Harker-Mortlock v Commonwealth Bank of Australia - [2019] NSWCA 56

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation: Harker-Mortlock v Commonwealth Bank of Australia [2019] NSWCA 56
Hearing dates: 27 and 28 February 2019 (last written submissions 18 March 2019)
Decision date: 27 March 2019
Before: Macfarlan JA at [1];
Meagher JA at [2];
Brereton JA at [104].
Decision:
(1) Grant leave to the appellants under Corporations Act 2001 (Cth), s 471B to commence proceedings against ilnvest (in liq) Pty Limited, by joining it as a respondent in the appeal upon terms that no judgment obtained be enforced against the company or its assets without the further leave of the Court.
(2) Order that ilnvest (in liq) Pty Limited be joined as second respondent in the appeal.
(3) Amend order 7 made on 31 August 2018 in the proceedings below to read “dismiss the first cross-claim dated 14 December 2016”.
(4) Dismiss the appeal.
(5) Order that the appellants pay the first respondent’s costs of the appeal.
(6) Order that the appellants pay the costs of ilnvest (in liq) Pty Limited as second respondent in the appeal.

Catchwords:
REAL PROPERTY – mortgages – where bank relies on liquidation of company to enforce possessory interest under mortgages – whether liquidation of company an event of default – whether repayment of bills matured loan account secured by mortgages – whether appointment of new trustee replaces the borrower in loan documents

PRIMARY INDUSTRY – farm debt mediation – Farm Debt Mediation Act 1994 (NSW) – where proceedings for possession an enforcement action under the Act – where s 11 certificate issued following farm debt mediation and settlement – whether certificate void – whether the Act applied at time of enforcement action

MISLEADING AND DECEPTIVE CONDUCT – where mortgagee informs mortgagor that mediation under Farm Debt Mediation Act 1994 (NSW) unavailable – whether misleading or deceptive conduct – whether mortgagor principally engaged in farming operations

EQUITY – rectification – where trustee purportedly declares property as being held for the benefit of itself – where true meaning of documents can be ascertained as a matter of construction – whether declarations of trust should be rectified
GUARANTEE AND INDEMNITY – where parties have agreed to maximum amount that the guarantor can be called to pay on demand – whether award of interest under Civil Procedure Act 2005 (NSW), s 100 contrary to agreed maximum
Legislation Cited: Australian Securities and Investments Commission Act 2001 (Cth), ss 12CB, 12DA, 12GF, 12GM
Civil Procedure Act 2005 (NSW), s 100
Contracts Review Act 1980 (NSW)
Corporations Act 2001 (Cth), ss 9, 471B
Farm Debt Mediation Act 1994 (NSW), ss 5, 6, 8, 9, 9B, 11
Farm Debt Mediation Amendment Act 2018 (NSW)
Real Property Act 1900 (NSW)
Supreme Court Act 1970 (NSW), s 75A
Trustee Act 1925 (NSW), s 9
Cases Cited: Aquatic Air Pty Ltd v Siewert [2016] NSWCA 318
Bendigo & Adelaide Bank Ltd v McMahon [2013] NSWSC 628
Buhr v Barclays Bank plc [2001] EWCA Civ 1223
Caterpillar Financial Australia Ltd v Ovens Nominees Pty Ltd [2011] FCA 677
Commonwealth Bank of Australia v Bird [2011] NSWSC 586
Commonwealth Bank of Australia v ilnvest Pty Ltd (in liq) [2014] NSWSC 1257
Commonwealth Bank of Australia v ilnvest Pty Ltd (in liq) (No 2) [2014] NSWSC 1640
Commonwealth Bank of Australia v Nemeth [2013] QDC 125
Commonwealth Bank v ilnvest (No 7) [2017] NSWSC 440
Constantinidis v Equititrust Ltd [2010] NSWSC 299; (2010) 14 BPR 27, 217
Coulton v Holcombe (1986) 162 CLR 1; [1986] HCA 33
English, Scottish and Australian Bank Limited v Phillips (1936) 57 CLR 302; [1937] HCA 6
Fitzgerald v Masters (1956) 95 CLR 420; [1956] HCA 53
Gemmell v Brienesse (1933) 33 SR (NSW) 472
Houben Marine Pty Ltd (in liq) [2018] NSWSC 745
In the matter of HIH Insurance Limited (in liquidation) ACN 008 636 575 [2018] NSWSC 1886
John Alexander’s Clubs Pty Limited v White City Tennis Club Limited (2010) 241 CLR 1; [2010] HCA 19
Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8
Kiriwina Investment Company Pty Ltd v Green Lees Developments Pty Ltd [2018] NSWCA 210
Krivoshev v Royal Society for the Prevention of Cruelty to Animals [2005] NSWCA 76
Lanai Unit Holdings Pty Ltd v Mallesons Stephen Jaques (No 2) [2017] 2 Qd R 456; [2016] QSC 242
Lemery Holdings Pty Ltd v Reliance Financial Services Pty Ltd (2008) 74 NSWLR 550; [2008] NSWSC 1344
Loxton v Moir (1914) 18 CLR 360; [1914] HCA 89
Monie v Commonwealth of Australia (2005) 63 NSWLR 729; [2005] NSWCA 25
Park v Allied Mortgage Corporation Limited [1993] FCA 404
Pentridge Village Pty Ltd (in liquidation) v Capital Finance Australia [2018] VSC 633
Ramage v Waclaw (1988) 12 NSWLR 84
Rosebridge Nominees Pty Ltd v Commonwealth Bank of Australia (No 6) [2014] WASC 203
Saxby Soft Drinks Pty Ltd v George Saxby Beverages Pty Ltd [2009] NSWSC 1486
Southern Cross Credit Union Ltd v Reavill Farm Pty Ltd [2018] NSWSC 999
TAL Life Ltd v Shuetrim; MetLife Insurance Ltd v Shuetrim (2016) 91 NSWLR 439; [2016] NSWCA 68
Varga v Commonwealth Bank of Australia [1996] NSWSC 86; (1996) 7 BPR 97,617
Waller v Hargraves Secured Investments Limited (2012) 245 CLR 311; [2012] HCA 4
Texts Cited: Meagher, Gummow and Lehane’s Equity Doctrines and Remedies (5th ed, 2014)
Category: Principal judgment
Parties: James Harker-Mortlock (First Appellant)
JHM Pty Ltd (Second Appellant)
Commonwealth Bank of Australia (Respondent)
Representation:
Counsel:
P E King (First and Second Appellants)
E Cheeseman SC, J White (Respondent)
Solicitors:
Allsop Glover Lawyers (First and Second Appellants)
Dentons Australia (Respondent)

File Number(s): 2018/00262869
Publication restriction: N/A
Decision under appeal

Court or tribunal:

Supreme Court of New South Wales

Jurisdiction:

Common Law Division

Citation:

[2018] NSWSC 1276

Date of Decision:

17 August 2018

Before:

Campbell J

File Number(s):

2013/00108514

headnote

[This headnote is not to be read as part of the decision]

ilnvest Pty Ltd (ilnvest) was the registered proprietor of two rural properties mortgaged to Commonwealth Bank of Australia (CBA). Some months after those mortgages were granted, ilnvest was appointed trustee of the Harker-Mortlock Family Trust (Family Trust), and purported to declare the properties as held for the benefit of that trust. ilnvest remained trustee of that trust until its liquidation on 29 October 2012, following which JHM Pty Ltd (JHM), the second appellant, was appointed trustee in its place. The first appellant is the guarantor of the three loan facilities secured by the mortgages, and a beneficiary of the Family Trust.

Following ilnvest’s liquidation, the respondent mortgagee commenced proceedings for possession of the properties and against the first appellant for a money judgment under the guarantee. The appellants brought cross-claims (including for misleading or deceptive conduct and unconscionable conduct) against the CBA on behalf of ilnvest, by way of set-off or otherwise in defence of its claims.

The primary judge (Campbell J) dismissed the cross-claim and ordered judgment for the CBA for possession of the properties, and a money judgment against the first appellant. The appellants appeal from those judgments and the dismissal of the cross-claim.

The principal issues on appeal were:

(1) Whether ilnvest’s liquidation was the event of default which entitled the CBA to possession as mortgagee.

(2) Whether by taking proceedings for possession, the CBA commenced enforcement action against ilnvest, contrary to the Farm Debt Mediation Act 1994 (NSW), s 8.

(3) Whether the inclusion of interest in the money judgment, awarded pursuant to Civil Procedure Act 2005 (NSW), s 100, was contrary to the terms of the guarantee which fixed a maximum amount that the first appellant could be called to pay on demand.

(4) Whether the two declarations of trust dated 10 November 2008 should be rectified.

(5) Whether the CBA, by rejecting a repayment proposal and imposing a requirement for the sale of livestock, breached cl 25.2 of the Code of Banking Practice, compliance with which was made a term of each of the loan facilities.

(6) Whether the CBA’s conduct in stating in July 2008 that ilnvest was not eligible for farm debt mediation and in requiring the proceeds of sale of another mortgaged property, Yulgilbar, to be paid to it was misleading or deceptive, or unconscionable contrary to the Australian Securities and Investment Commission Act 2001 (Cth), ss 12DA, 12CB.

Held (Meagher JA, Macfarlan and Brereton JJA agreeing), dismissing the appeal:

As to issue (1):

i. The making of the order winding-up ilnvest was an event of default under the loan facilities and also a “default” under the CBA’s standard Memorandum, entitling the bank to enforce each mortgage: at [16], [22].

ii. Despite the appointment of JHM as trustee of the Family Trust, ilnvest remained the Borrower and Security Provider under the loan facilities: at [19], [21].

Gemmell v Brienesse (1933) 33 SR (NSW) 472 applied.

As to issue (2):

iii. The Farm Debt Mediation Act1994 (NSW) did not apply to any enforcement action taken after 29 October 2012 because from the time of its winding up, ilnvest was an “externally administered corporation” and accordingly that Act did not apply: at [28], [29], [31].

As to issue (3):

iv. The exercise of the CBA’s entitlement to claim interest under s 100 does not engage the limit in the guarantee, which capped the amount the guarantor was required to pay the bank on demand and not the amount of any judgment that might be recovered for breach of that payment obligation: at [36].

Commonwealth Bank of Australia v Nemeth [2013] QDC 125 disapproved.

As to issue (4):

v. Rectification of the declarations of trust should be refused as unnecessary. The true meaning of each instrument can be ascertained as a matter of construction. Each must be read as identifying the Family Trust as the party for whose benefit the properties are to be held on trust: at [42]-[46].

Fitzgerald v Masters (1956) 95 CLR 420; [1956] HCA 53 applied; Saxby Soft Drinks Pty Ltd v George Saxby Beverages Pty Ltd [2009] NSWSC 1486 referred to.

As to issue (5):

vi. There was no breach of cl 25.2 of the Code of Banking Practice. The relevant repayment proposal was not put forward as a definite proposal, and not arbitrarily rejected by the bank. Nor did the CBA apply undue or unjustified pressure on ilnvest to sell the relevant livestock: at [58]-[60], [80].

As to issue (6):

vii. The CBA’s statement in July 2008 that ilnvest was not eligible for farm debt mediation was not misleading or deceptive, because ilnvest was not at that time principally engaged in a farming operation and accordingly not a “farmer” for the purposes of the Farm Debt Mediation Act: at [65], [67], [68].

Constantinidis v Equititrust [2010] NSWSC 299; (2010) 14 BPR 27, 217; Waller v Hargraves Secured Investments Limited (2012) 245 CLR 311; [2012] HCA 4 considered.

viii. ilnvest was not misled by the CBA’s conduct that in the absence of agreement otherwise, it would retain the proceeds of sale of the mortgaged property Yulgilbar, including the balance of the deposit moneys: at [53], [71].

Judgment

MACFARLAN JA: I agree with Meagher JA.
MEAGHER JA: This is an appeal from a judgment in favour of the respondent bank (CBA) for possession of two rural properties against iInvest Pty Ltd (in liq) (ilnvest), the registered proprietor and mortgagor of those properties, and a judgment for $4,492,545 against the first appellant, Mr Harker-Mortlock, the guarantor of the moneys secured by those mortgages: Commonwealth Bank of Australia v Ilnvest Pty Ltd (in liq) (No 9) [2018] NSWSC 1276 (Judgment (No 9)). The relevant judgments and orders were made and entered on 31 August 2018. The second appellant JHM Pty Ltd (JHM), with Mr Harker-Mortlock, was a cross-claimant in the proceedings below as trustee of the Harker-Mortlock Family Trust (Family Trust).
That discretionary trust was created by a deed of settlement dated 10 November 2008, and the two rural properties declared to be trust property on the same day. There is an issue as to the efficacy of those declarations. Mr Harker-Mortlock is a “beneficiary” under the trust and until it went into liquidation on 29 October 2012, ilnvest was the trustee. JHM was appointed as trustee by Mr Harker-Mortlock on the same day. That deed of appointment was not registered until 1 February 2019. The fact of registration is sought to be proved in the appeal. ilnvest was a cross-defendant in the proceedings below but is not presently a party to the appeal. On the second day of the hearing of the appeal, the appellants sought to have it joined as a party. For the reasons which follow, these applications should be granted and the appeal dismissed.
The proceedings for possession and against the guarantor were commenced in April 2013. There followed in November 2013 and October 2014 lengthy interlocutory applications concerning the cross-claims which Mr Harker-Mortlock sought to bring against the CBA on behalf of ilnvest, by way of set-off or otherwise in defence of its claims. In Commonwealth Bank of Australia v ilnvest Pty Ltd (in liq) [2014] NSWSC 1257 (Judgment (No 1)) at [23]–[24], the primary judge (Campbell J) summarised those claims:

The case that Mr Harker-Mortlock wishes to bring, both in defence to the bank's claims for possession, if allowed in to defend, and by way of cross-claim, relates to alleged breaches of ss 12DA and 12DB of Part 2 Division 2 Australian Securities and Investments Commission Act 2001 (Cth)(ASIC Act) involving false [or] misleading conduct. Alternatively, unconscionable conduct within the meaning of either s 12CC or s 12CB of the same legislation is relied on. His case is, in part based on s 12CC(1)(b) ASIC Act, that he suffered severe financial loss and damage by the bank, in connection with the supply of financial services, engaging in conduct which required the company as trustee of Harker-Mortlock Family Trust to comply with conditions in relation to the loans that were not reasonably necessary for the protection of the bank's legitimate interests. Moreover, it is said that the Bank failed to comply with the requirements [of] the Code of Banking Practice (the code) which was applicable either by force of s 12CC(1)(g) and (3) or by incorporation in the terms and conditions of the loan agreement in relation to each of the three facilities.
The remedies sought include not only damages under s 12GF of the ASIC Act, but also, importantly for present purposes, relief under s 12GM of that Act declaring that the bank is not entitled to take possession of the real property or otherwise enforce the security in respect of the real property together with an injunction restraining the taking of such action.

Initially Mr Harker-Mortlock sought to bring those claims on ilnvest’s behalf as a beneficiary of the Family Trust. However, as the primary judge observed in Judgment (No 1) at [54] and in Commonwealth Bank of Australia v ilnvest Pty Ltd (in liq) (No 2) [2014] NSWSC 1640 (Judgment (No 2)) at [32], where a new trustee has been appointed and is apparently competent to vindicate any right of action vested in it, or otherwise forming part of the property held by the former trustee for the benefit of the trust, proceedings to vindicate those rights should be pursued by that new trustee. See Loxton v Moir (1914) 18 CLR 360 at 371-372 (Griffith CJ), 378 (Rich J); [1914] HCA 89; Lemery Holdings Pty Ltd v Reliance Financial Services Pty Ltd (2008) 74 NSWLR 550 at [53]-[55]; [2008] NSWSC 1344; Ramage v Waclaw (1988) 12 NSWLR 84 at 90-93; TAL Life Ltd v Shuetrim; MetLife Insurance Ltd v Shuetrim (2016) 91 NSWLR 439 at [53]-[55]; [2016] NSWCA 68. Notwithstanding that being the position, and to avoid foreclosing the prosecution of any claim held by ilnvest for the benefit of the trust, on 21 November 2014, orders were made permitting Mr Harker-Mortlock to plead by cross-claim any claim said to be available to ilnvest as former trustee of the Family Trust and brought in his name as a beneficiary, and to join JHM as an additional cross-claimant so that it could pursue such claims as new trustee.
The primary judge dismissed each of the cross-claims brought by Mr Harker-Mortlock and JHM against the CBA. With the exception of the first which was for rectification, those claims sought to advance rights of action, or former rights of action, of ilnvest. The claims were for:

Rectification of the declarations of trust relating to the two properties – Brecon (sometimes spelt Breacon) and Blackburn – and a declaration that the properties and any “choses of action in relation to” them are held by JHM on trust for the Family Trust.

Declarations that the CBA was not entitled to take proceedings for possession of the properties. The grounds for this claim included that misleading or deceptive conduct of the bank deprived ilnvest of the opportunity to pursue its rights under the Farm Debt Mediation Act 1994 (NSW) (Farm Debt Act).

Damages under Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act), s 12GF and orders restraining the enforcement of the mortgages under s 12GM for reason of unconscionable conduct in connection with financial services contrary to s 12CB and misleading or deceptive conduct in relation to financial services contrary to s 12DA. The conduct relied on was alleged to have occurred between February 2008 and mid-2012, and included that in (2) above.

Relief under the “general law” and the Contracts Review Act 1980 (NSW) in respect of that same conduct.

Damages for breaches of cll 2.2 (obligation to act fairly and reasonably) and 25.2 (assist in overcoming financial difficulties) of the Code of Banking Practice, compliance with which was a term of each of the three loan agreements.

The grounds of appeal

There are 14 grounds of appeal in the amended notice of appeal. Grounds 1 to 6 and 13 were identified in oral argument as concerned with issues arising in the CBA’s claims for possession, and a money judgment under the guarantee. The remaining grounds were said to challenge the primary judge’s dismissal of the cross-claims. As will become apparent, some of the grounds identified as being within the first category are also relevant to challenges in the second. Nevertheless, after dealing with the two procedural applications, it is convenient to deal first with grounds 2 to 6 and 13, then with ground 1, which relates to the rectification of the declarations of trust, and finally with grounds 7 to 12 and 14. Because some of the challenges to factual findings made by ground 8 also arise in the resolution of other grounds, I propose to deal with those findings as they arise, and with those remaining after I have dealt with ground 14. To the extent that written or oral submissions have strayed beyond the grounds of appeal, and they have, those submissions have been ignored.

Applications to adduce fresh evidence and to join ilnvest

In the course of the hearing, the Court refused the appellants’ application to adduce as “fresh evidence” under Supreme Court Act 1970 (NSW), s 75A(7) a copy of Recommendation 1.14 in the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, Final Report (February 2019) at 23. It did so because the fact of that recommendation having been made is not relevant to any issue in the appeal.
The appellants also sought leave to tender a registered copy of the deed appointing JHM as trustee of the Family Trust, that registration having occurred on 1 February 2019 and after the hearing at first instance. The fact of registration is relevant to JHM’s claimed entitlement to pursue any choses in action vested in it as new trustee by the operation of Trustee Act 1925 (NSW), s 9(1). It was not contended that it is necessary for the Court to be satisfied there are “special grounds” justifying the receipt of that evidence: cf. s 75A(8). As the evidence is relevant in the respect identified and the CBA does not contend that it is prejudiced by any delay in the registration of the deed, or failure to lead such evidence at trial, the registered copy of the deed should be admitted as evidence in the appeal.

The appellants’ application to join ilnvest as a party to the appeal also should be granted. The orders sought in the appeal include that the judgment for possession against ilnvest be set aside; that the declarations of trust made by ilnvest on 10 November 2008 be rectified; and that JHM be registered as proprietor of Brecon and Blackburn. Each of these orders directly affects rights or liabilities of ilnvest. For that reason it is a necessary party to the appeal: John Alexander’s Clubs Pty Limited v White City Tennis Club Limited (2010) 241 CLR 1; [2010] HCA 19 at [131], [132]. Leave to join ilnvest as a respondent is thus necessary and should be granted under Corporations Act 2001 (Cth), s 471B. iInvest being in liquidation, its joinder would require a grant of leave under Corporations Act 2001 (Cth), s 471B, to begin proceedings against it. In circumstances where the liquidator does not oppose leave, it should be granted on the usual term that no judgment obtained be enforced against the company or its assets without the further leave of the Court.

Ground 2: Error in finding as to event of default

There were three loan facilities – a bill discount facility dated 2 April 2007 (the first facility), a further bill discount facility dated 2 October 2007 (the second facility) and a $200,000 temporary overdraft facility (the temporary overdraft) approved on 2 April 2008: Judgment (No 9) at [6]. The first facility was used to finance the purchase of Brecon and the second, the purchase of Blackburn. The registered mortgage of Brecon secured all moneys owing or which may become owing to the CBA under a “Secured Agreement”, defined in cl A1 of the bank’s standard Memorandum as a loan agreement acknowledged in writing to be one to which the mortgage extends. The registered mortgage of Blackburn was subject to the same Memorandum, and the three loan facilities were acknowledged in writing to be loan agreements secured by each of the mortgages.
The terms of each facility included the CBA’s “Terms and Conditions for Commercial Lending Facilities”. They described an “event of default” as including where:

(d) the Borrower or any Security Provider is a company and:
(i) an application is filed, an order is made or a resolution is passed for the winding-up of it or a meeting is convened for the purpose of considering such a resolution;
…

That was provided by cl 12.1(d) of those terms applicable to the first and second facilities, and cl 10.1(d) of the equivalent (but later) terms applicable to the temporary overdraft. In the language of that provision, ilnvest was a Borrower and, as mortgagor of each property, also a Security Provider. The happening of that “event of default” also constituted a “default” under cl A21(b) of the Memorandum, entitling the CBA to enforce each mortgage, and to do so without giving notice where, as here, the default could not be remedied (cl A22.3(a)).
The primary judge found that ilnvest went into liquidation on 29 October 2012, and that this was an event of default entitling the CBA to claim possession under each of the mortgages: at [45]. Ilnvest went into liquidation pursuant to an order made that day on the application of Huxley Associates Ltd, a creditor of ilnvest’s United Kingdom business.
The arguments made in support of ground 2 are: first, that the relevant event of default is “not replicated” in the security contracts’ standard form terms; secondly, that on the expiry of the two bill facilities, the moneys outstanding were debited to a “Bills matured loan account”, with the consequence that their repayment ceased to be secured by the mortgages; thirdly, that because the first facility was “broken” in August 2008, the bank’s general terms and conditions, including those defining the events of default, ceased to apply; and fourthly that the result of JHM’s appointment as trustee of the Family Trust on the date of ilnvest’s winding-up was that JHM became the Borrower, and seemingly Security Provider, in place of ilnvest with the consequence that there was no event of default, JHM not having been wound up.
The CBA’s standard Memorandum provided that a mortgagor was in default if it did not keep to the terms of the mortgage or of a Secured Agreement. Each of the facility agreements provided that an event of default occurred if a winding-up order was made in relation to a corporate Borrower or Security Provider. Therefore the making of that order was also a “default” under cl A21(b) of the Memorandum entitling the bank to enforce each mortgage. The first argument is not correct and must be rejected.
As to the second and third arguments, the bill facilities were fixed rate facilities, each for a term of five years. The last bill drawn under the first facility matured on 11 August 2008. To enable the proceeds of sale of the Yulgilbar property to be applied in reduction of that facility, on the maturing of that bill no replacement bill was drawn or accepted. Instead, the face value of the retired bill was debited to a bills matured account. The primary judge found that the fixed rate facility was broken at Mr Harker-Mortlock’s “request in anticipation of the settlement of Yulgilbar”: at [189]. Mr Harker-Mortlock was informed on 11 August 2008 that the face value of the expiring bill ($1,320,152) was to be debited to a bills matured account, described as a “BMA”. That debit was in accordance with cl 5.22 of the relevant commercial lending terms and conditions and the amount outstanding on that account, together with interest, remained payable by the Borrower, without any requirement for demand (cll 12.6, 12.7).
The position under the second facility is more straight-forward. The term of five years expired on 19 October 2012. The last fixed rate bill with a face value of $1,924,000 was drawn on 31 July 2012 and expired on 31 October 2012, two days after ilnvest’s liquidation. The face value of that bill was debited to ilnvest’s account in accordance with cl 5.22 and that amount, together with interest, also remained payable by ilnvest without any requirement for demand (cll 12.6, 12.7). For these reasons the second and third arguments must be rejected.
The final argument is that the effect of JHM’s appointment as trustee on 29 October 2012 was that it thereupon “replaced” ilnvest as Borrower and Security Provider and became its “successor”, in each case with the consequence that there was no event of default because no winding-up order had been made against it. This argument proceeds on the incorrect premise that a transfer of property subject to a mortgage (in this case land under the Real Property Act 1900 (NSW)) establishes privity between the mortgagee and transferee so that the latter becomes liable to the former on the covenants in the mortgage and in the place of the mortgagor. That is not the position as Harvey ACJ explained in Gemmell v Brienesse (1933) 33 SR (NSW) 472 at 474-475:

The mortgage being under the Real Property Act, that had the effect of transferring the land to Mrs. Brienesse as proprietor of the land, but it was subject to the mortgage, which was registered in the name of Gemmell Bros [the mortgagee]. Under the Real Property Act the law appears to be practically the same as it is at common law – that the transfer of the property subject to the mortgage did not establish any privity between Gemmell Brothers and Mrs. Brienesse in respect of the covenants contained in the mortgage; the original mortgagor, notwithstanding the transfer, remained liable under the covenants, and it was her liability, and her liability only, to carry out the covenants, with a right of indemnity against Mrs. Brienesse as transferee of the mortgaged property.

See also English, Scottish and Australian Bank Limited v Phillips (1936) 57 CLR 302 at 316 (Starke J); [1937] HCA 6. Furthermore, on the proper construction of the deed of appointment, JHM did not become trustee until after the winding-up order was made and the position of trustee had become vacant. Although cl 1 of the deed of appointment purported to remove ilnvest as trustee, cl 2 made clear it only applied “in the event that ilnvest… is not yet liquidated”. The effect of the unambiguous statement in recital E (that ilnvest “was liquidated”) is that cl 1 could not apply, and accordingly JHM’s appointment took effect after cl 13 of the trust deed (which provided that the office of trustee is automatically vacated upon the winding-up of the trustee company) had operated.
The registration of the deed of appointment on 1 February 2019 engaged the application of Trustee Act, s 9(1). However as JHM has not been registered as proprietor of the properties, ilnvest remains registered proprietor of Brecon and Blackburn, albeit as bare trustee for JHM: Trustee Act, s 9(3); Caterpillar Financial Australia Ltd v Ovens Nominees Pty Ltd [2011] FCA 677 at [7], [25]-[27] (Gordon J); Houben Marine Pty Ltd (in liq) [2018] NSWSC 745 at [15], [16] (Gleeson JA). ilnvest has never ceased to be the Borrower and Security Provider under the loan facilities, notwithstanding its liquidation. It follows that ground 2 should be dismissed.

Ground 3: Error in finding that CBA entitled to rely on “unpleaded non-monetary default of a material change in circumstances”

The short answer to this ground is that the event of default relied on by the CBA and found by the primary judge was the making of the order winding-up ilnvest. The default to which this ground is directed only became relevant in his Honour’s consideration of the cross-claims.
As the primary judge observed at [87], in support of those claims the appellants relied on conduct occurring during 2008, including concerning the distribution of the proceeds of sale of Yulgilbar. That settlement occurred on 2 October 2008 whilst the relevant bank officer, Ms Abbas, was on leave. There was an apparent misunderstanding between Mr Harker-Mortlock and the officers who replaced her, first Mr Stevens and then for a short time Mr Quinn, as to whether ilnvest would receive from the deposit moneys released on settlement $44,000 as Mr Harker-Mortlock sought, or $20,000 as the CBA eventually agreed. In early October, after that sale had been completed and the proceeds used to repay the temporary overdraft and pay down the first facility, Mr Harker-Mortlock inquired why the CBA was still proposing to “review our facilities” in circumstances where he considered ilnvest was not “in default on any of our other loan arrangements”. In response, Ms Abbas stated that the CBA was entitled to review those facilities where there had been a material change in the income stream of ilnvest’s business because of the termination of its relationship with CQS Management Limited (CQS), as to which see Judgment (No 9) at [15]-[20].
In this context the primary judge made the findings and observations at [150] and [190]-[194]. The finding that the termination of ilnvest’s contract with CQS constituted a material adverse change in its financial position is not challenged. Nor does this ground challenge the primary judge’s treatment of this subject as relevant to the evaluation of the CBA’s actions in the period May 2008 to October 2012 in the face of the allegations of unconscionable conduct. It plainly was. Ground 3 is dismissed.

Ground 4: Error in failing to hold that CBA took “enforcement action” without an exemption or s 11 certificate in 2008, 2009 and 2012

Before the primary judge the principal relevance of the Farm Debt Act was as the subject matter of alleged misleading or deceptive conduct on the part of Ms Abbas in July 2008. That claim is addressed in the consideration of ground 10 at [62] below. As the CBA submits the only relevance of the Farm Debt Act to the proceedings for possession is if those proceedings, clearly an “enforcement action”, were commenced and prosecuted contrary to the prohibition in s 8. In that event they would by Farm Debt Act, s 6 necessarily be “void”. The references to the Farm Debt Act as it applied in the circumstances of this case are to that Act as in force from 1 July 2010 to 2 September 2018; in the current version, sections have been renumbered and extensively amended.
In support of this ground, the appellants maintain that the s 11 certificate issued on 1 June 2012, following the farm debt mediation and settlement reached on 23 April 2012, was void and of no effect; it being a necessary fact for the issue of that certificate that the “farmer is in default under the farm mortgage,” which they submit was not the position at that time: see s 11(1)(a). It is also said that the mediation was not in respect of a “farm debt”, but rather a “boundary adjustment”: cf. s 11(1)(c)(i).
This last contention may be dealt with immediately. Reference to the terms of settlement shows that the mediation was about the repayment of moneys due under the two bill facilities, and accordingly on the appellants’ case, the “farm debt”. The primary judge made no finding as to whether ilnvest was in fact in default as at April 2012 because, as the CBA submits, the appellants’ case at trial in relation to the Farm Debt Act did not raise as a factual issue whether ilnvest was in default in early 2012. Because that question of default could have been addressed by evidence had it been raised, the appellants should not be permitted to make this argument for the first time on appeal: Coulton v Holcombe (1986) 162 CLR 1; [1986] HCA 33.
However more fundamentally, the Farm Debt Act did not apply to any enforcement action taken after 29 October 2012 because from that moment, ilnvest was an “externally administered corporation” within Corporations Act, s 9, and accordingly the Farm Debt Act did not apply to it: s 5(2)(c). For this reason ground 4 must be dismissed.

Ground 5: The taking of proceedings for possession prohibited by Farm Debt Act, s 8

This ground relies on the same argument as ground 4, a submission not made before the primary judge and which could have been the subject of evidence. However, as with ground 4, ground 5 must be dismissed on the basis that the Farm Debt Act did not apply after 29 October 2012 because of ilnvest’s winding up.
In oral argument it was also submitted, seemingly for the first time, that Mr Harker-Mortlock was a “farmer” for the purposes of the Farm Debt Act and, for that reason, that the taking of proceedings against him to enforce the guarantee was an enforcement action contrary to s 8. That submission is misconceived and rejected. Section 8 prohibits enforcement action by a creditor against a farmer in respect of a farm mortgage under which money is owed by the farmer to the creditor. A farm mortgage is an interest in or power over a farm property securing obligations of the farmer, whether as debtor or guarantor. Here, money is owed under the relevant mortgage by iInvest to the bank, and the mortgage secures obligations of iInvest; it does not secure obligations of Mr Harker-Mortlock. The Act does not prohibit enforcement against a guarantor of a farm mortgage, who is not the farmer mortgagor.

Ground 6: Mediation settlement agreement dated 23 April 2012 and s 11 certificate dated 1 June 2012 void

This argument was not pleaded or made before the primary judge. Nevertheless, it is dealt with shortly. The Farm Debt Act did not apply to the proceedings for possession due to ilnvest’s winding up, making the validity of the s 11 certificate irrelevant.

Ground 13: Error in construction of guarantee

The amount which Mr Harker-Mortlock could be called to pay under the guarantee was limited to the “Maximum Amount and the bank’s enforcement expenses”. The judgment entered on 31 August 2018 was for $4,492,545, including interest awarded pursuant to Civil Procedure Act 2005 (NSW), s 100(1) and calculated from a date prior to the commencement of the proceedings on 9 April 2013. That amount did not include enforcement expenses, and was calculated as at 15 March 2013, following a demand made on 30 November 2012. Section 100(1) provides that in proceedings for the recovery of money, the court may include interest in the amount for which judgment is given, calculated “(a) on the whole or any part of the money” and “(b) for the whole or any part of the period from the time the cause of action arose until the time the judgment takes effect”.
Two arguments are made in support of this ground. First, the appellants submit that no interest should have been awarded under s 100(1) where that award took the money judgment above the agreed Maximum Amount. Secondly, it is said that the agreed Maximum Amount following the repayment of the temporary overdraft in October 2008 was $3,238,000, and not $3,438,000 as maintained by the CBA. The original limit when the guarantee was given was “$314,000 plus enforcement expenses”. That amount was increased in connection with the first facility and further increased to $3,238,000 at the time of the second facility. On the acceptance of the temporary overdraft in early April 2008, it was further increased to $3,428,000. The appellants contend that $200,000 increase was “temporary”, like the overdraft, and ceased to apply once it had been repaid.
As to the first argument, the guarantor’s obligation was to pay on demand – “each time we ask” – any amount that the borrower does not pay when due (cl 1.2) and also to indemnify the CBA by paying, again on demand, the amount of any loss suffered by the CBA because of the borrower’s failure to pay (cl 2.1(a)). Clause 3 provided that the CBA could not ask the guarantor “to pay more than the Maximum Amount” and cl 5 made clear that in addition to that amount, the guarantor may be required to pay on demand the CBA’s “reasonable expenses of enforcing” the guarantee.
On 30 November 2012 the CBA demanded payment from the guarantor, Mr Harker-Mortlock, of $3,229,607 as the amount due under “the Facilities”. That amount was described in the demand as “not the total of the amount owing by the Guarantor to the Bank”. In the Statement of Claim the amount claimed as at 15 March 2013 was $3,376,001, alleged to be the sum of the moneys then owing under the first and second facilities and the temporary overdraft. No doubt the difference between those amounts is the additional interest accruing in that period, calculated at the rates applying under those facilities, as between ilnvest and the CBA.
The CBA’s pleaded claim entitled it to recover under the guarantee the amount not paid on demand on 30 November 2012 ($3,229,607), it being less than the Maximum Amount (assuming it to have been $3,438,000). The CBA was separately entitled under s 100 to claim interest on that amount from the date that cause of action for non-payment arose. The exercise of its statutory entitlement to make that claim did not engage the limit in the guarantee, which capped the overall amount the guarantor was required to pay the bank on demand. The limit does not apply to interest to which the CBA is entitled under s 100, calculated from the date the cause of action for non-payment arose. To the extent Commonwealth Bank of Australia v Nemeth [2013] QDC 125 concludes otherwise, I respectfully disagree. The reasoning in Nemeth at [13], [14] does not recognise and give effect to the difference between a limit on the maximum amount for which demand may be made under the guarantee, and a limit on the maximum amount for which any judgment may be obtained following a failure to satisfy such a demand.
As to the second argument, the terms of the temporary overdraft did not provide that the increased limit of $200,000 was given as security for that facility alone. On the contrary, those terms included “that any Security listed in the Security Schedule extends to cover my/our obligations under the Contract and any existing Facility set out in the letter of approval dated 2 April 2008”. In addition they provided that “item 13 of the Terms Schedule of any existing facilities listed in the Letter of Approval is amended so that the Security for each Facility is that listed in the current Security Schedule”. In other words, the $200,000 increase in the limit of the guaranteed obligation extended to secure the existing bill facilities and not merely the overdraft, whether temporary or otherwise. Those existing bill facilities were identified in the Letter of Approval of 2 April 2008, and the “current Security Schedule” forming part of the Terms Schedule attached to the acceptance letter signed by Mr Harker-Mortlock included the guarantee with its new limit of $3,438,000. It follows that the increase in the limit was not “temporary” in the sense argued, and did not cease to apply when the overdraft was repaid. Ground 13 should be dismissed.

The appeal from the dismissal of the cross-claims

JHM and Mr Harker-Mortlock brought their cross-claims in different capacities, JHM as trustee of the Family Trust and Mr Harker-Mortlock, in the alternative, as a “beneficiary” and for the benefit of that trust. To make good its entitlement to press those claims, JHM had to establish that the rights of action which it sought to enforce were available to ilnvest, liable to be enforced by ilnvest to protect the interests of the beneficiaries in the trust property and were either capable of vesting and had vested in JHM, or continued to be held by ilnvest as bare trustee.
In his defence of the underlying proceedings, Mr Harker-Mortlock relied on the declarations of trust of 10 November 2008 as sufficient to constitute the Brecon and Blackburn properties as trust property held for the benefit of the Family Trust. However in Judgment (No 1), the primary judge rejected Mr Harker-Mortlock’s application to set aside a default judgment for possession entered in favour of the CBA, including, because Mr Harker-Mortlock could not bring any derivative trustee claims due to the inefficacy of the declarations of trust. In Judgment (No 2), his Honour granted Mr Harker-Mortlock’s further application to set aside that default judgment on the basis that there was an arguable case for the rectification of those instruments, thus providing a basis for JHM as new trustee, or perhaps Mr Harker-Mortlock as beneficiary, to seek to vindicate any such rights of action either vested in JHM or remaining with ilnvest. His Honour did so in circumstances where his earlier decision that those declarations were not effective had not been the subject of argument (Judgment (No 2) at [15]).
The primary judge’s rejection of that claim for rectification is the subject of ground 1. His Honour then dealt with the various cross-claims on their merits, and without considering whether the rights of action that the appellants sought to vindicate had vested or were capable of vesting in JHM and, if not, whether ilnvest could be required to vindicate them for the benefit of the Family Trust. The CBA in its written submissions to the primary judge argued that JHM did not have standing to bring the cross-claims, and that the declarations of trust were “not enforceable against the Bank”. It was also submitted that as the three facility agreements were made before the purported declarations of trust, those contracts and any rights of action relating to them were not trust property. Those submissions did not separately focus on whether the rights of action had vested in JHM or remained with ilnvest as the former trustee and whether in the latter case, JHM was able to vindicate them by a derivative action, having joined ilnvest as a cross-defendant. Specifically, no submission was made that Trustee Act, s 9 could not vest in the new trustee ilnvest’s claims under the ASIC Act to damages or other relief for misleading or deceptive or unconscionable conduct because the language of that Commonwealth statute only authorised relief in favour of the party that had suffered, or was likely to suffer, loss or damage by the contravening conduct: cf. Park v Allied Mortgage Corporation Limited [1993] FCA 404 at [4]; Rosebridge Nominees Pty Ltd v Commonwealth Bank of Australia (No 6) [2014] WASC 203 at [18]-[22]; Aquatic Air Pty Ltd v Siewert [2016] NSWCA 318 at [113], [114]; Lanai Unit Holdings Pty Ltd v Mallesons Stephen Jaques (No 2) [2017] 2 Qd R 456 at [7], [8]; [2016] QSC 242; In the matter of HIH Insurance Limited (in liquidation) ACN 008 636 575 [2018] NSWSC 1886 at [40]; Pentridge Village Pty Ltd (in liquidation) v Capital Finance Australia [2018] VSC 633 at [114].
In the appeal and after the matter was raised by the Court, submissions were directed to the question whether such rights of action could vest in JHM, but not as to what the position might be if those rights of action remained with ilnvest. In the end it is not necessary to pursue these questions because they are not dispositive of the remaining grounds of appeal, which may be dealt with on their merits, as they were before the primary judge.

Ground 1: Error in refusing relief by way of rectification

The appellants sought to rectify each declaration of trust so that the “entity identified” in Schedule Two was the Family Trust rather than ilnvest. Although satisfied that the evidence justified such orders, the primary judge declined to make them, concluding that it was not necessary to do so. The appellants challenge that conclusion.
In my view his Honour was correct to refuse the claims to rectification, but not for the reasons he did. That is because, as the authors of Meagher, Gummow and Lehane’s Equity Doctrines and Remedies (5th ed, 2014) record at 27-100 (the same statement in an earlier edition cited and applied by Brereton J (as his Honour then was) in Saxby Soft Drinks Pty Ltd v George Saxby Beverages Pty Ltd [2009] NSWSC 1486 at [10]):

Generally speaking, proceedings for rectification ought not be brought if whatever mistake appearing in the written instrument is such that the true meaning of the document could be ascertained as a matter of construction without recourse to extrinsic evidence. A decision as to the true construction of an instrument may be adequate relief. Courts both of law and of equity regularly insert, delete, alter and interpret words in such a fashion as to make the document sensible, without necessary recourse to any doctrine of rectification. In effect they employ a doctrine of rectification by construction… In Fitzgerald v Masters [(1956) 95 CLR 420; [1956] HCA 53], the High Court of Australia was able to construe cl 8 of a contract for sale on a parcel of land reading:
The usual conditions of sale in use or approved of by the Real Estate Institute of New South Wales relating to sales by approved contract of land held under the Crown Lands Act shall so far as they are inconsistent herewith be deemed to be embodied herein.
so that ‘inconsistent’ was read as meaning ‘consistent’. As Dixon CJ and Fullagar J said in their joint judgment [at 426–427]:
There is a superficial difficulty in cl 8, because it purports to incorporate a set of conditions so far as they are inconsistent with what has been specifically agreed upon. No real difficulty, however, is created. Words may generally be supplied, omitted or corrected, in an instrument, where it is clearly necessary in order to avoid absurdity or inconsistency. Here it would be indeed absurd to suppose that the parties, having expressed their agreement on a number of special and essential matters, should intend to incorporate by reference terms inconsistent with what they had specially agreed upon. What they must clearly have intended is to incorporate a set of general conditions except so far as they were inconsistent with what they had specially agreed upon, and cl 8 must be read as if it said ‘consistent’ or ‘not inconsistent’.

The operative terms of the declarations of trust are relevantly identical. By each:

… The trustee hereby declares that it holds and will hold the benefit of the said agreement and the property the subject thereof and all monies paid or to be paid by the said entity described in the said schedule in relation to the said agreement in trust for the said entity absolutely…

Addressing the declaration in relation to the Brecon property, the named parties are ilnvest and the Family Trust. Recital (A) makes clear that the references to the “trustee” are to ilnvest and that the reference to the “agreement and the property” is to the contract for sale by which ilnvest purchased Brecon. The difficulty with the language arises in the references to “the said entity”, which is the entity for whose benefit Brecon is to be held on trust. In recital (C) that entity is identified as that “described in schedule two hereto”. The name of ilnvest appears in Schedule Two. However it is plain from recital (C) that that “entity” is not intended to be ilnvest, or at least not ilnvest other than as trustee of the Family Trust. The operative declaration set out above also makes clear that ilnvest has declared that it holds the benefit of the agreement and property for an “entity” which is not itself.
In these circumstances, Schedule Two is to be read as identifying the Family Trust as the relevant “entity”. That is clearly what the parties must be presumed to have intended to achieve by each declaration. Adopting the language of Dixon CJ and Fullagar J in Fitzgerald v Masters, it would be absurd to suppose that by a declaration of trust to which the Family Trust is party, and which uses language that makes clear the property is to be held beneficially for an entity other than itself, ilnvest should be taken to have declared the property be held for itself, and not the trust of which it was trustee.
This conclusion makes it unnecessary to address, other than briefly, the primary judge’s reasons for refusing rectification. The first, that it was unnecessary because the appellants could vindicate the rights of the Family Trust, overlooks that they could do so only if the trust property included Brecon and Blackburn, which was otherwise not established. The second, that the Family Trust “is simply ineffective against the bank” (at [65]), overlooks that the only rights sought to be enforced against the CBA are vested, or were formerly vested, in ilnvest, and that the only relevance of the Family Trust is to entitle the appellants to vindicate, or have ilnvest vindicate those rights. The third focusses on matters relevant to the merits of the claims sought to be vindicated, but not to whether the declarations of trust should be rectified.
In the result, ground 1 should be dismissed. As foreshadowed at the outset of these reasons I will now deal with remaining grounds 7, 9 to 12, 14 and then 8.

Ground 7: Error in application of Buhr v Barclays Bank plc to proceeds of sale of Yulgilbar

This ground of appeal is misconceived. The relevant principle referred to in Buhr v Barclays Bank plc [2001] EWCA Civ 1223 esp at [45] is that:

… security in an asset extends to the proceeds of sale of an authorised disposition by the debtor and an unauthorised disposition effected on behalf of the creditor rather than for debtor’s own account.

Contracts for the sale of Yulgilbar were exchanged on 20 August 2008. The CBA’s first registered mortgage over that property secured the repayment of the first and second facilities and temporary overdraft. Under the terms of the CBA’s standard Memorandum, its written consent was required for ilnvest’s sale of the property, and ilnvest agreed to comply with the requirements of any such consent (cll A11, A16). The appellants’ cross-claim included that the CBA was in breach of contract by applying the balance of the proceeds of sale, after the payment of the overdraft, in reduction of the first facility without the “authority” of ilnvest. It was also alleged that the CBA applied “undue pressure” on Mr Harker-Mortlock to pay the proceeds of sale to it, including “by instructing ilnvest to deliver the net sale proceeds” in return for the release of the mortgage.
Although the primary judge’s treatment of these issues commences with an acknowledgement of the correctness of the proposition that “security in an asset will almost invariably carry through to the proceeds of an unauthorised disposition by the debtor” (at [165], [166]), that principle remained irrelevant to the disposition of the argument made, which included that the CBA had wilfully misled Mr Harker-Mortlock about its intention to apply the proceeds of asset sales in reduction of ilnvest’s debt, rather than to permit ilnvest to use those proceeds as working capital. The primary judge’s findings concerning this subject are at [169]-[179].
The sale of Yulgilbar was in no sense an “unauthorised” disposition by ilnvest. Yulgilbar and Brecon had been listed for auction on 26 July 2008, neither selling on that day. By its letter of 31 July 2008, the CBA agreed to the sale by private treaty of Yulgilbar “for around $800,000” for the purpose of reducing “the level of debt”. In anticipation of that sale, Mr Harker-Mortlock requested advice as to the “possibility of doing a 30 day roll-over” on the first facility, the current fixed interest rate bill for which matured on 11 August 2008. The “breaking” of the fixed rate facility incurred a cost calculated by reference to current interest rates and the fixed interest rate under that facility. On 11 August 2008, Ms Abbas incorrectly advised Mr Harker-Mortlock that the costs were in his favour and in the amount of $6,152. In fact the costs were in the bank’s favour and for him to pay, as advised to him on the same day.
As the primary judge then notes at [170], following two queries from Mr Harker-Mortlock, Ms Abbas advised on 3 September 2008 that at settlement and after the deduction of selling costs and other settlement adjustments, “the net proceeds [from the sale of Yulgilbar] plus the deposit held by the agent is made available to the Bank”. On 19 September 2008 whilst Ms Abbas was on leave, Mr Harker-Mortlock requested that the “balance of the deposit funds” be made available to ilnvest. Later he asked that $44,000 out of those deposit funds be released to ilnvest. After further information was provided, Mr Stevens advised that the bank was prepared to consent to ilnvest retaining $20,000. Mr Harker-Mortlock again pressed for the $44,000, as noted by the primary judge at [177]. The settlement proceeded on 2 October 2008, having been delayed one day. Mr Harker-Mortlock made no complaint in his email of 7 October 2008 about the sufficiency or otherwise of any proceeds of the sale released to ilnvest. The primary judge was not satisfied that Mr Harker-Mortlock was misled in any way by the bank “as to its view of the legal position about what would happen with the proceeds of the sale”: at [179]. There was no occasion for him to consider or apply the principle which is the subject of this ground, which should be rejected. It also follows from the discussion above concerning the “breaking” of the first facility, that ground 8(e) should be dismissed. The primary judge did not err in finding (at [187]) that the “change” to the BMA was made at Mr Harker-Mortlock’s request.

Ground 9: Error in construction and application of cll 2.2 and 25.2 of Code of Banking Practice

The claim for breach of contract included for breaches of cll 2.2 and 25.2 of the Code of Banking Practice. The breaches alleged were first, the “arbitrary rejection” of ilnvest’s repayment proposal of 25 March 2008, and its Plan A proposed at a meeting on 21 May 2008; and secondly, the application of pressure on ilnvest to sell its livestock and Yulgilbar, which the bank knew or ought to have known would “compound rather than help ilnvest overcome [its] financial difficulties”.
It is submitted that in considering this conduct the primary judge “wrongly construed and read down” cl 25.2. That is said to follow from his Honour’s conclusion that there was no breach of cl 25.2, which required that the bank help the customer “overcome … financial difficulties”, by reason of the CBA’s alleged rejection of Plan A and imposition of conditions as to the sale of Yulgilbar and its livestock. The only separate submission made in relation to cl 2.2 is that any breach of cl 25.2 would also be a breach of the obligation to “act fairly and reasonably towards [ilnvest] in a consistent and ethical manner”. In their written argument in support of this ground the appellants also rely on ground 8(i) which challenges the finding that the CBA did not require the sale of all of the sheep on Yulgilbar. Reference also should be made to ground 12, which challenges the primary judge’s finding that Plan A was not put forward, in May 2008 or otherwise, as a definite proposal.
In para 55 of his affidavit of 18 June 2015, Mr Harker-Mortlock says that he proposed Plan A to Mr Ting, his CBA relationship manager, and Ms Abbas at their meeting on 21 May 2008. That proposal is said to have four parts – the sale of a limited number of stock, the sale of a twenty-acre lot on Blackburn, the pursuit of an opportunity to subdivide and sell 200 acres of Yulgilbar and the extension of the existing $200,000 overdraft for a further six months. The primary judge considered the evidence concerning Plan A at [118]-[136]. The appellants’ case, as his Honour summarised at [118], was that the CBA had dismissed Plan A and imposed its own plan which was directed not to assisting ilnvest to trade out of its difficulties, but rather to securing repayment of its loans.
At a meeting with Mr Ting, probably on 26 March 2008, there was discussion of the finance options referred to in a document prepared by Mr Harker-Mortlock and dated 25 March 2008. The primary judge did not accept Mr Harker-Mortlock’s evidence that Mr Ting’s response to that document was to require the overdraft be repaid immediately, that being “entirely inconsistent” with the steps subsequently taken by Mr Ting to assist ilnvest. Those steps included extending the existing overdraft for thirty days after which the bank was to have “a right to the existing mortgaged properties”. Mr Harker-Mortlock’s 2 April 2008 response to being advised of the bank’s position following that meeting was that he “had expected that to be the situation anyway, so this just formalises things, which is better for everybody”. That remained the position at the end of April 2008, when Mr Ting prepared the internal note extracted by the primary judge at [128], which sought approval for a further extension of the temporary overdraft for thirty days.
The next meeting between Mr Harker-Mortlock, Mr Ting and Ms Abbas was on 21 May 2008. It is at that meeting that those officers are said to have arbitrarily rejected Plan A and imposed pressure on ilnvest to sell the 2300 ewes on Yulgilbar. As the primary judge records at [134], Ms Abbas prepared a detailed note of this meeting which included under the heading “James Proposal to Bank”:

Requesting Bank re-instates the $200K A/A for 6 months to enable the following to occur:-
a) Allow the UK litigation to finalise (hopeful will occur in the next 3 months).
b) Sell assets below to service the next 6 months commitments.
c) Will lodge $250K on deposit in CDA (funds from relatives) with the Bank as comfort and in a worst case scenario to meet the next 6 months commitments.
Sale of assets
- sale of 2300 ewes @ $70 per head = $161K by 31/05/08, funds lodged to the A/A account by 15/06/06.
- 3 months to sell a 20 acre separate block of land at Blackburn with a DA for $250K, MV 10/07 $244K (part of bank security).
- List the Brecon & Yulgilbar properties for auction sale ASAP, 6 weeks to auction and 6 weeks to settle the sale.

On the same day, a lengthy extract of Ms Abbas’s note, including the description of the proposal made to the CBA, was sent to Mr Harker-Mortlock by email to which he responded:

Hi Soofia [Ms Abbas], thank you for your email. I also appreciate very much the time and patience shown by the bank. I agree, by working together, I am sure we will achieve a mutually satisfactory outcome. I have received your earlier email and I will get the information together as quickly as possible, …

As appears above, the proposal which Mr Harker-Mortlock put to the CBA on 21 May 2008 included the sale of 2300 ewes within 10 days, and that Brecon and Yulgilbar be sold by auction within 6 weeks or so.

In the face of these contemporaneous communications, the primary judge rightly concluded that Plan A was not put forward to the CBA as a definite proposal either at the meeting on 26 March 2008, or at that on 21 May 2008, and that the CBA had not applied undue or unjustified pressure on ilnvest to sell the ewes on Yulgilbar: at [136]. It follows that ground 9 should be dismissed, as should the challenges to the findings of fact made by grounds 8(i) and 12.

Ground 10: Error in construction and application of ASIC Act, ss 12CB and 12DA(1)

This ground also asserts errors with respect to the construction and application of the Contracts Review Act 1980 (NSW). However, during the course of oral argument, the appellants’ counsel expressly abandoned any appeal from the rejection of his clients’ claims for relief under the Contracts Review Act.
Otherwise this ground contains a limited challenge to the dismissal of the cross-claims for misleading or deceptive conduct in contravention of s 12DA(1) of the ASIC Act, and for unconscionable conduct in contravention of s 12CB. Counsel also indicated that the claims of misleading or deceptive conduct were limited to a representation made in July 2008 that the Farm Debt Act had no application to ilnvest and a further misrepresentation made in August or September 2008 concerning ilnvest’s entitlement to the “settlement proceeds” of Yulgilbar. In each case the remedy sought was damages. Finally, counsel indicated that the only claim of unconscionable conduct pressed in the appeal concerned the circumstances in which the temporary overdraft was “unilaterally imposed” on ilnvest in April 2008 and the remedy sought in relation to that conduct was the setting aside of the contract for that facility.
These limitations on the case pressed on appeal concerning the application of ss 12CB and 12DA(1) mean that not all of the following conduct, as described in the appellants’ written argument, need now be addressed. That conduct is: first, “knowingly” misleading Mr Harker-Mortlock in July 2008 into believing that farm debt mediation was not available to ilnvest; secondly, having ilnvest sell assets in 2008 without issuing “the s 8 notice that it was bound to issue at the time when enforcement action commenced”; thirdly, taking advantage of Mr Harker-Mortlock’s misapprehension as to the bank’s intention to retain all the proceeds of the sale of Yulgilbar; fourthly, refusing Mr Harker-Mortlock’s request in July 2009 for farm debt mediation on the basis that there was then no outstanding default; and fifthly, obtaining a s 11 certificate in 2012 which sought to exclude the Farm Debt Act. It is now necessary only to address the first and third aspects of the conduct described in the written submissions, as well as the further conduct now pressed as supporting the claim of unconscionable conduct.

Misleading or deceptive conduct: statements in July 2008 that ilnvest not eligible for farm debt mediation

The primary judge addresses this claim at [72], [73], [81] and [82], concluding that any statement to the effect alleged was not misleading because ilnvest was not a “farmer”, either “in the early part of 2008”, or as at “July 2008” and accordingly not within the prohibition in s 8 of the Farm Debt Act. His Honour also held that it was not established that ilnvest had lost anything of value by reason of the bank’s refusal to mediate in July 2008. The appellants’ case was that in the absence of the misleading conduct, ilnvest would have requested mediation under s 9(1A) and, in the face of the bank’s refusal to do so, sought and obtained a 6-month exemption certificate under s 9B, enabling it to put Plan A into effect. Alternatively, it was maintained that if the CBA had agreed to mediation, Plan A would have been considered and that the bank in all likelihood would have agreed to its implementation.
The primary judge treated Ms Abbas’ statement as one as to a fact, rather than of opinion, and accordingly to be assessed as misleading by reference to its correctness as a matter of fact and law. That characterisation of what her statement conveyed is not challenged on appeal. The critical question was formulated as being whether in July 2008 ilnvest was a “farmer”. Doing so accepted that for the prohibition in s 8(1) (as then enacted) to apply, the debtor in ilnvest’s position must answer the description of a “farmer”, as that word was then defined, at the time the enforcement action was proposed or taken. That is the construction of the defined term “farmer” as used in s 8(1) and the definition of “farm debt” adopted by Barrett J in Constantinidis v Equititrust Ltd [2010] NSWSC 299 at [11]-[14]; (2010) 14 BPR 27, 217; earlier by Young J in Varga v Commonwealth Bank of Australia [1996] NSWSC 86; (1996) 7 BPR 97,617; accepted, at least in relation to its use in s 8(1), in Kiriwina Investment Company Pty Ltd v Green Lees Developments Pty Ltd [2018] NSWCA 210 at [23] (White JA); and followed in Commonwealth Bank of Australia v Bird [2011] NSWSC 586 at [16] (Schmidt J); Bendigo & Adelaide Bank Ltd v McMahon [2013] NSWSC 628 at [13] (McCallum J, as her Honour then was); and Southern Cross Credit Union Ltd v Reavill Farm Pty Ltd [2018] NSWSC 999 at [49], [50] (Walton J).
It is sufficient to note here that there may be a difference between this construction of s 8(1) (as enacted until amended by the Farm Debt Mediation Amendment Act 2018 (NSW)) and the defined term “farm debt”, and that adopted of the same provisions in Waller v Hargraves Secured Investments Limited (2012) 245 CLR 311; [2012] HCA 4 esp at [48], [49] (Heydon J) (French CJ, Crennan and Kiefel JJ, and Hayne J separately, agreeing). Less cryptically, Heydon J construed the central defined term “farm debt” when used in s 5(1) as necessarily concerned with the debtor’s status at the time the debt is incurred rather than at any later time: cf. Barrett J in Constantinidis at [13], [14]. However these apparent differences in construction need not be resolved in the present case because the temporary overdraft was “incurred” in April 2008 and it is not suggested that ilnvest’s activities as at July 2008 were materially different from those three months earlier. Accordingly the issue of fact is whether during that period ilnvest was “principally engaged in a farming operation”, that not being its sole business activity.
The primary judge held that during this period, ilnvest was “engaged principally in its overseas business providing services to CQS” because, although that relationship had terminated, it was still pursuing recovery proceedings against CQS for substantial sums of money. Having considered all of the evidence, it is my view that his Honour’s conclusion as to ilnvest not being a “farmer” was correct, but for reasons that take account of all of ilnvest’s operations during the relevant period, rather than those merely concerned with CQS.
ilnvest’s accounts as at 31 December 2007 show that in the previous 12 months, its United Kingdom operations generated revenue in excess of $14.5 million and a gross profit of $409,000, whereas in the same period its farming operations produced a net loss after expenses of about $260,000. Those overseas operations were not limited to the provision of services to CQS, and included an electronic publishing business. Moving forward, by May 2008, ilnvest’s services agreement with CQS had terminated and there was claimed to be an amount in excess of £1.5 million due for services provided, including during the first quarter of 2008. To enable ilnvest to pursue legal proceedings against CQS, at the meeting on 21 May 2008 ilnvest sought the reinstatement of the earlier overdraft facility of $200,000, offering to provide 6 month cash-flow forecasts for the “farm” and for the balance of ilnvest’s remaining operations and businesses. That cash-flow forecast, provided in early June 2008, identifies the electronic publishing business as the principal source of ilnvest’s revenue, the forecasted farm income only resulting from the sale of the sheep herd and, treated separately, the sale of Yulgilbar, Brecon and a subdivided block of Blackburn. Further cash-flow projections for the period from October 2008 to June 2009 were provided to the CBA in September 2008. Those forecasts show projected revenue from the electronic publishing business far in excess of that expected to be generated from the “farm”, at least in the period from October to December 2008. This evidence, although not referred to by the primary judge, supports his conclusion that ilnvest was not “principally engaged in a farming operation” in the period between April and July 2008, or for that matter immediately thereafter. It follows that his Honour did not err in rejecting the allegation of misleading or deceptive conduct on the part of Ms Abbas. It also follows that ground 8(f) is not made out.
Furthermore, I agree with the primary judge’s conclusion that it was not shown on the balance of probabilities that ilnvest lost any valuable commercial opportunity as a result of Ms Abbas’ conduct. Had ilnvest requested a mediation in mid-2008 and the bank declined to mediate, ilnvest may have been entitled to apply for and obtain an exemption certification under s 9B preventing the bank from taking any enforcement action for a period of six months. It was contended that this would have permitted ilnvest “to put Plan A into effect”. This hypothesis does not take account of the position as it existed in fact in July 2008. As the analysis at [58]-[60] above shows, Plan A was not put to or rejected by the bank at the meeting on 21 May 2008. Instead a different proposal was put by Mr Harker-Mortlock and pursued following a further meeting on 2 July 2008. In its letter of that day, the CBA set out a revised plan for asset sales which included the sale of ewes, and auction of Yulgilbar and Brecon on 26 July 2008. Mr Harker-Mortlock responded on 2 July 2008 saying:

Hi Soofia [Ms Abbas], Thank you… for spending the time this morning to work things through. It was excell[en]t to be able to have a comprehensive discussion. Your understanding and co-operation is very much appreciated. Thank you for the document confirming the revised arrangements.

A further meeting was held on 30 July 2008 at which the CBA agreed to the sale of Yulgilbar for $800,000 and the extension of the temporary overdraft to 31 August 2008. The CBA did not take any action to obtain possession of Brecon or Blackburn or to enforce any power of sale at any time after August 2008 and before the mediation between the parties in early 2012. Furthermore when ilnvest did serve a request for mediation on the CBA in July 2009, the bank declined to mediate and ilnvest did not apply for an exemption certificate. In these circumstances the primary judge did not err in concluding that if there was misleading or deceptive conduct, it did not result in any damage by reason of the loss of an opportunity to successfully pursue Plan A. First, Plan A was never proposed to the CBA and pressed by Mr Harker-Mortlock in the form now contended. Secondly, the proposals which were put and agreed were pursued beyond a period of 6 months following August 2008. Thirdly, had a request for mediation been made, it is not established on the probabilities that it would have been agreed to or that mediation carried with it a more favourable outcome than that which resulted in fact.

Misleading or deceptive conduct: conduct in September 2008 in relation to retention of proceeds of sale of Yulgilbar

This subject is dealt with above in the consideration of ground 7. Having set out the relevant findings at [169]-[178], the primary judge was not satisfied that ilnvest “was misled in any way by the Bank as to its view of the legal position about what would happen with the proceeds of the sale of Yulgilbar” (at [179]). I agree with that conclusion for the reasons the primary judge gives. As is apparent from [53] above, both Ms Abbas and Mr Stevens made clear the bank’s position that, in the absence of agreement otherwise, the net proceeds from the sale of Yulgilbar, including the balance of the deposit moneys, were to be paid to it.

Unconscionable conduct: “unilateral” imposition of temporary overdraft in April 2008

The primary judge’s finding as to the circumstances in which the temporary overdraft was entered into on 2 April 2008 are at [107]-[111]. Mr Harker-Mortlock’s position, as stated in para 50 of his affidavit, was as summarised at [112], [113]. The primary judge rejected that evidence, finding in accordance with the contemporaneous communications: that on 25 March 2008 Mr Harker-Mortlock asked if the facility which “rolled-over on April 1st” could be continued; that on 28 March 2008 he met with Mr Ting and requested that extension, which on 2 April was approved and that fact communicated to Mr Harker-Mortlock by email together with a formal letter of approval to be signed and returned to the CBA; and that on the same day Mr Harker-Mortlock acknowledged receipt of that email and attachment commenting that he “had expected that to be the situation anyway, so this just formalises things, which is better for everybody”, and signed and returned the letter of approval.
The appellants’ factual challenge is narrower and to the primary judge’s finding that Mr Ting was not in his office on 2 April 2008, and accordingly unlikely to have spoken to Mr Harker-Mortlock on that day as he maintained in his affidavit. The primary judge considered it unlikely that conversation, which included Mr Ting suggesting that the formalisation of the arrangements was because the bank wanted “all their paper work in order”, occurred. It is not necessary to resolve this challenge. Even accepting that there was a conversation along the lines deposed to by Mr Harker-Mortlock, it does not support the finding sought by this ground, namely that Mr Harker-Mortlock was pressured by Mr Ting into executing the letter of approval. Accordingly neither this aspect of ground 10 nor the factual challenge in ground 8(b) is made out.

Ground 11: Primary judge erred in assessment of quantum, including in review of evidence of Mr Firth

The appellants in their written submissions in chief make no reference to this ground. In reply, the following submission is made:

The judge accepted Mr Firth’s evidence as to quantum resulting from the failure to accept Plan A, and the lost revenue impact of Plan A to 2015. Another 3 years of $250,000 per annum should be added making the total to date $2.2m. The judge inexplicably mulcted [sic] his finding by 15.00%.

The primary judge made no finding as to the quantum of the appellants’ damage, in the event their claim based on the lost opportunity to pursue Plan A was successful. Instead his Honour made observations about aspects of that claim and the heads of loss claimed, namely lost farm income, cost of subdivision, sale of real property, loss of capital value of properties, cost of replacing stock and equipment and the loan obtained from Mr Seaton (at [222]).
As to the first head of loss, his Honour identified the two bases upon which Mr Firth assessed lost farm income assuming that Plan A was implemented, noting that there was no evidence which permitted an assessment of the realistic outcomes of any attempt to implement that plan, or the likelihood of any of those outcomes coming to pass. His Honour did not find that ilnvest would have been entitled to damages for lost farm income on either of the bases proposed in Mr Firth’s evidence. What his Honour did do, however, was suggest that each of those assessments would have to be discounted “in the order of 15 per cent” to account for the risks inherent in the sheep farming venture assumed in the event Plan A was successfully pursued.
His Honour made no determination of the losses claimed for “sale of real property” or “loss of capital value of property”, the evidence being insufficient to permit other than an “assessment at large” which his Honour did not undertake. Finally, his Honour indicated that he would not allow any damages for the remaining heads of loss, there being insufficient evidence or no apparent justification to support doing so.
In this context the suggestion that the primary judge “inexplicably” applied a discount, in the nature of a penalty, to the claimed farm income losses is without foundation; and the justification for the assertion that the figures for lost farm income should be increased to allow for losses over the years 2016, 2017 and 2018 left unexplained in circumstances where Mr Firth’s assessment was only to 31 December 2015 and not, in either of its iterations, adopted by the primary judge.
In view of my conclusions as to the other grounds of appeal, this ground does not arise. Had it arisen, it would have been necessary to remit any question of damages to the primary judge, or some other judge in the Common Law Division, for further determination.

Ground 12: Error in finding Plan A not put as definite proposal

As I have already indicated in dealing with ground 9, ground 12 should be dismissed.

Ground 14: Errors in admitting or rejecting evidence as to material adverse change and of Messrs Harker-Mortlock and Ivey

No submissions are made in support of any challenge to the admission or rejection of evidence concerning any issue as to “material adverse change” of financial circumstances; or to the primary judge’s reasons for rejecting Mr Ivey’s report which included that “exceptional circumstances” justifying its service out of time had not been shown: Commonwealth Bank v ilnvest (No 7) [2017] NSWSC 440 esp at [18]. Accordingly this ground is not made out in relation to any such challenges.
In relation to the treatment of Mr Harker-Mortlock’s evidence, the issues to which any such evidence was relevant are identified as the “rejection of Plan A” and “property and asset sales required by the bank”. The arguments concerning those issues have been dealt with above to the extent they are relevant to substantive grounds of appeal; no other question involving error in the acceptance or rejection of Mr Harker-Mortlock’s evidence is identified as challenged and requiring consideration. Accordingly ground 14 is dismissed.

Ground 8: Challenges to findings of fact

Delay in giving judgment

At the forefront of their argument challenging the primary judge’s findings of fact, the appellants point to the time between the last day of oral argument and the delivery of judgment which, allowing for the written submissions that followed oral argument, was a period of 15 months. Whilst emphasising that period of delay, they concede that delay in itself is not appellable error. As Giles JA observed in Krivoshev v Royal Society for the Prevention of Cruelty to Animals [2005] NSWCA 76 at [123] (Hodgson JA and Young CJ in Eq agreeing):

Delay is of course undesirable, and is contrary to the public interest in the prompt resolution of disputes. But delay, however undesirable, does not itself mean that on appeal a different result is substituted or a new trial ordered – there would be no sense in causing further delay by a new trial. What must be considered is the effect of the passage of time on the quality of the decision-making, including the perception of an effect. The label of delay adds little.

Thus, the question for the Court remains whether there was error. As Hunt AJA had earlier observed in Monie v Commonwealth of Australia (2005) 63 NSWLR 729 at [44]; [2005] NSWCA 25 (Giles and Bryson JJA agreeing):

Delay may assist an appellant in establishing… error because, as the approach identified by the Full Federal Court [in Expectation Pty Ltd v PRD Realty Pty Ltd (2004) 140 FCR 17; [2004] FCAFC 189 at [69], [76]] demonstrates, the inference will more readily be drawn that a trial judge’s failure to deal in a significantly delayed judgment with particular matters on which the appellant relied in contradiction of the findings made in that judgment resulted from those matters being overlooked by the judge – either because of the time which has passed or because of the pressure on the judge in the end to complete the judgment.

There was delay in this case. However, an examination of his Honour’s reasons in light of the written and oral evidence shows that in relation to all of the challenged findings, he did advert to the relevant evidence. Furthermore the appellants have not established any deficiency in his Honour’s decision-making or in the expression of his decision. This is readily apparent from my consideration of the challenges made to his Honour’s findings, to the balance of which I will now turn.

Challenged findings (b), (d), (e), (f) and (i)

The appeals from these findings are dealt with above as follows: finding (b) is dealt with in the consideration of ground 10; finding (d) in grounds 7 and 10; finding (e) in ground 7; finding (f) in ground 10; and finding (i) in ground 9. For the reasons there given, the challenges to these findings should be rejected. It remains to consider the challenges to findings (a), (c), (g) and (h).

Challenged finding (a): January 2008 extension of temporary overdraft

At [90]-[117], the primary judge considered and rejected the appellants’ argument that the temporary overdraft was for a period of 90 days rather than for a period ending on 1 April 2008, it following if the argument was accepted that there would have been no default on the part of ilnvest in not repaying the overdraft by the end of March 2008. The challenged finding at [91] includes the following:

While there are some internal documents and some vague evidence from the cross-claimant that might support a conclusion that the term of the overdraft was for 90 days, I am satisfied that it was for 60 days. In truth, the only support for the contrary conclusion arises out of the later production of some internal documentation by the Bank, after the completion of discovery in the categories previously agreed between the parties.

His Honour added at [99]:

… when cross-examined that he himself had asked for an overdraft to 1 April, [Mr Harker-Mortlock’s] responses were weak (209.20 – 25T). He accepted the accuracy of the proposition but added “there was a discussion about 90 days as well from what I recall.” When it was pointed out that no such discussion appears in his affidavit he agreed but added “but there was a discussion about it.” This evidence does not amount to evidence from which a 90 day term could be inferred.

As his Honour observed between [94]-[97], the most relevant and reliable evidence of the terms on which the CBA agreed to provide the temporary overdraft establishes clearly that it had a “maturity date of 1 April 2008”. That evidence included an email exchange in which the bank indicated that the temporary overdraft had been organised with that maturity date, to which Mr Harker-Mortlock responded “thanks… great news”.
The appellants contend that in so concluding the primary judge did not consider all of the relevant evidence. First, it is said that in assessing Mr Harker-Mortlock’s evidence and concluding that his “responses were weak” (at [99]), the primary judge overlooked his evidence in re-examination. That evidence included that on about 28 January 2008 he had an exchange with Mr Ting to the effect: “I had requested an overdraft for 60 days, and as I recollect, Howard mentioned something about, well perhaps I might put it through for 90 days”. It is correct that this evidence is not referred to in his Honour’s reasons. However there was no need to refer to it because it is to the same effect as the evidence given by Mr Harker-Mortlock in cross-examination. And, as the primary judge found, it is not “evidence from which a 90 day term could be inferred”, particularly in the face of the written exchange extracted in Judgment (No 9) at [94]-[95].
Secondly, it is said that his Honour did not give due weight to Mr Ting’s instruction to his offsider Ms Kuang on 29 January 2008 to “implement T/E for $200k for 90 days”. An assessment of the weight to be given to evidence requires an evaluation that draws on common sense, logic and experience. The primary judge acknowledged the existence of and considered apparent inconsistencies in the CBA’s internal documents, including this instruction of Mr Ting. Most of these documents also described the facility as expiring on 1 April 2008; for example, the CBA’s email of 2 April 2008 referred to the overdraft as one which was “approved for 90 days and expired on 1/4/08”. His Honour also had regard to Mr Ting’s insistence under cross-examination that he had approved the overdraft to 1 April 2008. Accepting that the issue was as to the agreed expiry date of the facility, the primary judge correctly treated the contemporaneous written communications between the parties as determinative, especially where Mr Harker-Mortlock’s evidence did not suggest otherwise. His Honour’s conclusion was fortified by the fact that Mr Harker-Mortlock’s understanding in late March 2008 was that the overdraft would expire on 1 April 2008. There was no error in not regarding references to “90 days” as determinative, especially where most of them confirmed the maturity date as 1 April 2008.
Thirdly, the finding at [99] that Mr Harker-Mortlock’s responses were “weak” is said to be an adverse credit finding made in circumstances where no challenge was made to his credibility on this issue. This submission misconstrues and mischaracterises this finding, which is reasonably to be understood as directed to the strength or probative value of Mr Harker-Mortlock’s evidence, rather than its credibility.
Finally, it is said that an adverse inference should have been drawn “against the Bank in not calling Ms Kuang or Mr Jeong to explain” the email of 2 April 2008 referred to at [106]. The appellants describe that email to Mr Jeong as having been “tampered” with because one version in evidence commences “T/E $150K was approved for 60 days…” and another “T/E $200K was approved for 90 days…”. Whilst this discrepancy is left unexplained, each version continued “and expired on 1/4/08”. Thus each email remained wholly consistent with the CBA’s case. On no view could the rule in Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 and the absence of evidence explaining that discrepancy support a finding that the maturity date was not 1 April 2008. As the primary judge is not shown to have erred in any of the respects relied on, the challenge to finding (a) is rejected.

Challenged finding (c): ‘straight out exit’ strategy not attributable to CBA

The appellants’ case as put to Ms Abbas was, as the primary judge recorded at [137], that after 8 May 2008 the CBA’s determined strategy was to end its banking relationship with ilnvest by forcing the sale of its viable assets and otherwise imposing conditions which were commercially unworkable. That conduct was said to be unconscionable and misleading or deceptive in contravention of ASIC Act, ss 12CB and 12DA(1). As has already been noted in dealing with ground 10, the unconscionable and misleading or deceptive conduct cases pressed in the appeal do not rely on this conduct. That being the position, the relevance of this challenged finding to the arguments pressed on appeal is not readily apparent.
The primary judge dealt with this argument at [137]-[147], concluding that the CBA had not determined in May 2008 to end its banking relationship with ilnvest. His Honour’s reasons for doing so turned principally on his assessment of the bank’s conduct in and after May 2008, when the management of ilnvest’s accounts had been transferred to the Credit Management Unit (CMU). His Honour considered that course of conduct to be inconsistent with the bank having determined to bring the relationship to an end. Ms Abbas denied that she ever put such a strategy in place. His Honour considered the “straight out exit” statement to reflect her, at least initially “pessimistic” view of what was likely to happen rather than to be a statement of what the CBA had determined to achieve: at [137], [140]-[145].
The appellants’ first submission is that his Honour did not take account of or give sufficient weight to the fact that Mr Ting had proposed such an exit strategy on 5 May 2008. The primary judge rejected this argument. At [128] his Honour noted that Mr Ting’s analysis of 30 April 2008 was based on the options put forward by Mr Harker-Mortlock a day or so earlier. As his Honour then found at [140], the use of the expression “exit” in that earlier analysis did not describe the ending of the banker/customer relationship, but rather exiting from the temporary overdraft by its repayment. In this context the primary judge is not shown to have erred in not treating Mr Ting’s statement to “carefully manage this exit” made a few days later in his email of 5 May 2008 (see [138]) as extending beyond the repayment of that facility.
Secondly, it is said that in assessing the outcome of the meeting of 21 May 2008 at which Mr Harker-Mortlock put a proposal for the sale of assets, his Honour did not take account of the CBA’s strategy paper prepared prior to that meeting. It is correct that the reasons do not refer to that paper. It showed that in the short term the bank’s strategy was to allow the sale of assets sufficient to clear the temporary overdraft. That strategy was consistent with the outcome of that meeting being, as the primary judge found at [141], that no long-term decision be made “pending the provision of the additional information requested”. The information sought was subsequently provided and the bank’s longer-term position communicated by its letter of 24 June 2008. That proposal gave ilnvest the opportunity to undertake asset sales to reduce debt to “an appropriate level”. If that was achieved, control and management of the accounts would revert to a relationship manager. If it was not, the CMU would continue to work with the customer “to facilitate repayment of the facilities”.
Ultimately the primary judge held that Ms Abbas’ email and its reference to “a straight out exit” reflected her assessment of the likely outcome of the management of the credit facilities. However it did not follow that the bank had determined what the outcome of that process would be, and to pursue that result: Judgment (No 9) at [146], [147]. The primary judge is not shown to have erred in so concluding. In my view, his Honour was right to regard that conclusion as being supported by the course of dealings between the parties over the period from May 2008 to October 2012.

Challenged findings (g) and (h)

These challenges are respectively to the findings at [199] and [198]. Each is in general terms and as to the absence of matters which might ordinarily be relied on in a claim of unconscionable conduct, the onus of proving such matters resting on the appellants. In relation to finding (g), there is no separate challenge to his Honour’s findings concerning Mr Harker-Mortlock’s education, business successes and experience, and sophistication in rural activities. Nor in relation to finding (h) do the appellants’ submissions identify any benefit which the CBA acquired in its dealings with ilnvest to which it was not legitimately entitled under the terms of the facilities and registered mortgages. In the circumstances neither of these challenges is made out.

Conclusion

Orders enabling the joinder of ilnvest as a respondent should be made. As each of the grounds of appeal has failed, the appeal should be dismissed and the appellants ordered to pay the CBA’s costs of the appeal. The appellants have also agreed with the liquidator of ilnvest that they will meet its costs of the proceedings.
In the orders made by the primary judge on 31 August 2018, order 7 in terms dismissed the “second cross-claim”. As there was no cross-claim other than the first cross-claim, this order should be corrected so as to refer to that first cross-claim dated 14 December 2016.
On 14 November 2018, on the written undertaking of Mr Harker-Mortlock to the court that he would, among other things, maintain the properties in a good state of repair “until [the CBA] obtains possession” of them, this court stayed the execution of writs of possession in relation to each property until the final determination of this appeal. The form of that order makes it unnecessary that any further order be made in relation to that stay. That undertaking was given in circumstances where Mr Harker-Mortlock did not maintain for himself any claim to a leasehold interest in either property which was valid or binding on the CBA as registered mortgagee: see Judgment (No 1) at [60]-[68]; Judgment (No 2) at [42].
Accordingly, I propose the following orders be made:

Grant leave to the appellants under Corporations Act2001 (Cth), s 471B to commence proceedings against ilnvest (in liq) Pty Limited, by joining it as a respondent in the appeal upon terms that no judgment obtained be enforced against the company or its assets without the further leave of the Court.

Order that ilnvest (in liq) Pty Limited be joined as second respondent in the appeal.

Amend order 7 made on 31 August 2018 in the proceedings below to read “dismiss the first cross-claim dated 14 December 2016”.

Dismiss the appeal.

Order that the appellants pay the first respondent’s costs of the appeal.

Order that the appellants pay the costs of ilnvest (in liq) Pty Limited as second respondent in the appeal.

BRERETON JA: I have had the benefit of reading in draft the judgment to be delivered by Meagher JA. I agree with the orders proposed by his Honour and with his Honour’s reasons.

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Decision last updated: 27 March 2019

Medium Neutral Citation:	Harker-Mortlock v Commonwealth Bank of Australia [2019] NSWCA 56
Hearing dates:	27 and 28 February 2019 (last written submissions 18 March 2019)
Decision date:	27 March 2019
Before:	Macfarlan JA at [1]; Meagher JA at [2]; Brereton JA at [104].
Decision:	(1) Grant leave to the appellants under Corporations Act 2001 (Cth), s 471B to commence proceedings against ilnvest (in liq) Pty Limited, by joining it as a respondent in the appeal upon terms that no judgment obtained be enforced against the company or its assets without the further leave of the Court. (2) Order that ilnvest (in liq) Pty Limited be joined as second respondent in the appeal. (3) Amend order 7 made on 31 August 2018 in the proceedings below to read “dismiss the first cross-claim dated 14 December 2016”. (4) Dismiss the appeal. (5) Order that the appellants pay the first respondent’s costs of the appeal. (6) Order that the appellants pay the costs of ilnvest (in liq) Pty Limited as second respondent in the appeal.
Catchwords:	REAL PROPERTY – mortgages – where bank relies on liquidation of company to enforce possessory interest under mortgages – whether liquidation of company an event of default – whether repayment of bills matured loan account secured by mortgages – whether appointment of new trustee replaces the borrower in loan documents PRIMARY INDUSTRY – farm debt mediation – Farm Debt Mediation Act 1994 (NSW) – where proceedings for possession an enforcement action under the Act – where s 11 certificate issued following farm debt mediation and settlement – whether certificate void – whether the Act applied at time of enforcement action MISLEADING AND DECEPTIVE CONDUCT – where mortgagee informs mortgagor that mediation under Farm Debt Mediation Act 1994 (NSW) unavailable – whether misleading or deceptive conduct – whether mortgagor principally engaged in farming operations EQUITY – rectification – where trustee purportedly declares property as being held for the benefit of itself – where true meaning of documents can be ascertained as a matter of construction – whether declarations of trust should be rectified GUARANTEE AND INDEMNITY – where parties have agreed to maximum amount that the guarantor can be called to pay on demand – whether award of interest under Civil Procedure Act 2005 (NSW), s 100 contrary to agreed maximum
Legislation Cited:	Australian Securities and Investments Commission Act 2001 (Cth), ss 12CB, 12DA, 12GF, 12GM Civil Procedure Act 2005 (NSW), s 100 Contracts Review Act 1980 (NSW) Corporations Act 2001 (Cth), ss 9, 471B Farm Debt Mediation Act 1994 (NSW), ss 5, 6, 8, 9, 9B, 11 Farm Debt Mediation Amendment Act 2018 (NSW) Real Property Act 1900 (NSW) Supreme Court Act 1970 (NSW), s 75A Trustee Act 1925 (NSW), s 9
Cases Cited:	Aquatic Air Pty Ltd v Siewert [2016] NSWCA 318 Bendigo & Adelaide Bank Ltd v McMahon [2013] NSWSC 628 Buhr v Barclays Bank plc [2001] EWCA Civ 1223 Caterpillar Financial Australia Ltd v Ovens Nominees Pty Ltd [2011] FCA 677 Commonwealth Bank of Australia v Bird [2011] NSWSC 586 Commonwealth Bank of Australia v ilnvest Pty Ltd (in liq) [2014] NSWSC 1257 Commonwealth Bank of Australia v ilnvest Pty Ltd (in liq) (No 2) [2014] NSWSC 1640 Commonwealth Bank of Australia v Nemeth [2013] QDC 125 Commonwealth Bank v ilnvest (No 7) [2017] NSWSC 440 Constantinidis v Equititrust Ltd [2010] NSWSC 299; (2010) 14 BPR 27, 217 Coulton v Holcombe (1986) 162 CLR 1; [1986] HCA 33 English, Scottish and Australian Bank Limited v Phillips (1936) 57 CLR 302; [1937] HCA 6 Fitzgerald v Masters (1956) 95 CLR 420; [1956] HCA 53 Gemmell v Brienesse (1933) 33 SR (NSW) 472 Houben Marine Pty Ltd (in liq) [2018] NSWSC 745 In the matter of HIH Insurance Limited (in liquidation) ACN 008 636 575 [2018] NSWSC 1886 John Alexander’s Clubs Pty Limited v White City Tennis Club Limited (2010) 241 CLR 1; [2010] HCA 19 Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 Kiriwina Investment Company Pty Ltd v Green Lees Developments Pty Ltd [2018] NSWCA 210 Krivoshev v Royal Society for the Prevention of Cruelty to Animals [2005] NSWCA 76 Lanai Unit Holdings Pty Ltd v Mallesons Stephen Jaques (No 2) [2017] 2 Qd R 456; [2016] QSC 242 Lemery Holdings Pty Ltd v Reliance Financial Services Pty Ltd (2008) 74 NSWLR 550; [2008] NSWSC 1344 Loxton v Moir (1914) 18 CLR 360; [1914] HCA 89 Monie v Commonwealth of Australia (2005) 63 NSWLR 729; [2005] NSWCA 25 Park v Allied Mortgage Corporation Limited [1993] FCA 404 Pentridge Village Pty Ltd (in liquidation) v Capital Finance Australia [2018] VSC 633 Ramage v Waclaw (1988) 12 NSWLR 84 Rosebridge Nominees Pty Ltd v Commonwealth Bank of Australia (No 6) [2014] WASC 203 Saxby Soft Drinks Pty Ltd v George Saxby Beverages Pty Ltd [2009] NSWSC 1486 Southern Cross Credit Union Ltd v Reavill Farm Pty Ltd [2018] NSWSC 999 TAL Life Ltd v Shuetrim; MetLife Insurance Ltd v Shuetrim (2016) 91 NSWLR 439; [2016] NSWCA 68 Varga v Commonwealth Bank of Australia [1996] NSWSC 86; (1996) 7 BPR 97,617 Waller v Hargraves Secured Investments Limited (2012) 245 CLR 311; [2012] HCA 4
Texts Cited:	Meagher, Gummow and Lehane’s Equity Doctrines and Remedies (5th ed, 2014)
Category:	Principal judgment
Parties:	James Harker-Mortlock (First Appellant) JHM Pty Ltd (Second Appellant) Commonwealth Bank of Australia (Respondent)
Representation:	Counsel: P E King (First and Second Appellants) E Cheeseman SC, J White (Respondent) Solicitors: Allsop Glover Lawyers (First and Second Appellants) Dentons Australia (Respondent)
File Number(s):	2018/00262869
Publication restriction:	N/A
Decision under appeal	Court or tribunal: Supreme Court of New South Wales Jurisdiction: Common Law Division Citation: [2018] NSWSC 1276 Date of Decision: 17 August 2018 Before: Campbell J File Number(s): 2013/00108514