Supreme Court New South Wales Medium Neutral Citation: Commonwealth Bank of Australia v IInvest Pty Limited (in liquidation) (No 9) [2018] NSWSC 1276 Hearing dates: 30; 31 January 2017; 1; 2; 3; 6; 7 February 2017; 26; 27; 28 April 2017; 25; 26 May 2017. Date of orders: 17 August 2018 Decision date: 17 August 2018 Jurisdiction: Common Law Before: Campbell J Decision: Judgment for the plaintiff Catchwords: CONTRACT – Formation – offer and acceptance - agreement – remedies – debt – lawful termination – no service of default notice – express right to possession GUARANTEE AND INDEMNITY – guarantee agreement – maximum liability – whether the right to realise security is engaged – mortgage – finance agreement – terms and conditions – banks discretion – no obligation to loan If borrowers financial position has changed – act of default – winding up company – absence of financial default is irrelevant – without notice – bills matured account – obligation for borrowers to pay interest – banks remedies – amount due and payable and taking possession of property LAND LAW – Seeking possession of rural properties – company liquidated – default – mortgaged to the bank – bank enforcing security – cross-claim – guarantee – alterations – maximum liability – extension MEDIATION – Farm Debt Mediation Act 1994 (NSW) – loan was not in default – enforcement action – heads of agreement – no application to cross-claim Legislation Cited: Australian Securities and Investments Commission Act 2011 (Cth), ss 12CB, 12DA, 12DB, 12GF, 12GM Civil Procedure Act 2005 (NSW), s 100 Contracts Review Act 1980 (NSW), ss 6, 7, 8 Corporations Act 2001 (Cth), s 471B Farm Debt Mediation Act 1994 (NSW), ss 4, 9, 9B, 11 Real Property Act 1900 (NSW) Cases Cited: Buhr and Ors v Barclays Bank Plc [2001] EWCA Civ 1223; Bunnings Group Ltd v Asden Developments Pty Ltd & Ors (2013) 1 QDR 493; [2013] QCA 347; Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; [1983] HCA 14; Commonwealth Bank of Australia v IInvest Pty Ltd (in Liquidation) [2014] NSWSC 1257; Commonwealth Bank of Australia v IInvest Pty Ltd (in Liquidation) (No 2) [2014] NSWSC 1640; Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329; DKLR Holdings Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) [1980] 1 NSWLR 510; DKLR Holdings Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) (1982) 149 CLR 431; [1982] HCA 14; DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423; Federal Commissioner of Taxation v Park & Anor (2012) 205 FCR 1; [2012] FCAFC 122; Foss v Harbottle (1843) 2 HARE 461; 67 ER 189 Lamru Pty Ltd v Kation Pty Ltd (1998) 44 NSWLR 432; Mastronardo & Anor v Commonwealth Bank of Australia Ltd & Ors [2018] NSWCA 136; Mercedes Holdings Pty Ltd v Waters (No 2) (2010) 78 ACSR 118; [2010] FCA 472; Ipstar Australia Ltd v APS Satellite Pty Ltd (2018) 329 FLR 149; [2018] NSWCA 15; Parras Holdings Pty Ltd v Commonwealth Bank of Australia [1998] FCA 682; Provident Capital Limited v Szlasa [2010] SASCFC 65; Ramage v Waclaw (1988) 12 NSWLR 84; Rix v Mahony and Ors (No 2) [2012] NSWCCA 332; Watson v Foxman (1995) 49 NSWLR 315 Texts Cited: Code of Banking Practice Professor Sir Roy Goode, Goode's Legal Problems of Credit and Security (Sweet & Maxwell) Category: Principal judgment Parties: Commonwealth Bank of Australia (Plaintiff) IInvest Pty Ltd (in liquidation) (First Defendant) James Harker-Mortlock (Second Defendant) James Harker-Mortlock (First Cross Claimant) JHM Pty Ltd (Second Cross Claimant) Commonwealth Bank of Australia (First Cross Defendant) IInvest Pty Ltd (in liquidation) (Second Cross Defendant) Representation: Counsel: E Cheeseman SC with J White (Plaintiff) P King (Second Defendant) Solicitors: Dentons Australia (Plaintiff) Roderick Storie Solicitors (Second Defendant) File Number(s): 2013/00108514 Publication restriction: Nil JUDGMENT 1. The parties to this litigation are the Commonwealth Bank as plaintiff ("the Bank"); iInvest Pty Ltd (in Liquidation) as first defendant ("iInvest"); Mr James Harker-Mortlock as second defendant and first cross-claimant ("the cross-claimant"); and JHM Pty Ltd as second cross-claimant ("the trustee"). The Bank and iInvest are the first cross-defendant and second cross-defendant respectively. 2. IInvest has taken no active part in the proceedings. By evidence provided in earlier interlocutory proceedings, the Court was informed that the liquidators did not consent to iInvest being joined as a cross-claimant as the liquidation was without funding to bring any action or satisfy any adverse costs order. The liquidator believes that an action by the company has no benefit for the creditors as the Bank "is the first ranking secured creditor in the liquidation": Commonwealth Bank of Australia v iInvest Pty Ltd (in Liquidation) [2014] NSWSC 1257 (at [6] – [7]; Commonwealth Bank of Australia v iInvest Pty Ltd (in Liquidation) (No 2) [2014] NSWSC 1640 at [40] – [41]). 3. On 21 November 2014, under s 471B Corporations Act 2001 (Cth) I granted leave to the cross-claimant to join iInvest as a cross-defendant to the cross-claim. The nature of the case and the issues 1. With respect, the nature of the dispute and the issues to be determined are well-explained in the parties' final written submissions. I have drawn upon the Bank's submission to provide the introductory summary which now follows. 2. The Bank seeks possession of two rural properties located in Yass, New South Wales. The first is known as "Brecon", being the land described in folio identifier 1/1105157; and the second "Blackburn" and is the land described in folio identifier 2/1166883. IInvest is the registered proprietor of each property. IInvest went into liquidation on 29 October 2012. Its liquidation is the act of default relied upon by the Bank as entitling it to enforce its security. Given certain circumstances relied upon for the cross-claim, it is important to record that the Bank took no enforcement action against iInvest until after the commencement of its liquidation, notwithstanding arguing that there were earlier events of default. 3. IInvest has a long history as a customer of the Bank. Of relevance to these proceedings is a mortgage to the Bank over each property to secure its indebtedness under three commercial facilities. These three facilities (or advances or loans), are referred to in the statement of claim as the first better business bill facility dated 2 April 2007 ("the first facility"); the second better business bill facility dated 2 October 2007 ("the second facility"); and a $200,000 overdraft referred to variously in the evidence as a business line of credit ("BLOC"), or temporary extension ("the overdraft"). It is common ground that the overdraft was initially cleared on 3 October 2008 from the proceeds of the sale of another secured property, "Yulgilbar". But the circumstances surrounding its creation, conduct and initial discharge remain important in understanding the case. 4. The first and second facilities were granted by the Bank to finance the purchase of the properties. Brecon was purchased with the funds from the first facility and Blackburn with the funds from the second facility. Over the years finance provided by the Bank was secured against other property, but that is not relevant in itself. 5. Yulgilbar, also at Yass, figures in the factual matrix. It was purchased by iInvest in 2005. It was mortgaged to the Bank as security for the facilities until it was sold by iInvest. Settlement occurred on 3 October 2008. The proceeds of the sale, in part, were applied to clear the overdraft, and the balance was used to reduce, but not clear, the indebtedness of Invest under the first facility. 6. At the commencement of the hearing before me in February 2017 iInvest owed the Bank a little over $6 million under the first facility, second facilities and an overdrawn operating account, combined. As I have said, as against iInvest, the Bank seeks possession only. 7. The Bank sues the cross-claimant (second defendant) under a Deed of Guarantee ("the Guarantee") initially executed in January 2006. On the Bank's case, the Guarantee was extended at various times when further monies were advanced to iInvest at the request of the cross-claimant in May 2007, October 2007 and April 2008. The Guarantee was granted initially for an earlier no longer relevant mortgage. The extensions relate respectively to the first facility, the second facility, and the overdraft. The cross-claimant was the sole director of iInvest and its controlling mind and will. The Bank accepts (and the cross-claimant disputes) that the cross-claim liability under the Guarantee since 2 April 2008 has been capped at $3.438 million, plus enforcement expenses. 8. The cross-claimant disputes that either he or iInvest are indebted to the Bank as claimed. He initially contended that his personal liability under the Guarantee is capped at $655,000 plus enforcement costs. This was limit of the original Guarantee. By final submissions, I think it was accepted that the various extensions had in fact been made. He also said that the various notices or demands given by the Bank in relation to iInvest's default in or about November 2012 and its claim against him were not effective because they contained inaccuracies which did not come to his attention as alleged by the Bank. Moreover as the term of each of the bill facilities has expired and the funds referrable to them retired to bills matured accounts, the cross-claimant argues that the Bank may not rely upon the terms and conditions that, he submits, formerly governed them. 9. In relation to the claim for possession of the properties, the cross-claimant relies upon the creation of the Harker-Mortlock Family Trust ("the Family Trust") by deed dated 10 November 2008. The argument seemed at one time to be that the declaration of trust by iInvest operates as a disposition of Brecon, adverse to the interests of the Bank: [2014] NSWSC 1257 at [47] – [54]; [2014] NSWSC 1640 at [25] – [27]. However, he disavowed that his intent in creating the trust was to deprive the bank of its security (325.20 - 327.25T; [115] of the cross-claimants written submissions). He was hoping to protect the properties from other creditors arising from the termination of a contract important to iInvest's business (as to which see below). 10. The cross-claimant also relies upon the matters raised in his cross-claim as matters of "defence". Elaborate relief is sought by way of the amended statement of cross-claim filed on 15 December 2016. It is the fourth iteration of the cross-claim. Rectification of the declarations of trust forming the Family Trust is sought. Initially I understood this was advanced as a necessary anterior remedy to the case that the declarations of trust themselves are a disposition of the properties adverse to the Bank's interests. Given the evidence and submissions I have referred to, the relevance of the trust is questionable to any substantive issue in the proceedings. From the submissions, I understand the role of the trust is argued to be facilitative of the cross-claims given that iInvest is not an active party and has been replaced by the trustee which is. 11. Relief is also sought under ss 7 and 8 of the Contracts Review Act 1980 (NSW) ("Contracts Review Act"), under Australian Securities and Investments Commission Act 2011 (Cth) ("ASIC Act"), by reference to the Code of Banking Conduct and under the general law. The relief sought includes setting aside each of the mortgages and damages including those under s 12GF of the ASIC Act. The Bank denies the cross-claimant or the trustee are entitled to the relief sought. IInvest's Business 1. IInvest was the corporate vehicle for the pursuit by the cross-claimant of various business interests over many decades. The business operated from about 1986 to 2012. Its initial interests were in the field of electronic publishing and consulting in that field. Most of iInvest's "electronic publishing assets" were sold to Moody's Financial Information Services in 2002 or 2003 (156.50 – 157.5T). The cross-claimant became a consultant to that business and I infer other businesses. IInvest continued some involvement in that field. 2. From 2003 until February 2008, iInvest's principal contract and the principal source of its not insubstantial cash flow was a contract with a European hedge fund referred to in the evidence as CQS Management Limited ("CQS"). Some material suggests it was the largest hedge fund then operating in the United Kingdom ("UK"). This was of course just prior to the GFC. 3. My understanding of the evidence is that iInvest's principal involvement with that company was through a subsidiary in the UK referred to as "iInvest UK". The nature of the business with CQS seems to have been the supply of IT staff to CQS. The contract arose out of a personal relationship the cross-claimant enjoyed with the entrepreneur who ran the hedge fund. The entrepreneur asked the cross-claimant "whether (he'd) be interested in getting involved in supplying staff to (the) hedge fund which … was getting underway in London" (157.35T). Staff supplied were persons having expertise in software and "back office systems" (158.5T). The cross-claimant ran the business with the assistance of a UK based manager. 4. Some of the staff provided under the contract were iInvest employees and others subcontractors. The contract was lucrative, but it placed iInvest in the position of a "middle-man" in regard to subcontracted staff. This put iInvest under cash flow pressure from time to time. 5. According to the cross-claimant's description of the contract, the arrangement with CQS required that organisation to pay iInvest quarterly in advance for the provision of services based upon CQS's estimates of its staff requirements for the coming quarter. IInvest was remunerated on a commission basis taking a percentage of total billings up to an agreed cap. Some additional running costs were billed separately. Difficulties could arise if CQS required additional personnel to that estimated at the commencement of the quarter. There may be a lag between payment by CQS and the payment by iInvest of wages, and particularly subcontractor invoices. That is iInvest may have needed to pay its subcontractors before CQS paid it. 6. Although the cross-claimant maintained that iInvest continued with other business interests concurrently, it is clear to me that by the end of 2007 CQS was iInvest's main source of income. From about November 2005 with the purchase of Yulgilbar, iInvest commenced as a primary producer operating essentially as a pastoralist. Brecon and Blackburn were acquired in May and October of 2007 respectively. One does not establish a successful sheep operation overnight, and much of iInvest's available funds were ploughed into the significant improvement of these properties. The terms of the mortgages and guarantees The Guarantee 1. It is logical to commence with the Guarantee because its inception preceded the entry into the contracts for either first facility or the second facility. As I have said, the limit of the Guarantee was extended on three subsequent occasions in relation to the advance of further sums by the Bank to iInvest under the first facility, second facility and the overdraft. 2. The cross-claimant's initial stance that any amount due from him under the Guarantee did not exceed the initial limit of $655,000 plus enforcement costs seemed to have been based upon the perceived failure of the Bank to produce a signed form of consent and acknowledgment to the extension of the Guarantee for the later loans. I am satisfied, however, that each extension was agreed to by the cross-claimant and that his consent was signified by him signing each extension. 3. The Guarantee was entered into on 20 January 2006 and the cross-claimant's signature was witnessed by his then solicitor, Mr Phillip Bell. The original Guarantee guaranteed a loan in the sum of $655,000 borrowed from the Bank by iInvest to purchase Yulgilbar. The Guarantee was subject to a limit described as the "maximum amount [the Bank] can ask you to pay us under this guarantee" of $655,000 plus the Bank's enforcement expenses (CB 2.89-96). Clause 3 of the Guarantee made clear that although the cross-claimant's liability was capped the Guarantee extended to any further credit contracts with iInvest whether or not the cross-claimant consented. Clause 3 concludes "such contracts will be covered by the guarantee, subject to you being liable to [the Bank] only for the maximum amount." 4. Clause 10 provides that the Bank's rights and the cross-claimant's liabilities under the Guarantee were not affected by matters "that might otherwise affect our rights or your liabilities under the law relating to guarantees, including: … (h) the death, mental or physical disability or insolvency of any person including you or the borrower." 1. The definition of "guaranteed agreement" extends to "every future credit contract between [the Bank] and [iInvest]" (cl 21). 2. The cross-claimant signed the first extension on 9 May 2007 and his signature was witnessed by his mother. This extended his maximum liability to $1,314,000. The extension was occasioned by entry into the first facility. The second extension was signed on 9 October 2007 and the cross-claimant's signature was witnessed by Ms Susan Zhang, an officer of the Bank. It was occasioned by the second facility used for the purchase of Blackburn and increased the cross-claimant's maximum liability to $3,238,000. 3. Although the circumstances in which the cross-claimant entered into a written agreement in respect of the $200,000 overdraft on 2 April 2008 are controversial (and I will deal with them below), the Bank's approval of that finance was expressed to be subject to the provision of security specified in the security schedule to the letter of approval of 2 April 2008 (CB 2.743 at 758). Part of the security specified was "a guarantee limit to $3,438,000.00 by [the cross-claimant]" (CB 2.749). 4. The cross-claimant signed the acceptance document on 2 April 2008 at his then Mosman home. His signature was witnessed by a neighbour. The acceptance document was returned to the Bank, with the security schedule and other attachments. The cross-claimant separately signed the acceptance document at its foot and slightly above a box with printed acknowledgments. Among the acknowledgments his signature subscribed was the following: "I/we agree that item 13 of the Terms Schedules of any existing facilities listed in the letter of approval is amended so that the security for each facility is that listed in the current security schedule" (CB 2.753 – 4). The Terms Schedule was attached (CB 2.755-6). Item 13 refers to security by reference to an attached schedule, which as I have said includes the extension to the Guarantee. 5. It is as well to record here that the cross-claimant gave evidence that he understood from what his relationship manager at the Bank, Mr Howard Ting, said to him, that the documents were necessary to "formalise" arrangements. The cross-claimant said he felt he was being pressed to sign and that Mr Ting downplayed the importance of the documentation. As I have said, I will refer to these matters below. 6. I am of the view, however, that subject to resolution of the cross-claim the documentation establishes that the maximum limit due under the Guarantee in the event of a default is now $3.438m. Mortgages 1. The Bank took a first registered mortgage (AD159124) over Brecon (and the other property) to secure repayment of the monies advanced under the first facility (CB 2.487 – 8). The mortgage incorporated the terms in memorandum no. AC58503 filed in the Department of Lands, Land and Property Information (CB 2.89ff). The Finance Agreement supporting the first facility is constituted by a letter of offer dated 2 April 2007 accepted by iInvest by the signature of the cross-claimant on an acceptance document on 10 April 2007. The cross-claimant's signature was witnessed by his solicitor (CB 2.478A – 47H). There is an unsigned version of a letter of offer elsewhere in evidence (at CB 2.433ff). This document raised some questions in the mind of counsel for the cross-claimant and the trustee because the printed number of the nominated account for interest payments varied from that actually used during the operation of the account. However, the signed copy clears this up, if the point was important, as the printed matter was deleted and the operating account concluding in the number 7323 substituted in the hand-writing of the cross-claimant, I conclude, when it was executed. I infer it is the hand of the cross-claimant as the alteration bears his signature with which I have become familiar. The account ending in the number 7323 is undoubtedly the operating account used by iInvest in the conduct of its business and for the payment of the interest due from time to time on the first (and second) facility. 2. The letter of offer and the acceptance incorporate the Bank's usual printed terms and conditions for commercial lending facilities (CB 2.439ff). It was a condition that security be provided for the facility a first mortgage over Brecon (and other property). The vehicle for advancing the loan was an interest only fixed bill rate facility rolling over, after the first discount, every 90 days. The term of the loan was 5 years. It is unnecessary to describe the operation of the facility in any greater detail. 3. The terms and conditions define the contract by reference to the agreement "which is comprised of the letter of offer the borrower signed", any other document referred to in the letter of offer and the terms and conditions. The contract therefore extends to the terms of the mortgage over Brecon. Under cl 3.7, the Bank is not obliged to fund a loan or continue to permit it to operate upon the happening of certain events, including the default of the borrower or if "the Bank considers that the borrower may not be able to repay the loan or meet its obligations under a facility due to a change in the borrower's financial position since the date the borrower applied for the loan or facility" (cl 3.7(m)). 4. Acts of default are dealt with by cl 12. Where the borrower is a company it is an act of default if "an application is filed, an order is made or resolution is passed for the winding up of it or a meeting is convened for the purpose of considering such a resolution" (cl 12.1(d)). It is beyond argument that an order for the winding up of iInvest was made on 29 October 2012 and Ferrier Hodgson (or a partner of that firm) was appointed liquidator. This was beyond question an act of default. In this regard it is also important to bear cl 12.2 in mind, empowering the Bank to exercise its rights under the security, "without further notice" (cl 12.2(g)). 5. Other rights on default are expressly conferred on the Bank by cl 12.2. These include deciding that amounts "due under the loan or facility are immediately payable without any demand or notice" (cl 12.2(a)); cancelling any bill facility so that the Bank is no longer obliged to accept, endorse or discount any bills under the contract; in the case of a "Better Business Loan – fixed rate, debit any amount owing under the Contract to the loan account rather than the nominated account" (cl12.2(e)); and sue the borrower for the amount due under the Contract (cl 12.2(f)). 6. Under cl 5.21 the borrower is required to "retire all outstanding bills under a "bill facility" by the end of the term. At its discretion cl 5.22 entitled the Bank to "debit the face value of bills retired" to "a bills matured account the Bank opens in the borrower's name". By cl 12.5, where the borrower "fails to make any payment due" the Bank is empowered to debit the amount to a bills matured account. 7. Clause 12.6 is an important provision bearing in mind the argument that as the bills have expired nothing is due to the Bank. It imposes an obligation on the borrower to pay interest on all amounts debited to a bills matured account whether under cl 5.22 or cl 12.5, accruing at a daily rate equivalent to the Bank's monthly index rate for overdraft accounts plus a margin of 4.5 per cent "until the outstanding amount on the account is repaid". The amount outstanding in the bills matured account "remains payable without the necessity of the Bank making prior demand on the borrower": cl 2.7. 8. The agreement for the first (and second) facility was a "secured agreement" under the terms of the Bank's filed memorandum of mortgage. Clause A21 of the memorandum makes it an act of default if the mortgagor does not "keep to the … terms of this mortgage or of a secured agreement". This means the mortgage picks up and incorporates relevant terms and conditions of the contract for the first (and second) facility. Clause A22.2 generally requires notice of default before enforcement of the Bank's remedies providing an opportunity for the default to be remedied. However, by cl A22.3 the Bank is not required to give such notice and opportunity where it believes "on reasonable grounds" that the default cannot be remedied. Under cl A22.5, the Bank's remedies upon the mortgagor's default include deciding the amount due and payable, and taking possession of the property. 9. It is also relevant to record at this time that cl A11 of the mortgage prohibited any dealing in the security property, the mortgage "or any interest in them" without the Bank's consent. This condition needs to be borne in mind to the extent to which the cross-claimant's argument based upon the creation of Family Trust remains relevant. 10. The contract for the second facility was formed by the Bank's letter of offer of 3 October 2007 and iInvest's acceptance of the offer document bearing the same date (CB 2.618 – 625). That document was signed on behalf of iInvest by the cross-claimant and his signature was witnessed by a person residing not far from his then home. 11. As stated above, the purpose of the loan was "to assist with the purchase of the rural property at Blackburn" (CB 2.619). The amount of the loan $1,924,000 for a period of 5 years, expiring on 19 October 2012. Repayment terms were interest only and no reduction on the capital was "allowed during the fixed rate period" (CB 2.619). The frequency of roll-over was a 90 day period. The nominated account was not the usual operating account I have referred to above, but an account ending in the numbers 4870. In this case, the nominated account was not corrected or otherwise varied, but the evidence indicates that it was the operating account which was used by the Bank and iInvest for payment of monies due under the second facility. To that extent, if it is important, I am of the view that, by their conduct, the parties amended that part of the contract. 12. The specified security included a first registered mortgage over Blackburn. That security was described in the schedule as "new". Also "new" was an extension of the Guarantee (as I have already referred to). An existing second mortgage over the cross-claimant's then Mosman home was released. The first mortgages over Brecon and Yulgilbar were specified as "existing". As was a first registered equitable mortgage by iInvest over the whole of its assets and undertaking including uncalled capital and "OVER COY/BUSINESS ASSETS ALL BUSINESS" (CB 2.620). This equitable charge had been a requirement of the first facility too. 13. The contract provided for the Bank's standard terms and conditions for commercial lending facilities to apply, but referred to a later publication dated 20 April 2007 when compared with the first facility contract. However, there is no material difference relevant to the circumstances of the case and the summary of those salient features for present purposes provided above applied to the second facility. 14. IInvest provided the required first registered mortgage Dealing No. AD544718. It incorporated the terms set out in the same filed memorandum. Decision on the claim 1. Subject the cross-claim, I am persuaded that the Bank has established its entitlement to possession of Brecon and Blackburn. The relevant act of default under the terms and condition of each of the first and second facility is iInvest going into liquidation on 29 October 2012. It was only at this time that the Bank made demands for immediate repayment of the sums due to it. By then the principal amount of each of the first and second facility had been debited to a bills matured account. In his affidavit sworn on 18 June 2015 (at [197]), the cross-claimant says that "until iInvest's liquidation it had paid every loan facility payment to the Bank in accordance with the terms of the first facility, second facility and [bills matured account]". I infer that the payments referred to are, of course, payments of interest including any "default" interest due, as discussed above, after the debiting of the face value of a bill to a bills matured account. The cross-claimant's evidence about this is not challenged nor contradicted. At times these payments may have been made from the overdrawn operating account 2. An absence of financial default in the sense implied by the cross-claimant provides no defence to the Bank's claim. I repeat, the act of default relied upon to ground the claim for possession is iInvest going into liquidation. That event triggers the Bank's right to its remedies under the mortgage, including the right to possession. It should also be recorded, obviously, no payment has been made in reduction of iInvest's liability to bank since. 3. Letters of Demand were apparently sent by the Bank's solicitors to iInvest and the cross-claimant on 22 November 2012, which are not in evidence. But the default notices served on 30 November 2012 are (CB 3.1280). Notices were sent to the liquidator on the same day. I understood there to be an argument that a reference to the overdraft was erroneous as it had been cleared from the proceeds of the sale of Yulgilbar. This does not mean however that the operating account ending in 7323 was not overdrawn when iInvest defaulted. There is material clearly suggesting it was: CB 4.2220. However, any error in that regard would have been obvious to the cross-claimant or someone in his position. I am of the view that if an error, it does not in any way invalidate or vitiate the notices sent. If I am wrong about this, I would also observe that the default constituted by iInvest going into liquidation is not a default that could be cured or remedied by providing the cross-claimant or anyone else with a reasonable opportunity to do so. Notices, therefore, under the terms of the facilities and the mortgages were strictly not required. 4. The cross-claimant has argued that the expiration of the five year period during which the first facility and the second facility respectively were granted terminated the contract and accordingly (as I understand it) the expiration of the five year term for each was a lawful termination of the contract. It was argued that each contract had "ended or exhausted". The second facility "expired" on 19 October 2012. It was argued (at 5 [18] of the cross-claimant's written submissions) that both contracts had terminated prior to the service of any default notice, "so there was nothing to bring to an end and no subsisting contractual rights of possession of the character relied upon by the Bank in this case". The same result followed in each case. Reference was made to a number of cases including DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 434. With respect this citation is not to the point. That case concerned a contract for the sale of land which the High Court found had been abandoned by both parties. The only remedy available was an action by the purchaser to recover the deposit. 5. Likewise the passage cites from the Judgment of Parras Holdings Pty Ltd v Commonwealth Bank of Australia [1998] FCA 682 ("Parras Holdings"), Davies J does not assist the cross-claimant but in fact assists the Bank. The extent that his Honour held that the bills discount facility in that case was of a different character from an overdraft. Notice of, or a demand for, repayment was not necessary before the Bank was entitled to recover. His Honour, at 15, said "once a bill matured … and was not rolled over or reinstated, the sums payable under the bill were due and payable (by the customer) and were properly so treated by being debited to a bill matured account". 6. In my opinion the cross-claimant's argument overlooks the consideration that the contract for each of the first facility and the second facility were secured agreements under the mortgages which picked up or incorporated the standard terms and conditions so far as default was concerned for the purpose of the mortgage. Each of the securities covered each of the facilities. What entitled the Bank to possession is default under the mortgage which confers the express right to possession. There can be no suggestion that the mortgages had expired or come to an end. 7. In any event, I would not accept, as a matter of construction, that the contract for each of the facilities had expired merely because the time during which the facility was to be available had expired. The express term of the contract shows that the parties contemplated it would continue to subsist even after the expiration of the term until the amounts debited to a bills matured account were discharged by repayment. In accordance with the analysis of Davies J in Parras Holdings when final balance was debited to the bills matured account that amount became due and payable forthwith. 8. The cross-claimant's argument would lead to the somewhat ludicrous result that a Bank who had advanced loans totalling some millions of dollars, which had not been repaid, but were immediately due and payable in accordance with the terms of the loan could have no recourse to its security because the act of default relied upon, i.e. the company going into liquidation, occurred at a time after the principal sum advanced had become immediately due and payable. I reject this argument and, subject to my decision on the cross-claim, I find that the Bank is entitled to judgment for possession of each of Brecon and Blackburn. Liability for the Guarantee 1. On 30 November 2012, by registered post, the Bank (through its solicitors) served a notice of demand for payment on the cross-claimant as guarantor in respect of the three facilities (including the overdraft). The total amount demanded to be paid within 7 days was $3,229,607.75. The notice pointed out that this amount was not the total amount owed by the guarantor to the Bank. There was an express reservation to make further claims or demands "in relation to any amount falling due for payment from time to time" (CB 3.1285). The cross-claimant did not pay in accordance with this demand. 2. There cannot be any serious question about the cross-claimant's primary liability on the Guarantee (subject to the cross-claim). The amounts debited to bills matured accounts in respect of each of the first and second facility were immediately due and payable by iInvest. Even if iInvest had paid interest up until it went into liquidation, the principal remained outstanding. Moreover, that act of default justified the Bank's demands. As at 25 January 2017, the total amount due to the Bank was $6,005,274.47 calculated as follows: 1. $1,811,703 owing under the first facility; 2. $3,584,651.62 owing under the second facility; and 3. $608,919.74 owing on the operating account ending in 7323 (CB 4.2220). I am informed that this last amount does not relate to the overdraft agreement of 2 April 2008. Assuming I am wrong about the operating account, the amount due under the first and second facilities well and truly exceeds the amount by which the Guarantee which is capped at $3,438,000 plus enforcement costs. The Cross-Claim 1. As I have already pointed out, under the cross-claim, the cross-claimant and the trustee seek the following: 1. rectification of the Deed creating the Family Trust and the declarations of trust relating to each of Brecon and Blackburn; 2. a declaration that upon rectification Brecon and Blackburn and the causes of action which iInvest may have had against the Bank are held on trust for the Family Trust; 3. declarations that the Bank is not entitled to take enforcement action and an order restraining it from taking possession of the properties; 4. orders under s 12GM of the ASIC Act and under the general law declaring that the Bank is not entitled to take possession of the real property, restraining it from taking possession of the real property, restraining it from enforcing the Guarantee and declaring the mortgages and the guarantee each to be void; 5. orders under the Contracts Review Act; 6. an order, presumably a mandatory injunction, that the trustee "be placed on the title of the properties Blackburn and Brecon and that no stamp duty is payable on the transfer of title"; and 7. damages under either s 12GF of the ASIC Act or at common law together with interest and costs. 1. Leaving aside the question of rectification of the trust document, the various other legal bases advanced for relief on the cross-claim operate on a common factual background covering the period between the end of January 2008 and the liquidation of iInvest in October 2012. Apart from the legal categories said to give rise to the claims for principal relief under the cross-claim, other legal issues have been ventilated. As I have said in the introduction, the cross-claimant calls in aid of his claims for relief matters arising under the Code of Banking Practice ("the Code"). It is accepted by the Bank that the Code forms part of its contract with iInvest. As an example the cross-claimant invokes the duty of good faith arising from the Code. More generally he invoked a duty to cooperate or work together to work through iInvest's difficulties in early 2008. The cross-claimant also invokes the Farm Debt Mediation Act 1994 (NSW) ("Farm Debt Mediation Act"). He says that the Bank wrongly regarded the Farm Debt Mediation Act as inapplicable to the loans at least until the early part of 2012 when, following farm debt mediation, an agreement was reached whereby Blackburn could be subdivided to maximise its sale value. 2. It will be convenient to approach the cross-claim by first addressing some of these legal issues. Questions in relation to the Family Trust, and the application of both the Contracts Review Act and the Farm Debt Mediation Act can be dealt with against the background of facts already set out. I will then address the facts underpinning the balance of the claims for relief before addressing each of them in their legal context. 3. The potential relevance of the Family Trust was addressed at some length in my judgments in 2014: [2014] NSWSC 1257; [2014] NSWSC 1640. I dealt with this issue in my first judgment at [18] – [22]; [33] and [38]. Some of the documents relating to this issue are to be found in Ex 8. There is no doubt that the Family Trust was established by Deed dated 10 November 2008. The settlor was Ms Mary Dorothy Mortlock, the cross-claimant's mother and iInvest was appointed trustee. On the same day iInvest separately declared in respect of each of Brecon and Blackburn that it holds them "in trust for the entity described in the second schedule to the Deed of Declaration of Trust." However, the entity therein described was iInvest and not the Family Trust or its objects. It is not in dispute that a declaration in that form "is of no effect": DKLR Holdings Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) [1980] 1 NSWLR 510, Hope JA at 519; DKLR Holdings Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) (1982) 149 CLR 431; [1982] HCA 14, Gibb CJ at 442; Aiken J at 463; Brennan J at 473 – 474. The appellant's successful appeal to the High Court did not cast any doubt upon the correctness of this basal principle. In Rix v Mahony and Ors (No 2) [2012] NSWCA 332 Meagher JA (Campbell and Barrett JJA agreeing) at [19] regarded the principle as "fundamental and uncontroversial". 4. In my first 2014 judgment, in the absence of a claim for rectification, I held this principle was fatal to the interlocutory relief the cross-claimant then sought. 5. For the purpose of my second judgment, the affidavits of Mr Roderick Story sworn 26 September 2014, the cross-claimant sworn 26 September 2014, Mr Benjamin Brady sworn 26 September 2014 and Ms Mary Dorothy Mortlock sworn 8 October 2014 were read. For the purpose of the second judgment, I held there was an arguable case of rectification available: [2014] NSWSC 1640 at [25] – [27]. This evidence was not challenged at the final hearing and I am satisfied that it provides "clear and convincing proof that at the time of the execution of [the Trust instruments], the relevant … parties … had an actual common intention as to the effect which the (instruments) would have, which was inconsistent with the effect which the instrument as executed did have in some clearly identified way": Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329 at 345. Here what was intended was not that the declarations of trust should completely misfire, but that the "entity identified in the second schedule" should be the Family Trust and its objects. Without more I would grant rectification. 6. However, along with other equitable remedies, rectification is essentially discretionary and I am not satisfied that there is any good practical reason for granting rectification of the instruments creating the trust, essentially because I am satisfied that as the person with the power of appointment under the Family Trust and as a beneficiary, the cross-claimant may be permitted to bring the claim involving rights of property of the Family Trust in his own name if the trustee is insolvent: Ramage v Waclaw (1988) 12 NSWLR 84; Lamru Pty Ltd v Kation Pty Ltd (1998) 44 NSWLR 432. As I said in my first judgment in 2014 at [34] these principles were discussed by Perram J in Mercedes Holdings Pty Ltd v Waters (No 2) (2010) 78 ACSR 118; [2010] FCA 472 at [105] – [111]. His Honour held that the rule in Foss v Harbottle (1843) 2 HARE 461; 67 ER 189 did not apply to the question of whether a beneficiary could sue on behalf of the Trust. His Honour said at [111]: "No such necessity arises in the case of a trust. Because a trust does not have a separate legal personality about which creditors need be concerned and because it is the trustee who at all times remains liable, the removal of "capital" from a trust does not affect the position of creditors as against the trustee. This is particularly so because the trustee's liability to creditors is not limited to his own entitlement to indemnity out of the trust assets." (Citation omitted.) 1. At [53] of my first 2014 judgment I said were I satisfied that the declarations of Brecon and Blackburn had been legally effected, I would have permitted the cross-claimant to bring the action on the basis of those principles given the insolvency of iInvest. I adhered to that view in my second judgment. 2. At [54] of my first 2014 judgment I expressed the view that the trustee had been validly appointed as the new trustee of the Family Trust following iInvest's liquidation. It had standing to sue and to vindicate any cause of action forming part of the assets to the Trusts as of right, even causes of action accruing to the Family Trust prior to the trustee's appointment. Having revisited the issue in my second judgment while accepting that the trustee was validly appointed as the new trustee on 29 October 2012 and that it could ventilate or vindicate any rights vested in the former trustee, I made an order in the following terms: "[The cross-claimant] to have leave to re-plead a cross-claim in respect of any claim available to him in his own right and interest and as a beneficiary of the Harker-Mortlock Family Trust within 14 days of today" I granted leave to join the trustee as an additional cross-claimant "if so advised" within "28 days of today's date." 1. The first reason why rectification is unnecessary is because the cross-claimant can ventilate the rights of the Family Trust derivatively according to the order I have already made. 2. The second reason is that I have come to the firm view that the Family Trust is simply ineffective against the Bank. At the interlocutory stage I was prepared to allow the matter to be ventilated at a final hearing. Following a final hearing, it has become apparent that the cross-claimant, as the active mind and will of iInvest never had any intention of attempting to set up the Family Trust as some means of denying the Bank its lawful rights. This extends not only to its rights as mortgagee of the real property, but also as I have pointed out, its rights as the equitable chargee of iInvest's business and undertakings in accordance with the contracts for each of the first and second facility. There was no equitable basis upon which the trustee could defeat the Bank's rights and remedies as mortgagee, not only of the real property, but also of iInvest's business undertakings. As I have said there is simply nothing to be gained in practical terms by ordering rectification. 3. A third reason is that the essence of the cross-claim, however it is characterised, is that by its conduct, after January 2008, the Bank stultified or stifled iInvest's prospect of diversifying more fully into its pastoral and other rural undertakings by which means it could replace the income previously received from CQS to service the various loans, and ultimately repay them in accordance with their terms. As the Bank points out there is no express language in either of the declarations of the Family Trust in respect of each of Brecon and Blackburn which expressly creates a Trust of iInvest's ongoing pastoral undertakings. The Deed of Settlement defines distributable income in sufficiently wide terms to include income generated by working the real property in rural enterprises carried out on land held by the trustee subject to the Trusts. But this, of course, must be subject to the Bank's prior equitable charge over iInvest's business undertakings. 4. In the end, it seems to me that as the cross-claim is likely to stand or fall on whether the cross-claimant establishes a right to redress, rectification adds nothing to the scope for that redress. 5. Finally as the facts will show, any stifling or stultification of the rural undertakings was due to the Bank's conduct in the period between April and October of 2008. The Trusts were not purported to be created until November 2008. If that part of the cross-claimant's case which precedes October 2008 is unsuccessful nothing much will turn on what happened after that time. Contracts Review Act 1. I am of the view that the claim for relief under the Contracts Review Act is simply misguided. This is for two reasons, both of which arise out of s 6 of Act which is in the following terms: (1) The Crown, a public or local authority or a corporation may not be granted relief under this Act. (2) A person may not be granted relief under this Act in relation to a contract so far as the contract was entered into in the course of or for the purpose of a trade, business or profession carried on by the person or proposed to be carried on by the person, other than a farming undertaking (including, but not limited to, an agricultural, pastoral, horticultural, orcharding or viticultural undertaking) carried on by the person or proposed to be carried on by the person wholly or principally in New South Wales. 1. Clearly iInvest, the principal borrower, was at all material times a corporation. Any right that the cross-claimant has so far as it is derived from the Family Trust is, therefore, derived from the rights of a corporation. In my judgment this is fatal to the claim. Secondly, under s 6(2) relief is not available for contracts entered into in the course of or for the purpose of a business, other than a farming undertaking. It is true that the first facility and the second facility were commercial vehicles utilised to enable the purchase of a rural property. From this, one may infer that it was expected to the Bank's knowledge that iInvest would engage in agricultural or pastoral undertakings. However, the first facility and the second facility were each arranged in 2007. There is no complaint whatsoever about the Bank's conduct in relation to those facilities or at least the entry into them. The whole complaint giving rise to the cross-claim relates to, to put it in general terms, how the Bank handled iInvest's difficulty in repaying the overdraft in 2008. There is no specific complaint about the circumstances in which the overdraft was extended. The complaint at its earliest relates to the entry into the secured overdraft on 2 April 2008. There is no doubt that the overdraft and the secured overdraft were entered into in the course of iInvest's commercial activities as a service provider to CQS. It was in the first instance CQS's tardiness in paying invoices and in the second instance its termination of its contract with iInvest that generated the liquidity problem that iInvest sought to manage with the benefit of the overdraft. The overdraft was taken out by iInvest in its corporate name for the purpose of its commercial business in the UK. Relief is not available to it under the Contracts Review Act. Farm Debt Mediation Act 1. As part of the broader cross-claim, the cross-claimant complains that in 2008 and 2009 he was denied the opportunity of a mediation under the Farm Debt Mediation Act. Ultimately, a mediation was agreed to in 2012 and an agreement was reached that would have enabled a cross-claimant to negotiate with a neighbour about the adjustment of a boundary which may have led to the opportunity to subdivide Blackburn to his commercial advantage. The question of the application of the Farm Debt Mediation Act was first raised with Ms Sophia Abbas of the Credit Management Unit within the Bank in about May 2008. 2. The cross-claimant raised the matter at a meeting with Ms Abbas on 2 July 2008. The cross-claimant's evidence about this is at paras 81 to 84 of his affidavit of 18 June 2015. His evidence is that he was dissuaded from seeking farm debt mediation because Ms Abbas told him, when he raised it, "the loans that you have are not in relation to farming so you do not have access to the farm debt mediation process; your loans are commercial loans, not rural loans". 3. Also in attendance at the meeting was Mr Anthony Higgs who had some expertise in rural loans. He did not contradict Ms Abbas. Ms Abbas' notes of the meeting (CB 2.867) do not record any discussion about that topic. Nor is it referred to in her follow-up letter to the cross-claimant bearing the same date (CB 2.869). However, in cross-examination she accepted that such a discussion occurred and that was her view about it. She was cross-examined on the contents of the Farm Debt Mediation Act and agreed given the purpose of each of the loans, the subject of the first and second facility may have met the description of a farm mortgage or farm debt. Whatever concessions she made, it must be said that a farm debt is different from a farm mortgage. It relates to a debt incurred by the farmer for the purpose of the conduct of a farming operation. It is doubtful whether this was so in respect of the first and second facilities given that the whole of the proceeds of the loans was used to purchase the rural properties rather than to conduct the operation. 4. According to the cross-claimant's affidavit, the second rejection of a farm mediation occurred in July 2009. The cross-claimant's version is set out at paras 137 to 147. 5. At that time the cross-claimant was dealing with Mr Ian Stevens at the Bank. Mr Stevens had experience in rural lending. At the request of the cross-claimant he provided a certificate to enable him to apply for interest subsidy support under the exceptional circumstances provisions of the Rural Adjustment Scheme dated 2 July 2009 (CB 3.1109). The cross-claimant was also then disputing an estimate he had been given on the costs associated with the possibility of "breaking the bill on the Blackburn loan" (the second facility) (CB 3.1106). The cross-claimant was not prepared to accept that an estimate of $139,000 on a $1.9 million bill could be correct. This was the context in which he lodged the request for farmer initiated mediation under s 9(1A) of the Farm Debt Mediation Act on 11 July 2009. The cross-claimant advised Mr Stevens of this by email on 14 July 2009. It is clear from his email of that date (CB 3.1114) that it was his continuing incredulity about the estimate that he had been given which provoked him to take that action. 6. Mr Stevens replied on 15 July 2009 (CB 3.1115). He attempted to explain the charges again. Mr Stevens indicated that given the certificate the Bank had provided for rural support, the Bank had committed to continue to support his rural enterprise for 12 months "unless default occurs". In light of that contemporaneous matter, Mr Stevens was surprised that the cross-claimant had requested farm debt mediation. In his email of 17 July 2009 (CB 3.1123 – 1124) Mr Stevens explained that there would be no point in mediation as the dispute did not relate to a loan being in default. Therefore, "mediation at this time would not result in the Bank receiving a s 11 Certificate, notwithstanding that it has complied with the Act". The Bank declined to accept the invitation to mediate. Whatever may be said about Ms Abbas' understanding, Mr Stevens' understanding seems to have been soundly based: s 11 of the Farm Debt Mediation Act. 7. Of course, s 9 of the Farm Debt Mediation Act entitles a farmer to request mediation "whether or not the farmer is in default". In those circumstances, s 9A permits a creditor to decline to mediate and a refusal by a creditor to mediate does not of itself give rise to any claim or other consequence under the Act if the farmer is not in default. 8. Only a farmer who is in default may apply to the Authority for a Certificate of Exemption from enforcement action ("Exemption Certificate") if the creditor does not mediate: s 9B of the Farm Debt Mediation Act. The effect of an Exemption Certificate is that the creditor is not entitled to a s 11 Certificate entitling it to take enforcement action. By s 9B(4) an Exemption Certificate allows the farmer 6 months of respite during which the creditor may not take enforcement action. 9. As I have said the Bank ultimately agreed to a farm debt mediation which occurred on 23 April 2012 (CB 3.1254). This was initiated by the cross-claimant by a s 9(1A) Notice to Creditor dated 22 December 2011. This was given at the time that the cross-claimant was planning to adjust his boundary to Brecon by selling a portion of it to the neighbour. The readjustment of the boundary apparently would permit the entrance to be widened to 20 metres which itself would allow a subdivision into smaller holdings of around 100 metres assuming a propounded amendment to the local environmental plan was adopted. 10. By letter dated 12 January 2012, the Bank by its lawyers agreed to engage in farm debt mediation. Heads of Agreement were entered into on 23 April 2012 which gave the cross-claimant the opportunity to repay the debt owing to the Bank before 16 October 2012. Somewhat complex arrangements were made to further the boundary adjustment of Brecon and the sale of Blackburn. Following this agreement the Bank obtained a s 11 Certificate on 1 June 2012. 11. It seems to me that, although mediation took place in April 2012, when the cross-claimant approached Ms Abbas about farm debt mediation, whether the mortgages were farm mortgages and the debt a farm debt, iInvest was not a farmer within the meaning of the s 4, Farm Debt Mediation Act. A farmer is defined as a person including a corporation "who is solely or principally engaged in a farming operation" (so far as is material for present purposes). This description does not meet iInvest, at least not in the early part of 2008. As I have said at that point in time it was engaged principally in its overseas business providing services to CQS. I repeat the initial liquidity problem related to CQS' tardiness in paying invoices and subsequently CQS' termination of the contract. In the first half of 2008 the cross-claimant still expected to recover substantial monies he regarded as due to iInvest from CQS. He had taken steps to pursue litigation in the UK to achieve that purpose. The cross-claimant was still negotiating on behalf of iInvest through its English solicitors in an attempt to bring about a favourable settlement as at 30 July 2008 (CB 2.874). Ultimately, that litigation was settled on what were essentially very disappointing and unfavourable terms for iInvest. The anticipated favourable result simply did not materialise. 12. Even if I am wrong in saying that iInvest was not a farmer within the meaning of the Farm Debt Mediation Act as at July 2008. It is hard to see what was lost to it by the Bank's refusal to mediate at that time. The Bank in a sense was working through iInvest's cash flow issue with the cross-claimant, even if relations were terse at times. It certainly took no enforcement action within the meaning of the Farm Debt Mediation Act for something like 4 years after Ms Abbas refused the suggestion of farm debt mediation in July 2008. Enforcement action means taking possession of the property under the mortgage or any action to enforce the mortgage. No such action was taken until after iInvest went into liquidation in 2012. 13. It might also be said that no formal request for mediation was made in July 2008. It was discussed at a meeting, Ms Abbas was discouraging and it was not followed up further until 12 months later in an entirely different context. 14. The Farm Debt Mediation Act has no application to the cross-claim. The facts relevant to the cross-claim 1. The remaining legal categories of relief sought by the cross-claimant are unconscionability in a general law sense as discussed in Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; [1983] HCA 14 ("CBA v Amadio"); unconscionability under s 12CB of the ASIC Act; false or misleading representations in connection with the supply of financial services under s 12DB of the ASIC Act; and the claim for damages for breach of contract specifically by reference to the Code and an implied obligation of good faith. 2. It is convenient to deal with the factual issues which are more or less common to each category of claim before turning to the application of the law to the facts as found. 3. The factual matters relied upon generally run between 2008 and 2012, but there is a particular emphasis upon matters occurring during 2008 leading up to and including the sale of Yulgilbar. Particular emphasis is placed upon the conduct of Ms Abbas during the period that she was the bank officer responsible for managing the various accounts or facilities as an officer of the credit management unit. Relevant factual issues relate to the following topics. The issues of primary fact relating to the creation of the overdraft account are: 1. whether iInvest defaulted on the overdraft by not repaying it within 60 days - this issue relates to the term of the overdraft; 2. whether the cross-claimant had proposed an alternative financial plan to generate income, referred to in the evidence for ease as "plan A" to replace the income lost due to the termination of the CQS contract; 3. whether the Bank mislead the cross-claimant by failing to disclose it had determined upon a "straight-out exit" from its exposure to the iInvest borrowings; 4. whether the Bank "directed" iInvest against the will of the cross-claimant to divest assets in a fire sale to reduce the Bank's exposure without regard to iInvest's interests; 5. whether the Bank mislead the cross-claimant about the availability of farm debt mediation. (This has been dealt with above); 6. whether the Bank had wilfully taken advantage of the cross-claimant's misapprehension about the proceeds of sale of stock, assets and land in as much as it failed to make clear to the cross-claimant that the proceeds of sale would be used to reduce iInvest's indebtedness to the Bank and not as working capital to enable iInvest to generate income, principally from its pastoral or other rural undertakings; 7. the circumstances of the breaking of the first facility and retiring to a bills matured account in August 2008; and 8. whether the Bank was entitled to act on the basis that iInvest had suffered a substantial material adverse change in its financial circumstances such as to entitle the Bank to treat that circumstance as an act of default. Approach to resolution of conflicts of fact 1. As not infrequently happens, lay witnesses on either side of the record were asked to make affidavits and give oral evidence in cross-examination of events that occurred around a decade before the hearing in 2017. This common-enough circumstance calls to mind the well-known dictum of McClelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 319: "Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience." 1. For these reasons, I have preferred to consider the course of events as disclosed by the contemporaneous documents running to nearly 2,500 pages in the Court Books prepared by the parties. The term of the January overdraft 1. As I have tried to explain in different ways, although the overdraft was repaid in full from the proceeds of the sale of Yulgilbar, its term remains factually relevant because that it had remained unpaid at about the end of March 2008, set in progress a chain of events which led to the iInvest accounts being administered by, initially, Ms Abbas. Essentially, the cross-claimant's argument may be characterised as one that this circumstance and the events to which it led deprived him of the opportunity of restructuring his business, placing more emphasis upon the agricultural undertakings, carrying out some limited but strategic asset sales and ultimately trading out of the cash flow difficulties which he argues were essentially temporary in early 2008. 2. The issue is about whether the overdraft was for a term of 60 days or 90 days. While there are some internal documents and some vague evidence from the cross-claimant that might support a conclusion that the term of the overdraft was for 90 days, I am satisfied that it was for 60 days. In truth, the only support for the contrary conclusion arises out of the later production of some internal documentation by the Bank, after the completion of discovery in the categories previously agreed between the parties. 3. IInvest's need for an overdraft in January 2008 arose out of the delayed payment by CQS of iInvest's quarterly tax invoices. In June 2007 and September 2007 similar overdrafts had been agreed to by the Bank and had been repaid and cleared by iInvest without difficulty. 4. As to the June temporary excess limit (CB 5.2260), a limit of $100,000 was allocated on 26 June 2007 to be cleared by 10 July 2007, which it was. The September temporary excess was allowed on 11 September 2007 for a period of 30 days (CB 5.2262 – 3). 5. The most reliable evidence in relation to the contract for the January 2008 overdraft is to be found in the contemporaneous documents which consist of an exchange of emails between the cross-claimant and as it happened one of Mr Ting's associates, Ms Jane Kuang, who was also a Relationship Banker at the Bank. After an exchange of greetings, the cross-claimant provided copies of two invoices to CQS "for the current quarter" totalling £2,067,154.10 of which only £830,000 had been paid so far, leaving in excess of £1.2m to come. The cross-claimant wrote: "I would ask that, as in the past we might obtain a temporary overdraft facility of $AUD 200,000 on our iInvest business Veridian Account until 1st April 2008." (CB 5.2352) There were some further pleasantries and the cross-claimant passed on the news that some lambs, wool and stock had been sold in the last couple of months generating $150,000 "- far better than last year!" (CB 5.2353) 1. On 29 January 2008, Ms Kuang replied: "Temporary limit A$200K has been organised with maturity date on 1st April 2008. The limit should be available tomorrow and there is a standard establishment of $500 to be charged on the same account". The same account was a reference to iInvest's operating account ending in 7323. 1. On the same day the cross-claimant replied, almost immediately: "Thanks Jane – great news – cheers, James" 1. It seems to me that this is the relevant evidence which establishes the formation of a contract for the Bank to provide iInvest with the overdraft "with maturity date on 1st April 2008", as the cross-claimant had requested. In reality there was no discussion about 60 days or 90 days. 2. The cross-claimant's diary for 29 January 2008 (CB 2.722) notes as follows: "Howard Ting returns – o/d 200K to 1/4/08" Those entries in the diary are not set out in an entirely logical sequence, as I have set them out. There was also a reference, interspaced, which seems to say "send invoice". But read in the light of the email exchange they are intelligible as an aide memoire for the cross-claimant to make the approach that he in fact did. They corroborate that the term of the overdraft was until 1 April 2008. In his affidavit of 18 June 2015, the cross-claimant extrapolates the entry as I have done and suggests it is a diary note of a conversation as set out at para 43. This is possible, although I interpret the contemporaneous document differently. And the cross-claimant's email of 28 January 2008 which seems to initiate the application for the overdraft was not referred to in the affidavit. It is noticeable that in para 43 the cross-claimant recalls that he said to Mr Ting: "I may need a temporary overdraft of about $200,000 in order to meet month-end payments in relation to the operation of the London business, specifically for payments to staffers and contractors. Would you be able to assist me here?" At para 44 the cross-claimant states that the overdraft was made "available on account no. 7323 until 1 April 2008". 1. I must say when cross-examined that he himself had asked for an overdraft to 1 April, his responses were weak (209.20 – 25T). He accepted the accuracy of the proposition but added "there was a discussion about 90 days as well from what I recall." When it was pointed out that no such discussion appears in his affidavit he agreed but added "but there was a discussion about it." This evidence does not amount to evidence from which a 90 day term could be inferred. 2. I find that the term of the overdraft expired on 1 April 2008. For what it's worth, that this was the cross-claimant's understanding of it, I think it is confirmed by his email of Tuesday, 25 March 2008 (CB 5.2355). This email seems to be the initiation of a process to extend the overdraft beyond 1 April 2008. The email commences with some news from the farm – it's been raining. There's an explanation for further delays in obtaining payment said to be due from CQS and an indication that there is likely to be yet further delay. The email ends: "Consequently, whilst we are awaiting payment from the client, CQS, of the amounts due to us, which we expect within the next 2 to 4 weeks, I would ask if it would be possible to continue the $AUD 200,000 overdraft facility on the iInvest Business Veridian Account which we have in place currently. I understand that this is due to be rolled over on April 1st". (Emphasis added.) Mr Ting's response is perhaps telling: "I think it would be good if we caught up. Can we make it tomorrow? The earlier the better". 1. A meeting was arranged for 10:00 am at the Bank's George Street offices. 2. Despite the force of the contemporaneous evidence it must be acknowledged that Mr Ting in his affidavit sworn 9 October 2015 in para 40 states "I agreed at around the end of January 2008 to set up a temporary excess for a period of 90 days." This is inconsistent with the contemporaneous evidence as to the making of the contract, but there is other material which may suggest a 90 day term within the Bank's internal documentation. CB 4.1807, above a reduction of the cross-claimant's email seeking the overdraft of 28 January 2008, records an internal request from Mr Ting, "please implement T/E $200K for 90 days". 3. Mr Ting could not recall the conversation relayed at para 43 of the cross-claimant's affidavit (735.30 – 736.5T). It was put to him that he later telephoned the cross-claimant to tell him "that you were happy to provide that facility until 1 May?" Mr Ting did not recall any such conversation. He was cross-examined about the note (at CB 4.1807). He acknowledged the entry (737.15T) but was not pursued about further about it then. At 742.25T it was put directly that Mr Ting had previously approved $200K for 90 days. He insisted that what was approved was to "1 April 2008" (742.30T). 4. It is difficult to understand how the reference to 90 days crept into the Bank's internal documents and why the 90 day roll-over is referred to as the subject of the cross-claimant's email to Mr Ting of 25 March 2008. In the latter case it may be that the 90 days is a reference to the first facility and second facility which rolled over. It is not the language which one would normally use to refer to an overdraft. 5. There are other internal documents which refer to a 90 day period. 6. There are other inconsistencies in the Bank's internal documents. Particular emphasis is placed upon 2 emails that were sent by Mr Ting's colleague, Ms Kuang on Wednesday, 2 April 2008 at 10:09 am to Mr Ting's superior (CB 2.796). There is another version of apparently the same email: Document 1 Ex 6. Before dealing with these documents it is necessary to provide some context. Although Mr Ting did not recall what was discussed at the meeting arranged for 26 March 2008, I infer that the topic of extending the overdraft raised in the cross-claimant's email of 25 March 2008 must have been on the agenda. On the morning of 2 April 2008, the cross-claimant emailed Mr Ting pointing out that the overdraft limit of $200,000 "appears to have been removed from our account". He pointed out he needed the overdraft to keep operating. He said, "I had understood that the limit would be in place for another month i.e. until 1st May". That email was sent at 7:09 am. I infer that when he had not heard from Mr Ting he forwarded a copy to his colleague, Ms Kuang at 9:20 am. 7. The email from Ms Kuang to Mr Ting's superior refers to the overdraft of $200,000 having been approved for 90 days "and expired on 1/4/08". It sought "another 30 days" on behalf of iInvest. It attached the cross-claimant's explanation of the situation with CQS (CB 2.737), pointed out iInvest's good record of clearing temporary extensions, and explained the total indebtedness under the bill facility and the security position. Ms Kuang recommended approval. 8. It is also apparent that Mr Ting had emailed Ms Kuang on 31 March on the same topic, by implication, requesting that she process the application for the extension. 9. The superior, a Mr Joeng approved the extension to 1 May 2008 on the condition that the client acknowledge the amount of the overdraft and its expiry date and provided security in respect of it by close of business on Friday, 4 April 2008. 10. For completeness I record, Ms Kuang emailed the cross-claimant at 3:21 pm on 2 April 2008 confirming "their credit/risk area" had approved the overdraft "for another 30 days". She also pointed out that if the overdraft was not cleared by expiry date "then the Bank had a right to the existing mortgage properties". I infer that she attached the letter of 2 April 2008 with the attachments (CB 743 – 758). As I have previously stated the cross-claimant signed the acceptance document on the same day and returned it to the Bank. 11. The cross-claimant replied at 3:43 pm: "Thank you, yes, that is all fine. I had expected that to be the situation anyway, so this just formalises things, which is better for everybody. Thank you to you and to Howard". 1. I have to observe this is a far cry from what was put by the cross-claimant at para 50 of his affidavit of 18 June 2015. The cross-claimant attributes to Mr Ting a reference to the "temporary unsecured overdraft facility". He suggested that the significance of the documentation was played down. He said Mr Ting said "they want all their paper work in order" and a desire on the part of the Bank to have "the paper work in order now that the temporary unsecured facility is still running". 2. The cross-claimant feigned nonchalance about the matter, stating "OK I am pretty busy today Howard. The UK litigation and other things". Although at para 53 he seems to understand that the Bank required the overdraft to be repaid in full by 1 May and it was to be secured by the mortgages over the properties. 3. I find it highly improbable that such a conversation occurred. Mr Ting did not recall it but that may be due to the effluxion of time. However, I would infer that he was not in the office on 2 April 2008. He emailed Ms Kuong on 31 April in substance passing on all relevant information to enable her to process the application for an extension. He did not respond to the cross-claimant's email of 7:09 am and manifestly it was Ms Kuong who, after receiving a copy of that email later in the morning, processed the application internally, advised the cross-claimant of its success and pointed out the change in the conditions which the cross-claimant said he expected and acknowledged. 4. Nonetheless, Ms Kuong's email referred to a 90 day term, albeit expiring on 1 April 2008. The matter of concern to the cross-claimant is that the printout of an email in Ex 6 apparently sent by Ms Kuong to Mr Joeng at 10:09 am refers to "T/E 150,000 was approved for 50 days". When cross-examined about the matter, Mr Ting was unable to explain the apparent discrepancy saying "I am not an IT guy. I can't explain how it got to that". 5. I accept the discrepancy is a little troubling. On the other hand, I am not persuaded that there was anything sinister to be inferred from it. Moreover, notwithstanding the references to 90 days in some of the Bank's internal documentation, I remain satisfied that the term of the overdraft agreed to on 28 January 2008 was one which would expire on 1 April 2008. The contemporaneous documentation and the cross-claimant's account as at 2015 overwhelmingly point in that direction. 6. It should be pointed out that the failure of iInvest to repay the overdraft by 1 April 2008 was an act of default even if at that time the Bank chose not to act upon the matter but to deal with it by granting the extension sought subject to obtaining security. Plan A 1. This factual issue relates to whether Plan A was put forward by the cross-claimant to the Bank as a definite proposal for overcoming the difficulties flowing from the loss of the CQS income stream. The legal context in which the issue arises is that a large part of the cross-claimant's claim, however it is characterised, is that the Bank dismissed Plan A out of hand, and imposed upon him their own plan which was designed not to assist him to trade out of what he regarded as a temporary difficulty, but to secure repayment of its various loans only. 2. Ms Abbas and Mr Ting denied any such definite proposal was put forward for their consideration. For what it is worth, the Bank's records, which may not be perfect, do not contain either a version of the plan which appears at CB 2.734 or the second and final version which appears at CB 5.799. 3. Although much is made of this as an important factual element of the cross-claimant's case that the Bank failed to help iInvest overcome its financial difficulties and work with it to develop a repayment plan as required by cl 25.2 of the Code (CB 2.14), it is in some ways a false issue. I accept the plaintiff has led expert evidence in relation to the matter to which I will return, but my overwhelming impression from a consideration of the contemporaneous material is that, overall the Bank did work with the cross-claimant to develop a plan for the repayment of the various loans. 4. The cross-claimant said that he informed the Bank about the termination of the CQS contract in a telephone conversation with Mr Ting on 2 February 2008. He says that Mr Ting said, "thank you for letting me know that … I will ensure that you are given time to obtain a settlement with your UK client". Mr Ting cannot recall the conversation but says "that he would not have given such an assurance". He explained that it is in the nature of a temporary overdraft facility that it is required to be repaid within a specified time frame. He did not have authority to agree to an indefinite extension of time to pay. 5. I think the cross-claimant's account is at best doubtful. There is no contemporaneous written communication corroborating that account. Mostly, communication was by email either as a primary form of communication or by way of confirmation. By 31 January 2008 the overdraft account had already been drawn down to the tune of $140,000 (CB 4.1911). This was no doubt in payment of the contemplated end of month commitments. Had the cross-claimant informed Mr Ting that not only was CQS late in payment but it had terminated the contract, this is a matter which is likely to have been of such significance to a bank that it would have been clearly documented at that time. It is more likely that the cross-claimant told Mr Ting about the termination of the CQS contract sometime in late March or early April. 6. I would infer that the cross-claimant was becoming concerned about iInvest's financial position by about the middle of March. I draw this from the contents of his affidavit at paras 46 to 49. He realised by then that there was unlikely to be any early resolution of the dispute with CQS. I infer that he was preparing himself for an approach to the Bank to propose a way out of iInvest's predicament. For this purpose he obtained a sales appraisal in relation to Yulgilbar on 18 March 2008 from a real estate agent (CB 2.729). The agent quoted a range of $750,000 to $770,000. Moreover, on 22 March 2008 he received an email from an officer of CQS who assured him that that company would honour any outstanding amount due to iInvest. However, that officer suggested a line by line review was necessary and foreshadowed a "detailed approach". He regarded it as in the interest of both parties to get the matter resolved "as soon as possible" (CB 2.731). 7. I accept that the cross-claimant probably did prepare the document dated 25 March 2008 entitled Finance Options (CB 2.734). Some of its content is reflected in an application report prepared by Mr Ting probably in late April or early May 2008 (CB 2.800 – 801). 8. I accept given what the cross-claimant knew about iInvest's cash flow position that he did attend the meeting with Mr Ting prepared to discuss options for reducing iInvest's indebtedness to the Bank. But it must be said that options 1 and 2 were dependent upon the receipt of substantial payments from CQS in excess of $1,700,000. Option 1 consisted of no more than extending the overdraft and waiting for CQS to pay. Interestingly part of that sum was said to be due to iInvest for the period January 2006 to end of March 2008. This is interesting because the cross-claimant says he told the Bank that the contract had been terminated on 1 February 2008. Option 1 was really no more than leaving things as they were. Option 2 was very similar, it involved rolling over the overdraft for 90 days, paying back an unspecified portion of the overdraft now (it's not clear how this would be done) and revisiting the issue in 90 days by when CQS should have paid. Only option 3 addressed realising assets. That option was contingent on CQS failing to pay by 5 March 2008. 9. In his affidavit (at para 49) the cross-claimant says that Mr Ting rejected his proposal out of hand saying: "… the temporary facility must be repaid immediately. I am sorry, your plan is just no good. We are not really interested in the farming business – we are more interested in your London business." 1. Frankly this evidence cannot be correct. It is entirely inconsistent with the steps subsequently taken by Mr Ting to continue to assist iInvest. At its most obvious level far from insisting on repayment of the overdraft immediately he recommended and facilitated the extension of the overdraft for a further month in accordance with iInvest's request made in the email of 25 March 2008. 2. Moreover, when it became apparent towards the end of April that iInvest was still not in a position to repay the overdraft, as I have said, Mr Ting put forward an application report supporting the options that the cross-claimant had put forward at their discussion in March (CB 2.800 – 801). The report dealt with the three "exit strategies" that the cross-claimant had discussed (CB 2.800 – 801). It described the dispute with CQS (it did not mention that the contract had been terminated, although Mr Ting must have known by then) and stated: "The T/E limit is expiring soon on 1/5/08 [cross-claimant] has been in close contact with the Bank to keep us informed of the dispute and progress on recovery of the payment. An agreement was recently reached with CQS who will meet its obligation in the coming month. IInvest expects to clear the T/E $150K by the end of May 2008 (Exit Strategy No. 1). Should Exit Strategy No. 1 fail, [cross-claimant] will start selling the livestock in the farm to gradually repay the debt (Exit Strategy No. 2). Selling of the iInvest properties at … Yass (mortgage to CBA) will be another option (Exit Strategy No. 3). Due to his uncertainty, the client is downgraded to "potential TIA", but based on the previous dealings with the client, we do hold a greater level of confidence in his integrity and expertise in the area. Nevertheless the file is worth a closely monitoring." [sic] 1. In my judgment this was a very fair report. The initialisation TIA is for Temporary Impaired Asset. 2. Mr Ting also apparently arranged a meeting with the cross-claimant and Mr Ting's superior, Mr Jeong, at the end of April, probably in relation to the application report. However, when the overdraft was not paid by the 1 May in accordance with the terms, the Bank withdrew it. The cross-claimant emailed Mr Ting at 6:57 am on 2 May (CB 5.2371 – 2372) saying "I am not sure of the status of the overdraft facility". He also said that he would not have moved funds there on 1 May if he had not felt that they would be available to pay bills. Mr Ting wrote back at 8:34 am advising the cross-claimant that there would be a process for extension of the overdraft and that it would take a little bit of time. The cross-claimant replied "thank you, hugely appreciated" and passed on some optimistic news about the CQS debt. 3. Apparently because of the failure to repay the overdraft, the file was referred to the Credit Management Unit from the Commercial Credit Lending Division. It is clear from the email exchange in the earlier part of May that there had been some to-ing and fro-ing authorising the payment of some debts on a case by case basis. In an email on 6 May 2008, Ms Abbas expressed pessimism about the prospect of recovery of a debt overseas. On 20 May, Ms Abbas directed Mr Ting to dishonour nearly $5,000 in drawings from the account. She directed Mr Ting "dishonour drawings, no deposit no payment". She also asked him to arrange an interview as she wanted to meet the cross-claimant. The meeting was arranged for 21 May. On that morning the cross-claimant raised the dishonoured payments by email with Mr Ting. He stated: "I would ask that until ongoing arrangements to finalise which I understood was the reason for the meeting this morning, then any leases payments and bank fees etc be allowed in our account. As stated previously, we will honour our obligations to the Bank and keep the limit below the temporary facility which was put in place." 1. According to para 43 of the Amended Statement of Cross Claim, Plan A consisted of the following: 1. To raise approximately $1 to $1,000,000 within approximately 3 months by: 1. Selling a limited number of iInvest livestock (sheep) with a view to restocking later; 2. Selling a 20 acre concessional lot on Blackburn to raise $240,000; 3. Creating a 200 acre lot in Yulgilbar by way of subdivision for a sale at an estimated price of $750,000 to $770,000. 1. To extend the operation of the $200,000 overdraft – for 6 months. Those details appear at CB 2.799 on a document headed "Options for CBA" apparently dated 29 April 2008. The document also included a note as to the reason for the delay in recovering money due from CQS. This was to "in order to ensure that [iInvest] had a rock solid case". 1. Ms Abbas had prepared a strategy paper on 20 May 2008 which was admitted, inter alia, as Ex 7. In the way of computer generated documents it apparently had been added to following the meeting on 21 May. The document contains a short history of the relationship with CQS including the termination of the contract on 2 February 2008. It records that iInvest was claiming £1,530,589 as at 6 April 2008. In cross-examination Ms Abbas accepted that there were some errors in the document, in particular, the expired overdraft on 1 May 2008 was said to have blown out from $150,000 to $198,000. She had to accept, of course, that limit was always $200,000. She also accepted the comment that income had ceased and the account balance continues to escalate was an overstatement. I am not sure anything much turns on this. The document records that a proposal had been made to the Bank which had some elements in common with Plan A, but was not identical to it. The cross-claimant sought continuing support for 5 months. This would allow the UK litigation to finalise, asset sales to be undertaken "to service the next 12 months commitments" and repay the still outstanding overdraft. According to Ex 7 the Bank was prepared to accept most of what was put forward but on a tighter timeline. It accepted the cross-claimant's estimates of stock sales by 15 June 2008, required exchange of contracts on the 20 acre block by 1 July 2008 and settlement by 15 September 2008. It required fortnightly reports. In the event that the conditions were not met by 15 September 2008, or in the alternative, if the litigation was not favourably settled, then the "customer [was] to be given 6 weeks to arrange refinance settlement". 2. What actually happened at the meeting of 21 May 2008 is documented in Ms Abbas' note (at CB 2.820 – 821), her follow-up email to the cross-claim (at CB 2.822 – 3) and her letter of 26 May 2008 (CB 2.827 – 8). For present purposes what is important about those documents is that there is no reference to "Plan A" in terms, or the options document of 29 April 2008 (CB 2.799). What appears to have been agreed was more extensive than the options document, but similar to option 3, para 3 in the Finance Options Document of 25 March 2008 (CB 2.734). Ms Abbas at CB 2.824 records in her email to the cross-claimant what appears to have been agreed in principle at the interview: "Reinstate the overdraft for 6 months to: allow CQS litigation to finalise; Lodgement of cash deposit raised from family money in the sum of $250,000 as additional security; Engage in the sale of assets". The sale of assets required were the sale of 2,300 sheep; the 20 acre separate lot at Blackburn; and the whole of Brecon and Yulgilbar. Detailed timetabling was required by the Bank, but in the event that the sale of the assets I have mentioned was not achieved by 15 September 2008, or the litigation not finalised by then favourably to iInvest, the remaining Blackburn property was to be sold by auction with settlement to occur within 12 weeks. Other documentation was to be provided including an advice from the UK lawyers about the CQS litigation and financial information about iInvest including cash flow projections and confirmation that Brecon and Yulgilbar were put on the market. 1. It is notable that in response to Ms Abbas' email, the cross-claimant wrote, "I also appreciate very much the time and patience shown by the Bank" (CB 2.826). He did not protest in any way that the Bank had not accepted Plan A and that Plan A was the only workable solution. Rather, he temporised somewhat in regard to the provision of a term deposit (as additional security) and to some extent in relation to the sale of the ewes (rams seem not to have been mentioned), but on the whole thought the timetable for that sale "should be feasible". 2. I should also record that in his affidavit Mr Stevens denied ever having seen the options document referred to as Plan A (Affidavit, Ian Stevens, 2 October 2015 at paras 35 and 36; CB 1 tab 24). I am satisfied that at various times, the cross-claimant had looked into and was prepared to discuss options for managing his relationship with the Bank in light of the termination of the CQS contract and the amount owed to iInvest for past services. In particular, I am satisfied that when he met with Mr Ting on 26 March 2008 and at the important meeting on 21 May 2008, he attended with proposals that he thought he could live with, which might be acceptable to the Bank. I do not accept that Plan A was put forward as a definite workable proposal. Plan A was hardly a detailed proposal of the kind that one might expect a customer to present to a bank in a situation like iInvest was then in. It was really no more than a "back of the envelope proposal" although the cross-claimant had done some work in relation to it, including obtaining the market appraisal for the sale of 200 acres at Yulgilbar, if subdivision was approved. I am also satisfied that underpinning the cross-claimant's thinking at the time was his optimism (misplaced as it has proved to be) that the CQS litigation would be finalised with an outcome favourable to iInvest, providing sufficient capital to solve its pressing financial problems. This is made clear from the note at the foot of CB 2.799 (the April version of Plan A) which states the reason for the delay in finalising the case was the need to prepare a rock solid case. The straight-out exit issue 1. The expression "straight-out exit" (705.45T) was used by Ms Abbas in an internal email to Mr Ting of 22 May 2008 which was admitted as Ex 6.7. She made the comment to Mr Ting that "it looks like this is going to be a straight-out exit". She defined an "exit" as a situation where "the customer has [the] option to refinance or repay the Bank's debt that's what an exit is". When first asked about the topic it was put to Ms Abbas that after 8 May 2008 that in substance she put in place an exit strategy, "that is to say a strategy for the Bank to end its banking relationship … with iInvest". She disagreed (704.15T). She denied "forcing the sale of the viable remaining parts of [the] iInvest rural enterprise" (704.20T). She also disagreed that she implemented that strategy by "imposing conditions … which were commercially unworkable from iInvest's point of view" (704.25T). She could not recall saying to Mr Ting that "this is going to be a straight-out exit". 2. Mr Ting could not recall being told the Bank's decision was to exit the financial relationship with iInvest (746.25T). However, Mr Ting had used that expression in internal documents. I have already referred to his application report of the end of April 2008 when he referred to 3 exit strategies. After Ms Abbas assumed conduct of the file on behalf of CMU, he wrote an email to her at 11:07 am on 5 May 2008 in these terms (CB 5.2374): "Should we make a time to discuss this in person? I think there will be little income to come and hence need to carefully manage this exit. However, clients [sic] has shown very good integrity in the past and has a claim for payment for GPB 1.5m which is in dispute and hopefully coming to a resolution this month (not guaranteed). However, client has tried in his best attempts to meet interest in the next three months (this will include the outstanding debt of the T/E)." He attached a document setting out the history of iInvest's contract with CQS which the cross-claimant has provided including the fact of CQS's termination of the contract (CB 2.737 – 742). 1. When cross-examined about what he meant, he said that he couldn't recall the "context of those words at [the] time" (752.30T). I asked what does exit mean, and he answered: (at 752.35T) "It could be exit from my control, it could be exit from a bank, it could be, I could not remember the context how that associated, been put to" [sic]. 2. In Ex 6.7, Ms Abbas also said "it may be best that CMU take both management and control. This way when it is returned to you, you will continue with the good banking relationship that you had." That expression certainly contemplates successful management of the account by CMU leading to the customer remaining with the Bank and being returned to the usual relationship manager. As I have said, Mr Ting used the expression 'exit' in the review at the end of April 2008, which in that context did not connote the finalisation of the banker and customer relationship between the Bank and iInvest. 3. It is also apparent to me if one considers the outcome of the meeting of 21 May 2008 as documented in the record of the meeting at CB 2.821, and the subsequent email and the letter of 26 May 2008, no decision had been made by the Bank pending the provision of the additional information requested. IInvest, through the cross-claimant, provided this promptly on 28 May 2008 and the Bank's decision was conveyed to the cross-claimant as director of iInvest by a letter dated 24 June 2008 (CB 2.854 – 856). 4. The letter of 24 June relayed the Bank's decision which substantially approved the final proposal emerging from the meeting of 21 May 2008 subject to reasonably strict conditions as to time. An additional condition not previously discussed, it seems to me, is retiring the bills at their next respective roll-over date and placing them in a bills matured account. I will put that aside for the time being. 5. It is notable that the letter stated the object of CMU's involvement in the following terms: "In broad terms, the primary objective of the CMU is to work with clients to address the issues that will reduce the credits risks to an appropriate level. Once this is achieved, control and management of the account will revert to the Business Banking Centre. In instances where this cannot be achieved, the role of the CMU is to facilitate repayment of the facilities." 1. The Bank did not purport to impose a contingency requiring the customer to refinance. It did state, however, that if asset sales proceeded as agreed, a review of the customer's accounts would be undertaken to ascertain its ability to service its commitments "going forward". A letter of demand was sent on 27 June 2008 (CB 2.857), for the purpose, as explained in the letter of 24 June 2008, of protecting the Bank's position in relation to its power of sale under the mortgage. The demand was for repayment of the outstanding overdraft which had been in default since iInvest had been unable to repay it by 1 May 2008, as previously agreed. 2. It is also relevant to consider the whole course of dealings between banker and customer from May 2008 until October 2012, a period of 4 years. Looking at it as a whole, although it may be said that the Bank continued to closely manage or monitor iInvest's performance, it showed a degree of flexibility in its dealings with iInvest and notwithstanding what it took to be circumstances of default in 2008, it did not take steps to force iInvest into a termination of the banker and customer relationship. Indeed, iInvest (and the cross-claimant) remained in possession and occupation of Brecon and Blackburn throughout the whole of that period until iInvest was forced into liquidation by a creditor subcontractor left unpaid after the termination of the CQS contract. 3. There is no doubt that Ms Abbas used the expression "straight-out exit" in internal correspondence with Mr Ting. Given her definition of that expression, it may be taken that she meant it as she defined it. However, I accept the submission of the Bank that that comment betrayed her personal thinking only following the meeting on 21 May 2008. Doubtless it demonstrates that Ms Abbas was as pessimistic as the cross-claimant was optimistic. However, the betrayal of that private thought is not evidence of the Bank's attitude to and motivation in managing the accounts during and after 2008. 4. I am not persuaded that the Bank misled the cross-claimant by failing to disclose it had determined upon a straight-out exit from its exposure to the iInvest borrowings. The Bank had not misled the cross-claimant nor had it determined upon a "straight-out exit". Did the Bank direct iInvest, in the sense of forcing it against the will of the cross-claimant to divest assets to reduce the Bank's exposure without regard to iInvest's interests? 1. I am not persuaded that this is a fair description of the Bank's conduct during or after 2008. I have dealt with the primary facts already at some length. It is relevant to record that the Bank had formed the view that iInvest had defaulted on its various loans. The matters of default relied upon by the Bank through Ms Abbas were initially expressed in Ms Abbas' letter of 26 May 2008 (CB 2.827) They are as follows: * "Non-clearance of the expired temporary excess on 1 May 2008; * the termination of the United Kingdom (UK) contract has ceased the major income stream of the company; and * the litigation in train for CQS in the UK." The only default referred to in express terms was the non-clearance of the temporary excess or overdraft. The internal correspondence, I have referred to, demonstrates that the Bank was concerned about the deterioration of iInvest's financial position because of the termination of the CQS contract. When the Bank's "decision" in relation to "iInvest's proposal" was conveyed by letter of 24 June 2008 (CB 2.845), the act of default was characterised as iInvest's inability to meet its loan commitments going forward. 1. Jumping ahead, later in October 2008 (CB 3.968 – 970), Ms Abbas when answering queries or complaints from the cross-claimant explicitly or expressly characterised iInvest's "problems with the income stream from the UK" as an event of default (cl 10.1(m)) because "the Bank [considered this] to be a material adverse change to the financial position of the borrower". 2. I must say given the termination of its principal contract with CQS and the dispute over book debts due from CQS to iInvest, it could not be seriously gainsaid that there had been a material adverse change to the financial position of the borrower whatever nuances of fact and law might attend the meaning of the phrase. 3. The question of whether the Bank forced iInvest to divest itself of assets has to be viewed and assessed in that context. I will repeat given what the cross-claimant fully appreciated was a change in circumstances, he had been unable to clear the overdraft granted on a temporary basis on 29 January 2008 in the short term, as he had done with previous temporary overdrafts. He appreciated it would be necessary to come up with a plan or proposal to demonstrate iInvest could trade out of the obvious difficulty without risk to the Bank's security. Even accepting his evidence, contrary to my finding, that he had presented Plan A at the meeting on 23 May 2008, having previously discussed other options with Mr Ting on 26 March 2008, that evidence implies an understanding and acceptance on the cross-claimant's part that righting iInvest's financial ship with the Bank would involve divesting assets including the sale of a substantial body of stock. It was the cross-claimant who suggested that a large sum of $100,000 could be obtained fairly readily by the sale of a large number of ewes. Typical of his optimistic outlook, the price he expected to get was at the very high end of the market. But the point for present purposes is that he suggested asset sales to bring the situation with the Bank under control while at the same time believing a good result could still be obtained from the litigation with CQS. 4. It was accurate to refer to the proposal recorded in the memorandum of the meeting of 21 May 2008 and in the letter of 26 May 2008 as iInvest's proposal. In its final form it may well have been arrived at by a process of discussion or probably negotiation during the meeting. 5. Admittedly in the context of cross-examination about why farm debt mediation was refused, the following question and answer appear during Ms Abbas' evidence (693.25 – 35T). "Q. You knew that what you were contemplating was enforcement action against the customer, Iinvest, in relation to the farm debt, didn't you? A. I don't agree with that, your Honour. I put boundaries around what ‑ what the client was proposing at that time. It wasn't deemed ‑ enforcement to me is me taking possession and selling the property, which I was not doing, your Honour. I was asking for repayments … (not transcribable)" 1. It may well be that Ms Abbas was a person who was astute in safeguarding the Bank's position. That may have made her very firm in her negotiations with the cross-claimant on behalf of the Bank. She comes through that way I think in her contemporaneous correspondence, although she did not strike me that way in the witness box. 2. That the process of negotiation led the cross-claimant into a position that he would have preferred not to adopt in the process of Ms Abbas imposing boundaries is not to the point. No customer of the Bank experiencing financial difficulties is entitled to have the Bank accept their preferred conditions unconditionally. The Bank may impose boundaries that the customer would rather not be subject to without it being said that the Bank has directed or forced the customer to act against his or her will. 3. The cross-claimant pushed back against the Bank's decision conveyed in the letter of 24 June 2008 (CB 2.859). In an email on 30 June 2008 at 10:15 am he said, "[t]he latest proposal from the Bank which was attached to your email is quite different to the one originally discussed and which we were happy with". He was particularly concerned that he would not be allowed an operating account. He was concerned that the Bank had not had regard to the electronic publishing aspect of the business which he said continued to produce income and he objected to the statement that "iInvest is unable to fulfil its loan agreement … and to sustain the current level of debt" (CB 2.860). He did not agree that the first facility and second facility should be placed in a bills matured account. He also said (at CB 2.859 – 860): "… it is unclear to me as to the plans in regard to iInvest's portion of the proceeds of sale of the blocks of land. As these funds belong to iInvest and not to the Bank, then, as stated in my proposal it would be my intention to deposit these funds with the Bank, the intention also being to supply some of these funds to some limited refurbishment of "Blackburn" to enable it to be put in a good condition in order to generate income". (Emphasis added.) 1. He asked for a meeting to be attended by a banker with agricultural experience and concluded by stating, "I do truly appreciate the efforts being made by the Bank to assist us in difficult times for everybody" (CB 2.860). 2. That the cross-claimant felt entitled to voice complaints and to suggest other measures eloquently demonstrates that the Bank did not force any position onto him against his will. The Bank's response was to agree to a meeting to be attended by the cross-claimant, Ms Abbas and Mr Anthony Higgs (who was the agri specialist in New South Wales) (CB 2.859). Moreover, it is clear that the Bank accepted that the program for selling ewes was not proceeding at the pace previously indicated without complaint. 3. Moreover the result of the meeting on 2 July 2008 was that some of the Bank's conditions were softened (CB 2.867). The overdraft limit of $200,000 was to continue for the time being; $30,000 from the proceeds of the sale of ewes was to be applied to roll-over costs on the facility; the cross-claimant apparently agreed to reduce the overdraft limit to $170,000 "at the time"; the Bank reserved the right to review its strategy if the properties listed for auction on 26 July 2008 did not sell; and the Bank softened its attitude in relation to maturing the first and second facilities: only if roll-over costs were not met would a bill be matured to a bills matured account. This modified agreement was conveyed to the cross-claimant and iInvest by the letter dated 2 July 2008. The Bank also indicated its willingness to review the company's accounts following the assets sale. Additional information was required for that purpose by 15 October 2008. This was a period of 3 and a half months and again this does not support the suggestion that the Bank was forcing a sale or was unresponsive to the concerns of the customer. 4. The CQS litigation settled during July 2008 on disappointing terms from the claimant's point of view. CQS agreed to pay £40,000 and to withdraw their cross-claim. Obviously from what I have said, about the cross-claimant's expectation, this was a thoroughly disappointing result and did nothing to improve iInvest's financial position as the amount was apparently inclusive of legal costs (CB 2.872). Moreover, Yulgilbar and Brecon did not sell at auction on 26 July 2008. The Bank agreed to another meeting on 30 July 2008 attended by Ms Abbas and Mr Higgs. The cross-claimant reported on the litigation and the result at auction and explained that in the circumstances he was unable to reduce the overdraft limit by $30,000. He, at that time, undertook to meet future roll-over costs associated with the first facility and the second facility from other income sources. There was a discussion about an offer of $800,000 for the purchase of Yulgilbar which was $300,000 less than the Bank's valuation at the time of acquisition. The notes of the meeting record that the cross-claimant "is prepared to meet the market" (CB 2.872). The cross-claimant indicated that the Blackburn homestead would be put on the market. 5. In response to this disappointing news, the Bank again indicated a willingness to modify its demands by waiving the reduction in the limit, agreeing to the sale of Yulgilbar for the price offered and allowing further time to sell assets. This was confirmed in the letter of 31 July 2008. 6. As I have said, there are subsequent histories of the operation of the accounts was of further accommodation by the Bank to reasonable requests by the customer until iInvest went into liquidation. 7. Manifestly giving iInvest the time to improve its own position and responding in a reasonable way to requests from the cross-claimant demonstrates that the Bank did have regard to iInvest's interests. I am not satisfied that iInvest or the cross-claimant have proved that the Bank forced iInvest to divest assets in something like a fire sale against the cross-claimant's will. Farm Debt Mediation 1. I have dealt with this issue above. I am not of the view that the Bank misled the cross-claimant in 2008 or 2009 about the availability of farm debt mediation. I again record that mediation took place in April 2012 resulting in iInvest being given another opportunity to sell its remaining assets on favourable terms. Given the time that elapsed from May 2008 to the commencement of enforcement action in November 2012, even if I am wrong in my assessment of this, the cross-claimant and iInvest did not suffer disadvantage by reason of that consideration. Did the Bank wilfully mislead the cross-claimant about its intention to apply the proceeds of asset sales in reduction of iInvest's indebtedness to the Bank rather than permitting iInvest to use it as working capital? 1. I accept that the law is accurately stated in Buhr and Ors v Barclays Bank Plc [2001] EWCA Civ 1223 ("Buhr") at [45], Arden LJ. Her Ladyship said: "… if, as here, the mortgagor makes a disposition of the mortgage property in a manner which destroys the mortgagee's estate in the mortgage property, a security interest in the property which represents the mortgaged property automatically and as a matter of law comes into existence as from the moment that the mortgagor becomes entitled to that property." 1. This statement of principle was largely based upon Professor Sir Roy Goode's Legal Problems of Credit and Security (at 16) referred to by her Ladyship at [13]. In this part the learned author wrote: "Security in an asset will almost invariably carry through to the proceeds of an unauthorised disposition by the debtor and will also extend to proceeds of an authorised disposition where it is effected on behalf of the creditor rather than for the debtor's own account" (Professor Sir Roy Goode, Goode's Legal Problems of Credit and Security (Sweet & Maxwell)). 1. I note, however, that in Federal Commissioner of Taxation v Park & Anor (2012) 205 FCR 1; [2012] FCAFC 122 Buhr was distinguished (Jessup, Katzmann JJ and Siopis J dissenting). However, at [103] the majority seemed to accept "that an equitable charge of the kind proposed in the argument would operate only with respect to the proceeds of the unauthorised disposition in the hands of the errant vendor." That description did not fit the facts of that case and the argument was that there was a charge over the yet to be received purchase monies. Siopis J was of the view that Buhr was good law (at [63]). The principle was applied to Real Property Act 1900 (NSW) land by the Queensland Court of Appeal in Bunnings Group Ltd v Asden Developments Pty Ltd & Ors (2013) 1 Qd R 493; [2013] QCA 347. 2. Buhr was applied by the Full Court of the Supreme Court of South Australia in Provident Capital Limited v Szlasa [2010] SASCFC 65 at [9] (Gray J, Anderson and Kelly JJ agreeing). 3. The dispute about this fact arose in the context of the sale of Yulgilbar. It will be recalled that Yulgilbar and Brecon were passed in at auction on 26 July 2008. At the time of the meeting on 30 July 2008, the cross-claimant relayed to Ms Abbas and Mr Higgs that his neighbours, the Martins had made an offer to purchase Yulgilbar in the sum of $810,000. He agreed to sell the property for $810,000 and contracts were exchanged on 20 August 2008 with settlement arranged for 1 October 2008. 4. The cross-claimant seems to have assumed, contrary to my understanding of the law, that he would be entitled to say how the proceeds of the sale of Yulgilbar were to be dispersed. In an email to Ms Abbas on 2 September 2008 he informed her inter alia, "I would intend that $200,000 of the settlement amount be applied to clearing the $200,000 [overdraft]" (CB 3.893). He wrote again on 3 September on this topic in terms that strongly suggested he would be in control of the proceeds and how they were to be directed (CB 3.898). Ms Abbas responded: "These are automatically deducted at settlement by your solicitor and the net proceeds plus the deposit held by the agent is made available to the Bank" (CB 3.899). 1. The cross-claimant's response was to say "thank you" and to reiterate that he would want a portion of the funds allocated to payment of the overdraft. 2. Ms Abbas responded on the same day "[the overdraft] will be repaid at settlement and limit cancelled as all securities cover all debts" (CB 3.901). 3. The cross-claimant spoke to Mr Stevens in the absence of Ms Abbas on 18 September 2008 and he confirmed the contents of that conversation in an email of the following day (CB 3.904) where he said that it was his wish that the balance of the deposit after deduction of charges be available to iInvest. He was seeking "some understanding from the Bank in regard to the balance of the deposit funds, especially in the light of a good record of meeting our commitments to the Bank and in addition our willingness to cooperate as far as possible in asset sales in order to reduce debt" (CB 3.904). 4. He seemed to appreciate the Bank's position because he acknowledged that the proceeds that the sale of Yulgilbar "may not cover the whole loan". However, he pointed out that he regarded the security as providing comfort to the Bank. This topic arose on 18 September 2008 because in response to a query from the cross-claimant's solicitor, Mr Stevens had advised the solicitor "the full net proceeds of sale are required to be made available to the Bank at settlement (as the amount owing exceeds the gross sale value)" (CB 3.907). 5. Again, there is an indication that the Bank was not acting in a high-handed manner notwithstanding the legal position. Mr Stevens responded on the same day to the cross-claimant's email of 19 September 2008 indicating there may have been a misunderstanding about the import of the cross-claimant's emails of 3 September 2008. Mr Stevens asked a series of questions (CB 3.990) including how much the cross-claimant wanted released and what the funds were to be used for and other relevant matters including whether offers had been received and if so, in what amount, for Brecon and Blackburn. The cross-claimant indicated on his calculations he expected about $44,000 would remain of the deposit held by the agent "which we would wish to be released to us" to pay some smaller debts and for "running the business" (CB 3.913). He provided an update on Brecon and Blackburn indicating he was looking for a better result from their sale than he received from Yulgilbar. Mr Stevens responded that he would get back to the cross-claimant (CB 3.916). 6. Mr Stevens emailed the cross-claimant on the morning of Monday, 22 September 2008, he had picked up that the cross-claimant was proceeding on the assumption that the Bank would take the interest due on the other facilities from the proceeds of settlement. He sought confirmation of the ability of iInvest to meet its financial obligations as and when they fell due in relation to the first facility and the second facility (CB 3.929). However, he indicated that the Bank would be prepared to consent to the cross-claimant retaining $20,000 from the deposit if that confirmation was provided. He also extended the time for the provision of certain financial information that was outstanding. 7. The cross-claimant responded on the same day and thanked the Bank for its consideration. But he found it hard to understand why a figure of $20,000 was offered rather than the $44,000 requested. He expressed the following view (at CB 3.933): "As I recall, our failure to pay the overdraft at the end of April was the issue which lead to the current restructuring – once [the overdraft] is repaid I am not clear as to why we would not be entitled to the proceeds of all other sales. On my understanding it would not be appropriate for instance for the Bank to retain any balance on Brecon once the balance of the bills matured account for Yulgilbar and Brecon was repaid as no money would be due on the BMA account and Blackburn is a separate loan with a separate security". 1. He also asserted that he understood from Ms Abbas that iInvest were entitled to apply the sale proceeds in any way they wished between either of the bills matured account and the overdraft. However, there is nothing from the correspondence I have seen which would justify that conclusion. Mr Stevens responded on 23 September 2008 (CB 3.938) explaining the Bank's position in some detail, confirming that he was unable to find in the file or in the correspondence any commitment by Ms Abbas in relation to the availability of part of the proceeds, but that the Bank would be prepared to consider its position upon receipt of the outstanding information and an update on the sales program with respect to the other properties. He also pointed out that if the Bank was to pay the interest due on 1 October 2008 out of the proceeds of the sale of Yulgilbar, the amount required to payout the overdraft would accordingly increase. The cross-claimant only replied by saying he would get to work by putting some information together but he doubted that the financial data from the accountants would be available. He understood there were two parties interested in Brecon (CB 3.943). On 25 September 2008, the cross-claimant provided cash flow projections but had yet to receive information from his accountants. It seems that there was no further amount allowed from the proceeds of the sale of Yulgilbar. 2. The net proceeds of the sale were applied in reduction of the overdraft and the balance to the bills matured account into which the first bill had been retired. Looking at this evidence, I am unable to draw any inference that the Bank was not entitled to take the view that it did; notwithstanding its entitlement it offered some indulgence to the cross-claimant, and allowed further time to comply with documentary requirements if the cross-claimant desired it. I am unable to find that the cross-claimant was misled in any way by the Bank as to its view of the legal position about what would happen with the proceeds of the sale of Yulgilbar. I find it impossible to read the email exchange in that way. I am not satisfied that there was any misleading conduct at all in this episode and I am not satisfied that the Bank's conduct could even be called high-handed on this occasion. 3. It does remain the case, however, that the cross-claimant's experience on this issue led to a souring of the relationship between him and especially Ms Abbas. I think it fair to say that he fired off an email on 7 October 2008 asserting that as the overdraft was paid out iInvest were not in default on any loan arrangements with the Bank. He stated the reason for swapping to the BMA account was the confusion over the change from a 90 day to a 30 day bill and not because iInvest did not have funds available. This topic is the subject of the next issue. He questioned why the Bank was entitled to review the remaining facilities. He asserted that the relationship should continue as agreed in the original loan documents. The source of the cross-claimants frustration seems to have been that the settlement of Yulgilbar was delayed for a day which involved him in additional expense in terms of interest charges and the Bank dishonouring certain periodic payments. It seems his basic complaint (CB 3.970) was "the settlement was a mess, largely caused by the Bank having too many different and ill-informed managers involved, let's face it." Although there was obvious tension on each side (CB 5.2397 – 2396) the heat seemed to settle down when Ms Abbas suggested a meeting on 16 October 2008 with a superior, Mr James Riley. The cross-claimant responded, "the suggestion of a meeting with yourself and James Riley is a good one which I appreciate" (CB 3.967 – 8). Unfortunately, the meeting did not go ahead on the 16 October 2008 because the cross-claimant could not make it to Sydney that day (CB 5.2402). Ms Abbas re-booked the meeting for 21 November 2008. The tension continued with the cross-claimant asking for a payout on Brecon individually and Ms Abbas pointing out that any "payout figure … would include all outstanding debts which are the BMA for $783K and the Com/bill for $1.9m". She continued to suggest a meeting to "address the issues of concern to you and the Bank instead of this exchange on the email" (CB 5.2401). 4. The cross-claimant obtained a loan from his friend, Mr Donald Seaton for $500,000 on 29 October 2008 (CB 3.973). This was for a term of 2 years with interest at 7 per cent over the term of the loan. The loan was secured by a second mortgage over each of Brecon and Blackburn. He also instructed his solicitors to prepare the Family Trusts and the attempted declarations of trust by iInvest of Brecon and Blackburn. The Bank was made aware of the second mortgage, consented to it and entered into a deed of priority with Mr Seaton and iInvest (CB 3.1053 – 1057). The circumstances of the breaking of the first facility and retiring it to a bills matured account in August 2008 1. This issue can be dealt with briefly because from the evidence I have already referred to, it is apparent that even in October 2008 when the cross-claimant was upset at the Bank he accepted that the first facility was broken by confusion. 2. The confusion arose in this way. In anticipation of the exchange of contracts on Yulgilbar, by email detailed 7 August 2008, the cross-claimant sought a reminder from the Bank about whether the roll-over date for the first facility was the 11 or 12 August 2008. He requested advice about whether he needed to roll-over the whole bill "or does the exchange not make any difference?" (CB 3.880) Ms Abbas responded that the Bank could "look at a 30 day roll-over and then consider our position then" (CB 3.881). 3. On 11 August 2008 when the payment was due, the cross-claimant sent Ms Abbas a reminder about "a possibility of doing a 30 day roll-over" (CB 3.883). Ms Abbas wrote to a colleague, Ms Deborah Apriani, by email requesting that the first facility be rolled-over for 30 days instead of 90 because of the expected settlement of Yulgilbar. Ms Apriani responded in terms suggesting to me that the process was more complicated than Ms Abbas appreciated. Ms Apriani advised that the Global Market Division would need to provide a payout figure to terminate the bill and then roll it over "as a variable bill for 30 days". Once Ms Apriani received the Global Market Division's authorisation she could attend to the matter (CB 3.884). 4. Later that day Ms Abbas wrote to the cross-claimant erroneously advising him that the break cost of the bill was "in your favour" at $6,152. She informed him "I have requested the fixed rate facility be broken today" (CB 3.885). The mistake about who had to pay the fee was apparently made by "Steve from Global Markets". Ms Abbas instructed Ms Apriani to "proceed to roll it for one day and then process … to the BMA tomorrow" (CB 3.886). Ms Apriani acted on those instructions and advised Ms Abbas of the details of the transaction by email at 3:33 pm on 11 August 2008 (CB 3.887). The cross-claimant was advised by letter (CB 3.888). The cross-claimant noticed the overdraft was above its limit on 1 September 2008 and queried that matter with Ms Abbas. She related that matter to the interest on the BMA. She did, however, misstate the position by suggesting that the roll-over occurred because iInvest did not have funds for the 90 day roll-over and in view of the impending settlement for Yulgilbar it was "agreed that the facility would be transferred to the BMA". After receiving that explanation, the cross-claimant wrote to Ms Abbas again by email on 2 September 2008 stating that the charges changed again overnight. However, he made no particular complaint stating – "anyway this will get us through until the settlement of Yulgilbar" (CB 3.893). 5. Ms Abbas had informed the cross-claimant about Steve from Global Markets' mistake and the need to transfer the break costs from iInvest's account to the bills matured account. He does not seem to have raised any particular complaint about this (CB 3.896). The matter was not raised again by the cross-claimant until he found it necessary to vent his ire on 7 October 2008, as I have previously recounted. 6. I can find nothing in this incident that suggests that the Bank in any way took advantage of iInvest or the cross-claimant. The change was made at the request of the cross-claimant on behalf of iInvest for what seemed to be good commercial reasons. The change proved to be more complicated than Ms Abbas had first thought but the cross-claimant was prepared to put it down to confusion even as at 7 October 2008. Given the sale of Yulgilbar, the facility would have been broken in any event upon completion as it was a fixed rate bill facility. On this basis it is difficult to see what loss iInvest or the cross-claimant incurred. 7. The first complaint about breaking the first facility was made on 2 December 2009. He wrote to his then manager, Mr Craig Matthew, stating: "As I stated in our phone call there was no default by iInvest at any stage on the payment of this bill facility – it was broken to facilitate the sale of Yulgilbar (done at the Bank's request) and at a considerable loss to us – (in addition to the loss suffered due to the requirement to sell stock) and to repay the $200,000 facility which we had to the Bank. It was agreed that the Matured Bills Facility would be at the rate of the fixed bill i.e. 6.88 per cent. This was agreed with Sophia Abbas and confirmed by Ian Stevens" (CB 3.1153). 1. This is not correct; the bill was broken at his request in anticipation of the settlement of Yulgilbar to avoid paying interest on the usual 90 day roll-over unnecessarily. He was informed that interest on the BMA would be linked to the 30 day bill roll-over rate plus line fees. A margin of 4.5 per cent would be applied in the case of default. Substantial material adverse change in financial circumstances 1. I have referred to this issue previously. The cross-claimant argued strongly that there should be no consideration of this question as this is not an act of default relied upon to entitle the Bank to possession in the present proceedings. The Bank acknowledges that that is so but argues that the consideration remains relevant to understand and to evaluate the Bank's actions in the period from May 2008 to October 2012. I agree. 2. The evidence I have referred to above and the findings I have made establish that the Bank relied upon this consideration through Ms Abbas and Mr Stevens at all relevant times. 3. Whatever subtleties there may be in deciding whether such an event of default has occurred in a given case, the circumstances in the present case are, I think, beyond argument. It is sufficient to bring to mind that as at the time that the mortgages of Brecon and Blackburn were taken out to secure the funds paid under the first and second facility, and when the temporary overdraft was granted in January 2008, the most substantial part of iInvest's business was the lucrative contract to provide services to CQS in the UK. When the last of those transactions was undertaken, that is to say when the overdraft was applied for in January 2008, the application was supported by invoices totalling well over £1 million sterling. All of which was expected to be received in the short-term. Even after the termination of the contract by CQS, the cross-claimant on behalf of iInvest was representing to the Bank through Mr Ting not only that those funds would be received, but that other entitlements of iInvest had been identified under the contract for past services. By July 2008 it was obvious that none of those funds would materialise and that no comparable contract was likely to emerge to replace the income lost. Whereas, iInvest had other irons in the fire including its pastoral enterprise and perhaps its electronic publishing, nothing had come up by the middle of 2008 to replace the CQS contract and, indeed, with the benefit of hindsight, nothing came up in the interim before iInvest went into liquidation. 4. It is perhaps telling to consider that iInvest was finally put into liquidation not at the suit of the Bank but because of amounts due to subcontractors which had not been paid in the fallout of the termination of the CQS contract. 5. In my judgment, the Bank was entitled to rely upon that material change in circumstances as an event of default. This being so, as the Bank argues, its conduct during the period of 2008 to 2012 should be evaluated having regard to its rights under the terms and conditions upon which the facilities were granted. As counsel argue, upon the occurrence of an event of default and without prejudice to its rights to open the bills matured account, the Bank was entitled, without further notice, to (as I have already set out above): 1. decide what amounts owing or payable contingently or otherwise are immediately payable – cl 12.2(a); 2. cancel the facility, so that the Bank is no longer obliged to accept, endorse or discount any bills – cl 12.2(b); 3. debit the amount owing to the loan account – cl 12.2(e); 4. sue for the money owed – cl 12.2(f); and 5. exercise rights under any security – cl 12.2(g). 1. By cl 3.7, the Bank had no obligation to draw, accept, endorse or discount a bill if the borrower was in default, or if the Bank considered that the borrower "may not be able to … meet its obligations under a facility due to a change in the borrower's financial position since the date of the application for the facility". Determination of the cross-claims 1. I will turn then to the general law unconscionability. The principles are well-known and may be referred to simply by a reference to CBA v Amadio. It is sufficient to refer to the well-known passage in the judgment of Mason J at 461: "Historically courts have exercised jurisdiction to set aside contracts and other dealings on a variety of equitable grounds … In one sense they all constitute species of unconscionable conduct on the part of a party who stands to receive a benefit under a transaction which, in the eye of equity, cannot be enforced because to do so would be inconsistent with equity and good conscience. But relief on the ground of "unconscionable conduct" is usually taken to refer to the class of case in which a party makes unconscientious use of his superior position or bargaining power to the detriment of a party who suffers from some special disability or is placed in some special situation of disadvantage…" 1. It seems to me, and it is very important to bear in mind in this context, that there is no complaint made about the circumstances in which each of the loans was advanced to iInvest or in truth about the circumstances in which the cross-claimant granted the Guarantee. These were all perfectly ordinary commercial transactions of their type without any suggestion, in my view, of anything remotely approaching unconscionable conduct. 2. The difficulty faced by the cross-claimant to the extent to which he sues in his own right as well as derivatively is there is no evidence that the Bank has obtained some benefit to which it was not entitled by reason of a properly formed contract between two commercial entities. There can be no suggestion that iInvest was suffering from some special disability or was placed in some special situation of disadvantage. 3. Nor can the same be said of the cross-claimant, in his own right. As the evidence disclosed, he is an educated man who has been in business for a number of decades. Those businesses were successfully pursued in a variety of endeavours including electronic publishing and the provision of IT services to CQS under that contract. He also had some sophistication in rural activities. The fact that he successfully conducted businesses and was able to largely conduct his own affairs with the Bank generating proposals for the Bank's consideration, negotiating with the Bank in his own right and obtaining concessions along the way clearly indicates that there was no basis to find in this evidence that he was under some special disability or placed in some special situation of disadvantage. I would reject the claim based on general law principles. Australian Securities and Investment Commission Act 2000 – unconscionable conduct 1. Under s 12GF of the ASIC Act, a person who suffers loss or damage by the conduct of another person that contravenes a provision of subdivision C or subdivision D may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention. 2. Section 12GM confers wide power on the Court to declare contracts void, vary a contract, make an order refusing to enforce the provisions of a contract and other related powers. It is relevant of course to refer to the power of the Court to decline to permit the Bank to enforce its mortgage in an appropriate case. 3. It is a contravention of s 12CB, which may give right to an action for damages or other remedy, for a person in trade or commerce in connection with the supply of financial services to a person to engage in conduct that is in all the circumstances unconscionable. Section 12CB sets out a number of non-exclusive matters which the Court may have regard to for the purpose of determining whether s 12CB has been contravened. It is not necessary at this stage to descend into the detail of those matters. 4. The authorities in this area were recently reviewed by White JA (with whom Bathurst CJ and Macfarlan JA agreed) in Mastronardo & Anor v Commonwealth Bank of Australia Ltd & Ors [2018] NSWCA 136 (at [20] – [23]). By reference to his Honour's review of the authorities, I remind myself that it may not be necessary from the cross-claimant's point of view for him to establish that the conduct of the Bank in relation to the agreements made in and after May 2008 rose to "a high level of moral obloquy" or that the Bank behaved in some fashion which would be regarded as tricky by reasonable people. At the same time it may be necessary, bearing in mind the language of the statute and the relevant considerations set out in the statute, that the contract should be seen as exploitative. In Ipstar Australia Ltd v APS Satellite Pty Ltd (2018) 329 FLR 149; [2018] NSWCA 15 at [196]-[197], Bathurst CJ, with whom Beazley P agreed said: "In this context, it is important to bear in mind that the question of whether certain conduct is unconscionable does not involve an idiosyncratic determination of what is "fair" and "just" in a particular case. Rather, it involves a consideration of all the circumstances to conclude whether or not the conduct in question falls below acceptable norms, standards or values such as to warrant it being determined to be unconscionable. In considering that question, it is appropriate to have regard to, first, the terms of the statute itself, second, the approach taken by the courts in dealing with cases under the unwritten law, whilst recognising these cases do not limit the scope of the provision, and third, judgments in related areas including cases involving want of good faith. It is also necessary to have regard to all the circumstances surrounding the transaction." 1. His Honour referred to the importance of concepts of good faith which in the context of the exercise of contractual powers include "compliance with honest standards of conduct" and "compliance with standards of conduct which are reasonable having regard to the interests of the parties"… (at [198]). (Citations omitted.) 2. His Honour also pointed out that a party is generally entitled to exercise its bargaining power to protect its legitimate commercial interests by driving an advantageous bargain (at [200] and [211]). 3. On the facts as I have found them to be it is difficult to see which of the s 12CB factors might be engaged on the facts of this case. It might be observed that one of the large four banks is likely to have a relatively strong bargaining position compared to most customers other than equally large commercial entities. Even though I have found that the cross-claimant and iInvest defaulted on the terms of the loan both as to non-compliance with the conditions of the overdraft and with the material change in position, it was legitimate for the Bank to impose conditions upon its continuing support of the customer to protect its legitimate interests. It would have been justified in exercising its enforcement powers under the mortgages, but it did not do so. Rather, it did work with the customer over a period of nearly 4 years to assist it pay back the loans the Bank had advanced. It was only the actions of a third party that brought the customer, iInvest, undone. In those circumstances, it was not unreasonable in any way for the Bank to take the necessary steps to enforce the mortgage. 4. As I have said iInvest through the cross-claimant was sophisticated. There cannot be any serious suggestion that he was not able to understand the legal position or the documents that were sent to him in relation to the terms which the Bank was prepared to accept as the basis of an ongoing relationship. Had there been difficulties he had access to legal and accounting advice. He was in an ongoing relationship with solicitors and accountants. 5. On the facts as I have found them to be there is no suggestion of undue influence or pressure let alone unfair tactics being used against iInvest or the cross-claimant. Quite the contrary as I have tried to demonstrate, the Bank was flexible and accommodating whilst, of course, striving to maintain its own legitimate interests. 6. IInvest or the cross-claimant could have sought to refinance. The Bank did not require that of them. However, the cross-claimant, as a man of business could readily have undertaken that step if he considered that would be to iInvest's advantage. I do not accept that he was somehow deprived of an opportunity to do so by the Bank's conduct of his loans. 7. As I have said the cross-claimant relies upon the Code and it is convenient to discuss it in this context. 8. The cross-claimant relies upon cl 2.2 requiring the Bank to act fairly and reasonably towards customers in a consistent and ethical manner having regard to the conduct of each and the contract. In my judgment it has not been shown that there was any unfairness, unreasonableness or unethical behaviour. Indeed, my own view is the contrary was shown in the Bank's treatment of iInvest and the cross-claimant. This may be demonstrated by, as I have said, the flexibility, indeed forbearance, shown over a long period of time giving iInvest and the cross-claimant every opportunity of overcoming their financial difficulties. In my view, the Bank did work with iInvest and the cross-claimant to develop a repayment plan in accordance with the requirements of cl 25.2 of the Code. 9. So far as the Guarantee is concerned the Bank complied with cl 28.2A directly. The Guarantee, even as extended, was limited to a specific amount plus enforcement costs. In my judgment there can be no suggestion of any breach of the Code. 10. In the circumstances of this case once one puts aside any allegations of trickery, high-handedness or perhaps underhanded conduct there can be no serious suggestion that there is any want of good faith in commercial dealings. It is also important in my judgment that during the long period to which I have referred, the Bank exercised forbearance from enforcing its full contractual rights against iInvest and the cross-claimant. Every opportunity was provided to enable iInvest to, as I have said before, right its financial ship. Despite a degree of toughness, perhaps initially and despite the terseness that the relationship between the cross-claimant and Ms Abbas descended into after the sale of Yulgilbar, I am of the view that the Bank acted towards its customer in good faith. 11. I reject the claims brought under in respect of the alleged contravention of s 12CB of the ASIC Act. Misleading or deceptive conduct 1. Section 12DA(1) of the ASIC Act makes the following provision: 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. 1. In my judgment there is no persuasive evidence that any of the Bank's conduct in managing the accounts operated by iInvest after May 2008 involved misleading or deceptive conduct. In fact, at all times the Bank made its purpose clear and set out its conditions in writing. When there were difficulties complying with the strict letter of the Bank's requirements it showed flexibility and adjusted its demands. I am not satisfied the contravention of s 12DA has been demonstrated. The Code of Banking Practice and the contractual obligation of good faith 1. For the reasons I have already given, on the facts as I have found them, I am not satisfied that the conduct of the Bank breached the Code. It follows from my findings in relation to unconscionability that I am not satisfied that there was any breach of any obligation to act in good faith. For the reasons I have fully rehearsed quite the contrary. 2. It follows that the cross-claim must be dismissed. Quantum 1. I appreciate that normally it is the obligation of the trial judge to express his or her views on quantum for the benefit of the Court of Appeal in the event of an appeal and to avoid an unnecessary retrial. In a case like this, however, there is a very high degree of artificiality attending that exercise when so many separate complaints were made about the Bank's conduct, some of which, in theory might have constituted a breach while others did not. The artificiality of attempting to separate those matters out, I think with respect, makes an assessment of the hypothetical loss meaningless. 2. As I have commented, the subject of the loss flowing from the alleged breaches was addressed by some expert evidence. 3. I should say at the outset that the cross-claimant calculates the gross losses suffered in the sum of $4,889,708.03. The cross-claimant says that the maximum the plaintiff is entitled to recover on the Guarantee is $3,226,006.95. This takes into account the consideration that the overdraft of $200,000 was repaid in October 2008. However, it remains the case that in subsequent years the Bank permitted the account ending 7323 to go into overdraft for operating purposes. That overdraft at the time iInvest went into liquidation remains covered in my judgment by the agreements made on 2 April 2008. Taking this approach, the cross-claimant claims damages in the sum of $1,663,071.08. 4. The various heads of loss claimed involve lost farm income, cost of subdivision, sale of real property, loss of capital value of properties, cost of replacing stock, loss of supplies and equipment and the amount of the loan obtained from Mr Seaton. 5. The plaintiff's expert is Mr Andrew Firth, a Chartered Accountant. Mr Firth's role in the case was somewhat limited because as the able cross-examination of him demonstrated he had not attempted to demonstrate whether Plan A, if implemented would have been a success and what its outcomes might have been. Rather he proceeded to assess the net profit from rural enterprises on the assumption that all stock was sold in 2008 and that Brecon and Blackburn therefore generated no income thereafter (Affidavit, Andrew Firth, 30 July 2015 and Ex 1.21A). He assessed total net loss of profit at $1,419,236 (Ex 1.21A at 25). 6. On the assumption that additional stock had been purchased in 2009 to bring the number of livestock to the maximum carrying capacities of the properties, he would have assessed economic loss in the sum of $1,525,894 as a result of Plan A not being adopted (Ex 1.25A at 26). 7. There are criticisms of Mr Firth's methodology however I will not detail them all. In saying this, he accepted that sheep farming is a risky business with profitability being affected by fire, drought, flood, disease and adverse fluctuations in commodity prices (481.35 – 482.5T). He accepted that it would be necessary to take into account past contingencies given that past as well as future losses are likely to be hypothetical. No allowance was made for the residual carrying capacity of the properties even though they remain in the possession of the trustee. I would accept that his assessment of farm income losses would need to be discounted in the order of 15 per cent. 8. The Bank points out that the costs of subdividing the properties for the purpose of sale to implement Plan A were an essential part of Plan A and should not be visited upon the Bank. This applies to the claims made in respect of Yulgilbar and the so called concessional lot on Blackburn. The block of land referred to as the Mt Arthur block was sold in 2011. There is no suggestion that a sale at that point in time was occasioned by any unconscionable conduct on the part of the Bank. Yulgilbar was sold at a loss when compared with its valuation in 2007. On the other hand, it was sold for an amount commensurate with its purchase price only some 17 months earlier. There was no real suggestion in my opinion of a fire sale resulting in any additional loss. The property went to auction and there were subsequent negotiations with an interested purchaser which resulted in a sale. There is no reason to suppose the sale did not represent the market value at the time. 9. Another difficulty with these claims for capital losses which extend from Yulgilbar to the concessional lot and the subsequent sale of the Mt Arthur lot is that there is no current or reliable valuation evidence available. I admitted over the objection of the Bank evidence of the valuations that the Bank made at the time of the acquisition of various properties. But those valuations for security purposes are not necessarily a reliable guide to the market value of the properties at the time of sale, which I take to be the correct date for assessment bearing in mind the availability of pre-trial interest. This is a head of claim where at best the Court is left in the position of making an assessment at large. It seems uncalled for given my decision on liability issues. 10. A claim is made for the cost of replacing stock. The basis of the claim is that the stock was depleted at the insistence of the Bank. It is difficult to see how that claim could be made good even assuming a degree of unconscionability. As I have remarked elsewhere, the cross-claimant was the person who proposed however one looks at it the sale of certain stock. There was no evidence of any insistence by the Bank that he sell more stock than was advisable; nor was there any evidence that the Bank insisted upon him selling all breeding stock. Rather all discussions about selling sheep related to selling ewes. Given the Bank's flexibility in other matters, had he at any time said to Ms Abbas that the Bank needed to leave a sufficient number of breeding stock to continue operations to generate income in the future, I am of the view the Bank would have acceded to that request. I will not allow the cost of replacing stock. 11. The Bank makes the argument that in relation to the sale of stock, farm equipment and the like that there is no evidence that iInvest carried on the business of primary producer as trustee. But as I have said earlier, the Family Trust may lend itself to that interpretation. As I have said, however, there was no evidence of forced sale. Had the evidence been otherwise then some allowance should have been made under this head. 12. I am unable to determine the basis upon which the principal and interest on the Don Seaton loan could possibly be recoverable from the Bank and I would not allow this amount. 13. Orders My orders are: 1. Judgment for the plaintiff for possession of the whole of the land comprised in folio identifier 2/1166883 situated at and known as 1380 Cooks Hill Road, Yass in the State of New South Wales; 2. Judgment for the plaintiff for possession of the whole of the land comprised in folio identifier 1/1105157 situated at and known as 1205 Cooks Hill Road, Yass in the State of New South Wales; 3. Declare the plaintiff is entitled to judgment against the second defendant on the Guarantee in the sum of $3,438,000 plus enforcement costs; 4. Direct the parties to confer and agree upon the amount of the costs of enforcement of the guarantee and of interest to which the plaintiff may be due under s 100 Civil Procedure Act 2005 (NSW) to the intent of bringing in short minutes providing for entry of judgment on the Guarantee in favour of the plaintiff; 5. Liberty to the plaintiff to apply in default of agreement under order 4 for judgment on the Guarantee which liberty must be exercised within 10 days; 6. Dismiss the second cross-claim; 7. The second defendant and first cross-claimant to pay the plaintiff's costs of the proceedings; 8. Liberty reserved to the plaintiff to apply in respect of any special order as to costs which liberty must be exercised within 10 days of the date. ******* Amendments 27 August 2018 - Paragraph [5] - second sentence the word "second" changed to "first"; Paragraph [165] quoting Arden LJ the word "mortgagees" changed to "mortgagee's"; Paragraph [166] - first sentence [12] - [13] changed to [13]; Paragraph [203] - first sentence bracket closed after the word "agreed"; Paragraph [204] - [98] changed to [198]. 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: 27 August 2018