Commonwealth Bank of Australia v Wood

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT

S ECI 2014 000582

COMMONWEALTH BANK OF AUSTRALIA	Plaintiff
v
ROBERT JOHN WOOD	Defendant

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JUDGE:	ELLIOTT J
WHERE HELD:	MELBOURNE
DATE OF HEARING:	16-19, 24 MAY 2016
DATE OF JUDGMENT:	24 JUNE 2016
CASE MAY BE CITED AS:	COMMONWEALTH BANK OF AUSTRALIA v WOOD
MEDIUM NEUTRAL CITATION:	[2016] VSC 264

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BANKING – Guarantee – Code of banking practice – Whether complied with – Enforceability of guarantee – Breach of warranty – Causation – Whether guarantor would have executed guarantee regardless – Unconscionability – Fair Trading Act 1999 (Vic), ss 7, 8A – Trade Practices Act 1974 (Cth), s 51AA – Banking Code, cll 28.1, 28.4, 28.5, 28.6.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr A Kelly QC with Mr M Costello	K&L Gates
For the Defendant	Mr M Robins QC with Mr D McAloon	Coulter Roache Lawyers

TABLE OF CONTENTS

A.. Introduction................................................................................................................................... 1

B.. Background................................................................................................................................... 1

C.. Refinancing by Bankwest.......................................................................................................... 4

C.1... The early stages................................................................................................................... 4
C.2... Bankwest’s internal documents......................................................................................... 8
C.3... The documents for execution.......................................................................................... 10

D.. Banking Code............................................................................................................................. 19

D.1... Clause 28.4(a) – prominent notice of specified matters............................................... 21
D.2... Clauses 28.4(d) and 28.5 – disclosure requirements.................................................... 22
D.3... Clause 28.6 – provision of the Guarantee to the debtor.............................................. 25
D.4... The role of Coomes........................................................................................................... 26
D.5... Consequences of non-compliance with the Banking Code......................................... 27

E... Alleged unconscionable conduct............................................................................................ 36

F... Quantum...................................................................................................................................... 39

G.. Other Matters.............................................................................................................................. 41

G.1... The Commonwealth Bank’s discovery........................................................................... 41
G.2... Witnesses not called.......................................................................................................... 42
G.3... Urgency of transaction...................................................................................................... 43
G.4... Wood’s statutory declaration.......................................................................................... 44
G.5... Graeme’s accountant report............................................................................................. 45

H.. Conclusion................................................................................................................................... 46

HIS HONOUR:

A. Introduction

The defendant, Robert John Wood (“Wood”),[1] signed a number of documents, including a guarantee upon which the plaintiff, Commonwealth Bank of Australia (“the Commonwealth Bank”), now sues. The Commonwealth Bank is the successor in law to the Bank of Western Australia Ltd (“Bankwest”).[2]
[1]Wood, the sixth defendant, is the only defendant still pursued by the Commonwealth Bank. The Commonwealth Bank obtained default judgment against each of the other defendants. Each of the first to fifth defendants are now either bankrupt or in liquidation.
[2]With effect from 1 October 2012, pursuant to the provisions of the Financial Sector (Business Transfer and Group Restructure) Act 1999 (Cth), the Commonwealth Bank became the successor in law to Bankwest.

The Commonwealth Bank is entitled to judgment in the sum claimed.

B. Background

Wood is an orthopaedic surgeon. In 2007, when his dealings commenced with Bankwest, he was already involved in property development. Together with his brothers, Graeme Wood (“Graeme”) and Philip Wood (“Philip”) (collectively, “the Wood Brothers”), he was a director and equal shareholder in a sole purpose investment vehicle, Jackson Street Pty Ltd (“Jackson Street”).[3]
[3]Jackson Street was the fifth defendant. It was incorporated on 5 December 2005. It is now in liquidation.

Jackson Street entered into a joint venture agreement on 21 February 2006 (“the Joint Venture Agreement”). There were 5 principal parties to the Joint Venture Agreement. In addition to Jackson Street, P’Leisure Resort Properties Pty Ltd (“P’Leisure Resort”), Dzeladin Pty Ltd (“Dzeladin”) and Ceman Investments Pty Ltd (“Ceman Investments”) were joint venturers (together, “the Joint Venturers”). The other principal party was Mato Investments Pty Ltd (“Mato”), described as “the Manager”.

Each of the Joint Venturers had a designated representative, who was also a signatory to the Joint Venture Agreement. Philip was the representative for Jackson Street. Ian Bennett (“Bennett”) was the representative for P’Leisure Resort. Bennett played a leading role in negotiations conducted on behalf of the Joint Venturers. Each of Philip and Bennett, along with the persons representing Dzeladin and Ceman Investments, were directors of Mato. Wood and Graeme were not.

The recitals in the Joint Venture Agreement recorded that the Joint Venturers had agreed to participate in a joint venture for the acquisition and development of Kunanadgee Homestead, Spring Drive, Corowa, New South Wales (“the Property”). It was proposed that the Property be developed as an “Eco Resort”, with the sale and leaseback of units.

Mato, as Manager, was recorded as having agreed to act as agent and nominee for the Joint Venturers in proportion to their respective interests to facilitate the establishment and conduct of the joint venture. It was agreed that Mato would manage, and hold the legal interest in, the assets of the joint venture.

The initial capital was $1,000, which was deemed to be contributed by each Joint Venturer equally. Despite this, and that the profits were to be shared equally, Jackson Street agreed to advance the large majority of the initial funds required for the joint venture. The Joint Venture Agreement recorded that Jackson Street would advance $2 million to enable completion of the purchase of the Property, together with 2 further amounts of $200,000 in March and April 2006, to be used to fund planning and development costs. Relevant to the contribution of $2 million, the Joint Venture Agreement included the following:

13.2.5The Venture will pay the interest on the advance at the same interest rate as is being paid by JACKSON STREET PTY LTD to Westpac.
13.2.6Subject to clause 13.2.4, the principal sum of $2,000,000.00 plus interest accruing on that sum will be repaid to JACKSON STREET PTY LTD on whichever is the earlier of 12 months from the date of the advance or the refinancing of the Property at which time the mortgage to JACKSON STREET PTY LTD or Westpac over the title will be discharged and released.

On 22 February 2006, that is the day after the Joint Venture Agreement was executed, Jackson Street executed and returned to Westpac Banking Corporation (“Westpac”) an acceptance of an offer of finance to Jackson Street (“the Westpac Facility”). The purpose of the Westpac Facility was stated to be to “assist in purchase of [the Property]”. As part of the arrangements for the Westpac Facility, the Wood Brothers provided guarantees, limited to $2.4 million plus interest and costs. Mortgages were provided by Mato over the Property, and by Wood and Graeme over other properties, both in their own names and through their respective corporate vehicles. No mortgage was provided by Philip, although 2 of his companies also provided guarantees.

The Westpac Facility was for a 1 year term, with a drawdown date of 24 February 2006.

On 22 February 2006, Wood signed the guarantee and indemnity in favour of Westpac (“the Westpac Guarantee”), securing all liabilities and obligations of Jackson Street then or in the future. In addition to warnings on the cover page,[4] warnings concerning the execution of a guarantee occupied approximately half the execution page signed by Wood. Under the headings “IMPORTANT. BEFORE YOU SIGN. THINGS YOU MUST KNOW”, these warnings included that the Westpac Guarantee should be read before signing and that Wood should obtain independent legal advice and consider obtaining financial advice.
[4]The cover page consisted of the heading “GUARANTEE AND INDEMNITY” with a warning box below it stating “WARNING: THIS IS A VERY IMPORTANT DOCUMENT”. There was also 1 line at the top of the page stating that the Code of Banking Practice applied.

The documents signed by Wood on 22 February 2006 included a “Form of Acknowledgement — Business Guarantor”. This was said to be attached to the back cover of the Westpac Guarantee. Wood filled out this form.[5] Importantly for present purposes, the form included the following:
[5]The court book contained numerous examples of Wood filling out the same or similar forms with respect to other facilities provided by Westpac.

3.Within the “Warning” box on the front cover of the [Westpac Guarantee] we have stated that before you sign the [Westpac Guarantee] you should get advice from your own lawyer and from your own financial adviser (such as an accountant).
Answer “yes” alongside one of the following that is true:
A —     You got that advice …………………………………………       or_________
B —You got advice from your own lawyer but not from your financial adviser……………………………………………….       ……….   or_________
C —You got advice from your own financial adviser but not your lawyer ………………………………………………………..       ……….. or ________
D —You have decided to sign it without getting that advice            Yes[6]

As is apparent, Wood was required to choose between the 4 options set out. The completion of the form was not simply a process of “ticking the boxes”. Further, by reason that he responded affirmatively to paragraph 3D of the form, he was also required to respond to questions 4 and 5 of the form, by which he accepted, amongst other things, that he understood the risk involved in signing the Westpac Guarantee.

[6]In Wood’s handwriting.

In addition to Wood personally providing the Westpac Guarantee, Wood executed a further guarantee on behalf of Wood & Co Orthopaedic Services Pty Ltd (“Wood & Co Orthopaedic Services”) as the sole director and company secretary.

Wood said he was willing to enter into these arrangements in the manner that he did, without getting any financial or legal advice, because he saw the investment as relatively low risk. Wood did not suggest he had anything other than a full appreciation of the risks involved in executing the Westpac Guarantee.

In April 2007, Westpac agreed to roll over the Westpac Facility until 30 September 2007. In order to facilitate the rollover, Wood was required to execute documents on behalf of Jackson Street, Wood & Co Orthopaedic Services, Rob Wood Investments Pty Ltd and himself agreeing to vary the various obligations, including his personal obligations under the Westpac Guarantee.

C. Refinancing by Bankwest

C.1 The early stages

Mato’s shareholders met from time to time. Wood attended some of these meetings. It appears Graeme and Philip attended most, if not all of the shareholders’ meetings, with Graeme being recorded as chair of the meeting on occasion. Ordinarily, notes of the meetings were kept.

At a shareholders’ meeting held on 18 July 2007, it was agreed that financiers would be approached to replace the existing funding and for the development of the Property. Further, those in attendance (who did not include Wood), resolved that Jim Coomes (“Coomes”), a town planning consultant, be appointed as “Project/General manager for the project”.

In pursuit of alternate finance, Bennett sent an email to Coomes on 31 July 2007 providing a “list of things we need to get to [Bankwest] URGENTLY in relation to Kunanadgee” (original emphasis). This email was forwarded by Coomes to various others, including Wood. It formed part of a chain, the first email being from a Bankwest officer who listed the required information.[7] This email described Philip as “Director-Mato” and Wood as “Guarantor”. Although Graeme was also referred to, he was not listed as a proposed guarantor.
[7]Without going into the detail, it is noted that less information was sought from Graeme than was sought from Wood and Philip.

At a further meeting of Mato’s shareholders on 3 August 2007, the attendees (including Wood) confirmed the appointment of Coomes as project manager. It was noted that financial statements would be provided to Bankwest shortly. Bennett said that approval in principle had been received from Bankwest.

Bankwest’s dealings with the Joint Venturers and Mato were principally handled by Stephen Larken (“Larken”), a business development manager.[8] Larken dealt mainly with Coomes. On 14 or 15 August 2007, at a meeting between Larken, Larken’s immediate superior, Charles Rounds (“Rounds”), Bennett and Coomes, Rounds stated he was prepared to recommend approval of the proposed loan, subject to certain conditions.[9]
[8]A minor exception to this was when Larken was on holidays for 2 weeks in November 2007.
[9]The notes of the Mato shareholders’ meeting held 21 August 2007 suggested that this meeting was held on 15 August 2007. But an email sent on 15 August 2007 by Larken referred to the meeting as having been held on the previous day. Neither the notes nor the email suggested the identity of any proposed guarantors was discussed at the meeting.

On 15 August 2007, Larken sent an email to Coomes stating that Bankwest would submit a proposal to fund the development of the Property in 3 stages:

(1)Refinance the Westpac Facility with respect to the Property for an amount of approximately $2.9 million.
(2)Reimburse “soft costs already expended” by the Joint Venturers, subject to the provision of invoices demonstrating payment.
(3)Fund the infrastructure and subdivision development costs, subject to the verification of costings and the provision of qualifying presales to cover the proposed total debt level.

On 17 August 2007, a statement of assets and liabilities of Wood was emailed by Wood’s accountants to Bankwest. That statement recorded Wood’s total personal assets of $2.05 million and total liabilities of $1.2 million. This statement did not include assets in which Wood held, or may have held, a beneficial interest by reason of his investment companies and related trust structures.

At a meeting held on 21 August 2007, the Mato shareholders were informed that the Property had been recently valued. A valuation report was tabled which indicated the Property was valued at $7.2 million. Wood was in attendance.

At the next meeting on 5 September 2007, Graeme informed those in attendance, including Wood, that the rollover of the Westpac Facility did not extend beyond 30 September 2007. Graeme stated it was essential that the refinancing was in place before that date. After these observations were made, it was agreed that, in the event that finance for all aspects of the development could not be approved by 30 September 2007, Bankwest should be requested initially to finance the land acquisition and consulting fees, with a subsequent request for construction finance when all the required information was available.

Notwithstanding the end of September 2007 deadline, it was not until the next Mato shareholders’ meeting, on 5 October 2007, that Larken and Rounds met with the shareholders and their representatives, including Wood. Bennett informed the shareholders that Bankwest had recently opened in Melbourne and was keen to become a major player in property finance. Rounds confirmed that Bankwest was prepared to advance $6 million, comprising $3 million for the purchase of the Property and development costs to date, and a further $3 million for construction. Rounds said that after completion of a satisfactory valuation of the Property, he expected the approval of the loan would be completed by the end of October. After some further general discussion regarding the approach taken by Bankwest, Rounds and Larken left the meeting.

On 25 October 2007, a valuation report was provided to Bankwest. This valued the Property “as is” at $7,565,000 and on an “on completion” basis at $16,727,273 (both exclusive of goods and services tax).

On 31 October 2007, Coomes sent an email to various persons, including the Wood Brothers, advising that Rounds was endeavouring to have the loan application approved quickly. It was anticipated that the loan documents could be signed on 8 November 2007 at Bankwest’s premises in Melbourne. The email referred specifically to the Wood Brothers by name, stating that Westpac had indicated it would get the release documents to them promptly so that they could be signed and returned as soon as the Bankwest loan was approved. However, it was not until December 2007 that the execution of the Bankwest loan documents was completed.

The documents as (ultimately[10]) completed were accepted by Bankwest. Settlement did not take place until 23 January 2008. By this time, at least 3 months’ interest was outstanding on the Westpac Facility.
[10]See pars 61-75 below.

On 23 January 2008, Bankwest advanced $3 million to Mato (“the Loan”), including $2,457,961.15 to discharge all amounts owing under the Westpac Facility and $487,429.63 to Mato.[11] The Loan was for a 1 year term.
[11]Notes of a meeting of the Joint Venturers held on 5 February 2008 recorded that “the balance of $470,000 was distributed equally between the [J]oint [V]enturers”.

No further moneys were advanced for the proposed development. When the Loan was due to be repaid in 2009, Mato defaulted. Mato has failed to repay the Loan despite repeated demands. Demands have also been made of the guarantors, including Wood. No payments have resulted. Wood denies he is liable.

Essentially, Wood’s defence attacked the processes adopted by Bankwest in putting the Loan, and related securities, in place. The defence focused on certain inconsistencies in the approval process and on the failure of Bankwest to comply with the code of banking practice (“the Banking Code”).[12]
[12]The Banking Code was published by the Australian Bankers’ Association in August 2003. The Banking Code was amended and republished in May 2004, which version was current at the time of the relevant events in this proceeding.

C.2 Bankwest’s internal documents

During cross-examination of Bankwest’s witnesses, a careful analysis of the bank documentation occurred. This exposed some inconsistencies and mistakes.

To elaborate, a document entitled “Schedule of Securities” dated 15 November 2007 stated in 2 places that Graeme, amongst others, including Wood and Philip, was a proposed guarantor. This schedule was attached to an email, which also attached a corporate diagram, which named each of the Wood Brothers as directors of Jackson Street, and Philip as a director of Mato.

However, the “Credit Risk Submission”, which formed part of the same bundle of documents described in the covering email as an “updated CRS”, listed only Wood and Philip as the “principals” of Jackson Street. Further, that document stated that the “Wood brothers” were “both” medical practitioners. Philip was said to be “a GP and … the sole principal of a practice employing 10 doctors”. Wood was described, incorrectly, as an optometrist who operated his own practice with 6 full time specialists. In fact, Graeme was an optometrist. Finally, under the recommendation section of this document, each of the Wood Brothers was listed as a director of Jackson Street.

When it came to listing the proposed guarantors, in a number of places the Credit Risk Submission only referred to Wood and Philip.

A further document in the bundle, entitled “Summary Terms & Conditions”, listed the proposed guarantors in 2 places, both of which included Wood and Philip, but omitted Graeme.

Evidence was given on behalf of Bankwest that it would be expected that each director of a borrower would be asked to give a personal guarantee.

No meaningful explanation was given as to why Graeme was omitted as a guarantor in some of these documents while Wood was included. Larken simply gave evidence that it was intended that Graeme should not be a guarantor, but he could not be specific as to why this was so. Larken rejected the suggestion that the inclusion of Graeme in the Schedule of Securities as a guarantor was not a mistake. Larken said this particular document had been prepared by another bank officer assisting him, Terence Loo (“Loo”),[13] and that the discrepancy “would have been” a clerical error on Loo’s part.
[13]Loo was not called to give evidence. His present location is unknown by the parties.

Graeme was not called to give evidence. No witness could say why Graeme was not included as a guarantor. It was unclear whether Graeme not being listed as a guarantor was by reason of a specific agreement between Graeme and Bankwest or whether it was an omission by reason of oversight on the part of Bankwest.

As part of the approval process, the inconsistencies and mistakes referred to above were repeated in further iterations of these documents. From 8 November 2007 to 19 November 2007, this occurred in a series of documents on approximately 4 occasions, which were emailed internally between bank officers.[14] At all times leading up to the Loan being advanced, all such documents remained internal documents of Bankwest.[15]
[14]This amounted to no more than the same documents being attached to different emails.
[15]For completeness, it appears an erroneous document dated 19 November 2007 was emailed on 10 separate occasions, up to 22 January 2008, as part of the approval process.

On 23 November 2007, Gerrard Gablek (“Gablek”), then Bankwest’s chief manager, credit, for south eastern Australia, sent an email to Larken stating, in substance, that the loan application had been approved. That email attached the approval, together with the documents submitted in seeking the approval. The errors referred to in paragraphs 33 to 36 above were contained in the documents submitted.

Pausing here, whatever inferences might be drawn from Bankwest’s documentation referred to above, in the circumstances of this case they cannot be determinative. In short, the non-communicated internal workings of Bankwest have no relevant connection with the contractual relationship that eventuated.[16] Further, in considering all the circumstances in ascertaining whether Bankwest acted unconscionably, the fact that none of these internal documents were communicated to Wood is of considerable significance.[17]
[16]Cf Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337, 352.6 (Mason J).
[17]See pars 136-143 below.

There can be no uncertainty as to the lack of knowledge of Wood of the errors in the internal documents. Wood had no meaningful communication with Bankwest, other than through the written documents provided to him to put the relevant transactions in place. Further, at the meeting on 5 October 2007,[18] there was no evidence guarantees were discussed. Coomes said there was no such discussion.
[18]See par 25 above.

C.3 The documents for execution

As a result of the loan approval referred to in paragraph 41 above, on 23 November 2007, Larken sent an email to Loo. Loo was asked to urgently arrange for a letter of offer, and the security documents, to be prepared by Bankwest’s lawyers.

Almost immediately after receiving this email, Loo sent an email to the document preparation division of Bankwest, which email attached numerous documents. These included the Schedule of Securities which recorded that a guarantee would be obtained from Graeme. However, like previous communications, the Summary Terms & Conditions did not include Graeme as a guarantor.

On 26 November 2007, Bankwest forwarded a letter to its solicitors asking for them to act on behalf of Bankwest “in preparing all documentation, performing all the necessary due diligence, attending to settlement, and stamping and registration of securities”. The letter included the following:

Where personal guarantors are involved [Bankwest] will issue the prerequisite Code of Banking Practice documentation. In this situation please forward the legal documentation to [Bankwest], unless advised otherwise.

On the afternoon of 26 November 2007, Larken sent an email to Bennett attaching a letter of offer (“the First Letter of Offer”), indicating the pages that needed to be signed. Larken stated that Bennett was to “ensure witnesses are not a party to the loan !!!”. In evidence, Larken explained that he included this statement in the email as he wanted to be clear that the witnesses were independent to the transaction. The email referred to conditions precedent that needed to be satisfied before settlement.

Approximately half an hour later, Bennett forwarded Larken’s email to various interested persons, including the Wood Brothers. The message simply read:

Gentlemen! Here it is! This does not include the Engineering Loan.[19]

[19]The evidence did not indicate to what Bennett was referring by use of the term “the Engineering Loan”.

The First Letter of Offer attached consisted of a covering letter and a 15 page document entitled “FACILITY TERMS” (“the First Facility Terms”). Section 5 of the First Facility Terms was headed “SECURITY”. Listed below this heading was “all the Security that we will need before we will provide any of the Facilities to you”. Nine guarantees and indemnities were listed below this statement in a table consisting of 9 separate rows, which table was printed over 2 pages.

In his evidence in chief, Wood first stated that the First Letter of Offer gave him concern about the amount which the individual guarantors would be liable. When Wood gave his evidence, the relevant section of the First Facility Terms was not open in front of him to read. Having been directed to look at the document Wood turned to a relevant page, which only referred to the unlimited guarantees to be given by the relevant companies. Wood then gave evidence that he refused to sign when he saw Jackson Street was required to give an unlimited guarantee. Wood stated in substance, both in chief and under cross-examination, he did not recall whether he read the rest of the document.[20]
[20]Under cross-examination, Wood stated he “may have read some of the next page with the full figures”, but later said he may not have looked at the rest of the document.

The table of guarantees and indemnities set out on the following page of the First Facility Terms listed the individual guarantors, stating their guarantees were to be limited to $6,481,000. The guarantors listed included Wood and Philip, but not Graeme. The absence of Graeme was also apparent from the first section of the First Facility Terms, which expressly identified the parties to the proposed facility, including each guarantor, again listing Wood and Philip, but not Graeme.

Wood’s evidence was vague concerning precisely what parts of the First Facility Terms that he read. However, under cross-examination Wood volunteered that regardless of whether the offer had come from Westpac or Bankwest, he “would have looked hard at [it] … because of the nature of the investment”. Whatever Wood may or may not have read with respect to the First Facility Terms, he formed the view that he was not willing to proceed on the basis of the guarantees sought. Wood told his brothers of his position. Wood assumed that Graeme would communicate their response to the First Letter of Offer as Graeme was “the main point of communication”.

The fact that the Wood Brothers were not prepared to sign as requested was recorded in an email on 27 November 2007, from Coomes to Bennett. Despite this email, there is considerable uncertainty about precisely what was discussed between the Wood Brothers as to what they were willing to agree.

Wood asserted he was only willing to provide a guarantee for a twelfth of Mato’s liabilities under the proposed transaction. Further, Wood’s case was that he was assured Graeme would also be signing a guarantee.

Although Wood stated he “came into this whole process with a very firm belief” that his liability would be limited to a twelfth of Mato’s liabilities,[21] Wood’s evidence concerning what was actually said about this was very vague. In his evidence in chief, Wood said he told his brothers he would not sign because the scope of the debt would be potentially too high to justify a one-twelfth share in the project. He then said the exact words that were stated escaped him. While this is understandable given the lapse of time, the evidence given by Wood did not establish that he agreed with his brothers that his liability was to be limited to a twelfth. In short, his evidence reflects no more than a desire to reduce his exposure “to justify a one-twelfth share”.
[21]Wood’s non-communicated belief does not advance his case: see, for example, Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, 179 [40], citing Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451, 461-462 [22] (both cases: Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ).

The email sent by Coomes to Bennett on 27 November 2007[22] recorded that the Wood Brothers were prepared to provide guarantees for 25 percent of the proposed liabilities, “but they were not prepared to go joint and several for the whole amount”. Plainly, this is inconsistent with any arrangement that Wood would be liable to Bankwest for only a twelfth of Mato’s liabilities. When Coomes gave evidence, there was no suggestion he was in error in referring to 25 percent when conveying what he had been told by Graeme. Further, Coomes said he did not discuss with Larken what he had been told in his conversation with Graeme.
[22]See par 53 above.

It appears the position of the Wood Brothers, as recorded in the 27 November 2007 email, was substantially conveyed to Bankwest.[23] As a result, on 29 November 2007, Bankwest agreed to propose to limit all guarantees to 25 percent as requested.
[23]Internal emails from Larken suggest a request was made for all guarantors to have limited guarantees.

On 30 November 2007, a further letter of offer was sent to Mato (“the Final Letter of Offer”), including proposed facility terms reflecting the varied arrangement (“the Final Facility Terms”).[24] The Final Letter of Offer stated that Bankwest was offering facilities totalling $6,481,000.[25] Relevantly, the security section of the Final Facility Terms recorded in a table the guarantees and indemnities to be given. The table was divided into 4 rows (which all appeared on the same page), with each row representing each Joint Venturer. The fourth row listed Philip, Wood and Jackson Street. Again, there was no reference to Graeme. Significantly, the amount of each guarantee to be given by Wood, Philip and Jackson Street was expressly stated in the same row at $1,620,250.[26] Self-evidently, this represented a quarter of the $6,481,000, rather than a twelfth. As with the First Facility Terms, Graeme was also omitted from section 1 of the Final Facility Terms.
[24]A copy of the Final Letter of Offer was sent on 30 November 2007 by Coomes to Graeme, suggesting Coomes would bring a copy for signature the following Monday if Graeme was “happy with it”. There was no suggestion Graeme expressed any dissatisfaction in response to this email from Coomes.
[25]There were 5 facilities offered. Facility 1 was for $3 million to “refinance … original [l]and acquisition & provide finance for the [l]and subdivision works”.`
[26]The table included a footnote which indicated each guarantor was also liable to pay the costs, expenses and interest as per the terms of the proposed guarantee.

Wood’s evidence was that, although he looked at the First Letter of Offer, including the First Facility Terms, at a level of detail that at least drew to his attention the existence of unlimited guarantees, he did not review the detail of the Final Letter of Offer. He gave evidence that, at the time he decided to proceed with the transaction, he believed he was only required to guarantee a twelfth of the total possible liabilities and that his brother Graeme would also be providing a guarantee. Yet, even a cursory review of the Final Facility Terms would have been likely to bring to Wood’s attention that his beliefs were incorrect.

Bankwest was informed that the Final Facility Terms were acceptable. Coomes agreed to attend to having the documents executed by all the required signatories.

Wood executed documents to facilitate the Loan on 3 occasions.

On or about 6 December 2007, Coomes attended Wood’s accountant’s office in Geelong with the Final Facility Terms. Coomes was introduced to the accountant. The meeting lasted in the order of 15 to 20 minutes. Coomes showed Wood the documents to be signed. No explanation was given. Wood signed the documents, which included a privacy statement, and returned them to Coomes. No copies were left.

The Final Facility Terms provided for execution by the borrower, Mato, and by each of the guarantors. With respect to the proposed guarantees, Wood signed both as a director of Jackson Street and in his personal capacity,[27] the latter signature being witnessed by his accountant.
[27]It seems Wood signed twice in his personal capacity. Wood signed both at the place for the guarantor and at the place to witness his signature as guarantor. Above the latter of these signatures appeared the initials “RW” in handwriting and the signature appears to be struck through. No questions were asked of Wood in this regard. In my view, nothing turns on this beyond the fact that it might demonstrate a lack of care or attention to detail at the time of execution.

The execution pages of the Final Facility Terms listed Jackson Street on the penultimate page and Wood on the last page. With respect to Jackson Street, Wood co-signed with Philip. As to Wood’s further signature in his personal capacity, his name was the last name listed. Immediately above him was a place for Philip to sign. Immediately above Philip another individual guarantor was referred to. A place for Graeme to sign appeared on neither of the 2 execution pages upon which Wood placed his signature.[28]
[28]There was a further guarantor execution page which preceded the 2 execution pages referred to above.

On 7 December 2007, Coomes emailed Bennett stating he had lodged “the documents” with Larken. Further documents were required. On 12 December 2007, Bankwest’s solicitors provided Bankwest with the security documents for execution, including a limited guarantee to be provided by Wood, Philip and Jackson Street “as trustee for the Jackson Street River Trust”[29] (“the Guarantee”). Coomes set about getting these documents executed.
[29]The details of the Jackson Street River Trust, including the extent of Wood’s beneficial interest, were not in evidence.

On or about 13 December 2007, Coomes met with Wood, again at Wood’s accountant’s office. On this occasion, Wood signed an irrevocable authority and disbursement order (“the Irrevocable Authority”) on behalf of Jackson Street and on his own behalf, the latter signature being witnessed by his accountant.[30] Wood also signed the Guarantee in 1 of the 2 places he was required to sign.[31]
[30]The schedule to the Irrevocable Authority identified the “Collateral Security”, which included the Guarantee by reference to Wood, Philip and Jackson Street only.
[31]The Guarantee was not dated at this time. It was subsequently dated 23 January 2008, in accordance with cl 2 of the Irrevocable Authority.

On the same occasion, Wood made a statutory declaration as a guarantor. The declaration, made before Wood’s accountant, recorded that Wood solemnly and sincerely declared that he was a guarantor for the Loan, he had received independent legal advice and financial advice and, having received that advice, freely and voluntarily signed certain documents. The documents identified included the Guarantee and the Irrevocable Authority. Erroneously, the statutory declaration identified a mortgage in circumstances where Wood had not signed any mortgage. The statutory declaration was undated. Immediately below the signature of Wood’s accountant, the accountant’s stamp was affixed, albeit upside down, which recorded his professional details including that he was a certified practising accountant.[32]
[32]Wood did not submit the statutory declaration was anything other than a valid statutory declaration: cf Bank of Western Australia Ltd v Abdul [2012] VSC 222, [78] (Croft J).

Wood stated he was content to make the declaration because he believed his brother Graeme, as the Wood Brothers’ first point of contact, was also a guarantor of equal standing with the same interest and risks, and therefore had a vested interest to make sure the documents were correct. Wood said he was relying on Graeme, who Wood said had significantly more experience, to do the due diligence with respect to the appropriateness of the documents.

If Wood read the statutory declaration, not only would he have appreciated that it incorrectly referred to a mortgage having been signed by him, but also that the Guarantee was limited to the amount of $1,620,250, rather than a twelfth of the proposed advance.

Further, Wood said that, at the time, he believed he had received financial advice through Graeme. However, he said he did not receive any legal advice. In this regard, Wood acknowledged, under cross-examination, that “by definition” he falsely declared he had received independent legal advice. Wood tried to explain this away by stating that it was “a misinterpretation”.

For completeness, reference should be made to another document purporting to be a statutory declaration of Wood. The signing of this document by Wood was witnessed by Wood’s accountant with his stamp affixed (this time the right way up) adjacent to his signature. However, the document also contained Bennett’s name and, apparently, Bennett’s signature. This signature appeared twice: once at the location for the person declaring; once at the location for the witness. Both of these signatures, together with a printing of Bennett’s name, were struck through. There was also an additional signature of Wood’s and a printing of Wood’s name that were struck through. No explanation was given as to how or why this document was in that form.

As to what was stated at this second meeting, it followed much the same course as the previous meeting at which documents were signed. No explanation of the documents was given by Coomes, and no copies were left.

Inadvertently, Coomes failed to obtain all the signatures required from Wood and others. Accordingly, on or about 17 December 2007, he returned to Geelong. Wood was performing surgery on that day. Coomes attended at Geelong Hospital. Wood was “in scrubs” when he and Coomes met alone. The further signature was, or signatures were, obtained without any explanation.[33] Again, no copies of documents were left. The meeting was brief.[34]
[33]It was unclear on the evidence whether 1 or more of Wood’s signatures were obtained by Coomes on or about 17 December 2007.
[34]Coomes said the meeting went no more than 15 minutes. Although Wood had no specific recollection of the occasion, based on his usual schedule between operations, he said he would have only been able to have “5 minutes maximum contact time”.

The evidence does not disclose precisely the manner in which the Guarantee was signed by Wood in his capacity as a director of Jackson Street and in his personal capacity. The 2 signatures of Wood appear in different pen, suggesting the execution in each capacity occurred on different occasions. This is consistent with the evidence of Coomes about failing to obtain all the signatures required. When Wood signed as a director of Jackson Street, a black pen was used. This was also the colour of the pen used at the time he signed the statutory declaration. A reasonable inference is that these signatures occurred at the same meeting, and the execution by Wood as a guarantor in his personal capacity, which was in blue ink, occurred on a separate occasion. I so find.

It follows from this finding that Wood executed the Guarantee in his capacity as a director of Jackson Street on or about 13 December 2007. That is because the statutory declaration was executed on that occasion at the offices of Wood’s accountant. It also follows that it is highly likely, and I so find, that the signing of the Guarantee by Wood in his personal capacity occurred on or about 17 December 2007. Accordingly, at the time the statutory declaration was made, it is highly likely Wood was yet to sign the Guarantee in his personal capacity.

A further aspect of Wood’s evidence concerning the execution of documents cannot be passed over without comment. Under cross-examination, Wood suggested that he was not given the Final Letter of Offer in full. Wood said he signed the execution pages of the Final Facility Terms without having the rest of the document. This suggestion is implausible. When Coomes gave evidence, there was no suggestion he separated the execution pages from the remainder of the document. This was not even raised with Coomes in his evidence in chief to see if he had a recollection 1 way or the other. Further, Coomes gave evidence he provided “the documents” to Wood. Coomes had no reason to go to the trouble of separating the execution pages. Furthermore, the other person who attended 2 of the meetings at which the documents were signed, Wood’s accountant, was not called to give evidence. It may be assumed the accountant’s evidence would not have assisted.[35] In short, I do not accept Wood’s evidence in this regard.[36]
[35]See Androvitsaneas v Members First Broker Network Pty Ltd [2013] VSCA 212, [30] (Redlich and Priest JJA and Macaulay AJA); Jones v Dunkel (1959) 101 CLR 298, 308.5 (Kitto J), 312.6 (Menzies J), 320.8-321.2 (Windeyer J).
[36]In making this finding, it is not suggested that, by giving the evidence he did, Wood was being deliberately untruthful. The relevant events are more than 8 years ago: see Watson vFoxman (1995) 49 NSWLR 315, 318.8–319.5 (McLelland CJ in Equity); referred to with approval in BHP Billiton (Olympic Dam) Corporation Pty Ltd v Steuler Services GmbH & Co KG [2014] VSCA 338, [687] (Tate, Santamaria and Kyrou JJA) and Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd [2013] VSCA 237, [159] (Warren CJ, Osborn JA and Macaulay AJA).

Wood gave uncontested evidence that he never received a copy of the Guarantee or a copy of the Bankwest’s general terms, to retain for his own purposes, until he engaged solicitors a number of years after 2007. Wood also stated he never received a copy of the Banking Code from Bankwest at the relevant time. Finally, Larken gave evidence that Bankwest’s usual practice was to provide a ”guarantor’s pack” with respect to loans involving guarantees. Wood gave evidence he received no such pack, and there was no evidence that he did.

Before turning to the issues raised, it is noted that no case is advanced by Wood that he was misled by Bankwest. He gave evidence that his belief as to the terms of the Guarantee arose by reason of his discussions with Graeme and Philip, and in particular his assurances from Graeme. It was not suggested that Bankwest was privy to, or had any basis for knowing the substance of, the relevant conversations between the Wood Brothers beyond what was recorded in writing as set out above.[37]
[37]See pars 56-57 above.

D. Banking Code

Clause 23.2 of the Guarantee stated that the “relevant provisions” of the Banking Code applied. It was accepted by the parties that those provisions included the following:

28.1This clause 28 applies to every guarantee and indemnity obtained from you[38] (where you are an individual at the time the guarantee and indemnity is taken) for the purpose of securing any financial accommodation or facility provided by us[39] to another individual or a small business (called a “Guarantee”), except as provided in clauses 28.15 and 28.16.[40]
[38]“You” and “your” were defined to mean “a person who, at the time the banking service is provided, is an individual or a small business that is our customer (or, where this Code specifically applies to potential customers, a potential customer of ours) and includes, in clauses 28, 33 and 39, any individual from whom we have obtained, or propose to obtain, a Guarantee (original emphasis).
[39]“We”, “us” and “our” were defined to mean “the bank that you deal with that has adopted this Code” (original emphasis).
[40]No reliance was placed on cll 28.15 or 28.16.

…
28.4 We will do the following things before we take a Guarantee from you:
(a) we will give you a prominent notice that:
(i)you should seek independent legal and financial advice on the effect of the Guarantee;

(ii) you can refuse to enter into the Guarantee;
(iii) there are financial risks involved;
(iv)you have a right to limit your liability in accordance with this Code and as allowed by law; and
(v)you can request information about the transaction or facility to be guaranteed (“Facility”) (including any facility with us to be refinanced by the Facility);

…
(d) we will provide you with a copy of:
(i)any related credit contract together with a list of any related security contracts which will include a description of the type of each related security contract and of the property subject to, or proposed to be subject to, the security contract to the extent to which that property is ascertainable and we will also give you a copy of any related security contract that you request;
(ii)the final letter of offer provided to the debtor by us together with details of any conditions in an earlier version of that letter of offer that were satisfied before the final letter of offer was issued;
(iii)any related credit report from a credit reporting agency;
(iv)any current credit-related insurance contract in our possession;
(v)any financial accounts or statement of financial position given to us by the debtor for the purposes of the Facility within 2 years prior to the day we provide you with this information;
(vi)the latest statement of account relating to the Facility (and any other statement of account for a period during which a notice of demand was made by us, or a dishonour occurred, in relation to which we are required to give you information under clause 28.4(b)(i)); and
(vii)any unsatisfied notice of demand made by us on the debtor in relation to the Facility where the notice was given within 2 years prior to the day we provide you with this information; and

…

28.5 We will not ask you to sign a Guarantee, or accept it, unless we have:
(a)provided you with the information described in clause 28.4 to the extent that that information is required by this Code to be given to you; and

(b) allowed you until the next day to consider that information.
We do not have to allow you the period referred to in clause 28.5(b) if you have obtained independent legal advice after having received the information required by clause 28.4.

28.6 We will:
(a)not give the Guarantee to the debtor, or to someone acting on behalf of the debtor, to arrange the signing (except a legal practitioner or financial adviser who is working for you); and
(b)ensure that you sign the Guarantee in the absence of the debtor where we attend the signing of the Guarantee.

(Original emphasis.)

D.1 Clause 28.4(a) – prominent notice of specified matters

Wood alleged that Bankwest failed to give him prominent notice of the matters specified in clause 28.4(a). In fact, prominent notice was given.

The means by which Bankwest communicated the terms of the Guarantee to Wood was in writing. It was not a situation where a bank officer assumed any role in explaining the documentation.[41] The Guarantee was provided to Coomes, who dutifully delivered the documents to Wood for his signature.[42]
[41]Cf National Australia Bank Ltd v Rice [2015] VSC 10, [41]-[56], [81] and [83].
[42]It should be observed that, depending on the circumstances, this mode of delivering bank documents may be less than ideal: cf Bank of Western Australia Ltd v Abdul [2012] VSC 222, [76] (Croft J).

The Guarantee contained prominent notice of each of the matters referred to in clause 28.4(a) on its front page; and, with respect to most of those matters, upon the signing page, immediately above where Wood signed as a director of Jackson Street. On each occasion, the notice was in a box, respectively headed in bold with “Warning” and “IMPORTANT. BEFORE YOU SIGN. THINGS YOU MUST KNOW”.

Although there was no breach of clause 28.4(a) of the Banking Code, for completeness I observe that it is likely any breach in this regard would have been of little consequence. Wood knew: (1) of his ability to get independent legal and financial advice; (2) of his right to refuse to sign the Guarantee; (3) that there were financial risks involved; and (4) of his right to limit his liability (a right he had already exercised). Further, although there was no evidence on point, a person of Wood’s education and background[43] must have known he could have requested information about the Loan or the underlying transaction.
[43]By the end of November 2007, Wood fully understood the nature of a co-guarantor’s liability under a joint and several guarantee. Wood acknowledged he had understood for a number of years the consequences of signing a guarantee. From January 2003 to November 2007, Wood had previously engaged in transactions involving the execution of bank documents by him, either in his personal or corporate capacity, on at least 21 occasions, by which he indicated his acceptance to finance facilities (including renewals and variations), including the signing of up to 8 personal guarantees. On many such occasions, Wood indicated in writing he was willing to sign a guarantee without any advice or without any legal advice. See also fn 90 below.

D.2 Clauses 28.4(d) and 28.5 – disclosure requirements

Wood alleged breaches of the Banking Code by reason of Bankwest’s failure to provide him with a copy of:

(1)Any related credit contract together with a list of any related security contracts: clause 28.4(d)(i).
(2)The Final Letter of Offer provided to the debtor, Mato: clause 28.4(d)(ii).
(3)Any financial accounts or statement of financial position given to Bankwest by Mato for the purpose of the Loan within 2 years prior: clause 28.4(d)(v).[44]

Wood alleged a further breach of the Banking Code (clause 28.5(b)), by reason of a failure to allow Wood “until the next day” to consider the information referred to in subparagraphs (1) and (2) above.

[44]Reference was also made in closing submissions to the absence of any related credit report from a credit reporting agency and clause 28.4(d)(iii), but this allegation was not pleaded and there was also no evidence that there was any such report from a credit reporting agency.

Larken gave evidence that in 2007 it was Bankwest’s practice to provide a “guarantor pack” to potential guarantors, which ordinarily contained copies of the letter of offer, of the terms and conditions relating to the facility, of “things you should know about guarantees” and of the guarantee itself. However, there was no evidence such a guarantor pack was provided to Wood. Larken had no recollection of providing Coomes with a guarantor pack and stated he relied on others to provide the guarantor pack to Wood.

Wood positively swore that he never received the guarantor pack. This evidence was not challenged. Further, Larken gave evidence that he had not seen any document which suggested a guarantor pack had been sent to Wood, or anyone else, in relation to this transaction. Coomes did not suggest he had ever been given such documents.

The evidence above leads to the conclusion that, although it may have been standard practice for Larken, or those working under him, to provide a guarantor pack when a transaction involved a guarantee, no guarantor pack was provided to Wood.

The Commonwealth Bank submitted that the Final Letter of Offer was provided 5 days before the Guarantee was executed and that this amounted to compliance with clause 28.4(d)(ii). It is correct that the original of the Final Letter of Offer was provided to Wood for execution on or about 6 December 2007, approximately a week before he signed the Guarantee for the first time. However, no copy of the Final Letter of Offer was given to Wood.[45] The original was simply produced so it could be executed and then taken away.[46] In my view, this circumstance does not come within the requirements of clause 28.4(d)(ii). This observation applies equally to the copy documents referred to in clause 28.4(d)(i).
[45]In this context, the natural and ordinary meaning of the reference to a copy is a reference to a document other than the original the subject of execution. The document was only provided in paper form to Wood. It is unnecessary to consider whether a separate copy is required if the document had been provided electronically to Wood.
[46]The Final Facility Terms contained an acknowledgment that Wood had received a copy of the Final Letter of Offer. A similar acknowledgment was also on the signing page of the Guarantee. These acknowledgments do not alter the fact that no copy was provided.

With respect to Bankwest’s obligations under clause 28.4(d)(v), Larken acknowledged no financial statements were provided to any of the guarantors. He also accepted this was an error on his part.[47]
[47]The allegations concerning cl 28.4(d)(v) included an alleged breach by Bankwest by reason that Bankwest did not give copies of invoices previously supplied by Mato to Bankwest to support $600,000 of the proposed advance. It is difficult to conceive how such invoices come within the description “financial accounts or statement of financial position”. In any event, Wood has established a breach of cl 28.4(d)(v) independent of this allegation. Further, Wood gave no evidence that the provision of such invoices would have altered the course he adopted.

Accordingly, Wood has established that Bankwest breached its disclosure obligations by failing to comply with clause 28.4(d)(i), (ii) and (v).

As to Wood’s allegations regarding clause 28.5(b), obviously to the extent that clause 28.4(d) was not complied with by the complete failure to provide certain information, there was no opportunity to consider such material until the next day, or at all. However, to the extent that the information in clause 28.4 included information set out in the Final Letter of Offer and the Guarantee, Wood has not established that Bankwest did not allow Wood until the following day to consider that information. The obligation to allow until the next day does not go beyond giving the guarantor the opportunity to take until the next day.[48]
[48]National Australia Bank Ltd v Rice [2015] VSC 10, [237].

The relevant documents were provided by Bankwest to Coomes. Although their execution was being treated with urgency, there was no stipulated time by which the executed documents had to be returned.[49] Further, there was no obligation on Wood to immediately sign the documents when presented to him by Coomes on or about 13 December 2007. Wood chose to do so of his own volition. The fact that he could have taken at least 24 hours to consider the contents of the Guarantee is demonstrated by the fact that it was not until approximately 4 days later that his second signature was obtained. Indeed, during cross-examination Wood accepted he had the opportunity to ask for the documents to be left with him before he signed them.[50]
[49]For completeness, an email was sent by Larken to Coomes on 30 November 2007 expressing a “need” to have the Final Letter of Offer executed and returned by close of business the following Tuesday. Not only was this timeframe not met, but it was never suggested by Bankwest that the finance would be withdrawn if the documents were not provided by that time. As to the “need”, see pars 160-164 below.
[50]In accepting this, Wood also said he was being pressured. Whatever pressure Wood may have perceived, undoubtedly in large part because of the ongoing default with respect to the Westpac Facility, no pressure was being imposed upon him by Bankwest beyond Bankwest responding to the needs of the Joint Venturers: see pars 160-165 below.

If Wood had obtained independent legal advice, there would have been no obligation to allow him until the next day to consider the relevant information.[51] Even though Wood made a statutory declaration to the effect that he had received such independent legal advice, in fact he had not. Accordingly, as a matter of contract, the proviso to clause 28.5 did not apply in this case.[52]
[51]See the proviso to clause 28.5.
[52]But also see pars 166-168 below.

It follows Wood has, to the extent set out above, established a breach of clause 28.5(b) above. However, for the reasons set out below,[53] had this breach not occurred, it is more likely than not that Wood would have signed the Guarantee in any event.
[53]See pars 120-143 below. There was no suggestion that Wood would not have understood the terms of the Guarantee had he taken the time to read them.

D.3 Clause 28.6 – provision of the Guarantee to the debtor

Wood alleged that Bankwest breached clause 28.6 by providing the Guarantee to Coomes who was “someone acting on behalf of the debtor”, namely Mato. Under cross-examination, Larken was taken to the actual wording of clause 28.6(a) and then accepted that he understood that at all times Coomes was acting for Mato.

Notwithstanding this concession by Larken, which was, in my view, properly made, in closing submissions the Commonwealth Bank contended that Coomes was acting for the Joint Venturers and not the debtor, Mato. The evidence simply does not support this contention.

Coomes stated he was acting under the instructions of Bennett, who was 1 of the directors of Mato as well as being a director of a Joint Venturer. The documents were required to be signed because finance needed to be obtained given the default with Westpac.[54] The Loan was to be advanced to Mato. Further, under the Joint Venture Agreement, Mato was charged with the responsibility of facilitating the establishment and conduct of the joint venture.[55] Coomes’ instructions from Bennett must be understood in this context.
[54]See pars 160-163 below.
[55]See par 7 above.

Although the language used in the notes of the relevant meeting is not precise,[56] it is highly likely that, at all times from 18 July 2007, Coomes was acting for the Joint Venturers.[57] But whether or not Coomes was acting for the Joint Venturers at all relevant times, he was plainly acting for Mato when dealing with Bankwest.
[56]See par 17 above.
[57]In giving evidence, Coomes specifically acknowledged he was acting for the Joint Venturers in seeking to obtain finance. See also par 103 below.

Alternatively, the Commonwealth Bank alleged that, at the time he delivered the Guarantee to Wood for execution, Coomes was acting on behalf of Jackson Street and on the instruction of Graeme. As with the position concerning the Joint Venturers, whether or not Coomes was also acting for Jackson Street is not to the point if he was also acting for Mato.

In summary, the evidence demonstrates that Coomes was acting on behalf of Mato in assisting in obtaining the necessary securities required before the Loan would be advanced. Accordingly, Wood has established that Bankwest did not comply with clause 28.6 of the Banking Code.[58]
[58]To the extent that Bankwest might have been permitted to give the Guarantee to Coomes so that Coomes could give the Guarantee to Wood’s accountant as Wood’s “financial adviser” (about which I say nothing), there was no evidence the Guarantee was ever provided to the accountant.

D.4 The role of Coomes

Before turning to the consequences of Bankwest’s non-compliance, it is necessary to further explain the role of Coomes. Although some breaches have been established, Wood also sought to attribute the conduct of Coomes to Bankwest, in Bankwest allegedly failing to disclose various matters to Wood in accordance with the Banking Code.

Despite not being pleaded,[59] in Wood’s closing submissions he contended that Coomes was “relevantly” Bankwest’s agent when procuring the execution of the Guarantee. It was submitted that the terms of clause 28.6 altered the usual characterisation of the position of someone such as Coomes; namely, that a debtor, or someone on behalf of the debtor, would not generally be regarded as the creditor’s agent simply by procuring the execution of documents by the proposed surety.[60]
[59]In his amended defence and counterclaim, Wood alleged “Bankwest delegated the task of procuring [Wood’s] execution of the alleged guarantee”, but there was no allegation of agency, based on actual or ostensible authority, made.
[60]See, for example, HG & R Nominees Pty Ltd v Fava [1997] 2 VR 368, 401.6, 403.5 (JD Phillips J), referred to with approval in CIT Credit Pty Ltd v Keable [2006] NSWCA 130, [59] (Spigelman CJ, with whom Giles JA and Gzell J agreed).

Obviously, each case must depend on its own facts.[61] In this case, Coomes never purported to act on behalf of Bankwest. Further, Bankwest never authorised Coomes to do so. Larken gave evidence that he was content for Coomes to procure the signatures of the various parties, but nothing was said or done to suggest Coomes’ role went beyond that.[62] In fact, having been retained by the Joint Venturers and Mato to be the manager of the project,[63] Coomes did no more than transport the various documents to the signatories, ensure the documents were signed and then return them to Bankwest.
[61]Cf Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133, 172.2 (Ashley AJA; relevantly referred to with approval by Winneke P, 135.3).
[62]The extent of Larken’s instruction to Coomes was to advise where the documents had to be signed.
[63]See pars 7 and 17 above.

Further, there is nothing in clause 28.6 which suggests the usual principles of agency were not to apply. On the contrary, the wording contemplates that, as a matter of fact, the relevant documents might be given to the debtor or a person acting in that capacity (albeit in breach of the clause).

Finally, it was ultimately submitted that clause 28.6 provides an obligation “for the bank to ensure that it attends the execution”. Clause 28.6 does not impose such an obligation. On the contrary, the wording implicitly contemplates Bankwest not attending.

D.5 Consequences of non-compliance with the Banking Code

Although the Banking Code does not contain a provision which, of itself, provides a remedy for any contravention, that does not prevent the court granting a remedy.[64] Ordinarily,[65] when the provisions of the Banking Code are incorporated into a guarantee, they have contractual force.[66] In this case, the Banking Code was relevantly incorporated without any material qualification.[67]
[64]Cf Brighton v Australia and New Zealand Banking Group Ltd [2011] NSWCA 152, [109] (Campbell JA, with whom Giles and Hodgson JJA agreed).
[65]Each case must depend on the terms of the guarantee that incorporates the Banking Code.
[66]Doggett v Commonwealth Bank of Australia [2015] VSCA 351, [109]-[113], [137]-[139] (McLeish JA, with whom Whelan JA and Garde AJA relevantly agreed). Special leave to appeal was refused on 15 June 2016: [2016] HCASL 114.
[67]Clause 23.3 of the Guarantee provided for the provisions of the Banking Code to be read down in certain circumstances which are not relevant to the issues in this case.

Wood submitted that each of the clauses of the Banking Code relied upon were conditions (or essential terms),[68] the breach of which would give Wood the right to terminate the Guarantee. Further, Wood submitted that, by breaching the Banking Code, Bankwest evinced an intention not to be bound by the terms of the Guarantee and repudiated the Guarantee. As part of the allegations in Wood’s amended defence and counterclaim, Wood purported to accept the alleged repudiation and to terminate the Guarantee.[69]
[68]Associated Newspapers Ltd v Bancks (1951) 83 CLR 322, 336.3 (Dixon, Williams, Webb, Fullagar and Kitto JJ).
[69]The amended defence and counterclaim was filed on 28 August 2015.

The Commonwealth Bank submitted that the relevant clauses were no more than warranties (or non-essential terms),[70] so that Wood could only ever have a claim for damages if the Banking Code had been breached. Further, the Commonwealth Bank submitted that if there had been a breach of the Banking Code, such a breach or breaches did not amount to repudiatory conduct which would entitle Wood to terminate the Guarantee.
[70]Associated Newspapers Ltd v Bancks (1951) 83 CLR 322, 336.4.

The characterisation of clauses 28.4 to 28.6 of the Banking Code will depend upon the facts of each individual case, including the express terms of the Guarantee into which the Banking Code is incorporated.[71] Significantly, in this case, clause 10.1 of the Guarantee provided as follows:[72]
[71]Cf Brighton v Australia and New Zealand Banking Group Ltd [2011] NSWCA 152, [111] (Campbell JA, with whom Giles and Hodgson JJA agreed).
[72]The definitions of “we”, “us” and “you” in the Guarantee were different to the definitions of those terms in the Banking Code: see fnn 38-39 above. Nothing turns on this.

Rights given to us under [the Guarantee] and your liabilities under it are not affected by any act or omission by us or by anything else that might otherwise affect them under law or otherwise, including:
…
(g)the fact that the obligations of any person who guarantees any of the debtor’s obligations may not be enforceable;

…

A similar clause to clause 10.1 was considered by the New South Wales Court of Appeal in Brighton v Australia and New Zealand Banking Group Ltd.[73] It was held that such a clause expressly negatived a consequence that would follow if there were a breach of a term of the Guarantee and if that term otherwise appeared to be a condition. It was held that a clause that might have been construed as a condition could not be construed as such.[74]
[73][2011] NSWCA 152.
[74]At [90], [93], [102].

Accordingly, whether or not, in other circumstances, clauses 28.4 or 28.5 might possibly be construed as a condition, or an intermediate term,[75] in this case the provisions in those clauses can only properly be characterised as warranties.[76]
[75]See Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115, 139-140 [51]-[56] (Gleeson CJ, Gummow, Heydon and Crennan JJ).
[76]For further discussion on this issue, see National Australia Bank Ltd v Rice [2015] VSC 10, [192]-[217].

In resisting any suggestion that clauses 28.4 to 28.6 were warranties, Wood submitted that a guarantee must be construed strictly and that any ambiguity must be construed in favour of the guarantor. It was submitted the decision of National Australia Bank Ltd v Rice[77] was incorrect insofar as it held clauses 28.4 and 28.5 to be warranties because of a failure to take this principle of construction into account.[78]
[77][2015] VSC 10.
[78]Clause 28.6 was not raised in National Australia Bank v Rice.

There can be no doubt that guarantees should be construed strictly.[79] Further, if a provision is properly characterised as a condition precedent to the guarantor’s obligation, ordinarily strict performance would be required for the creditor to be able to enforce its rights.[80] However, the guarantor must establish that the breached provision is a condition, and not a mere warranty, before it may avoid its obligations under a guarantee. If, on a true interpretation of the provision, it is not intended to operate as a condition, “it is not easy to understand why the [guarantor] should be discharged by its breach”.[81]
[79]See, for example, Doggett v Commonwealth Bank of Australia [2015] VSCA 351, [198] (McLeish JA, with whom Whelan JA and Garde AJA relevantly agreed); McMahon v National Foods Milk Ltd (2009) 25 VR 251, 284 [82] (Nettle JA, with whom Neave and Dodds-Streeton JJA agreed); Chan v Cresdon Pty Ltd (1989) 168 CLR 242, 256.6 (Mason CJ, Brennan, Deane and McHugh JJ).
[80]Tricontinental Corporation Ltd v HDFI Ltd (1990) 21 NSWLR 689, 704E-705E (Samuels JA).
[81]Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549, 561.9 (Mason ACJ, Wilson, Brennan and Dawson JJ).

In addition, Wood placed emphasis on particular language in clauses 28.5 and 28.6 in submitting they were conditions. Focus was placed upon the promise not to accept the Guarantee before the stipulated information was provided and the promise to ensure the absence of the debtor in certain circumstances. Wood submitted that to permit Bankwest to accept the Guarantee in circumstances where clause 28.4 had not been complied with would ignore the plain words of clause 28.5. These submissions do not address the inconsistency that would arise between these provisions and clause 10.1 of the Guarantee if they were construed as conditions.

Further, the Guarantee was accepted by Bankwest and moneys were advanced as a result. There is no issue that a contract was entered into. It is not a question of the court permitting such an event to occur, but rather what consequences flow from the breaches of some of the provisions of the Banking Code.

Furthermore, the stipulation in clause 28.6(b) to ensure the absence of the debtor would only arise where Bankwest was attending the signing of the Guarantee. Bankwest did not do so in this case.[82]
[82]As to clause 28.6(a), that can only properly be construed as a warranty given the terms of clause 10.1 of the Guarantee: see pars 109-110 above.

Alternatively to his primary claim, on the basis that clauses 28.4 to 28.6 of the Banking Code were warranties, Wood claimed damages in an amount equivalent to the amounts claimed pursuant to the Guarantee. In essence, Wood contended that if the breaches had not occurred, he would have fully appreciated the extent of his obligations under the Guarantee and would have refrained from signing it. Accordingly, he submitted that, having signed the Guarantee he is now wrongfully exposed to the liabilities of Mato.

There are a number of difficulties with the position that Wood now seeks to adopt. But, before turning to these, it is important to properly characterise the case that is being put.

Wood gave evidence that, at all relevant times, he believed that his liability would be and was limited to a twelfth of Mato’s liabilities and that Graeme would be and was a co-guarantor. On this evidence, it must follow that at no time in the period shortly after 27 November 2007 (when there was a request for the proposed guarantee be limited in amount)[83] and before the Loan was in default[84] did Wood actually turn his mind to the question as to whether he would have signed the Guarantee had he known the true extent of his liability under the terms of the Guarantee as executed.[85] It follows Wood could only have engaged in the exercise of what he would have done with the benefit of hindsight, after the Loan was in default, after he had become aware of the terms of the Guarantee and after the prospect of making substantial losses from his involvement in the joint venture had become readily apparent.[86] In such circumstances, the evidence of what Wood said he would have done in December 2007 must be carefully considered, in the context of the objective facts as they stood at the time he signed the Guarantee.[87]
[83]See par 53 above.
[84]This occurred on 23 January 2009. On 18 March 2009, Bankwest served its first notice of demand on Mato. It was not until 11 February 2013 that Bankwest made a demand under the Guarantee. Precisely when Wood first considered what his position would have been is not clear.
[85]Of course, Wood had considered the unacceptability of providing joint and several guarantees for the full amount of Mato’s liabilities: see par 52 above.
[86]By 10 March 2009, it had been decided by the Joint Venturers not to proceed with the project.
[87]See, for example, Chappel v Hart (1998) 195 CLR 232, 246 fn (64) (McHugh J).

Turning to the difficulties in accepting Wood’s position.

First, I do not accept that Wood ever made it a condition of him signing the Guarantee that his liability was to be limited to a twelfth. Other than him giving evidence of his belief, there is no evidence that he ever stipulated that requirement to anyone.[88]
[88]See par 55 above.

Secondly, I am not satisfied that, if Wood was told directly his liability was limited as set out in the Guarantee, Wood would not have proceeded to execute the Guarantee in any event. Wood had financial incentives to execute the Guarantee whether or not Graeme was a guarantor and whether or not his liability was limited to a twelfth or a quarter. Under cross-examination, Wood accepted that the numbers that were being considered by the Joint Venturers indicated that Wood stood to gain a very substantial profit. Further, under the arrangements with Westpac, Wood was exposed to an amount of $2.4 million, plus interest and costs.[89] The Westpac Facility had been in default for a significant period of time. By signing the Guarantee, Wood facilitated the cessation of his obligations to Westpac in this regard and reduced his exposure to $1,620,250, plus interest and costs. Although Wood gave evidence that the transaction with Bankwest represented “a lower liability but a greater exposure”, I am not satisfied that he would not have taken on this exposure given the anticipated profits he expected to be able to share in.
[89]See par 9 above.

Thirdly, the history of financial arrangements between the Wood Brothers does not demonstrate that on all occasions they provided equal levels of security. On the contrary, there are numerous examples where the securities proffered by each of the Wood Brothers with respect to earlier joint investments were substantially different, including where Graeme had offered significantly more security than Wood or Philip.[90] In short, the previous dealings between the Wood Brothers do not suggest the Wood Brothers always provided the same or similar security, or provide a basis for concluding Graeme’s absence would result in Wood refusing to sign the Guarantee.
[90]In December 2005, the Wood Brothers jointly borrowed $1 million from Westpac to finance the purchase of shares. In that instance, Graeme agreed that his company, Graeme A Wood Pty Ltd, would provide a guarantee. No equivalent guarantee was proffered by Wood or Philip or any companies associated with them. Further, Graeme A Wood Pty Ltd provided mortgages over 2 of its properties (Wood suggested that Philip may have had a beneficial interest in a property held by Graeme A Wood Pty Ltd. Nothing turns on this. And further, Wood and Graeme together provided a mortgage over another property. In May 2006, the $1 million loan was increased to $1.9 million “to fund future investment opportunities”. The securities remained in place, but Graeme also gave a mortgage over a further property in his own name without any corresponding security being proffered by Wood or Philip.

Further, in circumstances where Bankwest never made a representation to Wood that Graeme would be a guarantor, there was no basis for Wood to reasonably assume that Graeme was to be a guarantor based on any conduct of Bankwest. Indeed, Bankwest made clear, and repeatedly represented to Wood in writing, that Graeme was not included in the documentation as a guarantor. This fact, coupled with Wood’s previous dealings, demonstrate there was no basis for Wood to assume Graeme would sign a guarantee unless he was informed by someone other than Bankwest that that would be the case.

Fourthly, the evidence as to when or how Graeme communicated to Wood that he would be a guarantor is extremely vague. The absence of Philip as a witness carries particular significance in this regard.[91] Further, it is of some moment that documents were forwarded to all proposed guarantors, not just Wood and Philip, indicating that Graeme was not included as a proposed guarantor and, apparently, no one took exception to Graeme’s absence.[92]
[91]See par 158 below.
[92]See also par 18 above.

Fifthly, even if I were able to be satisfied that Wood believed at the times of execution that his liability was to be limited to a twelfth of Mato’s liabilities, and that Graeme was to be a guarantor, I am not satisfied that he would have discovered the truth of the matter had Bankwest complied with the Banking Code. That is, if Bankwest had provided Wood with copies of the documents specified in paragraph 84 above, and had someone, who was not acting on behalf of Mato, provide Wood with the documents for execution, there is no satisfactory evidence that Wood would have discovered that the terms of the Guarantee were other than what he believed them to be.

Wood alleged that he did not review the documents provided to him because he “thought someone else had checked [them] out for [him]”, and because he “trusted [Graeme] at the time”. Wood also stated that he did not read the documents due to time pressure.[93] In the counterfactual, these circumstances would have remained the same. Therefore, there is no basis to find that, had the additional documents been provided to Wood in compliance with clause 28.4(d) of the Banking Code, Wood would have treated those documents any differently to those that were in fact provided.[94]
[93]The time pressure was the result of the circumstances of the Joint Venturers, rather than any independent conduct referable to Bankwest, and did not comprise a breach of the Banking Code: see pars 160-165 below.
[94]It is not necessary to consider clause 28.5 of the Banking Code in relation to the counterfactual in circumstances where, had the necessary information been provided pursuant to clause 28.4(d), clause 28.5 of the Banking Code would not have been breached: see pars 91-92 above.

As to Bankwest’s breach of clause 28.6 of the Banking Code, there is again no evidence that Wood would have done anything differently had someone other than Coomes provided the documents to him for execution. In light of Wood’s circumstances, including the fact that he stood to gain financially from the transaction, Coomes’ presence, as someone acting on behalf of Mato, would have been highly unlikely to have had any effect on Wood’s conduct in relation to the execution.[95]
[95]I note this issue was not raised directly with Wood at trial.

Sixthly, the counterfactual put by Wood is that he would have refused to sign because Graeme was not a co-guarantor. However, there is no evidence as to the position Graeme would have adopted if he had been asked to sign a guarantee for the Loan. In short, the court cannot be satisfied that, if the issue had been raised in December 2007, Graeme would not have proceeded to sign a guarantee. Therefore, the court cannot be satisfied Graeme would not have alleviated Wood’s alleged concern in this regard.[96]
[96]Naturally, if Graeme had also signed then this may have given rights to Wood against Graeme as a co-guarantor. But that does not go to the issue of whether Graeme would have signed, thereby removing an alleged obstacle to Wood signing. Further, there was no evidence as to Graeme’s present financial position or his ability to meet any liabilities which may have arisen if he had signed a guarantee.

Seventhly, Wood contended that if his refusal to execute the Guarantee would have meant that the Loan would not have been advanced, then it was likely the Property would have been sold, and Wood and Jackson Street would have been left with no liability to Westpac. This submission is based upon the valuations, provided in August 2007[97] and October 2007,[98] valuing the Property in excess of $7 million. Wood’s position was that the Property could have been sold for such a sum in circumstances where Bankwest accepted the latter of these valuations as reliable as part of the approval process for the Loan.
[97]See par 23 above.
[98]See par 26 above.

The problem with this submission is that it would not have been up to Wood to decide whether or not the Property ought to be sold. He was only 1 of 3 shareholders in Jackson Street, who in turn only held a quarter interest in the joint venture. In addition, it was Philip, not Wood (or Graeme), who was the representative of Jackson Street and a director of Mato, the owner of the Property.

Further, there was no contemporaneous evidence that in 2007 or early 2008 it was ever contemplated by any of the Joint Venturers that the Property might be sold. Although necessarily always a possibility, it must have been remote in circumstances where the Joint Venturers anticipated significant profits arising out of the development of the Property. For example, an email, sent by Coomes to Bennett on 7 December 2007, recorded that Philip was “very excited about the prospect of fractional ownership [and] was even more excited when I told him how much money Jackson Street stood to make from this deal”. The email also noted how excited Philip was concerning what his own interest “would add up to”. Furthermore, there was no evidence that any of the other Joint Venturers, or for that matter Graeme or Philip, would have agreed to having the Property sold.

In summary, considering the above matters individually and collectively, I am not satisfied that Wood’s evidence, given after the proposed development of the Property had failed,[99] as to what he would have done in December 2007 accurately reflects the course he would have adopted had the Banking Code not been breached.
[99]There was evidence that the development commenced, but that it soon fell into difficulty for reasons it is unnecessary to detail.

It follows that Wood has not established any causal link between the liabilities to which he is now subject under the Guarantee and Bankwest’s breaches of the Banking Code as found above.

As to the allegation that Bankwest’s conduct in breaching the Banking Code amounted to a repudiation of the Guarantee, the breaches were only breaches of warranties; but, even if the terms in question could be characterised as intermediate terms, the conduct in question could not be said to have deprived Wood of the substantial benefit of the transaction, or a substantial part of it.[100]
[100]Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115, 138-140 [49]-[55] (Gleeson CJ, Gummow, Heydon and Crennan JJ).

E. Alleged unconscionable conduct

Wood seeks relief based on an allegation that Bankwest, in trade or commerce, engaged in conduct that was, in all the circumstances, unconscionable in contravention of s 7 or alternatively s 8A of the Fair Trading Act 1999 (Vic) and s 51AA of the Trade Practices Act 1974 (Cth).[101] Ordinarily, any allegation as to whether or not a person has engaged in unconscionable conduct requires a close consideration of the facts in order to determine whether the claim for relief has been established.[102] Accepting that, this aspect of Wood’s case is of such little merit that I propose to state my reasons briefly.
[101]Section 7(1) of the Fair Trading Act provided a person must not, in trade or commerce, engage in conduct which is unconscionable within the meaning of the unwritten law. Section 51AA of the Trade Practices Act was the Commonwealth equivalent of s 7 of the Fair Trading Act. (Section 51AAB(1) provided s 51AA does not apply to financial services. This provision was not referred to in the pleadings or at trial.) Section 8A of the Fair Trading Act provided that a person must not, in trade or commerce, in connection with, relevantly, the supply or possible supply of services to another person, engage in conduct that is, in all the circumstances, unconscionable. Section 8A only applied to the acquisition or possible acquisition of services for the purpose of trade or commerce, and listed, non-exhaustively, various matters that the court may have regard to in determining whether or not the conduct in question was unconscionable.
[102]Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392, 400 [14] (French CJ, Hayne, Crennan, Kiefel, Bell, Gageler and Keane JJ).

Wood is a well-educated, intelligent and commercially experienced person[103] who fully appreciated the nature of a guarantee at the time the Guarantee was executed.
[103]See fn 43 above.

Before the principles of equity, or statutory provisions adopting them,[104] may be invoked to substantiate a basis for granting relief by reason of unconscionable conduct, a party must demonstrate a disability or disadvantage such that her or his ability to make a judgment in her or his best interests is affected.[105] As the evidence set out above demonstrates,[106] at the time of execution, there were no circumstances which in any way adversely affected the ability of Wood to make a judgment as to what was in his best interests. Put bluntly, he simply chose not to make the effort to review documents he signed in circumstances where, if such a review had taken place, he would have fully understood the substance of their contents.[107]
[104]See the reference to s 7(1) of the Fair Trading Act and s 51AA of the Trade Practices Act in fn 101 above.
[105]Mackintosh v Johnson (2013) 37 VR 301, 304 [11] (Buchanan and Whelan JJA and Hargrave AJA).
[106]See pars 42, 78, 83 and 92 above.
[107]In this regard, see Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, 180-181 [45], 182-183 [47]-[48] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ).

In short, Wood did not suffer from any special disadvantage. Accordingly, claims made under s 7 of the Fair Trading Act and s 51AA of the Trade Practices Act fail at the threshold.

As for the claims under s 8A of the Fair Trading Act, it is not enough for Wood to establish that the transaction was unfair or unreasonable. For conduct to be considered unconscionable under provisions such as the section in question, there must be a degree of moral taint so that it could properly be described as unethical.[108]
[108]Director of Consumer Affairs Victoria v Scully (2013) 303 ALR 168, 174 [18], 183 [48] (Santamaria JA, with whom Neave and Osborn JJA agreed).

On no sensible view of “all the circumstances” could the requirement of a significantly limited bank guarantee from a person with a real and substantial commercial interest in the underlying transaction, which person was well-educated, intelligent and commercially experienced and more than capable of protecting his own interests, be said to be unethical or to have a degree of moral taint. This claim also fails at the threshold.

Speaking generally, the mere fact that the transaction was, or ultimately proved to be, an improvident transaction does not, of itself, found a basis for relief.[109] Further, although the requirements of an industry code are relevant to the question of whether a person has acted unconscionably,[110] contravention of such a code does not necessarily lead to a conclusion that the contravener has acted unconscionably.
[109]See, for example, Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392, 401-402 [18]-[20]; Director of Consumer Affairs Victoria v Scully (2013) 303 ALR 168, 180 [39]; Australian Competition and Consumer Commission v Samton Holdings Pty Ltd (2002) 117 FCR 301, 323 [64] (Gray, French and Stone JJ); Louth v Diprose (1992) 175 CLR 621, 638.8 (Deane J).
[110]See Fair Trading Act, s 8A(3)(g).

Dealing very briefly with the specific allegations made by Wood:

(1)Bankwest was aware that Wood sought to limit his exposure under the Guarantee, but acted in accordance with the request made.[111]
(2)Wood has not established that his net assets were valued at $850,000 as at 17 August 2007, as the assets of Wood may have gone beyond those disclosed (which were only the assets in his own name in which he had both legal and beneficial ownership).[112]
(3)It has not been established that Bankwest knew or ought to have known that Mato’s financial position did not support a loan facility in the sum of $6.48 million. At least some of the Joint Venturers were commercially experienced and the valuation report relied upon suggested that, on completion of the development, the Property would be valued at $16,727,273.[113] As at December 2007, a number of presales of the proposed units had already been entered into. Further, “Facility 5” formed part of the facilities offered in the Final Letter of Offer, which was to allow interest capitalisation with respect to other facilities including “Facility 1”.[114]
(4)For reasons stated above,[115] Wood was not in a position of special disadvantage.
(5)Wood has not established that Bankwest knew or ought to have known that Wood did not understand, or may not have properly understood, the extent of his potential liability under the Guarantee or that he was vulnerable to misstatements being made to him by Mato or its representatives.
(6)It is correct that no officer or employee or Bankwest spoke directly to Wood regarding the Guarantee, but such conduct, of itself, was not unconscionable in the circumstances.
(7)It is correct that Bankwest entrusted the Guarantee to a representative of Mato to procure Wood’s signature, but such conduct cannot be viewed as unconscionable in the circumstances.[116]
(8)Bankwest did advise Wood that the Guarantee was not limited to a twelfth of the total indebtedness of Mato to Bankwest, on numerous occasions, in writing,[117] and Wood was perfectly capable of understanding the written communications.[118]
[111]See par 57 above.
[112]See par 22 above.
[113]See par 26 above.
[114]See fn 25 above.
[115]See pars 137-138 above.
[116]See par 100 above.
[117]This was stated in the Final Letter of Offer (see par 58 above), the draft of the statutory declaration, as adopted by Wood (see par 69 above) and the Guarantee itself.
[118]The claims of unconscionability also relied on an allegation that the transaction was “extremely high risk and was, at worst, wholly improvident”. Not only was this allegation not put to any of the Commonwealth Bank’s witnesses, but in closing Wood’s senior counsel acknowledged that such an allegation did not take into account the valuation that was obtained on 25 October 2007: see par 26 above.

F. Quantum

Clause 16 of the Guarantee provided that, if a certificate were given by Bankwest as to the amount payable, that certificate would be sufficient evidence of the matter or amount, unless it was proved to be incorrect.

A certificate dated 13 May 2016 was tendered (“the Certificate”). The Certificate complied with clause 16 and provided that, as at 9 May 2016, the amount owing and unpaid by Wood under the Guarantee was $2,596,225.60. Accordingly, unless Wood could prove the Certificate was incorrect, the Commonwealth Bank has established the amount claimed is due and owing.[119]
[119]Dobbs v National Bank of Australasia Ltd (1935) 53 CLR 643, 651.9-652.8 (Rich, Dixon, Evatt and McTiernan JJ).

Wood challenged the amount claimed on the premise that moneys received from the sale of the Property were not applied in their entirety to the amount owing under the Guarantee. The amount realised by receivers appointed was $1,148,041. These funds were credited to the accounts of the debtor, Mato. This reduced the amount owing to $2,394,487.48, which was less than the amount of $2,595,804.08 owing under the Guarantee before the settlement of the sale.[120] Accordingly, the proceeds of the sale of the Property only amounted to a reduction of the amount owing under the Guarantee of $201,316.60. The allocation of the sale proceeds was in accordance with the terms of the Guarantee.[121]
[120]This higher amount represented the principal sum of $1,620,250 plus interest and costs up to that time.
[121]As per cl 13.1 (the detail of which is not necessary to set out).

Wood did not allege any breach of the Guarantee by reason of this allocation, but rather referred to the pleadings to suggest he ought to receive a credit for the full amount of $1,148,041 from the amount actually claimed under the Guarantee at the time the proceeds of the sale of the Property were received. In the Commonwealth Bank’s reply, it was admitted that Wood’s liability under the Guarantee “will be reduced by any amounts received by the [Commonwealth Bank] before trial … from the realisation of the [Property] …”. In effect, Wood contended that the court should ignore the terms of the Guarantee because the trial was to be conducted on the basis of the pleaded case, as the parties had expressly agreed, and the pleaded case evinced an intention to allocate the funds as Wood contended.

In my view, there is little substance to Wood’s contention in this regard. It would be entirely artificial to read what was pleaded in the reply without reference to the terms of the Guarantee, upon which Wood stated he intended to rely at trial.[122] The relevant admission cannot sensibly be read as the Commonwealth Bank foregoing its entitlements as expressly provided in the Guarantee.
[122]Wood pleaded reference was to be made at trial to the Guarantee’s “terms and effect in full”.

An issue was also raised concerning the application of the proceeds of the Property to the costs incurred in seeking to recover moneys from the other guarantors. Ultimately, Wood made no substantive submission on this issue.[123] In any event, both the written and oral evidence led by the Commonwealth Bank demonstrated such costs were applied to the “Outstanding Amount” of Mato, in accordance with Bankwest’s general terms for business lending,[124] and not directly to Wood’s liability under the Guarantee. Such an application complied with the agreements that were entered into.
[123]T 433.20.
[124]These general terms were referred to in the Final Letter of Offer.

In summary, there was no evidence to prove the Certificate was incorrect.

G. Other Matters

G.1 The Commonwealth Bank’s discovery

There has been a failure on the part of the Commonwealth Bank to discover all relevant documents in this proceeding. For example, Larken gave evidence that notes were taken of meetings he attended in 2007 and 2008. In circumstances where Bankwest did not have formal applications for finance at this time, these notes were the record of customer details for the purposes of the proposed transactions. There can be no doubt they existed. They were not discovered.

Further, there were other examples of correspondence that had been obtained from sources other than the Commonwealth Bank, which had clearly been in the possession of Bankwest at the relevant times.[125]
[125]The issue of subpoenas to non-parties resulted in various documents being before the court, even though they were not discovered by the Commonwealth Bank.

Wood’s senior counsel sought to make much of this issue, particularly in light of the fact that no explanation was given for the apparent failures. In the absence of an explanation, I refrain from speculating as to why such documents were not discovered.

Although adverse inferences might be drawn in these circumstances,[126] the Commonwealth Bank’s failure to make full discovery did not provide a proper basis to draw the inference Wood invited the court to draw, namely that it was the parties’ continual mutual intention in 2007 that Graeme was to be a guarantor of Mato’s liabilities arising from the Loan. For reasons already stated,[127] the evidence strongly suggests otherwise.
[126]Microsoft Corporation v Atifo Pty Ltd (1997) 38 IPR 643, 647.1 (Tamberlin J).
[127]See pars 122-125 above.

Further, no application was made for further discovery from the Commonwealth Bank,[128] nor was there any other application seeking consequential orders based on inadequate discovery. In the circumstances of this case, in determining the issues at trial, it is not appropriate for the court to respond beyond drawing any adverse inferences which might properly be drawn on the facts of the case.[129]
[128]Supreme Court (General Civil Procedure) Rules 2015 (Vic), r 29.08.
[129]Wood did not contend that the non-production of documents by the Commonwealth Bank was necessarily the product of a deliberate abuse of process such that the proceeding should be struck out: cf British American Tobacco Australia Services Ltd v Cowell (2002) 7 VR 524, 587 [175] (Phillips, Batt and Buchanan JJA).

G.2 Witnesses not called

Wood gave evidence of conversations alleged to have occurred between himself, Graeme and Philip. Neither Graeme nor Philip gave evidence, although they were available to do so.

It is clear from more recent correspondence that there has been a complete falling out between Wood and Graeme. Without going into the specifics, Wood has apparently lost all trust in Graeme. They have not spoken for a number of years.

The same cannot be said of Philip. Wood is still in contact with Philip, who was a co-guarantor for the Loan. In the absence of any plausible explanation for Philip’s absence, I have drawn the inference that if Philip had been called his evidence would not have assisted Wood.[130] In particular, on Wood’s version of events, Philip could have given evidence about the proposal to limit Wood’s liability to a twelfth and, presumably, about whether it was intended that Graeme would be a co-guarantor.
[130]See fn 35 above.

Wood submitted an adverse inference should be drawn by reason that the Commonwealth Bank did not call Rounds as a witness. There were only 2 occasions where Rounds attended a meeting with the Joint Venturers.[131] There was no evidence the identity of proposed guarantors was discussed at these meetings.[132] Further, in circumstances where there is no allegation that Bankwest ever communicated to Wood or any of the Joint Venturers that Graeme would be a guarantor,[133] it is difficult to understand what material evidence he might have given.
[131]See pars 20 and 25 above.
[132]See par 43 above.
[133]See pars 42 and 78 above.

G.3 Urgency of transaction

Wood attempted to make a connection between Bankwest’s involvement in the apparent urgency of putting the Loan in place and the consequences of the documents, including the Guarantee, being executed in the manner in which they were. Put succinctly, Wood sought to criticise or blame Bankwest for imposing urgency. In my view, this attempt was of little substance.

There is clear evidence that Larken sought to deal with matters urgently. The evidence also strongly suggests that Coomes was performing his tasks with respect to the execution of documents with a sense of urgency. Coomes said time was of the essence in all matters associated with the Loan. Coomes said both Larken and Bennett were keen to have the documents signed.

However, Coomes also said he did not behave with inappropriate haste. Further, and more fundamentally, the urgency was brought about by the circumstances in which Mato, and, for that matter, Jackson Street, found themselves in late 2007. The Westpac Facility was in default and Jackson Street was exposed to higher interest rates and charges by reason of this. In addition, because of the terms of the Joint Venture Agreement,[134] the Joint Venturers were liable for this greater exposure as well as being in breach of their obligation to have Jackson Street repaid.
[134]See cll 13.2.5 and 13.2.6 in par 8 above.

In short, the urgency was created by the Joint Venturers’ circumstances and not by Bankwest. This conclusion is consistent with contemporaneous communications.[135]
[135]For example, on 29 November 2007, Bennett sent an email to Coomes stating there were “lots of loose ends … and we have got no time left”; and, on 12 December 2007, Bennett sent an email to various persons representing the Joint Venturers stating another week was going to be lost in settling “if we don’t get the following information in to [Larken] today or tomorrow”. There was no suggestion in this correspondence that deadlines were being imposed by Bankwest. See also par 24 above.

Further, documents were executed on the first 2 occasions in the presence of Wood’s accountant. Not only did Wood have independent advice available to him, Wood’s accountant was not called to give evidence of any untoward pressure at the times of Wood signing the Final Facility Terms and the Guarantee (on the first occasion).[136] In any event, given his evidence concerning his reliance on Graeme,[137] it is difficult to accept Wood would have acted any differently if the documents had been presented for signature in a more leisurely manner.
[136]See fn 35 above.
[137]See par 127 above.

In this context, it is convenient to mention Wood’s submission that the evidence established he had a busy practice which affected his ability to protect his interests. The evidence did not make clear how busy Wood’s practice was, although it appeared from the limited evidence that was led that he was reasonably[138] busy on 6, 13 and 17 December 2007. Regardless of how busy his practice was, Wood had enough time available to him to read the First Letter of Offer sufficiently to understand he was not willing to sign and to take steps to protect his interest, to attend at his accountant’s office on 2 occasions for signing documents and to attend numerous meetings of Mato’s shareholders.[139] In summary, this evidence was of marginal relevance, at best.
[138]On 6 and 13 December 2007, Wood’s first patient was not until 8.45 am or 8.30 am and his last patient was scheduled for 5 pm.
[139]See pars 19 and 23-25 above.

G.4 Wood’s statutory declaration

For the purpose of determining the outcome of this proceeding, it has not been necessary to consider the legal consequences of the statutory declaration made by Wood on or about 13 December 2007.[140] For completeness, I note the Commonwealth Bank alleged Bankwest relied on the representations in the declaration to the effect that Wood had received independent legal advice and financial advice before, and had acted freely and voluntarily in, signing the Guarantee. After pleading that Bankwest had acted to its detriment by advancing the Loan, it was alleged Wood was estopped from denying he had received such advice and acted as he had declared.
[140]See par 65-69 above.

Larken gave evidence that, if the statutory declarations of the guarantors had not been provided to Bankwest, it would have been a “big issue” at the time. Larken stated it was a “firm practice” that independent advice was provided to individual guarantors. I understood this evidence to mean that Bankwest’s practice was to satisfy itself that independent advice had been obtained.

Larken was not challenged about this evidence. The issue was not raised in cross-examination of any other witness called by the Commonwealth Bank. I accept such a practice existed. The statutory declarations were an obvious means to be so satisfied. Similar statutory declarations were provided by all individual guarantors. In the absence of any evidence that Bankwest appreciated at the time that the statutory declaration contained an error in listing a mortgage as a document signed by Wood, there is no apparent reason why Bankwest could not and did not properly rely on the statutory declaration with respect to Wood obtaining independent legal advice and financial advice, and entering into the Guarantee freely and voluntarily.

G.5 Graeme’s accountant report

The conditions precedent in the Final Facility Terms included a requirement that a report from an accountant be provided by each guarantor specifying certain matters. Although Graeme was not listed as a proposed guarantor under the Final Facility Terms, Bankwest proceeded to seek a report from Graeme’s accountant. There was no other provision in the Final Facility Terms, or elsewhere, that required Graeme’s accountant to give a report.

In response to Bankwest’s request, Graeme provided a report on 11 December 2007.[141]
[141]That report did not include details of Graeme’s financial position.

Although the request for, and the receipt of, a report from Graeme’s accountant was not explained,[142] this lacuna in the evidence is not material. As already noted,[143] Bankwest never represented to Wood that Graeme would be a guarantor. Indeed, it represented the opposite.[144] Given the state of Bankwest’s documentation,[145] it is possible that at various points in time there was confusion amongst the relevant bank officers as to whether or not a guarantee was to be obtained from Graeme. That confusion, or even an actual intention on the part of the relevant bank officers to obtain a guarantee from Graeme, does not alter the fact that none was sought from Graeme and nothing was said by Bankwest which would reasonably lead Wood to make an assumption that Graeme would be giving a guarantee.
[142]Larken said he could not comment on why he asked for this information concerning Graeme. Larken said if he had been taken by surprise by the provision of a report from Graeme’s accountant and 100 points of identification for Graeme, he would have raised it with Coomes in an email, but he did not do so.
[143]At pars 42 and 78 above.
[144]See pars 51 and 58 above.
[145]See pars 32-41 above.

H. Conclusion

For the reasons set out above, there will be judgment for the Commonwealth Bank in the amount claimed, namely $2,596,225.60 plus interest from 10 May 2016 until today.

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