Australia & New Zealand Banking Group v Karam - [2005] NSWCA 344

No judgment structure available for this case.

Reported Decision:
64 NSWLR 149
(2006) ATPR 42-089
(2006) Aust Contract Reports 90-222

Court of Appeal

CITATION:
Australia and New Zealand Banking Group Limited v Karam [2005] NSWCA 344
This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S):
27-29 July 2005

JUDGMENT DATE:

10 October 2005

JUDGMENT OF:
Beazley JA; Ipp JA; Basten JA

DECISION:
1. Appeal allowed and orders entered in the Equity Division on 6 February 2004 be set aside 2. Enter judgment for the Appellant against each of the Respondents in the amount of $3,729,049.89 together with interest from the date of judgment in the Equity Division 3. Order that the Respondents pay the Appellant's costs of the proceedings in the Equity Division 4. Cross-appeal dismissed 5. Order that the Respondents pay the Appellant's costs of the appeal 6. Order that the First-Fourth Respondents pay the Appellant's costs of the cross-appeal.

CATCHWORDS:
UNCONSCIONABILITY - family owned and operated company in perilous financial condition - directors of company unaware of extent of existing liability to financier - financier concerned that existing securities unenforceable - whether financier acted unconscionably in shoring up security position when business requested further financial accommodation - ECONOMIC DURESS - whether 'illegitimate pressure' was exerted by financier on the business - whether a finding of economic duress should be available where conduct complained of was not unlawful or unconscionable

LEGISLATION CITED:
Contracts Review Act 1980 (NSW)
Trade Practices Act 1974 (Cth)

CASES CITED:
Australian Competition and Consumer Commission v C G. Berbatis Holdings Pty Ltd (2003) 214 CLR 51
Barton v Armstrong [1976] AC 104
Blomley v Ryan (1956) 99 CLR 362
Bridgewater v Leahy (1998) 194 CLR 457
Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447
Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40
Dimskal Shipping Co SA v International Transport Workers Federation [1992] 2 AC 152
Director of Public Prosecutions (NI) v Lynch [1975] AC 653
Equiticorp Finance Ltd (in liq) v Bank of New Zealand (1993) 32 NSWLR 50
Hawker Pacific Pty Ltd v Helicopter Charter Pty Ltd (1991) 22 NSWLR 298
Karam v ANZ Banking Group Limited [2001] NSWSC 709
Karam v ANZ Banking Group Limited [2003] NSWSC 866
Lloyds Bank Limited v Bundy [1975] QB 326
Pao On v Lau Yiu Long [1980] AC 614
Parras Holdings Pty Ltd v Commonwealth Bank of Australia [1997] FCA 1107
Parras Holdings Pty Ltd v Commonwealth Bank of Australia [1999] FCA 391
Universe Tankships Inc of Monrovia v International Transport Workers Federal ("The Universe Sentinel") [1983] AC 366
West v AGC (Advances) Ltd (1986) 5 NSWLR 610
Westpac Banking Corporation v Cockerill (1998) 152 ALR 267

PARTIES:
Australia and New Zealand Banking Group Limited (Appellant)
Charles Raymond Karam (First Respondent)
John Raymond Karam (Second Respondent)
Nada Marie Karam (Third Respondent)
Diane Karam (Fourth Respondent)
Karam Bros Footwear Pty Ltd (Fifth Respondent)

FILE NUMBER(S):
CA 41161/03

COUNSEL:
B.W. Walker SC/P. Dowdy (Appellant)
M.L.D. Einfeld QC/A.C. Harding (Respondents)

SOLICITORS:
Coudert Brothers (Appellant)
Webster O'Halloran (Respondents)

LOWER COURT JURISDICTION:
Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S):
ED 2142/97

LOWER COURT JUDICIAL OFFICER:
Santow J

CA 41161/03
ED 2142/97

BEAZLEY JA
IPP JA
BASTEN JA
10 October 2005

AUSTRALIA & NEW ZEALAND BANKING GROUP v CHARLES RAYMOND KARAM & ORS

Karam Bros Footwear Pty (Ltd) (the Company), was a family owned and operated business. The Company borrowed money from Australia & New Zealand Banking Group Ltd (the Bank). The Bank obtained security over the assets of the Company and the personal assets of the directors of the Company.

The directors were initially unaware that they were personally liable for the Company’s debts. They became aware of the full extent of their exposure when they requested further financial accommodation at a time when the Company was in a perilous financial condition. Unknown to the directors, the Bank had doubts about the enforceability of the original securities. To shore up its security position, the Bank made the provision of further accommodation dependent on the directors executing additional documents including acknowledgments that they were personally liable for the company’s debts and a cross deed of covenant. Further, at the request of the Bank, the directors sold various properties to reduce the Company’s indebtedness.

The directors sought relief in relation to the securities on the basis that they were unjust for the purposes of the Contracts Review Act 1980, were unconscionable under the general law and should be varied or set aside. They also sought damages against the Bank in negligence, damages pursuant to s82 of the Trade Practices Act 1974 (Cth) and an order for equitable compensation.

The trial judge held the original security transactions were unconscionable and that subsequent transactions should be set aside on the grounds including, inter alia, economic duress and unconscionability.

Held by the Court:

1. A claim to relief on the basis of ‘illegitimate pressure’ with respect to conduct, which is not in itself unlawful, should be determined under the equitable doctrines of undue influence, unconscionability and relevant statutory remedies and not under economic duress: at [59], [64] and [68].

Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40; Equiticorp Finance Ltd (in liq) v Bank of New Zealand (1993) 32 NSWLR 50; Universe Tankships Inc of Monrovia v International Transport Workers Federation [1983] AC 366 and Dimskal Shipping Co SA v International Transport Workers Federation [1992] 2 AC 152 considered.

2. The fact that one party is in financial difficulties, of which the other party is aware, will be relevant but not sufficient to establish unconscionable conduct on the part of the stronger party. Something more is required and may be sought in the terms of the particular transaction. However, even unusual terms will not necessarily demonstrate taking unconscientious advantage of the situation of the weaker party. The greater the financial risk, the greater the justification for increased security: at [68].

3. The Karams understood the nature and effect of the action they were taking and took it because they understood it was necessary in order to obtain further financial accommodation, essential to the continued operation of the Company: at [92].

4. The perilous financial circumstances of the Company were not the Bank’s doing so there was no basis for saying that the Bank, in a legal sense, subjected the Karams to pressure. Rather, it was the Karams who were seeking that the Bank provide additional credit, without which the Company would have to cease trading. The Bank was under no obligation to extend the credit facilities already granted, nor to do so without securing its own position: at [95].

5. The finding by the trial judge that illegitimate economic pressure was imposed by the Bank was not supportable: at [96]. Bridgwater v Leahy (1998) 194 CLR 457 does not permit a finding of unconscionable conduct absent a finding that the victims suffered from a ‘special disability’ or ‘special disadvantage’ in the sense identified in Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447: see ACCC v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51.

6. The trial judge erred in treating the parlous financial state of the business as itself a form of illegitimate pressure and failed to recognise the fact that the directors had received financial and legal advice, provided by persons with relevant experience and having the relevant materials available to them and having the time they required to consider the material: at [123].

7. The cross deed of covenant and accompanying documents were not attended by any unconscionable conduct emanating from the Bank and they are enforceable according to their terms: at [124].

CA 41161/03
ED 2142/97

BEAZLEY JA
IPP JA
BASTEN JA
10 October 2005

AUSTRALIA & NEW ZEALAND BANKING GROUP v CHARLES RAYMOND KARAM & ORS

Judgment

1 THE COURT: This case concerns the right of a bank to appropriate assets of the directors and shareholders of a family company to reduce the indebtedness of the company. Over some 14 years the Australia & New Zealand Banking Group Ltd (“the Bank”) provided financial accommodation to a family business operated through Karam Bros Footwear Pty Ltd (“the Company”). By way of security the Bank took guarantees from the four members of the Karam families, being two brothers and their respective spouses. When the Company failed, its assets being insufficient to meet its liabilities, the Bank sought to recover the deficiency from the personal assets of the family shareholders and directors. They in turn argued that the relevant security documents did not cover the Company’s indebtedness and that the transactions by which the securities were obtained were unjust or resulted from unconscionable conduct on the part of the Bank.

2 Before the primary judge, the Karams were successful in having key securities set aside and obtaining judgments in their favour with respect to so much of the proceeds of sale of their respective homes as were appropriated to reduce the Bank’s indebtedness. The Bank obtained a judgment for the remaining debt against the Company, but not against the individuals. The Bank has appealed these orders.

3 The Karams were successful in limiting the purposes for which certain land acquired by them at Regents Park for the Company’s use could be applied. However, his Honour held that it could properly be applied, as it was, in reduction of the Company’s trading debt. The Karams cross-appealed against that finding.

4 The Company was unsuccessful in challenging the mortgage by which it acquired land at Ingleburn in 1989, and this finding was not challenged.

Background

5 Messrs Charles and John Karam are brothers, born in 1944 and 1946 respectively, in Lebanon. They came to Australia in 1961. Both worked in shoe factories in the suburbs of Sydney until 1972, when they left their respective employers and went into partnership under the business name “Karam Bros Footwear”. For a number of years prior to that time, they had been making shoes for friends in a garage. The partnership operated from premises at Greenacre.

6 At the time the business commenced, Mr Charles Karam was married to his first wife, Wendy, who died in a car accident to which reference will be made below. He married his present wife, Diane Karam, in 1976. Mrs Diane Karam was born in Lebanon and arrived in Australia in 1971. She moved to Sydney in 1975 or 1976, shortly prior to her marriage to Mr Charles Karam. She did not work in the business partnership which the brothers by then had established.

7 Mrs Nada Karam was also born in Lebanon, but arrived in Sydney when she was 8 or 9 years old and attended primary school and completed first form of high school, before leaving when she was about 14 years of age to work in a shoe factory. She met Mr John Karam in 1971 and married him shortly thereafter. She assisted in the partnership, together with Mr Charles Karam’s first wife, Mrs Wendy Karam, when the business commenced.

8 It is clear that the business grew significantly between 1972 and 1980, by which date some 10-12 people were employed, apart from the two Karam couples. Both couples had their own houses. At about the same time, Mrs Wendy Karam was killed in a motor vehicle accident, together with Mr John Karam’s daughter. Other members of the family were seriously injured. Also in about 1974, the partnership moved its banking business to the ANZ Bank at Chapel Road, Bankstown.

9 On 14 February 1980 the Karam brothers incorporated a company, Larama Pty Ltd, which later changed its name to Karam Bros Footwear Pty Ltd, but not until October 1990. The business formerly run by the partnership was presumably assigned to the Company at or about the time of its incorporation, but the precise terms of that arrangement were not adverted to on the appeal and may not be disclosed in the evidence.

10 The success of the business led the Karam brothers to seek larger premises than those rented at Greenacre. In late 1979, they located vacant land in Regents Park, on which they proposed to build a factory. The land was purchased, not by the Company, but by the four Karams jointly. Presumably the land was occupied by the Company under a lease or licence, but this arrangement remains obscure. It may be inferred that the Company had no interest in the land. How the purchase and construction was financed is not entirely clear either, but the first loan to the business from the Bank, which was secured over the Regents Park property, was not made until 26 May 1980, at which stage construction appears to have been completed. It also appears from a diary note produced by the Bank dated 26 May 1980 that the trading account for the business had remained in the names of the Karam brothers until that time, when it was transferred into the name of the Company.

11 The business was clearly expanding and was successful at that time. A Bank diary note dated 27 February 1980 stated:

“The partnership is operating quite profitably and in the six months to 31/12/79 have already exceeded the turnover disclosed for the previous 12 months term. Their December orders for school shoes alone amounted to $140,000. The Company is showing a pleasing record of growth and profitability and the principals are very reliable and astute businessmen who can be relied upon to liquidate any borrowings as quickly as practiceable [sic].”

12 The working capital for the Company continued to be supplied by the Bank, apparently by continued use of an overdraft account and commercial bills. A significant part of the growing business of the Company appears to have been children’s school shoes, which was a seasonal market with the major manufacturing period being September-December and the major sales period being January-February. By 1987 the Company appears to have reached its capacity at Regents Park and the directors were considering means by which it might expand.

13 The expansion plans came to fruition in mid-1989 when the Karams decided to purchase land at Ingleburn on which to construct a new and larger factory. A Bank diary note of 19 May 1989 refers to a proposal to acquire some 7.1 hectares of industrial land from the McArthur Development Board for a price of $2.3 million. At the same time, the directors had an option to purchase 2.35 hectares at a cost of $1,034,000, which was apparently an area sufficient to meet the Company’s needs. At that time the Company had funds on term deposit to cover expenses and 10% of the purchase price. According to the Bank diary notes, there was discussion with Charles Karam in relation to concerns that the Company was seeking to borrow money to finance a purchase of land in excess of its needs, in circumstances where it had no plans to ensure that the excess property would be income-producing and thereby assist to service the loan. The purchase of the Ingleburn property with finance of $2,070,000 to be supplied by the Bank, was signed on 22 December 1989, with settlement apparently occurring in March 1990. Construction of the new factory occurred during 1990 and the business moved to the new premises at Ingleburn in January 1991.

14 Although Mr Charles Karam discussed selling the Regents Park property once the business had moved to Ingleburn, that did not take place. As a result, the Company’s debt included the full amount of the loan to purchase the land, together with a variable rate fully drawn advance facility in an amount of $1.65 million, which was used to cover the cost of construction of the new factory. The heavy increases in the financial liabilities of the Company appear to have coincided with difficult economic conditions. As a result, the Company quickly ran into financial difficulty. As at 31 December 1990, the credit facilities available to the Company provided a limit of $4.269 million. At that time, whilst the business was still operating at Regents Park, the Company achieved sales in excess of $1.5 million. The Manager, Business Banking, noted in his review that the Karams were being advised as to a possible subdivision of the property at Ingleburn, to achieve a sale of the excess land and use of the proceeds in reduction of the current borrowings. No such subdivision or sales eventuated, the Bank manager noting in November 1992 that there appeared to be little interest in vacant industrial land at the time. Although the Company appears to have had “record sales” over 1992/93, as noted by the Bank diary notes of 5 May 1993, it is clear that the Company was struggling to pay its creditors over that period.

15 On 29 May 1992, the Manager, Business Banking, wrote to Mr Charles Karam as managing director of the Company, noting that the Company “is now under financial stress and will require a sizeable increase in Bank lending to fund it over the next three months or so”. He also noted:

“Should the directors/shareholders not be willing to accept the above requirements by 9/6/1992, and in writing, then the Bank will have little alternative other than to request full clearance of its debts.”

16 As early as 14 July 1992, Charles and Nada Karam had signed an authority to the Manager, Business Banking, to instruct a firm of accountants, Star Dean-Willcocks to prepare “an investigative accountants report” on the Company, to be provided to the Bank. On 22 July 1992, the accountants produced an “interim report” which stated, in part:

“It is clear the Company is highly geared and the interest burden may ultimately bring about its demise unless addressed. The Company’s future will be addressed in our final report, however, we believe that the Bank has no option other than to support the Company, certainly in the short term.”

“In summary, the directors and its newly appointed external accountants are confident that the Company can succeed and trade at a profitable level.

In so doing both the Company and its management will be required to address its problems by sale of company assets and/or personal homes to lessen the debt burden.”

17 On 29 July 1992, the relieving manager, business banking, wrote to Mr Charles Karam setting out the terms on which the Bank would continue to finance the Company and provide an additional facility. It will be necessary to return to that letter in due course, but it was accepted by Mr Charles Karam and the relevant facility was made available.

18 By 1993, there had been no property sales and no reduction in the Company’s level of borrowings. In May 1993 Mr Charles Karam anticipated that the Company would need an extra $300,000-$400,000 to cover purchases needed for the key production period in the last quarter of the year. In June 1993 further assistance was provided, but at the price of the Karams executing various security documents. The nature of these securities and the circumstances of their execution are important to the outcome of these proceedings and will be considered in detail below. At this time the Karams sought assistance from Marsdens, solicitors, who continued to act for them and for the Company, at least until October 1993.

19 On 5 October 1993, Mr Marsden wrote to the Manager, Business Banking, putting forward a proposition, which included the Karams selling their homes and the Regents Park property and using the proceedings in reduction of the Company’s indebtedness to the Bank. In consideration, the Bank was to assist with “the shortfall of monies for material required for production” until the shortfall could be reduced in March 1994 and agree to an immediate reduction in the interest rate on “our client’s loan” from 15% to a maximum of 9.5%. Proposals to sell the unproductive areas at Ingleburn appear to have been abandoned.

20 On 3 November 1993 John Karam sold his property at Banks Street, Bankstown: the proceeds of sale, amounting to $235,365 were received by the Bank in January 1994. On 15 December 1993 Charles Karam sold his property at Jacobs Street, Bankstown, the proceeds of settlement being $402,697, received by the Bank on 10 February 1994. The property at Regents Park was not sold. In October 1995 the Bank refused to advance further funds, a decision followed promptly by a termination of the existing facilities.

21 On 3 November 1995 the Bank appointed a receiver and manager to the Company and it ceased trading on 12 January 1996, after the receiver and manager was unsuccessful in selling the business. In March and April 1996 he sold the Company’s property, plant and equipment. The Ingleburn property realized $2.96 million. The Regents Park property was also sold, for $324,029. The Company remained indebted to the Bank as at 1 July 1996 for an amount marginally in excess of $1.7 million.

22 There was a curious absence of discussion in the judgment below, and on the appeal as to the time at which and the circumstances in which the proceeds of the sales of the Karams’ homes were applied by the Bank in reduction of the Company’s debt. Further, the material suggests the Regents Park property was sold by the receiver and manager of the Company, but it never had any interest in the property after it moved to Ingleburn (and may not have had before the move – see [13] above).

Proceedings in the Court below

23 On 22 April 1997, the Karams and the Company commenced proceedings against the Bank seeking relief in relation to the securities on the basis that they were unjust for the purposes of the Contracts Review Act 1980, were unconscionable under the general law and should be varied or set aside. They also sought damages against the Bank on a cause of action in negligence, relating to the purchase and mortgage of the Ingleburn property, damages pursuant to s 82 of the Trade Practices Act 1974 (Cth) and an order for equitable compensation. The Bank cross-claimed for judgment in an amount of $1,700,541 together with interest calculated from 2 July 1996. Hearing of the proceedings in the Equity Division commenced on 20 June 2000, but were not completed until 27 April 2001. The primary judge handed down his principal judgment on 21 August 2001: Karam v ANZ Banking Group Limited [2001] NSWSC 709. On 16 May 2002, the matter came back before his Honour in relation to certain unresolved issues concerned with the form of orders to be made to give effect to the earlier judgment. The further observations of his Honour on that occasion did not apparently settle all of the unresolved issues, in the minds of the parties, and the matter came back for further hearing on 19 June 2003, although the reason for the delay is not known to the Court. His Honour handed down a further judgment on 22 September 2003: Karam v ANZ Banking Group Limited [2003] NSWSC 866. On 26 November 2003 final orders were made and entered on 6 February 2004.

24 The factual material presented to the primary judge covered the history of the personal and commercial relationships between the Bank and the Karams over a period of some 17 years. Because questions of unjustness and unconscionability were raised, the primary judge was also called upon to consider the content of various discussions between Bank officers and members of the Karam families and their respective levels of education, comprehension of English and financial acumen, over the same period. For the purposes of the appeal, and at some risk of oversimplification, the key findings of the primary judge can be summarised in the following terms.

25 First, it was alleged that “representations, advices, assurances and predictions” had been made by officers of the Bank in relation to the purchase of the Ingleburn property, creating rights to relief in both the Company and the Karams. His Honour dismissed this claim in its entirety: see [471], [499]-[500] and [504]-[505]. There was no challenge to this conclusion and the substantial material devoted to this claim may be put to one side.

26 In addition to concluding that the claims made against the Bank in relation to the purchase of the Ingleburn property must be dismissed, his Honour also concluded that there was no basis for impugning the mortgage given by the Company over the Ingleburn property. Accordingly, the proceeds of sale of that property were available in satisfaction of any aspect of the Company’s indebtedness to the Bank.

27 Secondly, his Honour made findings that the personal homes of John Karam and Charles Karam, being the Banks Street and Jacobs Street properties respectively, both located in Bankstown, did not secure any part of the business debt of the Company, in diminution of which the proceeds of sale were ultimately applied by the Bank. Those conclusions were reached both as a matter of construction of the mortgages given to secure the loans by which they were purchased and because of circumstances surrounding the execution of the mortgages and the Karams’ understanding of their effect, as conveyed by Bank officers at the relevant times.

28 Thirdly, in 1980, each of the Karams signed guarantees, described as “unlimited guarantees”, which were relied on by the Bank as rendering the Karams personally liable for the future indebtedness of the business. The conclusions in that regard reached by his Honour were set out at [272] in the following terms:

“Subject to considering the 1993 documentation and any subsequent documentation it would in the circumstances then prevailing, be unconscionable:

(a) to treat the guarantees as covering the Company’s debt, in so far as that debt was in respect of a major corporate transaction not in the way of trading and outside the scope of the business based at Regents Park which was directly secured by the Company and not in contemplation at the time of the guarantees … .”

Contracts Review Act

29 Fourthly, the primary judge reached a similar conclusion in relation to the mortgage of the Regents Park property by the four members of the Karam families in May 1980 to that reached in relation to the earlier mortgages and the guarantees. However, because the mortgage was not entered into in order to secure a loan for the purchase of the property, nor to secure a loan in advance for the construction of the factory on the property, his Honour accepted that the Regents Park mortgage must extend to at least that much of the indebtedness of the Company as was then in contemplation. The conclusion set out at [272] in his Honour’s judgment in this regard reads as follows:

30 The final declarations made by his Honour were threefold and, because they do not clearly reflect the finding noted above, should be set out in full.

Regents Park property

9. Declare that it was and is unconscionable for the Bank to have recourse to, or retain the benefit of, any of the proceeds of sale of the factory at Regents Park … to the extent that they were applied by the Bank to satisfy indebtedness of the Company to it otherwise than indebtedness incurred for or in respect of the construction of the factory … upon land at Ingleburn owned by the Company … .

10. Declare that Charles, Diane, John and Nada [Karam] are entitled to equitable compensation to the extent that the proceeds of sale of the Regents Park property were applied by the Bank to satisfy any indebtedness of the Company to the Bank other than the Ingleburn factory construction debt, but the Court notes that the proceeds of sale of the Regents Park property were wholly applied by the Bank to satisfy indebtedness of the Company for and in respect of the Ingleburn factory construction debt.

Contracts Review Act

31 To give effect to the last declaration, his Honour further made the following orders:

Contracts Review Act

‘Provided that nothing herein contained shall require the mortgagor to pay or otherwise be liable to the Bank for any amounts other than the principal amount borrowed by the mortgagor and/or the customer from the Bank for the purpose of acquiring or constructing improvements upon the land over which this mortgage is granted (or other land upon which the customer may construct factory improvements for use by the customer in replacement of the improvements upon the land over which this mortgage is granted) together with interest upon that principal amount’

and that such variation take effect as and from the date of the Regents Park mortgage.

30. Order that to the extent that the terms of the Regents Park mortgage are inconsistent with the additional clause specified in para [29] above, the same shall be, and be deemed from the date of the [Regents Park] mortgage to have been, void and of no force or effect.”

32 Given the matter “noted” by the Court in declaration 10, it would appear that none of these declarations and orders are of any consequence in relation to the appeal. They become relevant, however, because the Karams seek, by way of cross-appeal, deletion of so much of each of paragraphs 9, 10, 11 and 29 as would allow the proceeds of sale of the Regents Park property to be used in any way to satisfy the indebtedness of the Company.

33 Fifthly, his Honour considered the effect of documentation signed by the Karams on 10 June 1993 and separately, but more briefly, a cross-deed of covenant executed by them on 1 October 1993. His Honour found that both the acknowledgment signed on 10 June 1993 and the cross-deed of covenant signed on 1 October 1993 were procured by the Bank “unconscionably and by the exercise of economic duress”. As a result, the primary judge ordered that each of those documents be declared void and be set aside. Further, he declared that they did not give rise to any estoppel in favour of the Bank so as to prevent the Karams denying liability under the earlier guarantees and the associated mortgages, in relation to the indebtedness of the Company.

34 Sixthly, his Honour concluded that a letter signed by the Karams on 1 March 1995, which purported to be an acknowledgement by them as directors of the Company that they had no further claims on the Bank “in respect of past or present facilities” did not operate, as a matter of construction, as a release or waiver of the rights of the Karams to obtain relief in relation to the security provided by them to the Bank. Although that conclusion was challenged in the notice of appeal, the Appellant abandoned reliance upon it in its written submissions. Accordingly, it will not be necessary to deal further with that matter.

35 In the course of the appeal, senior counsel for the Karams devoted a large part of his argument to justifying the conclusions reached by the primary judge in relation to the arrangements entered into before 1989. Counsel for the Bank, however, did not focus on the findings with respect to the construction of the mortgages and the circumstances of their execution, but placed emphasis on the subsequent events in 1993 which, it was argued, were sufficient to render the homes and the Regents Park property security for the indebtedness of the Company. It is convenient to deal first with the arguments presented on the appeal by the Bank, though bearing in mind the earlier history outlined above.

The 1993 documentation

36 It is reasonably clear from the internal diary notes kept by numerous Bank officers over the years that the Bank considered, at all relevant times, from the date of execution of the unlimited guarantees in 1980, that the four directors had accepted personal responsibility for the Company’s indebtedness, from the time that the business was taken over by the Company, and that the mortgages over the two homes and over the Regents Park property provided security for the personal liabilities the subject of the guarantees. That, in the minds of the Bank officers, was no doubt the basis upon which continuing credit was given to the business, when it ceased to be undertaken by the partnership consisting of the Karam brothers and was assigned to the Company, at the stage when the Company owned no real estate or other realisable assets. However, assuming that the properties in the name of the Karams were not legally available as security for the debts of the Company in 1993, contrary to the views held by the Bank, one question is whether the documentation entered into at that time had the effect of rendering them available to the Bank as security for the on-going indebtedness of the Company.

37 The document signed on 10 June 1993 was headed “Acknowledgment” and was addressed to the Bank. It read:

“We, CHARLES KARAM, DIANE KARAM, JOHN RAYMOND KARAM and NADA KARAM, having receiving independent legal advice and financial advice in relation to this Acknowledgment and the business of KARAM BROS FOOTWEAR PTY LTD (‘Company’), acknowledge that the Guarantee, Mortgages and other documents referred to in the Schedule have been given by us to the Bank to secure to the Bank, and have always been intended to secure to the Bank, payment of all present, future, actual and contingent liabilities of the Company to the Bank.

We acknowledge that the Bank is relying on this Acknowledgment in continuing at its pleasure to provide accommodation to the Company.”

“1. Unlimited Guarantee by Charles Karam, Diane Karam, John Karam and Nada Karam of the account of the Company (then known as Larama Pty Limited) dated 26 May 1980 (‘Guarantee’);

2. First Registered Mortgage No R929568 dated 26 May 1980 by Charles Karam, Diane Karam, John Karam and Nada Karam over 24 Carlingford Street Regents Park being the whole of the land in Certificate of Title Volume 6434 Folio 28 (‘Mortgage R929568’);

3. Form S148 lodging Mortgage R929568 in support of the Guarantee;

4. First Registered Mortgage No Q925655 dated 28 September 1978 by John Raymond Karam in favour of the Bank over 7 Sir Joseph Banks Street, Bankstown being the whole of the land in Certificate of Title Volume 2819 Folio 111 (‘Mortgage Q925655’);

5. Form S148 lodging Mortgage Q925655 in support of the Guarantee;

6. First Registered Mortgage No W172955 dated 10 January 1986 by Charles Karam in favour of the Bank over 69 Jacobs Street, Bankstown being the whole of the land in Certificate of Title Volume 6635 Folio 197 (‘Mortgage W173955’);

7. Form S148 lodging Mortgage W172955 in support of the Guarantee.”

38 In understanding how this document was considered by the primary judge, it is helpful to note the manner in which it was addressed in the pleadings. The document was only obliquely referred to in the amended statement of claim filed on behalf of the Karams and the Company and its scope and effect was not then directly challenged. The principal indirect reference to the acknowledgment was as a particular of loss or damage suffered as a result of the alleged misrepresentations with respect to the purchase of the Ingleburn property, a claim dismissed by the primary judge. However, the relief sought included, somewhat obscurely, a declaration that the documents executed in October 1993 “supersede and replace” those executed in June 1993.

39 In its defence, the Bank sought to rely upon the acknowledgment as an answer to the whole of the statement of claim. By their reply, the Karams and the Company asserted that “the 1993 Documents were not signed and given by them upon independent legal advice, and freely and voluntary but, rather were signed and given under duress”. Although they also did not admit “the force or effect” of the 1993 documents, the challenge to their efficacy appears to have been limited to the circumstances in which they were obtained, rather than raising any issue as to their effect if properly obtained.

40 Before dealing with the substance of the attack on the execution of the acknowledgment, two subsidiary issues may be disposed of. First, there was an attack on the “independence” of Mr Marsden, the solicitor who advised the Karams at this stage. That was rejected by the primary judge as unfounded. That finding was not challenged on the appeal.

41 Secondly, his Honour found that the acknowledgment was “false on its face” in so far as it stated that the documents identified in the schedule had “always” been intended to secure payments to the Bank of the liabilities of the Company. The example his Honour gave in support of that proposition was the first registered mortgage of the property owned by John Karam, dated 28 September 1978. As his Honour noted, it was given at a time when the Company “was not even incorporated or in contemplation”. No other example was given, nor was one suggested in argument. However, because the mortgages only secured the debts of the individual Karams, they could not have had the relevant effect until the guarantee was executed on 26 May 1980. Since the acknowledgment referred to the guarantees, mortgages and other documents as a category, rather than individually, the acknowledgment should be understood as referring to the time from which the documents, taken as a whole, could in their terms have been relied upon to secure the indebtedness of the Company. In any event, it is not clear from the judgment that anything followed from the finding as to falsity. The thrust of the complaint in relation to the acknowledgment, accepted by the primary judge, lay elsewhere.

42 It will be necessary to consider in more detail below the reasoning of the primary judge in relation to this issue. However, for the purpose of identifying the relevant legal principles to be applied, the relevant factors can be summarised as follows:

(a) the acknowledgment was obtained in circumstances where the Company was under extreme financial pressure, and

(b) although the Karams received legal advice in relation to the execution of the acknowledgment, that advice was deficient because the solicitor had not had access to the documents identified in the schedule before giving the advice, due to the unconscionable conduct of the Bank.

It is convenient to identify the legal principles relevant to each of these matters in turn.

Legal principles: economic duress

43 Perhaps because the acknowledgement had not been identified as a separate contractual arrangement in the amended statement of claim, but was only dealt with by way of reply, the Karams did not expressly rely on the Contracts Review Act in seeking to resist the operation of the acknowledgment. Nevertheless, they did invoke the circumstances identified in s 9(2) as factors relevant to questions of general law unconscionability. Thus, they asserted that, in May 1993, there was a material inequality in bargaining power between themselves and the Bank, that the terms of the acknowledgment were not reasonably open to negotiation or alteration, and that given the relative economic circumstances of the parties, they were not reasonably able to protect their own interests. Each of these factors is reflected in s 9(2).

44 Section 9(2) of the Contracts Review Act does not in terms adopt equitable concepts such as fraud, misrepresentation, breach of fiduciary duty, undue influence and unconscionable conduct. Rather, it identifies a range of considerations which may, in particular circumstances, fall within those categories, but need not. As McHugh JA noted in West v AGC (Advances) Ltd (1986) 5 NSWLR 610 at 621A-B:

Contracts Review Act

45 In Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447, Mason J identified a significant distinction between a claim that a transaction should not be enforced because it has been induced by “undue influence” and one which should not be enforced because of “unconscionable conduct”. His Honour stated (at 461) after reference to a number of bases upon which equity might decline to enforce a transaction:

“But relief on the ground on ‘unconscionable conduct’ is usually taken to refer to the class of case in which a party makes unconscientious use of his superior position or bargaining power to the detriment of a party who suffers from some special disability or is placed in some special situation of disadvantage … . Although unconscionable conduct in this narrow sense bears some resemblance to the doctrine of undue influence, there is a difference between the two. In the latter the will of the innocent party is not independent and voluntary because it is overborne. In the former the will of the innocent party, even if independent and voluntary, is the result of the disadvantageous position in which he is placed and of the other party unconscientiously taking advantage of that position.”

46 As was noted in the joint judgment of Gaudron, Gummow and Kirby JJ in Bridgewater v Leahy (1998) 194 CLR 457 at [73] despite the overlap between these concepts, there is danger in failing to attend to the “conceptual and practical distinctions between them”. But it may be noted that the matters which must be considered under each will fall into three broad categories, namely:

(a) those affecting the status, characteristics or situation of the party seeking to resist enforcement of the document or transaction;

(b) factors relating to the position of the enforcing party, and

(c) the conduct of the one with respect to the other.

Amadio

Bridgewater

47 In this context, care must be taken in using phraseology such as “economic duress”, which may have an ordinary meaning somewhat broader than its legal counterpart, and with an emotive connotation. The circumstances in which the Karams found themselves were, in one sense, quite similar to those which arose in Amadio, namely that they were providing guarantees to a company which was “in a perilous financial condition”. Nevertheless, the differences are important. In the case of the Karams, the Company was their own, in the sense that they were the shareholders and, in relation to the brothers, were the directors of the Company and in relation to their wives, had been the directors at all times up to 22 February 1993. It may be that they believed that the Company was “a flourishing and prosperous enterprise, though temporarily in need of funds”, but their knowledge of its financial circumstances was the same as that of the bank. They may have had greater expectations of its ability to trade out of its difficulties than did the relevant Bank officers, but they were not ignorant of its affairs, as were the Amadios in respect of their son’s business. It follows that the Karams were not in a position of special disadvantage vis-à-vis the Bank in the sense that the Bank knew the true circumstances, whereas they did not; the Bank could not be said to have relied on their ignorance to its own advantage.

48 In relation to economic duress, the Karams relied upon a passage in the speech of Lord Scarman in Universe Tankships Inc of Monrovia v International Transport Workers Federation(“The Universe Sentinel”) [1983] AC 366 at 400B-D. Although Lord Scarman was in dissent in relation to the application of the principles, his statement of the relevant principles was not a point of departure from the majority. The relevant passage reads as follows:

Barton v Armstrong

Pao On v Lau Yiu Long

49 At common law, the concept of physical duress rendered a contract void because the consent of the complaining party was not a true consent, but one given in circumstances where the will of that party was overborne. It would seem that the expansion of that concept in The Universe Sentinel, to include economic duress, was intended to be an expansion by analogy and thus limited to circumstances where, in the words of Lord Scarman, the pressure must be such that its practical effect is “compulsion or the absence of choice”: see generally, Mason and Carter, Restitution Law in Australia (1995) p 161.

50 In discussing the rationale of the rule, Lord Diplock made three points clear. The first was that he was dealing with a development of the common law. Secondly, in a passage reflected by McHugh JA five years later in this Court, he rejected the following factors as part of the rationale of the development:

“It is not that the party seeking to avoid the contract which he has entered into with another party, or to recover money that he has paid to another party in response to a demand, did not know the nature or the precise terms of the contract at the time when he entered into it or did not understand the purpose for which the payment was demanded.”

“… similar to that which underlies the avoidability of contracts entered into and the recovery of money exacted under colour of office, or under undue influence or in consequence of physical duress.”

51 Noting that the case involved the field of industrial relations, “to which very special considerations apply”, Lord Diplock eschewed any attempt to identify the limits of legitimate economic pressure.

“It is not, however, in my view, necessary, to enter into the general question of the kinds of circumstances, if any, in which commercial pressure, even though it amounts to a coercion of the will of a party in the weaker bargaining position, may be treated as legitimate and, accordingly, as not giving rise to any legal right of redress.”

52 In Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40, at 45-46 McHugh JA discussed the conceptual basis of the defence of economic duress, albeit in terms in which the other members of the Court (Samuels JA and Mahoney JA) did not join. His Honour suggested that the reference in TheUniverse Sentinel to “compulsion of the will of the victim”, was “unfortunate”. As his Honour noted, the concept of duress in the criminal law was discussed by Lord Simon of Glaisdale, in Director of Public Prosecutions (NI) v Lynch [1975] AC 653 at 695 in a passage which expressly equated with contract law the proposition “that duress is not inconsistent with act and will, the will being deflected, not destroyed”. His Honour continued:

“Indeed, if the true basis of duress is that the will is overborne, a contract entered into under duress should be void. Yet the accepted doctrine is that the contract is merely voidable.

In my opinion the overbearing of the will theory of duress should be rejected. A person who is the subject of duress usually knows only too well what he is doing. But he chooses to submit to the demand or pressure rather than take an alternative course of action. The proper approach in my opinion is to ask whether any applied pressure induced the victim to enter into the contract and then ask whether that pressure went beyond what the law is prepared to countenance as legitimate.”

53 McHugh JA also echoed the description of Lord Diplock set out above in relation to the limits of legitimate pressure (at 46):

“Pressure will be illegitimate if it consists of unlawful threats or amounts to unconscionable conduct. But the categories are not closed. Even overwhelming pressure, not amounting to unconscionable or unlawful conduct, however, will not necessarily constitute economic duress.”

54 Two aspects of this passage were to cause difficulty. First, although the context was one in which his Honour was considering an extension of the common law doctrine of duress, the introduction of the criterion of “unconscionable conduct” appeared to invoke equitable principles. As Lord Diplock had referred to “undue influence” as enjoying a similar rationale, the reference to equity may have been deliberate. Secondly, the reference to “overwhelming pressure”, in a context in which his Honour had rejected the need for the will to be overborne, was also apt to create uncertainty. The term appears to have been a reflection of the passage in Lord Diplock’s speech in The Universe Sentinel.

55 In 1991, in Hawker Pacific Pty Ltd v Helicopter Charter Pty Ltd (1991) 22 NSWLR 298 Clarke JA (Priestley JA to similar effect and Handley JA agreeing) noted the common law distinction between physical duress (or “duress to the person”), which rendered a contract void, and unlawful detention of a person’s goods (“duress of goods”) which was sufficient to enable the complaining party to recover money paid in an action for “money had and received” but not, if the distinction held, to avoid a contract entered into in those circumstances. Clarke JA noted at 306:

“This distinction, if correct, leads to the absurd result that if A paid money under duress of goods he could recover the money paid but if he entered into a contract to pay money under similar duress he could not avoid the contract and would be obliged to pay the moneys due thereunder.”

56 By this time, the concept of “economic duress” had become accepted terminology. In Dimskal Shipping Co SA v International Transport Workers Federation [1992] 2 AC 152, Lord Goff of Chieveley (at pp 165-166) referred to the English case law, including the decision of Pao On v Lau Yiu [1980] AC 614, in the Privy Council, reaching the same conclusion as that which had been reached in this Court in Crescendo Management and Hawker Pacific. His Lordship noted at 165G:

“… it is now accepted that economic pressure may be sufficient to amount to duress for this purpose, provided at least that the economic pressure may be characterised as illegitimate and has constituted a significance cause inducing the plaintiff to enter into the relevant contract.”

Crescendo

Management

“It is sometimes suggested that the plaintiff’s will must have been coerced so as to vitiate his consent. … I myself, like McHugh JA, doubt whether it is helpful in this context to speak of the plaintiff’s will having been coerced.”

57 Two years after Dimskal and Hawker Pacific, the concept of economic duress came back before this Court in Equiticorp Finance Ltd (in liq) v Bank of New Zealand (1993) 32 NSWLR 50. The majority (Clarke JA and Cripps JA) held that “the appellants had not established any illegitimate pressure of the kind to which McHugh JA referred in Crescendo Management”: at 151D. Kirby P (dissenting in the result) noted the vagueness of the doctrine (at p 106E):

“What precisely the law is prepared to countenance as ‘legitimate’ begs the question which needs to be answered in characterising particular conduct as impermissible economic duress (on the one hand) or the permissible (even necessary) operation of the market economy (on the other).”

“The doctrine of economic duress may be better seen as an aspect of the doctrines of undue influence and unconscionability respectively. If relief, beyond statute, is appropriate, courts would be better able to provide such relief in a consistent and principled fashion under the rubric of undue influence and undue unconscionability rather than by pretending to economic expertise and judgment which they generally lack.”

58 In Westpac Banking Corporation v Cockerill (1998) 152 ALR 267 at 289, Kiefel J (with whom Northrop J and Lindgren J substantially agreed), after reference to the passage in Crescendo Management set out above, stated:

“I do not think that his Honour was intending in this passage to refer to the equitable doctrine of unconscionable dealing which is recognised as affording an independent ground on which a court exercising equitable jurisdiction can relieve from a contract.

The point of distinction which is relevant for present purposes is that duress, like undue influence, focuses upon the effect of pressure, upon the quality of the consent or assent of the pressured party, rather than the quality of the conduct of the party against which relief is sought… .”

Parras Holdings Pty Ltd v Commonwealth Bank of Australia

Cockerill

Parras Holdings Pty Ltd v Commonwealth Bank of Australia

59 The point that unconscionable conduct does not require the will to be overborne, so that the victim does not act independently and voluntarily, was restated by Gummow and Hayne JJ in Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd (2003) 214 CLR 51 (“Berbatis”) at [36] in the following terms:

Trade Practices Act

non est factum

60 In Berbatis, Gleeson CJ at [12] stated that it was “the inability of a party to judge his or her own best interests that was said by McTiernan J in Blomley v Ryan [1956) 99 CLR 362, and again by Deane J in Amadio, to be the essence of the relevant weakness”. Gummow and Hayne JJ adopted a similar position in considering the concept of “special disadvantage” as a necessary factor in establishing unconscionable conduct, as identified by Mason J in Amadio. Their Honours stated:

“[55] It will be apparent that the special disadvantage of which Mason J spoke in this passage was one seriously affecting the ability of the innocent party to make a judgment as to that party’s own best interests.

[56] In the present case, the respondents emphasise that point and stress that a person in a greatly inferior bargaining position nevertheless may not lack capacity to make a judgment about that person’s own best interests. The respondents submit that the facts in the present case show that [the tenants] were under no disabling condition which affected their ability to make a judgment as to their own best interests in agreeing to the stipulation imposed by the owners for the renewal of the lease, so as to facilitate the sale by [the tenants] of their business. Those submissions should be accepted.”

61 How the doctrine of economic duress fits with the equitable doctrines is unclear. The reference to “unlawful” conduct, read in context of the earlier authorities, was originally a reference to unlawful detention of goods. Concepts of ‘illegitimate pressure’ and ‘unconscionable conduct’, if they do not refer to equitable principles, lack clear meaning, outside, possibly, concepts of illegitimate pressure in the field of industrial relations. Mason and Carter in Restitution Law in Australia (1995 at [540]), referring to Professor Beatson, The Use and Abuse of Unjust Enrichment (1991, OUP) state:

“Professor Beatson has criticised the use of the blackmail analogy in the area of economic duress, and questioned the capacity of the courts to impose judicial control on threats of lawful termination of contract. The only three categories he would allow are threats made maliciously and without any interest whatsoever; threats in the context of a protected relationship, namely one of dependency or a fiduciary relationship; and threats made in a public law context where principles of fairness and rationality apply. There is much to be said for keeping to those better trodden and more carefully tended paths, rather than rushing down broader paths that beckon but which may in the end lead to a tangled wilderness of single instances.”

62 The question is whether the doctrine operates where the conduct in question is not in some sense unlawful. As Professor Beatson noted (supra at p 131) The Universe Sentinel was not a case involving a threat of lawful action:

“At common law the conduct of the union was tortious. The question before the Court was whether Parliament had legitimated what was otherwise undoubtedly a tort. This meant that the House did not have to and did not fully analyse the position of threats to do lawful acts or address the difficult question of how to evaluate the propriety of lawful conduct.”

Dimskal

Crescendo Management

Equiticorp

Amadio

63 Because the trial judge in the present case appears to have adopted a broader approach, it is necessary to consider whether either the general law or statute law in this country has adopted some general doctrine of ‘inequality of bargaining power’ such as that identified by Lord Denning in Lloyds Bank Limited v Bundy [1975] QB 326. That view appears to be reflected in the present case in the passage at [388], where his Honour stated:

Bridgewater v Leahy

Bridgewater

64 Bridgewater involved an improvident transfer of a part of a pastoral property by its then owner, Mr Bill York, to his nephew Neil, shortly before Mr Bill York died. The discussion of the relief required in that case extended over several paragraphs of the judgment - see [123]-[144] - but commenced at [123] in the following terms:

“[123] The relationship between Bill and Neil meant that, when Neil raised the question of using the proceeds of sale of the Injune Land, they were meeting on unequal terms. Neil took advantage of this position to obtain a benefit through a grossly improvident transaction on the part of his uncle.

[124] In some cases, the equity that arises by reason of a unconscientious or unconscionable dealing of the nature with which this appeal is concerned may be satisfied only by setting aside that dealing in its entirety.”

65 In discussing the facts of the case, the joint judgment identified in some detail the circumstances of Mr Bill York, relevant both to his state of mind and the possibility of undue influence being exercised over him by his nephew, Neil York, in relation to the disposition of parts of a not inconsiderable pastoral property. The following passages suggest that their Honours were directly concerned with the condition of Bill York and whether he suffered from a “special disadvantage”.

“[116] There are passages in the reasons of the primary judge which appear to suggest that the existence of such a position of disadvantage necessarily involves physical frailty and enfeeblement with diminished knowledge by the party in question of that party’s property and affairs generally. That will not necessarily be the case. In any event, the primary judge did find that, probably from the time of his 84th birthday … Bill’s condition deteriorated. … His Honour said that Bill’s condition ‘did probably wax and wane, leaving open the possibility that 19 July 1988 was a ‘good’ day’.

[117] Before Bill executed the transfers and the deed on 19 July 1988, Bill (and his brother Sam) were briefly examined, for a period of some 10 minutes, by a practitioner in Roma, Dr Hatcher. … He found evident in Bill no signs of senile dementia and found his physical condition appropriate for his age, saying, ‘[h]e was a fragile elderly man’. …

[118] We have referred to the primary judge’s conclusion that Bill had ‘the capacity then to know what he was doing and to make informed decisions about the disposition of his property’. That however is not an answer to the question whether, on the primary facts, the conclusion should have been reached that advantage was taken of Bill’s disadvantaged position. Even with respect to the doctrine of undue influence, as distinct from that dealing with unconscionable conduct, equitable principles may be invoked to set aside a gift where a donor is perfectly competent to understand and intend what he or she did.”

66 The vagueness inherent in the terms “economic duress” and “illegitimate pressure” can be avoided by treating the concept of “duress” as limited to threatened or actual unlawful conduct. The threat or conduct in question need not be directed to the person or property of the victim, narrowly identified, but can be to the legitimate commercial and financial interests of the party. Secondly, if the conduct or threat is not unlawful, the resulting agreement may nevertheless be set aside where the weaker party establishes undue influence (actual or presumptive) or unconscionable conduct based on an unconscientious taking advantage of his or her special disability or special disadvantage, in the sense identified in Amadio. Thirdly, where the power to grant relief is engaged because of a contravention of a statutory provision such as s 51AA, s 51AB or s 51AC of the Trade Practices Act, the Court may be entitled to take into account a broader ranger of circumstances than those considered relevant under the general law. Pursuant to both Trade Practices Act provisions and the Contracts Review Act, the relative strengths of the bargaining positions of the parties, and their ability to negotiate terms, will be relevant. However, it does not follow that because, for the purposes of s 9(2)(a) of the Contracts Review Act, there was a material inequality of bargaining power, a contract between such parties will necessarily be set aside. Most “contracts of adhesion” will fall into that category, but most will be valid.

67 On the other hand, if the Court is satisfied that the provisions of the contract were not “reasonably necessary for the protection of the legitimate interests” of the stronger party, a concept adopted by both the Trade Practices Act and the Contracts Review Act, an important strand favouring intervention may have been established. The statutory adoption of the term “legitimate” in relation to the commercial interests of one party, tends, if anything, to strengthen the argument against use of the generic term “illegitimate pressure”, so as to avoid confusion between the legitimacy of “pressure” on the one hand and of commercial interests on the other.

68 Where the statutory definitions operate, there is no necessary condition prescribed, but merely a range of factors to be taken into account. These factors require the Court to look at the situation of each party, their relationship and the terms of the transaction. The fact that one party is in financial difficulties, of which the other party is aware, as in the present case, will be relevant, but not sufficient to establish unconscionable conduct on the part of the stronger party. Something more is required and may be sought in the terms of the particular transaction. However, even unusual terms will not necessarily demonstrate taking unconscientious advantage of the situation of the weaker party. The greater the financial risk, the greater the justification for increased security.

Application of principles by primary judge

69 The situation in the present case, as in Berbatis, arose because the transaction in question involved the grant of an indulgence or a new right on condition that an existing dispute was settled. The case for the Karams was that, at least in part, earlier unconscionable conduct tainted the new arrangements.

70 The primary judge gave careful consideration to discussions between the Bank and John and Charles Karam in particular, which occurred between approximately 5 May 1993 and 9 June 1993. At the outset of that period, his Honour summarised the circumstances as follows at [360]:

“Clearly the Bank saw its options as either enforcing the security or itself laying down a program of debt reduction based on a sale of the directors’ homes and Regents Park. This the directors would have no option but to do if they wished to avert enforcement by a receiver/manager with the ultimate prospect of liquidation in any event. They had warning of the Bank’s likely enforcement [from] the earlier dishonour of the cheques, itself clearly a form of pressure.”

71 At a meeting which probably occurred on 7 June 1993 the following interchanges took place, as noted by the primary judge at [350]-[352].

‘The company doesn’t look like it’s travelling well, what’s the problem? Why is this happening?

‘The company is travelling well. The problem is the outgoings have been very high. We are paying high interest rates to the Bank about $47,000 per month, we’ve got this back tax assessment of $160,000 and now we have got Star Dean-Willcocks’ fees. The slow-down in the economy doesn’t help us to get on top of everything. We need a little bit extra support from the Bank until the economy gets a little better. We are trying to sell the rest of the Ingleburn land. We put it up for auction last year. We didn’t have one call for it. Now we are trying to put it with an agent to sell though to reduce our debts.’

‘My understanding of the security position of ANZ at this time was that ANZ had the Ingleburn mortgage and a mortgage over the machinery, stock and fittings and that was all it had.’”

72 From this evidence, which appears to have been accepted by the primary judge, the following inferences might be drawn:

(1) the Bank was prepared to provide further financial accommodation, but on condition that the Karams provide personal guarantees and some other documents, impliedly by way of security;

(2) the Bank was of the view that it was entitled to sell all the Karams properties, even if no further security were provided;

(3) Mr Charles Karam was of the view that the Bank had no right to any security to meet the Company’s indebtedness, other than the Ingleburn property and the Company’s machinery, stock and fittings, and

(4) the Karams were obtaining legal advice.

73 None of this amounted to any form of unlawful or unconscionable conduct by the Bank. The critical issue falls within a narrow compass: it is whether the Bank acted unconscionably in failing to provide copies of the relevant documents referred to in the schedule of the acknowledgment for consideration by the Karams and their solicitors, prior to the date by which the acknowledgment needed to be signed, as a practical matter, in order to obtain the financial accommodation urgently sought on behalf of the Company. The answer to this question requires consideration of the involvement of Mr John Marsden, of Marsdens solicitors, on behalf of the Karams and the Company.

74 In a Bank diary note dated 2 June 1993, there is a notation in the following terms:

“DR $651,154/$533,000.”

“Later Charlie Karam called in. He was looking for clearance from the Bank to pay essential suppliers cheques –”

75 A diary note of 7 June 1993, prepared by Mr Murray, includes the following statement in parenthesis:

“(John Marsden had telephoned me briefly on 4/6/93 to advise that the Karam Bros had been with him for over 2 hours discussing their problems and he could not understand why the Bank was not paying their cheques. Advised Mr Marsden I was not at liberty to discuss Karams affairs but yes the Bank was considering a funding package and a meeting was scheduled for 7/6/93 (Mr Marsden said he had not been made aware of such a meeting). He inquired about what decision the Bank was going to make in relation to … funding requirements and was advised that such decision would be conveyed to Messrs Karam once it had been made – he asked to be advised of the decision).”

76 The diary note of 7 June also stated that prior to a meeting on that day with Messrs Charles and John Karam, Mr David Lamb and Mr Ron Dean-Willcocks to discuss the Star Dean-Willcocks report, a “without prejudice” letter had been received from Marsdens, solicitors. A copy of that letter was in evidence: it commenced:

“We confirm that the writer, Mr John Marsden, spoke to you on the telephone last Friday, the 4th June, 1993, noting that we had been instructed by Charles Karam, his brother John Karam and their Company, Karam Bros Footwear Pty Ltd in relation to their banking arrangements with the ANZ Bank.

We confirm that we have only had instructions for a short period and we are still obtaining full details of those instructions.”

113 Further, as his Honour recognised at [398], when advice was given on 1 October 1993, Mr Marsden had (and had had for some weeks) the earlier security documentation from the Bank. Accordingly, to the extent that his Honour relied upon the failure of the Bank to provide that documentation as at 10 June 1993, that conduct would not be relied upon as of 1 October 1993. The only relevance of that conduct on the later occasion would have been its continuing effect, on the basis that the Karams believed that they had lost their right to deny the Bank security over their properties, because those rights had been relinquished on 10 June. That attitude would no doubt be evidenced by resignation, but not by continued assertion that the Bank had no right to security over those properties, as Mr Charles Karam was clearly asserting. Mrs Nada Karam also gave evidence of the conversation which took place with Mr Marsden prior to signing the cross-deed of covenant. According to her Mr Marsden had said:

“You have already signed personal security documents before and these are not any different to the ones previously signed. The house are going to be sold, Ingleburn will be sold, Regents Park will have to be sold. Everything you have has to be sold to satisfy the Bank so that the Bank will have confidence that you are doing everything possible to service the loan. If you do not do that they will close you down tomorrow.”

114 On 5 October 1993, Mr Marsden wrote to Mr Murray confirming that a meeting had been held on 1 October and putting forward a proposal “on a totally ‘without prejudice’ basis”. After referring to the emotional stress caused to the wives of the Karam brothers, Mr Marsden stated:

“The documentation that you have submitted has been approved by the writer, approved by the clients, and is held in escrow at our office pending resolution of the matters referred to hereunder.”

“1. That our clients will forthwith list their homes for sale … and will agree forthwith to the sale of their matrimonial personal homes and all monies accruing from the sale of those homes will be paid to the Bank in reduction of our client Company’s indebtedness to the Bank.

2. It is clear that the lessee in relation to the Regents Park property will not wish to continue the lease after the end of the December period. Our clients will, on that basis, forthwith list that property for sale as vacant possession. …

3. The Bank will assist our clients with the shortfall of monies for material required for production, with a substantial reduction agreed between the parties, after the close of the Christmas school purchase period, that is, as at the 15th March, 1994.

4. The Bank … will agree immediately to a rationalisation of the interest component of our clients’ loan by reducing the interest component from … approximately 15% to a maximum of 9.5%.

5. The Bank will rewrite the loan documents in accordance with the above, at no cost to our clients.”

115 A Bank diary note of 7 October 1993 indicated that the overdraft limit of $1.4 million had been reached and further drawings would result in it being exceeded. The note concluded:

“Arrangements have been made for discussions to be held with Charles and John Karam, Mike Leon [the Company’s new accountant] and David Lamb (if possible) at 12.30 tomorrow to cover the Company’s present financial crisis.”

116 Mr Murray’s further note of the meeting with Mr Leon and Mr Lamb indicates that he was impressed with Mr Leon’s grasp of the issues. He proposed that the role of Star Dean-Willcocks as monitoring agents would be suspended for three months provided that the Company complied with Mr Leon’s directions. A meeting was held with the Karam brothers and Mr Marsden later on 8 October, at which time Mr Marsden handed over the executed security documents “and confirmed his client’s [sic] commitment to sell their personal residences and the Regents Park factory immediately”. There was some adjustment of the existing facilities, and an increase in the overdraft limit to $1.8 million, until 30 November 1993 at which time it was to reduce to $1.4 million, the reduction being presumably achievable by payment of the proceeds of one or more sales.

117 The deed of cross-covenant, signed by the Company and each of the Karams, was a lengthy document to simple effect, namely it obliged each of the signatories to pay to the Bank all sums of money which should from time to time be owing and unpaid by each of the other signatories: the obligation of each being several, separate and independent of the others. It was accompanied by certificates of independent legal advice and independent financial advice for each of the Karams, deeds of defeasance over the life policies of Charles and John Karam and four letters described as “Form S2/148” being standard form letters addressed to the manager of the Bank acknowledging that the mortgages of the Banks Street, Jacobs Street and Regents Park properties “have been deposited by [the mortgagor] with you in support of cross-deed of covenant dated 1st October 1993 for the accounts of” the Company and the other covenantors.

118 There was no discussion in the judgment as to the legal effect of the cross-deed of covenant and the relevant mortgages thereafter. Rather, his Honour concluded in relation to the documents executed on 1 October, at [398]:

“This time, further pressure was being exerted to sign yet further intended reinforcement of the Bank’s security position. This was recognised for what it was by Mr Marsden; duress. For in the circumstances, though the financial pressure on the Karams to meet their Bank debt was not just of the Bank’s making it was accentuated by the security advantage the Bank had unconscionably obtained and by the illegitimate pressure the Bank brought to bear as attended execution of the acknowledgments earlier. The Bank was in October 1993 again seeking to retain, and indeed extend, an advantage earlier unconscionably procured by illegitimate pressure. Once such a process of illegitimate pressure commences, its effect is reinforced by any advantage obtained as a result. If thereafter further advantage by way of additional security is sought and obtained, that advantage will be seen more readily as the product of the same illegitimate pressure or at least influenced by it. And influence is enough.”

119 Immediately after the passage just cited, his Honour continued:

Barton v Armstrong

a

120 Assuming for present purposes, and contrary to the conclusion reached above, that the acknowledgments were signed as the result of some form of unconscionable conduct on the part of the Bank, it was still a matter for the Karams to demonstrate that the pressure continued to operate on 1 October 1993. It may be correct to say that once illegitimate pressure has been established, at a causally relevant time, there will be no need for the plaintiffs to do more than demonstrate that it was a contributing cause of the execution of the documents in October. To say that a defendant, in such a case, is subject to “a heavy onus” should be taken as a tactical or strategic consideration, rather than a statement as to legal onus of proof. What is required is careful attention to the nature of the pressure inflicted on the earlier occasion, in order to determine whether it continues to operate, or whether its effect has dissipated by the time of the later event.

121 It is also undoubtedly correct to say that such influence had not necessarily ceased “merely because an independent advisor intervened”. Nevertheless, the fact of such intervention invites attention to its nature and effect. True it is that Mr Marsden’s advice appears to have placed some weight on the practical consequences for the Company if the Karams did not sign the documentation put forward by the Bank. However, there appears to be little doubt that the matter which led to emotional exchanges was the legal effect of so doing. If the purport of his Honour’s comment as to the Karams “having signed the earlier documents now including the acknowledgments” was to suggest that signing the deed had no additional legal consequence, that does not appear to have been the way in which it was perceived by the Karams. Mrs Nada Karam, at one stage, asked “if that is the case then why should I sign”, in response to a comment that if they did not, the Bank would “close you down tomorrow”. Nevertheless, that comment did not appear to suggest that she had formed the view that the deed would have no legal consequences: she, it would seem, was the most resistant to signing it, from which one may infer that she believed it was an act adverse to her interests.

122 Further, the fact that Mr Marsden now had the earlier security documents cannot be dismissed as inconsequential, because they were supplied “belatedly”. If the receipt of those documents had led Mr Marsden to form a different view as to their effect from that which he had been prepared to assume in their absence, one would expect some indication of that, possibly in strong terms, because Mr Marsden had, in his letter of 10 June, said to Mrs Nada Karam:

“I confirm that I pointed out to you that I was very, very unhappy about signing the documentation and signing the solicitor’s certificate. I pointed out to you I would be signing the solicitor’s certificate without seeing the security documents.”

“I pointed out to you that not only did I not know what the security documentation contained but it appears that no-one there was aware of the details of the documentation.”

123 With respect, there appears to be nothing in the material in October 1993 which supports the conclusion that the execution of the cross-deed of covenant was attended by unconscionable conduct. His Honour’s conclusion to the contrary appears to rely, not only on the finding of illegitimate pressure in June 1993, but on treating the parlous financial state of the business as itself a form of illegitimate pressure and in failing to recognise the significance of the fact that the Karams had received financial and legal advice, provided by persons with relevant expertise and having the relevant materials available to them and having, by the Bank’s concession, the time they required to consider the material.

124 Accordingly, the cross-deed of covenant and the accompanying documents were not attended by any unconscionable conduct emanating from the Bank and they are, accordingly, enforceable according to their terms.

The earlier documentation

125 The next matter to consider is whether his Honour’s findings in relation to the earlier documentation gave rise to some continuing effect of unconscionable conduct, which continued to operate in June 1993 and had not been vitiated by October 1993.

126 The case, as presented on behalf of the Karams, was that the Bank had acted unconscionably in relation to the Karams and their business since 1978, as evidenced by the fact that the declarations made by his Honour found unconscionable conduct in relation to the impugned transactions. However, it is necessary to say something, at least briefly, about those findings.

127 In relation to the two home mortgages, being the Banks Street property in the name of Mr John Karam and the Jacobs Street property in the name of Mr Charles Karam, his Honour found as a matter of construction that the mortgages secured only the advance made by the Bank for the purchase of the respective properties. Further, his Honour found that that was how the Bank had represented the effects of the mortgages to each of the Messrs Karam at the time they were executed, with the result that it would be, quite apart from the construction point, unconscionable for the Bank to have recourse to those properties to satisfy any indebtedness of the Company. The primary significance of those findings, by June 1993, is that they justify the beliefs of the Karams to the same effect. The correctness of those findings and the existence of the beliefs, has been assumed for the purpose of considering the 1993 transactions.

128 There is no need for the Bank to challenge any of these conclusions in order to justify, on the basis of the 1993 transactions, appropriating the amounts received by the Bank on the sale of the two properties in reduction of the Company’s indebtedness. In each case, the sale was undertaken by the respective Mr Karam and was not a sale by the Bank in reliance on a power of sale under a mortgage. Each sale took place after the execution of the cross-deed of covenant on 1 October 1993, Mr John Karam contracting to sell the Banks Street property on 3 November 1993 and Mr Charles Karam selling the Jacobs Street property by auction on 15 December 1993. The proceeds of the sales were appropriated by the Bank to reduce the indebtedness of the Company on 2 March 1994, a matter to which further reference will be made below.

129 The other issue concerns the fate of the Regents Park property. As noted above, the Karams had leased the Regents Park factory to a third party after the Company’s business was moved to Ingleburn. Despite an offer, conveyed to the Bank by Mr Marsden, to sell the property with vacant possession in December 1993, no such sale took place until after the appointment of the receiver/manager to the Company on 3 November 1995. The receiver/manager having failed to sell the Company as a going concern, the Company ceased to trade on 12 January 1996. According to the summary of facts contained in his Honour’s judgment at [154]:

“On 12-14 March 1996 the receiver/manager sold at auction the Company’s property, plant and equipment including the sale of the Regents Park property and the Ingleburn property.”

130 Nevertheless two other points should be noted. First, his Honour found at [268] that the Company was taking over the business previously carried on by the Karams “in a context understood by the Karams of their making available, reasonably enough, the Regents Park factory as security for the loan to obtain and build that factory”. His Honour continued:

in respect of that transaction

131 There is some doubt about that finding, given that the Regents Park mortgage and the guarantees were taken out after the purchase of the property and the construction of the first factory on that land. In any event, his Honour continued:

“I accept that the Karams, on balance would have understood the guarantees to be available for the associated ordinary business borrowings of the newly incorporated company, for which previously the Karams personally were liability, though limited as I have earlier explained in relation to future loans.”

132 Significantly in relation to the mortgages, his Honour declared that it was unconscionable for the Bank to have recourse to, or retain the benefit of, the guarantee executed by the Karams on 26 May 1980, to the extent that “the guarantee was applied to meet Ingleburn-related indebtedness of the Company to the Bank”. The guarantee, if effective, rendered the individuals liable for the debts of the Company. What was applied to reduce the indebtedness of the Company were the assets of the individuals. Because, on the basis of the findings set out above, the appropriation of the assets of the individuals in reduction of the Company’s indebtedness depended upon the 1993 documentation, the declarations made with respect to the 1980 guarantee, whether correct or not, lack utility and should be set aside.

133 More importantly, when it came to determine the matters to which the Regents Park property mortgage could relate, his Honour held at [337]:

“It is entirely to be expected that construction of the Ingleburn replacement factory would be so secured by its predecessor Regents Park and I am satisfied that this was understood by the Karams. But I do not consider that there was any understanding on the Karams part, who continued to own Regents Park personally, that Regents Park would be available for the Bank’s accommodation for general business purposes of the Company or for the Ingleburn land purchase.”

134 These points are relevant to the situation in 1993 in four ways. First, if both the guarantee and the Regents Park mortgage continued to provide security to the Bank in relation to the Company’s trading indebtedness arising out of its operations at Ingleburn, it is wrong to suggest that the acknowledgment was, is so far as it related to past liabilities, entirely inaccurate or inappropriate. Secondly, it demonstrates that, if the Karams were firmly of the view that none of their properties secured indebtedness of the Company in June 1993, they were wrong, according to his Honour’s finding as to their understanding in 1980 and 1989. Thirdly, it demonstrates that, even on his Honour’s findings, there were elements of doubt and confusion attending the scope of the earlier security documentation which, on any view, the Bank was entitled to seek to resolve, before extending further financial accommodation. Fourthly, there are dangers in seeking to reconstruct the legal framework against which the parties negotiated in June 1993 by reference to findings made by the Court eight years later, in order to demonstrate unconscionable conduct in 1993.

Conclusions

135 It follows that each of the declarations numbered 1-13, relating to the “Banks Street property”, the “Jacobs Street property”, the “Regents Park property”, and the “guarantee” should be set aside.

136 Declaration 14 stated that there was “no basis for impugning the mortgage given by the Company on 22 December 1989 over the Ingleburn property”. A more appropriate form of the declaration might have been that the mortgage is valid and effective according to its terms. However, no one sought a declaration in that form and the mortgage had by that stage been discharged as a result of the sale and transfer of the property. To reflect this conclusion would be sufficient to order that, subject to any other appropriate declarations, the proceedings brought by the Karams and the Company be otherwise dismissed.

137 Declarations 15-17 relate to “the 1993 documents and declare that the acknowledgments and cross-deeds of covenant and other documents” (unidentified) signed on 10 June and 1 October 1993 respectively, were procured by the Bank unconscionably “and by the exercise of economic duress”. For the reasons set out above, these declarations cannot be supported. Nor should declaration 16, providing for the 1993 documents to be set aside under the Contracts Review Act, stand. Declaration 17 refers to the absence of any estoppel arising in favour of the Bank preventing the Karams denying liability under the earlier security documents. Because the Bank does not need to rely on the earlier documents, no question of estoppel arises.

138 Declaration 18 relates to the proper construction of a release executed by the Karams on 1 March 1995 and is no longer relied upon by the Bank. The declaration is accordingly unnecessary.

139 Declarations 19 and 20 relate to the entitlements to equitable compensation said to arise in the Karams as a result of the earlier declarations with respect to the appropriation of funds by the Bank. These declarations are consequential and must fall if the earlier declarations are set aside.

140 It also follows that orders numbered 23-32, based upon the declarations referred to above in relation to the Karams, are consequential and should be set aside.

141 The Bank cross-claimed seeking orders against each of the Karams individually and against the Company for outstanding indebtedness. His Honour gave judgment for the Bank on its cross-claim against the Company in the amount of $3,729,049.89. On the basis that the Bank was entitled to seek to satisfy the indebtedness of the Company from the Karams personally, judgment should have been given against all of the present respondents in that amount, as sought by the Bank in its notice of appeal.

142 His Honour gave judgment against the Karams individually in an amount of $81,851.94, which, as explained in his judgment of 22 September 2003, was the amount outstanding in an equipment loan account, which was treated as trading indebtedness, rather than “Ingleburn-related indebtedness”, a phrase which was explained as indebtedness relating to the purchase of the land at Ingleburn and the construction of the factory on that land. That trading debt will, however, form part of the indebtedness of the Company and no separate order is required in relation to that amount, on the findings set out above.

143 The calculation of the amount of the debt owing to the Bank will depend on a calculation of interest. In its amended cross-claim, the Bank claimed judgment in the sum of $1,700,541.19, being the indebtedness as at 1 July 1996, after realisation of the various assets, together with interest from 2 July 1996 to the date of judgment. The current figure will need to be recalculated in accordance with the conclusions reached above.

Cross-appeal

144 On 28 June 2000, the Karams cross-claimed against the Company for an indemnity or contribution for any amount that they might be ordered to pay to the Bank. The Company has not, apparently, been put into liquidation, but no contribution is claimed in the notice of cross-appeal.

145 The Karams (though not the Company) filed a notice of cross-appeal in this Court seeking to vary orders 9, 10, 11 and 29. The ground of complaint relates to his Honour finding that the Regents Park mortgage (or the property secured by the mortgage) was available to repay the indebtedness of the Company with respect to the construction of the factory at Ingleburn.

146 For the reasons set out above, the limitation imposed by his Honour on the availability of funds from the sale of the Regents Park property, based on the 1993 arrangements, was misconceived. Accordingly, the cross-appeal should be dismissed. However, were the Bank not entitled to rely upon the 1993 documents, his Honour’s reasoning, based on the understanding of the Karams that the Regents Park property was sought by the Bank to secure the factory construction loan for Ingleburn, is not attended by error. The proper inference from his Honour’s findings in relation to the guarantees and the Regents Park property mortgage, taken together, is that their combined purpose was to secure the indebtedness to the Bank of the business then run by the Company, in circumstances where the Company had no assets to offer by way of such security. There is no basis in the materials accepted by his Honour for concluding that the Bank induced any different belief in the Karams, or that the Karams held any different belief. Accordingly, on any view, the cross-appeal should be dismissed.

147 It follows, in relation to costs, that the Company and the Karams should pay the Bank’s costs of the appeal and that the Karams should pay the costs of the cross-appeal, in this Court. It also follows that the Karams and the Company should pay the whole of the Bank’s costs of the claim and cross-claim proceedings in the Equity Division.

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12/10/2005 - Typographical error - Paragraph(s) 44

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Citations

Australia & New Zealand Banking Group v Karam [2005] NSWCA 344

Most Recent Citation

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Cited Sections

CITATION:	Australia and New Zealand Banking Group Limited v Karam [2005] NSWCA 344 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	27-29 July 2005
JUDGMENT DATE:	10 October 2005
JUDGMENT OF:	Beazley JA; Ipp JA; Basten JA
DECISION:	1. Appeal allowed and orders entered in the Equity Division on 6 February 2004 be set aside 2. Enter judgment for the Appellant against each of the Respondents in the amount of $3,729,049.89 together with interest from the date of judgment in the Equity Division 3. Order that the Respondents pay the Appellant's costs of the proceedings in the Equity Division 4. Cross-appeal dismissed 5. Order that the Respondents pay the Appellant's costs of the appeal 6. Order that the First-Fourth Respondents pay the Appellant's costs of the cross-appeal.

CATCHWORDS:	UNCONSCIONABILITY - family owned and operated company in perilous financial condition - directors of company unaware of extent of existing liability to financier - financier concerned that existing securities unenforceable - whether financier acted unconscionably in shoring up security position when business requested further financial accommodation - ECONOMIC DURESS - whether 'illegitimate pressure' was exerted by financier on the business - whether a finding of economic duress should be available where conduct complained of was not unlawful or unconscionable
LEGISLATION CITED:	Contracts Review Act 1980 (NSW) Trade Practices Act 1974 (Cth)
CASES CITED:	Australian Competition and Consumer Commission v C G. Berbatis Holdings Pty Ltd (2003) 214 CLR 51 Barton v Armstrong [1976] AC 104 Blomley v Ryan (1956) 99 CLR 362 Bridgewater v Leahy (1998) 194 CLR 457 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40 Dimskal Shipping Co SA v International Transport Workers Federation [1992] 2 AC 152 Director of Public Prosecutions (NI) v Lynch [1975] AC 653 Equiticorp Finance Ltd (in liq) v Bank of New Zealand (1993) 32 NSWLR 50 Hawker Pacific Pty Ltd v Helicopter Charter Pty Ltd (1991) 22 NSWLR 298 Karam v ANZ Banking Group Limited [2001] NSWSC 709 Karam v ANZ Banking Group Limited [2003] NSWSC 866 Lloyds Bank Limited v Bundy [1975] QB 326 Pao On v Lau Yiu Long [1980] AC 614 Parras Holdings Pty Ltd v Commonwealth Bank of Australia [1997] FCA 1107 Parras Holdings Pty Ltd v Commonwealth Bank of Australia [1999] FCA 391 Universe Tankships Inc of Monrovia v International Transport Workers Federal ("The Universe Sentinel") [1983] AC 366 West v AGC (Advances) Ltd (1986) 5 NSWLR 610 Westpac Banking Corporation v Cockerill (1998) 152 ALR 267
PARTIES:	Australia and New Zealand Banking Group Limited (Appellant) Charles Raymond Karam (First Respondent) John Raymond Karam (Second Respondent) Nada Marie Karam (Third Respondent) Diane Karam (Fourth Respondent) Karam Bros Footwear Pty Ltd (Fifth Respondent)
FILE NUMBER(S):	CA 41161/03
COUNSEL:	B.W. Walker SC/P. Dowdy (Appellant) M.L.D. Einfeld QC/A.C. Harding (Respondents)
SOLICITORS:	Coudert Brothers (Appellant) Webster O'Halloran (Respondents)

LOWER COURT JURISDICTION:	Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S):	ED 2142/97
LOWER COURT JUDICIAL OFFICER:	Santow J