Supreme Court New South Wales Medium Neutral Citation: Australia and New Zealand Banking Group Limited v Adventure Quest Paintball-Skirmish Pty Limited; Woollard v Hodgson; Hodgson v Woollard [2016] NSWSC 188 Hearing dates: 20, 21 April 2015 Decision date: 08 March 2016 Jurisdiction: Common Law Before: Adams J Decision: (1) Judgment for the plaintiff against the third defendant. (2) The plaintiff has leave to issue forthwith a writ for the possession of the land contained in Certificate of Title Folio Identifier 139/751656 known as 12 Singleton Road, East Kurrajong (also known as 1200 Putty Road, Blaxlands Ridge) in the State of New South Wales. (3) As to the first cross-claim, judgment for the first and second cross-defendants against the cross-claimant. (4) As to the second cross-claim, judgment for the cross-claimant against the first cross-defendant. (5) ANZ and Mr Hodgson are directed to serve Mr Woollard with proposed orders effecting the judgment, including orders as to costs. Failing agreement within 14 days, the parties have liberty to apply on 3 days' notice. Catchwords: Corporations Act 2001 (Cth) – bank loan – all money guarantee – loan agreement with forged signatures of one director – whether statutory assumptions apply Contracts Review Act 1980 (NSW) - whether notice of increased facility necessary Legislation Cited: Contracts Review Act 1980 (NSW) Corporations Act 2001 (Cth), Part 2B.2 Australian Securities and Investments Commission Act 2001 (Cth) Cases Cited: Albion Insurance Company Limited v Government Insurance Office of New South Wales [1969] HCA 55; 121 CLR 342 Australian and New Zealand Banking Group Ltd v Frenmast Pty Ltd [2013] NSWCA 459 Browne v Dunn (1893) 6 R 67 Capital Access Australia Pty Limited v Hraiki and Anor [2011] NSWSC 109 Chen v Song [2005] NSWSC 19 Eden Energy Ltd v Drivetrain USA Inc [2012] WASC 192 Esperance Cattle Company Pty Ltd v Granite Hill Pty Ltd [2014] WASC 279 Hancock v Williams (1942) 42 SR (NSW) 252 Klement v Pencoal Ltd [2000] QCA 152 Learn & Play (Rhodes No 1) Pty Limited as Trustee for Rhodes 1 Childcare Centre Unit Trust v David John Frank Lombe [2011] NSWSC 1506 Leybourne v Permanent Custodians Ltd [2010] NSWCA 78 MDN Mortgages Pty Limited v Caradonna [2010] NSWSC 1298 Quikfund (Australia) Pty Limited v Airmark Consolidators Pty Limited [2014] FCAFC 70; (2014) 312 ALR 252 Rowe v B & R Nominees Pty Limited [1964] VR 477 Soyfer v Earlmaze Pty Limited (supra) Soyfer v Earlmaze Pty Limited [2000] NSWSC 1068 West v AGC (Advances) Limited (1986) 5 NSWLR 610 Texts Cited: G E, Dal Pont, Law of Agency, 2nd Ed (2008) LexisNexis Butterworths Category: Principal judgment Parties: Australia and New Zealand Banking Group Limited (plaintiff/ second cross-defendant to first cross-claim/ second cross-defendant to second cross-claim) Adventure Quest Paintball-Skirmish Pty Limited (first defendant) Andrew Mark Hodgson (second defendant/ first cross-defendant to first cross claim/ cross-claimant to second cross-claim) Kim Garnet Woollard (third defendant/ cross-claimant to first cross-claim/ first cross-defendant to second cross-claim) Representation: Counsel: C E Bannan (Australia and New Zealand Banking Group Limited) T T Bors (Andrew Mark Hodgson) T C Holmes (Kim Garnet Woollard) Solicitors: Kemp Strang (Australia and New Zealand Banking Group Limited) Bricknell Legal (Andrew Mark Hodgson) Herbert Weller Solicitor (Kim Garnet Woollard) File Number(s): 2014/65969 Judgment Introduction 1. On 26 September 1983 Mr Woollard borrowed money from the Australia and New Zealand Banking Group Limited to purchase a property at Kurrajong, securing the loan by mortgage. Although the loan has long been paid out, the mortgage has never been discharged. In 1991 Mr Woollard, Mr Hodgson and several others formed a company called Adventure Quest Games Pty Ltd, to operate a paintball field on the Kurrajong property. This company was deregistered in 1998, following disagreements. Meanwhile, in 1994 Adventure Quest Paintball Skirmish Pty Ltd was incorporated, its directors being Mr Woollard and a Mr Irvine, and an overdraft account was created with ANZ, of which both were guarantors. As it happened, on 15 April 1996 each of Mr Woollard and Mr Hodgson (in place of Mr Irvine) agreed to guarantee the obligations of Adventure Quest to ANZ. These guarantees were in conventional terms covering all moneys outstanding to the account of Adventure Quest. In accordance with ANZ's requirements, both Mr Woollard and Mr Hodgson received legal advice from a solicitor as to their obligations under the guarantee. Although the certificate does not specifically say so, I think it inevitable that a solicitor acting properly in these circumstances, would have at least also pointed out to the guarantors that the guarantee was an all moneys obligation. A certificate as to the advice was signed by the solicitor. The guarantee, as is usual, contained an acknowledgment, initialled by each guarantor, that he was given the opportunity to read the guarantee and obtain legal advice from an independent lawyer before signing it, amongst other things. It seems to me that executing the guarantee amounted to representations by each to ANZ that they understood and were bound by the conditions of the guarantee, indeed, that this was so whether those obligations were in fact fully understood or not. 2. The terms of the guarantees included, as I have mentioned, the obligation to pay all the "guaranteed money" defined (for present purposes) as meaning "at any time all money which… the customer owes to ANZ at that time for any reason". The "customer" was, of course, Adventure Quest. The liability of Mr Woollard and Mr Hodgson was joint and severable. The guarantees provided, so far as discharge was concerned, that they remained in force until discharged in writing or ANZ was paid the full amount of the guaranteed money. Since, on any case, the full amount of the guaranteed money has never been paid, it follows that the guarantees remain in force. 3. On 11 March 1997 on behalf of both themselves and the company, Mr Hodgson and Mr Woollard wrote to ANZ confirming a previous phone communication that they would like to reactivate a $5000 overdraft facility. The letter added that they "would like the overdraft to be in place permanently and carry all existing guarantees …". 4. Mr Hodgson was appointed a director of Adventure Quest on 1 June 2000 replacing Mr Irvine; he and Mr Woollard being both the only shareholders as well as the only directors. 5. Loan agreements were entered into in 2004 and 2009, the latter (for approximately $150,000) essentially subsuming debt (of about $100,000) then outstanding but making available approximately $50,000 in additional funds. Further overdraft facilities were also agreed of $15,000 and $20,000. 6. Adventure Quest defaulted and demands were, in due course, made against it, Mr Woollard and Mr Hodgson. The debt remained unpaid and, on 3 March 2014, ANZ commenced proceedings for the outstanding sum against the company as principal debtor and against Mr Woollard and Mr Hodgson pursuant to their securities. On 28 May 2014, default judgment was entered against both Adventure Quest and Mr Hodgson for the sum of $219,924.56. On 25 September 2014 Mr Hodgson paid $124,596.92 to ANZ. Mr Woollard has defended the principal proceedings and, by cross-claim against ANZ, sought relief under the Contracts Review Act 1980 (NSW). He has also cross-claimed against Mr Hodgson, at first seeking exoneration and contribution from him in respect of the whole of any liability to ANZ but, on the first day of the hearing, reducing the claim to the additional advance made under the 2009 loan agreement and the subsequent overdrafts. For his part, Mr Hodgson has cross-claimed against Mr Woollard for a contribution of one half of all the funds found to be payable to ANZ under the 2009 loan agreement and subsequent overdraft facilities. Mr Holmes of counsel for Mr Woollard conceded at the outset of the case that nothing that occurred prior to the 2009 loan agreement provided any escape from Mr Woollard's obligations to ANZ but submitted they do not attach to debts arising by virtue of the 2009 loan agreement and subsequent advances, essentially because he was unaware of the loan at the time and signatures purporting to be his on the relevant documents were forgeries. The statutory assumptions 1. Given the allegations made by Mr Woollard as to the validity of the loan agreement sued on by ANZ and the applicability of his prior guarantee and indemnity securing repayment of Adventure Quest's liability, it is necessary to consider the effect of what is usefully described as the statutory assumptions of regularity prescribed by the Corporations Act 2001 (Cth), which relevantly provides – 127 Execution of documents (including deeds) by the company itself (1) A company may execute a document without using a common seal if the document is signed by: (a) 2 directors of the company; or (b) a director and a company secretary of the company; or (c) for a proprietary company that has a sole director who is also the sole company secretary—that director. Note: If a company executes a document in this way, people will be able to rely on the assumptions in subsection 129(5) for dealings in relation to the company. (2) … (3) … (4) … Part 2B.2—Assumptions people dealing with companies are entitled to make 128 Entitlement to make assumptions (1) A person is entitled to make the assumptions in section 129 in relation to dealings with a company. The company is not entitled to assert in proceedings in relation to the dealings that any of the assumptions are incorrect. (2) … (3) The assumptions may be made even if an officer or agent of the company acts fraudulently, or forges a document, in connection with the dealings. (4) A person is not entitled to make an assumption in section 129 if at the time of the dealings they knew or suspected that the assumption was incorrect. 129 Assumptions that can be made under section 128 Constitution and replaceable rules complied with (1) … Director or company secretary (2) A person may assume that anyone who appears, from information provided by the company that is available to the public from ASIC, to be a director or a company secretary of the company: (a) has been duly appointed; and (b) has authority to exercise the powers and perform the duties customarily exercised or performed by a director or company secretary of a similar company. Officer or agent (3) A person may assume that anyone who is held out by the company to be an officer or agent of the company: (a) has been duly appointed; and (b) has authority to exercise the powers and perform the duties customarily exercised or performed by that kind of officer or agent of a similar company. Proper performance of duties (4) A person may assume that the officers and agents of the company properly perform their duties to the company. Document duly executed without seal (5) A person may assume that a document has been duly executed by the company if the document appears to have been signed in accordance with subsection 127(1) … Document duly executed with seal (6) … Officer or agent with authority to warrant that document is genuine or true copy (7) … (8) Without limiting the generality of this section, the assumptions that may be made under this section apply for the purposes of this section. The 2004 loan agreement 1. On 30 March 2004 ANZ offered a business loan facility of $150,000, an overdraft facility of $5000 and a $2000 encashment facility to Adventure Quest by way of its usual letter of offer. The Acceptance was signed by each of Mr Hodgson and Mr Woollard on or about 6 April 2004. The letter specified as security a first registered mortgage by Mr Woollard over the Kurrajong Property. Although it also stated in parenthesis after this condition that this was "(to be taken)", Mr Woollard accepted that he was aware that the existing mortgage over the Kurrajong Property which, as I have mentioned, had not been discharged, was "collateral" for the loan. He said that, at first, he and Mr Hodgson would "put up our land as collateral for the loan" but that "in the end I found it was only my land … that was placed on the bank's documents … I signed as accepting". His evidence continued – "Q. You understood that you would put up your land at East Kurrajong as collateral for the loan --- A. That's right. Q. Yes. So you understood that the mortgage - - - --- A. Not from 1983, no. I believed I was signing a new mortgage, but it was – it's the same thing. I put my land up. We're arguing about a point of detail. Q. Yes. You understood that if there was a default under the 2004 - - - --- A. I believed I was signing a new mortgage that if I was in default on that, they would take my land. I understood that perfectly." 1. Accepting that Mr Woollard, at the time, believed that a new mortgage was to be entered into (as, indeed, was stipulated by the letter of offer) there is nevertheless no issue that, at least so far as the moneys advanced under the 2004 letter of offer went, he was aware that he was obligated, one way or another, to secure the debt and this obligation was secured by the earlier mortgage. 2. As I have mentioned, Mr Woollard claims that certain signatures purporting to be his on a number of relevant documents are forgeries. However, this claim is not made in respect of his signatures on the acceptance of the 2004 letter of offer, consent to the provision of information to a guarantor, disbursement authority and guarantor acknowledgment, although that purporting to be his on the "Declaration by Proprietors/Directors/Guarantors" (that the attached financial statements and tax returns were true copies of the originals) is not his. 3. On 11 July 2005 ANZ wrote to Adventure Quest inviting it to increase its overdraft facility from $5,000 to $20,000. That letter stated, amongst other things – "Your overdraft facility is currently secured by a guarantee, and will continue to be subject to that security. If you accept this offer, your existing overdraft facility and agreement will remain in place but the limit will be increased to the amount referred to in this offer. Please ensure that the Guarantor section of this letter is signed by each of the guarantors to acknowledge the increase in the overdraft limit and the increase in their liability under the guarantee. Subject to the guarantors' consent, the increase in your Overdraft limit has been pre-approved and I can activate this for you within three working days of receiving your signed acceptance and guarantors' acknowledgment which can be returned to me in the enclosed reply-paid envelope." Acceptance of this offer was signed by each of Mr Hodgson and Mr Woollard acknowledging the increase as guarantors, with no dispute about the authenticity of the signatures. 1. On 4 November 2005 ANZ offered a further overdraft facility of $15,000 to Adventure Quest. As to guarantees, the offer said – "If ANZ holds Directors' Guarantees which cover your business lending, then this new Overdraft will be subject to that security. Please note that you will need to have the Guarantor section of the "Acceptance" page signed by each Guarantor if Directors Guarantees have previously been provided as security. If ANZ does not currently hold Directors' Guarantees from you, you may be required to provide them as a condition of this offer. This will be set out in the attached letter of offer. Please note that if you accept this offer, any other security provided by the business in connection with other business facilities will also secure this Overdraft. The details of offer attached to this letter, stated in respect of security – Individual Guarantee and Indemnity from Kim Garnett Woollard and Andrew Mark Hodgson in favour of ANZ in respect of the obligations of Adventure Quest Paintball – Skirmish PL unlimited (held)." The acceptance was signed by Mr Andrew Hodgson as director of Adventure Quest on 29 November 2005 and not by Mr Woollard. The guarantor section of the acceptance page was, however, not signed by either of them. It is no part of Mr Woollard's case that the fact that the acceptance was signed by only one director and neither guarantor had signed the acceptance page has the result that Adventure Quest was not obliged to repay the loan. At all events, ANZ was entitled to rely on the statutory assumptions of regularity in respect of Mr Hodgson's authority to act as agent for Adventure Quest. (I deal later with the submission made on his behalf that his specific consent was a prerequisite to the application of his guarantee and indemnity to any such increase in the obligations). 1. Pursuant to the 2004 loan arrangements a number of what had been called "redraws" were made. On 19 March 2007 Mr Hodgson, on behalf of the company, sought to redraw $40,000, which was effected that day. On 19 December 2007 $20,000 was redrawn and, on 13 March 2008, a further $15,000 was redrawn (pursuant to a redraw request of the same date from Ms Smith, the company's book-keeper). On 5 June 2008 the company redrew $10,000 pursuant to a "Redraw Withdrawal Authority" dated 29 May 2008. Lastly, on 10 February 2009 the company redrew $20,000 following a "Redraw Withdrawal Authority" dated 9 February 2009. The last two redraw authorities were signed by Mr Hodgson but Mr Woollard denies the authenticity of the signatures on them purporting to be his. 2. The position of Mr Woollard in respect of the 2004 loan agreement is somewhat obscure. He accepted, as I have said, that the signatures on the agreement documents, including those relating to the guarantee, were his (as also was his signature accepting the offer increasing the overdraft to $20,000), except for the signature purporting to be his on a "declaration by proprietors" as to the authenticity of listed company records. It is conceded by Mr Holmes that Mr Woollard raises no issue about the authenticity of this loan agreement. It is submitted, nevertheless, that this does not end the matter. He points out that Mr Woollard denies that the signature on the declaration authenticating records is genuine and that variations of the agreement concerning a further $15,000 overdraft and a number of redraws occurred without his knowledge or consent. As to the disputed signature on the authentication declaration, Mr Holmes notes that the impugned signature is obviously inconsistent with the genuine signatures and, that this appears "in the one document that was in ANZ's possession since 2004, [it] poses a concern", although the concern is not articulated and, indeed, Mr Holmes submits "it is unlikely that anything turns on this inconsistency in Mr Woollard's signatures". (This is correct: nothing does turn on it). Mr Holmes turns then to the elements of the 2004 agreement: a loan for "business investment"; an overdraft facility for "business working capital"; and an encashment facility for "business requirements". He submits that each loan is a distinct banking product and, although the nature of a "encashment facility" is not explained in the evidence (and, it is conceded, does not need determination) it should be considered similar to an overdraft. The relevant conditions do not, in terms, provide for any redraw from the business loan. Mr Holmes also points to the fact that, although these redraws were made against the business loan, the purpose of which was "business investment", the first four redraws were paid into the overdraft facility provided for "business working capital" and it is unclear where the funds drawn on 21 February 2009 went. 3. Even so, Mr Holmes does not in the end make any submission as to the legal consequences of these characteristics. As Mr Bannan points out, the purpose of the loan is relevant only to whether the Consumer Credit Code applies (see s 6(1)(b)) and, at all events, there is no issue in the case about the purpose or propriety of the loan. Even if Adventure Quest had used any particular facility for other than the stated purpose (and it is not submitted on behalf of Mr Woollard that this occurred, nor is there any evidence suggesting that it did), it is difficult to see how this could affect ANZ's entitlement to recover or enforce its security and none is suggested. Mr Holmes brought to attention, so far as the redrawn amounts against the business loan are concerned (set out above) that Mr Woollard stated he "firmly believed that the loan was a one off loan, never to be withdrawn on and to be paid out" confirming also that he was generally unaware of the practice of redrawing funds and denied the relevant signatures were his. 4. In respect of the 2004 loan, Mr Holmes raises two further "issues" concerning the variation of the original transaction by the extension of further credit and redraws on the loan. The submission is made that the overdraft agreement signed by Mr Hodgson as "authorised representative" of Adventure Quest but not Mr Woollard does not comply with the relevant requirements of s 127. For reasons I later discuss in connection with Mr Woollard's cross-claim against Mr Hodgson, there can be little doubt that he allowed Mr Hodgson to hold himself out as Adventure Quest's agent for the purpose of making arrangements with ANZ and thus it is unnecessary for ANZ to rely on the statutory assumptions, but neither in Mr Woollard's pleading nor in his affidavit evidence was a case advanced which impugned the legality or validity of the 2004 agreement, the redraws made pursuant to it or the overdrafts. The outstanding debt which was refinanced by the 2009 loan agreement, comprehended all amounts then owing and Mr Woollard did not in his defence seek to make a case that that amount was not owing or that payment of it had not been guaranteed by him and secured by the mortgage over his Kurrajong property. In substance, the only substantive defence he pleaded was that he was discharged from liability under his guarantees by virtue of the entry into the 2009 loan agreement by Adventure Quest; this does not raise in any sense a denial that the debt outstanding at the time the 2009 agreement was entered into was not owing, let alone that Adventure Quest had not validly accepted the overdraft offer of 4 November 2005. Nor did Mr Holmes suggest how this "issue" was relevant to Mr Woollard's liability. 5. Mr Holmes also submits that the redraws made in respect of the 2004 business loan between March 2007 and February 2009 were inconsistent with or otherwise not envisaged by, the agreement which Mr Woollard guaranteed, submitting that he went no further than guaranteeing "a simple loan facility that did not provide for redraws". Since the agreement obliged Adventure Quest to make stipulated monthly payments of capital and interest, it was plainly not obliged to make additional payments. When this was done, those payments could not be used by ANZ to reduce the facility (unless by specific agreement) and thus constituted a "credit", on which – subject to process requirements – Adventure Quest was entitled to draw down or, to put it obversely, which ANZ was not entitled to retain. I am unable to see how such an arrangement could affect Mr Woollard's obligation to repay Adventure Quest's debt to ANZ in the event of default merely because it was not specifically provided for in the loan agreement. The argument may be much more simply answered: Mr Woollard had not guaranteed (as Mr Holmes submits) "a simple loan facility that did not provide for redraws", but the payment, in the event of default, of all moneys owing by Adventure Quest to ANZ, howsoever the debt arose. The simplest answer of all, however, is that this contention was nowhere advanced in Mr Woollard's pleading and it is too late to do so now. The 2009 loan agreement 1. The business loan account statement as at 26 November 2009 showed an outstanding debit balance of $101,544.47. As I have mentioned, the 2004 facility was for $150,000 which (except for the requirement to repay principal by instalment together with interest) would have left available funds of $48,455.53. According to Mr Hodgson, in 2009 he and Mr Woollard sought to drawdown further funds on the company's loan because of losses resulting from the global financial crisis. Mr Hodgson thought that these funds were available under the redraw arrangements. However, ANZ would not permit an additional drawdown unless the existing loan was rewritten, as it appeared that, in fact, no overpayment "credit" was available. In the result, the loan agreement extended a facility of $151,545, which was credited to the company's account on 14 December 2009. After an adjustment of interest, the effective additional advance was $49,560.89. Ms Dakwer (ANZ's business banking manager at the time for Adventure Quest) said that the rewritten loan agreement "effectively increased the principal for the loan" by this meaning, as I understand it, that the original principal under the 2004 loan of $150,000 had been reduced to $101,544.47 by payment of the stipulated instalments and this (now principal) sum was increased to $151,545, subsuming that debt. Mr Hodgson said he was told (or, at least, understood) that further securities were not required as this was merely a rewriting of the existing loan which did not increase the loan amount. (This much may well be correct). He said, "We signed the 2009 agreement in order to allow us to further drawdown additional surplus payments we had made into this loan". In this it appears he was mistaken but I accept that he might have miscalculated the position. Certainly, the amount of the 2009 facility was virtually the same as that agreed in 2004. 2. Returning to the documents, an "Express Business Credit Application" form was filled in and sent to ANZ in early December 2009. It is apparently signed both by Mr Hodgson and Mr Woollard. Mr Woollard gave no evidence about this application but it is conceded by ANZ (in the context that Mr Woollard had denied knowing anything of this loan until after it had been obtained) that the signature purporting to be his appears to be similar to those on other documents which he denies are his. On 7 December 2009 a letter of offer under the hand of Ms Dakwer was sent to Adventure Quest of a business loan of $151,545 and an overdraft facility of $15,000. The security was specified as follows – "Securities for the facilities are as detailed below. Additional security requirements may be detailed in the Conditions precedent section of this letter; [no such requirements were stated]. (a) First Registered Mortgage by Kim Garnet Woollard over the property situated at 1200 Singleton Road East Kurrajong NSW 2758 (already held) (b) Standard Guarantee and Indemnity unlimited as to amount by Andrew Mark Hodgson as guarantor on account of Adventure Quest Paintball – Skirmish Pty Limited (already held). (c) Standard Guarantee and Indemnity unlimited as to amount by Kim Garnet Woollard as guarantor on account of Adventure Quest Paintball – Skirmish Pty Limited (already held) Supported by First Registered Mortgage by Kim Garnet Woollard over the property situated at 1200 Singleton Road East Kurrajong NSW 2758 (already held)". 1. This offer was accepted by Adventure Quest on 10 December 2009 by signatures of Mr Hodgson and (purportedly) Mr Woollard, the latter's authenticity being denied. The same is true of the consent to providing information to a guarantor and the guarantor acknowledgment. Neither ANZ nor Mr Hodgson sought to make the case that the signatures were genuine, ANZ contending that this was irrelevant, whilst Mr Hodgson simply denied that he had placed Mr Woollard's signature on any document (and it was not put to him in cross-examination that he did so). The effect of the forgeries 1. As I have already mentioned, Mr Hodgson did not defend ANZ's claim and it obtained default judgment against him. So far as Mr Woollard is concerned, he filed a defence and cross-claim which, as the written submissions of Mr Bannan fairly summarise, raised the following issues: Mr Woollard has no liability under the 2009 letter of offer because he did not sign the acceptance or the guarantor acknowledgment; any liability that he might have had under the original (2004) transaction was discharged when the company entered into the 2009 transaction; ANZ engaged in unconscionable conduct; and each of the guarantee and mortgage was unjust within the meaning of the Contracts Review Act 1980 (NSW). As Mr Bannan rightly pointed out, it appears that the nub of Mr Woollard's case is a denial of liability for the first of these reasons although the other reasons were not abandoned. 2. Mr Holmes points to the evidence of Mr Woollard, in substance that, though he was aware (after the event) that Mr Hodgson had arranged to borrow "another $50,000", he had not authorised Mr Hodgson to do so and did not understand how, without his specifically authorising ANZ, the funds could be made available. Mr Holmes contends that, whether by way of redraw (as is patently not the case) or an increase in the total facility over the 2004 outstanding balance, Mr Woollard should have been given notice as guarantor of this variation and, consequently, these funds are not secured by his guarantee. (It had been agreed by Mr Holmes at the outset of the proceedings that it could not be disputed that Mr Woollard was liable to ANZ under his guarantee in respect of the sum outstanding to ANZ under the 2004 loan agreement and subsequent variations until it was overtaken by the 2009 loan agreement, which had the effect, as it were, of resetting the clock and, accommodating the then outstanding debt, lending the additional sum of $50,000). Mr Holmes agreed that his best case against ANZ was that Mr Woollard was not liable to indemnify it in respect of this additional advance. Accordingly, no issue arises as between Mr Woollard and ANZ as to his obligations under the guarantee securing the debt outstanding as at the institution of the 2009 loan agreement. The problematic matters to which Mr Holmes referred, so far as the earlier transactions were concerned are, accordingly immaterial, although the logic of this position did not inhibit Mr Holmes from relying on them in respect of the debt due under the 2009 loan agreement. 3. The most significant issue in this case is the extent to which Mr Woollard was bound by the 2009 agreement, in particular, whether ANZ is entitled to enforce against him the security which he had earlier provided, despite the fact (if it be the fact) that he was unaware of the transaction and was not a party to the agreement. ANZ submits that it is entitled to rely on the statutory assumptions of regularity, with the result that the alleged forgery is irrelevant and Adventure Quest cannot deny its appropriate execution of the acceptance of the loan offer. Since Mr Woollard's undoubtedly valid guarantee applied to Adventure Quest's obligations, once it be found that Adventure Quest was indebted under the agreement, ANZ was entitled to have resort to the guarantee in accordance with its terms and also to enforce its rights as mortgagee of the Kurrajong property. 4. The starting point is that the Court must be satisfied that there were dealings between ANZ and Adventure Quest in relation to the 2009 agreement since, as s 128(1) makes clear, the assumptions in s 129 concern "dealings with … [the] company". In this case there is no issue that, indeed, ANZ dealt with Adventure Quest, at least through its communications with Mr Hodgson who (by way of either explicit or implicit agreement with Mr Woollard) was its intermediary with the bank and acted as its agent. In Soyfer v Earlmaze Pty Limited [2000] NSWSC 1068, dealing with similar provisions superseded by the Corporations Act Hodgson CJ in Eq said that, in the case of an impugned execution of a document, the question was not whether the particular conduct was "within the agent's authority in such a way as would make the company liable for it within the principle of Lloyd v Grace Smith & Company (1912) AC 716" but that "it is sufficient that the person in question be an agent of the company in the sense of having some legitimate role on behalf of the company in relation to the dealings in question": ibid at [80]; cf Esperance Cattle Company Pty Ltd v Granite Hill Pty Ltd [2014] WASC 279 at [393]. Here, although Mr Woollard maintains (and Mr Hodgson agrees) that his arrangement with Mr Hodgson was that both of them had to agree to dealings with ANZ which created or increased the company's debt, it is no part of his case that ANZ were or should have been aware of this arrangement and concedes, implicitly, that Mr Hodgson was held out by Adventure Quest as authorised to act on its behalf in respect of the relevant transactions. At all events, the unquestioned transactions with ANZ were arranged by Mr Hodgson with Mr Woollard's actual or implicit authority, Mr Woollard never having (it appears) himself contacted ANZ in relation to them and there was nothing to suggest, from ANZ's point of view, that the 2009 transaction was any different. ANZ was entitled to deal with Mr Hodgson in respect of the questioned transactions on the basis that he was the company's agent for all relevant purposes. Accordingly, Mr Hodgson can be taken as having been an agent of the company, at least in the sense described by Hodgson CJ in Eq. 5. Answering the criticism that this would make it too easy for fraudsters to create liabilities for the company, his Honour said – "[82] In fact, some protection to the company is given by the requirement that the person must be engaged in dealings with the company in the first place; which in my opinion means that there must be dealings (in the sense of negotiations or other steps in relation to a contemplated transaction) with someone on behalf of the company which are dealings authorised by the company, and the document in respect of which the assumptions may be made must be a document which is "in relation to" those authorised dealings (and I take this to extend to a document arising out of authorised negotiations or other steps). I note that in Story at 733, Gleeson, CJ suggested that the concept of having dealings with a company must embrace purported dealings, because if the provisions only applied where the person representing the company had actual authority, they would be largely unnecessary. I take this as meaning that it is not necessary that the person representing the company have authority from the company to commit the company to the relevant transactions or execute the relevant documents; but in my opinion, it is necessary that the person have authority to undertake some negotiation or other steps, so that the dealings, in relation to which the document is executed, are properly considered to be dealings with the company." 1. The 2009 agreement was executed on behalf of Adventure Quest by Mr Hodgson and purported to be executed by Mr Woollard. Both were directors. On its face, although no common seal is used, Adventure Quest executed the document by the signatures of its two directors and objectively appeared to comply with s 127(1), bringing into effect the assumption in s 129(5) that ANZ was entitled to act on the basis that the acceptance of the letter of offer had been duly executed by Adventure Quest. It is therefore unnecessary to resort to s 128(3) in respect of the forgery by "an officer or agent of the company". It was no part of Mr Woollard's pleading either against ANZ or Mr Hodgson, and Mr Holmes did not put to Mr Hodgson in cross-examination, that he had placed Mr Woollard's signature on the loan agreement documents (though his submissions inappropriately suggested as much) but there was, in the end at all events, no contention that the signature had been forged by other than an officer or agent of Adventure Quest. In Australian and New Zealand Banking Group Ltd v Frenmast Pty Ltd [2013] NSWCA 459, a company was held to be bound by a guarantee it had provided to ANZ even though one of the directors' signatures had been forged by the other director. The other director had in fact dealt with the bank, which was entitled to assume that, by virtue of ss 128(1) and 129(4) he had done so properly: ibid at [37]. 2. Mr Holmes submits that Frenmast should be distinguished. He submits that there the issue concerned the provision of the guarantee by Frenmast securing facilities provided by the bank to individuals and another company. The signature of one of the directors of Frenmast on the guarantee document was forged. Mr Holmes submits this is clearly distinct from the present case in which the guarantee was offered by a non-corporate individual to secure the debts of a company. As distinct from Frenmast, where the bank was relying on the legitimacy of the company's execution of the guarantee to enforce it against the company, here the question is whether ANZ can rely on the same provisions to bind a non-corporate individual. There is no merit in this argument. The guarantee relied on by ANZ in the present case was undoubtedly executed by both Mr Woollard and Mr Hodgson. The crucial question here is whether Adventure Quest entered into the 2009 agreement at all. The statutory assumptions relied on by ANZ are directed to the validity of that agreement, rendering the forgery of Mr Woollard's signature as a director irrelevant to the creation of the obligation to repay the company's debt and enabling recourse to the guarantees. cMr Holmes makes the same submission in respect of Soyfer but, for the same reasons, the distinction is without a difference. In Frenmast and Soyfer the question was whether the company was bound despite the forgery of the signature of one of its directors, officers or agent on the relevant document; this is the same question here, though the obligation sought to be enforced is, as it were, secondary to the primary liability of the company. In short, ANZ does not rely on the assumptions in respect of the execution of the guarantees, but only in respect of the validity of the loan agreement. Since Adventure Quest cannot "assert in proceedings in relation to the dealings that any of the assumptions are incorrect", it follows that it is indebted to ANZ despite any forging of Mr Woollard's signature on the loan documents purportedly executed by it and, accordingly, ANZ is entitled to enforce the guarantees given by Mr Hodgson and Mr Woollard, as well as the latter's mortgage. 3. Mr Holmes points to MDN Mortgages Pty Limited v Caradonna [2010] NSWSC 1298 as factually analogous to the current situation (as distinct, he argues, from Frenmast and Soyfer) in which the defendant alleged that she had not signed the relevant mortgage or guarantee and contended that the assumption of regularity could not be made where, as was submitted to be the case, the relevant person at MDN Mortgages "knew or suspected that the assumption was incorrect" vide s 128(4). Kirby J rejected the defence submission that the relationship between the plaintiff and the debtor company was such as to give rise to knowledge or suspicion that the relevant facility agreement (using the forged signature of the defendant) was affected by fraud. The plaintiff's case, in part, rested upon its reliance on the fact that, on its face, the relevant signatures on the security documents were witnessed by a solicitor. MDN had also sent to the guarantors, including the defendant, a letter confirming the details of the mortgage. Those facts were simply additional material relied on by the plaintiff to show that it had no knowledge or suspicion of the forgery. As it had not been put to relevant witnesses on behalf of the defendant that reliance on the solicitor was unreasonable or further steps should have been taken to check that the signatures were genuine, the rule in Browne v Dunn (1893) 6 R 67 precluded the defendant from taking this point. MDN Mortgages is not authority for the proposition that it was necessary for a lender to a company to ensure that signatures were witnessed and confirm with the guarantor that the guarantee and mortgage had been taken out. Those simply happened to be material relevant to whether the financier knew or suspected fraud. 4. So far as 128(4) is concerned, Mr Holmes submits (rightly) that Mr Woollard did not need to prove that ANZ or its officers had actual knowledge of the forgery. The section itself states that a suspicion that the assumption as to regular execution was incorrect would prevent reliance on it. He submits, relying on Eden Energy Ltd v Drivetrain USA Inc [2012] WASC 192 at [84]-[85] that the evidence would justify an inference being drawn that ANZ or its officers were wilfully blind to the likelihood of forgery. In this respect, Eden Energy takes the argument no further. The paragraphs relied on simply state the evidentiary approach to the task of testing whether a person had knowledge or suspicion of the relevant facts, pointing out, amongst other things, that "the court's view of what a reasonable person would know cannot be conclusively attributed to a person as actual knowledge is required". Mr Holmes did not point to any evidence which would justify the drawing of an inference that the bank or any of its officers knew or suspected that Mr Woollard's signature – or any signature for that matter – might have been forged. Furthermore, ANZ called evidence on this question through Ms Dakwer. She stated in her affidavit – "In response to paragraph 3 of the November Woollard affidavit [alleging that the signatures on the 2009 loan documents were forgeries], at the time the 2009 letter of offer was received by ANZ along with a signed Acceptance and Guarantor Acknowledgment, I did not have any reason to suspect that the signatures attributed to Mr Woollard on those documents could have been forgeries as alleged by Mr Woollard until I became aware of such allegations in about 2012." 1. Mr Sarandi Marinos, who was the ANZ employee dealing with Adventure Quest between June 2005 and January 2008 similarly deposed that he had no reason at any point to suspect otherwise than that Mr Hodgson or Ms Smith were acting with the authority of Adventure Quest when relevant documents were submitted. There was no challenge to the evidence either of Ms Dakwer or Mr Marinos in cross-examination or otherwise. Quite apart from the fact that there is no evidentiary basis for submitting that anyone at ANZ knew or suspected Mr Woollard's signatures were or might be forgeries, it is now not open to Mr Holmes to submit otherwise. This is not to say that a close inspection of the impugned signatures would not raise a suspicion to the eye of a careful observer by virtue of their apparent difference with other signatures that they might not be genuine but there is no evidence that such a comparison took place and it cannot be contended that there was any relevant duty to do so, whatever prudence might have suggested, since the question is whether there was actual knowledge or actual suspicion of forgery. Mr Bannan submits that ANZ would be entitled to rely on the statutory assumptions whether or not it made any enquiry, citing in support of this now obvious proposition Esperance Cattle Company Pty Ltd v Granite Hill Pty Ltd at [390]. At all events, as Mr Bannan also submits, the impugned signatures on the 2009 documents were rather similar to a number of other signatures purporting to be Mr Woollard's on documents that had been received by ANZ over time, now claimed by him to be forgeries as then unbeknownst to Ms Dakwer, making it entirely plausible that she might quite reasonably have concluded that the signature on the 2009 documents did not so markedly differ from the earlier signatures as to generate a suspicion as to genuineness. But, at all events, as I have already said, Mr Holmes did not seek to cross-examine Ms Dakwer about any of these matters and it is not necessary to analyse the issue further. 2. Mr Holmes submits, on the assumption that ANZ can rely on the 2009 agreement as binding on Adventure Quest (due to the statutory assumptions), the question remains whether Mr Woollard's guarantee applied to the repayment of the further advance of $48,560.89 (on the assumption that it applied to the subsumed amount outstanding under the 2004 facilities). He submits that ANZ was required by an implicit term of the guarantee to give notice to Mr Woollard of the loan agreement and any variation of it and obtain his consent to the transaction. It is not argued that any specific term of the guarantee required such notice or consent. Mr Holmes points to the earlier occasion where there was an increase in the available funds pursuant to the 2004 agreement, when a guarantor acknowledgement signed by Mr Woollard was obtained as was also the situation when the overdraft was increased from $5,000 to $20,000 and was sought (but not obtained) in relation to the additional $15,000 overdraft. Furthermore, ANZ sought this consent also in relation to the 2009 agreement, as I have mentioned. It is submitted that this indicates that, at least by the 2009 agreement, it was impliedly (or perhaps collaterally) agreed between ANZ and Mr Woollard that his consent would be obtained before any increase was made to Adventure Quest's borrowings. 3. Mr Bannan on behalf of ANZ, submits, firstly, that Mr Woollard did not plead any case enabling this issue to be raised at this point. The only conceivably relevant allegation is as follows – "[10]. In answer to the whole of the statement of claim the third defendant says that without his knowledge or consent the plaintiff and the first defendant, through the actions, of the second defendant, purportedly entered into the Agreement dated 10 December 2009 by which the amount payable under the loan increased on and from about 14 December 2009. [11]. In the premises the first defendant is discharged from all liability to the plaintiff under the Guarantee. [12]. The defendant claims: a. An order that the Guarantee be set aside; b. In the alternative, an order that the Guarantee be varied to limit the first defendant's liability thereunder." 1. Mr Holmes contends that, since the pleading alleges that the 2009 agreement was entered into by Adventure Quest without Mr Woollard's knowledge and consent, the issue is raised whether ANZ was under an obligation, for one reason or another, to notify Mr Woollard of the agreement. I do not agree that such a consideration is required in order to determine the matter raised by paragraph 10 (or paragraphs 11 or 12). There is nothing in the pleading that alleges any obligation to give notice in the event of variation, nor, more particularly, is any express or implied term of the guarantee pleaded as giving rise to such an obligation, let alone any facts or circumstances that might require such an obligation to be implied. As Mr Bannan rightly argues, these paragraphs appear to go to the defence of variation of the principal transaction which is, as he points out, a question often raised in cases concerning guarantees, resting on the long standing principle stated in Hancock v Williams (1942) 42 SR (NSW) 252, where Jordan CJ and Halse Rogers J said (at 255-6, omitting references) – "A guarantor is responsible only for the obligation which he has guaranteed. Hence, if the obligee and obligor, without his consent, agree between themselves to alter the nature of the obligation, the guarantor is discharged because the obligation in its altered form is not that which he guaranteed … Thus, if the contract of suretyship provides that another person shall join in the guarantee or that a security shall be taken for the obligation guaranteed, and the obligee does not obtain or subsequently releases the co-guarantor or the security, the guarantor is discharged, because the obligation is not or ceases to be that which he guaranteed – an obligation with a co-guarantor or a security … Similarly, a binding agreement by the obligee to extend the time for performance by the obligor of his obligation releases the guarantor unless by the agreement the obligee reserves his rights against the guarantor (in which case the rights and liabilities of the guarantor remain unaffected) ... But the fact that a. stipulated security for the guaranteed obligations has been exploited or realised by the obligee, in a manner which involves no breach of the contract of suretyship and no change in the nature of the guaranteed obligation, does not release the guarantor … although if such exploitation or realisation is negligently carried out, so that the surety derives less advantage from it than he is entitled to expect, he is entitled in equity to treat himself as discharged to the extent to which he has been damnified thereby, but no further … The rights of the obligee and the liabilities of the guarantor are, however, not destroyed or reduced by anything which, according to the terms or the suretyship agreement, leaves the obligation still one which the guarantor has agreed to guarantee …" 1. The guarantee here makes provision for termination of the guarantor's obligations in Part 7 which permits the guarantor to stop further amounts being added to the obligation by giving notice that further amounts advanced or provided to the customer will not be part of the guaranteed money although this, not surprisingly, would not affect current obligations; furthermore, the guarantee and indemnity may be brought to an end by paying out the full amount of the guaranteed money or making arrangements to do so with the bank. Part 2 of the guarantee contains provisions referring to the "liability limit" which applies if what is called the "limited liability box" is completed and the "unlimited liability box" is deleted and the deletion initialled by the guarantor, in which event the guarantor's liability is limited to the specified sum. The relevant page of the guarantee shows that the limited liability box has been deleted and initialled by the guarantors, leaving the unlimited liability specification extant, with the effect that the guarantor's liability is unlimited and the guarantor must, in the event of default, "pay all of the guaranteed money" owing at that time. The mere fact that ANZ, in the event, agreed to advance additional funds to Adventure Quest did not of itself vary the obligations of the guarantor, since that obligation was to guarantee all moneys advanced. If, on the other hand, the guarantee limited the obligation of the guarantor in respect of future debts, it would simply follow, as a matter of contract, that the guarantor's obligations did not comprehend that further liability. It is obvious that the mere making of additional advances, contemplated by the guarantee itself, to the guaranteed debtor could not, of itself, vary the obligation of the guarantor in any sense which could give rise to a discharge of the guarantor's obligation in respect of the agreed amount. The rule referred to in Hancock v Williams is not relevant in this case, where all that has happened is that the debt has been increased. In the result, the case to which the pleading is apparently directed cannot be established but it does not follow that the case now sought to be made in respect of notice is implicitly pleaded and available. 2. At all events, there is nothing in the terms of the guarantee and no term able to be implied that supports the contention that ANZ was obliged to inform Mr Woollard of an increase in Adventure Quest's liabilities. It follows that ANZ was not required to seek his consent as guarantor to the 2009 loan agreement. Alternatively, that consent was expressly given (without reference to amount) by the terms of the guarantee which secured repayment of all moneys owing at any time of default. Mr Woollard is bound by the terms of that guarantee and nothing more is required for his obligation to remain extant providing, of course, that Adventure Quest is bound to repay the funds ultimately lent to it. 3. ANZ also submits that, apart from the statutory assumptions of regularity, there is another basis upon which Mr Woollard is liable pursuant to the guarantee arising out of its terms. The original guarantee of February 1996 provided – "5. The indemnity I agree to indemnify ANZ against any loss that it suffers because: (a) … (b) ANZ cannot recover the guaranteed money from the customer because: … (iv) the customer acted without power, or misused or exceeded its power or someone appearing to act on behalf of the customer acted without authority or misused or exceeded that person authority; …" 1. Accordingly, it is contended on ANZ's behalf that, if Mr Hodgson, who appeared to act on behalf of Adventure Quest, was not authorised to do so or misused his authority, or some other person, unauthorised by the company, had signed Mr Woollard's name, so that ANZ could not recover the guaranteed money from Adventure Quest, that money would nevertheless be payable. This submission is plainly correct. Contracts Review Act claim 1. Mr Bannan conceded that, in light of Quikfund (Australia) Pty Limited v Airmark Consolidators Pty Limited [2014] FCAFC 70; (2014) 312 ALR 252, Mr Woollard's claim for relief under the Contract Review Act is limited to the application of the guarantee in respect of funds borrowed by Adventure Quest without notice being given to Mr Woollard of those proposed advances. It is submitted, in substance, that the omission in the guarantee of any requirement of notice being given to Mr Woollard of the increase in the borrowings (here constituted by the advance made under the 2009 agreement) results in an unjust contract in breach of s 7 of the Act. Mr Holmes points to the well-known passage from the judgment of McHugh J in West v AGC (Advances) Limited (1986) 5 NSWLR 610 at 620 – "Under s 7(1) a contract may be unjust in the circumstances existing when it was made because of the way it operates in relation to the claimant or because of the way in which it was made or both. Thus a contractual provision may be unjust simply because it imposes an unreasonable burden on the claimant when it was not reasonably necessary for the protection of the legitimate interests of the party seeking to enforce the provision …" Mr Holmes submits that, because the guarantee did not require notice and because Mr Woollard was unaware that notice was unnecessary, the guarantee in this respect was unjust. It may fairly also be observed that ANZ's own practices required agreement by the customer to disclose the letter of offer to the guarantors and an acknowledgment by them, in substance, that their guarantees include the obligations created by the proposed facility. If, on the other hand, Mr Woollard knew, or had represented to the bank that he knew, that notice was unnecessary, it would not be unjust for the bank to extend further credit, secured by the guarantee, without giving him notice of a proposed arrangement to do so. A solicitor's certificate as to advice was required by ANZ to be completed as part of the relevant security documentation. The explanations required to be given were as follows – "PART B EXPLANATIONS GIVEN BY THE CERTIFYING SOLICITOR: I CERTIFY that in the absence of the borrower and before the guarantor signed the documents, I gave legal advice in respect of the documents required to be signed by the guarantor and I EXPLAINED to the guarantor: * that if the borrower defaults in payment or in other obligations to you the guarantor would be liable to make good that default which could involve all amounts owed by the borrower to you and substantial arrears of interest. * that the giving of a guarantee involves considerable risk, including the risk of losing any security, property and other assets and requires very careful thought. PART C EXCLUDED EXPLANATIONS: I INFORMED the guarantor in very clear, terms that I was not expressing any opinion nor advising on: * the viability of the transaction which the borrower was undertaking; and * the borrower's ability to make the required payments to you; and * the client's (guarantor's) ability to make die payment to you. I FURTHER INFORMED the guarantor that if in any doubt on those aspects the guarantor should obtain independent financial advice before signing the documents." 1. It seems to me that the requirement to explain the consequence of default required at least an outline of what would constitute default, in particular, the fact that the guarantee covered all moneys owing by Adventure Quest and that it was not necessary for the bank to give notice of any advances made pursuant to the loan agreement. The mere fact that, in terms, the guarantee did not specify that it was unnecessary for ANZ to give notice of any actual advances did not make the contract unfair if it was understood, as it should have been explained to Mr Woollard, that no notice was necessary. But at all events, a complaint as to the general nature of a contract must be considered in light of the particular circumstances. In the case of the 2009 loan agreement, the knowledge of and consent to the facility was evidenced by the signatures of Mr Woollard on the appropriate parts of the document. It is self-evident that, if the signatures were genuine, they demonstrated that Mr Woollard was indeed aware of and consented to the transaction and no complaint that it was unjust that the guarantee did not provide for notice could succeed, whatever view might be formed in the abstract, as it were, as to the absence of any specific clause in the guarantee about notice which might lead a guarantor to mistakenly, though not altogether unreasonably, think that notice would need to be given before the bank increased the conditional liability created by the guarantee. Here, ANZ acted on the basis that (for whatever reason) notice should be given of the proposed increase of Adventure Quest's debt. The absence of a specific term in the guarantee that required it to do so was not therefore productive of any injustice. The fact, as it happened, that Mr Woollard had not actually signed the guarantor's notice did not make the contract unjust. It is not, and could not be, submitted that ANZ's mode of ensuring that he was aware of, and agreed to, the loan was unreasonable. This is especially so given that Mr Woollard was not a true third party. He was a director of Adventure Quest and had actually or apparently signed a large number of documents dealing with the facilities made available to the company over many years. As such, it was reasonable for ANZ to infer that he would at all events be aware of the proposed transactions, not least because the letter of offer (with the accompanying documents) was addressed to both Mr Hodgson and Mr Woollard as directors of Adventure Quest. In short, ANZ acted as it would have acted had the guarantee contained a term requiring notice. I do not accept that the guarantee was a relevantly unjust contract because it did not specifically state that notice was unnecessary nor was it unjust in the circumstances given that, so far as ANZ was aware, the material obligations (which must include the question of notice) were explained by the solicitor whose certificate was a pre-requisite for its initial acceptance of the guarantee as security for Adventure Quest's debts and. Furthermore, ANZ took reasonable steps, at all events, to ensure that Mr Woollard was aware of and consented to the facility. 2. It follows that the Contract Review Act case cannot succeed. Australian Securities and Investments Commission Act 2001 (Cth) claim 1. I mentioned at the outset that Mr Woollard sought to establish a case against ANZ of unconscionable conduct by it. Mr Holmes candidly conceded in his closing submissions that the conduct of ANZ and its officers did not reach the high standard required for an adverse finding in this respect and this aspect of his cross-claim was therefore not pressed. Conclusion as to liability to ANZ 1. Mr Woollard and Mr Hodgson are jointly and severally liable under their contracts of guarantee and indemnity to pay to ANZ the amount of the outstanding debt due by Adventure Quest to it. ANZ is also entitled to execute its rights under the mortgage to obtain payment of this amount. The cross-claim of Mr Woollard against Mr Hodgson 1. Mr Woollard claims a sum from Mr Hodgson equal to any liability which Mr Woollard might have under his guarantee to ANZ. The basis of his claim, as put by Mr Holmes, is that he did not consent to the 2009 agreement and that the entry into it by Adventure Quest was done by Mr Hodgson without Mr Woollard's knowledge or consent, knowing that the signatures on the agreement purporting to be his were not his signatures. In a witness statement made to police on 1 April 2011 Mr Woollard gave a brief account of his connection with the business, including the following – "In 2004, Adventure Quest Paintball Skirmish approached the ANZ bank and applied for a loan of $100,000 to pay me back. That loan was approved and it was agreed previously that both of us would put our land up as collateral for the loan but in the end I found that it was only my land … was placed on the Bank documents. Those Bank documents I signed as accepting. By 2007, the business was running well and turning over nearly a million dollars a year. Andrew was still the main figurehead in the day to day activities and he handled all finances for the business. In either late 2009 or early 2010; Andrew approached me and told me that the business was in debt due to running costs. We had a discussion and I recall him saying, "We've had to borrow another fifty thousand" I said, "Fifty thousand, you're kidding" I couldn't understand how we could have been so far behind when only a couple of years earlier we had been turning over significant amounts of money. Not knowing of the day to day running of the business, I accepted that we were now turning a loss and accepted that the loan had to be taken out. I did not have to sign anything for that loan as it had already been taken out. I don't know anything about any documentation for that loan. The fact that the loan was past tense annoyed me a bit but after a while l forgot about it. I should have been consulted before the loan was taken out. It played on my mind and, on the 7th March, 2011, I made enquiries at the ANZ Bank regarding the loan. I was told certain things about the loan documents during those enquiries. (My alleged signature was on the application forms). As a result of the enquiries,' I was later forwarded copies of the acceptance offer dated 7th December, 2009. That night, Andrew rang and I had a conversation with him. I had found out that the loan documents for the loan had my land only as collateral, not Andrews as well. He had only signed a personal guarantee. I said, "I don't think putting up my land as collateral is a fair go." Andrew said, "I'll put my land up as well then." I said, "Did you forge my signature for the 2009 redraw facility." He said, "I didn't need your signature." I said, "Michael HOLE from the ANZ Bank has said he will forward the redraw documents to me by email for signature verification. There is a signature on there that they say is mine. I don't recall signing anything". Andrew said, "You've forgotten that you signed it. Do I have to write you a note every time you do anything for AQPS." I later received-the documents and on examination I found that the signatures depicted on pages 6, 8 and 9 that have my name against them are not my signatures. I did not sign that paperwork and the signatures are not even close to looking like mine." 1. Two initial observations should be made about this statement. First, the amount borrowed in 2004 was $150,000 plus an overdraft facility of $5000, (increased to $15,000 on 11 July 2005), all of which obligations Mr Woollard knew of and had signed up to, on his own account. In his evidence he corrected the amount of the loan but then expressed some uncertainty about whether it was $100,000 or $150,000. He stated in his evidence also that he believed the amount outstanding in late 2009, before his claimed conversation with Mr Hodgson, was about $100,000. As it happened, this figure was almost correct. It appears to follow that Mr Woollard was indeed aware of the company's financial position vis-à-vis the bank at this time. 2. Mr Woollard said, although he was a director of Adventure Quest, he was merely a silent partner, as "someone who didn't work for the company but had an active interest in its perpetuation, its advancement, someone who gave it support but wasn't there on a daily basis and was not involved in day to day management". On the other hand, he said, Mr Hodgson was the managing director and responsible for day to day management of the company. He said that he relied upon Mr Hodgson to keep him informed of the financial position of the company. He did not check the company's accounts in respect of payments being made (and I assume received) because he had no reason to do so, assuming that "if we were having trouble, Andrew would have told me". He first said that he would call Ms Smith "probably a maximum of 20 times a year, maybe", then amended that to "more like once a month"; he would attend at the office "three or four times" a year, then amended this to "I could generalise – I'd say I probably saw … [Ms Smith] between two and four times a year, and there was probably a phone call a month, every couple of months, maybe that, yeah". Ms Smith (who was not called for cross-examination) said in her affidavit that, in her role as Administrative Manager/Bookkeeper, she would, together with the company's accountant, reconcile and prepare quarterly financial and payroll reports, which were sent to Mr Davis, the tax accountant, for finalisation and lodgement with the ATO; they would be returned to the office, together with management reports including details on cash flow, forecasts, budgets and profit and loss spreadsheets for current and past years and provided to Mr Woollard when he attended the office. When he visited the office, he would always ask how the company was trading and she would tell him. 3. It is not disputed between Mr Hodgson and Mr Woollard that neither had any authority independent of the other to commit the credit of the company. In particular, Mr Hodgson conceded that to obtain credit on behalf of Adventure Quest Mr Woollard's agreement was necessary. Furthermore, the practice of the company had been for both of them to consent to the borrowings. It is not controversial that there are no company records of a directors' meeting, minutes or anything of that kind granting Mr Hodgson authority to enter into the 2009 agreement on behalf of Adventure Quest. This is not significant since the same is true of earlier company transactions which Mr Woollard does not dispute, and Mr Hodgson agrees that he did not have such sole authority. In the result, Mr Holmes (rightly) submits that the only available documentary evidence is the 2009 agreement itself, which Mr Hodgson agrees he signed and Mr Woollard asserts he did not sign and was unaware of until after it had been executed. 4. Although Mr Hodgson agreed that he managed the business on a day to day basis ("for lack of having someone else put their hand up"), with the title of managing director, he denied that Mr Woollard was only a silent partner. In addition to various dealings with property, he had signed five leases for cars on behalf of the company. He attended the field from time to time to inspect operations and ask Mr Hodgson or the day manager about the day's takings. He said that Mr Woollard regularly visited the office and met with Ms Smith to go over the finances. Adventure Quest's accountant, Mr Davis, was also Mr Woollard's accountant. It was usual for Mr Woollard to attend at Adventure Quest's office, Mr Hodgson's home or the Kurrajong property to sign documents, which would often be left at a convenient location so that each could sign at his convenience. On occasions he would date a document and leave it for Mr Woollard to sign. Mr Woollard did not deny this evidence and Mr Hodgson was not cross-examined to suggest it was wrong. He said, in substance, that he and Mr Woollard would constantly talk over the company business. He did not have a specific recollection about needing to get an additional $50,000 from the bank at the end of 2009 but said that he spoke with Mr Woollard about the need for money every time this was the case "just in general conversation" and the additional $50,000 "would have come up in conversation". Mr Hodgson said that his understanding was that the original loan facility was for $150,000, that additional payments had been made which brought it around to about $80,000 and then various redraws were made bringing it back up to $150,000 (I think this was a mistake for $100,000) but he said that he did not think the 2009 facility was an additional liability of $50,000 because "it didn't go over the original $150,000 that the original liability was" which, in effect, Mr Woollard had agreed to obtain from the bank under the original agreement. He denied telling Mr Woollard about the loan after it had been put in place. 5. As to the 2009 loan documents, Mr Hodgson denied signing Mr Woollard's name but agreed that he had printed their names and entered the dates next to the signatures. 6. Mr Holmes also submits that Mr Hodgson should have known that the signatures on the 2009 agreement purporting to be those of Mr Woollard were in fact not his. I already mentioned that the acceptance of the letter of offer of December 2009 was signed by Mr Hodgson who agreed that he also printed Mr Woollard's name and dated each signature. It is not clear if Mr Woollard's signature was already on the document when Mr Hodgson made these entries. The same is true of the consent to providing information to a guarantor, where the dates appearing next to the signatures on the guarantor acknowledgment were also entered by Mr Hodgson. The case, therefore, made against Mr Hodgson is not that he forged Mr Woollard's signatures but that he completed the documents and forwarded them to ANZ when he ought to have known that Mr Woollard's signatures on them were not genuine. Mr Holmes submitted that, in circumstances where Mr Hodgson had not himself seen Mr Woollard sign the documents and could not recall discussing the borrowings specifically to which the 2009 letter of offer referred, he should have questioned the authenticity of the signatures, especially where it would have been easy for him to confirm Mr Woollard's concurrence with the transaction. 7. Mr Holmes also points to the fact that on each of the Adventure Quest tax returns for the financial years 2004, 2005, 2006 and 2007 the signatures purporting to be those of Mr Woollard were, according to him, not his. It is submitted that there were many documents containing Mr Woollard's purported signature which was not actually his. Thus, there has been a history of his signature being used by some other person or persons, though it is not suggested for any fraudulent purpose. Mr Hodgson was unable to identify any person aside from himself and Mr Woollard who had an interest in signing these documents. In the result, however, the case mounted by Mr Woollard against Mr Hodgson is that Mr Hodgson arranged for the facility without informing him and provided documents purportedly signed by him which he ought to have known did not bear his genuine signature. 8. Mr Woollard was of the view that either redraws were not permitted under the arrangements with the bank or that they would not be undertaken, asserting several times in his evidence that he believed that when payments were made which exceeded the required instalments they reduced the company's indebtedness and did not provide any further credit on the company's account. It is not clear how he arrived at this understanding. He does not suggest, for example, that he and Mr Hodgson had discussed the issue and made a decision about it. I am left in some doubt as to whether his evidence about the redraws is reliable, given the size and number of the sums involved and Ms Smith's evidence about informing him of the company's trading. I should also point out, in fairness, that there is no evidence that any of the moneys in Adventure Quest's account were misused by Mr Hodgson or were not utilised for the company's business within Mr Hodgson's agreed responsibilities, nor did Mr Holmes make any submission otherwise. 9. As to the effect of the 2009 loan agreement which, as I have mentioned, resulted in increasing the facility available to Adventure Quest by $50,000, Mr Hodgson said that his understanding was that this amounted merely to a re-draw of earlier overpayments, although further documentation was required by ANZ. The actual communications of the bank's staff with Mr Hodgson are not the subject of evidence and I accept that it may be that Mr Hodgson may not have appreciated that the additional funds added to the outstanding debt to the bank. In relation to these funds also, as it seems to me, it appears they were expended in the course of the business and there is no evidence of any misapplication. Again this expenditure was within Mr Hodgson's authority as agreed with Mr Woollard. 10. I formed the view that Mr Woollard downplayed his actual communications with Mr Hodgson and Ms Smith and his knowledge of the company's financial affairs, although I would not go so far as to find his answers in these respects were dishonest; rather, I suspect his present recollection has somewhat reconstructed the past. I also formed the impression that he was not quite the business ingénue he represented himself to be. The crucial dispute between Mr Woollard and Mr Hodgson is whether Mr Hodgson informed Mr Woollard of the 2009 advance before it was arranged or, as Mr Woollard maintains, afterwards. On both accounts Mr Hodgson told Mr Woollard about it at about the time (though the latter puts it as late December 2009 or early January 2010). If Mr Hodgson knew (or believed) that Mr Woollard had not seen or signed the loan agreement documents, this would have been consistent with an attempt to keep the advance secret from Mr Woollard but this makes his disclosure shortly afterwards inexplicable. The objectively more likely course of events is that he told Mr Woollard about what he proposed (or thought) to be a drawdown before the arrangement was made. (As already mentioned, it is Ms Dakwer's evidence that this was Mr Hodgson's initial proposal but he was told that new documentation had to be signed). What exactly happened to the documents is unclear but it is fair to say Mr Hodgson rightly understood that, though the facility was for $150,000, $100,000 was to be used to repay the outstanding balance on the 2004 facilities (as varied) so that the net advance was $50,000. The documents therefore in substance reflected what, on both accounts, Mr Woollard was told. Furthermore, if Adventure Quest was travelling as well as Mr Woollard said he believed it was, he might well have been unpleasantly surprised by the need for a further advance. I accept that he had no recollection of having seen any documents relating to the loan and I think it unlikely that he had seen them. In that light, he might later have thought about whether it was necessary for him to have signed documents before the advance was made and this provoked his inquiry at the bank. In the result, I do not accept Mr Woollard's evidence that he only learned of the advance after the event. I think that the probabilities favour the conclusion that Mr Hodgson told him of the necessity for the advance before and not after it was finalised. 11. Given the way in which the case has been litigated, it cannot be concluded that Mr Hodgson signed Mr Woollard's signature on the 2009 loan documents. I accept, on balance, that Mr Hodgson believed that the documents had come to his attention and did not realise the signatures were not genuine. A suspicion about authenticity could only have arisen, as a matter of practical reality, if a comparison were made between the impugned signatures and genuine ones. It was not put to Mr Hodgson that he had made or should have performed such a comparison. Nor, to my mind, was it reasonable to have expected him to do so. However, I accept Mr Woollard's evidence that the signatures were not his. The evidence does not permit me to conclude without inappropriate speculation quite how they came to be on the documents. Ratification 1. Mr Bors of counsel for Mr Hodgson submits that, at all events, Mr Woollard ratified the extension of the advance, pointing to his response to being told about it. As Mr Woollard said, he "accepted that the loan had to be taken out". At that time, it seems he believed that he had not needed to sign anything for the loan as it had been taken out without any documentation executed by him in respect of it. However, after significant delay, on 7 March 2011 his enquiries with ANZ disclosed that the signatures depicted on the relevant forms were not his. Mr Bors argues that Mr Woollard's evidence that he accepted, in substance, that it was necessary for the purposes of the business to take out a loan of the additional funds and, although he had not authorised it (contrary to the understanding between him and Mr Hodgson that both needed to agree before funds were borrowed) he accepted Mr Hodgson's acting unilaterally, even though his resignation to what had occurred changed when he discovered what he claimed to be the forging of his signatures on the loan agreement and, so far as he was able to do so, withdrew from what had in effect been his partnership with Mr Hodgson in running Adventure Quest. His response, furthermore, was to double the rent payable on the property used by Adventure Quest to $4,000 per month although, following negotiations, this was ultimately agreed at $3,000 per month. Mr Bors submits that Mr Woollard had ratified the 2009 loan agreement, despite denying the genuineness of his signature. In Leybourne v Permanent Custodians Ltd [2010] NSWCA 78 the Court said – "[131] A principal can ratify the making of a contract entered into by a purported agent when the agent did not in truth have authority to make the contract on behalf of the principal. The ratification has retrospective effect, and the agent is treated as having had the requisite authority: Union Bank of Australia Ltd v McClintock (1922) 1 AC 240 at 248; [2006] NSWSC 1028 at [81]; Jones v Peters (1948) VLR 331 at 335. [132] Whether the conduct of the principal amounts to ratification is a question of fact, but there should be "clear adoptive acts" (Eastern Construction Co Ltd v National Trust Co Ltd (1914) AC 197 at 213 per Lord Atkinson); the conduct must be unequivocal (for example, Petersen v Moloney (1951) 84 CLR 91 at 101). It is well expressed in Dal Pont, Law of Agency, 2nd ed at 5.28 - 'The positive acts of the alleged principal may, aside from any express words, constitute sufficient evidence of ratification. This may be so where the fair inference to be drawn from a person's conduct, on an objective basis, is that the person consents to a transaction to which he or she might properly have objected. Put another way, ratification 'is implied from or involved in acts when you cannot logically analyse the act without imputing such approval to the party whether his mind in fact approved or disapproved or wholly disregarded the question.' (citations omitted) [133] Acceptance of the benefit of the unauthorised act of the agent with knowledge that the benefit flows from that act will ordinarily suffice (Australian Blue Metal Ltd v Hughes (1961) 79 WN (NSW) 498 at 515; Brockway v Pando [2000] WASCA 192 at [120]). Suing on a transaction brought about by an agent acting beyond authority will also ordinarily mean ratification of the unauthorised transaction: the reason is obvious, see Dal Pont, op cit, at para 5.29 and cases cited. [134] There must be full knowledge of all the material circumstances in which the act was done, unless the principal intends to ratify and take the risk whatever the circumstances (for example, Bremner v Sinclair NSWCA, 3 November 1998; (2001) ANZ Conv R 29 at [32] per Campbell J. The extent of knowledge necessary depends on the particular facts. It should be enough knowledge to decide whether or not to adopt the unauthorised act (Bremner v Sinclair at [32])." 1. In Learn & Play (Rhodes No 1) Pty Limited as Trustee for Rhodes 1 Childcare Centre Unit Trust v David John Frank Lombe [2011] NSWSC 1506 at [21] Pembroke J pointed out that even "[s]ilence, acquiescence or inactivity may be sufficient to demonstrate implied ratification … [and if] the principal is aware of all the material facts, takes no steps to disown the transaction within a reasonable time, or adopts no means of asserting his rights at the earliest opportunity, that may, in certain circumstances, amount to sufficient evidence of ratification." His Honour went on to point out, what was important in this case – "[22] What is crucial, however, in any ratification is that it is necessary that the principal have full knowledge of all the material circumstances in which the transaction was purportedly entered into and its material features. There may be circumstances, probably rare, in which the principal should be taken as having intended to ratify and take the risk of the transaction, whatever the circumstances may have been: Suncorp Finance & Insurance Corp v Milano Assicurazioni SpA (supra) at 234. This is not one of those cases. [23] I should also observe that ratification has objective as well as subjective features. It is not open to a principal who, by his conduct, appears to the outside world to have adopted a transaction, to be able to prove subjectively that he did not intend to approve it. A principal is not entitled to prove subjectively that he did not intend to adopt a transaction when he has done an unequivocal act to adopt it with full knowledge of its terms and features: Suncorp Finance & Insurance Corp v Milano Assicurazioni SpA (supra) at 235." 1. In Chen v Song [2005] NSWSC 19, James J pointed out that whether there can be ratification of a forgery is a difficult question, citing Rowe v B & R Nominees Pty Limited [1964] VR 477, Klement v Pencoal Ltd [2000] QCA 152 and Soyfer v Earlmaze Pty Limited (supra); see also G E, Dal Pont Law of Agency, 2nd Ed (2008) LexisNexis Butterworths at [5.15]. In Capital Access Australia Pty Limited v Hraiki and Anor [2011] NSWSC 109 Schmidt J held that the defendants had from the beginning known of and authorised both the particular mortgage and loan agreement in dispute even though their signatures on both were forged. The defendants, however, contended that this did not assist the plaintiff because forgery or fraud could not be ratified, although accepting that a forged document could be adopted, if there was knowledge of the fraud. Her Honour found that, at the point of alleged ratification, they were aware of the forgery but nevertheless withdrew the allegation of forgery, with a consequence that they accepted the documents as genuine. 2. It cannot be said at any point that Mr Woollard accepted that his signatures on the 2009 agreement which he denied being his were in fact his. However, he did not take any steps to inform ANZ of this matter, let alone to suggest that the increased debt was fraud against him as guarantor although, for the reasons which I have stated, this would not have been effective to reduce his obligation in relation to it in the events that happened. It may be that, if it needed to, ANZ would have the defence of ratification (a question which I do not need to decide) but this does not deal with the position between Mr Woollard and Mr Hodgson. 3. The issue of ratification arises only if I conclude that, indeed, Mr Hodgson had knowingly entered into the 2009 loan arrangements with the bank without the agreement of Mr Woollard. The difficulty facing Mr Bors' contention is that, at the point when Mr Woollard acquiesced (to attempt a neutral term) following his being told of the transaction, he was unaware of the fact that ANZ had required fresh loan documentation and that, when provided, it contained his forged signature. It seems to me, therefore, that the only relevant period when ratification might have occurred was after he had become aware of this matter. The evidence of Mr Woollard was that he separated himself from Adventure Quest and Mr Hodgson. The mere fact that he increased the rent payable by the company did not suggest that he had ratified the making of the advance. Mr Bors did not put forward (let alone put to Mr Woollard) what more he should have done to demonstrate his non-acceptance of the legitimacy of Mr Hodgson's obtaining the loan. It follows that the defence of ratification does not apply. 4. The company's bank statements show that, when the additional advance of $49,560.89 was credited to the company's account it had at that stage a debit balance of $17,856.82. Accordingly, the potential liability of each was reduced by that sum with the consequence, as Mr Bors submits Mr Hodgson's notional liability in respect of the advance could only amount, at best, to $40,632.48 (that is $49,560.89 less one half of $17,856.82). Conclusion as to contribution 1. The principles relating to contribution are not in dispute. The usual rule applying to sureties such as Mr Woollard and Mr Hodgson in respect of their guarantees is that each has an equal liability. The general doctrine is comprehensively set out by Kitto J in Albion Insurance Company Limited v Government Insurance Office of New South Wales [1969] HCA 55; 121 CLR 342 at 350-351. As his Honour said (at 351) "the right arises at law when 'one of several persons has paid more than his proper share to discharging a common obligation". It is not necessary to dilate on the principles further. For the reasons I have given, it is clear that both Mr Hodgson and Mr Woollard have equal liability to ANZ in respect of Adventure Quest's outstanding debt. 2. The fact that Mr Hodgson has already paid a substantial sum must be taken into account. The additional interest that has accrued to ANZ as a result of Mr Woollard's defence and his failure to pay his share of the debt should be paid by him to Mr Hodgson. Since the costs (including legal costs) of enforcement are an additional charge, that amount payable by the guarantors which is due to Mr Woollard's defence of ANZ's action is also payable by him. Orders 1. Judgment for the plaintiff against the third defendant. 2. The plaintiff has leave to issue forthwith a writ for the possession of the land contained in Certificate of Title Folio Identifier 139/751656 known as 12 Singleton Road, East Kurrajong (also known as 1200 Putty Road, Blaxlands Ridge) in the State of New South Wales. 3. As to the first cross-claim, judgment for the first and second cross-defendants against the cross-claimant. 4. As to the second cross-claim, judgment for the cross-claimant against the first cross-defendant. 5. ANZ and Mr Hodgson are directed to serve Mr Woollard with proposed orders effecting the judgment, including orders as to costs. Failing agreement within 14 days, the parties have liberty to apply on 3 days' notice. ********** 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: 03 June 2016