on how best to maneuver the situation and you are very happy with his direction - He will deliver to you late this week his recommendations on various business planning - You are quite the innocent bystanders awaiting his advice Upon our meeting we will be informing her - The only benefit you are seeking from wind Up is to rectify the contract and protect against tanning Litigation - Any other benefits are inconsequential - The bank at all times will be fully covered security wise & all obligations met fully - Charges and securities will be positioned to suit the bank and Indio with no erosion of each position. (emphasis added) 110Wise was last to arrive. Michaelson attributes to Smith, before Wise arrived, statements to the effect that once the new company was doing all the trading and all the funds were flowing into its account, with CPL having ceased trading, the Bank would not be concerned about rewriting the loans to be with ISC. He attributes to Smith a statement that it was important that information be given to BankWest the right way, via a face-to-face meeting with Kalogerou, who was well respected and an expert in this area, and well-known to Wise who respected his expertise. 111Michaelson says that after Wise arrived, the discussion included reference to the Holy Land contract, to obtaining supply from new suppliers, to the fact that they had opened up a new company which would be a substitute for CPL and that they needed to open a new bank account in the name of Indio Skin Care Pty Ltd. Michaelson attributes to himself informing Wise that CPL would cease to trade and that all funds would be directed to Indio Skin Care Pty Ltd. 112Michaelson attributes to Kalogerou a statement that the new company would essentially be the new trading arm and would take over all the existing loan facilities and obligations of CPL, except for the Holy Land contract. 113Ruskin says that before Wise arrived, they spoke of the settlement of the sale of City Road and of the need to inform Wise of the substitution of companies from CPL to Indio and that CPL would soon cease to trade. He attributes to Smith a statement that the Bank would not care about the restructure of CPL if it no longer traded because the Bank was always covered by its charges and security. He says that Smith told them to leave discussion with the Bank regarding the restructure to the expert, Kalogerou, and himself when the time was right. 114Ruskin says that once Wise arrived, they talked of the settlement of City Road, the onerous Holy Land agreement and their new structure. He says Michaelson said they had opened a new company, Indio Skin Care Pty Ltd, on the advice of Kalogerou, to substitute CPL, which would allow them to buy bulk products and use multiple suppliers at much better margins. He says that Michaelson said the new company would essentially do everything that CPL did, apart from being obligated to the Holy Land agreement, and it would also service the loan. 115Ruskin attributes to Wise the words "[o]kay, so Indio replaces CPL Australasia?" and to Michaelson words to the effect "[n]ow that we are going to drop most of Holy Land products apart from the best sellers, we will relaunch to the market place under the Indio Skin Care name. Yes, as soon as we open the new bank account in the name of Indio Skin Care Pty Ltd we can notify clients." 116Wise says Michaelson informed her that they had established another company called Indio Skin Care Pty Ltd, which would order the new stock from their new suppliers. She says that a conversation to the following effect took place: Michaelson: The reason we are doing this is to protect the business against Holyland. Holyland have tried to take a share of the business. They've already done this to a company in Romania. Wise: What will be the impact of setting up this new company on your supply arrangements with Holyland? Michaelson: I'm not involved in the new company, but we will continue to get some stock from Holyland so as not to breach our agreement. We will be reducing our orders. Also, the stock we are ordering from our new suppliers is not identical to the product supplied by Holyland. Wise: I need to see a new business plan as to what is happening. The Bank would also need to obtain a fixed and floating charge over the assets of the new company to secure the cashflow of the business. 117She denies that Michaelson informed her that CPL would cease to trade and that all funds would be directed into Indio Skin Care Pty Ltd. She says that at no stage did Michaelson, Ruskin or Smith inform her that CPL would cease to operate or that the restructure would or may involve CPL being placed in voluntary administration. She says her understanding, from what was said, was that CPL would continue to trade for the purpose of selling products supplied by Holy Land in order to avoid breaching its agreement with that supplier. 118Smith says that the reference in his email of 19 November 2008 to "hinting at this" was a reference to the potential or negotiated voluntary administration of CPL. 119Smith denies that he said "[o]nce the new company Indio Skincare is doing all the trading and all funds are flowing into this account, with CPL having ceased trading the bank will not be concerned about rewriting the loans". He also denies that Michaelson said "[w]e have set up a new company, Indio Skin Care Pty Ltd which will be a substitute for CPL" or "CPL will cease to trade and all funds will be directed to Indio Skincare Pty Ltd". Instead, he recalls Michaelson saying words to the effect of "CPL's operations will be wound down". 120The meeting contemplated "next Monday" (24 November 2008) in Smith's email of 19 November 2008 did not take place. Smith attempted to schedule such a meeting but was unable to arrange it to occur before 3 February 2009. 121In evidence is a document entitled "Minutes of Indio Director's Meeting held at Boardroom 11AM Monday, November 24, 2008" which contains the following: * Meeting last week with Debbie Wise during which she advised she is happy to substitute the new indio company for CPL Group and knows all trading will now go through Indio Skin Care Pty. Ltd., to avoid possible litigation with Holyland. [...] * CPL will cease to trade. 122At this time, Ruskin's father, Mr John Ware Ruskin ("John Ruskin"), then retired, but who had held various senior positions in the superannuation industry, was providing business consultancy services to the CPL Group. He was asked to look at the Group's trading results. John Ruskin had also been asked by Michaelson to assist with cash flow and funding for CPL to manufacture its own brand. 123On 25 November 2008 Ruskin received from CPL's accountant, Steve Danielson, a valuation of CPL. The valuation disclosed that for the year ended 30 June 2008, CPL had made a net loss of over $1.7 M and a loss of over $300,000 for the three months ended 30 September 2008. As at 30 September 2008 it had a net deficiency of assets of over $3.1 M. Danielson's opinion was that the company had a nil value. He also expressed the view that based on the trading results, the company was unlikely to be able to meet its debts as and when they fell due. 124John Ruskin saw the valuation at the time. His evidence was that he was asked to look at the trading results and was concerned when he received the report, but gave unconvincing evidence that he was not in a position to come to a judgment as to the solvency of the company. 125On 1 December 2008 Ruskin emailed Wise stating, amongst others, that there was a "payment plan" with Rite Pak. He said: As discussed I am pushing all creditors terms as long as possible as our debtors are doing to us. Only the urgent cheques are sent which enable us to continue trading. 126Also on 1 December 2008 Michaelson emailed Smith a draft plan of required funds "to fuel international sales". It included $90,000 for an order from Holy Land, which Michaelson agreed (under cross-examination) would only be delivered well after 8 December 2008. 127On 3 December 2008 Michaelson says he met with Smith and Wise at a Kingsgrove café when, according to him, he handed to Wise a business plan dealing, amongst others, with CPL's new supplier arrangements. The business plan states that as of 15 October 2008, the CPL Group had 26 lines including 8 products still being supplied by Holy Land, to reduce to 5 by March 2009. Michaelson says they discussed further funding for CPL and the need for funds to be in hand to capitalise on the Christmas trade. He says that he told Wise that they were relaunching their brand Indio with many new lines and deleting most existing formulas from Holy Land, that all invoices would now be in the name of Indio and not the CPL Group, which would substitute CPL for Indio Skin Care. He says that he told her CPL would cease to trade, that all funds would go through Indio and that everything the CPL Group did would now be done by Indio Skin Care. He attributes to Wise words to the effect "[o]kay, so basically Indio Skincare replaces CPL Australasia?" and to himself the response "[y]es that is correct, except the Holy Land agreement". 128Wise does not recall any meeting with Michaelson and Smith at the Kingsgrove café on 3 December 2008 and her diary does not record it. However, amongst others, she denies that Michaelson said CPL would cease to trade and all funds would go through Indio, that everything the CPL Group did would now be done by Indio Skin Care and that she said "[o]kay, so basically Indio Skin Care replaces CPL Australasia?" She says that at no stage during any of the conversations that she had with Michaelson in December 2008 (or prior to this time) did Michaelson inform her that the restructuring of the CPL Group would involve CPL ceasing to operate the skin care business or would involve CPL being placed into voluntary administration. She says it was her understanding that CPL was going to continue to trade. 129On 8 December 2008 Ruskin spoke to Elizabeth Naumovski, a relationship support officer who worked with Wise, who told him that Wise had informed her that they would like to open some new accounts for Indio Skin Care. She undertook to send him documents. There was an exchange of emails between Wise and Michaelson on that day concerning a director of the new company, Matt Harold, whose name appeared on a company search. Wise wrote to Michaelson, relevantly: Company search is showing he is a Director with a 20% shareholding in this entity. I need to understand the relationship and and what income this entity will be generating. I am making some assumptions here that this entity is as a protection from the Holyland Manufacturing Agreement?? It is quite likely that we will need to take a Charge and Guarantee from this entity to secure the cashflow of the business. 130Ruskin replied, relevantly: On Tony Kalogerou's advise we need to set up a new bank account. Mat Harold is a short term necessity for protecting Indio's interest in the Holyland agreement. Its fine to take a charge and guarantee from this entity. 131Ruskin says he spoke to Wise on 8 December 2008, when she told him that she was going to need to take a fixed and floating charge over Indio Skin Care as well as a guarantee, and she agreed that Indio Skin Care would have the same type of trading account as CPL and Indio would take over all loan repayments. 132Michaelson says that CPL ceased trading and servicing the CPL Group loans on 8 December 2008. Ruskin says that from around 8 December 2008 onwards ISC began operating the business previously operated by CPL, then CPL subsequently ceased trading other than receiving debts owed to it pursuant to invoices it had previously issued. 133Michaelson says that he had a conversation with Wise in which there was agreement that there would be a cessation in trading by CPL immediately. Also on 8 December 2008, Ms Naumovski emailed to Ruskin details for a new ISC business cheque account facility which would be added to the existing CPL Australasia Online Business Banking Facility and that cheque and deposit books would be mailed out over the next 7 to 10 days. Later on that day there were email exchanges between Wise and Smith. There had been a credit review carried out by a credit review officer, Tim Kitchen, whose risk assessment was that the CPL Group's viability was unclear and that performance of its accounts indicated viability was "borderline insolvent". Wise wrote to Smith "just got smashed on the Review for these guys. Increase is now a shot duck I would think..." 134On 10 December 2008 the 21-day period for compliance with the Rite Pak demand expired. 135On 17 December 2008 Mark Addison ("Addison") of solicitors Dibbs Abbott Stillman ("Dibbs") wrote a letter to ISC setting out the basis upon which Dibbs would advise ISC on the restructuring of CPL Australasia. 136On 17 December 2008 Ruskin emailed Wise about cheques which had been drawn on one of CPL's accounts. 137Also on 17 December 2008 Rite Pak commenced proceedings in the Supreme Court of Victoria to wind up CPL. 138Wise prepared various CRFAs in December 2008 and January 2009. One of these, apparently prepared on 17 December 2008, refers to the establishment of a new trading entity, Indio Skin Care, for the purpose of seeking new suppliers. It refers to a reduction in supplies from Holy Land. 139On 18 December 2008 Ruskin emailed Wise about stock to be paid for in the last week of December or early January including stock to be delivered from Holy Land. The amount anticipated to be payable to Holy Land was $60,000. 140On 22 December 2008 Kalogerou emailed Mr Tony Doyle ("Doyle") of Lawler Partners: Better get the forms ready for the VA. Can they be left undated for now? Steve Ruskin is the director who will execute the documents. 141Doyle sent the forms to Kalogerou, who on-sent them to Ruskin, on 23 December 2008 under cover of the following email: Here are the forms as discussed. Kel is confident that Debbie will come good. Let me know when you want to get together. 142On 12 January 2009 Wise sent an email to Ruskin and Michaelson in which she stated, amongst others: As you are aware we have had some issues with the request for an increase. Once Credit had a full look at the position of the accounts, they were very concerned about the drop in sale of approx 42% and they requested a more thorough analysis of the accounts. Given the situation however they agree that you require some assistance in the short term and I am preparing this request today. At this stage I will be requesting a limit of $120k to cover the current position plus a further $200[k] to assist with working capital and stock. This is only a short term solution and is very much reliant on the sale of Seaforth to alleviate your cashflow position. It is the expectation that this property will be finished in February and placed for sale during this time. 143On 14 January 2009 Wise sent Michaelson and Ruskin a fairly lengthy email dealing, amongst others, with the current balances of the various accounts and the Bank's concerns about the current position. It shows the $2 M loan to CPL and additional excesses of $132,000 on its accounts. CPL's No. 3 account was $54,143.76 in debit. ISC's account was in debit in the amount of $51,878.62. She referred to the fact that the overall amount overdrawn was at $196,000 and proposed a limit of $200,000 for the day-to-day requirements of the business. In the penultimate paragraph, she said: I am sorry that I cannot be more positive but we are at crunch time now and I have to see improvement in the business to gain confidence in its ongoing viability and be able to support to Credit. 144Michaelson gave evidence of a conversation with Wise on 16 January 2009 in which he says he said, amongst others, "[a]s you know CPL has ceased trading" and "[c]an you please confirm the transfer of loan documents from CPL to Indio is almost complete? As we want to ensure we follow Tony's advice with Indio Skin Care". Wise denies this conversation. 145On 17 January 2009 Michaelson sent an email to Wise which contained the following: I will have to make an order to Holyland also in the next few days but this will get us rolling again. 146In evidence is a document entitled "Minutes of Indio Director's Meeting held at Boardroom at 11AM Monday, January 19, 2009" which records as being present Ruskin, Michaelson, Gay and Kimberley. It contains, amongst others, the following: * Scott advises Debbie Wise will make supplier payments via the new Indio account. Debbie agrees with the substitution of Indio Skin Care Pty. Ltd. for CPL Group and all of its borrowings. This comes from Scott's discussion with Debbie last Friday evening. [...] * Debbie has approved and will process payments to both international and local suppliers. 147On 22 January 2009 the Bank agreed to vary CPL's existing facilities by providing an additional facility for working capital of $120,000 for a period of four months and a new business bonus overdraft facility of $200,000 repayable on demand. All the companies in the CPL Group and all guarantors signed a variation letter on 27 January 2009. 148Michaelson says that he spoke to Wise after receiving the variation letter and said: These are in the wrong name. It is Indio that pays the loan. CPL no longer trades and has no capacity to repay the loans. 149He says that Wise responded: Leave it with me and I will sort it out. 150Ruskin says that after seeing the documents he spoke with Michaelson about the fact that the documents were in the wrong name. They both say that they signed the variation documents in the expectation that the Bank would issue corrected documents shortly thereafter. Wise denies that there was ever any request for CPL's facilities to be transferred into the name of ISC. 151Ruskin gave evidence that on or about 7 January 2009 he observed that Wise had transferred the sum of $83,862 from ISC's account into the CPL No. 1 account. He says at this stage the balance of the CPL No. 1 Account was "zeroed out" which was what they expected to occur as CPL had ceased trading and it was not supposed to be repaying any loan commitments. He also gave evidence that Wise's email of 14 January 2009 confirmed his understanding that CPL's loan commitments and facility had been transferred to ISC and that CPL's obligations to Bankwest had been taken over by ISC. 152Michaelson says that he understood from these transfers that the substitution of companies from CPL to ISC was complete and the transfer of loans would follow shortly as the process was well underway. This to him was validation that the CPL loan was transferred to ISC. 153Michaelson and Ruskin both also say that they had conversations between themselves in January 2009 about CPL's loan having been zeroed out and the transfer of CPL's loan to ISC having occurred. 154On 22 January 2009 May Kupresak ("Kupresak") sent to, amongst others, Michaelson and Ruskin a Cash Flow Review showing the net position of the various accounts. 155Kalogerou gave evidence of a meeting with Wise, Smith and another bank officer at BankWest's Kingsgrove premises on 28 January 2009. He does not now recall if he raised the voluntary administration of CPL with her at this meeting but says there is no question in his mind that he raised it with her in meetings, one of which he identifies as the 28 January 2009 meeting and one was at a coffee shop in Kingsgrove (on 3 February 2009), to which further reference is made below. 156Both Michaelson and Ruskin say that they expected that at the 28 January 2009 meeting Kalogerou and Smith were to provide Wise with further information about the proposal to appoint a voluntary administrator to CPL. 157Ruskin says that he spoke with Kalogerou on or about 28 January 2009, when Kalogerou told him that Wise knew about the pending VA and transfer of loans. He says that up until that point he expected that if it was the case that Wise considered any aspect of the information provided to her by Kalogerou or Smith on 28 January 2009 to be problematic she would have advised them accordingly. 158Both Smith and Wise deny that any meeting took place with Kalogerou on 28 January 2009. An exchange of emails on 28 January 2009 between Wise and Smith concerning the proposed meeting with Kalogerou that day clearly establishes (and the plaintiffs correctly concede) that the proposed meeting was cancelled and did not occur. 159At the end of January 2009 CPL needed US$20,000 to pay, by telegraphic transfer, Holy Land for stock. 160On 30 January 2009 Kupresak sent to, amongst others, Michaelson, Ruskin and Wise an email referring to the CPL Group's active accounts, which included 3 CPL accounts. 161On 2 February 2009 Kupresak emailed Michaelson and Ruskin, copy to Wise, that Wise had asked her to tell Michaelson and Ruskin that with the then existing account excesses of nearly $248,000 and with a $70,000 interest payment due later in February, there was an insufficient balance to cover the requested US$20,000 for the Holy Land stock. The voluntary administration of CPL 162Although the 28 January 2009 scheduled meeting did not occur, there was a meeting on 3 February 2009 at the Kingsgrove café between Smith, Kalogerou and Wise. What occurred at this meeting is of central importance because the plaintiffs assert that Kalogerou informed Wise of CPL's intention to appoint voluntary administrators and that either expressly or by implication Wise assented to this course on the footing that the Bank would not treat this as an Event of Default under the facility. 163On 2 February 2009 Wise received an email from Doriano (Dori) Meta ("Meta") of the Bank's Portfolio Enhancement section informing her that CPL featured on a list of companies in respect of which winding up applications had been commenced. He asked whether this was the Bank's customer or related to it. 164On 2 February 2009 Smith emailed Kalogerou as follows: Debbie called me today re Winding up proceeding on CPL from Rite Pak. I said I didn't know and would discuss tomorrow at our meeting. 165Kalogerou replied (copies to Michaelson and Ruskin) as follows: These are the creditors that have been pushing us to liquidate the company. We will tell Debbie the amount is in dispute and it is another reason with the tanning health issues and the Holyland contract for winding up CPL. We are in court on 10 February 2009 with Rite Pak. That is why it is imperative that we tell Deb that we are putting CPL into administration with Vouris tomorrow at the latest. When we appoint Vouris the court action by Rite Pak goes away. (emphasis added) 166Michaelson then emailed Kalogerou, Smith and Ruskin as follows: deb is aware that the ritepak debt is around and may or may not know if the debt is being disputed. Steve can you shed some light on this? 167Ruskin emailed Michaelson, Kalogerou and Smith as follows: She is aware of this debt but as far as bank is concerned we are disputing the debt. Debbie is unaware whether the debt is in dispute or not. 168Wise then emailed Ruskin and Michaelson as follows: We have been advised CPL has a winding up notice against it from Ritepak. Please advise as a matter of urgency as this is a trigger for default and credit are requesting urgent clarification. 169Ruskin then emailed Wise and others as follows: Tony Kalogerou is dealing with this and will discuss it when he meets with you tomorrow. 170Next, Michaelson emailed Wise about the difficulties he was having with the Seaforth project which he said was 6 weeks behind schedule. He had tried every avenue to gain further finance but found it difficult with no security. He assured Wise that he was absolutely committed to the sale of Seaforth but had to have it completed in order for it to sell quickly and for the best possible price. 171Wise responded to Michaelson as follows: The winding up notice for CPL is a default trigger and complicates this to the Max. I am unsure of where this will now head. 172Michaelson forwarded Wise's email to Smith. 173Smith then emailed Michaelson, Kalogerou and Ruskin as follows: Please do not panic as yet There is only one wind up notice Whilst its not good hopefully the bank will be convinced we are almost there Trust me there will be no more support from BW credit Wise so do not even think of it but lets hope they don't pull the rug from under us Tony and I will convince Debbie you will make it and meet their commitments and with a little more patience it will be fine Either they or you can sell down the assets and lets hope they see the benefit of you maintaining control I have quite strong influence there and Tony and I will do our best 174On 3 February 2009 at about 9.00am Wise met Smith and Kalogerou at a café named the Grove, near BankWest's Kingsgrove office. 175Wise says that a conversation to the following effect took place: Kalogerou: I've been reviewing the CPL Group's viability. They are too highly geared and they need to reduce their debt. They have no way of getting out of the manufacturing agreement with Holyland. If they do not make drastic changes, they will not survive. Wise: What about the strategy in place with Indio Skin to source their products from other suppliers? Kalogerou: This is not going to work. The agreement is iron clad. Their only option is to VA the company. Wise: They can't VA the company. It is an event of default. If you feel this is the only option, then you will need to put together a business plan or a strategy paper to outline why it is necessary and I will need to go to Credit with that strategy. The Bank needs to support this strategy. I can schedule a meeting with credit to discuss this and try to get the Bank's support. Kalogerou: Ok. 176Wise says that at the end of the meeting, as she stood up to leave, she said to Kalogerou and Smith words to the following effect: You need to put together something for me in writing ASAP. You can't VA the company without the Bank's support. 177She says that the meeting with Kalogerou and Smith on 3 February 2009 was the first time that she had heard of a proposal to appoint a voluntary administrator to CPL. 178According to Michaelson, at about 3:30pm on 3 February 2009 they acted to appoint voluntary administrators to CPL. An Instrument of Appointment signed by Ruskin is in evidence, but no resolution was produced in the proceedings. At the time, Ruskin was the sole director of CPL. Vouris and his partner, Mr Bradley John Tonks, were appointed as voluntary administrators ("the administrators"). 179Wise says that later that afternoon on 3 February 2009, she received a telephone call from either Meta or Lee during which she was informed that a voluntary administrator had been appointed to CPL. She says that she then called Smith and had a conversation to the following effect: Wise: Kel, they VA'd the company. Was I not clear in my instructions to Tony this morning that the client would need the Bank's approval prior to the VA being appointed. Smith: Absolutely. I'm as shocked as you are. 180According to Smith, at the meeting, Kalogerou explained the problems that the CPL Group were having with Holy Land and their concerns about potential litigation from the sale of tanning beds. He says there was then a discussion in the following effect: Kalogerou: The plan is to VA CPL. Wise then swore. Wise: This is a major issue. We have only ever allowed this for one client and they had a seventeen year relationship with the Bank. Don't do anything until I speak with Marty. This will be a clear default under the loan. 181He says that at no stage during the meeting did Wise make any statements to the effect that she was comfortable with or that the Bank would support the appointment of a voluntary administrator to CPL. 182He says that later that afternoon, he received a telephone call from Wise and they had a conversation in words to the following effect: Wise: They have appointed the VA. Smith: I don't know anything about it. I'll find out. Wise: I told them not to do this. I made it very clear this morning that they were not to do it. 183Kalogerou deposed to three affidavits. In his first affidavit sworn 4 June 2012 he says that sometime in October or November 2008 he suggested to Michaelson, Ruskin and Smith to put CPL into voluntary administration in order to deal with issues being caused by some insistent creditors and also to overcome liabilities which it may have had in connection with the sale of sun beds. He deposed as follows: 21. I do not recall when it was that Kel Smith and I first mentioned to Debbie Wise that we believed it would be beneficial to put the current trading entity into voluntary administration. I may have raised it at my meeting with Debbie Wise, Kel Smith and an officer of the bank (whose name I do not now recall) at the bank's Kingsgrove premises on 28 January 2009 but I do not now recall if I raised the voluntary administration at this meeting. However, I am confident that l raised the voluntary administration with Debbie Wise prior to my meeting with her on 3 February 2009, which is referred to in paragraph 22 below. My recollection is that Debbie Wise's initial reaction when I first raised the issue was to say words to the effect of 'Why are we supporting you if that's what's going to happen?'. She seemed concerned about the prospect of one of the companies in the group going into voluntary administration but did not indicate that the bank would regard it as being a default or otherwise advise against this course of action. I recall discussing her concern with John Vouris, who responded by pointing out to me that the bank would not be disadvantaged in any respect by the voluntary administration because its security position was unchanged. Mr Vouris also observed that the voluntary administration would resolve certain creditor issues for the Group and had the potential to take away risks of unknown liabilities flowing from the involvement in the sun bed industry. 22. I cannot now recall precise details of the conversations which I had with Debbie Wise prior to the trading entity going into voluntary administration on 3 February 2009. I have reviewed my diary for the time (which I keep on my telephone) but cannot find reference to the meetings which I attended with Ms Wise. However there is no question in my mind I had meetings with Ms Wise at which the restructure was discussed before it took place - one of those taking place at the bank's offices in Kingsgrove on 28 January 2009 and one at a coffee shop in Kingsgrove (a meeting which Kel Smith also attended) on 3 February 2009. My recollection is that I spoke to Ms Wise to indicate that the restructure was a possibility. I recall that I did not go into technical details in my discussion with her about the issue but I do recall that I continued to emphasise the benefit to the Group of restructuring the company which had exposure to potential tanning industry liability claims and supplier issues. 23. As to her response to the prospect of a company in the CPL Group going into voluntary administration, I recall that she expressed concern that it would not be looked upon favourably by the bank but she did not suggest that the bank would regard it as being a default under its mortgage documentation. However, I cannot recall the words that she used. 24. Eventually, it was an intransigent creditor that caused us to proceed with the voluntary administration at the time that we did. 184In his second affidavit sworn 9 May 2013 he denies that 3 February 2009 was the first time Wise had heard about the proposal to appoint a voluntary administrator to CPL. He deposes that throughout the period October 2008 to February 2009 he was in regular contact with Wise. The focus of the meetings and telephone conversations he had with Wise were on the need to restructure the CPL Group to avoid the commercial risks it faced. He says that he cannot now recall every conversation nor all the words spoken in these conversations, however, he can recall saying on numerous occasions in 2008 and early 2009 words to the effect: "We are looking at all possible ways to manage the issues including selling the business to a new entity. In the end it is likely that CPL will be wound up but let's cross that bridge when we have to." 185He denies that at the 3 February 2009 meeting he said to Wise words to the effect: "Their only option is to VA the company". He denies that Wise said words to the effect: "They can't VA the company. It is an event of default. If you feel this is the only option, then you will need to put together a business plan or a strategy paper to outline why it is necessary and I will need to go to credit with that strategy." He denies that Wise said words to the effect: "You need to put together something in writing ASAP. You can't VA the company without the Bank's support." He denies that Wise said words to the effect: "This is a major issue. We have only ever allowed this for one client and they had a 17 year relationship with the Bank. This will be a clear default under the loan." 186He says he does not recall Wise saying words to the effect: "The Bank needs to support this strategy. I can schedule a meeting with credit to discuss this and try to get the Bank's support." However, he does recall her saying, in response to the VA proposal, words to the effect: "I will need to get this through credit." He says he does not recall Wise saying words to the effect: "Don't do anything until I speak with Marty". 187He says that at no time in any of the numerous discussions he had with Wise in the period October 2008 to 3 February 2009 when the issues of restructuring the CPL Group, incorporating a new trading entity and winding up CPL were discussed, did Wise say to him that the appointment of an external administrator to CPL was a default under the various securities held by the Bank and that the Bank would not accept it. He says that Wise did express her concerns but always indicated to him that she was confident that she "could get it through credit". He says she would regularly say to him during these discussions words to the effect: "I am confident I can get this through credit". He says he was aware from his previous dealings with the Bank and with Smith that Wise was very good at presenting proposals to the credit department which maximised their prospects of being fully approved. 188He says that at no time in any of the numerous discussions he had with Wise in this period, when they discussed the new trading entity being incorporated and the CPL business being run by this new entity, did she say that the Bank would not accept this restructure or that it was a default under the securities held by the Bank. Events immediately after the voluntary administration 3 February 2009 189Late in the afternoon of 3 February 2009 Lee emailed Onno Hornstra ("Hornstra"), a Senior Manager - Credit & Assessment Management within the Bank, reporting the voluntary administration. 190That evening Kalogerou sent Doyle a list of creditors which discloses that more than $750,000 was owed to trade creditors from before December 2008. 191That evening Wise sent an email to Meta in which she said: Apologies Dori I have been in meetings most of the day and have been speaking with credit regarding the situation. Further to our discussion this evening, I met this morning with the consulting accountant for CPL who implemented the VA action for CPL Australasia based on the following 3 issues: 1) CPL are in dispute with Rite Pak over faulty packaging. The current debt is $70k (advised by the broker) 2) Manufacturing agreements have been established in the name of Indio Skincare to protect the cashflow of the business. Previous manufacturing agreement was INO CPL and as such this entity will no longer trade. 3) CPL Australasia previously distributed sunbeds. There is a potential class action on the horizon for the manufacturer, Ergoline and CPL as the supplier. These 3 things were identified as potential problems to the customer with the solution being to VA the company in his opinion. Accountant feels that this measure as well as his restructuring of the business operations will ensure the ongoing viability of the business. I will discuss with you tomorrow as he wants to establish communication with the bank and assist where appropriate. Please call to discuss if you require any further clarification. 192Later that evening Kalogerou emailed Wise: As discussed this morning, here are the details of the administrator. John Vouris Lawler Partners Level 9 1 O'Connell Street Sydney Tel 8346 6000 Mob 0418 449 098 John is known to Onno Hornstra of the Portfolio Asset Team at Bankwest. One of John's staff has been liaising with Sharon Tai this afternoon. Sharon works in Onno's office. Further to our conversation this morning, I have been acting as a consultant to CPL. John Vouris and I were partners at Nexia Court & Co. I have worked with John on a number of occasions and have referred many clients for specialist reconstruction advice. The step to put the company into administration is a result of the difficulties in dealing with one of the principal suppliers with which CPL has an onerous contract. There is also the continuing risks associated with the sun beds and tanning salons. The other issue involves the dispute with Rite Pak, another supplier. You are aware that Indio Skin Care Pty Ltd ACN 134 156 004 was established on 13 November2008. This company represents the future business vehicle of Scott and Steve. I have spent considerable time in guiding the future business interests of both families. Gross margins have improved significantly in a short period of time due to better buying practices by implementing new suppliers. Wages and freight costs have been slashed. The credit policies in relation to debtors have been revamped. We are all intent on working through the administration with the bank in order to achieve a positive result. Please let me know if I can assist you further in any way 193Wise responded: Nice and succinct. Let's hope it will be enough to convince credit as they are not very happy at the moment. 194Thereafter, Smith emailed Kalogerou: Debbie is quite disappointed CPL went straight from our meeting to VA hoping rather discussions were had first with the powers to be to explain the process and have the banks full support. Here are there main concerns 1. Can the Business Turn Around 2. Is there more bad news to come 3. Appointment of VA creates default 4. It Goes out of Debbies Hands to Asset Restructuring 5. VA triggers default Interest Rate In your meeting with Bankwest you will need to support Debbies recommendation to credit that business is solid and that major reasons for VA are the Holy Land contract and future protection of Solarium litigation not some hidden agenda we are not aware. Debbie and definitely I will be pushed aside until the bank decides there response. Can I strongly reiterate your greatest allie will still be Debbie so please keep me in the loop so I can keep her so Finally my trail immediately ceases so personally all my work since May last year to keep this guys alive will now cost me financially and reputation wise Just wanted to put you totally in the picture 195Under cross-examination Smith gave evidence, which I accept, of being in shock upon learning of the appointment of the administrators and of a conversation in which Michaelson said to him "if we didn't do it, somebody else would have done it". 4 February 2009 196On 4 February 2009 the administrators issued their first Report to Creditors. 197On the same day, Kupresak emailed Ruskin with copies to Smith and Wise saying, amongst others: The Bank's operations group has reviewed the documents you've signed yesterday and advised that they have to be executed properly by the 2 directors of Indio Skin. 198The email requested execution of documents attached, which were a fixed and floating charge by Indio and guarantees to be given by Indio for CPL, Sunlovers and Tanning. 199Early that morning Hornstra emailed Wise, Lee and Meta: Look forward to your report later today setting out the circumstances and potential loss scenario (if any). Without knowing the background kindly arrange for the administrator to execute a 440 instrument today. Please advise which lawyers' you propose to use - happy to discuss. Has the customer discussed this appointment with you as relationship manager? They certainly have not called me which is against the unwritten rule. (The reference to a 440 instrument is apparently a reference to an instrument of consent by the administrators to the enforcement of the Bank's security interests, notwithstanding the VA.) 200Wise responded as follows: Dori and I are planning to go over this current development later today however I am preparing an urgent CRFA to transfer file to yourself, as per email from Greg Wynne. Kemp Strang were the settling Lawyer so assume they will not be engaged to act in this matter. HDY acted in the matter of Sacca and I was comfortable in dealings with them but will leave this up to you. The first I heard about the VA was yesterday in a meeting with the Consulting Accountant, Tony Kalegerou and the Broker. At that meeting I had requested he provide a summary outlining why the company was to be put into VA and I was going to arrange a meeting with Dori and yourself (if you were agreeable) to discuss this matter and ensure the Bank was supportive. Later that afternoon I was advised the VA had been actioned already. Customer wanted to also attend the meeting however as the Broker and accountant were planning to discuss other clients, the Broker was going to arrange a meeting between Scott and I at a later time. 440 Instrument has been requested. 201At about the same time, Smith emailed Kalogerou: A couple of other issues on from those relayed last night File is now with Onno in AR and as you know he may 1 Apply default Interest Rates 2 Call for valuations (standard practice) 3 Call for Internal Audit You need to argue against 1 & 2 vehemently for obvious reasons - I am sure you will succeed As for Valuations we must avoid this as a new valuation will never reach levels we set on approval and I will have zero influence here until it comes back from Onno This is also further reason for sorting the problem on Monday with victor because a valuer will discover the caveats immediately and it is then game over - so boys bring your best offer and negotiating skills on Monday 202As well, Kalogerou emailed Smith, Michaelson and Ruskin: I am meeting Vouris today in his office. Following on from Kel's email we need to have Deb's support. The bank can do all of the things set out below, however if we do everything quick enough and the correct way then we will be fine. 203Late that night, Meta emailed Hornstra, Wise and Lee saying, amongst others: Strategy will be key here as we naturally want to protect the Bank's position and be repaid but ironically (foolishly!) the borrower had intended to VA so that future trading would be under another company name (Indio Skincare Pty Ltd) where BWA would have a FFC over and the banking relationship would continue. the foolish bit is that they did not seek prior Bank consultation on winding up CPL! 5 February 2009 204On 5 February 2009 Vouris (who was not called) wrote to Hornstra: I refer to previous correspondence on the above matter and to your telephone conversation with Messrs Doyle and Elliott of my office on 4 February 2009. I advise that Mr Doyle has held subsequent conversations with your colleagues Debbie Wise and Sharon Tai. It is my understanding that our acceptance of this appointment has caused you and the Bank angst and I can assure you that has not been our intention. We value the working relationship that we have with you and your staff and we wish to maintain that during this Administration and into the future. Some months ago, I met with the Company's director and external accountant and I was advised the group was going through a restructure, loans were going to be refinanced through a new entity and the Company would ultimately cease its operations. Noting that BankWest was the secured creditor, I advised the director that BankWest must be kept informed as these steps were taken. The director informed me that negotiations to restructure and refinance with BankWest were already underway. I did not hear from the Company until the matter was urgent and an appointment was necessary as a winding up application is before the Victorian Supreme Court on 11 February 2009. My staff asked whether BankWest was advised of this and the accountant assured us numerous conversations were held with BankWest. In regard to BankWest being fully aware of the strategy, that has of course been found to be incorrect. It is now my understanding that steps have been taken to have the loans transferred to the new entity, Indio Skin Care Pty Ltd ("Indio"), and that a registered fixed and floating charge has been offered as security alongside existing securities however this has not been finalised. I am informed that the Company has sold its business to Indio. I am currently seeking a copy of this agreement from the director and/or his solicitor. It would appear that the director has been naive during this process and has not appreciated the importance of finalising matters with BankWest prior to making an appointment. In your conversation with Messrs Doyle and Elliott you requested an update on a number of issues and I report as follows[...] 205Also on 5 February 2009 Wise emailed Hornstra, copies to Meta and Lee: I anticipate no loss in regard to this client. My understanding was that CPL Australasia would wind down gradually which is evident by the accounts. All trading accounts are held with BWA and deposits to the CPL accounts were declining, with deposits to the Indio Skincare accounts increasing. At no time however had I been advised that this entity would be put into Administration. Up until this point the clients have been working with the Bank to restructure their business, grow the business through equity from sale of property and reduce their liabilities. Clients conduct is obviously very disappointing and I am of the opinion that the clients do not fully comprehend the significance of this action. (emphasis added) 206She also emailed Hornstra: Just to clarify I was not aware that CPL were stripping the assets of the business in preparation for a VA. 207Wise emailed Michaelson and Ruskin as follows: Please be advised that all accounts in the name of CPL Australasia P/L have been frozen as at date of Administration Tuesday 03/02/2009. The appointment of an Administrator to CPL Australasia P/L constitutes a Default under the terms of your Contract with BankWest. Until this matter is resolved all facilities will be on default interest rate. (emphasis added) 208Lee asked Wise to get advice from solicitors Henry Davis York ("HDY") on the issue of a breach letter and reservation of the Bank's rights. 209Smith emailed Michaelson, Ruskin and Kalogerou: We don't want to get into any arguments with BW at this tender stage My belief is if they decide to keep you they won't apply default interest. From Debbie's email it appears it is only the CPL Accounts that are frozen so I assume you are wanting to tap in your OD funds attached to that. You will note the legalese in Debbie's communications so until the bank decides there position I would suggest you use the other account and communicate as little as possible with her - she will currently do everything to the book. This is totally new ground for me boys but my gut reaction is it will be OK you have to manage somehow with the banks support for the moment. 210Smith later emailed Michaelson, Ruskin and Kalogerou: Things are quite tense at Bankwest and this could easily go either way Default rates are now applied to all facilities except the home loans. At 18% this will soon sink the entire operation. The bank is uncertain of their future relationship with the group and feel suspicious of the motives of the VA They have already asked me of my confidence of refinancing you - my answer in this environment is obvious They also acknowledge the hard work to date by you and in particular Debbie in getting the business to this point and in particular you have always met your obligations This path can go two ways and totally depends on the banks and in particular Debbies 'faith' in you Debbie has spent the past two days being scrutinized by all levels at Bankwest and CBA she has to face a further number of managers at senior level at both Bankwest and CBA to plea the viability of your future with the bank One of the key issues is the commitment to meeting obligations and your next one is your signed agreeance to sell Seaforth by the end of the month Whatever needs to be done to sell it, auction it and exchange it in the quickest possible time needs to be done now or the default interest will simply put it out of your hands. If you agree great if you don't then I cannot help you and my almost full time gratis work on this since May has all been in vain. If you do then we need to pen an email to Debbie before the morning stating the following points Aware now the VA of CPL although with all best intentions was done somewhat naively and you did not expect it to alarm or distress Bankwest Great accomplishments have been achieved since your time with Bankwest and for many reasons ( and list them) the company is now solid As with all other obligations made on your behalf to the bank you will continuer to meet your commitments As such you are fully committed to the sale of Seaforth and the agent has been appointed the marketing campaign begun contract drawn up and it will sell regardless - give them the shorts possible date till tenders cease or auction called - don't know how you will achieve this but this is the key Any other p[positives may be added but briefly I need a few hours away from this put something together and I will review 6 February 2009 - 1 March 2009 211On 6 February 2009 Wise recommended a risk downgrade and a transfer of the file to Credit & Asset Restructuring following the VA. 212On 6 February 2009 Michaelson emailed Wise. He said, amongst others: I wanted to write to let you know that I am aware now that the VA of CPL Group although with all the best intentions was done somewhat naively and we did not expect it to alarm or distress Bankwest. Tony Kalogerou advised us that a VA was in our best interests. The Bank's position will not be compromised in any way. The way it was put to me was that CPL would cease trading and our future business would be done in Indio. I am happy to come into the bank with Kel and Tony to meet with your city team to give you some comfort around our decision to proceed with the VA. As with all our obligations made on our behalf we will continue to meet our commitments. I am fully committed to the sale of Seaforth at all costs to further bullet proof indio and to ensure its ongoing success and destiny that has been 5 years in the making. Ray white real estate has been appointed as exclusive agents and they are ready to bring through potential buyers. Indio has guaranteed CPL's obligations to the Bank. Just transfer the borrowings and the overdraft from CPL to Indio. All of our other facilities will stay as they are. 213On 9 February 2009 Wise emailed Lee concerning the temporary excess facility of $320,000, in the following terms. Prior to the VA of CPL we were in the process of formalising a temporary excess arrangement of $320k. We have received the executed LOVs and the new Guarantees and F&FC over the new trading entity (Indio) as part of this approval. It should also be noted that this LOV has the Special Condition for the sale of Seaforth included as a condition for this temporary advance. At present we are carrying an excess of $245 and I have made provision for loan instalments due this Friday 13th of approx $70k. This excess has been carried over 4 accounts, as they use various accounts for different parts of the business. As this is part of an approved limit, approval is sort to load the limits to formalise the arrangement and simplify the ongoing management of the accounts. Whilst this will regularise the accounts it should be noted that this facility, along with all Group facilities, will also be charged at the default rate of 18.6%. Recommended to load limits. 214On 9 February 2009 Smith emailed Michaelson and Ruskin, copies to Vouris and Kalogerou: The bank is starting to understand the wisdom of the VA Regardless the default interest stays in place which is crippling They will revert back once they are convinced the VA is solely there for the purpose of the Holyland Contract and the Potential Solarium Litigation and isn't hiding a multitude of bad creditors From an external view point you have never been in default with the bank to date - thanks mainly to Debbies good management of your accounts The one critical point in reverting to a standard rate and renewing your relationship with the bank is sale of Seaforth Announce an exchanged contract an auction date or an expressions of interest deadline and I would predict the conflict with Bankwest re the VA would be resolved 215On 10 February 2009 Vouris deposed to an affidavit in the Rite Pak winding up proceedings. His current estimate of the value of unsecured creditors and related parties was $1,245,770. He deposed that he had been negotiating with a potential purchaser for the purchase of the assets of CPL and had reached agreement in principle on the purchase price which was to be paid into a fund under a Deed of Company Arrangement and that the DOCA (if accepted) would result in a dividend of approximately 10 cents in the dollar to be paid to unsecured creditors. 216On about 11 February 2009 Meta prepared a credit deterioration report which was submitted to the Bank's credit review panel on or about 13 February 2009. In it, the following statement is made: Although BWA aware of the plan to eventually transfer assets into Indio Skin Care (over which BWA obtained a 1st ranking fixed and floating charge in 1/09), the borrower and consultant were naive in not communicating the intention of appointing a VA. 217On or about 11 February 2009, Wise and Meta prepared a CRFA in respect of the CPL Group's facilities which was submitted to the Bank's Executive Credit Committee on or about 13 February 2009. 218On or about 11 February 2009 Wise emailed Meta, Lee and Hornstra. Amongst others, she said: There is no question that this relationship needs to be exited from the Bank given the circumstances of this Breach. From a commercial perspective however, my main priority is to ensure that we allow sufficient time for this business to be able to refinance with minimal, if any, loss to the Bank. 219On 12 February 2009 Smith emailed Ruskin, copies to Michaelson and Kalogerou: Say absolutely nothing except that you look forward to putting all this behind you and moving forward with the bank They are going to accept the CPL VA and take you off penalty rates and increase your margin due to risk rating from 1.95 to 2.5 but it's a hell of a lot better than 17% Let it unfold during the next few days and please don't let them believe you know what will happen or that you think its all ok They are quite annoyed with you and want you to squirm a bit In the end of the day they don't want to damage the business and its future potential survival 220Ruskin replied "thanks for the advice". 221Smith responded: no probs Do me a favour mate, my name ain't so hot out at Bankwest at present thanks to this It would be fatal for me if they thought I was involved or had prior knowledge of the VA whilst still raising funds for you As I have explained to Tony the VA was between you Scott and them. 222Ruskin replied "of course mate no need to mention". 223On 12 February 2009 Smith emailed Kalogerou: Again just for your knowledge. It appears Bankwest will accept VA and eventually Onnor will advise They will take boys of penalty but increase there margin from 1.95 to 2.5% Bank will place them on 6 month facility with a view to allowing a comfortable exit Sale of Seaforth is a matter of priority Good luck tomorrow I am meeting Debbie on Monday to discuss feasibility. 224In evidence is a document entitled "Minutes of Indio Skin Director's Meeting held at Boardroom at 11AM Monday, February 16, 2009", which records as being present Ruskin, Michaelson, Gay and Kimberley. The minutes record, amongst others, the following: BankWest will remove penalty interest and increase our rate by 55 basis points and will accept the V.A. of CPL for the greater good of all concerned 225On 17 February 2009 the Bank gave notice to CPL that it had committed an Event of Default by virtue of the appointment of the voluntary administrators. 226On or about 23 February 2009, the Bank's Executive Credit Committee approved a downgrade of the risk grade of the CPL Group's facilities. The Bank regarded the loans to the CPL Group as non-performing loans, but not ones where the Bank expected to suffer a loss. 227On or about 23 February 2009 the CPL Group's facilities were transferred to the Bank's Credit & Asset Management section. Ongoing management was transferred to Hornstra. 228On 27 February 2009 Wise sent Hornstra and Meta a document entitled Risk Hindsight Review which, amongst others, stated: Given that the Bank was not advised prior to the VA appointment the client has demonstrated a lack of integrity & respect for its banking relationship. As such we are seeking to exit the relationship. 2 March 2009 229On 2 March 2009 a meeting took place at BankWest's office. Present were Hornstra, Michaelson, Ruskin and Kalogerou. Both Michaelson and Ruskin say that Kel Smith was present. Smith denies that he was there. He was not challenged. Hornstra says that Ms Sharon Tai, Regional Manager Portfolio Enhancement Corporate and Business Division, may also have been present. He also says that Doyle and Vouris were present at the start of the meeting but left shortly after it started. There is no dispute that at the meeting Hornstra made it clear that the Bank no longer wanted the CPL Group as customers and requested repayment in full. It was put that Hornstra required refinancing within 21 days. Hornstra's evidence was that the request would have been for a letter of offer within 21 days from a reputable financier to repay the facilities at some point in the future. 230Michaelson and Ruskin say that at this meeting Kalogerou said that Wise had been told by Kalogerou about the VA beforehand by letter, that Hornstra asked for the letter and Kalogerou told him he would get it for him. 231Hornstra's affidavit evidence is that whilst he does not recall, it is possible that this conversation occurred. In cross-examination he said he would no doubt have asked whether or not they were aware of the VA. He did not recall any conversation about a handwritten note but that he might have asked if there was a letter advising the Bank and might have asked for it. He gave further evidence that he had asked Wise before the meeting whether she had had any prior knowledge of the voluntary administration and that Wise had said she had not had any notice until the voluntary administration actually occurred. 232Kalogerou, however, gave affidavit evidence of attending a meeting with Hornstra and others in or about the middle of 2009, which appears to be the same meeting. His recollection is that he and Hornstra had a conversation to the following effect: Hornstra: We had no idea that a voluntary administrator was going to be appointed. Kalogerou: Yes you did know. We told you guys we were thinking about doing this. The bank was aware of what was going on. Hornstra: Who knew? How did they know? What were they told about why the voluntary administration was being proposed? Kalogerou: We will talk about that at another time. This will all come out later. 233Under cross-examination Kalogerou said that although his affidavit made no mention of it, he did give Wise a handwritten note about the VA but could not remember when he did so, that at the meeting there was a request for him to produce the note and that his response (he thought) was that he said "we'll talk about it later". 234There is in evidence a document purporting to be minutes of this meeting kept by Ruskin which record that Hornstra asked Kalogerou why the Bank was not informed of the VA, that Kalogerou responded that the Bank had been advised via Wise, that she was given a handwritten note before the date of the VA, and that Hornstra requested a copy of it. The minutes do not record Sharon Tai being present. They refer to a handwritten note rather than a letter. Whichever it assertedly was, there is no dispute that no copy of it has ever been produced by Kalogerou. The DOCA and the Deed of Forbearance 235According to an affidavit by Vouris sworn on 10 February 2009 in the Rite Pak proceedings, by that date he had reached agreement in principle on the purchase price to be paid into the administration to fund a DOCA under s 444A of the Corporations Act 2001 (Cth). 236Mark Hilton ("Hilton"), assisted by Kieran Ryan ("Ryan"), of HDY was retained by the Bank. Addison of Dibbs, assisted by Richard Lyne ("Lyne"), was retained by ISC. 237On 8 April 2009 Hilton of HDY informed Addison of Dibbs by email that the Bank wished to retain all of its rights to act under its security and accordingly proposed to abstain from voting on the proposed DOCA. By 8 April 2009 there was apparently in existence a draft DOCA prepared by Dibbs. 238Later that day Addison emailed Hilton saying that if and when the DOCA was executed, ISC and the Deed Administrators would obviously require the Bank to consent to the transfer of the assets. 239On 9 April 2009 Ryan of HDY emailed Addison of Dibbs that the Bank required a complete refinance of the facilities of the CPL Group as a matter of urgency and that it would be necessary for the DOCA to express the fact that ISC would have until no later than six months from the date of appointment of the voluntary administrators to refinance the debts due and payable by it and its related parties to the Bank and that until such finance occurred, all assets would remain subject of the Bank's security. 240Later that day Addison responded to Ryan and Hilton that to insist that a refinance must occur within six months put the entire DOCA at risk, particularly where the refinance may not be available for reasons outside the control of ISC. Addison stated: It is for this reason that an agreement regarding refinancing of the BankWest debt should not be a condition of the DOCA, but rather should be separately agreed between Indio and BankWest. 241On 15 April 2009 Ryan emailed Addison, amongst others, reiterating that the Bank required complete refinance before it would discharge its secured rights over CPL's assets. 242On 17 April 2009 Lyne emailed Ryan, suggesting a separate deed be entered into between ISC, CPL and the Bank, confirming that any transfer of assets would be subject to the Bank's charge. 243On 21 April 2009 the creditors of CPL resolved that CPL should enter into the DOCA. The Bank abstained from voting. One creditor, the Australian Taxation Office, asserted to be owed $130,929, voted against it. Ruskin was present. 244On 22 April 2009 Addison of Dibbs emailed Ruskin and others that Rite Pak's winding up application had been dismissed that morning. Ruskin replied, thanking him for the news and informing him that there was a majority vote in favour of the DOCA. He added "I just need to manage the BankWest issue". 245On 23 April 2009 Addison of Dibbs emailed Ruskin saying that they were still waiting on a response from HDY as to what the Bank needed to be comfortable with ISC over the next six months. Lyne of Dibbs then emailed Ruskin, informing him that he had heard from Ryan, who was waiting for final instructions from his client, but had drafted a deed that would satisfy the requirements of the Bank, which he anticipated would be provided shortly. 246Ruskin says that on or about 4 May 2009 he had a telephone conversation with Hornstra to the following effect: Hornstra: Hi Steve, I like you guys. But there's just a little bit of paperwork for you to sign. It's in your best interests. Ruskin: What is that for? Hornstra: You need to sign a Deed of Forbearance otherwise I won't allow the DOCA to go through and I will appoint my own liquidator over Indio Skin Care and the other companies. Ruskin: I will sign them both at the same time. 247He says that "At the end of the telephone conversation I felt I had no option but to sign the documents in accordance with the demand placed on me by Onno". 248Hornstra says he has no recollection saying the words attributed to him by Ruskin but that it was his invariable practice when speaking to clients about contractual arrangements to say words to the effect of "on a without prejudice basis, reserving all rights". In cross-examination, he made it clear that he did not accept that he said the words attributed to him. 249On 4 May 2009 Ruskin emailed Addison: I spoke with Onno at Bankwest can you contact HDY and ask for a copy of the draft deed. 250Addison responded that he would get onto it in the morning. 251The following morning (5 May 2009) Lyne emailed Ruskin: I chased Kieran Ryan again this morning. He had been waiting for final instructions from his client on the draft Deed that they had prepared. Those instructions have now been given and he hopes to get the draft deed across to us today. As soon as we receive it we will be in contact. 252Ruskin then emailed Lyne and Addison: Thanks Richard if you don't get a response before 3pm can you chase him again. Would like to finalise this asap. 253On 6 May 2009 HDY sent Dibbs a copy of a draft Deed of Forbearance proposed by the Bank. Addison forwarded it to Ruskin the next day, stating "[w]e're reviewing it now." 254On 7 May 2009 Addison emailed Ruskin: Re: the transfer of Fixed Charge Assets I've had another more careful look at the draft deed. The transfer of assets that is prohibited is from Indio to some other entity, so therefore the transfer from CPL/Vouris to Indio is OK. So there is no need to extend the licence from Vouris to Indio. We'll send the draft deed to John Vouris to OK (as he has to sign it on behalf of CPL - no-one else can) We should be ready to sign the DOCA some time on Monday. 255Ruskin replied: Great look forward to signing off Monday. 256On 9 May 2009 (Saturday) Ruskin emailed Addison. Relevantly, he stated: As per our discussion can you confirm we can sign off on Monday the 11th for the DOCA, sale of business and deed of forbearance. 257On 11 May 2009 Ryan emailed Lyne: We have reviewed the attached deed with our client who is willing to execute it in its current form We also understand that CPL Australasia is also willing to execute the Deed. Our client is due to attend our offices at 2.30 today to execute the documents. Please provide an execution copy for executing by our client in advance of that meeting. 258Ruskin gave evidence that on 11 May 2009 he had a conversation with Lyne to the following effect: Lyne: These are the documents we need executed. [pointing to a bundle of documents including the Deed of Forbearance.] You need to get independent legal advice in relation to these documents. I cannot act for you anymore, as we are acting for the administrator. Ruskin: How am I going to do that when its nearly 3.00pm? 259He says that soon after this conversation, he had a conversation with Hornstra to the following effect: Ruskin: Onno I have just been told by Dibbs that they can't act for me. Hornstra: Steve I need the documents signed today. If they are not signed today, then I will have no choice but to appoint a bank appointed receiver. Ruskin: It's just I may need a few days to arrange a lawyer. Hornstra: Its only a little bit of paperwork. Just sign it or I appoint receivers today. It's in your best interests. 260Ruskin says that he felt a great sense of pressure in signing "these documents" because of what was said by Hornstra. He says he felt he had no choice but to execute the Deed of Forbearance that day and that if he did not sign it, receivers or liquidators would be appointed to ISC and other entities in the CPL Group. He says he did not obtain any legal advice prior to signing the Deed of Forbearance because, given Hornstra's "threats", he did not consider that he had the time to do so. For the same reason he did not read the document or discuss it with anybody after his conversation with Hornstra. He says that as a result of the "sense of pressure" he felt to sign the document, he simply turned to the last page of the Deed of Forbearance and signed it. 261Again, Hornstra gave affidavit evidence that he has no recollection of saying the words attributed to him and that it was his invariable practice to make it clear that the discussion was on a without prejudice basis, reserving all rights. As well, in cross-examination, he made it clear that he did not accept that he said the words attributed to him and "would never have said them in his life" and "would not talk to his customers like that". 262Ruskin apparently attended at 2:30pm on Monday 11 May 2009, where he executed both the DOCA and the Deed of Forbearance on behalf of ISC. On the same day, Dibbs wrote to ISC for the attention of Ruskin, providing an estimate of costs for completing their work, including documents to effect the transfer of assets from CPL to ISC. 263On 12 May 2009 Dibbs wrote to Ruskin about the steps that then had to take place including that Indio should comply with the requirements of the Deed of Forbearance. The letter concluded "Should you wish to discuss these matters, please do not hesitate to contact either Mark Addison or Richard Lyne". 264On 20 May 2009 Lyne emailed Ruskin informing him that the original Deed of Forbearance had been placed into their safe storage system. The email concluded "Please ensure that as per our previous correspondence you comply with the obligations imposed on you and Indio under that agreement". 265Michaelson says he went to Israel in May 2009 to discuss a joint venture with Anna Lotan which he says was signed in August 2009. He says they received equipment from Anna Lotan which assisted in production and production time. Salient terms of the Deed of Forbearance 266By cl 3.1 of the Deed of Forbearance the Bank agreed to forbear from taking any enforcement action against CPL and ISC for the purpose of recovering CPL's outstanding debt until the earliest to occur of a number of specified events or "such date as determined by the Bank in writing in the Bank's absolute discretion but absent such notification, then 3 August 2009". 267By cl 6.2 CPL and ISC acknowledged and agreed that there had been default under the facility and related facilities and securities by reason of (amongst other things) the appointment of the administrators. 268By cl 6.4 (set out below) CPL and ISC represented and warranted in favour of the Bank, amongst others, that they had obtained advice on it from their own lawyer. 6.4 Representations and warranties CPL Australasia and Indio Skin represent and warrant in favour of the Bank that: (a) they have read this deed thoroughly, taking care to understand and consider it and its effect on them; (b) the Bank has warned them that they should obtain advice from their own lawyer and from their own financial adviser (such as an accountant); (c) they have obtained advice on this deed from their own lawyer; (d) they have obtained advice on this deed from their own financial adviser or, if not, from their own investigations and they understand the risk of the transactions contemplated by this deed (and are not looking 10 the Bank to explain this deed or to advise whether or not he or she should be signing); (e) they understand that they may not be able to rely on anything which may be said to them by anyone about this deed unless it is confirmed in writing by the Bank; and (f) they are making their own decision to sign this deed. 269Clause 7 (entitled Release and Bar to Proceeding) is in the following terms: 7.1 Release CPL Australasia and Indio Skin and their respective Agents and Employees forever release and discharge the Bank and its Agents and Employees from any actions, causes of action, potential causes of action, proceedings, suits, rights, claims (including any claim for costs, interest, contribution or indemnity), decrees, demands, damages, judgments, liabilities, losses, orders, costs, charges and expenses of any kind or any nature whatsoever (including at law or in equity or by statute or otherwise) which they have, or may have had but for this release, against the Bank or any of its Agents and Employees including any action or claim by reason of or arising out of or in any way related directly or indirectly to the CPL Facilities, the Related Facilities, the CPL-Indio Securities and the Related Securities or any dealing in connection with any of them. 7.2 Bar to proceeding This deed may be pleaded by the Bank or any of its Agents and Employees as a bar to any action, suit, claim, demand or legal proceedings commenced or to be commenced against the Bank or any of its Agents and Employees which have been or may be brought out of any act or omission, advice, business, conduct, dealing or transaction arising before or after the execution of this deed including any action or claim by reason of or arising out of or in any way related directly or indirectly to the CPL Facilities, the Related Facilities, the CPL-Indio Securities and the Related Securities or any dealing in connection with any of them. Expiry of the forbearance period 270On 30 July 2009 HDY wrote to CPL pointing out that the forbearance period was due to end on 3 August 2009 and stating that the Bank was expecting the debt to be repaid on that date. 271At this time Patrice McEniery ("McEniery"), a manager in Credit & Asset Management with the Bank, was responsible for the day-to-day management of the CPL Group accounts. 272On 3 August 2009 the forbearance period under the Deed of Forbearance expired. 273On 3 August 2009 Ruskin wrote to the Bank (McEniery, copy to Hornstra) that the CPL Group had not been able to refinance its facilities with the Bank. A refinancing offer by St George had (taking account of fixed interest break costs of approximately $500,000) fallen short by over $1 million on the amount necessary to refinance the CPL Group's facilities with the Bank. Ruskin said that best endeavours would be used to sell the "Botany Bay" (ie Botany Road, Alexandria) premises at a price which would cover bank debt, agent's fees etc. 274On 10 September 2009 a Strategy Paper authored by McEniery and others was issued. It recommended that the mortgagee take possession of Botany Road and MacIntosh Street. 275On 1 October 2009 the Bank demanded repayment by CPL of the amount outstanding under CPL's facilities with the Bank. The letters of demand stated that the appointment of administrators to CPL was an Event of Default under the facility with the Bank and constituted a default under the CPL Charge. 276On 16 October 2009 the Bank demanded from Eminence, Mascot, Sunlovers, ISC, Tanning Systems, Michaelson, Ruskin and the female guarantors the amount owing by CPL to the Bank. The non-refinancing 277Following a meeting at the Bank on 22 October 2009 between Michaelson, Ruskin, Hornstra and McEniery, the Bank retained Neil Singleton ("Singleton") and Paul Gunson ("Gunson") of PPB Advisory to prepare a report regarding the progress of the CPL Group towards refinance of its facilities. 278By letter dated 30 October 2009 addressed to Smith, Prudential Finance Pty Limited ("Prudential") made (what the letter describes as) an indicative loan offer to Sunlovers, Eminence, the Michaelsons, the Ruskins and Gay of $6.768 M for 12 months at 13% per annum interest with a default rate of 20% per annum and an establishment fee of 1.5% of the principal amount. The offer stated that it was subject to: A. Mascot Property Group Pty Limited ACN 084 949 002 selling 410-412 Botany Road, Alexandria NSW 2015 for $3,500,000 to reduce the current BankWest debt. B. 21 Seaforth Road, Seaforth NSW 2092 to be completed. C. 12-14 Macintosh Street, Mascot NSW 2020 to be developed in the future jointly by our nominee. 279Michaelson gave evidence that at a meeting on 4 November 2009 Singleton said to him and Ruskin: You don't want to have anything to do with Prudential. I will be suggesting to the bank that they should rewrite the loan facilities and loan covenants. My report will have a lot of influence there and you have a great business. 280Ruskin's evidence was that Singleton said: Are you guys crazy why move away from Bankwest with an offer of such high rates? My suggestion after looking at your business and the financials is that Bankwest will re-write the loan facilities and loan covenants. As an independent accounting firm the bank will value our opinion. I see no problem with them keeping you as a client. 281Singleton's version was that he said of the Prudential offer: It's extremely conditional and onerous. If you really believe that you will generate significant profits from your business strategy you would be better off convincing the Bank of your ability to achieve it. Anyway, this isn't Prudential Financial? Who are these people? Irrespective, you should get this offer finalised. You should also be exploring all other finance opportunities. 282On 5 November 2009 Singleton reported to the Bank. In his final recommendations he said that the Prudential offer appeared to be onerous or at best, unrealistic, but recorded: Directors to obtain a detailed letter of offer from Prudential Finance to ascertain whether acceptable terms are able to be negotiated. 283On 6 November 2009 Ruskin resigned, and was replaced by Michaelson, as the sole director of ISC. 284On 6 November 2009 Ruskin emailed Singleton, copy to Michaelson. Relevantly, he said: On your advice we have stopped to finalise our letter of offer from Prudential Finance however we do not want to stop this action until we move to a new division within bankwest in case things change. We believe it is prudent to have options at this fragile stage. We also have another broker that looks to have a bank that may be interested so we will keep this moving forward (although hopefully we wont require it) We are now hopeful of moving into a new division and away from asset restructure. 285On 9 November 2009 Singleton responded, relevantly: I agree you should proceed to get final details of Prudential offer and any other opportunities. 286Michaelson and Ruskin gave evidence that in a conference call with Singleton on 11 November 2009 Ruskin asked whether they should move forward with the Prudential offer and Singleton responded that it would not be necessary because he was recommending to the Bank to keep them as a client and to rewrite the loans and covenants with the Bank. 287Singleton gave evidence that whilst he does not recall a telephone conversation on 11 November 2009, he denies having said this. He says he had no reason to say it. 288Both Michaelson and Ruskin gave evidence that relying on the conversations they say they had with Singleton on 4 and 11 November 2009, they ceased progressing the Prudential offer. The Equiset offers 289In 2009 Socrates Adam (Artie) Kalpidis ("Kalpidis") was employed by Jones Lang LaSalle as a commercial and industrial real estate agent. In December that year he was National Director and branch licensee. In 2009 he was instructed by Michaelson and Ruskin to market Botany Road. Michaelson gave affidavit and oral evidence that on 7 December 2009 he received two formal written offers from Equiset Grollo Group ("Equiset") for the purchase of Botany Road, one for $3,030,000 and one for $3,300,000. 290Two conditional offer letters from Equiset each bearing the date 7 December 2009, and respectively making offers in those amounts, are in evidence. The conditions vary slightly between them. 291Michaelson gave evidence of a conversation on 7 December 2009 with Ruskin after receipt of the two offers, and of a conversation on 7 or 8 December 2009 with McEniery in which he told her of having received a formal written offer from Equiset of $3.3 M, which he said would allow them to reactivate the Prudential offer and potentially go with another first tier lender. He recounted a positive response from McEniery and then a celebratory beer with Ruskin. 292He gave evidence of a meeting on 11 December 2009 with Hornstra, McEniery, Singleton, himself and Ruskin, at which he handed the higher Equiset offer to Hornstra, who barely glanced at it. He says a conversation then took place to the following effect: Michaelson: I have the new formal offer here for the sale of 410 Botany Road from Equiset for $3.3 million! Hornstra: Unfortunately we have to appoint receivers on your business. Neil from PPB will be looking after the Bank's interests. Michaelson: Why? You haven't looked at the offer. We have met all our repayments and I have the offer there for the sale of Botany Road. Hornstra: Don't worry it will be ok it is just to give the bank some extra comfort and to assist in the sale of Botany Road. We can remove the receivers at any time we like. It can happen the following day if we want to. We will allow you to still run your skincare business. You need to do everything Neil tells you. Michaelson: Why are you doing this? You are supposed to help us transition to another lender. If you don't want us then why are you making it impossible for us to leave? Hornstra: Relax Scott. We just want comfort over the sale of Botany and Neil can help you. I can remove him at a day's notice. Michaelson: But you have the offer there for $3.3million. Why don't you take it? Hornstra: I'm sorry, but the decision has been made. It's too late. Michaelson: But a receiver will add big costs and not allow us the opportunity to get the best possible price. You have the offer right there, take it. Receivers traditionally don't get the highest possible value or the best price. 293Neither Hornstra nor McEniery recall a conversation as recounted by Michaelson. Their evidence was that it was possible that it took place. 294Michaelson gave evidence of leaving the meeting and feeling sick. He said he did not understand why the Bank would appoint a receiver when he had informed McEniery of the offer for $3.3 M three days before and presented it at the beginning of the meeting. 295Michaelson was cross-examined at some length on these offers. It was put to him that the second and higher offer was not received until some six or seven weeks after 7 December 2009, a proposition to which Michaelson responded: I completely refute that. That offer was absolutely real. It's true and correct. 296His attention was directed to a number of emails which he wrote which it was suggested were inconsistent with his evidence. They included an email to Hornstra and McEniery on 15 December 2009, in which he wrote, relevantly: We expect to have our second offer from the Grollo group in the vicinity of 3.2 to 3.3 million by tomorrow for the sale of Botany rd the settlement would be 90 days. and one to Singleton on 23 December 2009, in which he said: We have had an offer for 3.2 yesterday from Grollo. Based on the agents advice Jones Lang LaSalle have gone back with a counter offer of 3.4 they are now considering it and Grollo then said that they would like to have this wrapped up before the end of the year with a figure we can agree to. They will revert back shortly with there last offer. Grollo has asked for a 30 day due diligence period. and one to Hornstra and McEniery on 31 December 2009, in which he wrote, relevantly: I wanted to update you and we have received a further offer for 3.2 million from Grollo the big construction developer. This is up from the previous offer of 3.030,000. The agent jones Lang lesalle advised to go back with 3.4. Million. 297However, he adhered to his evidence. 298Michaelson was under cross-examination over the weekend of 30 August 2013. On resumption of his cross-examination on 2 September 2013 it emerged that he had, despite having been given the usual warning by his legal advisers, been in contact with Kalpidis. At this point, counsel for the plaintiffs produced an affidavit from Kalpidis to the effect that he had, on 7 December 2009, handed over the Equiset offer for $3.3 M. I directed that Michaelson's cross-examination be interrupted and Kalpidis' evidence interposed. I also directed that there be no communication with Michaelson in relation to the proceedings, other than administrative arrangements, until Kalpidis' evidence was complete. 299In a short affidavit deposed to on 2 September 2013, Kalpidis says: 7 During early December 2009, I was engaged in negotiations on behalf of Scott and Steve with potential purchaser Joseph Harb of Equiset. 8 Negotiations continued between Equiset and myself until 7 December 2009. 9 On or about 7 December 2009, I received by way of written offer from Joseph Harb on behalf of Equiset to purchase The Premises for an amount of $3.3 million dollars. 10 On or about 7 December 2009, I attended the offices of Scott Michaelson and Steve Ruskin at 410 Botany Road, Alexandria NSW, and presented the offer of $3.3 million made by Equiset. 300Kalpidis gave evidence that in preparing the affidavit the only records he was shown were the two Equiset offer letters both bearing the date 7 December 2009. 301During cross-examination Kalpidis was shown the email of 31 December 2013 from Michaelson to Hornstra and McEniery, referring to a further offer of $3.2 M from Equiset. He accepted that if the dates were correct, his understanding on 31 December 2009 was that an offer for $3.2 M had come in and it was an increase from the previous offer from Equiset of $3.03 M. 302Kalpidis was then shown an email written by him on 5 February 2010 to David Hobart, a property consultant whose assistance had been obtained at the suggestion of Singleton, and copied to Gunson of Singleton's office, in which he wrote: I have attached a copy of the two offers received from Equiset. Whilst they are both dated 7 December, the initial offer arrived on that date and the second correspondence was actually 22 January 2010. 303Kalpidis did not dispute the genuineness of his email, nor the truth of the assertion in it. 304This contemporaneous material makes it abundantly clear that the second Equiset offer was received on 22 January 2010. I accordingly reject Kalpidis' evidence to the contrary but having regard to the lapse of time and to the fact that he was not shown documents critical to the matter upon which he was requested to depose, I do not consider that his evidence, although wrong, was dishonest. 305Another somewhat remarkable feature of the circumstances surrounding Kalpidis' evidence is that whilst the filing page of his affidavit displayed the details of the plaintiffs' solicitors on the record, counsel for the plaintiffs informed the Court that the principal of the firm of solicitors concerned had instructed him to convey to the Court that the firm's solicitors and staff had nothing to do with when the affidavit came into existence and did not speak to Michaelson about it. It was apparently prepared by a consultant working on the case. The receivership and subsequent events 306On 1 December 2009 Eileen Whyte, the mother of Steven Whyte (Kimberley's husband), an elderly woman living in Albury and without commercial experience, became the sole director of ISC. 307On 11 December 2009 the Bank appointed Singleton and Stephen James Parbery ("Parbery") of PPB ("the receivers") as receivers and managers of Botany Road and MacIntosh Street. 308The CPL Group's business continued to operate during the currency of the receivership of Botany Road and MacIntosh Street. 309On 14 January 2010 Ruskin wrote to McEniery enquiring of the possibility of an agreement which would allow them to move forward and get their banking on track. 310The Bank responded by email to the effect that if the CPL Group had a formal proposal regarding the repayment of the outstanding debt in full which may be acceptable to the Bank, it should be submitted as a matter of urgency, otherwise the Bank would continue to enforce its rights. 311On about 1 March 2010 Ruskin, purporting to act on behalf of Mascot, signed a four year lease with Lumiére Lighting for premises at Botany Road. He accepted that he knew that receivers had been appointed to the property, acknowledged his signature on the instrument and that it was dishonest to deal with property subject to the control of receivers, knowing that it was subject to their control. 312Under the DOCA the deed administrators undertook to enter into a separate agreement with Indio to transfer all rights, title and interest to Indio of the following assets of CPL: all stock then currently held; trade receivables at book value; the registered trademark "Indio"; and all tenants, fixtures and fittings at Botany Road. No such separate agreement was in evidence. 313In March 2010 Ruskin initiated steps to revitalise Mayo Skin Care Pty Ltd, an inoperative company. Thereafter, amongst others, he procured its name change to Industry Only Pty Ltd ("Industry Only"). Ruskin gave evidence that at the time he was employed as General Manager and Steven Whyte as a storeman by ISC. Ruskin gave unconvincing evidence that the steps that he took preparatory to the purchase by Industry Only were done on instructions from Steven Whyte because he was taking over the business. 314By instrument entitled Business Sale Deed bearing the date 13 April 2010, ISC sold its business to Industry Only (of which Steven Whyte became the sole director), its business described as that of a skincare product wholesaler, for $100 "in addition to the payment as set out in the Sub-Licence Deed between the Vendor and Purchaser". 315The trademark was not disposed of as contemplated in the DOCA, but rather, on 15 May 2010 was assigned to Rowe Estates Pty Ltd, a company associated with acquaintances of Michaelson, for unspecified consideration. 316On 16 May 2010 Rowe Estates licensed Industry Only to use the trademark for three years for license fees of $5,000 in each of the first two years and $10,000 in the third. 317On about 15 June 2010 Mascot and Eminence exchanged contracts for the sale of Botany Road with Equiset for a sale price of $3.035 M and the contract settled on 18 August 2010. 318On 18 January 2011 the Bank appointed Gayle Dickerson and Paul Billingham as joint and several receivers and managers of ISC. 319Also on 18 January 2011 the Bank appointed Christopher Hill and Parbery of PPB Advisory as receivers and managers of CPL Australasia, Mascot, Eminence, Sunlovers and Tanning. 320Shortly afterwards, ISC commenced proceedings in this Court against Whyte and Industry Only, claiming that the disposition of ISC's business to Industry Only was an alienation of property with intent to defraud creditors, and seeking to have the disposition set aside pursuant to s 37A of the Conveyancing Act 1919 (NSW). 321On 24 May 2011 Barrett J (as his Honour then was) so found. His Honour: (a)declared that Industry Only held all of the assets, undertaking, fittings, fixtures, plant and equipment, intellectual property, goodwill and stock in trade relating to or used in connection with the skin care product wholesaling business known as "Indio" on trust for ISC; (b)ordered pursuant to section 37A of the Conveyancing Act 1919 (NSW) that every transfer or disposition of the assets, undertaking, fittings, fixtures, plant and equipment, intellectual property, goodwill and stock in trade relating to or used in connection with the skin care product wholesaling business known as "Indio" to Industry Only was void and of no effect; and (c)ordered that Industry Only do all things as may be necessary to restore and re-vest in ISC all of the assets, undertakings, fittings, fixtures, plant and equipment, intellectual property, goodwill and stock in trade relating to or used in connection with the skin care product wholesaling business known as "Indio". See International Skin Care Suppliers Pty Ltd v Whyte [2011] NSWSC 463. 322On 13 October 2011 the sale of MacIntosh Street was settled for $2.1 M. THE PROCEEDINGS 323The hearing occupied 22 hearing days. 324Initially Mr F M Douglas QC appeared together with Mr D E Baran of counsel and Mr D Robertson of counsel for the plaintiffs. Mr Douglas withdrew after two days. I was informed on day 19 that Mr Robertson had withdrawn. Mr Baran appeared throughout. He also appeared for Ruskin and Michaelson, although they do not proffer any defence to the Bank's claims against them. 325Mr A Leopold SC together with Mr J Hynes of counsel and, at times, with Ms T Wong of counsel, appeared for the Bank. 326Mr F F F Salama of counsel appeared for the female guarantors. 327The Court Book is regrettably not in chronological sequence and omits not a few important documents. It exceeds 13,500 pages. A significant volume of additional exhibits was tendered. 328The affidavits run to hundreds of pages. Twenty-one lay witnesses were called and some were cross-examined extensively. 329Each party called a forensic accountant, who gave evidence on the value of the business said to have been lost. The plaintiffs called Mr Tony Samuel. The Bank called Mr Gregory Meredith. They gave their evidence mainly in concurrent session. 330Both the plaintiffs' final written submissions and the Bank's final written submissions exceed 150 pages. THE WITNESSES 331At this point, it is pertinent to record my findings with respect to the credit of material witnesses. Michaelson and Ruskin 332The conduct of Michaelson and Ruskin in their business dealings, in the baseless claims they are prepared to make (including unfounded allegations of dishonesty they are prepared to level) and in the dishonest evidence they are prepared to give, reveals them as completely unscrupulous men. 333They were entirely unsatisfactory witnesses whose evidence I do not believe except where it is corroborated by other objective material or against interest. Ruskin in particular was deliberately evasive. Each was prepared to say anything which he thought may advance the case. 334Baseless claims brought by them and respects in which I consider their evidence to have been dishonest are dealt with in detail below. 335Examples of what I consider to be unscrupulous business dealings are the entry into of a formal exclusive supply agreement with Holy Land without any intention of honouring it, the entry into of the Lumiere lease during the receivership, the disposition of ISC's business to defraud creditors, and the failure (referred to below) to inform John Ruskin either of the sale or that the Bank had made demand. Kalogerou 336Kalogerou was an unsatisfactory witness in material respects. In particular with respect to his evidence of having informed Wise of the proposed voluntary administration earlier than 3 February 2009 and more particularly, at a meeting on 28 January 2009 which did not occur, but to which evidence he adhered. Wise 337Wise's credit was heavily attacked. Part of the attack included an allegation made without proper foundation, and later withdrawn, that she had forged Ruskin's signature on a charge. This is dealt with further below. Her evidence disclosed that on one occasion, to assist the CPL Group by having limits loaded on an increased facility, she purported to ex post facto witness signatures although she was not present. She was attacked for this. Her action was consistent with her efforts over a long period of time, and sometimes in apparently trying circumstances, to support the CPL Group despite its accounts being out of order. She adequately explained the circumstances in which this occurred and readily accepted responsibility for her action. 338She was entirely unshaken in cross-examination. 339She is undoubtedly a competent and efficient bank officer and her version of events sits comfortably with both the objective contemporaneous material and the inherent probabilities. 340I found her an entirely satisfactory and truthful witness. Where her evidence conflicts with Michaelson, Ruskin and Kalogerou, I prefer it. Smith 341I found Smith, too, to be an entirely satisfactory and truthful witness, and where his evidence conflicts with Michaelson, Ruskin and Kalogerou, I prefer it. Hornstra 342Hornstra is undoubtedly a somewhat hard-edged banker. In giving evidence he displayed an air of condescension and self-confidence, perhaps bordering on arrogance. But in my opinion, he gave truthful evidence and where his evidence conflicts with that of Michaelson and Ruskin, I prefer his evidence. ISC'S CLAIM IN THE PRINCIPAL PROCEEDINGS The relevant statutory enactments 343Section 12BB(1) and (2) of the Act provide: (1) If: (a) a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act); and (b) the person does not have reasonable grounds for making the representation; the representation is taken, for the purposes of Subdivision D (sections 12DA to 12DN), to be misleading. (2) For the purposes of applying subsection (1) in relation to a proceeding concerning a representation made with respect to a future matter by: (a) a party to the proceeding; or (b) any other person; the party or other person is taken not to have had reasonable grounds for making the representation, unless evidence is adduced to the contrary. 344Section 12CA(1) of the Act provides: A person must not, in trade or commerce, engage in conduct in relation to financial services if the conduct is unconscionable within the meaning of the unwritten law, from time to time, of the States and Territories. 345Section 12CB(1)(a) of the Act provides, relevantly: A person must not, in trade or commerce, in connection with [...] the supply or possible supply of financial services to a person [...] engage in conduct that is, in all the circumstances, unconscionable. 346Section 12DA(1) of the Act provides: A person must not, in trade or commerce, engage in conduct in relation to financial services that is misleading or deceptive or is likely to mislead or deceive. 347Section 12GF(1) of the Act provides: A person who suffers loss or damage by conduct of another person that contravenes a provision of Subdivision C (sections 12CA to 12CC) or Subdivision D (sections 12DA to 12DN) may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention. 348Section 12GM of the Act provides that the Court can make other orders when it finds a party to proceedings has suffered or is likely to suffer loss or damage by conduct of another that was engaged in a contravention of one of the provisions referred to above. Under s 12GM(7), the orders can include an order declaring the whole or any part of a contract made between the person who suffered or is likely to suffer loss or damage and the person who engaged in the conduct void ab initio or at all times on and after a date before the date on which the order is made. The issues 349It is not in dispute that under the facility CPL is liable to the Bank and that each of the plaintiffs, including ISC, as guarantors of CPL's obligations are equally liable. 350As at 27 November 2012 their indebtedness to the Bank was $7,672,545.94. 351It is not in dispute that the appointment of voluntary administrators to CPL on 3 February 2009 was an Event of Default under cl 22 read with cl 16.1(o) of the facility, entitling the Bank to appoint receivers to Botany Road and MacIntosh Street under the mortgages given by Mascot and Eminence, and Sunlovers and Eminence respectively. 352However, ISC claims that the Bank by its conduct induced CPL to believe that the Bank would not treat the appointment by CPL of voluntary administrators as an Event of Default under the facility. 353It says that in reliance on that belief so induced, CPL appointed the voluntary administrators, which constituted an Event of Default which enabled the Bank to appoint receivers to Botany Road and MacIntosh Street. 354It is not suggested that at the time of the conduct complained of the Bank had any actual intention of relying on an appointment as an Event of Default. Rather, it is put that the Bank's ultimate reliance on it rendered its earlier conduct misleading. 355Properly viewed, ISC's case is one concerning a representation as to a future matter as contemplated in s 12BB(1)(a) of the Act, which it asserts the Bank did not have reasonable grounds for making. The contest in this regard was focused on whether the Bank conducted itself so as to induce a belief on the part of CPL that it would not treat the appointment of voluntary administrators as an Event of Default. I have approached the matter on the basis that if such conduct is established, it was misleading or deceptive. 356A contention that the appointment of receivers, in reliance on the voluntary administration as an Event of Default, was unconscionable within the meaning of the unwritten law as contemplated by s 12CA(1) because the Bank departed from an assumption which it induced CPL to hold that the Bank would not do so and upon which ISC acted to its detriment, was not pressed. 357ISC says that the appointment of the receivers to Botany Road and MacIntosh Street destroyed its business, the value of which it lost, and that thereby, by the conduct of the Bank complained of, it suffered loss and damage. Mascot, Eminence and Sunlovers themselves make no claim. 358The Bank puts in issue each element of ISC's claim. Additionally, it pleads as precluding ISC's claim the release and bar in cl 7 of the Deed of Forbearance. 359ISC concedes that in terms, cl 7 of the Deed of Forbearance precludes its claim but contends that in procuring the release and bar, the Bank engaged in unconscionable conduct because it was made under threat and because the Bank had resiled from its holding out that the voluntary administration of CPL would not be regarded as an Event of Default under the facility. It contends that the Deed of Forbearance is in the circumstances not binding upon it. It seeks an order that it be set aside. 360The issues which arise on ISC's claim are whether: (a)conduct of the Bank induced the plaintiffs to believe that the voluntary administration of CPL would not be treated as an Event of Default; (b)ISC's entry into the Deed of Forbearance was procured by conduct of the Bank which was unconscionable; and (c)if the answer to both (a) and (b) is yes , ISC suffered loss by the conduct of the Bank complained of. 361I will deal with each of these issues in turn. The misleading and deceptive conduct 362The elements of the misleading conduct alleged to have induced the asserted belief are: (a)knowledge on the part of the Bank of CPL's intention to appoint voluntary administrators; and (b)conduct by the Bank which conveyed to CPL that it would not treat such an appointment as an Event of Default. 363ISC puts that the Bank acquired knowledge of CPL's intention because: (a)it was directly conveyed to the Bank by Kalogerou in conversations with Wise; and (b)other matters conveyed to the Bank necessarily implied it. 364ISC also puts that given the possible dire consequences of appointing voluntary administrators, there is a strong probability, and it is to be inferred, that CPL would never have done so unless it had received comfort from the Bank that it would not be an Event of Default. 365I find that at no time prior to the meeting on 3 February 2009 at which, in the presence of Smith, Kalogerou told Wise of the contemplated appointment, was an intention to appoint voluntary administrators conveyed to the Bank whether expressly or by implication. 366I accept Wise's evidence that she was not told of the voluntary administration until 3 February 2009. 367Kalogerou says that he is confident he raised voluntary administration with Wise prior to meeting with her on 3 February 2009. I do not accept Kalogerou's evidence that he did so. He identifies no particular occasion upon which this may have happened other than the meeting on 28 January 2009, which plainly did not occur. 368I do not accept Kalogerou's evidence that he gave Wise a handwritten note about the VA, as referred to in the minutes of the meeting on 2 March 2009. No such note (or letter, as referred to by Michaelson and Ruskin) has ever been produced. 369Corroboration for Wise's version is provided by: (a)Smith's email to Michaelson, Ruskin, Vouris and Kalogerou of 19 November 2008 which indicates that voluntary administration had not at that point even been hinted at; (b)the fact that the meeting foreshadowed in the email for the following Monday (24 November 2008), at which the hint would be given, did not take place; (c)Kalogerou's email to Smith (copies to Michaelson and Ruskin) of 2 February 2009, in which he said "that is why it is imperative that we tell Deb that we are putting CPL into administration with Vouris tomorrow at the latest" (Kalogerou's oral evidence was that he contemplated telling her on 3 February 2009 that they would be placing the company into voluntary administration); (d)the fact that CPL's financial distress became critical on 2 February 2009 as a consequence of the Rite Pak proceedings and the Bank becoming aware of them (according to Kalogerou, eventually it was an intransigent creditor that caused them to proceed with the voluntary administration when they did); (e)Wise's adverse reaction (Smith says she swore) to the possibility of voluntary administration at the 3 February 2009 meeting; (f)the fact that on the evening of 3 February 2009 Kalogerou emailed Wise a paper seeking to motivate the voluntary administration, which Wise said she had earlier requested, and her response of hope that "it will be enough to convince credit as they are not very happy at the moment"; (g)Wise's emails to Meta on 3 February 2009, to Hornstra on 4 February 2009 and to Hornstra and Meta on 27 February 2009 reporting that she had first learnt of the voluntary administration on 3 February 2009; (h)the tenor of Smith's email to Kalogerou late on 3 February 2009 and Kalogerou's email to Smith, Michaelson and Ruskin is consistent only with an understanding on the part of those individuals that the administrators had been appointed without the Bank's imprimatur; (i)Vouris' letter of 5 February 2009 stating that he had advised the director that the Bank must be kept informed as steps were taken and that the director had been naïve and had not appreciated the importance of finalising matters with the Bank prior to making an appointment; (j)the contents of Michaelson's email to Wise on 6 February 2009 in which he said that "the VA [...] was done somewhat naively and we did not expect it to alarm or distress BankWest", a statement inconsistent with the notion that the Bank had been informed beforehand and acquiesced; (k)the absence of any document evidencing that the Bank was informed before 3 February 2009; and (l)the absence of any assertion by the CPL Group, after receipt of Wise's 5 February 2009 email advising that CPL's accounts had been frozen as a consequence of the default, that the Bank had been told earlier. 370ISC puts that knowledge on the part of the Bank it is to be inferred because: (a)the Bank had knowledge of the difficulties being experienced by CPL with respect to its relationship with Holy Land; (b)the Bank had knowledge that CPL was ordering stock from a new supplier in breach of the Holy Land agreement; (c)the Bank had knowledge of CPL's concerns with respect to potential tanning bed litigation; (d)the Bank had knowledge, prior to 3 February 2009, that there was to be a complete substitution of ISC for CPL; (e)the Bank facilitated that substitution by the creation of accounts, by "zeroing out" the bank accounts in January 2009 and obtaining new charges from ISC; and (f)the Bank had knowledge of the relationship between Kalogerou and Smith, which had the consequence that it must have known that a proposal to be advanced was that CPL would be placed into voluntary administration. 371A telling consideration that nothing conveyed to the Bank prior to 3 February 2009 implied CPL's intention to appoint administrators is that prior to that date, the Bank drew no such implication. 372I do not accept Michaelson's and Ruskin's evidence that it was conveyed to Wise that the strategy involved a complete substitution of ISC for CPL and a cessation of the business of the former. 373From an early stage, it was conveyed to the Bank that CPL's business was to be reduced and that the bulk of the skincare business was to be carried on through a new vehicle, which turned out to be ISC. 374However, at no time prior to the appointment of voluntary administrators on 3 February 2009 was it conveyed to the Bank that CPL's business was to cease completely. To the contrary, it was conveyed that CPL's business would continue. This was the fact because CPL still needed Holy Land's products, although a reduced number of them. 375On 3 December 2008 Michaelson gave Wise a business plan which referred to eight products then being supplied by Holy Land, to reduce to five by March 2009. Ruskin's 18 December 2008 email to Wise concerned stock to be ordered from Holy Land and to be delivered after that date. These dealings are corroborative of Wise's evidence of never having been told that there was to be a complete substitution but rather that she understood, from what she was told, that CPL would continue to trade for the purpose of selling products supplied by Holy Land in order to avoid breaching its agreement with that supplier. 376Michaelson gave inconsistent evidence on the topic. His initial evidence was that as of 8 December 2008 CPL had ceased trading. Under cross-examination, when faced with the reality that CPL had continued to order from Holy Land, he gave evidence that the cessation of trading actually occurred on 13-14 January 2009 and eventually gave evidence that ISC was "taking over everything except for the Holy Land agreement". He also gave evidence of a conversation with Wise on 16 January 2009 in which he said that CPL had ceased trading. Wise denied this conversation. I find that it did not take place. 377Despite having given affidavit and oral evidence that as at about 8 December 2008 ISC had been substituted for CPL, Ruskin gave the following evidence under cross-examination: His Honour: The question is intended to convey that it wasn't completely substituted, it was only going to be substituted in part? Ruskin: That's correct, your Honour. His Honour: CPL would continue to supply products but other products would be supplied by some new entity; correct? Ruskin: Yes, your Honour. Leopold: If it was only going to be substituted in part, then it would be a nonsensical and absurd proposition to put it into voluntary administration? Ruskin: It was still - some of the stock was still being sold. Leopold: Not an answer to my question-- His Honour: If it was going to continue to trade, what Mr Leopold is putting to you is it would have been nonsense to put it into voluntary administration? Ruskin: Yes. 378I am not satisfied that the Bank knew or understood that CPL was ordering product from other suppliers in circumstances which constituted a breach of the Holy Land agreement, if this was the case. But even if the Bank knew this, it means that the Bank also knew that CPL was continuing to order from Holy Land, which would be inimical to any understanding that CPL had shut up shop. 379CPL's concerns with regard to the potential tanning litigation were conveyed to the Bank. But no claims had yet been made and there is nothing to suggest that it was conveyed to the Bank that any were imminent. The Bank was told that channelling business to a new entity was, in part, to protect against litigation but this did not translate into it being told that CPL was to be put into voluntary administration or be closed down entirely. 380ISC relies, as corroboration for the contention that total substitution was contemplated and discussed with Wise, on the documents said to be minutes of meetings held on 3 November 2008, 24 November 2008 and 19 January 2009 respectively. 381There are a number of general and specific anomalies associated with these documents. The Bank served notices to produce and subpoenas were issued (including to the receivers of CPL and ISC) for production of the original minutes, but none were produced. Gay gave evidence minutes were kept in a file, not delineating between companies in the CPL Group. No minute book was produced. No adequate explanation was provided as to why the plaintiffs were nevertheless able to produce these (manifestly self serving) and two other company minutes but not others. 382The 3 November 2008 document is entitled "Minutes of Indio Director's Meeting" and refers to Indio Skin Care Pty Ltd replacing CPL Australasia Pty Ltd. But ISC was only incorporated on 13 November 2008 and if the minute is read as contemplating the complete replacement of CPL by ISC, other material indicates that this was not the fact. 383The 24 November 2008 document records "Meeting last week with Debbie Wise during which she advised she is happy to substitute the new indio company for CPL Group and knows all trading will now go through Indio Skin Care Pty. Ltd., to avoid possible litigation with Holyland" and "CPL will cease to trade." At the lowest, these are inaccurate recordings of the facts at the time. 384The 19 January 2009 document records "Debbie agrees with the substitution of Indio Skin Care Pty. Ltd. for CPL Group and all of its borrowings. This comes from Scott's discussion with Debbie last Friday evening." The discussion is apparently intended to be a reference to the telephone conversation which Michaelson says he had with Wise on 16 January 2009 (which Wise denies) and in which he says he said "as you know CPL has ceased trading" and "can you please confirm the transfer of loan documents from CPL to Indio is almost complete? As we want to ensure we follow Tony's advice with Indio Skin Care". Two particular anomalies are that the following day Michaelson sent an email about making an order to Holy Land, which is inconsistent with CPL having ceased trading, and there was never any transfer of loan documents from CPL to ISC. Moreover, I accept Wise's denial that such a conversation took place. 385I have significant doubt that these documents are genuine minutes brought into existence at the times shown on their face. However, it is not necessary for me so to find. I am not satisfied that in the relevant respects they constitute an accurate recording of facts for which ISC contends. 386The contemporaneous material makes it clear that CPL's accounts were not zeroed out. To the contrary, Wise's email of 12 January 2009, Kupresak's Cash Flow Review of 22 January 2009 and her email of 30 January 2009 show that they were active. On 12 January 2009 interest of $51,761.11 was debited to CPL's account No. 3 and that account had a debit balance of $54,143.76 by 14 January 2009. Nothing in Wise's email can fairly be read as conveying that CPL's obligations had been transferred to ISC. 387I reject as unsustainable the proposition that it follows from the Bank's knowledge of the relationship between Kalogerou and Smith that it must have known that a proposal to be advanced was that CPL would be placed into voluntary administration. It entails the assumptions, which have not been made good, that Kalogerou inevitably advises in favour of voluntary administration and that the Bank must have understood this. However, it is unsustainable as a matter of fact because, as I have already said, I accept Wise's evidence that the Bank was not told until 3 February 2009. 388ISC puts that: [T]he bank remained silent in circumstances where the surrounding circumstances demanded that bank to state in clear and unequivocal terms that the cessation of trading by CPL, it's winding down or any other adverse trading conduct by CPL threatened the ability by CPL to make its loan repayments. Instead the bank engaged in conduct that was likely to have mislead and deceived the Plaintiffs by stating that it would require the new charge over ISC and gave every indication that the substitution or replacement was permissible. Part of that process was the commercial demise of CPL. 389ISC puts that the Bank must have held out to an experienced insolvency practitioner such as Kalogerou that it would not raise a protest at CPL being placed into voluntary administration, given that ISC had taken over the substantial part of trade with CPL winding down. 390I reject these submissions. 391I have already found that CPL's intention was not conveyed to the Bank before 3 February 2009. This being the case, the Bank could not have conveyed to CPL that it had no difficulty with what CPL says was foreshadowed. 392But in any event, I also find that at no time did the Bank convey to CPL or any of the individuals associated with it that the appointment would not be regarded as an Event of Default. 393To the contrary, I find that at the meeting on 3 February 2009 Wise conveyed that the appointment would be an Event of Default and would be so regarded unless the support of the Bank was sought and obtained beforehand, and that CPL went ahead in this knowledge and without obtaining the Bank's support. 394Kalogerou's own evidence of the meeting on 3 February 2009 (even if accepted) was that Wise expressed concern that the proposed voluntary administration would not be looked upon favourably by the Bank. Even if, as he says, she did not suggest that the Bank would regard it as being a default under its mortgage documentation, her reaction as described by him falls well short of anything that could have been construed as acquiescence to it on the basis that it would not be a default. 395The Bank required a new charge over ISC because part of the assets the subject of its security was to go over to ISC, which became an account holder in its own right. The new charge (which Ruskin says he signed) was sent by Kupresak for execution by email on 4 February 2009, after the 3 February 2009 meeting. 396As to the suggested probability that CPL would not have proceeded without comfort from the Bank because of the possible dire consequences of doing so, the objective material suggests otherwise. CPL was insolvent and it had no other choice. The decision was forced upon it by Rite Pak. This is dealt with more fully below. 397The plaintiffs concede that if I accept Wise and Smith's version of the 3 February 2009 meeting (which I do), ISC's claim must fail. It fails at the first hurdle. The Deed of Forbearance 398ISC accepts that cl 7 of the Deed of Forbearance, in its terms, is a bar these proceedings. 399It says that the Bank procured the instrument by unconscionable conduct consisting of threats alleged to have been made by Hornstra to Ruskin. 400The first threat is said to have been made during their 4 May 2009 conversation when, according to Ruskin, Hornstra told him he needed to sign the Deed of Forbearance, otherwise Hornstra would not allow the DOCA to go through and would appoint his own liquidator over ISC and the other companies. 401If a conversation to this effect took place, it hardly embodied a threat but, rather, a statement of the Bank's commercial position. There was nothing improper in that position and there was nothing improper in Hornstra stating it. 402The second threat is said to have been made during their 11 May 2009 conversation when, according to Ruskin, Hornstra refused Ruskin's request for time to obtain legal advice and informed him that if he did not sign the Deed of Forbearance that day, Hornstra would appoint receivers. 403ISC pleads that on 11 May 2009, "as a result of these threats, and in the absence of any legal advice, Ruskin as director of ISC executed a Deed of Forbearance". ISC pleads further that if Ruskin as director of ISC had not signed the Deed of Forbearance, it would not have been executed by CPL or binding upon CPL. 404If a conversation on 11 May 2009 to the effect of that alleged by Ruskin took place, I do not consider that it discloses any threat or anything improper on the part of the Bank. 405However, I do not believe Ruskin that a conversation with Hornstra in such terms occurred. Leaving aside that I consider Ruskin to be an untruthful witness and that I prefer Hornstra's evidence, Ruskin's own behaviour at the time and other contemporaneous events and circumstances entirely undermine the occurrence of a conversation in those terms. 406I do not believe Ruskin that Lyne told him that he could not act for him anymore because they were acting for the administrator. I also do not believe Ruskin that he did not obtain any legal advice or that he did not read the document. 407The suggestion that Lyne, at a late stage, informed Ruskin that he could not act for Ruskin (meaning ISC, instructions on behalf of which were being given by Ruskin) because he was acting for the administrators cannot be reconciled with Ruskin's own behaviour, let alone that of Lyne. Lyne was not called. It may be inferred that his evidence would not have assisted ISC. 408Dibbs was not acting for the administrators on the Deed of Forbearance. Dibbs acted for, and even after it was signed and as late as 20 May 2009 continued to act for, ISC with respect to the Deed of Forbearance. Ruskin signed the Deed of Forbearance on behalf of ISC, not in his personal capacity. 409Dibbs clearly gave advice to ISC via Ruskin. On 7 May 2009 Addison forwarded a draft deed to Ruskin stating he was reviewing it later that day gave some specific advice about its terms. Ruskin's email to Addison on 9 May 2009 makes it clear that there were discussions between them about the Deed of Forbearance. It is inconceivable that these discussions could have occurred without Ruskin having read at least part of the instrument. 410By cl 6.4 of the Deed of Forbearance, CPL and ISC represented and warranted to the Bank that they had read the Deed thoroughly, taking care to understand and consider it and its effect on them, that the Bank had warned them that they should obtain advice from their own lawyer and from their own financial advisor and that they had obtained advice on it from their own lawyer. 411I do not believe Ruskin that he felt any sense of pressure because of what was said by Hornstra. Prior to these proceedings, Ruskin made no complaint of any such pressure. 412The Deed of Forbearance came about as a result of a suggestion made by ISC's lawyers that there be a side agreement dealing with ISC's obligation to refinance. Ruskin's contemporaneous behaviour, far from revealing any pressure applied by the Bank reveals an enthusiasm on his part for the instrument to be signed. On 4 May 2009 Ruskin asked Addison to contact the Bank's lawyers to ask for a copy of the Deed and then, on the following day, asked Lyne to chase it up. 413ISC and CPL needed the Bank's consent under the charge given by CPL, for the transfer to ISC of CPL's business. There was a distinct commercial benefit in this occurring and Ruskin enthusiastically embraced it. 414Also, under the Deed of Forbearance ISC received the distinct benefit of the Bank forbearing for a significant period of time from taking enforcement action, despite an acknowledged Event of Default. 415Under cross-examination, when faced with the contents of Addison's 7 May 2009 email about the draft deed, clearly a reference to a draft Deed of Forbearance - there was and is no provision in the DOCA prohibiting transfer of assets - Ruskin gave evidence that this did not concern the Deed of Forbearance but the DOCA. I consider that evidence to have been deliberately untruthful. 416During Ruskin's re-examination he gave the following evidence: Baran: When you said your hands were tied, what did you express to mean by that particular term in the context of Mr Hornstra? Ruskin: My hands were tied because he said we needed to sign the deed of forbearance otherwise the documents would not go through. Basically, what that meant he was a large threatening man. He was about 6 foot 8. Whatever he said we had to do we did. Leopold: I object to the last part of the answer. His Honour: Was that intended to mean if you did not do what he said, he'd beat you up? Ruskin: He was very threatening, very forceful in the way he spoke to me on the phone and meeting, he was very intimidating. We did whatever he said, your Honour. His Honour: I propose to allow the answer to stand. 417Ruskin appeared to me to be, apparently for the first time, claiming physical intimidation by Hornstra. Nothing of this type of intimidation can be gleaned from Ruskin's affidavit evidence, nor was it pleaded. Hornstra is a tall man, but Ruskin is by no means diminutive. I do not believe Ruskin that he felt physically intimidated by Hornstra. I consider the suggestion to be an example of Ruskin's preparedness to assert complaints for which there is no basis on the footing that he sees some benefit in so doing. 418As part of its charge of unconscionable conduct, in final submissions, ISC put that the Bank had put itself in a position of being able (via Hornstra) to make the so-called threat of not going along with the DOCA and putting in his own receiver (to ISC) if the Deed of Forbearance was not signed, because it had obtained a fixed and floating charge from ISC by earlier misleading Ruskin into executing the charge by not disclosing before it obtained the charge that it considered CPL to be in default because of the appointment of voluntary administrators. It put that "Ruskin and Michaelson had a legitimate expectation that the bank would have informed them that in truth and fact the facilities were in default", and that "[h]ad such a disclosure been made, it is inconceivable that a separate entity not otherwise charged or the subject of a facility with the bank would have executed the charge documents". It put that "ISC was now captured in the Deed in circumstances where had the truth been conveyed, it would not have been party to the Deed" and that this then led the Bank to be in a position where it could secure via a threat to Ruskin a complete release from CPL and ISC of any causes of action or rights which otherwise would have been available. 419An initial observation about this submission is that it is difficult to reconcile with Michaelson's and Ruskin's evidence that they thought there had been earlier agreement from the Bank to transfer all of the loans from CPL to ISC. 420I have already found that no threat by the Bank has been established. Additionally, arrangements for a charge to be obtained from ISC had been made prior to 3 February 2009 in view of the proposed shift to ISC of a large part of CPL's business. 421On 5 February 2009 Ruskin validly executed the ISC charge at a time at which he knew that an Event of Default had been committed and had no reason to believe that it would be condoned by the Bank. 422It follows that I reject ISC's submission that the entry into the Deed of Forbearance was attendant with any conduct on the part of the Bank that was unconscionable or misleading. 423It follows that ISC's claim fails for the additional reason that it is barred by the Deed of Forbearance. 424At this point, it is appropriate to deal with an allegation made by counsel on behalf of ISC of criminality and serious misconduct for which, in my view, there was no proper basis. The allegation was initially levelled only at Wise but then, in the alternative, against both Wise and Kupresak. The making of the allegation was sought to be justified solely as relevant to Wise's credit. Kupresak was not called. 425There were provisionally admitted into evidence two documents bearing a signature under the name "Steven Ruskin" in handwriting. The first was an ASIC Notification of details of a charge, on its face signed by Ruskin on 5 February 2009, notifying a charge said to have been created on 3 February 2009. The second was a Form of Fixed and Floating Charge, on its face signed by Ruskin. On the front page, the date of charge is shown in handwriting as 3 February 2009. The execution page bears a signature under the name "Steven Ruskin" but is undated. 426It was put to Wise that the second document (the charge) was not signed by Ruskin. It was put to Wise that no charge was created on 3 February 2009, that the signatures on the two documents were different and that the 3 February 2009 document was not sent to Michaelson or Ruskin. Wise agreed that the signatures appeared to be different but did not recall seeing the document and did not know whether it had been sent on to Ruskin. Her evidence was that she was not personally responsible for preparation of these charges. 427Nevertheless, the allegation was made in the following exchange: Baran: This document again I want to suggest to you, to your knowledge, was not sent on to Mr Ruskin? Wise: I wouldn't know that. Baran: And again I want to suggest to you that the signature that appears in the document I've just showed you is a forgery and that you committed it? Wise: That is absolutely not correct. Baran: Just like you are prepared to falsely witness a document, as you referred to in your affidavit, being the second affidavit in these proceedings? Wise: Absolutely not. The correlations are totally different. 428Later, during submissions, it was put that it was either Wise or Kupresak who had committed the forgery. 429This was despite the fact that no evidence had been lead (or was sought to be lead) from Ruskin that it was not his signature or that he had not given someone authority to append it. Indeed, the Court was informed by counsel that a decision had been taken not to call Ruskin's evidence on the topic as the plaintiffs' case was closed and it was considered that it (presumably leave to call it) would have been refused. 430More than this, there was contemporaneous written material including emails by Ruskin himself which undermines the allegation. 431On 4 February 2009 Kupresak emailed Ruskin (copied to Wise) that the Bank's operations group had reviewed the documents he had signed yesterday and advised that they had to be executed properly by the 2 directors of Indio Skin. New documents for execution were provided. There was no issue that these included a fixed and floating charge by ISC. The document upon which the allegation was founded has only one signature. 432Far from demurring to the statement that he had not the previous day signed the document sent for re-signature, early the following morning Ruskin emailed Kupresak: Hi May, As per your request see resignation of director. As soon as Ellen arrives we can finalise and I will email you the ASIC confirmation. I will courier this morning are there any more changes? 433Kupresak replied: Hi Steve, Yes you can date them today. 434Ruskin then emailed Kupresak, copies to Wise and Smith: Hi May, All documents have been signed and booked with a courier. 435There would, of course, have been no reason for the Bank to send back to Ruskin the defectively executed document. 436In the end result, on the 19th day of the hearing, the allegations, which should not have been made in the first place, were withdrawn in the following exchange: Baran: I can inform your Honour that my learned friend junior has withdrawn. His Honour: Is it something that I said? Baran: No, your Honour, but there's something I need to say now. The assertions that have been put through me about impropriety against Ms Wise were done on what I believe to be an adequate basis. Having reflected upon that it would appear that that basis now in hindsight was not as adequate as one perhaps would have required in the circumstances and I formally withdraw and I apologise profusely to the court for any assertions put to Ms Wise regarding any of the issues regarding exhibits V and W and any allegation that I have put which may tend to either suggest or assert an act of dishonesty or forgery on her behalf, Ms Kupresak or the bank. His Honour: Okay. That's in the transcript. Baran: I ask your Honour to ignore anything in my submissions that makes reference to it. Loss and damage 437ISC has failed to establish that the Bank engaged in the misleading and deceptive conduct complained of. It has also failed to establish that the Deed of Forbearance should be set aside. 438Although it is not necessary to do so, I will nevertheless proceed to consider whether, had ISC established both of those matters, it suffered any loss by the conduct complained of. 439The onus rests on ISC to prove not only that by the conduct of the Bank complained of it suffered loss, but also the quantum of that loss. I will consider each of these matters in turn. 440Whether ISC suffered loss by the conduct complained of requires consideration of whether, taking a common sense approach, that conduct caused ISC loss. Loss 441I consider that ISC has failed to establish on the balance of probabilities that if the conduct complained of occurred, it caused it loss. 442The fulcrum of ISC's contention that the Bank's conduct caused it loss is that the voluntary administration on which the Bank relied as an Event of Default justifying the appointment of the receivers would not, but for that conduct, have occurred. 443ISC says that, in that event, it would have taken over the bulk of CPL's business and met CPL's liabilities. CPL would over time have become dormant and ISC would have prosperously lived on as a going concern. 444However, in my view, it is more likely than not that CPL would have appointed voluntary administrators anyway (or worse, have been wound up) and in any event, ISC could not have shouldered CPL's liabilities and survived. 445As early as 25 November 2008, CPL's accountant Steve Danielson considered that CPL had a nil value and that based on its trading accounts, it was unlikely to be able to meet its debts as and when they fell due. 446By 1 December 2008 Ruskin was delaying creditors and had avowedly made a payment plan with Rite Pak which CPL was unable to meet. 447By 3 February 2009 CPL was hopelessly insolvent. 448It had a significant deficit of current assets over current liabilities. It was unable to pay its debts as and when they fell due (or indeed, it appears, at all). It had a pressing creditor, Rite Pak, owed some $60,000 and a winding up application based on an unsatisfied statutory demand, which had been commenced on 17 December 2008, was pending. CPL would have had no real prospect of establishing its solvency in the winding up proceedings. No one on its side suggested at the time that the application could be met by so doing. 449In a letter to creditors on 4 February 2009, the administrators reported that CPL had creditors of $1,199,038 (excluding the Australian Taxation Office which was owed some $130,000). Of this, some $750,000 was owed to related parties. 450Vouris swore an affidavit on 10 February 2009 to obtain an adjournment of the Rite Pak proceedings in the Supreme Court of Victoria, on the basis of the administration and the prospect of a DOCA. He referred, amongst others, to the liabilities of CPL for arrears of rent on the commercial and warehouse premises occupied by it in Sydney, and arrears of payments due on various hire purchase agreements and equipment leases. He estimated that the proposed DOCA would yield a dividend of approximately ten cents in the dollar to be paid to unsecured creditors. 451In a Report to Creditors on 2 March 2009, the administrators stated, amongst others that: their estimation was that the amount owing to non-related, unsecured creditors, including the ATO, was $777,061; that a summary of CPL's balance sheets revealed a deficiency of net assets of $6,128,198; that total liabilities at the date of their appointment consisted of current liabilities of $1,670,078 and non-current liabilities of $4,005,649, and that the balance sheet showed current assets of $536,660 and non-current assets of $78,190. In respect of the information provided, they added: The above is indicative of insolvency and our preliminary view is that the director may have traded the Company whilst insolvent. 452It was otherwise contemplated that CPL would have continued to trade, needing a limited range of products from Holy Land. This contemplation was modified because of Rite Pak. 453As Kalogerou says in his affidavit, eventually, it was an intransigent creditor that caused them to proceed with the voluntary administration at the time that they did. 454As Vouris wrote in his letter of 5 February 2009, the matter became urgent and appointment was necessary because the winding up application was before the Victorian Supreme Court on 11 February 2009. 455As Michaelson said to Smith, "if we didn't do it, somebody else would have done it". 456It was suggested that CPL was not insolvent because it had resources available to it in the form of the temporary excess accommodation of $320,000 which had been approved (although not yet formalised) and the preparedness of John Ruskin to provide ongoing financial assistance to the business whenever Michaelson or Ruskin asked for it. 457It was also put that given the Bank's prior approval of requests for temporary funds to manage cash flow, the Bank would not have called a default on an $11.5 M facility on the basis of a $63,000 debt owing to Rite Pak. 458The existence of the temporary excess facility was no answer. It had been put in place to deal with existing excesses of over $200,000 on CPL's account. As at 2 February 2009 the excess was almost $248,000 and an interest payment of $70,000 was due to the Bank later that month. There was insufficient to cover USD $20,000 for Holy Land stock which CPL had requested. In effect, there was only about $2,000 left of this facility. 459John Ruskin deposed to two affidavits in the proceedings. In his first affidavit sworn 12 July 2012, he states: In addition to the past funding that I had provided, it was always my intention to continue to provide ongoing financial assistance to the Indio Skin Care business whenever Scott or my son asked for it. I would have drawn on my superannuation fund in order to provide this financial assistance. 460In his second affidavit sworn 7 May 2013, he gave evidence for the first time, of what he described as an arrangement which was made in a conversation between him, Michaelson and Ruskin to the following effect: Michaelson and Ruskin: We are planning to expand the ISC business in the domestic markets, and overseas markets, however we may need additional working capital during this expansion phase. John Ruskin: I will keep advancing working capital to ISC when it needs it, and in return for this, and the funds I have already advanced, you will transfer or issue a 10% shareholding in ISC to me, which will be held by Ruskin Management. As a result you will not require me to advance any amount for that transfer of shareholding but, like I say, I will continue to provide working capital. The transfer of the shares will be in full and final satisfaction for the amounts I have already contributed to ISC, and it will be in lieu of any repayment of any future ongoing financial assistance that I provide to ISC. I won't seek payment of any dividends from ISC in respect of my 10% shareholding for five years, until the Indio Skin Care domestic and overseas expansion is complete. Ruskin: That's great Dad, I appreciate your confidence. We have a deal then. 461John Ruskin gave evidence that between February and 18 November 2008 he advanced some $249,000. CPL paid back $75,000 on 17 October 2008. Between 30 March and October 2009 he lent ISC $120,200. 462He provided details of the state of his superannuation fund and other assets being three fixed properties: the family home at Belrose, NSW, owned jointly with his wife; a demountable home at One Mile Beach, NSW, also owned jointly with his wife and a unit at Docklands, Victoria, which he said was at mid 2009 mortgaged to the Commonwealth Bank for "[p]robably $350,000". He said he was prepared to utilise his assets to advance or raise moneys to advance to ISC on request from either Michaelson or Ruskin. 463In about November 2009 a 10% shareholding in ISC was allocated to Ruskin Management Group Pty Ltd, the directors and shareholders of which are John Ruskin and his wife, Hazel. 464The Bank challenged John Ruskin both as to the existence of the alleged arrangement and as to his avowed preparedness to fund ISC on an unlimited basis. 465I feel no actual persuasion that the conversation which John Ruskin says he had with Michaelson and Ruskin in which the arrangement was made took place. I am not satisfied that any such arrangement was made. John Ruskin was an unpersuasive witness. 466Palpably his evidence was coloured by his desire to assist his son, and undermined by significant objective contra indications. 467Neither Michaelson nor Ruskin gave affidavit or oral evidence of the arrangement. 468John Ruskin did not recall the specific date upon which the conversation took place, nor the specific details of it. He made no mention of it in his first affidavit. Rather, he referred to an intention to continue to provide ongoing financial assistance whenever Michaelson or his son asked for it. 469He gave evidence that he did not think it important to mention the alleged arrangement in his first affidavit. This was particularly unconvincing given that he dealt with discussions dealing with arrangements on his part to lend money to ISC and his future intentions in that regard. 470There was no written document reflecting it, or even referring to it. John Ruskin is undoubtedly an intelligent man, experienced in commerce. His explanation for the absence of writing was that he did not consider it necessary because Ruskin is his son and he had known Michaelson for at least three years. I found this unconvincing. 471Ruskin did not disclose to his own father his resignation as a director of ISC on 6 November 2009, the fact that the Bank had made demand on ISC, or the sale of its business to Industry Only, circumstances which point to the absence of any such arrangement. 472I find inherently improbable the existence of an open-ended arrangement in return for a static 10% shareholding. 473Nor am I persuaded that John Ruskin was in a position to provide, or would have provided, ISC with resources adequate to ensure its survival. 474At no time was the balance owing to him significantly more than $90,000. 475In his second affidavit he identified as assets upon which he would have raised funds, the family home at Belrose and the jointly owned property at One Mile Beach. However, under cross-examination, he agreed that there was a limit on his preparedness to lend money by reference to the need to have regard to his wife's joint interest in the two properties and that it was important for him to seek to maintain an adequate nest egg for him and his wife to live off during their retirement. 476His superannuation fund was worth of the order of $760,000. His evidence did not extend to revealing the values of, or equity in, the encumbered properties. 477There is no evidence of CPL or ISC calling on John Ruskin to provide the necessary funding when ISC most needed it either to pay unsecured, unrelated creditors at the time of the voluntary administration, or to refinance around the time of the appointment of receivers. At the time of the receivership, the shortfall was of the order of $1.6 M. I am unpersuaded that John Ruskin could, or would, have been in a position to advance money approaching this level. 478John Ruskin was asked whether the 25 November 2008 report on CPL gave him very serious concerns about its solvency. His response was that he could not answer that "because he did not have the records and had no involvement in the company other than the accounting records given to him in relation to the trading of CPL". When asked whether the report which reflected a net loss of $1.7 M to 30 June 2008 and a net deficiency of tangible assets of over $3 M did not indicate to him that the company was insolvent, his evidence was that he was not in a position to come to a judgment on that. I found this evidence to be unconvincing. 479From an early point in time, it was intended to channel the bulk of CPL's enterprise to ISC. In the event, the vehicle for this transfer was a sale of business as part of the DOCA in the administration. This facilitated CPL's creditors, including trade creditors (including the ATO - which voted against the DOCA) being dealt with, other than by payment in full. On the hypothesis that there would not have been an administration but ISC would nevertheless have acquired the enterprise, it was put (as it had to be) by ISC that it would have discharged CPL's trade creditors so as to avoid an Event of Default. 480But ISC was in no financial position to do so. It has not been established that ISC had any significant independent resources, and CPL's non-related trade creditors were (including the ATO) over $750,000. In my view, neither CPL nor ISC could have survived if CPL's creditors had to be paid. 481In a somewhat understated fashion, Mr Samuel agreed that if ISC had to pay CPL's creditors, "it would have a going concern issue". 482Its trading results over many months that followed would not have assisted it to deal with the pressing intransigent creditor. The submission that it is inconceivable that the Bank would have called a default on the basis of the Rite Pak claim cannot be accepted. On 2 February 2009 Wise described it as a "default trigger". 483When it ultimately appointed receivers, there were other Events of Default available to the Bank to found the appointment. Under cl 16(o) of the terms of the facility, read with cl 22, an Event of Default occurred 21 days after the statutory demand, when CPL was taken to have failed to comply with it. Another occurred on 16 January 2009, when the Rite Pak winding up application had not been stayed, withdrawn or dismissed within 30 days. The Bank could have availed itself of these Events of Default for the appointment of the receivers. Quantum 484ISC claims as the quantum of its loss "the value of ISC's business which was destroyed by the wrongful appointment of receivers by the Bank". 485It puts that "[s]ince damages are calculated on a once-and-for-all basis, the amount the plaintiffs claim is essentially the value of the cash flows of ISC's business in perpetuity". 486It is for ISC to establish both that it lost the entirety of the value of the business and what that value was. 487In my view it has established neither. 488As to alleged total destruction, apart from the evidence of Michaelson and Ruskin themselves, ISC called evidence from salon operators, Rebecca Daniel, Michelle Taylor, Paul Carbis and the executive officer of a private industry association, the Aesthetics Practitioners Advisory Network Pty Ltd, Tina Viney, to establish that news that Indio was going bust or was in trouble caused ISC to lose custom. An article appeared in a newspaper referring to the receivership. I accept that industry rumours that Indio was in financial trouble had some negative affect on ISC's customer base. 489But even making allowances for their unreliability, ISC's monthly management accounts from December 2009 to December 2010 disclose no significant slump in Indio sales. They do show a significant tailing off of equipment sales, but there were alleged litigation concerns on that front. ISC's witnesses did not give evidence about not buying tanning equipment because of rumours of ISC's financial woes. 490Not only did ISC's business continue to operate, on 13 April 2010, albeit to defraud its creditors, it disposed of its business for value (whether or not an undervalue) to Industry Only and disposed of the trademark Indio separately to a company associated with Kimberley's husband, Steven Whyte. Accounts are in evidence reflecting the trading of the business well beyond that date. There is no evidence of what became of the business after Barrett J set aside the disposition. What is clear, however, is that ISC has not established that the business was rendered worthless by the conduct of the Bank. 491ISC does not put any scenario for quantification of its loss in the alternative to that based on total destruction. It has accordingly failed to establish the quantum of its loss. 492Proceeding on the assumption that ISC had established that its business had been destroyed, I turn to the question of what it was worth, that is, what is the present value of profits (if any) that were lost. 493The significant differences between the expert witnesses are not as to methodology but as to the efficacy of the assumptions to which they applied it. 494They were agreed that they were unable to verify the management accounts due to a lack of detailed accounting records. Mr Samuel placed significant reliance, in coming to his view of ISC's prospects, on its performance reflected in monthly management accounts for the period January 2009 to December 2010. These accounts show a net profit for the calendar year 2009 of $363,942 and for the calendar year 2010 $228,731. However, whilst analysis is hampered by the fact that monthly figures are not shown, it seems that a better indication of ISC's trading results for the period 1 July 2009 to 30 June 2010 is the profit and loss statement printed on 25 January 2011 for that period. Ruskin agreed that these accounts are more reliable than earlier emanations. These accounts show an operating loss for the financial year to June 2010 of $202,282.70. I observe, however, that in recognition of the unreliability of the accounts Mr Samuel adopted a specific risk premium of 5%. 495The experts agreed that discounted cash flow (or DCF) methodology was appropriate, with a long term growth rate of 3% and a residual value at the end of the DCF period (2015) to be calculated using the Gordon Growth Model adjusted for mid-year cash flows "on the assumption that the Court finds the losses continue into the future indefinitely, as both experts have assumed". 496They differed on whether, in determining the appropriate discount rate, a weighted average cost of capital (or WACC) (Mr Samuel) or cost of equity (Mr Meredith) rate was appropriate. Mr Meredith's view was that ISC's business was not capable of finance by way of debt without credit enhancement in the form of property security, which it did not have, so that the cost of equity rate would be more appropriate than a WACC. He made the point that, in assessing a discount rate, finance theory requires a matching of actual cash flows with the discount rate and the company's actual cash flows were affected by its interest obligations. Mr Samuel took the view that this approach did not reflect the way in which an investor would pay for the discounted cash flow and that the interest obligations of the business were not properly to be taken into account in assessing the value of its cash flow. He opined that Mr Meredith's approach was more akin to valuing the equity of the business rather than its operating cash flows. I think that little turns on the difference of approach in the present case and it is not necessary to resolve which approach is the better one. The real difference lies in selection of the appropriate integers to be applied to the methodology. 497The most significant areas of disagreement were the hypothesised revenue growth rate of the business and the gross margin percentage applicable to its sales. 498Mr Samuel considered 20% to be a reasonable level of growth for Indio sales during the DCF period, whilst Mr Meredith adopted a revenue growth rate of 10% in 2010, 7% in 2011 and 3% thereafter. 499Mr Samuel started by making an estimation of ISC's hypothetical results for the year ending 31 December 2010. In forming this view, he assumed that sales of Indio products for 2010 would have been 20% higher than actual 2009 sales and amongst others, relied upon the affidavits of Michaelson and Ruskin which indicated that had invested time, effort and cost into the promotion of the brand. 500On the other hand, Mr Meredith opined that it was difficult to estimate hypothetical sales with only one year of actual data prior to the impacting event. He assumed an uplift in sales in 2010 as a result of increased awareness of the product in the market but took the view that 10% was at the high end of a reasonable range. He also took the view that based on long term industry growth rates, and the mature life cycle of the industry, he would expect the business growth rate to decline to eventually line up with the long term industry growth rate of approximately 3%. 501Mr Samuel attributed a significant value to the joint venture which ISC had embarked upon with Anna Lotan of Israel, which was to market products known as Correcta. He valued this business separately. However, by 11 December 2009 this joint venture had not generated any revenue. Mr Meredith took the view that there was insufficient information to prepare a reasonable assessment of this scenario. 502There was evidence that ISC's enterprise would have faced competition provided by skin needling techniques and competing products called Environ and Bio-Line. 503Mr Samuel adopted a gross profit margin percentage of 80% based on the monthly management accounts which include the period after the sale of the business to Industry Only. In Mr Meredith's view, 80% is an extremely high margin. He took the gross margin rate at 68% which was achieved in 2009. He expressed the view that the difference is unusual and given ISC's assertion that the business collapsed after December 2009, he would expect to see a significant deterioration of the gross margin during 2010 as the business offered greater discounts in an attempt to capture sales, yet gross profit margin improved by 12%. 504Mr Samuel's conclusion was that Indio's business (as at 11 December 2009) was worth $8,605,011 and the Correcta business $7,558,057 making a total of over $16 M. 505In stark contrast, Mr Meredith concluded (on his assumptions) that the value of Indio's business was $270,920. 506I do not accept Mr Samuel's opinion and to the extent that it is necessary to do so, I prefer that of Mr Meredith. 507In the context of a business that was clearly insolvent on 3 February 2009, was unable to refinance in 6 months and which owed its bankers some $12 M, Mr Samuel's conclusion that as at 11 December 2009 it was worth over $16 M fails to pass a reality test. 508His projected level of growth is to my mind unrealistic as is his assessment of the value of Anna Lotan, which never yielded any revenue. 509In circumstances where there is no evidence concerning how the business was operated after the sale to Industry Only, I prefer Mr Meredith's view that the 2009 gross margin figure should be adopted. 510As at 11 December 2011 ISC had a significant cash flow shortfall. Mr Samuel assumes that any cash flow shortfall that it needed to fund was covered by an assumed sale of Botany Road for $3.3 M and additional working capital financing from John Ruskin. These assumptions are not made out. Ultimately Botany Road was sold for $3.035 M and as appears above, I am not persuaded that any meaningful capital finance was available from John Ruskin. In addition, Mr Samuel did not consider the scenario that ISC had to pay CPL's creditors, and he accepted that this would affect his opinion. Given my view that ISC would not have survived, a critical underlying assumption of continuity which underlies Mr Samuel's opinion has been eroded. On this footing, even Mr Meredith's far more modest valuation is an optimistic one. 511I record that during the course of the hearing, at my request, the experts produced calculations based on an assumption of 10% growth for the DCF period. It is not necessary to deal with these calculations as I do not consider that it would be appropriate to adopt that assumption. THE GUARANTORS 512The Bank cross-claims against each of the plaintiffs (except Barun Concepts Pty Ltd) as guarantors. They proffer no defence. 513As at 27 November 2012, each was indebted to the Bank in the amount of $7,672,545.94. Subject to adjustment to bring the figures up to date, the Bank is entitled to judgment against each for that amount. 514In separate proceedings, the Bank sues the Michaelsons in respect of their direct liability under home loan facilities made available to them and secured by mortgages over Seaforth. It seeks an order for possession of Seaforth. 515Under an agreement dated 18 May 2008 between the Bank and the Michaelsons ("the Rate Tracker"), the Bank advanced $2.24 million (by way of refinancing their home loan with NAB). The advance was repayable over three years and one month by way of 37 monthly instalments. Under a second agreement with the Michaelsons dated 15 August 2008 ("the Bridging Loan") the Bank advanced $235,000. This advance was repayable over five months in monthly instalments. 516The Michaelsons executed mortgages over Seaforth. The mortgages have registered numbers AE32058K and AE32059H. Under their terms, a breach of the Rate Tracker Agreement or Bridging Loan Agreement is a breach under the mortgages entitling the Bank to possession of Seaforth. 517There is no dispute that the Michaelsons are in default, and that the Bank has made due demand. 518As at 27 November 2012, the Michaelsons were indebted to the Bank for $2,642,613.77 under the Rate Tracker and for $282,211.39 under the Bridging Loan, making a total of $2,924,825.16. Subject to adjustment to bring the figures up to date, the Bank is entitled to judgment against the Michaelsons for that amount, and an order for possession of Seaforth. 519In further proceedings against the Michaelsons, the Bank sues to enforce the guarantees given by them for the obligations of the CPL Group. In the same proceedings, the Bank sues Gay and Kimberley under their guarantees. 520Michaelson proffers no defence. As at 27 November 2012, Michaelson was indebted to the Bank under his guarantees as follows: The facility $2,320,000.00 Mascot and Eminence $87,517.36 Sunlovers and Eminence $1,764,257.72 Tanning Systems $350,000.00 Total $4,521,775.08 Subject to adjustment to bring the figures up to date, the Bank is entitled to judgment against Michaelson for that amount. 521Suzanna, Gay and Kimberley deny liability under their guarantees, contending that they were unjust in the circumstances relating to them at the time they were made, within s 7(1) of the Contracts Review Act 1980 (NSW). By cross-claim they move the Court for orders refusing to enforce their provisions. 522As at 27 November 2012, Gay and Kimberley were each indebted to the Bank under their guarantees as follows: The facility $2,320,000.00 Mascot and Eminence $87,517.36 Sunlovers and Eminence $1,764,257.72 Tanning Systems $350,000.00 Total $4,521,775.08 523In further proceedings the Bank sues the Ruskins under their guarantees. 524Ruskin proffers no defence. As at 27 November 2012, Ruskin was indebted to the Bank under his guarantees as follows: The facility $2,320,000.00 Mascot and Eminence $87,517.36 Sunlovers and Eminence $1,764,257.72 Tanning Systems $350,000.00 Total $4,521,775.08 Subject to adjustment to bring the figures up to date, the Bank is entitled to judgment against Ruskin for that amount. 525By mortgage dated 13 June 2008, registered number AE32087C, Simone mortgaged Allambie Heights to the Bank as security for her liabilities, including under her guarantees. Under the provisions of the mortgage, default under her guarantees is default under the mortgage. The Bank seeks an order for possession of Allambie Heights. 526The Bank makes no claim against Simone for repayment of the home loan presently outstanding and secured over Allambie Heights (which the Bank refinanced in 2008) because monthly mortgage payments are up to date. It claims only under her guarantees. As at 27 November 2012, Simone was indebted to the Bank under her guarantees as follows: The facility $1,300,000.00 Mascot and Eminence $87,517.36 Sunlovers and Eminence $1,120,000.00 Tanning Systems $350,000.00 Total $2,857,517.36 527As with the other female guarantors, she denies liability under her guarantees, contending that they were unjust in the circumstances relating to them at the time they were made, within s 7(1) of the Contracts Review Act. By cross-claim she moves the Court for orders refusing to enforce their provisions. 528I turn then to the position of the female guarantors. The Contracts Review Act 529By s 7(1) of the Contracts Review Act, 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, if it considers it just to do so, and for the purposes of avoiding as far as practicable an unjust consequence or result, it may make certain orders including refusing to enforce any or all of the provisions of the contract, declaring it void in whole or in part or varying it. 530"Unjust" is defined in s 4(1) to include "unconscionable, harsh or oppressive, and 'injustice' shall be construed in a corresponding manner". 531Section 9 of the Contracts Review Act provides: 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, because of his or her age or the state of his or her physical or mental capacity, (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 532Consideration of whether relief should be granted to a party under the Contracts Review Act requires a determination, on the particular facts of the case, whether the contract was unjust in the circumstances relating to it when it was made and then, if the contract was unjust, the exercise of a discretion whether or not to grant relief and if so, the form of any such relief, in order to avoid an unjust consequence or result. 533The circumstances described in s 9 of the Contracts Review Act are not exhaustive and each case must be determined on its own facts. Relief may be available in circumstances where the conscience of the counter party is not affected and even where relevant circumstances were not known to it when the contract was entered into. A contract, or a provision thereof, may be unjust in circumstances where there was no pre-existing duty owed by a lender to a borrower to act in a particular way. 534A contract may be unjust in the circumstances existing when it was made because of the way it operates in relation to a party or because of the way in which it was made or both. A contractual provision may be unjust simply because it imposes an unreasonable burden on a party when it was not reasonably necessary for the protection of the legitimate interests of the party seeking to enforce the provision. 535The public interest requires the Court to consider the position and rights of the party against whom relief is sought. Orders may be made in favour of a party to a contract who proves that at the date of the contract that he or she suffers from a relevant disability even though the other party to the contract is unaware of it. In general the Court should be reluctant to exercise the jurisdiction where the effect may be to deprive an innocent person of valuable contractual rights. 536Where a bargain is obtained by a stronger party unconscientiously using its power against a weaker party, equity has jurisdiction to relieve the weaker party of the bargain. 537The focus, in the exercise of this jurisdiction, is not upon the quality of the weaker party's assent, as is the case with undue influence, but upon the conduct of the stronger party. The weaker party must have a disabling condition, or the circumstances must be such, so as seriously to affect the ability of that party to make a judgment as to his, her or its own best interests. The weaker party's need or distress must be such as to leave that party in the power of the stronger. The disadvantage of the weaker party may arise because of illness, ignorance, inexperience, impaired facilities, financial need, lack of assistance or explanation where necessary, lack of relevant language competence, emotional dependence or other circumstances. It is not necessary for the stronger party to have actual knowledge of the weaker party's special disadvantage. It is sufficient if the stronger party is aware of the possibility or of facts that would raise that possibility in the mind of any reasonable person that the weaker party is suffering some special disadvantage. The stronger party must take advantage of the opportunity presented by the weaker party's disadvantage. The stronger party's conduct in taking such advantage must be unconscientious. Where a stronger party has taken advantage of a weaker one to obtain a beneficial bargain, the onus is on the stronger party to show that his conduct was fair, just and reasonable. The presence of independent advice can be an important factor in showing that the transaction was fair, just and reasonable. The Banking Code of Conduct 538The Australian Bankers' Association has published an instrument called the Code of Banking Practice ("the Code"). In 2006 the Bank adopted the Code. 539Clause 1 of the Code recites that it is a voluntary code of conduct which sets standards of good banking practice for banks to follow when dealing with persons who are or who may become individual and small business customers and their guarantors. Clause 40 defines "small business" to mean, relevantly, a business having less than 20 full time (or equivalent) people. 540Clause 39.1(a)(ii) of the Code provides: On and after the commencement date: (a) we will be bound by this Code in respect of: (ii) any Guarantee (as described in clause 28) we obtain from you, 541Clauses 28.4 and 28.5 of the Code, relevantly, provide: 28.4 We will do the following things before we take a Guarantee from you: (d) we will provide you with a copy of: (i) any related credit contract together with a list of any related security contracts which will include a description of the type of each related security contract and of the property subject to, or proposed to be subject to, the security contract to the extent to which that property is ascertainable and we will also give you a copy of any related security contract that you request; (ii) the final letter of offer provided to the debtor by us together with details of any conditions in an earlier version of that letter of offer that were satisfied before the final letter of offer was issued; (iii) any related credit report from a credit reporting agency; (iv) any current credit-related insurance contract in our possession; (v) any financial accounts or statement of financial position given to us by the debtor for the purposes of the Facility within 2 years prior to the day we provide you with this information; (vi) the latest statement of account relating to the Facility (and any other statement of account for a period during which a notice of demand was made by us, or a dishonour occurred, in relation to which we are required to give you information under clause 28.4(b)(i)); 28.5 We will not ask you to sign a Guarantee, or accept it, unless we have: (a) provided you with the information described in clause 28.4 to the extent that that information is required by this Code to be given to you; and (b) allowed you until the next day to consider that information. We do not have to allow you the period referred to in clause 28.5(b) if you have obtained independent legal advice after having received the information required by clause 28.4. The female guarantors' submissions 542In argument, counsel for the female guarantors narrowed the submissions significantly from those contained in his final written outline. A number of manifestly unsustainable propositions, including some that were not pleaded, were initially put in final argument but then abandoned. One was that the guarantees were discharged because the terms of the facility were varied from time to time. Another was that as a matter of construction the guarantees did not cover obligations under amendments to the facility. These propositions were abandoned, doubtlessly because each variation was consented to in writing by each female guarantor who acknowledged that the guarantee covered the amendment concerned. 543Firstly, it was put that (a)the terms of the Code became express or implied terms of each guarantee; (b)the Bank had, in breach of cl 28.5 of the Code, not provided the female guarantors with the information described in cl 28.4 before 4 June 2008 and had not allowed them until the next day to consider the information; and (c)the guarantees were thereby discharged or otherwise unenforceable. 544Secondly, it was put that the guarantees were unjust in the circumstances relating to them at the time they were made because: (a)the female guarantors executed acknowledgments of receiving the "Disclosure Documents" without in fact having received them; (b)they did not understand the limit of the guarantees; (c)the female guarantors had no real practical opportunity to obtain independent legal advice and no-one represented the interests of the female guarantors independently; (d)there were no negotiations between the parties and it was not reasonably practicable for the female guarantors to negotiate for the alteration of or to reject any of the provisions of the guarantees; (e)there was a material inequality in bargaining power between the Bank and the female guarantors; (f)at its highest, the option to obtain independent legal advice was first offered at or around 3pm on 4 June 2008 at the offices of Kemp Strang; and (g)a settlement was taking place in a pressured and urgent environment. 545It was put that in obtaining the guarantees, the Bank acted unconscionably because it knew that the female guarantors had not received any of the disclosure documents as required by the Code, that they could not have reviewed the immense amount of documents during their attendance at Kemp Strang and that a solicitor was not acting in their interests, independently and specifically. 546It was put that "unconscionability by the Bank enforcing the guarantees must arise" as: (a)the female guarantors did not understand the purport and effect of the transaction; (b)the transaction was voluntary (in the sense that the female guarantors obtained no gain from the contract, the performance of which was guaranteed); (c)the Bank understood the female guarantors reposed trust and confidence in their husbands and relatives, in matters of business, and therefore understood that the borrowers may not fully and accurately explain the purport and effect of the transaction to the female guarantors; and (d)the Bank did not itself take steps to explain the transaction to the female guarantors or find out that a stranger had explained it to them. Consideration 547The proposition that the Code became an express or implied term of each guarantee was not developed. It is not necessary to deal with it or with the consequences of breach, because it has not been established that the provisions of the Code relied on, applied in this case. Even if it did, and it was breached, the nature of the breach was of no meaningful consequence. 548In a position paper which Ruskin sent to the Bank on 3 August 2009 he stated "since last November we have downsized from 25 personnel to 13 over the last 9 months..." The Court's attention was not directed to evidence which would sustain a finding that there were less than 20 full time employees at the time the guarantees were given. 549If the Code did apply, the female guarantors obtained independent legal advice after having received the information required by cl 28.4, so that the Bank did not have to allow the period in cl 28.5(b). 550As against Wise's evidence that on 29 May 2008 she put envelopes containing guarantor packs for Suzanna and Simone in the postal out-tray for delivery the following day and personally delivered guarantor packs to Gay and Kimberley at Botany Road on 30 May 2008, there is no evidence from Suzanna or Gay that they did not receive guarantor packs before 4 June 2008, there is a statement by Simone that to the best of her recollection she did not receive one, and an acceptance by Kimberley that she received one but not before June 2008. 551I accept Wise's evidence. I accordingly do not accept that the female guarantors did not receive guarantor packs earlier than 4 June 2008, but in any event, each of them signed an acknowledgement on 4 June 2008 of having received disclosure documents. 552Pirintji impressed me as a competent, thorough and careful practitioner. 553Perhaps unsurprisingly, his evidence was not challenged and I accept it. Where Pirintji's evidence conflicts with that of the female guarantors, I prefer it. 554In any event, and by contrast, the evidence of the female guarantors, viewed both individually and collectively, was unsatisfactory in a number of important respects. 555Whilst Simone agreed that Pirintji spent about 15 to 20 minutes with her, Suzanna denied that at any point Pirintji spoke to her one on one, but then agreed that she did not recall. Gay had no recollection of spending time individually with Pirintji. Kimberley denied that Pirintji spoke to her individually. It is inherently unlikely that Pirintji would have spent one on one time with some but not all of the female guarantors. 556I find that Pirintji spent some hours at Kemp Strang and spoke individually to each of the female guarantors as he says he did. 557As to their understanding of the import and effect of the guarantee each was signing, and the risk each was undertaking, I am satisfied that Pirintji provided them with adequate advice and that they understood it. 558He gave them the opportunity of taking other advice and they voluntarily and consciously eschewed it. Each also signed a statutory declaration (which was part of the guarantee), witnessed by Pirintji, that she had received independent legal advice and had freely and voluntarily signed the guarantee. 559Each of the female guarantors is intelligent. Simone is particularly articulate and has other business experience. Gay was office manager and her duties extended to supervising administrative staff and checking MYOB entries. She is clearly numerate. 560The evidence of each female guarantor as to her understanding of the import and effect of the guarantee she was signing and the risk she was undertaking, differed. 561For example, Suzanna said that she could not recall any specific conversations whilst in the boardroom or when signing the documents, but said under cross-examination that Pirintji advised her that by signing the documents she could be liable for payment of monies to the value of her house, which she understood was used as security for the loans. Simone agrees that Pirintji explained to her, amongst others, the importance and seriousness of becoming a guarantor of the obligations of the CPL Group and she absorbed the message. Gay, apparently as a consequence of medical treatment, has no meaningful recollection of the occasion of signing documents on 4 June 2008. In her affidavit evidence, Kimberley says that not only was she not offered or afforded the opportunity to obtain legal advice, and had not received any regarding the guarantees, she agreed to sign them because she believed in the products and the brand and did not actually believe there was a risk in being a guarantor because she did not believe that the family business had a chance of failing. However, under cross-examination she agreed that she did understand, particularly having heard what Pirintji said about the nature of guarantees, that it imposed a serious legal obligation on her and that her affidavit evidence needed to be qualified accordingly. 562Added to the fact that Pirintji's evidence was not challenged, it is inherently unlikely that his explanation to each of the female guarantors differed in material respects. 563Little attention, if any, was devoted by counsel for the female guarantors to the contentions that there was a material inequality in bargaining power between the Bank and the female guarantors; that there were no negotiations between the parties; that it was not reasonably practicable for the female guarantors to negotiate for the alteration of or to reject any of the provisions of the guarantees; that the female guarantors reposed confidence in their husbands and relatives; and that the settlement was taking place in a pressured and urgent environment. 564The borrowers and the female guarantors were well represented by a competent solicitor who protected their interests. 565No urgency or deadline was imposed by the Bank. No hurdle was placed by the Bank in the way of the female guarantors having further time, whether to obtain further legal advice or otherwise. Any urgency came from the CPL Group. 566It is not put that any particular term of the facility or any guarantee was or is harsh, oppressive or unnecessary, or that but for the matters complained of, any of the female guarantors would have refrained from proceeding or have acted differently. 567The guarantees were part of a wider transaction for the refinancing of the CPL Group's facilities, to its advantage. 568The female guarantors were not strangers to the CPL Group. Each, to a greater or lesser extent, had some personal direct or indirect economic stake in it or its prospects. 569Suzanna's company Nuala Design did business with it. Gay and Kimberley worked there. 570Michaelson Family Pty Ltd held shares in CPL. It was a trustee of the Michaelson Family Trust, of which Suzanna was a beneficiary. Ruskin Group Pty Ltd held shares in CPL, Mascot, Sunlovers and Tanning. It was a trustee of the Stephen Ruskin Family Trust, of which Simone was a beneficiary. Gay was a beneficiary of the Michaelson Family Trust and held a beneficial shareholding in CPL and Eminence. Kimberley was a beneficiary of the Michaelson Family Trust and held a small non-beneficial shareholding in CPL and a beneficial shareholding in Eminence. 571There is no basis for the submissions that there is unconscionability in enforcing the guarantees because the Bank understood that the borrowers may not fully and accurately explain the purport and effect of the transaction to the female guarantors and did not itself take steps to explain it to them or find out if a stranger had done so. 572None of the female guarantors were under any specific disability or disadvantage. In the circumstances which occurred, given especially the presence and intervention of Pirintji, the Bank was neither in a position to, nor did it, in any way unconscientiously take advantage of the position of the female guarantors. 573The submissions that the guarantees were unjust in the circumstances relating to them at the time they were made, that they were unconscionably obtained and that unconscionability arises in the Bank enforcing them are rejected. 574In the circumstances of this case, I would in any event not exercise any discretion in favour of the female guarantors. 575It follows that the Bank is entitled to judgment against each of the female guarantors. 576The Bank is entitled to an order for possession of Allambie Heights. THE ABANDONED CASES 577Ordinarily, I would not consider it necessary to deal in any detail with claims made in proceedings but abandoned. In this case, however, for reasons which will become apparent, I consider it necessary and appropriate to do so in respect of two claims which were brought but abandoned during the hearing. They should be dismissed on their merits. The clawback arrangement claim 578Prior to 19 December 2008 BankWest was owned by HBOS. On 8 October 2008, by Share sale deed ("the sale deed"), the Commonwealth Bank as Buyer purchased HBOS's shares in BankWest and the settlement of the transaction took place on 19 December 2008. 579The purchase price was $2.1 billion, subject to adjustment in accordance with cl 10.1 of the sale deed. That provision required HBOS as Seller to prepare and deliver to the Buyer a draft completion balance sheet of BankWest and its controlled entities, no later than 40 days after completion. 580Under cl 10.4 of the sale deed, the Buyer could within 40 business days after receipt of the draft balance sheet state that it did not agree with specific items in the draft balance sheet, in which event cll 10.5 and 10.6 of the sale deed provided a procedure for resolution of disputes and finalisation of the completed balance sheet by the expert determination of a person appointed by the chairman of the Institute of Chartered Accountants in Australia, Sydney branch. 581The expert determination would be final and the draft completion balance sheet would be adjusted to reflect the resolution of all disputed items. Accordingly, if a value of an asset reflected in the draft balance sheet was determined by the expert to be worth less than as reflected, the purchase price would be adjusted downwards. This mechanism the plaintiffs described as the clawback arrangement. 582The plaintiffs claimed that on or about 19 December 2008 the Commonwealth Bank replaced senior personnel of BankWest and that it was to the economic advantage of BankWest and/or the Commonwealth Bank to call Events of Default on facilities such as the facility and the CPL Group's facilities for the purpose of the clawback arrangement. They claimed that there was a significant economic advantage to the Bank to impair loans. 583Leaving aside questions of whether this claim had been adequately pleaded, its thrust was that the Bank had (after 5 February 2009) classified the CPL Group facilities as impaired when it knew that they were not, so as to derive, unconscionably, an economic advantage by a reduction in the purchase price in the shares in BankWest under the clawback arrangement. 584The three central elements of this claim (which I will refer to as the clawback arrangement claim) are that: (a)the CPL Group facilities were to the knowledge of the Bank not in fact impaired; (b)the Bank nevertheless classified them as impaired; and (c)its commercial motivation was to obtain an advantage under the clawback arrangement. 585However it is characterised, it is a charge of serious and deliberately dishonest commercial misconduct. 586Between June 2009 and June 2011 McEniery was responsible for the day-to-day management of the Bank's file concerning the CPL Group. Hornstra transferred management of the CPL Group's facilities to her. 587On 10 September 2009 she submitted a strategy paper to senior officers in the Credit and Asset Management section (CAM) seeking approval for, amongst other things, the appointment of receivers to Botany Road and McIntosh Street and recording a provision for loss of $2.988 M. She gave as reasons for impairment the establishment of ISC to take over CPL's trading, the Rite Pak winding up application, and the appointment of the voluntary administrators. 588As part of the assertion of commercial misconduct, it was put to McEniery that the strategy paper was prepared for the purpose of impairing the loan no matter what, that it was part of a review of loans to determine whether loans which had been impaired after the Commonwealth Bank acquisition of BankWest could be identified as loans impaired prior to the acquisition, and that she was given those instructions by persons working at the Commonwealth Bank. She denied that this was so. 589Later, the following exchange occurred: Baran: And I am suggesting to you you created this particular document for the sole purpose of dishonestly portraying that the CPL group of facilities were impaired requiring the raising of provision when that was not the case? McEniery: I don't agree with that statement. 590Still later, the following exchange occurred: Baran: And again I suggest to you your 10 September document, the strategy paper, is a document which falsely and dishonestly purports to put the CPL group into a category of impaired loans for the raising of provision well-known by you to be false when you wrote it? McEniery: That's not true. 591In response to the clawback arrangement claim, amongst others, the Bank called Peter Anthony Ogilvy ("Ogilvy"), who between 16 March 2009 and 1 October 2012 was the Chief Manager CAM (NSW) at BankWest and Kathryn Margaret Porteous ("Porteous"), General Manager of Group Provisioning, Credit Risk at the Commonwealth Bank. 592On 19 March 2009 Ogilvy received an email from Alan Pavisich, the Head of CAM, ("Pavisich") initiating a review, in the context of the Commonwealth Bank's acquisition of BankWest, of accounts as at 19 December 2008 which required a provision. 593On 20 March 2009 Pavisich sent Ogilvy, amongst others, an email attaching a list headed "BankWest Business Specific Provisions", which identified a number of accounts. The email referred to a meeting where the Bank had asked them to come forward with some detail on why the Bank had a provision or provision estimate greater than HBOS. Amongst others, Pavisich asked "Did we have a reasonable idea that they were impaired on or before 19/12/2008?" 594Ogilvy then oversaw members of CAM (NSW) undertake a review of files, including files identified on the Specific Provisions List to assess whether any other loans should be included in the Specific Provisions List. 595He gave evidence that the CPL Group was not considered during the review process for inclusion in the Specific Provisions List because the impairment event (being the appointment of the voluntary administrators) occurred after 19 December 2008 and was outside the time frame referred to by Mr Pavisich in his 19 March 2009 email. 596The plaintiffs did not suggest that any of the CPL Group facilities were on the list or reviewed. 597On 19 February 2009 HBOS submitted a Draft Completion Balance Sheet as required by the sale deed. It recorded both individual provisions and a collective provision for impairment losses on loans. 598Porteous was one of the persons involved in the Commonwealth Bank's acquisition from HBOS. She was responsible for reviewing and consolidating individual impairment information for inclusion in a Dispute Notice which the Commonwealth Bank sent to HBOS on 20 April 2009 giving notice that it did not agree with a number of items contained in the Draft Completion Balance Sheet, including certain individual provisions. 599The dispute was ultimately referred to and settled by Ernst & Young, as the expert. 600I observe that if the Commonwealth Bank had intended to act as was suggested in the clawback arrangement claim, its objects could only have been achieved if HBOS had not taken issue with a relevant challenge to the Draft Completion Balance Sheet or, if it had taken issue, the independent expert would, notwithstanding that the loan had wrongly been impaired, have determined that it was correctly impaired. 601It is apparent, as Porteous says, that the CPL Group is not included in the Dispute Notice. 602There was no evidence that impairment of any of the CPL Group facilities could, let alone did, have any downward effect on the price paid by the Commonwealth Bank. 603There was no evidence that the CPL Group facilities were impaired as at any date earlier than September 2009. No default was called until after 3 February 2009 and thereafter, under the Deed of Forbearance, the Bank agreed not to take enforcement action until August 2009. 604There was no evidence of any instruction to McEniery dishonestly to impair loans, as was put to her. 605There was no proper basis for the charges of dishonesty against the Bank or its officers which were levelled in the clawback arrangement claim. It is difficult to see how the view could properly have been formed that there was any basis for the allegations. They should not have been made. The Singleton-Prudential misleading conduct claim 606ISC brought a claim that on 11 November 2009 Singleton, on behalf of the Bank, misled Ruskin and Michaelson into not progressing Prudential's indicative offer of finance because he said his recommendation was that the Bank should keep the CPL Group as a client and rewrite their loans, and that ISC thereby suffered damage. This is on the footing that had the Prudential offer been progressed, it would have been implemented and ISC would have been able to refinance with Prudential. Singleton denied having conveyed to them that they should not progress Prudential's offer, either for the reason asserted, or at all. 607For good reason, the claim was abandoned during submissions. It was bound to fail in its own right. Although it did not assert dishonesty on Singleton's part, it did assert misleading conduct in the course of discharging his professional obligations. 608First, the assertion as to what Singleton had held out was inconsistent with an email he sent two days earlier, on 9 November 2009, in which he agreed with Ruskin's own proposal that all options should be kept open, including the Prudential offer. 609Secondly, the offer, even if it had been implemented, would not have enabled ISC to refinance because a significant shortfall remained. At the time, the debt owing to the Bank was some $11.05 M. The Prudential offer was for $6.768 M and assumed the sale of Botany Road at $3.5 M. The total of $10.268 M available was insufficient to discharge the Bank debt. In fact Equiset at the time had offered $3.03 M, increasing the shortfall by $470,000. Added to this, $100,000 was required for Prudential's establishment fee and another $330,000 was required for the Bank's break costs. 610Thirdly, there was no realistic possibility of ISC meeting the stringent conditions to which the Prudential offer was subject, either in a time span short enough to have staved off receivership, or at all. The conditions required completion of the Seaforth redevelopment, which was still some months away, and MacIntosh Street to be redeveloped jointly with a nominee of Prudential on unspecified terms. This is in addition to the requirement for Botany Road to be sold for $3.5 M. THE NON-SET-OFF AND DEDUCTION POINT 611ISC itself is liable under four guarantees. Each of its guarantees incorporates the Banks' Guarantee and Indemnity - Terms (Commercial) (December 2008), which contains provisions that ISC will not reduce its liability to the Bank by claiming a right of set-off against the Bank so long as any of the guaranteed money remains outstanding (cl 9(a)), and that ISC will pay the guaranteed money in full without set-off, counter-claim or deduction (cl 13.1). 612In its claim, ISC seeks no relief directed to setting aside its guarantees or to directly impeaching its debt obligation to the Bank. 613The Bank put that the guaranteed money is thus unpaid and its non-payment is a contractual bar to the making of a claim such as ISC's, which is, in effect, asserting a set-off or deduction. Such issues usually arise at an early stage in proceedings, where a lender seeks to raise it as a plea in abatement to a counter-claim brought by a guarantor or borrower. Having regard to the fact that these proceedings are being disposed of on a final basis, and to the fact that ISC has failed, it is not necessary to deal with this issue. CONCLUSION 614The plaintiffs' claims are dismissed. 615The Bank is entitled to judgment against each of the cross-defendants. 616The Bank is entitled to judgment against each of the female guarantors. 617All cross-claims against the Bank are dismissed. 618The Bank is entitled to orders for possession of Seaforth and Allambie Heights. 619The parties are to bring in short minutes. I will hear them on costs and on any issues which they draw to my attention as still requiring to be dealt with. 620The Exhibits are to be returned. ********** 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. Decision last updated: 29 November 2013