Court of Appeal Supreme Court New South Wales

• Medium Neutral Citation: Brighton v Australia and New Zealand Banking Group Ltd [2011] NSWCA 152
• Hearing dates: 4 May 2011
• Decision date: 20 June 2011
• Before: Giles JA at [1]; Hodgson JA at [2]; Campbell JA at [3]

Decision

1. Appeal dismissed with costs.

2. The stay of orders made in the court below is dissolved.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

• Catchwords: GUARANTEE - Construction - whether bank owed guarantors a contractual obligation to maintain confidentiality - whether express contractual obligation of confidentiality; GUARANTEE - Construction - whether implied contractual obligation of confidentiality - term implied in law - obligation of confidentiality implied into contract between banker and customer but not into contract between banker and guarantor; GUARANTEE - Construction - whether implied contractual obligation of confidentiality - term implied in fact - test from BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 not satisfied - obligation of confidentiality not necessary for business efficacy nor so obvious that it goes without saying; GUARANTEE - Construction - whether contractual obligation of confidentiality was a condition, such that breach gave rise to right to terminate - analysis of the reasoning in Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549 - whether mere possibility of detriment to the guarantor is enough to bring about discharge of the guarantee - effect of provision that guarantor's obligations are unconditional and not affected by anything that would otherwise release the guarantor; GUARANTEE - Construction - whether contractual obligation of confidentiality was an intermediate term that had been breached in a sufficiently serious way to give rise to right to terminate - whether breach deprived the guarantors of substantially the whole benefit which it was intended that they should obtain from the contract; CONTRACTS - Harsh and unconscionable contracts and statutory remedies - Contracts Review Act 1980 - Exclusion from contracts entered into in the course of or for the purpose of a business; TRADE PRACTICES - whether conduct of bank towards guarantors in obtaining release and confirmation of enforceability of securities was unconscionable - Trade Practices Act 1974 (Cth) - Australian Securities and Investments Commission Act 2001 (Cth) - whether there was a substantial opportunity to negotiate the provisions of the release and confirmation of enforceability of securities - whether legal advice given was independent - whether legal advice given was adequate - whether unconscionable to take advantage of another's pressing need, even if the person who takes advantage has not brought about that pressing need - whether unconscionable to make provision of advance made conditional on executing release and confirmation of enforceability of securities - whether execution of release and confirmation of enforceability of securities was excessive price for advance; CONTRACTS - Interpretation - Rules of construction - Contra proferentem rule - Ejusdem generis rule - drafting by stating a general principle and giving examples
• Legislation Cited: Australian Securities and Investments Commission Act 2001 (Cth); Building & Construction Industry Payments Act 2004 (Qld); Contracts Review Act 1980; Trade Practices Act 1974 (Cth)
• Cases Cited: Adamson v Ede [2009] NSWCA 403; Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549; Australian and New Zealand Banking Group Limited v Aldrick Family Company Pty Limited [2010] NSWSC 1000; Australian Bank Ltd v Stokes (1985) 3 NSWLR 174; Australian Securities and Investment Commission v National Exchange Pty Ltd [2005] FCAFC 226; (2005) 148 FCR 132; Bank of Adelaide v Lorden (1970) 127 CLR 185; Black v Ottoman Bank (1862) 15 Moo 472; 15 ER 573; BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266; Buckeridge v Mercantile Credits Limited (1981) 147 CLR 654; Canon Australia Pty Ltd v Patton [2007] NSWCA 246; (2007) 244 ALR 759; Chen v Song [2005] NSWSC 19; [2005] ANZ Conv R 130; Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337; Deputy Commissioner of Taxation v Dick [2007] NSWCA 190; (2007) 242 ALR 152; (2007) 64 ACSR 61; Ford by his Tutor Beatrice Ann Watkinson v Perpetual Trustees Victoria Limited [2009] NSWCA 186; (2009) 75 NSWLR 42; Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26; Jones v Dunkel (1959) 101 CLR 298; Kowalczuk v Accom Finance Pty Ltd [2008] NSWCA 343; (2008) 252 ALR 55; National Roads and Motorists' Association v Whitlam [2007] NSWCA 81; North v Marina [2003] NSWSC 64; (2003) 11 BPR 21,359; O'Day v Commercial Bank of Australia Ltd (1933) 50 CLR 200; Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41; (2005) 14 BPR 26,639; Ring Tread Systems (Australasia) Pty Ltd (Receiver and Manager Appointed) v Tubb (Court of Appeal, 30 October 1998, unreported); Schoenhoff v Commonwealth Bank of Australia [2004] NSWCA 161; Toscano v Holland Securities Pty Ltd (1985) 1 NSWLR 145; Tournier v National Provincial and Union Bank of England [1924] 1 KB 461
• Category: Principal judgment
• Parties: Lyn Dulcie Brighton (First Appellant); Wayne Brighton (Second Appellant); Dulcie Catherine Aldrick (Third Appellant); Diane Patricia Bowen (Fourth Appellant); Aldrick Family Company Pty Limited (Fifth Appellant); Brighton Associates Pty Ltd (Sixth Appellant); Australia and New Zealand Banking Group Limited (Respondent)
• Representation: Counsel; P Menzies QC; B Nolan (Appellants); M Lee; E Cowpe (Respondent); Solicitors; Jade Lawyers (Appellants); Kemp Strang (Respondent)
• File Number(s): 2008/283775
• Publication restriction: Nil

Decision under appeal

• Jurisdiction: 9111
• Citation: Australian and New Zealand Banking Group Limited v Aldrick Family Company Pty Limited [2010] NSWSC 1000
• Date of Decision: 2010-09-10 00:00:00
• Before: Einstein J
• File Number(s): 2008/283775

Judgment

1 GILES JA : I agree with Campbell JA.

2 HODGSON JA : I agree with Campbell JA.

3 CAMPBELL JA : The Appellants were all associated with a group of companies called the Sea Slip Marinas Group. That group was referred to as " SSMG ", and comprised companies that have been referred to as " SSMA ", " SSMI ", " SSMQ ", " Pontoons ", and " Manufacturing ".

4 Mrs Brighton has at all relevant times been the Managing Director of SSMA. Her husband, Mr Brighton, has worked for the Group in marketing. Mrs Aldrick is Mrs Brighton's mother. Ms Bowen is Mrs Brighton's sister. Aldrick Family Company Pty Ltd is a company 100% owned by Mrs Brighton. It has been referred to in the litigation as " AFC ". Brighton Associates Pty Ltd is a company that is now in liquidation, in which Mrs Brighton and Mr Brighton were both shareholders.

5 Between 19 January 2005 and 4 October 2006, ANZ provided financial accommodation to SSMA, AFC, Brighton Associates, Mrs Brighton and Mr Brighton. All the Appellants other than AFC provided guarantees to ANZ. While all of those guarantees were in standard form, they differed concerning the debtor or debtors whose debt was guaranteed, and the limits of indemnity. All of the guarantees relevant to this case were of debtors who were either recipients of financial accommodation from ANZ, or were SSMI or SSMQ. All the Appellants also gave mortgages over real property to ANZ, to secure their respective indebtedness.

6 In proceedings in the Commercial List of the Equity Division of the Supreme Court, Einstein J gave judgment against each of the Appellants for a sum of money, and for possession of the mortgaged property: Australian and New Zealand Banking Group Limited v Aldrick Family Company Pty Limited [2010] NSWSC 1000. The orders for possession have been stayed pending determination of the present appeal, on the basis that the appeal be expedited.

The Factual Background

7 All the issues in this appeal relate to a disclosure by ANZ to a commercial rival of SSMG of confidential information relating to SSMG's affairs, and the subsequent taking by ANZ of a deed that released it from liability for having made that disclosure. The issues arise from the following factual background.

8 At least from the middle of 2006 the companies in the Group were experiencing some cash flow difficulties. A significant source of those difficulties was that Abel Point Marina (Whitsundays) Pty Limited (" APM "), a company for whom SSMA had carried out a significant building construction project, had not paid a sizeable debt that SSMA had claimed from it. Mr Andrew Robinson, the principal of APM, had, in the eyes of Mrs Brighton, been engaged in a strategy aimed at driving the Group into insolvency.

9 Mrs Brighton's account of her words during a conversation she had with a bank officer on 12 September 2006, included:

"Mr Andrew Robinson is the person that has caused the default on all of our accounts. He is the owner of Abel Point Marina and the Principal of the $9m Marina expansion works that we have just completed and he is also a Sydney Lawyer: Robinson Legal, in Kent Street. He has been delaying contract payments and using the court system where he can to delay the payments for as long as he can."

10 Mrs Brighton's account of her words during a conversation she had with another ANZ officer on 19 September 2006, included:

"I have also been advised that he is known to set up and take over companies, we believe that this is what he has been attempting with our SSSMA [sic] in the past 18 months as he stopped contract payments one month into the contract and delayed and delayed the payments as long as he could and then he would negotiate a lesser sum just prior to adjudication or court proceedings. He told me December 2005 in a phone conversation that I would win the Court cases but he would appeal and appeal until I run out of money and he would win. He also mentioned to my husband that he and his wife have more money than me, in fact, he said, they each hold $1m in their daily access accounts."

11 The judge did not make findings about whether all of these allegations were correct, but found that " Mr Robinson/TS Recoveries had long been in dispute with SSMA and already formed an intention and indeed taken active steps to put financial pressure to cause the winding up of SSMA before the date of disclosure " ([66]), and " Mr Robinson/TS Recoveries (for the benefit of APM) did indeed embark on a strategy from at least June 2006 to bring about the financial collapse of SSMA " ([67]).

12 No bank officer gave evidence, and it was not suggested to Mrs Brighton that her account of her conversations with the bank officers was incorrect. Thus by 19 September 2006 ANZ was aware of Mrs Brighton's views about Mr Robinson's intentions.

13 There had been various defaults by Mr and Mrs Brighton, SSMA, AFC and Brighton Associates under loan agreements with ANZ by 30 July 2006. The judge found, at [25]:

"On or about 1 September 2006, ANZ's file relating to the loans was transferred to Mark Hancock of ANZ's lending services division to consider an 'exit strategy'. That is, about this time, ANZ had decided not to make any further loans to companies within SSMG and wanted all existing facilities repaid."

14 On 11 September 2006, TS Recoveries Pty Limited, another company controlled by Mr Robinson, took an assignment of a debt of $198,414.70 that Waterway Constructions Pty Limited claimed from SSMA. The next day, TS Recoveries notified SSMA of the assignment of the debt, and served a statutory demand on SSMA.

15 The judge goes on to set out the relevant chronology:

"29 On 28 September 2006 (before the expiry of the creditor's statutory demand), TS Recoveries filed an Originating Process in the Supreme Court of New South Wales seeking orders that SSMA be wound up on the grounds of insolvency (proceedings no 5092 of 2006) (First Winding Up Proceeding). On 3 October 2006, SSMA filed an Originating Process seeking to set aside the statutory demand.

30 On 4 October 2006, Brighton Associates defaulted under the Fifth Agreement."

16 On 5 October 2006, TS Recoveries filed an Interlocutory Process seeking to dismiss SSMA's application to set aside the statutory demand. On 6 October 2006, TS Recoveries filed an Interlocutory Process seeking the appointment of a provisional liquidator to SSMA. That process was returnable on 13 October 2006. In support of that application, Mr Robinson swore an affidavit on 5 October 2006. One of several matters to which he deposed in that affidavit, all clearly intended to be indicative of the insolvency of SSMA, was:

"On 25 September 2006 I had a telephone conversation with Mr Mark Hancock of the ANZ Bank. During this conversation Mr Hancock said:

'We have decided that Sea-Slip is an exit account. A memo is being considered by Melbourne at the moment about the best way to enforce our security.'

Later in the conversation he said:

'I know about the Brisbane proceedings, but I am not worried about them. We have an undertaking from Lyn to pay any proceeds to us in permanent reduction of her facility.'

I believe that this comment relates to the possible judgment in the Brisbane Proceedings which Ms Brighton has also undertaken to pay to the subcontractors on the Abel Point Marina Project.

Annexed and marked 'Q' is a copy of a file note I made immediately following this conversation."

17 The file note confirmed his account.

18 The "Brisbane Proceedings" there referred to was litigation between APM and SSMA in the Queensland Supreme Court. In that litigation APM challenged an adjudication that had been given in SSMA's favour under the Building & Construction Industry Payments Act 2004 (Qld). That adjudication related to a progress payment due to SSMA by APM.

19 Mr Hancock giving Mr Robinson this information was referred to in the litigation as the " Disclosure ". It was only upon reading Mr Robinson's affidavit of 5 October 2006 that anyone from SSMG came to know of the Disclosure.

20 The judge continued the chronology as follows:

"32 In a letter from SSMA to ANZ dated 13 October 2006, SSMA made a number of allegations regarding the Disclosure and requested a response from ANZ.

33 ANZ does not dispute that, in substance, Mr Hancock conveyed to Mr Robinson that ANZ had concerns about SSMG's then present financial condition and that ANZ was contemplating enforcing its security - as was the truth.

34 On 17 October 2006, a directions hearing in the First Winding Up Proceeding was scheduled. The matter was stood over to 2pm on 18 October 2006.

35 On the same date, Mrs Brighton sought to instruct an experienced solicitor, Mr Peter Harkin of Collin Biggers and Paisley, solicitors, to assist SSMA in the First Winding Up Proceeding.

36 Colin Biggers and Paisley required SSMA to deposit $50,000 in to their trust account on account of legal costs before they would act for SSMA in the First Winding Up Proceeding.

37 Mrs Brighton requested ANZ to advance a further $50,000 to SSMA to fund the legal costs.

38 Critically, on 18 October 2006, ANZ's solicitors, Kemp Strang, prepared a deed in relation to the requested further advance and certain other matters. This draft deed was provided to Mrs Brighton and Mr Harkin, and amendments to the draft Deed were negotiated and agreed."

The Deed

21 The Deed, in the form ultimately negotiated, was executed on 19 October 2006. It was made between ANZ, SSMA, Brighton Associates, SSMQ Manufacturing, SSMI, Mrs Brighton and Mr Brighton. The Deed contained definitions, including:

" 'Allegations' means any allegation by any of the Non-ANZ Parties that ANZ or its servants, agents or employees has in any way acted improperly or in breach of any law or statute (including the Privacy Act) including but not limited to the allegations made in the letter dated 13 October 2006 sent by SSMA to ANZ;

'Claim' means any action, suit, cause of action, arbitration, debt, due, cost, claim, demand, verdict or judgment either at Law or in Equity, or arising under any statute;

'Communication' means any communication whatsoever and whether oral, electronic or in writing between any servant, agent or employee of ANZ and any other person or entity in relation to the affairs of any of the Non-ANZ Parties including but not limited to the Conversation or any communication whether oral, electronic or in writing with Robinson or any representative of TS Recoveries or Abel Point Marina;

'the Conversation' means the alleged conversation referred to in paragraphs 17, 18, 19 and 20 of the Robinson Affidavit;

'the Disclosure' means the disclosure of any information about the affairs of any of the Non-ANZ Parties during the Conversation;

' the Debt' means the outstanding balance of the Facilities from time to time;

'the Robinson Affidavit' means the affidavit sworn by Robinson on 5 October 2006 in the Winding Up Proceedings;"

22 It also defined "the Facilities" by identifying each account in which ANZ had provided financial accommodation to any of the Non-ANZ Parties. Only SSMA, Brighton Associates and Mr and Mrs Brighton were there listed as recipients of financial accommodation. "Guarantee" was defined as any guarantee given to ANZ by any of the Non-ANZ Parties in relation to any obligation of any one or more of the other Non-ANZ Parties to ANZ. The "Litigation Advance" was an amount of $50,000 advanced to SSMA by ANZ by clearing a cheque for $50,000 payable to Colin Biggers & Paisley on an account that SSMA maintained with ANZ, called the "SSMA Overdraft". The "Securities" was defined widely, as any security given by any of the Non-ANZ Parties.

23 Clause 2.1 of the Deed provided:

"The Non-ANZ Parties acknowledge, warrant and covenant that:

...

(b) the Securities secure the repayment to ANZ of the Debt;

(c) the Securities which relate to them are valid, binding on them and enforceable by ANZ;

...

(e) ANZ is entitled to enforce its rights under the Securities;

...

(g) the obligation of SSMA to repay the debit balance of the Overdraft to ANZ is a Guaranteed Arrangement under any Guarantee given by them and the Liability Limit of any such Guarantee is hereby increased by $50,000.00 to cover the Litigation Advance; and

(h) ANZ was entitled to make the Disclosure."

24 Clause 3 of the Deed contained a widely worded release:

"The Non-ANZ Parties release ANZ and its servants, agents and employees from any Claim which they have now, may have had in the past or may have at any time in the future but for the execution of this deed, in respect of or arising directly or indirectly out of:

(a) any Allegations;

(b) any Communication;

(c) the Conversation;

(d) the Disclosure;

(e) the Privacy Act;

(f) the Robinson Affidavit; and

(g) the Winding Up Proceedings"

25 Another provision was:

"4.12 This deed may be pleaded as a bar to any proceedings between the parties in relation to the subject matter of this deed other than in respect of a breach of any provisions of this deed."

Events Following Execution of the Deed

26 Once the Deed was executed, ANZ cleared the cheque for $50,000 on 19 October 2006. SSMA was thenceforth represented in the First Winding Up Proceedings.

27 With the legal assistance procured by the $50,000 advance, the First Winding Up Proceedings were disposed of by consent orders on 1 November 2006. Those orders included dismissal of the proceedings. However, SSMA undertook that it would cease trading except to pursue its rights against APM or as otherwise permitted by further order of the Court.

28 SSMA's difficulties continued. The judge found:

"42 On 9 November 2006, Engwirda assigned a debt owing by SSMA to it (in the amount of $233,277.25) to TS Recoveries.

43 On 13 November 2006, TS Recoveries served a creditor's statutory demand on SSMA in respect of this debt.

44 On 15 November 2006 (before the expiry of the creditor's statutory demand), TS Recoveries filed an Originating Process seeking that SSMA be wound up (proceedings no 5834 of 2006) (Second Winding Up Proceeding).

45 SSMA admitted insolvency but alleged the Second Winding Up Proceeding was an abuse of process. This contention was rejected and on 7 December 2007, Barrett J made orders in the Second Winding Up Proceeding that a liquidator be appointed to SSMA."

29 After making the appropriate demands, ANZ commenced the proceedings from which this appeal is brought, seeking to recover the amounts owing under the various loan facilities, and seeking to enforce the various guarantees and mortgages.

The Issues on Appeal

30 The issues on appeal are in one respect wider, and in other respects narrower, than the issues litigated at first instance. The issues are:

1. Whether the breach of confidentiality by ANZ in making the Disclosure had the effect of discharging the Appellants from their liability under the various guarantees. This was not an issue in the court below, but ANZ raises no objection to it being considered on the appeal.

2. Whether the Deed of Release is enforceable as a matter of law. This issue affects only the First and Second Appellants, as the other Appellants were not party to the Deed. The First and Second Appellants contend that the Deed should be varied under one or more of s 12CC Australian Securities and Investments Commission Act 2001 (Cth) (" ASIC Act "), s 51AC Trade Practices Act 1974 (Cth) (" TPA ") and s 7 Contracts Review Act 1980 . Their objective in seeking that variation is to remove from the Deed the acknowledgement of enforceability of the Securities, the release relating to the Disclosure and the provision permitting the Deed to be pleaded as a bar. That would, they contend, remove an obstacle that would otherwise exist to their succeeding on Issue 1. The trial judge had refused to grant any relief concerning the Deed on the basis of those statutory provisions.

3. Whether the judge was mistaken in holding that the First and Second Appellants entered into the Deed "in the course of or for the purpose of a trade business or profession carried on or proposed to be carried on by [them]" within the meaning of s 6(2) Contracts Review Act , and that hence the First and Second Appellants were not entitled to claim relief under that Act.

31 It is not altogether clear why AFC is an Appellant, when it was not a guarantor, and is not affected by the second and third issues. However, the appeal papers do not contain the mortgage given by AFC, and it might be the case that the mortgage given by AFC secures a debt that arises under a guarantee. This lack of clarity does not affect the outcome of the appeal.

The Guarantees

32 The standard provisions of each of the guarantees included:

CODE OF BANKING PRACTICE

The applicable provisions of the Code of Banking Practice apply to this Guarantee.

...

3. Indemnity - my obligations if there is a legal problem with the Customer

This clause applies if:

(a) in the case of any Guaranteed Arrangement, the Customer does not have full legal capacity (because he or she is under 18 or for some other reasons), is insolvent or in Administration, or has died, or ...

and as a result:

(A) ANZ has no legal right to recover any or all of the Guaranteed Money from the Customer; or

(B) the Customer does not owe money that otherwise would be Guaranteed Money.

If this happens I will pay that amount to ANZ whenever ANZ asks. That amount will be taken to be part of the Guaranteed Money.

This applies even if ANZ knew of the problem, or should have known. It applies even if, because of the problem, the Customer could never have been required to pay ANZ that amount.

This is a principal obligation. It is independent of the Customer's obligations to ANZ.

...

4. 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.

For example, I continue to be liable even if any of the following occur:

• ANZ does not, or is slow to, exercise any of its rights against the Customer or anyone else.

• ANZ gives anyone, or anyone becomes entitled to, a full or partial discharge or release, time to pay or any other concession.

• ANZ makes any arrangement, transaction or compromise with anyone including one which varies, takes away or limits its security or rights, or its freedom to exercise them.

• There is a change in the nature or constitution of anyone including its members.

• This Guarantee or any other document or security is not valid against, or is not signed or binding on, any other person.

• Anyone dies, becomes insolvent or incapacitated or goes into some form of Administration.

• Anyone has a claim against ANZ.

...

19.1 Certificates

Any statement signed by an ANZ appointee, including a certificate as to the amount of the Guaranteed Money owing at a date mentioned in the certificate, will be conclusive evidence and will be binding on me.

...

20.2 How to read this Guarantee

(a) In this Guarantee the following rules apply:

...

(ii) Examples do not limit general wording.

...

(vii) The fact that this Guarantee was drafted by or for ANZ does not mean that it must be interpreted against ANZ's interests.

The Code of Banking Practice

33 The Code of Banking Practice (the " Code "), which is incorporated by reference into each guarantee, is a voluntary code of conduct promulgated by the Australian Bankers Association. It adopts a practice of printing in bold any words that have a defined meaning. Clause 40 of the Code contains the following definitions:

Small business means a business having:

(a) less than 100 full time (or equivalent) people if the business is or includes the manufacture of goods; or

(b) in any other case, less than 20 full time (or equivalent) people,

unless the banking service is provided for use in connection with a business that does not meet the elements in (a) or (b) above.

We, us and our means the bank that you deal with that has adopted this Code.

You and your means a person, who at the time the banking service is provided, is an individual or a small business that is our customer (or, where this Code specifically applies to potential customers, a potential customer of ours ) and includes, in clauses 28, 33 and 39, any individual from whom we have obtained, or propose to obtain, a Guarantee.

34 Clause 22 of the Code provides:

22. Privacy and confidentiality

We acknowledge that, in addition to our duties under the Privacy Act 1988, we have a general duty of confidentiality towards you , except in the following circumstances:

(a) where disclosure is compelled by law; or

(b) where there is a duty to the public to disclose; or

(c) where our interests require disclosure; or

(d) where disclosure is made with your express or implied consent.

35 Clause 28.1 provides:

This clause 28 applies to every guarantee and indemnity obtained from you (where you are an individual at the time the guarantee and indemnity is taken) for the purpose of securing any financial accommodation or facility provided by us to another individual or a small business (called a "Guarantee" ), except as provided in clauses 28.15 and 28.16.

36 Clause 28 goes on to set out lengthy provisions about the manner in which a bank will act in relation to any guarantee it obtains, but none of those provisions mention the Bank being under any obligations of confidentiality to the guarantor or anyone else.

37 Clause 33 is a clause enabling information to be provided between the bank and the guarantor by electronic communication.

38 Clause 39 provides:

39.1 On and after the commencement date :

(a) we will be bound by this Code in respect of:

(i) any banking service that we commence to provide to you ; and

(ii) any Guarantee (as described in clause 28) we obtain from you ,

except as provided for below.

39 The rest of Clause 39.1 contains transitional provisions concerning existing accounts and guarantees, and the manner of application of previous versions of the Code. It does not affect this case.

Issue 1 - Are the Guarantors Discharged?

40 The Appellants contended in both their written submissions and orally, that the guarantees contained an obligation of confidentiality or secrecy on the part of ANZ, that that obligation had been breached, that that breach was a breach of a condition of the guarantee (or perhaps a serious breach of an intermediate term), and thus the guarantor was discharged by operation of law.

Breach of Contractual Obligation to Guarantor to Maintain Confidentiality?

41 There are different reasons concerning different Appellants why this argument does not succeed. The first reason concerns whether ANZ owed the respective guarantors a contractual obligation to maintain confidentiality. As will be seen below from [44] to [60], ANZ owed Mr and Mrs Brighton such a contractual obligation, but not Mrs Aldrick and Ms Bowen. Thus, so far as Mrs Aldrick and Ms Bowen are concerned, the argument fails at its first step.

42 The second reason concerns whether the breach of this contractual obligation gave Mr and Mrs Brighton (and Mrs Aldrick and Ms Bowen, assuming contrary to the above that they were owed a contractual obligation) a right to terminate their respective guarantees. Examination of the guarantee, and in particular Clause 4, demonstrates that any contractual obligation to maintain confidentiality cannot be construed as a condition. Nor is it an intermediate term that, in the circumstances of the particular breach constituted by the Disclosure, gave rise to a right to terminate the guarantee ([63] to [111] below). Together, these provide a separate reason why breach of the contractual obligation did not give any of the Appellants a right to terminate the guarantees.

43 I have referred ([31] above) to the unclarity of AFC's role in this appeal. Even on the assumption that the mortgage given by AFC secures a debt arising under a guarantee, if a guarantor for whose debt AFC had provided security could not terminate its guarantee, AFC would continue to be liable for that guaranteed debt.

Express Contractual Obligation - Mr and Mrs Brighton

44 There is no express obligation of confidentiality in the standard form of guarantee document itself.

45 Further, insofar as the Code is incorporated by reference into the terms of the guarantee, that Code does not contain a duty of confidentiality that is owed to a guarantor, in the capacity of guarantor. The express obligation of confidentiality in Clause 22 of the Code is owed to "you" . However, "you" according to the definition in the Code, is defined in two separate ways. The first of them, arising under the words to the end of the parentheses in the definition is, in effect, a person who is a customer of the bank, who is also an individual or a small business. The second of them, arising under the words following the parentheses in the definition, is a meaning that applies only in Clauses 28, 33 and 39 of the Code.

46 I will deal first with the application of the first of the ways in which the Code defines "you" . Mr and Mrs Brighton and AFC were customers of ANZ. Mr and Mrs Brighton are individuals. It is true that they were customers by virtue of a different contract to the contract of guarantee, but the definition of "you" in the code hinges on the status of being a customer of the bank, not on the manner in which or document under which that status arises. Thus, in my view, the general duty of confidentiality arising under Clause 22 of the Code was a term of the guarantees given by Mr and Mrs Brighton.

47 The written submissions of ANZ say that:

"... it accepts that a duty of confidentiality was owed to the Debtor Appellants which arose by reason of the fact that the respondent provided a loan to each of those parties and, as a consequence, a banker/customer relationship existed with those parties."

48 In light of that concession it is unnecessary to explore whether there is any means other than through the incorporation of Clause 22 of the Code into the guarantees of Mr and Mrs Brighton that a duty of confidentiality towards them might arise. However, it is of some importance to the argument that the Appellants put that duty of confidentiality is actually a term of those guarantees, not a duty that arises in some other way.

Express Contractual Obligation - Mrs Aldrick and Ms Bowen

49 However, Mrs Aldrick and Ms Bowen were not customers of ANZ, and were not a "small business" . Thus the first of the ways in which the Code defines "you" does not lead to their being owed a contractual obligation of confidentiality under Clause 22 of the Code.

50 The definition of "you" also includes:

"... in clauses 28, 33 and 39, any individual from whom we have obtained, or propose to obtain, a Guarantee."

51 Clause 39.1(a) contemplates that ANZ will be bound by the Code in respect of any Guarantee ANZ obtains from "you" , provided that Guarantee is of the type described in Clause 28. Thus, if the guarantees given by Mrs Aldrick and Ms Bowen were of the type that fell within Clause 28 of the Code, Clause 39 of the Code would provide an alternative way in which the obligation of confidentiality contained in Clause 22 of the Code could come to be owed to Mrs Aldrick and Ms Bowen.

52 The guarantees given by Mrs Aldrick and Ms Bowen were each of certain debts of AFC. Each of those guarantees fell within the requirement of Clause 28.1 that the guarantee be given by an individual. However neither of those guarantees secured any financial accommodation provided by ANZ to another individual. Further, no submission was made to us that AFC was a "small business" , within the definition in the Code. Indeed, the question of whether AFC was a "small business" within that definition does not appear to have been litigated at the trial. It follows that neither of the guarantees given by Mrs Aldrick and Ms Bowen has been shown to be of the type that fell within Clause 28 of the Code. Thus the second part of the definition of "you" does not provide a means by which the obligation of confidentiality contained in Clause 22 of the Code was owed to Mrs Aldrick and Ms Bowen.

Implied Contractual Obligation - Mrs Aldrick and Ms Bowen?

53 The Appellants argued that an implied contractual obligation of confidentiality was owed to Mrs Aldrick and Ms Bowen, the guarantors who were not customers of the Bank. I do not accept that there is any such implied contractual obligation.

54 One of the ways in which an implied contractual obligation can arise is as a term that the law has recognised as being an incident of a type of relationship. The law has long recognised an obligation on the part of a banker to observe secrecy with respect to the customer's account together with information derived from the account itself, and any other information which he acquires in his character as the customer's banker: Tournier v National Provincial and Union Bank of England [1924] 1 KB 461 at 480-1, 485. (There are some exceptions not presently relevant.) However, while that obligation of confidentiality is implied into the contract between a banker and customer, a guarantor of a debt of a bank customer is not, simply by virtue of being a guarantor, a customer of the bank. Thus, that recognised legal incident of banker/customer contracts does not apply to the contracts of guarantee between ANZ on the one hand and Mrs Aldrick and Ms Bowen respectively on the other.

55 Another way in which a term can be implied in a contract is if it satisfies the test stated by the Privy Council in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 at 282-3, and adopted by the High Court in Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 347:

"(1) It must be reasonable and equitable;

(2) It must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;

(3) It must be so obvious that 'it goes without saying';

(4) It must be capable of clear expression;

(5) It must not contradict any express term of the contract."

56 The present case does not involve any contention that ANZ has disclosed any confidential information concerning the affairs of Mrs Aldrick or Ms Bowen. It might possibly be the case that if a guarantor were to supply to a bank information concerning his or her own financial circumstances (as could fairly readily happen if the bank needed assurance that the guarantor had the wherewithal to meet the guarantee) there would be either an implied contractual obligation of confidentiality, or an equitable obligation of confidentiality concerning that information. It is not necessary to decide whether that is so, for the purpose of deciding the present case.

57 The implied term that the Appellants contend exists in the guarantees is that ANZ "will keep its customers' affairs confidential and would not disclose details of customers' affairs unless under compulsion of law". That formulation is imprecise about whether the "customers" whose affairs may not be disclosed are restricted to the particular customer or customers whose debt or debts are guaranteed by the particular guarantor in question, or whether it extends wider, and if so how much wider.

58 Even if the implied term is taken to be restricted to one preventing ANZ from disclosing the affairs of the customer whose debt is guaranteed, the tests for implication are not met. The second of the tests in BP Refinery is not met because a contract of guarantee would be effective and workable without any such implied term. Except in the unusual case where a duty that would otherwise arise as a matter of law is expressly negatived, the banker is already restricted by a term of its contract with the customer from disclosing confidential information concerning the customer. The history of case law has not (so far as we have been informed by counsel) previously provided an instance of a contract between a banker and a guarantor containing such an implied term, notwithstanding that the entering of contracts of guarantee with bankers has been part of the stream of commerce for well over a century. This fact is in itself indicative that the implied term argued for is not necessary. Furthermore, the Code does not provide for any obligation of confidentiality to be owed to a guarantor who is not also a customer. This fact is also indicative of the term not being necessary for business efficacy.

59 These matters also provide reasons why the third requirement in BP Refinery for implication of a term is not satisfied.

60 It would be even harder to satisfy the tests in BP Refinery concerning a term preventing the bank from disclosing the affairs of any wider class of persons than the customer whose debt is guaranteed.

No Breach of any Obligation of Confidentiality? - Mrs Aldrick and Ms Bowen

61 The Bank also argues that, in any event, Mrs Aldrick and Ms Bowen have not established that the Bank has breached any obligation it owed them not to disclose the affairs of the guaranteed debtor. That is because the only debtor whose debts Mrs Aldrick and Ms Bowen guaranteed was AFC. The Bank submits that the Disclosure related only to the affairs of SSMA.

62 I am not persuaded that this argument of the Bank should be accepted. The judge recorded at [33] of his judgment (set out at [20] above) that in substance the disclosure was about SSMG's financial condition (which would include the companies in SSMG, which did not include AFC), and that ANZ was contemplating enforcing its security. In the context of the connection between AFC and SSMG, the proper reading of that finding is that one of the securities the Bank was contemplating enforcing was the security concerning the debts of AFC.

Does Breach of Confidentiality Obligations Discharge Guarantors?

63 In light of my conclusion that no contractual obligation of confidentiality was contained in the guarantees given by Mrs Aldrick and Ms Bowen, the following discussion applies only to the guarantees given by Mr and Mrs Brighton. However, if I had been wrong in holding that there was no obligation of confidentiality in the guarantees given by Mrs Aldrick and Ms Bowen the discussion would also apply to those guarantees.

64 The argument of the Appellants for discharge of the guarantees was founded on the decision in Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549. The Appellants' contention was that the decision in Ankar showed that the obligation of confidentiality should be regarded as a condition of each guarantee (as opposed to a warranty), and that breach of the condition led to a right of termination of the guarantee. Alternatively, the Appellants contended that the obligation of confidentiality should be regarded as an intermediate term of the guarantee, that had been breached in a serious way, and thus similarly led to a right of termination of the guarantee.

65 In the court below the judge dismissed a claim for damages that various of the Appellants brought, alleging they had suffered loss as a consequence of the Disclosure. One reason for dismissing that claim was that the admitted breach by the Bank of the obligations of confidentiality owed to its customers had not caused the eventual demise of the SSMG group. The judge found, at [72], that:

"Mr Robinson/APM had already embarked on their strategy of causing SSMA to be wound up well prior to the disclosure, and the disclosure had no causal connexion with the ultimate financial collapse and winding up of SSMA. A review of the evidence of the Brightons demonstrates that they conceded this to be the case. It follows, axiomatically, that any breaches by ANZ did not cause the loss or damages claimed."

66 The Appellants submit that, notwithstanding that finding of lack of causal connection, their argument for discharge of the guarantees should succeed.

67 They first submit that the status of a contractual term, as condition, warranty, or intermediate term, must be capable of being decided at the time of contract formation, and does not depend upon the consequences of a particular breach of a term. I accept that proposition.

68 On the basis that the obligation of confidentiality that is a term of the guarantee extends to keeping confidential the affairs of the debtor whose debt is guaranteed, the Appellants then argue that the disclosure of confidential information concerning a debtor is the sort of thing that, in at least some circumstances, could prejudicially affect the guarantor. The Appellants' argument culminates in the following passage in Ankar at 559-60, where Mason ACJ, Wilson, Brennan and Dawson JJ discussed a principle in certain English cases that:

"is the by-product, not so much of the general law of contract, as of the special relationship between creditor and surety arising out of the suretyship contract upon which equity fastened to protect the surety when the creditor's conduct affected the surety's liability: Holme v Brunskill (1877) 3 QBD 495. According to the English cases, the principle applies so as to discharge the surety when conduct on the part of the creditor has the effect of altering the surety's rights, unless the alteration is unsubstantial and not prejudicial to the surety. The rule does not permit the courts to inquire into the effect of the alteration. The consequence is that, to hold the surety to its bargain, the creditor must show that the nature of the alteration can be beneficial to the surety only or that by its nature it cannot in any circumstances increase the surety's risk, eg, a reduction in the debtor's debt or in the interest payable by the surety. The mere possibility of detriment is enough to bring about the discharge of the surety."

69 The Appellants submit that this principle has the effect that, because disclosure of confidential information concerning the debtor could possibly affect a surety, the surety in the present case is discharged, even though in fact there is a finding that the Disclosure did not bring about the collapse of SSMG.

70 Whether this part of the Appellants' argument is accepted depends on the particular role that the passage I have just quoted plays in the plurality judgment as a whole.

The Judgment in Ankar

71 Ankar concerned a guarantee of the obligations of the lessee under a lease of plant and equipment. The lease in question contained a prohibition on the lessee assigning its interest in the goods without the consent of the lessor, subject to the proviso that the lessor would not unreasonably refuse its consent to an assignment to a respectable and responsible assignee. Part of the commercial arrangement between the lessor and Ankar was that Ankar would deposit a particular sum of money into a special account in the books of the lessor, on the terms of a Security Deposit Agreement. That money was charged, under the Security Deposit Agreement, with payment to the lessor of any monies due by the lessee under the lease agreement. Under Clause 8 of the Security Deposit Agreement, the lessor was to use its best endeavours to ensure that the equipment remained in the possession of the lessee, and agreed to notify Ankar if the lessee proposed to sell or assign its interest in any of the machinery. Under Clause 9 of the Security Deposit Agreement the lessor agreed to notify Ankar if the lessee fell into default, and to consult with Ankar about the course of action to be taken in that circumstance. When the lessee fell into default, the lessor failed to notify Ankar of the default, and the lessor consented to the lessee assigning its interest under the lease to another company, on terms that the original lessee retained its personal liability to the lessor. The lessor did not give Ankar any prior notification concerning that assignment. The litigation in question was not an action to enforce the guarantee, but rather a claim by Ankar for repayment of the deposited money. By the time of the hearing in the High Court the lessor accepted that the effect of the Security Deposit Agreement was to constitute Ankar as a surety for the lessee's debt (567).

72 The plurality judgment starts its argument at 555 by recounting an argument put by the lessor that, even though there had been breaches of Clauses 8 and 9, discharge of a contract of suretyship occurred only in the circumstances in which any contract would be discharged under the ordinary principles of the law of contract. Their Honours recognised, at 555, that:

"[T]he decided cases do not speak with a single voice on the issues presented by these arguments. On the contrary, support can be found in the authorities for a variety of discordant propositions relating to the discharge of the surety."

73 Their Honours temporarily put that discordancy to one side, to examine, at 555-557, how the analysis of the factual situation before them would run if the only relevant principles governing discharge of guarantees were those of the ordinary law of contract. They stated the relevant principle of the general law of contract at 555:

"Breach of an essential term or a breach going to the root of the contract will of course discharge the surety from future liability if the surety elects to rescind for breach."

74 Their Honours recognised that there is a conceptual distinction between a condition precedent to liability (which can fail to be fulfilled without any breach of contract occurring) and a condition in the sense of being an essential term of the contract. However they took the view that in the context of a contract of suretyship which involves nothing more than a guarantee of payment of the debt owing to the creditor, any condition precedent will also be a condition in the other sense. They also noted, at 556-557, the preference of the courts to construe a term as not being a condition, " at least where other considerations are finely balanced" .

75 Their Honours concluded, at 557, that if the contract in question were to be viewed as an ordinary contract without regard to its special character as a suretyship contract, they were inclined to think that Clauses 8 and 9 were conditions. However, they said:

"It is necessary to take into account as well the special character of a suretyship contract and of the relationship that it creates between the parties. As appears later, when this is done, the relevant obligations in clauses 8 and 9 are clearly seen to have the status of conditions."

76 Starting with the final sentence on 557 (where their Honours start to deal with a new topic in the middle of a paragraph) their Honours consider how the matter is affected by the special character of a contract of suretyship. They start that discussion by considering:

"... the special principle, said to apply to a suretyship contract, that the surety is discharged from its obligations by the creditor's breach of that contract, so long at any rate as the breach materially prejudices the interests of the surety." [emphasis added]

77 That language shows their Honours maintaining a distance from the suggested principle. At 558-559, the plurality observed that "[ o ] ne of the problems with this special principle is that it has been expressed in a variety of ways ". Their Honours then set out various statements by English judges of the circumstances in which a guarantor can be discharged. They recognised at 558 that the special circumstances in which a guarantor can be discharged are:

"... founded not so much on cases dealing with a breach of a term in the suretyship contract, as on cases in which conduct on the part of the creditor materially altered the surety's obligations. Such an alteration takes place when the creditor agrees to a variation of the principal contract or to an extension of time within which the debtor may comply with that contract. The creditor's agreement with the debtor thereby alters the nature of the surety's obligations without the surety's consent."

78 After consideration of more English cases dealing with the way in which material alteration of a surety's risk could discharge the surety, their Honours made the statement on which the Appellants rely in the present case (reproduced at [68] above). Their Honours' own conclusion, at 560, was:

"The foundation of the rule is that the creditor, by varying the principal contract or extending time, has altered the surety's rights without consulting it though the surety has an interest in the principal contract, and that the creditor cannot be permitted to do: see Rees v Berrington (1795) 2 Ves Jun 540; 30 ER 765. Thus, the liability of a surety was seen to be strictissimi juris and the suretyship contract was construed strictly in his favour."

79 After a digression concerning United States law of construction of guarantees, their Honours returned at 561 to pose the following question:

"Is the rule of strict construction, derived from the equitable rule which protects the surety from any alteration in its liability, subsumed in the general principles of the law of contract so that the surety may treat itself as discharged from liability if, but only if, the breach is such as to entitle the surety at law to rescind the contract?"

80 Their Honours concluded, at 561, that there was no difference between the equitable rule and the legal rule. The ratio of Ankar is at 561:

"At law, as in equity, the traditional view is that the liability of the surety is strictissimi juris and that ambiguous contractual provisions should be construed in favour of the surety. The doctrine of strictissimi juris provides a counterpoise to the law's preference for a construction that reads a provision otherwise than as a condition. A doubt as to the status of a provision in a guarantee should therefore be resolved in favour of the surety and so the provision should be interpreted as a condition, or perhaps as an innominate term, instead of a mere warranty. If the surety is to be discharged for breach of a promissory term in the suretyship contract, the justification for the discharge must be that the creditor has failed to comply with a provision that, as a matter of interpretation, requires strict performance as a condition precedent to the surety's obligation or at least requires substantial performance of the promise such that the surety would not have entered into the contract if it had not been assured that there would not be a breach such as the breach which in fact occurred. If on its true interpretation the term is not intended so to operate, it is not easy to understand why the surety should be discharged by its breach."

81 The plurality then went on, at 561-2, to give recognition to the notion of an intermediate or innominate term, that Diplock LJ had articulated in Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26. Their Honours did not, however, apply the notion of an intermediate term in Ankar , because they concluded that Clauses 8 and 9 should be analysed "as conditions, breach of which, at Ankar's option, discharged it from performance of its obligations under the Security Deposit Agreement ..." .

82 From this explanation of the structure of the reasoning of the majority in Ankar , it can be seen that the passage, quoted at [68] above, upon which the Appellants rely as the last step in their argument, is not the ratio of the case. Conversely, the Appellants had pointed to the passage that sets out the ratio as though it was an intermediate step in the argument.

83 In accordance with the ratio of Ankar , one must construe the contract of guarantee in the present case, to ascertain whether the term as to confidentiality:

"... requires strict performance as a condition precedent to the surety's obligation or at least requires substantial performance of the promise such that the surety would not have entered into the contract if it had not been assured that there would not be a breach such as the breach which in fact occurred."

What this test seems to require is that one consider types of breach, rather than the particular breach that occurred.

84 If the contract of guarantee had not included Clause 4 I would have construed those contracts of guarantee that were entered with a customer of the bank (ie, the guarantees with Mr and Mrs Brighton) as containing a condition in the terms of Clause 22 of the Code, breach of which would entitle those guarantors to terminate the guarantees. ANZ takes no point in the present case that any guarantor has failed (at the least by the guarantors' pleading in the court below) to exercise any right it had to terminate the guarantees, or that any right to terminate that had once existed had been lost.

85 There is some imprecision in the wording of Clause 22 of the Code in that the "general duty of confidentiality towards you " is not explicit about the types of information to which that duty of confidentiality attaches. However, construing the contract in a sensible commercial fashion, I would take it to apply to any information that was itself of a confidential nature, the disclosure of which could affect the interests of the guarantor that related to the guarantee. The information disclosed by Mr Hancock was in my view of that character. Thus, I conclude that the term has been breached. In my view, were it not for Clause 4 of the guarantees, that breach would have given rise to a right for Mr and Mrs Brighton to terminate their respective guarantees.

Effect of Clause 3

86 In oral submissions Mr Menzies QC, counsel for the Appellants, put other submissions that went somewhat more widely than the argument that had been advanced in the written submissions. One submission he made was that that there was an implied term in the guarantee that ANZ would not do anything by its conduct that brought about a situation in which the guarantor became a principal debtor, through the operation of Clause 3 of the guarantee (reproduced at [30] above). Mr Menzies points out that the Disclosure was in fact relied upon by Mr Robinson as evidentiary material to seek the winding up of SSMA. He submitted that Mr Robinson was "thereby putting at risk the activation of Clause 3 of the Guarantee and transforming the guarantor's obligations from guaranteeing those of others to his or her own principal obligations" .

87 It is unnecessary to consider whether there is an implied term of the kind alleged in the guarantee, because, even if that term existed, it has not been breached. I do not accept that Mr Robinson's deployment of the disclosed information put at risk the activation of Clause 3 of the guarantee. The definition of "Administration" in Clause 20.1 of the guarantee includes winding up. Clause 3 applies if either para (a) or (b) is satisfied, and if also as a result:

"(A) ANZ has no legal right to recover any or all of the Guaranteed Money from the Customer; or

(B) The Customer does not owe money that otherwise would be Guaranteed Money."

88 I would accept that para (a) of Clause 3 would apply if SSMA were to be wound up. However, I do not accept that as a result either of the consequences in (A) or (B) would follow. Even if the Customer were to be wound up, ANZ would still have a legal right to recover the Guaranteed Money from the Customer, and the Customer would still owe that money. It may be that in the winding up the debt the customer owed to ANZ did not result in payment to ANZ of a full one hundred cents in the dollar, but that does not affect whether ANZ had the legal right to recover the Guaranteed Money, or whether the Customer owed the Guaranteed Money. Thus, even if SSMA were to be wound up, a guarantor of debts of SSMA would not become a principal debtor through the operation of Clause 3.

89 An alternative way in which Mr Menzies put the case for the Appellants in oral submissions was that there was an implied term in the guarantee that ANZ will not engage in any conduct whereby " it prejudices the rights of the guarantor by conduct which at law, as a matter of principle, gives rise to the guarantor's rights to be discharged from the guarantee" . There is no such implied term in the guarantee. Consideration of Clause 4 of the guarantee will demonstrate why this is so.

Clause 4

90 It is impossible to construe the guarantee Mr and Mrs Brighton actually gave without taking into account Clause 4 (reproduced at [30] above). In particular, one cannot construe the guarantee for the purpose of deciding whether the obligation of confidentiality in the guarantee is a condition without taking Clause 4 into account. As well, since a term cannot be implied into a contract if it contradicts an express term of the contract ([55] above), it is necessary to construe Clause 4 to decide whether there is the implied term for which Mr Menzies contended in his alternative oral submission.

91 It is well established that an adequately drafted clause in a guarantee that provides that the guarantee will not be discharged by identified particular matters that would otherwise discharge the guarantor, can be effective to prevent a discharge that would otherwise arise under the general law: eg O'Day v Commercial Bank of Australia Ltd (1933) 50 CLR 200 at 219-220 per Dixon J (Rich J agreeing), 222 per Evatt J, 223 per McTiernan J; Bank of Adelaide v Lorden (1970) 127 CLR 185 at 191-193 per Barwick CJ (with whom Windeyer and Gibbs JJ agreed, and with whom Walsh J agreed on this point), 201 per Menzies J; Buckeridge v Mercantile Credits Limited (1981) 147 CLR 654 at 666-667 and 671 per Aickin J (with whom Gibbs CJ and Wilson J agreed), 675-676 per Brennan J (with whom Gibbs CJ, Murphy and Wilson JJ agreed). Similarly, a clause providing in general terms that the guarantor's liability shall survive anything that would otherwise discharge it has been held to be effective, if drafted with sufficient clarity: Schoenhoff v Commonwealth Bank of Australia [2004] NSWCA 161 at [19]-[22] per Stein AJA (Ipp and McColl JJA agreeing).

92 I do not accept a construction advanced by the Appellants of the second sentence of Clause 4 whereby the "which might have released me" phrase was read as meaning, "which might possibly have released me, but in fact did not release me" . Clause 4 would be pointless if that were the correct construction of "which might have released me" . The clause is clearly included so that it has a real effect, and the construction that the Appellants urge in that respect does not in any circumstance permit it to have a real effect.

93 Rather, the meaning that the ordinary user of English would draw from the second sentence of Clause 4 can be paraphrased as:

Think about everything that might possibly have released me from all or part of my obligations, or limited them, if clause 4 had not been part of the guarantee. What we agree is that none of those things will release me from this guarantee.

94 Mr Menzies argued that the examples in Clause 4 would be unnecessary if the second sentence were interpreted in that way, and that that provides a reason for not adopting the interpretation.

95 I do not accept that the fact that examples are given leads to the conclusion for which Mr Menzies submits. Both in the drafting of contracts and of statutes, the use of examples is a legitimate way of assisting in making clear the scope of general words. It is one of the ways in which ostensive definition can occur, and ostensive definitions operate by indicating a meaning without spelling it out exhaustively.

96 Sometimes, if general words are accompanied by a list of examples which all fall within some genus that is narrower than the general words, that can provide a reason for restricting the general words. This approach to construction is well enough known, and old enough, to have Latin labels - the ejusdem generis rule is a subcategory of the noscitur a sociis rule. But there are well-recognised limitations on the use of such an aid to construction (eg Deputy Commissioner of Taxation v Dick [2007] NSWCA 190; (2007) 242 ALR 152; (2007) 64 ACSR 61 at [12]-[14]; National Roads and Motorists' Association v Whitlam [2007] NSWCA 81 at [63]-[64] and cases there cited). In particular, it is necessary to be able to identify some more limited category in the examples before the general words are limited. It is not possible to identify a limited category of the general words of the chapeau, in the list of examples in Clause 4.

97 As well, as the ejusdem generis rule is only an aid to construction, it is possible for the parties to a contract to agree that that aid will not apply. The parties in the present case have so agreed, in Clause 20.1(a)(ii) of the guarantee. Subject to what I say in [111] below, in my view, the first two sentences of Clause 4 are effective to negative any claim that the guarantor has been released by a breach of an obligation that ANZ owes to the guarantor.

98 Mr Menzies also submits that, in accordance with Ankar , the provisions of Clause 4 should be read contra proferentem . Mr Lee, counsel for ANZ, points out that the parties to the guarantee have agreed, in Clause 20.2(vii) of the guarantee, that the fact that the guarantee was drafted by or for ANZ does not mean that it must be interpreted against ANZ's interests.

99 There may be room for argument about whether a provision such a Clause 20.2(vii) would be effective to remove all traces of the contra proferentem rule. It is a striking feature of the case law that has invoked a " contra proferentem rule " that judges have often used the term with little or no explanation, and in ways that are not consistent. One of the ways in which that "rule" has been said to operate is that it operates against the interests of the person who confers a benefit by the disputed words in a document ( North v Marina [2003] NSWSC 64; (2003) 11 BPR 21,359 at [57]-[72], and esp [62]-[65]), while another has been that it operates against the interests of a person who receives a benefit under the disputed words in a document ( ibid at [66]-[68]). In the present case, it could be argued that it was the guarantor who was conferring a benefit by Clause 4, while it was ANZ that received a benefit from it.

100 I do not find it necessary to decide whether either of these ways of regarding "the contra proferentem rule" should be applied in the present case. One reason is because in Ankar at 561 the plurality have laid down that " the liability of the surety is strictissimi juris and ... ambiguous contractual provisions should be construed in favour of the surety. " In my view there is no ambiguity in the chapeau of Clause 4, so that mandatory rule of construction arising from Ankar does not apply. Nor is there any need to invoke any other manifestation of the contra proferentem rule, because the contra proferentem rule is only to be applied to resolve an ambiguity, and only ever as a rule of last resort (cases cited in North v Marina at [75]-[77]).

101 In any event, the present case is within the scope of the examples contained in Clause 4. The first dot point is one example of conduct of ANZ that could prejudice a guarantor's rights. The second of the dot points includes within its denotation a situation where a customer has a defence, arising from a breach by ANZ of the contract between ANZ and the customer, to a claim by ANZ against the customer for payment of the guaranteed debt. The final dot point is capable of applying to a situation where a customer can bring a cross-claim against ANZ alleging a breach of an obligation owed by ANZ to the customer. Further, I see no reason why "anyone" should not include the guarantor himself or herself. Thus, the final dot point applies to a situation where the guarantor can bring a cross-claim against ANZ alleging a breach of an obligation owed by ANZ to the guarantor. Thus, the second and final dot points extend to claims that the guarantor is discharged by reason of a breach of an obligation that ANZ owed to the customer whose debt is guaranteed, or by reason of a breach of an obligation that ANZ owed the guarantor, in his or her capacity as guarantor. That is the essence of the argument that the Appellants seek to put in the present case.

102 Thus, Clause 4 expressly negatives a consequence that would follow if there were breach of a term requiring confidentiality in the guarantee and if that term was a condition. It follows that any such term requiring confidentiality cannot be construed as a condition.

103 Therefore the express terms requiring confidentiality (or an implied term with respect to Mrs Aldrick and Ms Bowen if such an implied term were held to exist) were not conditions. Thus an argument that there has been a breach of a condition, entitling the relevant Appellants to terminate the guarantees, must fail.

104 However, the Appellants argued in the alternative that the terms should be classified as intermediate or innominate terms. The breach of such a term only gives rise to a right to terminate if the consequences are sufficiently serious. The Appellants submit that the consequences of the breaches were sufficiently serious and they therefore had rights to terminate the guarantees.

105 Even if the confidentiality terms of the guarantees are properly classed as intermediate terms instead of warranties, breach of which gave rise to a right to damages only, I do not accept that the breaches were sufficiently serious. In the Hongkong Fir case, Diplock LJ envisaged that the newly-created category of intermediate term would apply to terms with respect to which:

"some breaches will and others will not give rise to an event which will deprive the party not in default of substantially the whole benefit which it was intended that he should obtain from the contract."

106 In the Hongkong Fir case itself, the English Court of Appeal considered a seaworthiness term in a charterparty contract. The charter was for a period of 24 months. The Court of Appeal noted that some breaches of this term would be serious, but some would only be minor. The Court of Appeal concluded that even after an actual delay of seven weeks and a foreseeable delay of 13 weeks, the performance of the contract could not be regarded as substantially different from that intended by the parties.

107 I do not consider that the Bank's breach of the confidentiality term was an event which deprived the relevant guarantors of substantially the whole benefit which it was intended that they should obtain from the contract. Indeed, as the trial judge held at [72]:

"In summary, the evidence plainly establishes that Mr Robinson/APM had already embarked on their strategy of causing SSMA to be wound up well prior to the disclosure, and the disclosure had no causal connexion with the ultimate financial collapse and winding up of SSMA."

108 Further, even if, apart from Clause 4, the Disclosure would have been a breach of an intermediate term of sufficient seriousness to entitle the guarantors to terminate their guarantees, Clause 4 has the effect of preventing that breach from giving rise to a right to terminate.

109 Clause 4 does not prevent a guarantor from suing ANZ for breach of contract, to recover the loss that the guarantor has actually suffered by reason of any breach by the bank of a contractual obligation owed to the guarantor in that capacity. In any such action, the guarantor sues on the basis that the breach is of a contractual warranty. However, Clause 4 is effective to prevent the guarantors in the present case from arguing that the breach by the Bank of its obligations of confidentiality (whether owed to the debtor whose debts are secured, or owed to the guarantor) has the effect of releasing the guarantor.

110 That Clause 4 has the construction that I have held it to have has the effect that there is no implied term in the guarantee of the type for which Mr Menzies contended in his alternative oral submission ([89] above), at least insofar as it relates to conduct of ANZ of the type involved in making the Disclosure. A sufficient reason is because such an implied term presupposes that there is conduct which could, as a matter of law, give rise to a guarantor's rights to be discharged. Yet Clause 4 denies, by an express term, that there can be any such conduct.

111 What I have said on this topic should not be taken as deciding that Clause 4 is effective to prevent any breach whatever, of any obligation whatever that the bank owes to a guarantor, from resulting in the guarantee ceasing to be enforceable. There might possibly be circumstances where the need to construe contracts to give a sensible commercial outcome, unless the words intractably require otherwise, results in some reading down of what the ordinary user of English would draw from the general words of Clause 4. For example, the question of whether a clause such as Clause 4 is effective to keep a guarantee on foot even if a bank were to engage in a deliberate or malicious breach of an obligation to a customer can be kept for another day. It is not suggested that Mr Hancock's breach was anything other than negligent or inadvertent. It occurred in a context where Mr Robinson had in some fashion ascertained that Mr Hancock was handling the SSMG accounts, and Mr Robinson then telephoned him. All that is necessary to decide, for the purposes of the present case, is that Clause 4 is effective to prevent the type of breach that Mr Hancock committed of the obligation of confidentiality that ANZ owed to Mr and Mrs Brighton from resulting in the guarantee being able to be terminated.

Black v Ottoman Bank

112 In oral argument the Appellants also came to rely, in the alternative, on a principle articulated in the Privy Council in Black v Ottoman Bank (1862) 15 Moo 472; 15 ER 573 at 483; 577. The principle is that a surety would be discharged if there has been "some positive act done by [the creditor] to the prejudice of the surety, or such degree of negligence, as in the language of Vice-Chancellor Wood in Dawson v Lawes (1854) 23 LJ Ch 434 at 441, 'to imply connivance and amount to fraud'" .

113 Leave was granted to the Appellants to file supplementary written submissions concerning the application of Black to the present case. Those supplementary submissions accepted that the facts of the present case did not fall within the words I have just quoted. It is therefore unnecessary to give any further consideration to what, if any, principle Black can now be taken to establish. Likewise, it is unnecessary to consider whether Clause 4 would be effective to negative any consequences for the enforceability of the guarantee that might have arisen by reason of Black if Clause 4 had not been in the guarantee.

Issue 3

114 As success by Mr and Mrs Brighton on this issue is a precondition to them being entitled to succeed on Issue 2, insofar as Issue 2 is based on the Contracts Review Act , it is logical to consider Issue 3 at this stage.

115 Section 6 Contracts Review Act provides, so far as presently relevant:

"(1) ... 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 ..."

116 The judge's reasoning on the application of s 6(2) was:

"165 In relation to s 6(2), the defendants submitted that the deed was not entered into 'in the course of or for the purpose of' the Brightons' pontoon and marina business. Rather, it was contended, the purpose of the Deed was to extinguish the ANZ's liability for a wrongful disclosure. The defendants' counsel submitted that the deed 'was for a protective purpose not a mercantile purpose'.

166 In my view this submission is incorrect. In relation to Mrs Brighton it seems clear to me that the deed was entered into 'in the course of or for the purpose of' the trade, business or profession she was carrying on through SSMG. Put simply, in the course of carrying on that trade, business or profession - and specifically in resisting the winding up proceedings against SSMA - Mrs Brighton entered into the deed. Thus she is not entitled to relief under the CRA.

167 In relation to Mr Brighton, on his own account he had a substantial involvement in the SSMG group over a number of years, including in the period covering the execution of the deed. He had taken a leave of absence of some 14 months in around 2004 in order to work with the SSMG. He intended to join the SSMG in a full time role in 2006. Mr Brighton also had a 50% shareholding in Brighton Associates, which in turn owned 100% of SSMA. When regard is had to these factors, the correct conclusion as a matter of substance is that Mr Brighton entered the deed either in the course of, or for the purpose of, the trade, business or profession he was carrying on, or proposed to carry on, through SSMG. Thus he is also not entitled to relief under the CRA."

117 The Appellants submit that this conclusion is erroneous, because the judge failed to take into account the decision of McLelland J (as his Honour then was) in Toscano v Holland Securities Pty Ltd (1985) 1 NSWLR 145. McLelland J there considered a situation in which a business was carried on by a company that had only two shareholders, who had previously carried on the business in partnership. One of the contracts concerning which relief was sought under the Contracts Review Act had been entered into by one of the former partners in his own name, but as undisclosed principal for the company. The other was a guarantee by the other shareholder of the obligations of the first-named shareholder under that contract. McLelland J held that those shareholders were not carrying on a business at the time, and hence the contracts in question were not entered into "for the purpose of" a business carried on by the person who entered the contract.

118 In Australian Bank Ltd v Stokes (1985) 3 NSWLR 174 Rogers J followed the decision in Toscano . Rogers J did so with grave reservations that Toscano seemed at odds with the apparent purpose of s 6 to make the Act inapplicable to what could be broadly described as commercial transactions. However ultimately, in light of the well established distinction between a corporation and its shareholders, and difficulties in deciding what sort of relationship between a shareholder and a corporation would need to exist before the business of the corporation was "carried on by him" his Honour followed the literal construction that McLelland J had given to s 6(2).

119 In Chen v Song [2005] NSWSC 19; [2005] ANZ Conv R 130 at [187] James J found, without any reference to Toscano or Australian Bank v Stokes , that:

"... the business was proposed to be carried on by the company Golden Mountain Group Pty Ltd and that, accordingly, s 6(2) of the Act is not an obstacle to Mr and Mrs Song being granted relief."

120 Mason P (Meagher and Handley JJA agreeing) followed Toscano in Ring Tread Systems (Australasia) Pty Ltd (Receiver and Manager Appointed) v Tubb (Court of Appeal, 30 October 1998, unreported). Mason P said, at 8, "I cannot see any basis upon which the Contracts Review Act was excluded from the proceedings" insofar as the beneficiary of a guarantee of the debts of a company sought to enforce it against the guarantor.

121 In Ford by his Tutor Beatrice Ann Watkinson v Perpetual Trustees Victoria Limited [2009] NSWCA 186; (2009) 75 NSWLR 42 Allsop P and Young JA (Sackville AJA agreeing) held that the Contracts Review Act could in principle be applied to a situation where the person seeking relief had entered a contract that related to a business that was then proposed to be carried on, but where he did so as a consequence of manipulation, and with no intention "to take any benefit whatsoever from the business or to carry on the business" [96]. The primary judge in that case had said he was willing to accept an argument "that the provisions of the Act did not in any event apply to the transaction as the loan was for business purposes within the terms of s 6(2) of the Act" . Allsop P and Young JA said, at [95]:

"With respect, that is not the relevant question for s 6(2). What must be answered is whether [the person seeking relief] entered into the contract in the course of or for the purpose of a trade or business carried on by him or proposed to be carried on by him."

122 At [99] their Honours referred to another case in which a trial judge had said:

"The loans sought by [the applicant for relief] were stated in her application to be for business purposes. She confirmed that purpose to [counsel]. There is no evidence that the proceeds of the loan were not applied for a business purpose, contrary to [the applicant's] statements. Those circumstances take the loans out of the purview of the Contracts Review Act 1980 , even if some factual basis for relief under the Act had otherwise been made out: see s 6(2)."

123 Allsop P and Young JA said of those remarks, at [100]: "With respect, as a statement of the relevant test under s 6(2) that expression of the matter is inadequate." At [103] their Honours specifically referred to Toscano , Australian Bank v Stokes and Chen v Song without a hint of criticism.

124 The written submissions of counsel for ANZ specifically referred to the decisions in Ring Tread Systems and Ford v Perpetual Trustees , and did not contend to the contrary of what those cases had decided concerning the applicability of s 6(2). Thus, Issue 3 should be resolved in favour of the Appellants. That clears the way to move on to Issue 2.

Issue 2

125 At the trial, it appears to have been the contention of the Appellants that the whole of the Deed should be set aside. The contention on the appeal was more limited, namely that the Deed should be set aside insofar as it contained a release of claims against ANZ or freed it from deleterious consequences arising from having made the Disclosure. Relief that achieved that objective would probably need to delete all the provisions I have set out at [23], [24] and [25] above.

126 Even if such an order were to be made, it would not avail Mr and Mrs Brighton in the present litigation, for the reasons that I have given in connection with Ground 1. Notwithstanding that, it is appropriate to consider the arguments put concerning statutory unconscionability and injustice.

127 In considering this issue it is the form of the legislation as at the date the Deed was entered, 19 October 2006, that should be applied.

128 Section 51AC TPA as at 26 October 2006 provided, so far as relevant:

"(1) A corporation must not, in trade or commerce, in connection with:

(a) the supply or possible supply of goods or services to a person (other than a listed public company); or

(b) the acquisition or possible acquisition of goods or services from a person (other than a listed public company);

engage in conduct that is, in all the circumstances, unconscionable.

(2) A person must not, in trade or commerce, in connection with:

(a) the supply or possible supply of goods or services to a corporation (other than a listed public company); or

(b) the acquisition or possible acquisition of goods or services from a corporation (other than a listed public company);

engage in conduct that is, in all the circumstances, unconscionable.

(3) Without in any way limiting the matters to which the Court may have regard for the purpose of determining whether a corporation or a person (the supplier ) has contravened subsection (1) or (2) in connection with the supply or possible supply of goods or services to a person or a corporation (the business consumer ), the Court may have regard to:

(a) the relative strengths of the bargaining positions of the supplier and the business consumer; and

(b) whether, as a result of conduct engaged in by the supplier, the business consumer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; and

(c) whether the business consumer was able to understand any documents relating to the supply or possible supply of the goods or services; and

(d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the business consumer or a person acting on behalf of the business consumer by the supplier or a person acting on behalf of the supplier in relation to the supply or possible supply of the goods or services; and

(e) the amount for which, and the circumstances under which, the business consumer could have acquired identical or equivalent goods or services from a person other than the supplier; and

(f) the extent to which the supplier's conduct towards the business consumer was consistent with the supplier's conduct in similar transactions between the supplier and other like business consumers; and

(g) the requirements of any applicable industry code; and

(h) the requirements of any other industry code, if the business consumer acted on the reasonable belief that the supplier would comply with that code; and

(i) the extent to which the supplier unreasonably failed to disclose to the business consumer:

(i) any intended conduct of the supplier that might affect the interests of the business consumer; and

(ii) any risks to the business consumer arising from the supplier's intended conduct (being risks that the supplier should have foreseen would not be apparent to the business consumer); and

(j) the extent to which the supplier was willing to negotiate the terms and conditions of any contract for supply of the goods or services with the business consumer; and

(k) the extent to which the supplier and the business consumer acted in good faith."

129 Section 12CC ASIC Act as at 26 October 2006 was in closely similar terms to s 51AC TPA , save that it was expressed to apply to "a person" not merely to "a corporation" , and that it was concerned with the supply of financial services, rather than goods and services, and with the supply of those services to any other person (called a "service recipient" ) rather than with the supply or possible supply of goods or services to a person or corporation, referred to as "the business consumer" . As the Full Federal Court (Tamberlin, Finn and Conti JJ) said in Australian Securities and Investments Commission v National Exchange Pty Ltd [2005] FCAFC 226; (2005) 148 FCR 132 at [30], s 12CC "was intended to act as a 'mirror' provision to s 51AC of the Trade Practices Act ..." .

130 No attention was paid in the submissions to whether the loan of $50,000 that ANZ made to SSMA on the terms of the Deed was a "financial product" . Rather, the matter proceeded on the basis that one or other of s 51AC and s 12CC provided the norm of conduct against which ANZ's conduct in making the loan on the terms of the Deed should be measured, and there was no relevant difference between those norms of conduct.

Failure to Consider Overall Effect of Circumstances?

131 The judge's discussion about the enforceability of the Deed was structured by reference to s 12CC. He considered seriatim , the application of s 12CC(2)(a), (b), (c), (d), (e) and (j). The Appellants submit that, by doing so, the judge "inappropriately restricted his consideration to the taxonomy of the various matters contained in section 12CC(2)."

132 The Appellants submit, correctly, that the matters listed in s 12CC(2) do not exhaustively prescribe a catalogue of factors that are relevant to whether statutory unconscionability is established: ASIC v National Exchange at [40]; Canon Australia Pty Ltd v Patton [2007] NSWCA 246; (2007) 244 ALR 759 at [45]-[46]. However, the judge considered those individual factors under a heading "Considering the various factors contained in s 12CC(2) in order to determine whether ANZ's conduct was unconscionable" (following [134]). After considering the various factors to which I have earlier referred, his Honour, following [157], reached his conclusion under a heading "Overall Conclusion required: was ANZ's conduct unconscionable under s 12CC/s 51AC?" He concluded that it was not unconscionable.

133 I am not persuaded that the judge has failed to address the correct question, or adopted an inappropriately restricted method in his consideration of that question. In listing, and considering seriatim , various of the factors under s 12CC(2) his Honour was following the structure of the submissions that the Appellants had made to him. No submission was made to the judge that the claim of unconscionability depended upon anything other than the particular factors that his Honour considered. It was not suggested to us that there was any matter relevant to whether the conduct of ANZ was unconscionable, within the meaning of those statutory provisions, that his Honour had overlooked. His Honour explicitly considered the collective effect of those factors. In my view, the judgment is not erroneous in this respect.

Was the Finding of No Unconscionability Correct?

134 At [123] the judge accepted Mrs Brighton's evidence in the following respects:

"i. Mr Harkin had made it plain to Mrs Brighton that without that $50,000 being placed into its trust account Colin Biggers & Paisley would not act.

ii. Mrs Brighton was cross-examined in detail about the advice of Mr Harkin regarding her options when deciding whether or not to enter the deed. Mrs Brighton repeatedly could not recall matters which the cross-examiner suggested had been canvassed in Mr Harkin's advice. She emphasised that it was a frantic time, because of the 2 o'clock court appearance on 18 October 2006. However, ultimately Mrs Brighton agreed that she was aware that she could have reserved her rights and not accepted ANZ's offer of funding. However, she did not chose [sic] this course because she felt she had no alternative but to fight the litigation [the implicit reason for this was because of the consequences facing the SSMG group]. [emphasis in original]

iii. At one point Mr Harkin had called Mrs Brighton and told her that she would have to speak to Mr Brighton because he was not prepared to sign the deed, and it needed to be signed for the money to be released by ANZ. Mrs Brighton had made a telephone call to her husband in which she sought to convince him to sign the deed."

135 The judge also appears to have accepted, at [124], Mrs Brighton's evidence to the effect that the Deed was received an hour or so before she was due in court, and that she had some discussion with Mr Harkin concerning it. The judge set out, and apparently accepted, the following evidence:

"Q. You decided to sign it because you were of the very firm view that there was a necessity to obtain the funds to assist the defence of the winding up proceedings, correct?

A. There was no reasonable alternative.

...

Q. Now at the time that you actually put pen to paper and executed the deed did you in truth propose to reserve your rights at some later stage to sue the ANZ in relation to the disclosure?

A. If I'm understanding that question correctly it was never my intention to sue the ANZ.

Q. Yes. And you had no intention of suing the ANZ at the time that you executed the deed because you knew that by executing the deed you were giving up your rights to sue the ANZ, correct?

A. I executed the deed so I could save my group.

Q. Yes. And you had no intention of suing the ANZ at the time you executed the deed because you knew, from what Mr Harkin had told you, that by taking that step and executing the deed you were giving up your rights against the ANZ, correct?

A. I don't recollect Mr Harkin telling me that but I was aware that that was what the deed was for."

136 Section 12CC(5) ASIC Act and s 51AC(5) TPA each provided that, in deciding whether a contravention of s 12CC(1) or s 51AC(1) has occurred "the court must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention ..." . Clearly with those provisions in mind, Mrs Brighton's cross-examination included:

"Q. I see. Well, would this be a fair characterisation of your evidence, that at the time that you signed the deed you couldn't reasonably foresee the consequences that would be flowing from the disclosure, correct?

A. That is correct.

Q. Didn't realise that it would lead to a catastrophe, correct?

A. Correct.

Q. But what you say to his Honour is even if in truth you had have realised that, you still would have signed? That's what you tell his Honour?

A. Yes."

137 In cross-examination Mrs Brighton accepted that "I understood the deed" . Her cross-examination further included:

"Q. I see, so whatever Mr Harkin did do in relation to the deed was sufficient to apprise you of an understanding of the ramifications of the provisions of the deed, correct?

A. I made up my own choice of signing the deed, Mr Lee. What Mr Harkin - Mr Harkin gave me a couple of options, but what I saw as my options and what Mr Harkin saw as my options were miles apart.

Q. I see, so Mr Harkin gave you advice and you chose -

A. No, Mr Lee.

Q. You considered that advice and then you made a decision on the basis of that advice.

A. Yes."

138 The judge found at [129]:

"i. Mrs Brighton accepted that it was open to her to reject ANZ's offer of funding and reserve her rights against ANZ, however she felt this option was in commercial reality not open to her because of the consequences she perceived would result for the SSMG group if she did not gain representation in the winding up proceedings.

ii. The deed was prepared in a time-pressured environment. On Mrs Brighton's evidence she had some time to review the deed but not a lengthy opportunity. However, Mrs Brighton admitted she understood that the effect of the deed would be to extinguish her rights against ANZ."

139 Mr Brighton gave evidence, in the course of which he acknowledged that he had been "talking to Mr Harkin over some conversations" , and that after Mrs Brighton had phoned him begging him to sign the Deed, he told Mr Harkin "that I had a fundamental understanding of it" . The judge accepted Mr Brighton's evidence "that Mr Harkin had clearly harassed him into signing the deed but that he had so signed because he knew that by signing the deed he was assisting his wife who was actually begging him to do that" . Apart from that, the judge found that "his recollections were so bad that the Court could not accept his evidence save where it was corroborated by contemporaneous written material or by the evidence of others whose recollections could be accepted as correct." It was not suggested that the Bank was aware, or even had reason to suspect, that Mr Brighton had been "harassed" into signing the Deed.

Badges of Unconscionability

140 The Appellants pointed to several matters that, in their submission, were indications that the conduct of ANZ was unconscionable. I will deal with them seriatim , even though the reasons that I give concerning one individual item are to some extent repetitive of the reasons that I give concerning another item. That some of the reasons are repetitive is not surprising, when the items are all ones that the Appellants point to as justifying a single characterisation (unconscionable) of a single piece of conduct (ANZ making the Disclosure and then advancing the $50,000 on the terms of the Deed). A common factor to all of them is that, though the Disclosure was a breach of an obligation of confidentiality, it is not shown (or submitted) to be anything other than carelessness or inadvertence on Mr Hancock's behalf.

Opportunity to Negotiate?

141 The Appellants submit that there was no substantial opportunity to negotiate or to reject any of the provisions of the Deed.

142 The evidence showed that there was a draft deed that differed from the Deed that was ultimately executed. The first draft made provision for Mrs Aldrick, Ms Bowen and AFC to be parties to the Deed, but they were removed as parties following a request that Mr Harkin made on Mrs Brighton's behalf. Further, the Bank agreed (contrary to the provisions of the first draft) that its own legal costs would not be deducted from the $50,000 that was to be provided pursuant to the Deed. Mr Harkin's contemporaneous file note dated 18 October 2006 includes: "I attempted to negotiate with the Bank to convince the Bank that it should give up its rights to the $450,000 odd but the Bank ultimately indicated through Michael Joseph at about 1pm today that it was not prepared to give up those rights." (The "$450,000 odd" was the amount expected to be payable to SSMA following the Brisbane litigation to which Mr Robinson had referred in his affidavit.) Thus, there was not only an opportunity to negotiate, there was actual negotiation, some of which resulted in changes.

Independent Legal Advice?

143 The Appellants also contend that, while Mr Harkin gave legal advice about the Deed, it was not proper independent advice.

144 Mr Harkin was not called to give evidence, nor was his absence from the witness box explained. The judge took this into account, making reference to Jones v Dunkel (1959) 101 CLR 298, in reaching a positive conclusion that ANZ had "succeeded in establishing that Mr and Mrs Brighton were competently advised" . I doubt that the judge was right in placing reliance on Jones v Dunkel for this purpose. That is because, if the objective of Mr and Mrs Brighton was to prove the inadequacy of the advice they had received from Mr Harkin, he could hardly be said to be a witness who was in their camp, so far as the contents of that advice was concerned. However, that error is of small significance in the overall scheme of the allegation of unconscionability.

145 In deciding whether the conduct of ANZ was unconscionable, it is particularly important how things would have appeared to ANZ, so far as the provision of legal advice to Mr and Mrs Brighton is concerned. The solicitors for ANZ were aware that Mr and Mrs Brighton had sought advice from Mr Harkin, and that Mr Harkin was putting to Mr Michael Joseph, the solicitor for ANZ, proposals that were objectively of a type calculated to advance the interests of the guarantors. It is not suggested that ANZ had any reason to doubt Mr Harkin's ability to give advice concerning a deed of the type being negotiated, or concerning the adequacy of the advice that he actually gave on this particular occasion. Further, the commercial essence of the transaction embodied in the Deed was really quite simple - ANZ would advance $50,000 on the basis that it was acknowledged that the Disclosure did not affect the enforceability of its existing securities, any signatory to the Deed who might have had cause of action against ANZ arising from the making of that Disclosure gave up that cause of action, and the $50,000 was paid into the trust account of Colin Biggers & Paisley rather than to SSMA itself. It may well have been a difficult exercise in practical business judgment whether to accept an offer on those terms (though in fact Mrs Brighton did not find it so), but it was hardly a transaction that called for legal advice of any complexity.

146 If it matters, the evidence included a contemporaneous file note by Mr Harkin, that confirms that he outlined to Mrs Brighton alternative courses of action that were open to her.

147 The Appellants submit that quite apart from the adequacy of Mr Harkin's advice, the independence of the advice is impugned because (as the Bank knew) the $50,000 was being sought to fund legal action in which Mr Harkin's firm would act in the winding up proceedings. The Appellants submit that the possibility of the advice being affected by self-interest, in obtaining fees for the work in defending the First Winding Up Action, prevented the advice from being truly independent.

148 If that were right, the only circumstance in which a lawyer could give truly independent advice about whether litigation should be launched or defended, or a commercial transaction embarked on or continued with, would be if the lawyer involved in giving that advice was not to be involved in the subsequent litigation, or commercial transaction. That would be a highly surprising conclusion.

149 It suffices for present purposes to note that "independent advice" is not in itself an item that appears in the list of factors to which the court may (not must) have regard in s 51AC(3) TPA and s 12CC ASIC Act . Whether there is independent legal advice is a matter that might enter into some of those factors (such as the relative strengths of the bargaining positions of the parties, and whether the plaintiff was able to understand any documents relating to the transaction), but "independent advice" has no specific role to play in either of the statutes.

150 There is no skerrick of evidence that Mr Harkin was actually influenced, in any of the advice he gave to Mr and Mrs Brighton, by the prospect of receiving fees if the advance were made. Nor is there any evidence to suggest that ANZ had reason to suspect that Mr Harkin was actually so influenced. What the Appellants are asking the Court to accept is that in deciding whether the Bank's conduct was unconscionable, weight should be placed on the possibility that the solicitor advising Mr and Mrs Brighton might have given advice, in the adequacy or correctness of which he did not have a bona fide belief, because of a motive of private gain. A solicitor who behaved in that way would be guilty of professional misconduct. The amount of money involved is comparatively small, in the context of a solicitor's reputation and professional future. It is not even as though the whole $50,000 would ultimately be gross receipts (not net profits) of Mr Harkin's firm - it was specifically proposed (as actually later happened) that a barrister would be briefed to defend the action. ANZ was in a situation of having knowledge that Mr Harkin was giving advice about a transaction from which his firm was likely to gain, but not to gain much, where there was no reason to believe the advice was not competent and bona fide, and where the failure of the solicitor to give bona fide advice would be a gross departure from proper professional standards. I do not accept that ANZ having that type of knowledge warrants being given any significant weight in deciding whether ANZ's action was unconscionable.

151 I should in fairness record that the judge rejected a submission that the advice of Mr Harkin could be impugned for want of independence because he was improperly motivated by the incentive of the $50,000 to be advanced ([137]). The judge was right to do so.

Pressure Through Urgency?

152 Another matter contributing to the unconscionability, according to the Appellants, is that the Bank knew that the $50,000 was urgently required or the Appellants would be left without legal representation.

153 It is correct that there was great urgency, but the urgency was not of the Bank's making. The First Winding Up Proceedings had been on foot since 28 September 2006, and followed the service of a statutory demand on 12 September 2006, but it was only on 17 October 2006 that Mrs Brighton first sought legal assistance from Colin Biggers & Paisley, concerning a legal hearing that was to take place the next day. A file note of Mr Joseph shows that Mr Harkin first contacted Mr Joseph concerning this matter on 17 October 2006, and on that day they discussed a proposal for ANZ to advance $50,000 for legal costs and get a release "from any Privacy Act issues" and that ANZ would send a letter to the company "saying it will appoint VA/Receivers if prov liq appointed" . (I take it that 'VA' stands for 'voluntary administrator'.) That letter was clearly intended (as ultimately happened) to be one that could be placed before the judge, to show him the reality of a risk that appointment of a provisional liquidator might be of little or no help to the unsecured creditors.

154 Another contributor to the urgency was the desperate financial situation of the companies in SSMG, but again that was not of the Bank's making.

155 Further, even though the transaction was entered urgently, it is not as though that urgency had the consequence that the parties to the Deed did not understand the transaction.

156 Of course, it can sometimes be unconscionable for a person to take advantage of another's pressing need, even if the person who takes advantage has not brought about that pressing need. The judge recognised that possibility ([155]). However the notion of " taking advantage of " necessity suggests that there is something in the transaction entered into that is advantageous to the person who " takes advantage" and would not have been in the transaction if the necessity had not existed. The only elements that were advantageous to ANZ in entering this particular transaction were obtaining the release and confirmation of enforceability of its securities. Thus the significance, if any, for deciding whether ANZ's conduct was unconscionable by reason of the transaction being entered in pressing urgency depends on a matter that the Appellants had identified as a separate contributor to unconscionability. That separate fact is that the advance was made conditional on executing the Deed.

Advance Made Conditional on Executing Deed?

157 The Appellants also submit that a contributor to the unconscionability was that provision of the $50,000 advance was conditional upon executing the Deed and thereby releasing ANZ from the consequences of its own wrongdoing. It is true that the advance was conditional upon executing the Deed. However, that fact needs to be seen in the context of the Bank having already formed the view that it wished to disengage itself from SSMG, and that defaults by borrowers connected with SSMG had been unremedied for several months. There was significant commercial risk for ANZ in advancing any further money to any of the companies in SSMG, on any terms at all. The significance of the Deed needs to be seen in light of Mrs Brighton not intending in any event to sue ANZ concerning the disclosure, and not being in a position reasonably to foresee the consequences that would flow from the Disclosure. It as not as though, by entering into the Deed, she was reluctantly giving up something that she prized. My conclusion concerning Issue 1 shows that she was not, inadvertently or through inadequate advice, giving up something that she should have regarded as valuable. She was aware that she was free to decline the terms of ANZ's offer, even though she regarded not defending the litigation as an impractical alternative.

Extracting an Excessive Price for the Deed

158 The Appellants also submit that ANZ knew Mr and Mrs Brighton's right to sue it for damages for the breach was worth far in excess of $50,000, and that extracting an excessive price from a person in a situation of urgent necessity was indicative of unconscionability.

159 The judge rejected this contention. He accepted, on the basis of evidence of Mr and Mrs Brighton, that the value of that right was not reasonably foreseeable at the time of the alleged contravention, and recognised that s 12CC(5)(a) of the ASIC Act and s 51AC(6)(a) of the TPA forbad him to take into account considerations that were not reasonably foreseeable at the time of the alleged contravention.

160 The Appellants submit that Mrs Brighton's concession to that effect is merely her subjective view, and was not decisive of what was reasonably foreseeable at the time of the alleged contravention. While that is correct, it was still open to the judge to accept Mrs Brighton's concession. The Appellants do not point to any item of evidence from which it could be inferred that the Bank had any views at all about the quantum of damage (if any) that SSMG, or the Appellants, might sustain in consequence of the Disclosure. The conclusion to which I have come concerning Issue 1 shows that, insofar as the Deed contained confirmation of the enforceability of the various securities of ANZ notwithstanding the Disclosure, the Deed gave ANZ no additional rights to enforce its securities. Of course, those guarantors who were owed an obligation of confidentiality by ANZ gave up their right to sue for damages for any breach of that obligation involved in the Disclosure. However, the judge's finding that the demise of the SSMG was not caused by the Disclosure shows that those guarantors were giving up no right of substance. Further, when Mrs Brighton was not at the time intending to sue ANZ by reason of the Disclosure, it is not even as though in her own mind the Deed required her to give up something she valued highly.

Conclusion Re Statutory Unconscionability

161 In these circumstances, I am not persuaded that his Honour was wrong in declining to hold that the Deed was unconscionable under either s 51AC TPA or s 12CC(1) ASIC Act .

Contracts Review Act

162 Section 7 Contracts Review Act so far as presently relevant provides:

"(1) Where the Court finds a contract or a provision of a contract to have been unjust in the circumstances relating to the contract at the time it was made, the Court may, if it considers it just to do so, and for the purpose of avoiding as far as practicable an unjust consequence or result, do any one or more of the following:

(a) it may decide to refuse to enforce any or all of the provisions of the contract,

(b) it may make an order declaring the contract void, in whole or in part,

(c) it may make an order varying, in whole or in part, any provision of the contract ..."

163 The Contracts Review Act does not contain an exhaustive definition of "unjust" , but s 4(1) provides:

" unjust includes unconscionable, harsh or oppressive ..."

164 There are two distinct steps involved in considering a claim under the Contracts Review Act . The first is a finding that the contract was unjust, and the second is a decision as to what, if any, relief should be granted: Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41; (2005) 14 BPR 26,639 at [34]-[36], [109]; Kowalczuk v Accom Finance Pty Ltd [2008] NSWCA 343; (2008) 252 ALR 55 at [87]; Adamson v Ede [2009] NSWCA 403 at [48].

165 Whether a contract is "unjust" within the meaning of s 7 Contracts Review Act involves a different standard of evaluation to that invoked in deciding whether someone's conduct concerning entering into a contract is unconscionable within the meaning of s 51AC TPA or s 12CC ASIC Act . Mr Menzies put on appeal an argument that he accepted had not been put below. He submits that it can be relevant to whether a transaction is unjust, within the meaning of the Contracts Review Act , that it is entered after a party has received inadequate legal advice, even if the other party to the transaction does not know of or suspect the inadequacy of the advice that has been received. He submits that the advice of Mr Harkin was inadequate not only because of its lack of independence, but also because its substance was inadequate. He submits that Mr Harkin's advice was inadequate because he should have advised Mrs Brighton that the rights against ANZ that the non-ANZ parties to the Deed were contemplating giving up were potentially very valuable, and that Mrs Brighton should seek to raise the money to fund the defence of the winding up proceedings from a source other than ANZ, rather than raise the money from ANZ on the terms of the Deed.

166 I do not propose to go into whether it is open to Mr Menzies to put this argument on appeal when it was not put below, because in any event the argument fails. The reason why Mr Menzies submits that the rights that were given up by the Deed were very valuable is that, in his submission, the breach of confidentiality by ANZ entitles the Appellants to avoid their respective guarantees. I have already rejected the argument that ANZ's breach of confidentiality has that effect.

167 Further, I am not persuaded that there was a realistic prospect of any of the non-ANZ parties to the Deed obtaining alternative funding for the defence of the winding up proceedings in sufficient time from any source other than ANZ. Mr Harkin's advice was given on 18 October 2006, after the draft deed had been received from ANZ's solicitors. The advice was given in a context where the winding up proceedings had been stood over to 2 pm on 18 October 2006, and the funding was needed (or at any rate the basis on which the funding was to be provided needed to be agreed at least in principle) before that time. SSMG was in a dire financial predicament, and had been for months. In practical reality, SSMG would not appear to any lender to be an attractive borrower even if the time had not been so short, and when the time in which the money needed to be raised was, at most, literally a matter of hours, then in practical reality there was no alternative possible source of funds than ANZ. A solicitor has no obligation to give advice concerning courses of action that lack practical reality.

168 When the Appellants have failed to discharge their onus of establishing the inadequacy of the advice, the factual basis of the argument is not made out. It is unnecessary to examine the legal propositions that are involved in the argument.

169 I have said earlier that the standard of evaluation required to attract s 7 Contract Review Act is different to that involved in establishing unconscionability within the meaning of s 51AC TPA or s 12CC ASIC Act . On appeal, Mr Menzies submitted that the Contracts Review Act has a lower threshold for operation than does either s 51AC TPA or s 12CC ASIC Act . However, the argument of the Appellants at first instance did not seek to suggest that there might be circumstances in which the various provisions of the Deed relating to release of rights could be modified under the Contracts Review Act , if those provisions could not be modified under s 51AC TPA or s 12CC ASIC Act . The written submissions of the Appellants at first instance said at [132] that "The operative structure of the three Acts is similar", and did not seek to argue that the standard for intervention would be attracted under one of the Acts if it was not attracted under the others. Even on appeal, Mr Menzies does not point to any factor, beyond the one I have just rejected, which would be relevant to the operation of the Contracts Review Act but not relevant to the operation of the other two Acts. Further, Mr Menzies does not elaborate on how any lower standard there might be for attraction of the Contracts Review Act would actually apply in the facts of the present case.

170 By reason of the Appellants failing on the first issue that they raise in this appeal, no practical consequence for the outcome of this litigation will flow from whether the Deed is modified under the Contracts Review Act . It is therefore unnecessary to give any separate consideration to the various factors that the Appellants rely on as establishing that the Deed is unjust. It suffices to say that, by reason of the same factors that led me to conclude that statutory unconscionability had not been made out, I am not persuaded that the contract is an unjust one within the meaning of the Contracts Review Act .

171 In any event, there would be some significant obstacles in the way of granting relief under any of the Acts upon which the Appellants rely. The judge's finding that the Disclosure was not the cause of the ultimate financial collapse and winding up of SSMA suggests that no practical purpose would be served, outside the confines of the present litigation, by excising from the Deed the release and the confirmation of enforceability of securities from the Deed. And as I have said, my decision concerning Issue 1 shows that the excision of the release and the confirmation have no practical purpose within the confines of the present litigation. A court does not make orders that serve no practical purpose.

172 For these reasons, I hold that the Appellants do not succeed by reason of Issue 2.

Orders

173 A consequence of the judgment so far is that the appeal should be dismissed with costs. For the avoidance of any doubt about it, it is desirable to make an order that the stay (referred to at [6] above) is dissolved.

174 I propose the following orders:

1. Appeal dismissed with costs.

2. The stay of orders made in the court below is dissolved.

**********

Decision last updated: 20 June 2011