Supreme Court New South Wales Medium Neutral Citation: Australia and New Zealand Banking Group Limited v James (No 3) [2019] NSWSC 832 Hearing dates: 20 and 21 June 2019 Decision date: 05 July 2019 Jurisdiction: Equity - Commercial List Before: Ball J Decision: The defendant's notice of motion filed on 19 September 2017 is dismissed with costs Catchwords: JUDGMENTS AND ORDERS – Amending, varying and setting aside – Fraud, misrepresentation or suppressions of material fact – whether to set aside judgment by consent – whether misleading and deceptive conduct by plaintiff – discretionary considerations – whether defendant has arguable defence – delay – whether delay in advancing case of misleading and deceptive conduct disentitles defendant to relief MISLEADING AND DECEPTIVE CONDUCT – Australian Consumer Law – silence – whether reasonable expectation of being informed of information concerning activities of receivers – whether disclosure required by terms of guarantee – whether reasonable expectation of disclosure of other matters – reliance – whether defendant relied on absence of that information – whether knowledge of that information would have led defendant to not accept judgment by consent CORPORATIONS – Receivers and managers – duties – s 420A of Corporations Act 2001 (Cth) – whether arguable defence based on this provision – scope and function of s 420A – rights of guarantors – standard imposed on receivers – exclusion by contract Legislation Cited: Australian Consumer Law Australian Securities and Investment Commission Act 2001 (Cth) Corporations Act 2001 (Cth) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Buckeridge v Mercantile Credits Ltd (1981) 147 CLR 654; [1981] HCA 62 Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 Coles v Burke (1987) 10 NSWLR 429 Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31; [1992] FCA 851 Dimitrovski v Australian Executor Trustees Limited [2013] NSWSC 337 Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 GE Capital Australia v Davis (2002) 180 FLR 250; [2002] NSWSC 1146 Harvey v Phillips (1956) 95 CLR 235 In the matter of Wine National Pty Ltd, James Estate Wines Pty Ltd, Liquor National Pty Ltd [2014] NSWSC 507 James v Australia and New Zealand Banking Group Ltd (2018) 97 NSWLR 663; [2018] NSWCA 41 Kendell v Carnegie (2006) 68 NSWLR 193; [2006] NSWCA 302 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; [2010] HCA 31 OXS Pty Ltd v Sydney Harbour Foreshore Authority [2016] NSWCA 120 The Owners-Strata Plan No 57164 v Yau (2017) 96 NSWLR 587; [2017] NSWCA 341 Xenos v National Australia Bank Ltd & Anor [2007] NSWSC 973 Texts Cited: Code of Banking Practice Category: Procedural and other rulings Parties: Australia and New Zealand Banking Group Limited (ABN 11 005 347 522) (Plaintiff | Respondent) David Anthony James (Defendant | Applicant) Representation: Counsel: IM Jackman SC with R Foreman (Plaintiff | Respondent) D Pritchard SC with J Baird and N Condylis (Defendant | Applicant) Solicitors: Allens Linklaters (Plaintiff | Respondent) Allsop Glover Lawyers (Defendant | Applicant) File Number(s): 2013/306563 Judgment Introduction 1. By a notice of motion filed on 19 September 2017, the defendant, Mr David James, seeks an order setting aside a judgment obtained against him by consent by the plaintiff, Australia and New Zealand Banking Group Limited (ANZ), on 16 May 2014. The judgment, for the sum of $13,928,818.66, was obtained in respect of four guarantees Mr James had given to ANZ of debts owed by various companies controlled by him including TLT Nominees Pty Limited (Receivers and Managers Appointed) (In Liquidation) (TLT), Newcastle Liquor Wholesalers Pty Limited (Receivers and Managers Appointed) (In Liquidation) (NLW), James Australia Group Pty Ltd (In Liquidation) (Receivers and Managers Appointed) (JAG) and Print National Nominees Pty Ltd (In Liquidation) (Receivers and Managers Appointed) (PNN) (together, the Companies). 2. The Companies primarily carried on the business of a wholesale seller of alcoholic and non-alcoholic beverages. They operated in parallel with another group of companies controlled by Mr James that was primarily in the business of producing and selling wine. That group had borrowed money from Rabobank. Included in the group were Wine National Pty Limited (WN), Liquor National Pty Limited (LN) and James Estate Wines Pty Ltd (JEW), which was a party to a share farming agreement dated 10 July 2002 relating to a winery at Baerami and which jointly operated the cellar door sales from the winery. 3. As well as the guarantees obtained from Mr James, ANZ had also obtained security for the debts owed to it in the form of charges over the assets of the Companies. 4. Mr James seeks to set aside the judgment on the ground that he was induced to consent to it by the misleading and deceptive conduct of ANZ. That misleading and deceptive conduct is alleged to have had two components. First, it is alleged that Mr James was misled at the time he agreed to the consent judgment into believing that the security held by ANZ from the Companies was sufficient to repay the borrowings the group had made. The misleading conduct was the failure of ANZ to disclose before judgment was entered that the receivers who had been appointed by ANZ had sold stock belonging to TLT and NLW for amounts that were substantially less than the book value of the stock held by those companies as disclosed in a report prepared by PricewaterhouseCoopers (PwC) at the request of ANZ prior to their appointment as receivers. Mr James says, in effect, that had he known the true position he would not have consented to judgment but instead would have sought to advance a case that the receivers had sold the stock at an undervalue in contravention of s 420A of the Corporations Act 2001 (Cth) and had, in breach of their duties, released the receivers appointed by Rabobank from claims the receivers appointed by ANZ had to stock stored at the Baerami property – claims that he now seeks to advance if judgment is set aside. 5. Secondly, Mr James contends that ANZ engaged in misleading and deceptive conduct by failing to disclose to him that ANZ had attempted on 10 occasions between 3 September 2010 and 3 February 2012 to manipulate the bank bill swap rate (BBSW) in contravention of s 12CC(1) of the Australian Securities and Investments Commission Act 2001 (Cth) (as it then was) and that that conduct had been the subject of an investigation by the Australian Securities and Investments Commission (ASIC). Mr James contends that had he known those matters he would not have trusted ANZ and therefore would not have been prepared to agree to the consent judgment. Originally, Mr James took the position that if the consent judgment was set aside, he would seek to advance a defence based on that conduct. However, at the hearing of the notice of motion, Mr Pritchard SC, who appeared for Mr James, indicated that Mr James would no longer seek to rely on that defence. 6. ANZ denies that it engaged in misleading and deceptive conduct or that Mr James relied on any non-disclosure by it. It also claims that, even if Mr James is able to make out a case that he was misled by ANZ's conduct, the Court should refuse relief on discretionary grounds. Three grounds are identified. First, ANZ submits that it would be futile to set aside the judgment because Mr James has no arguable defence. Second, ANZ relies on Mr James's delay in seeking to set aside the judgment. Third, in the case of the claim based on the attempt to manipulate the BBSW swap rate, ANZ submits that the Court would not set aside the judgment on that basis to permit Mr James to advance an unrelated case based on a contravention of s 420A of the Corporations Act. The guarantees and Code of Banking Practice 1. As I have said, Mr James entered into four guarantees. The first was dated 19 August 2005. Under that guarantee, Mr James guaranteed the debts owed to ANZ by JAG. The second was dated 21 December 2005. Under that guarantee, Mr James guaranteed money owing by PNN. The third was dated 16 November 2006. It related to moneys borrowed by PNN and LNW. The fourth was entered into on 9 April 2010. It related to moneys borrowed by TLT. 2. Each of the guarantees is in substantially the same terms. Each provides that: The applicable provisions of the Code of Banking Practice apply to this Guarantee. 1. Clause 2.4 states: No deduction Payments I make must be in cleared funds and free of any set off or deduction, except for taxes where required by law. I will not deduct amounts I claim are owing to me by ANZ or any other person. 1. Clause 4 relevantly provides: Unconditional nature of obligations My obligations under this Guarantee are unconditional. They are not affected by anything which might have released me from all or part of my obligations, or limited them, if I had not agreed to this clause. 1. Clause 9 provides: Other security Any other security for all or part of the Guaranteed Money or Guaranteed Arrangements is independent of this Guarantee. Nothing affecting any security will affect my obligations under this Guarantee. ANZ can enforce this Guarantee and any security in any order it wishes, or can choose not to enforce any security at all. I cannot at any time ask ANZ to enforce any security in a way which benefits me or maximises my rights. Until the Guaranteed Money is paid in full, I cannot claim the benefit of, and have no right to, the security. This does not limit clause 4. 1. Clause 13 provides: What does ANZ have to tell me? If any Guaranteed Arrangement is a Regulated Arrangement then the Consumer Credit Law gives me rights to certain information and warnings. Those rights are summarised in the information statement, 'Things You Should Know About Guarantees'. If the Code of Banking Practice applies (the Details Page will say if it does) then I have rights to certain other information. In all other respects (and except as expressly set out in this Guarantee or as required by any law or applicable code of conduct): (a) ANZ is not required to do anything in relation to, or tell me anything concerning, the Customer's financial and business condition and affairs or its transactions with ANZ; and (b) ANZ does not have to tell me if anything happens in relation to the Guaranteed Money or the Guaranteed Arrangements or any security or rights. It is my responsibility to find it out. Subject to what appears above, this applies both before and after I sign this Guarantee. 1. Clause 16 provides: Set off If I have an account with ANZ, ANZ may (but does not have to) use any credit balance in that account to pay any Guaranteed Money which is due and payable. To the maximum extent allowed by law I give up any rights to set off any amounts ANZ owes me against amounts I owe under this Guarantee. 1. The Code of Banking Practice sets out in Part B a number of general obligations of participating banks. Mr James relies on cl 2, which provides: Our key commitments to you 2.1 We will: (a) continuously work towards improving the standards of practice and service in the banking industry; (b) promote better informed decisions about our banking services: (i) by providing effective disclosure of information; (ii) by explaining to you, when asked, the contents of brochures and other written information about banking services; and (iii) if you ask us for advice on banking services: (A) by providing that advice through our staff authorised to give such advice; (B) by referring you to appropriate external sources of advice; or (C) by recommending that you seek advice from someone such as your legal or financial adviser; (c) provide general information about the rights and obligations that arise out of the banker and customer relationship in relation to banking services; (d) provide information to you in plain language; and (e) monitor external developments relating to banking codes of practice, legislative changes and related issues. 2.2 We will act fairly and reasonably towards you in a consistent and ethical manner. In doing so we will consider your conduct, our conduct and the contract between us. 2.3 In meeting our key commitments to you, we will have regard to our prudential obligations. 1. The Code of Banking Practice also contains specific obligations of disclosure in relation to guarantees. However, those obligations are excluded by cl 28.15 in relation to a "sole director guarantor", which is defined to mean "a guarantor of a Facility who is a director of a company that has only one director, and that company is to be the debtor for the Facility". It is common ground that Mr James falls within the definition of "sole director guarantor". Factual background 1. By 12 April 2013, a number of the facilities that had been guaranteed by Mr James had fallen due for repayment and had not been repaid. On 12 April 2013, ANZ wrote to Mr James stating that it was prepared to continue to forbear from enforcing its securities on the basis of a number of conditions, including a condition that an independent review be conducted by PwC in relation to various aspects of TLT's business. That review commenced shortly afterwards. 2. On 23 May 2013, PwC sent Mr James a draft redacted version of their report. The covering email enclosing a copy of the redacted draft said: ANZ has a draft version of the full report which we will finalise once you confirm the facts of the report are factually correct by return email. Mr James gave that confirmation in an email dated 30 May 2013. 1. The version of the report sent to Mr James included a section dealing with inventory. That section observed that inventory was situated at four locations, which were warehouses in Sydney and Newcastle, the winery at Baerami and a warehouse leased by TLT at Denman. 2. The draft report contained the following table summarising the position in relation to inventory: 1. Commenting on the realisable value of the inventory, the report said: • For packaged inventory (excluding James Estate wine), we have used 90% and 75% of costs as our high and low realisable values respectively. Our low scenario assumes a nil recovery from the James Estate bulk and packaged wine as the title of the grapes is uncertain. 1. In relation to debtors, the draft report stated: • A debtor listing as at 29 April 2013 totalling $9.1m was provided by management which excluded intra-company receivables ($180k between TLT warehouses), bad and doubtful debts and intercompany balances of $2.3m. We have not been provided a complete balance sheet to this date. A note in the draft report also states "The trade debtors appear to be supported by genuine customer invoices and delivery documentation". 1. A final copy of PwC's report was provided to ANZ on 31 May 2013. The table set out above was repeated in the final report. 2. In the "At a glance" section of the final version of the report (which was not provided to Mr James in draft), PwC makes the following observations in relation to the estimated security position: • In the event that ANZ hypothetically chose to exercise their security over TLT only, we have estimated the financial outcome in the Selected Information section on page 19. • A full recovery is estimated in a high scenario, however, in a low scenario ANZ may face a shortfall of $1.0m before realisation costs. However, if the bank enforces its security over the related properties as well, it appears that it should recover its debt in full as we understand from management that the properties could be worth between $3-$4m, but no valuations have been provided. • The major item impacting the range of outcomes is the potential ownership issue over the bulk and packaged James Estate wine. Although a formal grape supply agreement has recently been provided and title to the wine should vest with TLT, there is a risk that JEW will dispute TLT's ownership and/or take possession of the wine or claim a lien over it. 1. On 21 June 2013, Allens Linklaters (Allens), acting for ANZ, gave notice of default but indicated that ANZ would forbear from enforcing securities until 26 August 2013. 2. On 1 August 2013, Allens served a notice of demand on NLW and on 8 August 2013 they served notices of demand on TLT and JAG. On 13 August 2013, Allens sent a letter to TLT withdrawing ANZ's agreement to forbear from enforcing securities before 26 August 2013. 3. On 19 August 2013, ANZ appointed PwC as receivers. At the same time, ANZ appointed Mr Shaun Fraser and Mr Christopher Honey of McGrathNicol as joint and several administrators of JAG, TLT, PNN, NLW and Rugama Trading Pty Ltd, the beneficial owner of the shares in TLT and NLW. 4. Mr James says that on 26 August 2013 he was admitted to the Lake Side Clinic, Warners Bay Private Hospital where he was treated for a major depressive disorder. He remained there until 1 October 2013, when he was transferred to the Mater Mental Health Service at Waratah, where he remained until 4 October 2013. 5. On 30 August 2013, Allens served a notice of demand on Mr James demanding the payment of $14,133,818.66 under the four guarantees given by him. 6. On 11 September 2013, McGrathNicol provided a report to creditors (the Creditors Report) of the companies to which they had been appointed as administrators. The report stated: The Receivers and Managers are currently conducting a sale process for the business and assets. This process is ongoing and is uncertain at this stage whether a successful sale will eventuate. The Receivers and Managers anticipate that there will be a significant shortfall to the secured creditor and therefore a return to unsecured creditors from the sale of businesses and assets is remote. 1. On 11 October 2013, ANZ commenced these proceedings against Mr James claiming the sum of $14,133,818.66 under the guarantees. 2. On 15 November 2013, ANZ filed a notice of motion in these proceedings for summary judgment. That notice of motion was supported by an affidavit of Mr David Michael Popkin, a solicitor with Allens. Paragraph 9 of that affidavit states: I am informed by James Bitossi, an associate director of the Bank, and believe, that as of the date of this affidavit Mr James has failed to pay the Bank the amount of $14,133,818.66 demanded by the Bank under the terms of the Guarantees or any amount. 1. At the time the affidavit was sworn, Mr James had not filed an appearance. His brother, Mr Murray James, appeared for him by leave on the first return date of the summons on 1 November 2013. 2. On 22 November 2013, Hammerschlag J entered summary judgment for ANZ against Mr James for $14,133,818.66 together with interest from 19 August 2013 to 22 November 2013, but stayed that order for a period of 14 days to give Mr James an opportunity to make an application to set aside the judgment. 3. On 13 December 2013, Hammerschlag J ordered that the summary judgment entered on 22 November 2013 be set aside. Hammerschlag J also gave directions in relation to the further progress of the matter, including a direction that ANZ serve any further evidence in chief by 20 December 2013. 4. By that stage, the receivers had commenced to sell stock held by TLT and NLW. In all, between 25 September 2013 and 28 April 2014, they sold TLT's stock for $742,016 (of which $611,828.98 was realised by the receivers) and NLW's stock for $402,892 (of which $344,169.41 was realised by the receivers). 5. On 19 December 2013, Mr John Symons, an employee of ANZ, swore an affidavit. Paragraph 31 of that affidavit stated: As at the date of this affidavit, the Companies have not repaid to ANZ in part or in full any amounts owing by them to ANZ demanded in the letters dated 8 August 2013 or any amounts of interest, fees and charges accruing since that date, with the exception of an amount of $315,663.20 that was applied by ANZ to TLT Nominees' Variable Rate Fully Drawn Advance Facility by way of set-off from an account held with ANZ in the name of Print National Australia Pty Ltd ACN 107 512 649 (Print National Australia), which I understand is also a company associated with Mr James. A true copy of a company extract in relation to each Print National Australia obtained from ASIC by Allens and provided to me is at Tab 1. 1. Paragraph 34 stated: As at 19 August 2013, the amounts owing by the Companies to ANZ under the JAG Facility and the TLT Group Facility were as follows: (a) James Australia Group $386,029.79 (b) Print National Nominees $1,529,653.54 (c) TLT Nominees and/or Liquor National Wholesale: (i) Variable Rate Fully Drawn Advance Facility $11,729,718.83 (ii) Overdraft Facility $198,416.50 (iii) Indemnity/Guarantee Facility $290,000.00 Total $14,133,818.66 1. On 29 January 2014, Mr James, at a time when he was acting for himself, served a notice to produce on ANZ seeking relevantly documents "recording any defaults, breaches and or notifications of any intended recovery actions as served on the companies and or guarantors" of various companies controlled by Mr James, including TLT. At the same time, he served a subpoena on PwC. The drafting of the subpoena is convoluted, although it is plain that what was sought were documents recording the interest of any person in purchasing, or investing in, "the David James Group" during the period 1 January 2011 to 26 August 2013. 2. On 3 March 2014, ANZ and PwC filed notices of motion to set aside the notice to produce and subpoena. Subsequently, Mr James advised the solicitors acting for ANZ and PwC that he did not press them. 3. On 3 March 2014, Mr James filed a Commercial List Response. In that response, he admitted all of ANZ's allegations, but denied that he was liable under the guarantees on the basis that a sale of his businesses for $60,925,000 pursuant to an agreement entered into on 6 October 2012 did not proceed because of breach of confidentiality obligations owed by Grant Thornton, who had been appointed by ANZ on 13 June 2012 for the purposes of conducting a review of the Companies. At the same time, Mr James filed a cross-claim against Grant Thornton and ANZ relying on the same matters. 4. On 28 March 2014, Mr James filed a Commercial List Amended Cross Claim Statement, which did not include a claim against ANZ. That prompted Allens to write to Dib Lawyers on 15 April 2014 indicating that in light of the admissions made in the Commercial List Response and the discontinuance of the cross-claim against ANZ, ANZ proposed to seek summary judgment. 5. On 19 March 2014 the receivers filed Form 524 Presentation of Accounts for TLT and NLW for the period 19 August 2013 to 18 February 2014. The accounts for TLT disclosed that the total receipts for it were $2,236,132.71, which included receipts from the sale of stock of $712,911.11 on 22 January 2014 and $34,710.48 on 23 January 2014. The accounts for NLW disclosed that the total receipts for it were $1,630,408.28, which included receipts from the sale of two lots of stock on 23 January 2014, one of $368,804.89 and the other of $27,739.80. 6. On 23 April 2014, ANZ filed a notice of motion seeking summary judgment in these proceedings. That notice of motion was supported by an affidavit filed by Mr Popkin sworn on the same day. In that affidavit, Mr Popkin states that he relied on the facts set out in his affidavit dated 15 November 2013 and the affidavit of Mr Symons dated 19 December 2013. 7. It is common ground that prior to 16 May 2014 the receivers had informed ANZ that their investigations had caused them to believe that: 1. The total of all stock at the Homebush Bay warehouse as at 19 August 2013 was approximately $4.2 million; 2. The total of all TLT stock at the Homebush Bay warehouse as at 19 August 2013 was approximately $1.46 million; 3. There was no stock of either LN or WN at the Homebush Bay warehouse as at 19 August 2013; and 4. Levels of TLT stock at the Homebush Bay warehouse as at 19 August 2013 were very different from the levels of TLT stock at that warehouse the subject of the PwC report in May 2013. 1. The motion for summary judgment came on for hearing before Hammerschlag J on 16 May 2014. Mr James, who attended the hearing, was represented by Mr Ashhurst SC instructed by Mr Kekatos of Dib Lawyers. Mr James took issue with the amount claimed by ANZ on the basis that it had failed to give credit for an amount of $205,000 that had been held as a cash deposit in respect of the indemnity/guarantee facility of $290,000. The representatives of ANZ accepted that Mr James was entitled to a credit of $205,000, with the result that judgment was entered by consent for $13,928,818.66 together with interest from 19 August 2013 to 16 May 2014. 2. Mr James says in his affidavit evidence that, as no amounts for realisation were disclosed in Mr Symons' affidavit, he "understood and assumed that there had been no realisations to that date, and that accordingly the assets of TLT and NLW had not been sold with the receipts from such sale accounted to ANZ". 3. Mr James also says in an affidavit sworn on 12 June 2019 that: As at 16 May, 2014 it was my understanding and belief, based upon my reading of these affidavits [that is, the affidavit of Mr Symons and the two affidavits of Mr Popkin] and the draft PWC report, that realisations of the stock and debtors of TLT [and NLW] were likely to be as set out in the draft PWC report and would either fully satisfy the claim of ANZ Bank against me, or there might be a small shortfall as set out in that report. 1. At the time the consent judgment was entered, it was agreed that the judgment would be stayed until 2 October 2014 pending the determination of the cross-claim Mr James had filed against Grant Thornton. That cross-claim was dismissed on 26 September 2014 and, in accordance with its terms, the stay came to an end on 2 October 2014. 2. Mr Pritchard submitted that the judgment was stayed for two reasons. One was to await the outcome of the cross-claim against Grant Thornton. Another was to give the receivers time to sell the secured property. That submission, however, is inconsistent with the terms of the stay and the evidence given by Mr James. The stay was in these terms: Enforcement of Orders 1 and 2 above is stayed to 2nd October 2014 or such other date as is ordered by the Court with liberty to the defendant to apply to extend the stay if judgment in the Cross-Claim in this proceedings is not delivered by 2nd October 2014. 1. It is plain from the terms of the order that the purpose of the stay was to give Mr James time to pursue his cross-claim as a source of funds to pay ANZ. Moreover, that was the only reason for the stay mentioned by Mr James in his affidavit evidence. When he was cross-examined on the issue, Mr James initially denied that he had asked for a stay pending realisation of the secured assets, although he later sought to resile somewhat from that evidence. He gave this evidence: You didn't ask for a stay of the judgment pending any realisations by the receivers of secured assets, did you? A. No. Q. I suggest to you that if you thought that those realisations would be equal to or greater to the guaranteed debt, then you would have sought a stay of the judgment pending those realisations being made? A. No, I believed that the receivers will have realised the assets by 2 October and there would be an excess of funds over and above the debt owed to ANZ. Q. But the stay was only pending the determination of the cross‑claim against Grant Thornton, not pending the realisation of assets, was it? A. It was only for one reason, but it did a dual purpose for me. 1. In my opinion, Mr James's initial denial should be accepted. It is consistent with his affidavit evidence and the terms of the order. It was not qualified substantially by his later evidence. 2. On 6 June 2014, the receivers distributed $400,000 to ANZ. They distributed further amounts to ANZ of $1,427,211.93 on 13 October 2014 and $350,000 on 13 November 2014. 3. On 14 October 2014, ANZ issued a bankruptcy notice against Mr James. 4. At some stage in November 2014, Mr James became aware that the receivers had made some distributions to ANZ. How he did so, is not apparent from the evidence. 5. On 1 December 2014, the first bankruptcy notice issued by ANZ was set aside by consent, since it had taken no account of the amounts received by ANZ. 6. On 9 December 2014, ANZ issued a second bankruptcy notice against Mr James, which gave credit for the amounts it had received. 7. On 24 April 2015, a sequestration order was made against the estate of Mr James on the application of the Commonwealth Bank of Australia. There was an appeal from that judgment and ultimately the sequestration order was set aside by the Full Court of the Federal Court on 18 August 2015. 8. On 19 August 2015, ANZ issued a creditor's petition against Mr James based on its second bankruptcy notice. 9. On 11 February 2016, Mr James commenced proceedings in this Court claiming damages against ANZ and PwC in connection with the sale of the secured assets at what is alleged to have been an undervalue (the 2016 Proceedings). At the same time, Mr James applied for a stay of these proceedings. 10. The application for a stay was dismissed on 23 February 2016. 11. On 5 April 2016, the Federal Court dismissed ANZ's creditor's petition on the ground that it was not satisfied that the bankruptcy notice on which it was based had been correctly served. 12. On 1 December 2016, ANZ and PwC filed a notice of motion seeking summary judgment or a strike out of the 2016 Proceedings. That notice of motion was heard by Stevenson J on 24 February 2017. On 9 March 2017, his Honour delivered judgment dismissing the proceedings on the basis that any rights Mr James had had merged in the consent judgment of 16 May 2014. An appeal from Stevenson J's judgment was dismissed on 15 March 2018 and on 14 September 2018 the High Court refused special leave to appeal from the Court of Appeal's judgment. 13. In the meantime, on 23 February 2017 ANZ issued a third bankruptcy notice against Mr James. Relevant legal principles Principles relating to setting aside a consent judgment 1. There are two bases on which the Court may set aside a consent judgment. 2. First, the Court has an inherent power to set aside a judgment entered by agreement between the parties on any basis on which the agreement on which it was based could be set aside. As the High Court explained in Harvey v Phillips (1956) 95 CLR 235 at 243-4: The question whether the compromise is to be set aside depends upon the existence of a ground which would suffice to render a simple contract void or voidable or to entitle the party to equitable relief against it, grounds for example such as illegality, misrepresentation, non-disclosure of a material fact where disclosure is required, duress, mistake, undue influence, abuse of confidence or the like. Although all the examples given by the High Court were examples of where a court may set an agreement at common law, there is no reason to think, and it was not suggested that, some different principle applied where the right is said to be statutory. 1. Secondly, a judgment may be set aside under Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 36.15(1), which provides: A judgment or order of the court in any proceedings may, on sufficient cause being shown, be set aside by order of the court if the judgment was given or entered, or the order was made, irregularly, illegally or against good faith. 1. There is no suggestion in this case that the consent judgment was obtained irregularly or illegally. The question is whether it was obtained "against good faith". In Coles v Burke (1987) 10 NSWLR 429, Kirby P (with whom Samuels and McHugh JJA agreed) said at 437: The genus which is involved in the phrase "irregularly, illegally or against good faith" appears to me to be misconduct or dishonourable conduct of the person who procured the judgment. See also Kendell v Carnegie (2006) 68 NSWLR 193; [2006] NSWCA 302 at [60] per Bryson JA (with whom Hodgson and McColl JJA agreed). 1. In both cases, the Court has a discretion whether to exercise the power or not: see Dimitrovski v Australian Executor Trustees Limited [2013] NSWSC 337 at [11] (in relation to UCPR r 36.15) and The Owners-Strata Plan No 57164 v Yau (2017) 96 NSWLR 587; [2017] NSWCA 341 at [81]-[83] per Beazley P (with whom Leeming JA and Emmett AJA agreed) (in relation to the inherent power). Matters relevant to the exercise of the Court's discretion include whether the rights of third parties would be affected, whether the amount in question is insignificant, whether there has been unreasonable delay and whether it would be futile to set aside the judgment because the defendant has no defence. 2. In the present case, it is said that the judgment obtained by ANZ is liable to be set aside because the agreement on which it was based was induced by the misleading and deceptive conduct of ANZ. Those same facts are said to establish that the judgment was obtained against good faith. 3. In final submissions, Mr Pritchard submitted that it was possible for the Court to conclude that the judgment obtained against Mr James was against good faith even if the Court was not satisfied that ANZ had engaged in misleading or deceptive conduct of a type that would be amenable to relief under the Australian Consumer Law. How that could be so, however, is not easy to understand. The only conduct relied on by Mr James is the conduct which is said to be misleading and deceptive conduct and which induced Mr James to consent to judgment against him. If that claim fails, it is difficult to see how it could still be said that that same conduct was against good faith. 4. Mr Pritchard did point to other cases where the Court has held that a plaintiff's conduct was against good faith even though the defendant was not misled. One such case was Xenos v National Australia Bank Ltd & Anor [2007] NSWSC 973. But that case is of not assistance in this context. It was not concerned with a consent judgment. It was a case where judgment was set aside because the Court was misled by the failure of the plaintiff to disclose a relevant fact on an ex parte application. Plainly, misleading and deceptive conduct is not the only basis on which a judgment can be set aside. The point, however, is that in this case Mr Pritchard was unable to point to any particular facts of the case which might make ANZ's conduct against good faith even though it was not misleading or deceptive. For that reason, it is appropriate to focus on the question whether Mr James would be entitled to relief for misleading or deceptive conduct. Relevant principles relating to misleading and deceptive conduct 1. The case ANZ engaged in misleading and deceptive conduct is a case that it engaged in conduct of that character by silence. Silence is a circumstance like any other to be taken into account in determining whether conduct is misleading or deceptive. The question is whether in all the circumstances the conduct leads or is likely to lead a person into error: Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; [2010] HCA 31 at [15]ff per French CJ and Kiefel J. Normally, a practical way of answering that question is by asking whether the person who is said to have been misled or deceived had a reasonable expectation of being told what the person was not: Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31; [1992] FCA 851 at 32. See also OXS Pty Ltd v Sydney Harbour Foreshore Authority [2016] NSWCA 120 at [178]; Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 at [209]. The test is objective: Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd at [20]; Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 at [25] per French CJ. 2. The question whether conduct is misleading or deceptive or likely to mislead or deceive is distinct from and logically anterior to the question whether a person has suffered loss or damage because of the conduct of another person and is therefore entitled to damages under s 236 of the ACL or an order under s 237, although there may be practical overlaps in the resolution of the two questions: Campbell v Backoffice Investments Pty Ltd at [24] per French CJ. In the present case, it was common ground that the question of causation raised by the second issue turned on whether Mr James relied on the conduct said to be misleading and deceptive. Did ANZ engage in misleading or deceptive conduct? Realisations by the receivers 1. Mr James gave particulars of the misleading and deceptive conduct on which he relies in a document titled "Particulars of Misrepresentation by Silence of ANZ". 2. Mr James's case is that ANZ engaged in misleading and deceptive conduct by failing to disclose to him the fact that the assets of TLT and NLW had been realised before 16 May 2014 and that only $2.177 million was recovered by the receivers. The error that is said to have induced Mr James is a belief that "there had been no realisations or recoveries by ANZ or by the Receivers on its behalf under ANZ's securities to that date which would materially affect the amount for which ANZ was seeking to obtain judgment against him" (Particulars, para 42). That particular is poorly drafted. On one interpretation, it states that the conduct complained of suggested that ANZ was entitled to judgment in the terms it sought, which plainly (subject to the adjustment of $205,000) it was. As is apparent from Mr James's affidavit evidence, his real complaint is that ANZ's conduct gave the misleading impression that the receivers had not sold any assets and that nothing had changed since PwC's report. 3. The particulars given by Mr James of ANZ's misleading and deceptive conduct are extensive. Mr James sought to supplement them in his final written submissions. In substance, though, Mr James contends that ANZ's silence was misleading and deceptive having regard to the following matters: 1. ANZ had a duty to act ethically and in good faith under the Code of Banking Practice; 2. To ANZ's knowledge, Mr James was aware from PwC's report of May 2013 that it was expected that the security held by ANZ would be sufficient to cover the amount owed to it; 3. ANZ commenced proceedings to recover the full amount of the debt owing to it and relied on affidavits deposing to the full amount of the debt owed to it without referring to any recoveries that had been made by the receivers; 4. ANZ did not disclose the realisations that had been made by the receivers during the discussions on 16 May 2014 in which Mr James raised the fact that ANZ had not given him credit for the amount of $205,000 it had received; 5. Between January and March 2014, the solicitors for ANZ and PwC refused to produce documents in relation to recoveries as requested by Mr James; 6. As at 16 May 2014, ANZ had knowledge of Mr James's illness and the fact that he was admitted to hospital. 1. The last two of these matters are either wrong factually or irrelevant. 2. It is not correct to say that ANZ and PwC refused to produce documents in relation to recoveries as requested by Mr James. The "requests" relied on are the notice to produce served by Mr James on ANZ and the subpoena served on PwC. Neither the notice to produce nor the subpoena sought documents concerning recoveries made by the receivers. The notice to produce relevantly sought documents relating to recovery actions served on various companies. The subpoena sought documents relating to any potential sale of or investment in companies controlled by Mr James. Neither could reasonably have been understood to be seeking documents relating to the amounts the receivers had recovered. 3. Moreover, it is difficult to see how ANZ's and PwC's refusal to supply information about the realisation of assets could have led anyone into believing that the position had not changed since the information contained in the PwC report. At most, the refusal to supply information was neutral. 4. The evidence is that Mr James was discharged from hospital on 4 October 2013. There is no evidence concerning the state of Mr James's mental health at the time he consented to judgment on 16 May 2014, some seven months later. At that time, he was represented by able senior counsel. Mr James was sufficiently alert to pick up the fact that ANZ had not given him credit for the $205,000 in cash held in respect of the facility for $290,000 and to seek an adjustment in the amount of the consent judgment to reflect that fact. In addition, it is unclear how it is said that Mr James's mental state contributed to a reasonable expectation on his part that he would be told that the amount realised for the assets was substantially less than the amount of the debt. 5. At the heart of Mr James's case is the contention that ANZ created the impression that the secured assets would be sufficient to repay the debt and it was misleading of it not to correct that misleading impression. There are, however, difficulties with that contention. 6. First, it is not correct to say that, assuming Mr James believed that the secured assets would be sufficient to discharge the debt owed to ANZ, that that belief had been created by ANZ or PwC. The PwC report was based on the information supplied by the relevant companies, which were controlled by Mr James. PwC was not prepared to finalise their report until Mr James confirmed the factual information it contained, which is what it did. It was not Mr James that relied on PwC. Rather, it was PwC that relied on Mr James. 7. Second, contrary to Mr James's affidavit evidence, it could not be said that the affidavits relied on by ANZ created the impression that nothing had changed since the PwC report. Those affidavits stated the amount still owing to ANZ at the times the affidavits were sworn. On their face, they did not purport to deal with the recoveries that had been made by the receivers. The receivers were appointed on 19 August 2013. Consent judgment was entered on 16 May 2014. The principal assets of TLT and NLW were debtors and stock. There was no reason to think that the debtors would be particularly difficult to collect or that the stock would be particularly difficult to sell. In the normal course of events, it would have been expected that, by the time the consent judgment had been entered, the receivers would have recovered most of what they could from the secured assets. 8. Moreover, Mr James's affidavit evidence is directly contradicted by the evidence he gave in cross-examination, when the following exchange occurred: Q. Now can I ask you, 16 May 2014 was about nine months after the receivers were appointed on 19 August 2013, correct? A. Yes. Q. In that nine‑month period, may we take it you assumed that the receivers had collected some debts? A. Yes. Q. The receivers had realised some property? A. No, they hadn't - real estate property? Q. Had realised some secured assets? A. Yes, they, they were doing their job. I assume they were doing their job. Q. You assumed that they were selling wine, correct? A. Trading the business, selling wine, yep. Q. So you assumed, did you not, that in that nine‑month period, the receivers, PricewaterhouseCoopers, had actually collected some debts and sold some wine, yes? A. I assume so. 1. The only reasonable inference that could be drawn from the fact that ANZ was still pursuing its claim against Mr James and had not received any amount from the receivers was that recoveries from the sale of secured assets were likely to fall short of the debt owed to ANZ. If it were otherwise, it is to be expected that ANZ would have received at least some amount from the receivers in reduction of its debt. And if the true position is that the secured assets were sufficient to repay ANZ, it is to be expected that that would have become apparent by May 2014, making judgment against Mr James unnecessary. Far from suggesting that ANZ was likely to recover the full amount of the debt owed to it from the securities it held, the affidavits in context and the fact that ANZ was still seeking judgment for the full amount of its debt suggested that the recoveries had been non-existent or minimal. 2. In final written submissions, Mr James contends that the fact that ANZ chose to pursue him revealed nothing because ANZ had a right to elect in whatever order it enforced its securities. That ANZ had that right may be accepted. The question still remains why it would go to the cost and expense to pursue Mr James when it had already appointed receivers and, as Mr James conceded, it was to be expected that they would already have realised the secured assets. 3. Third, the Code of Banking Practice does not provide any assistance to Mr James. That Code is incorporated by the terms of the guarantees. Clause 13 of the guarantees specifically states that, except as required by the Code of Banking Practice, ANZ was not required to tell Mr James anything about "the Customer's financial and business condition and affairs or its transactions with ANZ" or "[I]f anything happens in relation to the Guaranteed Money or the Guaranteed Arrangements or any security or rights. It is my responsibility to find it out". The specific disclosure obligations contained in the Code of Banking Practice were excluded in the case of Mr James. In any event, none of them required disclosure of the amount realised from other securities. 4. Mr James relies on the general obligations set out in cl 2.1 of the Code of Banking Practice. But nothing in cl 2.1 can be interpreted as imposing specific obligations of disclosure. They are broad statements of principle that apply to all types of relationships involving the provision of banking services. They set out the standards the relevant bank will seek to apply in discharging specific obligations it has. They are not themselves the source of those obligations. 5. Fourth, there is no other reason why Mr James could have had a reasonable expectation that ANZ would disclose to him the level of recoveries made by the receivers before he consented to judgment. A normal incidence of the appointment of receivers is that they would set about realising the property in respect of which they were appointed. Mr James understood that, as the evidence quoted in para 84 above demonstrates. The level of recoveries made by the receivers was not directly relevant to the amount for which ANZ was entitled to obtain judgment. Under the terms of the guarantees, ANZ was entitled to judgment for the full amount outstanding at the time judgment was sought. It did not have to give credit for possible recoveries, although of course it did have to give credit for actual recoveries. On its face, the amount recovered by the receivers was irrelevant to the amount for which judgment should be entered. 6. Mr James's case is that it was relevant to him because had he known the true position he would not have consented to judgment but instead would have pursued a claim under s 420A of the Corporations Act. But how he could have had a reasonable expectation that ANZ would disclose the amount recovered by receivers for that purpose is unclear. It was not obvious from the fact that there was a large shortfall that Mr James might want to advance a case that the stock was sold at an undervalue rather than agree to judgment against him. If that is why the information was relevant, it is to be expected that Mr James would have made his own enquiries. The information was available publicly. He could have asked ANZ for it at the time he agreed to judgment. However, he did not do so. Why, it might be asked, was it reasonable for Mr James to expect ANZ to provide the information when Mr James did not ask for it in circumstances where he admits that he expected the receivers to have done their job and sold the stock? Attempts to manipulate the BBSW rate 1. There is no basis on which it could be said that Mr James had a reasonable expectation that ANZ would disclose its attempts to manipulate the BBSW rate or ASIC's investigation of that matter. The fact that certain employees of ANZ had attempted to manipulate the BBSW rate who had nothing to do with the facilities guaranteed by Mr James was entirely irrelevant to the question whether Mr James should consent to judgment. 2. Mr James attempts to make those matters relevant by saying that he would not have trusted ANZ if he had known the true facts and they were relevant for that purpose. That submission cannot be accepted. Mr James does not explain why those with whom he dealt could not be trusted because employees of ANZ who worked in a different part of the bank and who had nothing to do with the facilities he had guaranteed had attempted to manipulate the BBSW rate. If that contention was correct, the same could be said about any wrongdoing by any employee of ANZ, with the result that any wrongdoing by any employee of ANZ would have to have been disclosed. Plainly, that conclusion is absurd. Did Mr James rely on the conduct said to be misleading and deceptive? Realisations by the receivers 1. The main evidence of reliance is given by Mr James himself. As I have said, he gives evidence that if ANZ had disclosed the amount realised by the receivers he would not have consented to judgment but instead would have pursued a case that the assets of TLT and NLW were sold at an undervalue. 2. There is a question whether Mr James already knew that there would be a shortfall from the sale of the assets the subject of ANZ's security. In my opinion, he did. 3. On 12 December 2013 and 28 February 2014, Black J heard an application to stay the winding up of JAG and Wine Investment Services Pty Ltd, another company controlled by Mr James. Mr James was one of the applicants, for whom Mr Allen appeared. Mr James concedes that he was present on the first day of that hearing. He says that he cannot recall whether he was present on the second day, although the likelihood is that he was. The fate of Mr James's companies was obviously important to him. He was a party to the proceedings and he had attended the first day of the hearing. It is to be expected that he would also attend the second. On the first day of the hearing, a copy of the Creditors Report was tendered. The likelihood is that Mr Allen was given a copy. That is the normal practice and the transcript records Mr Allen as saying "I have only just been provided with it …". 4. Mr James denies in his affidavit evidence that he saw a copy of the Creditors Report. However, I do not accept his denial. In my opinion, Mr James was not a satisfactory witness. Much of the evidence in his affidavits was obviously tailored to suit his case. One example is the evidence he gave about the belief he formed on whether the stock had been sold by the receivers, which was contradicted by the evidence he gave in cross-examination. Another is evidence Mr James gave that he was given a copy and read the Code of Banking Practice on each occasion before he signed the guarantees. That evidence was given for the first time in an affidavit sworn by Mr James on 12 June 2019. In that affidavit Mr James refers to specific clauses of the 2004 and 2013 Codes, even though the last guarantee was entered into in 2010 and he says that as a result of reading the Code he believed that ANZ had an obligation to comply with the Code and that it would have acted ethically in its dealings towards him. That evidence has plainly been manufactured. Having denied emphatically in his affidavit evidence that he had seen a copy of the Creditors Report in connection with the hearing before Black J, he accepted in cross-examination that he may have, but he cannot remember one way or the other. 5. The likelihood is that Mr Allen at least showed the Creditors Report to Mr James. The report was tendered in relation to the question whether one of the companies controlled by Mr James was insolvent. It would have been natural for Mr Allen to obtain Mr James's instructions on the report. 6. On 1 May 2014, Black J delivered judgment (In the matter of Wine National Pty Ltd, James Estate Wines Pty Ltd, Liquor National Pty Ltd [2014] NSWSC 507). In that judgment, his Honour summarised some of the comments of the administrators in the Creditors Report, including a recommendation that "the relevant companies, including JAG, be wound up on the basis that there was no proposal for a deed of company arrangement; the companies were, or were likely to become, insolvent; and a liquidation would facilitate the completion of investigations commenced by the Administrators" (at [9]). Although Mr James denies doing so, it is likely that he read that judgment shortly after it was delivered. As I have said, he was an applicant and the judgment affected the fate of companies he controlled. It is to be expected that he would be keen to know what it said. 7. The result is that the likelihood is that at the time consent judgment was entered Mr James was on notice from the Creditors Report and Black J's judgment that there would be a shortfall in the amount that would be recovered by ANZ and that the Companies were insolvent. It follows that Mr James could not have relied on ANZ's silence to conclude the opposite. 8. Moreover, Mr James cannot give any satisfactory explanation for why, if it was important to him, he did not ask what recoveries had been made by the receivers before consenting to judgment. It is his case that he expected to be told. But the question is told what? He ended up accepting that he expected some sales to have occurred. He knew that he had not been told what those sales were. In those circumstances, it is to be expected that if the amount of the sales was important to him, he would have asked about them. The fact that he did not ask, strongly suggests that they were not. 9. On 28 May 2014, Dib Lawyers wrote to PwC and McGrathNicols asking for information, including documents evidencing the sale of any asset and the amount of that sale, for the purpose of preparing an expert report in connection with the claim against Grant Thornton. Allens responded to the letter to PwC on their behalf on 30 May 2014 stating that some of the information was available publicly. Subsequently, on 1 August 2014, Dib Lawyers served subpoenas on PwC and ANZ. The subpoena served on PwC sought, among other things, ""any documents evidencing the sale and/or realisation of all assets" of TLT, NLW and other companies and "all documents evidencing any estimates on valuation of all unsold assets". In response to that subpoena, on 4 August 2014, Allens indicated that PwC intended to respond by producing copies of their first six monthly report filed with ASIC. Those documents were produced on 11 August 2014. It is likely that Dib Lawyers would have told Mr James the content of those documents because they were important in assessing the amount of the claim against Grant Thornton. Consequently, by about mid-August 2014, it is likely that Mr James knew the amount realised from the sale of stock. On any view, he must have known the true position when the first bankruptcy notice served on him was set aside apparently on the ground that it did not give credit for recoveries made by ANZ. Despite that, Mr James only raised for the first time that he had been misled when he filed the present notice of motion on 19 September 2017. If he had really formed the view in May 2014 as a result of ANZ's silence that the recoveries were likely to exceed the guaranteed debt, it is to be expected that he would have complained that he had been misled when he knew the true position and when the stay of the judgment against him expired. However, he said nothing. Attempts to manipulate the BBSW 1. It is difficult to see how Mr James can maintain a case that he relied on the failure to disclose the attempt to manipulate the BBSW rate and ASIC's investigation of that matter when he no longer seeks to advance a case that he suffered any loss as a consequence of that conduct. Mr James says he would not have agreed to the consent judgment if he had known the true position in relation to the BBSW rate. However, in my opinion, that evidence cannot be accepted when Mr James accepts that ANZ's conduct caused him no loss. Discretionary considerations Does Mr James have an arguable case? 1. Having regard to the conclusions I have reached, it is strictly not necessary to consider the question whether the relief sought by Mr James should be refused on discretionary grounds. However, I should say something about that in the event that I am wrong. 2. For the purposes of this application, ANZ made the following concession: Subject to the terms of the guarantee (on which ANZ continues to rely), ANZ accepts that, for the purpose of the application, paragraphs 1 to 130 (but not 131-153) of the proposed cross-claim behind tab 8 of the Court Book would not be liable to be summarily dismissed on the facts and that on the evidence that has been filed there is a sufficiently arguable case as to paragraphs 1 to 130 (but not 131-153) that ought to go forward if the judgment is otherwise set aside. The proposed cross-claim is the cross-claim Mr James intended to file if the judgment was set aside. Paragraphs 1-130 raise the defence that the assets of TLT and NLW were sold at an undervalue by the receivers and that the receivers breached their duties by agreeing to a compromise with the receivers appointed by Rabobank. Paragraphs 131-153 raise a defence based on the BBSW rate, which was abandoned at the beginning of the hearing of the motion. 1. The concession made by ANZ reserves the question whether Mr James has an arguable case given the terms of the guarantees. 2. Generally, any loss in the value of security arising from the neglect or default of a creditor reduces the liability of a guarantor by a corresponding amount, except to the extent that the guarantor bargains away the "right to complain of the act which occasions the deficiency": Buckeridge v Mercantile Credits Ltd (1981) 147 CLR 654; [1981] HCA 62 at 675 per Brennan J (with whom Gibbs CJ, Murphy and Wilson JJ agreed). 3. In the present case, ANZ submits that Mr James bargained away the right to complain that the secured property was sold at an undervalue by cls 4 and 16 of the guarantees. Clause 4 states that Mr James's obligations under the guarantees are unconditional and that "[t]hey are not affected by anything which might have released me from all or part of my obligations, or limited them, if I had not agreed to this clause". By cl 16, Mr James gives up "[t]o the maximum extent allowed by the law" his rights to set off any amounts ANZ owed him. In the present case, Mr James's right is said to depend on s 420A of the Corporations Act. However, according to ANZ, that makes no difference given Leeming JA and Sackville AJA's acceptance in James v Australia and New Zealand Banking Group Ltd (2018) 97 NSWLR 663; [2018] NSWCA 41 of the decision of Bryson J in GE Capital Australia v Davis (2002) 180 FLR 250; [2002] NSWSC 1146 that s 420A does not confer any rights on guarantors. Bryson J stated the position in these terms in GE Capital at [53], [56] (quoted with approval by Leeming JA and Sackville AJA at [60]): … the requirement imposed on the controller by subs 420A(1) takes the place of, or it may be operates cumulatively to the obligation otherwise existing with the general law of a controller exercising power of sale in respect of property of a corporation. In so doing the section enhances the duty of the controller and the protection afforded to the corporation. This is achieved, and the apparent legislative intention is fulfilled without altering the remedies available to the corporation for breach of obligation in exercising the power of sale, and without altering the means available for obtaining remedies. Where real property subject to a mortgage has been sold and the mortgagor succeeds in establishing that there has been a sacrifice of the mortgagor's interest in the exercise of the power of sale the mortgagor's remedy is to be credited compensation when accounts are taken of the mortgage debt. Subsection 420A(1) alters this scheme by inserting a more stringent rule, but does not otherwise change the scheme. … In my opinion the equitable remedies which in an earlier state of the law were available to a guarantor where there was a breach of the mortgagee's duty to a mortgagor corporation are now to be tested by reference to whether there was a breach of the duty stated in subs 420A(1)." 1. Nonetheless, Mr James relies on the following passage from the judgment of Leeming JA and Sackville AJA in James v Australia and New Zealand Banking Group Ltd for the proposition that it is still arguable that clauses such as cls 4 and 16 of the guarantee cannot limit the obligation arising from s 420A: If Mr James' case depended on whether the terms of the guarantee precluded Mr James' reliance on s 420A we would be reluctant to uphold the summary dismissal of his claim. The general principle that a surety may "bargain away his right to complain of the act which occasions the deficiency" is established by Buckeridge v Mercantile Credits Ltd. Nonetheless, we accept that there is some force in Mr James' submission that permitting a mortgagor or guarantor to contract out of the protection afforded by s 420A(1) would be inconsistent with the mandatory terms of the provision and the purpose it evidently seeks to implement. However, it is not necessary to decide this question and we should not express a final view. (at [69], footnotes omitted) 1. ANZ submits that this passage is obiter and is inconsistent with Leeming JA and Sackville AJA's earlier acceptance of the proposition that s 420A does not confer any rights on guarantors, with the result that I should follow the earlier proposition. I do not accept that submission. The point made by Leeming JA and Sackville AJA is that s 420A does not confer any rights itself on guarantors. What it does is alter the standard that receivers must meet. The question they left open is whether, in altering the standard, s 420A prevents affected persons from contracting out of the consequences of a failure to meet that standard. Those consequences still arise at common law, not from s 420A. There is no inconsistency in asserting both that s 420A does not of itself confer any rights and that the section prevents contracting out of a right arising from a failure to comply with it, although it might be thought that if all the section does is alter the relevant standard it should not readily be read into its words a prohibition on exercising rights that have another source. The question, though, in the present context is whether such a proposition is arguable. Having regard to what Leeming JA and Sackville AJA said, in my opinion it is. 2. It follows that, on the concessions made by ANZ, Mr James would have had a reasonably arguable defence if judgment had been set aside. Delay 1. The significance of the delay must be tested on the basis that, contrary to the conclusions I have reached, Mr James was misled into consenting to judgment. That still leaves open the question when Mr James became aware that he had been misled. On any view, that must have been by December 2014, when the first bankruptcy notice was set aside. Mr James did not advance a case that he had been misled until September 2017, almost three years later. ANZ submits that that delay would disentitle Mr James to relief. In making that submission, it relies on the decision of the Court of Appeal in The Owners-Strata Plan No 57164 v Yau (2017) 96 NSWLR 587; [2017] NSWCA 341 where the Court refused to set aside a consent judgment obtained 15 months earlier. 2. In my opinion, the decision in Yau is of limited assistance in this case, turning as it did on its own facts. Of particular relevance in that case was the fact that the consent orders had been fully performed before the application to have the orders set aside was made. In the present case, there has been substantial delay. However, some of that delay can be explained by the fact that Mr James had commenced the 2016 Proceedings and it was only after those proceedings were determined by Stevenson J that it could be said that Mr James suffered real prejudice as a consequence of the consent judgment. Before then, however misguided Mr James might have been, he proceeded on the basis that the consent judgment did not affect his ability to pursue his case based on a contravention of s 420A of the Corporations Act. Unlike Yau, this is not a case where the consent judgment has been fully performed. Mr James has not paid the amount of the judgment and has not been bankrupted. ANZ does not point to any specific prejudice it has suffered as a consequence of the delay. The amount of the judgment is large. On the concessions made by ANZ and the conclusions I have reached, Mr James has an arguable case. Accordingly, had Mr James otherwise made out his case, I would not have refused relief because of the delay. Exercise of discretion in relation to the BBSW issue 1. Even if Mr James had made out his case that he had been misled by the failure to ANZ to disclose its attempts to manipulate the BBSW rate and ASIC's investigation of that matter, I would still have refused to set aside the consent judgment based on that conduct. In my opinion, it would not be appropriate to set aside the judgment on that ground simply to permit Mr James to pursue a totally unrelated case based on a contravention of s 420A of the Corporations Act. Either Mr James is entitled to pursue a case based on a contravention of s 420A of the Corporations Act because he was misled about that matter into consenting to judgment or he is not. If he is not, he should not be permitted to pursue that case because he was misled about some completely unrelated matter. Orders 1. On the conclusions I have reached, Mr James is not entitled to have the consent judgment obtained against him on 16 May 2014 set aside. It follows that the orders of the Court are that the defendant's notice of motion filed on 19 September 2017 is dismissed with costs. ********** Amendments 05 July 2019 - formatting 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: 05 July 2019