National Australia Bank Ltd v Rose

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2015 0033

NATIONAL AUSTRALIA BANK LTD	Applicant
v
JOHN ALBERT ROSE	Respondent

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JUDGES:	WARREN CJ, FERGUSON and McLEISH JJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	23 July 2015
DATE OF JUDGMENT:	21 July 2016
MEDIUM NEUTRAL CITATION:	[2016] VSCA 169
JUDGMENT APPEALED FROM:	National Australia Bank Ltd v Rice [2015] VSC 10

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BANKING — Guarantees — Warranties — Code of Banking Practice cl 28.4 — Obligation of bank to give prospective guarantor a prominent notice of certain matters — Whether prominent notice given — Relevance of context — Whether breach of warranty caused loss to guarantor.

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APPEARANCES:	Counsel	Solicitors
For the Applicant	Mr A C Archibald QC with Mr C M Archibald	Minter Ellison
For the Respondent	Mr J W S Peters QC with Mr S J Minahan	Madgwicks

Warren CJ:
McLeish JA:

There is before the Court an application by National Australia Bank Limited (‘NAB’) for leave to appeal from a decision of a judge of the Trial Division.[1] The judge dismissed NAB’s claim for $3,878,744.05, plus interest and costs,[2] brought pursuant to five guarantees executed by the respondent, John Albert Rose (‘Rose’). In summary, his Honour did so because he found that (1) NAB had breached contractual warranties by failing to comply with the Code of Banking Practice (‘Banking Code’) in taking the guarantees;[3] and (2) those breaches had caused loss to Rose in the amount claimed by NAB.
[1]National Australia Bank Limited v Rice [2015] VSC 10 (‘Reasons’).
[2]By the time of trial, interest had increased the total claim to over $6 million.
[3]Australian Bankers’ Association, May 2004 edition.

It was agreed at trial that Rose executed the five guarantees which formed the basis of NAB’s claim (together, ‘the guarantees’) and that the guarantees would be enforceable by NAB unless Rose successfully established a defence.[4] The parties’ dispute focused on the circumstances in which the guarantees were executed and on whether NAB had complied with its obligations under the Banking Code. It was ultimately accepted by NAB, for the purposes of this proceeding, that the Banking Code was contractually binding as between NAB and Rose and that its terms were to be treated as ‘contractual terms of each of the [g]uarantees’.[5]
[4]Reasons [1].
[5]See ibid [143]–[144], quoting NAB’s closing submissions at trial.

The key questions for determination on the present application are:

(a) whether the trial judge was correct to conclude that NAB failed to give ‘a prominent notice’ of the matters set out in cl 28.4(a)(i)–(iv) of the Banking Code, and thereby breached the guarantees; and

(b) whether his Honour was correct to conclude that NAB’s breaches caused Rose to enter into the guarantees.

For the reasons that follow, we do not consider that NAB has established any error in the trial judge’s conclusions that is relevant to the outcome of the appeal. We would grant leave to appeal in respect of both proposed grounds of appeal, but would dismiss the appeal.

Factual background

In 2007, Rose entered into a joint venture with a Timothy Craig Rice (‘Rice’), the first defendant at trial, to acquire investment properties on the Gold Coast. They had been personal friends for a number of years. Rose and Rice established a holding company in which they had equal shareholdings and, for each property acquisition,[6] a separate subsidiary company of which they were both directors.
[6]There was one exception, however; Glacial Reflections Pty Ltd purchased two of the properties: see n 21.

The acquisitions were funded by a combination of (a) funds contributed by Rose and (b) borrowings from NAB, broadly speaking as follows. In March 2007, Rose contributed $4.8 million. Then, in June 2007, the joint venture acquired three properties at a total price of $10.3 million, of which around $5.7 million was borrowed from NAB. Between June and December 2007, five further properties were acquired for a total price of around $3.4 million; those purchases were funded almost entirely by borrowings from NAB.

For each acquisition, Rose signed loan documents on behalf of the borrowing entity, which was the relevant subsidiary company. He also executed a guarantee in respect of each acquisition, personally guaranteeing the liabilities of the relevant borrower company to NAB. The documents were all signed in the presence of John D’Angelo, a senior business banking manager at NAB (‘D’Angelo’).

In 2010, following default on the loans, the properties were repossessed and sold. NAB issued demands against the guarantors, including Rose, seeking payment of the outstanding balance of the loans.

The proceedings below

NAB commenced proceedings against Rice and Rose by writ filed on 19 March 2012. It claimed the amount outstanding under five of the eight guarantees,[7] being $3,878,744.05, with interest and costs continuing to accrue.
[7]Specifically, NAB claimed payment under what the trial judge called the first, second, sixth, seventh and eighth guarantees: see further [23], [29] and [30] below. Although the statement of claim numbered the guarantees differently, in these reasons we adopt his Honour’s numbering for ease of reference.

On 4 September 2012, NAB entered judgment in default of appearance against Rice.

Rose filed a defence on 12 July 2012 and an amended defence on 5 July 2013. He alleged that the guarantees were unenforceable by reason of unconscionable conduct that arose from him being mistaken as to the terms of the guarantees and from NAB failing to take certain steps at the time of execution.

In his outline of submissions for trial dated 7 February 2014, Rose raised new contentions of a duty of disclosure and breach of the Banking Code. On 5 August 2014, the day fixed for trial, Rose applied for and obtained leave to further amend his defence in order to plead the issues raised in his submissions. The trial was adjourned to 15 September 2014.

Rose filed his further amended defence on 7 August 2014. He alleged that NAB had failed to disclose certain dealings it had had with Rice, and that it had breached the Banking Code in a variety of ways, including by failing to provide notice of various matters as required by cl 28.4(a). He alleged that the breaches had the consequence that the guarantees were voidable or unenforceable, although he did not plead any counterclaim for damages or set-off. In its reply, NAB denied the grounds for the defence.

The trial recommenced on 15 September 2014 and initially ran for three days of evidence. Rose accepted prima facie liability to NAB, and the trial concerned whether any of his defences were made out. Neither Rose nor NAB called Rice as a witness.[8]
[8]The judge observed that this may be explained on the grounds that Rose had a falling out with Rice and NAB had entered default judgment against Rice: Reasons [3] n 5.

The parties filed and exchanged written closing submissions, and oral submissions were heard on 29 September 2014. With leave obtained during closing submissions, Rose filed on 30 September 2014 a second further amended defence which corrected sundry aspects of the defence.

After closing submissions, the trial judge invited Rose to apply to amend his defence to include a counterclaim for damages for breach of the Banking Code. The application was heard on 3 October 2014 and leave to amend was granted.

Rose filed a third further amended defence on 6 October 2014, introducing a defence of set-off for loss suffered in consequence of breaches of the Banking Code. NAB obtained leave to recall Rose for further cross-examination on 14 October 2014. Supplementary written closing submissions were then filed by the parties on 16 and 20 October 2014, without further hearing.

Judgment was delivered on 26 March 2015 and authenticated orders were made on the same date.

The trial judge’s decision
Factual findings — chronology of events

The trial judge made a number of factual findings which are not disputed by the parties before this Court. It is convenient to set out at this point particular findings and aspects of the evidence which are relevant to the submissions that were made on this application for leave to appeal.

First, his Honour found that at the time Rose and Rice began their joint venture, Rice was experienced in managing real estate on the Gold Coast, but Rose had not previously invested in real estate for commercial gain.[9] Rose had been a successful businessman, and in May 2007 he reported net assets of approximately $23 million to NAB.[10] He did not, however, have any recollection of previously giving a guarantee, and there was no evidence that he had done so.[11] Rose’s evidence, which was not contradicted, was that he and Rice agreed to fund the purchasing companies on a fifty-fifty basis. Rose was to put up his 50 per cent share in cash for the initial investments and Rice would arrange for the purchasing companies to borrow the remaining money needed to acquire the properties, as he did not have funds of his own to invest.[12]
[9]Ibid [5]–[6].
[10]Ibid [6].
[11]Ibid [7].
[12]Ibid [8]–[10].

Secondly, his Honour found that the information provided to NAB about the joint venture proposal principally came from Rice.[13] Rose had not had any business relationship with NAB before February 2007, while Rice had had business dealings with D’Angelo since 2002.[14] Rice introduced Rose to D’Angelo in February or March 2007, and told D’Angelo that Rose was a person of means.[15] D’Angelo was told Rose would be contributing his 50 per cent investment in cash.[16] It was D’Angelo’s understanding at all relevant times that the ultimate ownership of the properties, through the purchasing companies, was to be fifty-fifty as between Rice and Rose.[17]
[13]Ibid [16], [20].
[14]Ibid [11], [14]. The judge observed that in May 2007, Rice and entities associated with him were indebted to NAB for over $3.5 million while contemporaneous bank records indicated that the assets held by Rice and his related entities totalled $4.311 million: at [22].
[15]Ibid [14].
[16]Ibid [17].
[17]Ibid.

Next, the judge found that in accordance with what had been agreed, separate companies wholly owned by Rose and Rice’s holding company purchased investment properties on the Gold Coast between April 2007 and February 2008.[18] His Honour stated:

Although Rose agreed to become a director of each of the companies, he said he never understood the detail beyond the fact that there was a holding company pursuant to which he held his 50 percent share. Rose said that although he initially believed he was going to be involved, he actually left the arrangements to Rice, including setting up the companies, buying the properties and negotiating with NAB.[19]

In connection with these transactions, Rose executed eight guarantees and related documents between June 2007 and April 2008, including the five guarantees which were the subject of NAB’s claim.[20]

[18]Ibid [29], annexure A.

[19]Ibid [30].

[20]Ibid [29].

The first, second and third guarantees were executed on 18 June 2007.[21] They related to the purchase of three properties in April 2007 and the extension by NAB of loan facilities totalling $5.72 million to the purchasing companies.[22] The three guarantees were in identical terms, making Rose and Rice jointly and severally liable for the debts of the relevant borrower companies and for related costs, expenses and liabilities incurred by NAB.[23] They also made express provision for the application of the Banking Code.[24] Each guarantee bore a warning on its front page in terms set out later in these reasons.[25] The circumstances in which these guarantees were executed were the focus of the evidence at trial, given the similarity between the first three guarantees and those that followed, and D’Angelo and Rose’s general lack of recollection about the circumstances in which many of the guarantees were signed.[26]
[21]The third guarantee was not sued upon by NAB; it was subsumed by the seventh guarantee when the relevant borrower company purchased a second property: ibid [30] n 22.
[22]This represented approximately 56 per cent of the total purchase price: see Reasons annexure A.
[23]Clauses 6 and 7.
[24]Clause 5 provided: ‘NAB has adopted the Code of Banking Practice and if you are an individual and the customer is another individual or a small business customer (as defined by the Code) relevant provisions of the Code apply to this Guarantee’.
[25]At [34]–[35].
[26]See Reasons [57]–[58], [70], [72], [80]–[81], [89].

The trial judge found that D’Angelo attended Rose’s home on 18 June 2007 with all of NAB’s documents that required execution by Rose for the purposes of the three relevant loan facilities.[27] Nobody else was present. His Honour stated:

D’Angelo recalled sitting down with Rose at a table in the kitchen area of the family room. D’Angelo said he broke up the documentation into 3 bundles, referrable to each of the 3 loans. Rose said he could only recall 1 pile of documents. However the documents were arranged, this was the first time Rose had seen any of the bank documents. For each loan, those documents included a letter of offer (consisting of 36 pages), a letter in respect of “your proposed guarantee” (which was addressed solely to Rice), a guarantee and indemnity (consisting of 17 pages, but also incorporating the Banking Code), a certificate by a guarantor, a declaration by guarantor and a mortgage.[28]

[27]Ibid [41].

[28]Ibid [42].

The judge observed that D’Angelo did not directly recall what he said to Rose by way of explaining the documents, and that his evidence was limited to his standard practice in such meetings.[29] That practice was to begin by talking about the letter of offer, giving details of the facility limit, expiry date, interest rate, fees and charges, and reading ‘verbatim’ what the securities were, before asking if the client wished to sign the letter of offer.[30] Next, it was D’Angelo’s practice to discuss the mortgage and to have it signed.[31] After that, he moved to the guarantee and indemnity. The judge described D’Angelo’s evidence on this point as follows:
[29]Ibid [44], [57].
[30]Ibid [47]–[48].
[31]Ibid [49].

… D’Angelo stated his standard operating procedure was to look at the front page. D’Angelo said he would not go through the front page line by line, but would summarise the warning page by saying that, as a guarantor, the person would become responsible for the debt if in fact the customer defaulted on the loan.
As part of this process, he also said, by reference to the relevant pages of the guarantee, he would state who the customer was, and who the guarantors were, and would “confirm” the amount being guaranteed, before he would go to the end of the documentation and “confirm” that there was an acknowledgement that the guarantor was “happy to sign”.
…
Under cross-examination, D’Angelo said that during this process he would ask the proposed guarantors “if they would like to seek legal advice and if they were happy with what they were signing”. D’Angelo said if guarantors did not want legal advice, he “would have them execute that certificate of guarantor acknowledging that and that they were happy to do so”.
…
As to the process of obtaining Rose’s signature, D’Angelo said that the documents typically contained “sign here” stickers to indicate where the signatures were required. D’Angelo stated that he could not recall discussing the individual pages of the documentation. Having given this evidence the following occurred:
So then in signing the documents, how were the signatures of Mr Rose or the initials of Mr Rose put on the paper?---So I hand the document to the client and confirm where he needs to sign. So he then executes on that page and we keep turning until I get to the pages that need to be executed by the client and that continues to happen until it’s done.[32]

[32]Ibid [50]–[52], [54] (citations omitted).

The judge found that Rose also had a poor recollection of the 18 June 2007 meeting, though he recalled sitting at a table in his family room next to D’Angelo, who had ‘a big bunch of documents’.[33] His Honour stated:

… Rose said the only thing he could recall being told [about the documents], and could remember seeing, was that there were “certain moneys booked against companies, companies that Rice had me register as a director of back in about February. There’s a list of companies”. Rose said he did not understand what it was about beyond moneys being “booked” against the companies. …
Rose recalled coloured tags and said that “D’Angelo just pulled over the pages and it was basically ‘sign here’”. Rose said D’Angelo flicked through the documents and showed Rose where to sign.
When Rose was taken to the First Guarantee in the witness box, he said he could not recollect signing it. Further, he said he did not recall D’Angelo bringing any specific aspect of any of the documents to his attention. Rose gave positive evidence that the warning at the commencement of the First Guarantee was not drawn to his attention or explained by D’Angelo. He also stated that D’Angelo did not explain to him what a guarantee and indemnity was or the liabilities that he might face if he signed any of the First, Second or Third Guarantees.
On the issue of independent legal advice, Rose was quite emphatic in his evidence. He stated that D’Angelo never said to him that he should obtain independent legal advice in relation to the First, Second or Third Guarantees (or, for that matter, any of the subsequent guarantees).
Further, Rose said D’Angelo never asked him whether he understood the documents. Rose also said he could not recall D’Angelo ever asking whether Rose was happy to sign them or whether Rose wanted additional time before signing them.
Rose was, in fact, happy to sign each of the First, Second and Third Guarantees, but he said he had no appreciation of what he was committing to. Rose stated that if he had been told at the time that not only was he contributing his funds in cash, but that, under the First, Second and Third Guarantees, he would potentially be personally liable for any moneys being borrowed, … he would not “have had a bar” of the transactions and … “there’s just no way known [he] would have done it”. Rose stated that he knew that he put his half of the money in and that the rest was Rice’s responsibility.[34]

[33]Ibid [58].

[34]Ibid [59]–[64].

The judge considered that it was ultimately unnecessary to decide between D’Angelo and Rose’s accounts of what was said at the meeting,[35] given his conclusion that even if D’Angelo had complied with his standard practice, NAB would have failed to comply with the Banking Code.[36] Nevertheless, his Honour preferred Rose’s evidence that the meeting took between 15 and 30 minutes to D’Angelo’s evidence that it ‘could’ have been 45 minutes to an hour.[37] This was in part because the judge did not accept that D’Angelo ‘gave any detailed explanation of the documents’.[38] He also found that at the time of the 18 June 2007 meeting, Rose ‘had, based on his understanding of what Rice had told him, a fundamentally different understanding as to the nature and extent of his potential liability to NAB than was reflected in the documents he was being asked to sign’.[39]
[35]The judge did, however, find in relation to all the guarantees that the ‘poor state’ of contemporaneous documentation prepared by NAB ‘raised serious doubt about the evidence of D’Angelo that he strictly followed banking procedures when dealing with security documentation and related matters’: ibid [138]–[139] and see generally [104]–[140].
[36]Ibid [223], [233], [235]. The judge’s conclusion that NAB failed to comply with the Banking Code is discussed further at [46] ff of these reasons.
[37]Ibid [45]–[46].
[38]Ibid [46].
[39]Ibid [67].

The fourth and fifth guarantees were signed in August 2007.[40] They related to the purchase of two properties in June 2007 and two related loan facilities totalling $1.02 million.[41] They had the same terms as the first three guarantees. As they were not sued upon by NAB, it is unnecessary to consider them further, save to say that the trial judge found that neither D’Angelo nor Rose had any particular recollection of their execution.[42]
[40]The trial judge so stated: ibid [69]. However, at the hearing of the application for leave to appeal, senior counsel for NAB stated that these two guarantees were never executed. Whether they were in fact signed is not of any present significance.
[41]The borrowed amounts represented over 98% of the total purchase price of the two properties: see ibid annexure A.
[42]Ibid [70], [72].

The sixth guarantee was signed on 12 September 2007. It related to NAB’s provision of a loan facility for the full $515,000 purchase price of a further property.[43] Its terms were the same as those of the earlier guarantees. Neither Rose nor D’Angelo recalled the particular circumstances in which the sixth guarantee was signed. Nevertheless, it was D’Angelo’s evidence that he would have followed his standard practice,[44] while Rose stated that he did not believe any of the warnings were drawn to his attention or that any of the documents were explained to him.[45]
[43]Ibid [74].
[44]Ibid [81].
[45]Ibid [80].

The seventh and eighth guarantees were executed on 20 December 2007. These guarantees related to the purchase of two further properties for $1.875 million, fully funded by loan facilities from NAB.[46] There were minor differences in form between these guarantees and those that preceded them, but their terms were substantially the same.[47] Again, neither D’Angelo nor Rose recalled the specific circumstances in which they were executed.[48]
[46]Ibid [82]. See also at appendix A. The seventh guarantee replaced the third guarantee and reflected an increase in the loan facility extended to Glacial Reflections Pty Ltd.
[47]Ibid [90]. See further [35]–[36] of these reasons.
[48]Ibid [89].

Following the execution of the eight guarantees and through to April 2008, there were further dealings between NAB, Rice and Rose.[49] Those dealings are not presently relevant except inasmuch as the trial judge found that they did not alert Rose to the extent of his exposure under the guarantees he had executed.[50]
[49]See ibid [91]–[103].
[50]Ibid [98], [103].

As to Rose’s knowledge of the extent of his exposure, the judge stated:

I am satisfied, on the balance of probabilities that, in relation to the First, Second and Third Guarantees, Rose did not know that, by signing these documents, he would potentially become jointly and severally liable for all of the borrowers’ liabilities. It was contrary to the understanding Rose had, based on what Rice had told him. Nothing D’Angelo said to Rose suggested that Rose’s understanding was incorrect.
Equally, with respect to the Sixth, Seventh and Eighth Guarantees, I am satisfied that Rose did not appreciate that, at the time he signed those documents, he might be liable to NAB beyond his half of the loans, his half of the interest on the loans, and his half of the other liabilities for which each borrower would or might become liable. Again, this is based upon what Rice told him, together with an absence of an explanation by D’Angelo to disabuse Rose of his misunderstanding.[51]
[51]Ibid [141]–[142] (citations omitted).

Findings as to the warnings on the guarantees

The trial judge found, and it is not presently in dispute, that written warnings appeared on the guarantees executed by Rose as follows.

The cover page of each of the guarantees featured a box containing the following text:

Warning
Please Read
·     You should seek independent legal and financial advice on the effect of this guarantee and indemnity (Guarantee) before you agree to sign it.
·     You can refuse to sign this Guarantee.
·     There are financial risks involved in signing this Guarantee (for example, it may become necessary for you to sell your assets so that you can pay NAB).
·     You have the right to limit your liability under this Guarantee in accordance with the Code of Banking Practice (if it applies to this Guarantee) and as allowed by law.
·     You can request information about the credit contract or other facility or financial obligation to be guaranteed (including any existing credit contract, facility or financial obligation with NAB to be refinanced by the new credit contract, facility or financial obligation).
·     This Guarantee applies to:
(a)a future credit contract; or
(b)any other facility granted by NAB to the customer in the future; or
(c)any other financial obligation that the customer incurs to NAB in the future (together, the future obligations)

to the extent that the future obligations (together with all other existing credit contracts, facilities or other financial obligations secured by this Guarantee) are within the limit that you agree to in this document.
Otherwise this Guarantee applies to future obligations if NAB gives you a copy of the relevant contract document and obtains your written acceptance of the extension of the Guarantee to that contract.[52]

[52]Emphasis in original.

Below that boxed text, the following text also appeared on the cover page of the first to sixth guarantees:

This Guarantee is an important document.
By signing this Guarantee you, as the guarantor, may become personally responsible for the amounts owed by the customer to NAB, up to the Guarantee Limit. Even if you have given NAB security, the amount payable by you under this Guarantee may exceed the value of that security.
If you fail to pay NAB, in addition to any security given by you to cover this document, NAB may be able to resort to any other security, which NAB holds or which you give NAB in relation to your own affairs. This may include a mortgage over your family home.[53]
[53]Emphasis in original.

This text did not appear on the cover page of the seventh or eighth guarantees. We interpolate here that the seventh and eighth guarantees were supplemented by a two page document entitled ‘IMPORTANT — What a Guarantee Is — Explanation of your Guarantee & Indemnity’,[54] which relevantly stated:
[54]It would appear that a document with the same title was referred to in the certificate pages of all of the guarantees: see [37] below. However, such a document only formed part of the copies of the seventh and eighth guarantees that were in evidence. Senior counsel for NAB submitted that the differences between the seventh and eighth guarantees and the earlier guarantees were immaterial to the question before the Court. Senior counsel for Rose did not contest this proposition.

The purpose of this document:
…
·     This document is not intended to be and is no substitute for legal advice.
·     You should see your solicitor to obtain legal advice on your proposed Guarantee … .
·     If you have any doubts about the level of financial risk involved you should obtain independent financial advice.
Important provisions of the Guarantee of which you should be aware:
1.   Warnings
Warnings appear on the front cover and above the signature section of the Guarantee. You must read them carefully. They alert you to important issues in relation to the Guarantee including that:
·the Guarantee is an agreement by which you, the guarantor, accept personal responsibility to pay a debt which the customer owes or may come to owe NAB;
·the Guarantee applies to future credit contracts granted to the customer; and
·if you do not pay under the Guarantee, NAB may take and sell your mortgaged property and recover any shortfall from you.

…
3. You are individually liable to NAB for the full amount whether or not others are also liable.
You are “jointly and separately liable” with any other guarantors. This means that NAB, at its option, may claim the full amount under the Guarantee from you individually, or from any or all of the guarantors together.
You are liable under the Guarantee even if someone who is intended to be a co-guarantor does not sign it or stops being liable for any reason, or is released from liability by NAB (see clause 4 of the Guarantees).
…

Next, warnings appeared on the signature page of each guarantee. The following text appeared in a box at the top of the signature page of the first guarantee:

IMPORTANT
BEFORE YOU SIGN
·     READ THE GUARANTEE AND INDEMNITY AND THE TERMS RELATING TO THE CREDIT CONTRACT OR OTHER FACILITY OR FINANCIAL OBLIGATION TO BE GUARANTEED.
·     You should obtain independent legal and financial advice.
·     You should make your own enquiries about the credit worthiness, financial position and honesty of the customer.
THINGS YOU MUST KNOW
·     Understand that, by signing this Guarantee, you may become personally responsible instead of, or as well as, the customer to pay the amounts which the customer owes and NAB’s expenses in enforcing the Guarantee.
·     If the customer does not pay you must pay. This could mean you lose everything you own including your home.
·     You may be able to withdraw from this Guarantee or limit your liability. Ask your legal adviser about this before you sign this Guarantee.
·     This Guarantee applies to:
(a)A future credit contract; or
(b)Any other facility granted by NAB to the customer in the future; or
(c)any other financial obligation that the customer incurs to NAB in the future (together, the future obligations)

to the extent that the future obligations (together with all other existing credit contracts, facilities or other financial obligations secured by this Guarantee) are within the limit that you agree to in this document.
· Otherwise this Guarantee applies to future obligations if NAB gives you a copy of the relevant contract document and subsequently obtain[s] your written acceptance of the extension of the Guarantee in this regard.

Similar warnings appeared on the signature pages of the other relevant guarantees. Here again, the minor differences between the guarantees are not significant for present purposes.

Finally, each guarantee included certificates to be signed by each guarantor. These included various statements which were the subject of an initialling requirement on the first page and a signature requirement on the second page. The statements in the first guarantee are representative; they read as follows:

I certify to NAB that:
1. NAB has provided to me an explanation of the nature and effect of the Guarantee:
·I was provided with the Guarantee and the document ‘IMPORTANT: What a Guarantee Is’ prior to the interview;
·I have read and understood both documents;
·I had the opportunity to ask questions at the above interview and the Bank Officer answered all my questions to my satisfaction; and
·The Bank Officer also verbally explained to me at the above interview the nature and effect of the Guarantee in words consistent with the document ‘IMPORTANT: What a Guarantee Is’ (delete if full explanation is not required).

2. The Bank Officer also:
·Drew my attention to the warnings printed on the front, and above the signature section, of the Guarantee;
·Informed me that NAB was not making any statements or promises about the creditworthiness, financial position or honesty of the Customer or any other person;
·Recommended that I obtain independent legal and financial advice prior to signing the Guarantee; and
·Confirmed to me that I could refuse to sign the Guarantee.

3. I am fully aware of the nature of the Guarantee and of the risks associated with signing the Guarantee. I am unwilling or unable to take legal advice concerning it.
4. In particular I understand that under the Guarantee:
·NAB may claim the full amount of the Guarantee Limit solely from me even if the Customer is not liable or there were other guarantors;
·the Guarantee Limit is the basic amount mentioned above; which can be made up of any amounts owed by the Customer to NAB, plus additional amounts described in the Guarantee;
·NAB can claim amounts from me without first having to exhaust claims against the Customer;
·I remain liable, up to the Guarantee Limit, despite any events or arrangements that may occur without my knowledge or consent, including increases in the Customer’s debts to NAB, extensions to the date for repayment or changes to the types and number of facilities;
·If I am a trustee of a trust named in the Guarantee, I am liable personally and in my capacity as a trustee; and
·NAB is entitled to set off any credit funds in my name against my liability under the Guarantee.
Guarantor to initial first page ______

5.   This certificate and “IMPORTANT: What a Guarantee is” are not complete summaries of the terms of the Guarantee and do not amend or replace those terms.
6.   I have agreed to sign the Guarantee voluntarily and without any pressure from NAB, the Customer or any other person.
7.   I did not require a translator for the interview, as I have no difficulty understanding spoken and written English (delete if not applicable).[55]

It should be observed at this point that the judge found in relation to the certificate for the first guarantee that ‘it must have been abundantly clear to D’Angelo at the time he sought and obtained Rose’s signature on the certificate that its contents were manifestly untrue’.[56] Similar findings were made in relation to the other guarantees.[57] His Honour determined that the certificate pages could not sensibly be given any weight or provide any corroboration of D’Angelo’s account.[58] Those conclusions are not challenged.

[55]Emphasis in original.

[56]Reasons [113].

[57]Ibid [114], [124], [131]–[132].

[58]Ibid [137]–[140].

In addition to the cover page, the details pages, the signature pages, and the certificate pages, each guarantee consisted of 7 to 10 pages of terms — the terms of the seventh and eighth guarantees being in a smaller font size.

Findings as to the role and requirements of the Banking Code

Although NAB had submitted at the outset of the trial that the Banking Code was of no legal effect, in closing submissions it accepted for the purposes of the proceeding that the terms of the Banking Code had the status of contractual terms of each of the guarantees.[59] The trial judge indicated that in any event he would have found that the provisions of the Banking Code upon which Rose relied were contractual terms of the guarantees.[60]
[59]Ibid [143]–[144].
[60]Ibid [145].

The application of the Banking Code is not in dispute on this application for leave to appeal. In passing, however, we observe that this Court recently considered this issue in Doggett v Commonwealth Bank of Australia.[61] There, as in this case, each guarantee provided that ‘relevant provisions of the [Banking Code] apply to this guarantee’.[62] McLeish JA, with whom Whelan JA and Garde AJA relevantly agreed,[63] concluded that cl 25.1 was incorporated into the guarantees there in issue as a ‘relevant’ provision of the Banking Code, because ‘a promise by a bank as to the level of care it will take in conducting [a credit] assessment’ was relevant to the transactions and obligations for which the guarantees provided.[64] It must be thought that cl 28.4, which is framed as an express promise to a guarantor that the bank will do certain things before taking a guarantee, is even more plainly relevant to the transactions and obligations under the guarantees in the present case.[65] The same can be said of cl 28.5. Accordingly, we would respectfully agree with the trial judge’s conclusion that those clauses of the Banking Code had contractual force as terms of the guarantees at issue in this proceeding.
[61][2015] VSCA 351 (‘Doggett’). The High Court refused an application for special leave to appeal that decision on 15 June 2016: [2016] HCASL 114.
[62]Doggett [2015] VSCA 351 [104] (McLeish JA).
[63]Ibid [1] (Whelan JA), [218] (Garde AJA).
[64]Ibid [121], [137]–[139] (McLeish JA),
[65]The tension in Doggett, between the ostensibly limited scope of the cl 25.1 promise at first blush and the generality in fact given to that clause by the Banking Code definition of ‘you’, does not arise in the context of cl 28.4, where the natural reading of the clause aligns with the definition given to ‘you’ in cl 40, which expressly includes a guarantor in the context of cl 28: cf ibid [141]–[143] (McLeish JA).

At all relevant times,[66] cl 28.4 of the Banking Code provided:
[66]The version of the Banking Code current at the time each of the guarantees was executed was the amended version published by the Australian Bankers’ Association in May 2004.

We will do the following things before we take a Guarantee from you:
(a)we will give you a prominent notice that:
(i)     you should seek independent legal and financial advice on the effect of the Guarantee;
(ii)     you can refuse to enter into the Guarantee;
(iii)    there are financial risks involved;
(iv)   you have a right to limit your liability in accordance with this Code and as allowed by law;
(v)    you can request information about the transaction or facility to be guaranteed (“Facility”) (including any facility with us to be refinanced by the Facility);
(b)from 1 June 2004 we will tell you:
(i)     about any notice of demand made by us on the debtor, and any dishonour on any facility the debtor has (or has had) with us, which has occurred within 12 months before we tell you this, and from 1 June 2005 within 2 years before we tell you this;
(ii)     if there has been an excess or overdrawing of $100 or more on any facility the debtor has (or has had) with us which has occurred within 6 months before we tell you this, and from 1 February 2005 we will give you a list showing the extent of each of those excesses or overdrawings;
(c)we will tell you if any existing facility we have given the debtor will be cancelled, or if the Facility will not be provided, if the Guarantee is not provided;
(d)we will provide you with a copy of:
(i)     any related credit contract together with a list of any related security contracts which will include a description of the type of each related security contract and of the property subject to, or proposed to be subject to, the security contract to the extent to which that property is ascertainable and we will also give you a copy of any related security contract that you request;
(ii)     the final letter of offer provided to the debtor by us together with details of any conditions in an earlier version of that letter of offer that were satisfied before the final letter of offer was issued;
(iii)    any related credit report from a credit reporting agency;
(iv)   any current credit-related insurance contract in our possession;
(v)    any financial accounts or statement of financial position given to us by the debtor for the purposes of the Facility within 2 years prior to the day we provide you with this information;
(vi)   the latest statement of account relating to the Facility (and any other statement of account for a period during which a notice of demand was made by us, or a dishonour occurred, in relation to which we are required to give you information under clause 28.4(b)(i)); and
(vii) any unsatisfied notice of demand made by us on the debtor in relation to the Facility where the notice was given within 2 years prior to the day we provide you with this information; and
(e)we will give you other information we have about the Facility (including any facility with us to be refinanced by the Facility) that you reasonably request but we do not have to give you our own internal opinions.[67]

[67]Emphasis in original.

Clause 28.5 of the Banking Code provided:

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

We do not have to allow you the period referred to in clause 28.5(b) if you have obtained independent legal advice after having received the information required by clause 28.4.[68]

Conclusions of the trial judge

[68]Emphasis in original.

It will be appreciated from what has been said earlier in these reasons that at trial Rose pleaded a number of defences.[69] Ultimately, he pressed contentions that NAB had failed to comply with the Banking Code and that it had acted unconscionably in taking the guarantees.[70] The former argument was put both as a circumstance relevant to the latter, and also as an independent defence. Although it is not necessary for present purposes to detail the judge’s consideration of the allegations Rose made at trial under the rubric of his unconscionability argument, it bears noting his Honour’s conclusions that:
[69]See [11]–[17] above.
[70]Rose did not ultimately press a case based on unilateral mistake or an estoppel argument: Reasons [2]. The trial judge also observed that Rose’s closing submissions treated his non-disclosure allegations as circumstances relevant to his defences based on unconscionability and breach of the Banking Code.

(c) Rose was not in a position of special disability or disadvantage, beyond the fact that he ‘did not fully understand the nature and extent of each of the [g]uarantees’ and ‘for at least some of the relevant period … was not aware of Rice’s true financial position’;[71]
[71]Ibid [171].

(d) ‘NAB was never informed that Rose’s potential liabilities under the [g]uarantees were to be more limited than Rice’s position’;[72]
[72]Ibid [172(4)].

(e) ‘D’Angelo was not told that Rose had understandings based on Rice’s explanations that were fundamentally inconsistent with NAB’s documents’;[73]
[73]Ibid [172(8)].

(f) ‘There was no evidence which showed, or allowed any inference to be drawn properly to the effect that D’Angelo “knew” of Rose’s misunderstandings’;[74] and

(g) ‘Rose was … perfectly capable of protecting his own interests and obtaining his own advice if he wanted to do so’.[75]

The parties do not seek to dispute these conclusions.

[74]Ibid [174].

[75]Ibid [172(9)].

His Honour found that Rose had not established that NAB had acted unconscionably in taking the guarantees from Rose, absent any breach of the Banking Code.[76] It therefore fell to consider whether any such breach had been established.
[76]Ibid [187]–[189].

The judge held that cll 28.4 and 28.5 of the Banking Code were not conditions of the guarantees, as Rose had contended, but warranties.[77] Any breach by NAB would not entitle Rose to terminate the guarantees, but could provide the basis for a claim of damages.[78] That conclusion is also not contested.
[77]Ibid [216].
[78]Ibid [217].

Turning to the question whether the warranty in cl 28.4(a)(i) had been breached by NAB, the judge made findings of fact including the following:

(h) ‘at no time in relation to any of the [g]uarantees did D’Angelo [specifically] state to Rose that he should get independent legal and financial advice’;[79]
[79]Ibid [230]. As opposed to asking whether he was ‘happy to sign’ or ‘would like’ to seek legal advice: at [225]–[226].

(i) ‘D’Angelo did not, when taking Rose through the documents to whatever extent that he did, bring the notice as to independent legal and financial advice [on the cover page of the guarantees] to Rose’s attention’;[80]

(j) ‘Rose never read the documents before signing and … D’Angelo was fully aware of this’;[81] and

(k) ‘[a]t no time were the documents in Rose’s possession before signing other than as part of the execution process’.[82]

[80]Ibid [230].

[81]Ibid [231].

[82]Ibid.

His Honour considered that even if D’Angelo had followed his standard procedure on each occasion, his summary of the cover page of the guarantees did not refer to the warning that independent advice should be sought, and asking whether Rose was ‘happy to sign’ the guarantees or ‘would like’ to seek legal advice fell far short of providing the required warning.[83]
[83]Ibid [224]–[229].

Relevantly for the warranties in cl 28.4(a)(ii) and (iv), the judge found that D’Angelo did not tell Rose that he could refuse to sign each guarantee, or that he had a right to limit his liability under each guarantee.[84]
[84]Ibid [232].

His Honour concluded that NAB had breached the warranties contained in cl 28.4(a)(i), (ii) and (iv) of the Banking Code.[85] He stated:

NAB submitted that it was not necessary to articulate the warnings orally. So much may be accepted. But to comply with the Banking Code, NAB was required to give Rose “a prominent notice” of such matters. Simply “looking” at the front page and giving the inadequate summary that D’Angelo said formed part of his standard practice, and not inviting Rose to read any of its contents, did not give prominent notice of the required warnings.[86]

[85]Ibid [234].

[86]Ibid [233].

The judge concluded that NAB had also breached the warranty contained in cl 28.4(a)(iii) of the Banking Code. In this regard, he stated:

If D’Angelo followed what he stated was his standard practice and expressly told Rose that Rose could be responsible for the whole of the debt of each borrower, D’Angelo was, implicitly at least, informing Rose that there were financial risks involved. Accordingly, based on the alleged standard practice, clause 28.4(a)(iii) would have been complied with. However, D’Angelo failed to state clearly to Rose on any occasion that Rose would potentially be liable for the whole of the debt under the Guarantees. Further, he failed to state that there were financial risks for Rose in signing the Guarantees. Accordingly, clause 28.4(a)(iii) was also breached.[87]

[87]Ibid [235].

On the question of breach of the warranty in cl 28.5, his Honour held:

… on the facts of this case, where D’Angelo: (1) failed to bring the specific warnings to the attention of Rose, (2) failed to state to Rose that he had the opportunity to consider the documentation and sign it on the following day, and (3) D’Angelo attended upon Rose on each occasion with the clear intention of having the documents signed, NAB failed to comply with clause 28.5(b) of the Banking Code. It is not to the point, on the facts of this case, that Rose must have known he had not been given until the next day to read the documents. This is because Rose was not informed or aware of the position afforded him under the Banking Code.[88]
In conclusion on this point, NAB asked Rose to sign each Guarantee, and NAB accepted each Guarantee, without allowing Rose until the following day to consider the relevant information before the relevant documents were executed. …[89]

[88]Ibid [238].

[89]Ibid [239].

On the issue of causation, the judge accepted Rose’s evidence that ‘if he had been told by D’Angelo that he should obtain legal advice before signing any of the [g]uarantees, he would have done so’ and that ‘if he had known he would potentially become liable for all the debts of each of the borrowers, he would not have signed any of the [g]uarantees’.[90] The judge considered it ‘most likely’ that obtaining legal advice would have informed Rose of the true extent of his potential liability under each guarantee.[91]
[90]Ibid [241].
[91]Ibid.

His Honour also accepted Rose’s evidence that in D’Angelo’s absence, Rice had explained the need for Rose to execute the guarantees ‘in a manner which suggested to Rose that Rose’s liability was considerably less than what was in fact required by NAB’.[92] It would have come as a surprise to Rose to learn from D’Angelo the true extent of his potential liability.[93] Yet, Rose was not surprised by anything D’Angelo told him.[94] His Honour stated:

In summary, D’Angelo’s explanation made it clear to Rose how much was to be borrowed by each investment company. At the time of signing each Guarantee, Rose knew he was assuming some personal liability. However, nothing D’Angelo said in addressing the documents informed Rose that his understanding, based on what Rice had said, was incorrect.[95]

[92]Ibid [247].

[93]Ibid [247]–[248].

[94]There was no suggestion that Rose did not pay attention to what D’Angelo told him. The judge said that ‘[i]t is clear from Rose’s evidence that his level of attention was greater than someone disinterested in what he was being told’: ibid [249].

[95]Ibid [258].

His Honour continued:

Even if I am incorrect in my finding that Rose would have acted on advice from D’Angelo that Rose should get legal advice, that does not alter the outcome of the case. The findings that D’Angelo did not tell Rose that there were financial risks involved for Rose or that Rose could limit his liability, together with the fact that Rose was not properly informed of his liabilities under the Guarantees, and that if he had been so informed he would not have signed them, are sufficient to establish a breach of the Banking Code and a direct causal link to the loss the subject of the claim for set off.[96]

[96]Ibid [259].

The judge then discussed various submissions made by NAB, before summarising his conclusions on causation as follows:

In summary, I do not find any of the contentions of NAB persuasive. They do not provide a proper basis to reject the evidence of Rose. Accordingly, I find that if the Banking Code had been complied with, the warnings required to be given pursuant to clause 28.4(a) had been duly given by D’Angelo or D’Angelo had clearly explained the nature and extent of Rose’s obligations under the Guarantees, Rose would not have signed any of the Guarantees.
As to the breach of clause 28.5(b), that breach alone did not cause any loss. It is highly probable that if Rose had been given “until the next day” to consider the relevant documents on each occasion, he would not have bothered to read them. Further, absent some suggestion that he should get legal or financial advice, I also expect he would not have used the additional time to do so. As Rose frankly admitted under cross-examination, if D’Angelo had offered Rose the opportunity to take the documents away to look at them for a day or so, it is most likely he would not have acted upon the offer.[97]

[97]Ibid [280]–[281].

His Honour determined that NAB’s breaches caused Rose loss in the amounts claimed by NAB pursuant to each of the guarantees, entitling him to set off damages.[98] NAB does not challenge that conclusion in the event that breach and causation are established.
[98]Ibid [282] ff.

In light of his conclusions, the judge dismissed NAB’s claim. He considered it unnecessary to determine whether NAB’s breaches of the Banking Code made NAB’s conduct unconscionable in circumstances where he had found that it otherwise was not.[99] It was also unnecessary to consider other aspects of the Banking Code upon which Rose had relied.[100]
[99]Ibid [296]–[297]. See [43]–[44] above.
[100]Ibid [298], referring to cll 2.1(b)(i) and 2.2 of the Banking Code.

Proposed grounds of appeal

NAB seeks leave to appeal on the basis of two proposed grounds of appeal as follows:

1. [The trial judge]:
(a)erred in finding that NAB breached the Guarantees because it failed to give the respondent prominent notice of matters provided by cl 28.4(a)(i)–(iv) of the Code;
(b)ought to have held that NAB’s pre-contractual conduct did not amount to a breach of the Guarantees, and that prominent notice of the matters set out in cl 28.4(a)(i)–(iv) of the Code was given to the respondent.

2. Further or alternatively, his Honour:
(a)erred in holding that any breach by NAB of cl 28.4 of the Code caused the respondent to enter into the Guarantees;
(b)ought to have held that any breach of cl 28.4(a), alternatively cl 28[.4](a)(ii) and/or (iv), as incorporated into the Guarantees, did not cause the respondent to enter into the Guarantees and therefore caused the respondent no loss.

Proposed Ground 1
The parties’ submissions

It is not in dispute that the incorporation of cl 28.4 as a term of each guarantee had the effect that NAB warranted to Rose that it would ‘give [him] a prominent notice’ of the matters set out in cl 28.4(a) before taking each guarantee from him.[101] Neither party seeks to challenge the trial judge’s factual findings regarding the circumstances in which the guarantees were executed, although there are differences in how they emphasise and characterise those findings.
[101]The day before the hearing of the application for leave to appeal, NAB withdrew reliance on an argument made in its written case to the effect that its conduct prior to the signing of each guarantee could not of itself give rise to a breach of contract sounding in damages.

NAB’s principal submission in support of its first proposed ground of appeal is that the trial judge erred by focusing ‘exclusively’ on what was said and done by D’Angelo when meeting with Rose prior to the execution of the guarantees. NAB contends that the judge did not address himself directly to the question whether alone, or in combination with what was said and done by D’Angelo, the explicit warnings and information set out in the guarantees sufficed to satisfy the requirements of cl 28.4(a)(i)–(iv).

NAB submits that it complied with cl 28.4 by reason of the written warning printed on the cover page of each guarantee, as reinforced by other provisions of the guarantees. It submits in the alternative that, if D’Angelo’s conduct was relevant, then compliance with cl 28.4 was established by the express terms of the guarantees taken together with that conduct. On either argument, NAB contends that a breach of the Banking Code could not occur solely because of defects in D’Angelo’s conduct, and it submits that there was no allegation or finding that D’Angelo had diverted Rose’s attention from the documents.

At the hearing of the application for leave to appeal, senior counsel for NAB advanced a submission that the words ‘give … a prominent notice’, as they are used in cl 28.4(a), connote the giving of a written notice and only a written notice. It was argued that the word ‘notice’ indicated a textual or visual means of communication; that the words ‘give’[102] and ‘a’ were more consistent with the handing over of a written document than the oral communication of information; and that the word ‘prominent’ indicated physical, visual conspicuousness. Thus, the use of a written communication to convey the required matters was at least permissible, if not essential. On NAB’s alternative argument, even if no written notice was given, compliance with cl 28.4(a) could be effected if a bank officer orally explained the required warnings. Ultimately, it is not necessary to address NAB’s submission that cl 28.4(a) required the giving of a written notice. For reasons we will explain, the written documents on which NAB relied did not constitute the required prominent notice in the circumstances of this case, and D’Angelo’s statements were insufficient to either rectify that difficulty, or to constitute the required notice in their own right.
[102]In contrast to the use of the word ‘tell’ in other sub-clauses of cl 28.

Senior counsel for NAB advanced three main propositions in support of his contention that the written warning on the cover of the guarantees effected compliance with cl 28.4(a). First, it undoubtedly constituted notice of the matters set out in that sub-clause. It was difficult to conceive how it could have been more explicit, and in some respects it said more than cl 28.4(a) required. Secondly, it was ‘given’ to Rose when each guarantee was delivered to him by D’Angelo for signature. Although it could be artificial to describe the notice as having been ‘given’ if it had been concealed from Rose in some way, there was no such allegation in the present case. On the contrary, D’Angelo’s standard practice would have involved him ‘looking at’ the cover page with Rose. Thirdly, the notice was ‘prominent’ because it featured in a conspicuous breakout box on the cover page, with a bolded direction to read it.[103] Whether Rose in fact saw it was not relevant, because the prominence of the notice was to be determined objectively; the question was whether it was likely to be seen, rather than whether it was. An analogy was drawn to the case law on the incorporation of terms into ticket contracts. For similar reasons, the written warnings set out at [35]–[37] above were said to constitute further prominent notice of the required matters.
[103]Senior counsel referred to Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2011] FCA 1254 (‘TPG’), where Murphy J found that ‘prominent’ in s 53C of the Trade Practices Act 1974 (Cth) had its natural meaning and meant ‘standing out so as to strike the attention’, ‘conspicuous’, ‘easily seen’ or ‘very noticeable’: at [125]–[126].

Senior counsel submitted that on a proper reading of cl 28.4(a), NAB had no obligation to recite, summarise or explain the relevant warnings to Rose. Nor was it required to satisfy itself that he actually read or understood the warnings. In NAB’s submission, such requirements ‘would universalise Amadio’[104] and would be commercially burdensome for banks. A business-like construction, it was said, required that NAB be allowed to give the notice by post if it wished, without any involvement of a bank officer.
[104]Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447.

If D’Angelo’s conduct had a role, senior counsel contended it was an ‘additive’ one, complementing and enhancing the notice given by the document rather than taking its place. It was submitted that in a context where the document had been on the table in front of Rose, for D’Angelo to ask whether Rose was ‘happy to sign’ the guarantee or ‘would like’ to seek legal advice was a natural way of inviting Rose to seek legal advice without insisting that he do so — cl 28.4(a)(i) did not require NAB to insist. It was said that D’Angelo’s words built upon the content of the document and recognised that it had engaged with the topic. Similarly, it was submitted, by confirming the amount to be guaranteed D’Angelo gave notice that Rose was assuming financial risks, even if Rose was confused about how much risk was involved — cl 28.4(a)(iii) did not go so far as to require NAB to ensure Rose understood the full extent of risk he was assuming. Senior counsel acknowledged that there was no evidence D’Angelo told Rose he could refuse to sign the guarantees or that he could limit his liability; NAB’s case was that the documentation alone gave notice of those matters.

Rose submits that the trial judge correctly held that NAB breached the contractual terms found in cll 28.4 and 28.5 of the Banking Code. He submits that the judge did not focus exclusively on D’Angelo’s conduct, but considered the whole of NAB’s conduct in the context of the parties’ relationship, attributes and characteristics, as well as the text of the documents. In that context, critical findings of the judge included: (a) his finding that Rose was not taken to the warnings set out in the guarantees or given a proper summary of them by D’Angelo, (b) his finding that D’Angelo was aware Rose had not read the guarantees before signing them, (c) his finding that Rose was not provided with the guarantees before being asked to execute them, and (d) his finding that on each occasion D’Angelo arrived with the documents intending to have them executed immediately and did not offer Rose the opportunity to consider the documents further before signing them.

Rose submitted that since NAB’s related documentation was in such a state that it was unable to establish what documents or explanations Rose had been given, it was natural for the judge to look to the discussions attending the execution of the guarantees to ascertain whether NAB’s presentation of the documents abided by the required contractual standard. This approach did not ignore the effect of the written warnings. On the contrary, it assessed their effect in the broader context of what NAB said and did when taking the guarantees from Rose. Senior counsel for Rose referred to Australian Competition and Consumer Commission v TPG Internet Pty Ltd (‘TPG’)[105] and the New South Wales Court of Appeal’s decision in Rolfe v Katunga Lucerne Mill Pty Ltd[106] in support of his contention that prominence must be assessed in context.
[105][2011] FCA 1254, [130]–[131].
[106][2005] NSWCA 252 (‘Rolfe’).

Rose contended that ‘[p]roviding a complex legal document containing the text relied on by NAB without offering or providing the time to read it or advice that [Rose] should do so, knowing he has not read it[,] does not amount to “prominent notice”.’[107] Senior counsel for Rose described D’Angelo’s attendance at Rose’s home as ‘a simple signing ceremony’ and ‘a page-turning exercise’ which involved moving through over 180 pages of material in between 15 and 30 minutes.[108] He submitted that while NAB was not obliged to ensure that the warning on the cover page came to Rose’s attention, the fact that Rose did not recall seeing it said something of the context in which it was presented to him, and its capacity to stand out in that context.
[107]Respondent’s written case dated 25 May 2015, [14].
[108]In the case of the signing of the first, second and third guarantees: see [23] ff above.

On the question of D’Angelo’s role, Rose submitted that there was insufficient evidence that D’Angelo’s conduct satisfied the requirements of cl 28.4 even if the presentation of the documents did not. The judge found that D’Angelo’s evidence that he asked whether Rose ‘would like’ to seek legal advice or was ‘happy to proceed’ was a reconstruction of what occurred, as was his evidence that he had confirmed the amount of the guarantee with Rose at the time of signing. Moreover, even if D’Angelo did do those things on each occasion, such conduct fell short of what cl 28.4 required.

Rose contended that NAB’s obligations under cl 28.4(a) of the Banking Code must be read in the context of the whole of cl 28, including the obligation under cl 28.5 to allow the guarantor until the next day to consider the information which had to be provided. Although the judge found that the breach of cl 28.5 did not lead to any loss directly, it remained relevant because it contributed to the breach of cl 28.4(a). The obligations NAB assumed under cl 28 are not predicated on any special disability on the part of the guarantor and do not require that any oral explanations be provided; rather, they set procedural requirements for the provision to guarantors of prior access to documents, clear warning of their import and a recommendation and fair opportunity to obtain legal advice. They state that the bank will not take a guarantee unless those conditions are met. In Rose’s submission, NAB should be held to that promise.

The scope of NAB’s obligation

The incorporation of cll 28.4 and 28.5 of the Banking Code as terms of each of the guarantees had important consequences for how NAB could take the guarantees from Rose. Two are of particular relevance. First, by cl 28.4(a), NAB warranted that before it took each guarantee, it would give Rose ‘a prominent notice’ of the matters set out in that sub-clause. Secondly, by cl 28.5, it warranted that it would not ask Rose to sign a guarantee, or accept one from him, without first providing him with the information required to be provided under cl 28.4 and allowing him until the next day to consider that information.[109] Plainly, those obligations are interconnected, since time could only start to run under cl 28.5 once the cl 28.4 information had been provided to Rose.
[109]Since Rose did not obtain independent legal advice on the guarantees, the exception to the cl 28.5 obligation did not apply.

This case requires this Court to determine the scope of the cl 28.4(a) obligation. However, it is not to ignore cl 28.5 in doing so. It is well established that the terms of a contract are to be interpreted in the light of the contract as a whole. In Australian Broadcasting Commission v Australasian Performing Right Association Ltd,[110] Gibbs J stated:

It is trite law that the primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. Of course the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious one with another.[111]

[110](1973) 129 CLR 99.

[111]Ibid 109. See also McCann v Switzerland Insurance (2000) 203 CLR 579, 606 (Kirby J).

In Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd,[112] Barwick CJ stated that in searching for the parties’ contractual intention, ‘no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements.’[113]
[112](1968) 118 CLR 429.
[113]Ibid 437. See also Mineralogy Pty Ltd v Western Australia [2005] WASCA 69, [14]–[15], [68] (McLure JA, Steytler P and Roberts-Smith JA agreeing).

More recently, in Electricity Generation Corporation v Woodside Energy Ltd,[114] a majority of the High Court stated:

[T]his Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding “of the genesis of the transaction, the background, the context [and] the market in which the parties are operating”. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption “that the parties … intended to produce a commercial result”. A commercial contract is to be construed so as to avoid it “making commercial nonsense or working commercial inconvenience”.[115]

[114](2014) 251 CLR 640.

[115]Ibid 656–7 (French CJ, Hayne, Crennan and Kiefel JJ) (citations omitted).

In their submissions on the meaning of ‘prominent’ in cl 28.4(a), both NAB and Rose referred to TPG.[116] That case concerned the requirement in s 53C of the Trade Practices Act 1974 (Cth) that a corporation specify, in certain circumstances, a single price for goods or services ‘in a prominent way’. ‘Prominent’ was not defined in the legislation. Murphy J held that for the word to be given content, the single price had to be ‘more than … simply able to be read or seen’.[117] His Honour referred to dictionary definitions of ‘prominent’ and concluded:
[116][2011] FCA 1254.
[117]Ibid [124].

There is nothing in the context of the section or the Act which operates to give the word anything other than its natural meaning. Accordingly “prominent” in s 53C means that the single price is required to stand out so as to “strike the attention”, “be conspicuous”, “be easily seen” or “be very noticeable”, with the proviso that there is no requirement that the single price be as conspicuous as the specification of the $29.99 monthly charge.[118]
[118]Ibid [126].

His Honour later continued:

A determination as to whether the single price is sufficiently prominent can only be made by analysing the context in which the single price is specified in each of the three advertisements.[119]

He then considered the various components of the television, radio and newspaper advertisements in issue and concluded that it was unlikely that a ‘casual but not overly attentive observer’ would notice the single prices in the contexts in which they appeared.[120] Accordingly, each advertisement failed to satisfy the legislative requirement that the single price be prominently specified.[121]

[119]Ibid [131].

[120]Ibid [136].

[121]Ibid [138].

It is self-evident that Murphy J considered the meaning of the word ‘prominent’ in a specific statutory context. The contractual interpretation issue before this Court in the present case is quite different. Nevertheless, and with respect, his Honour’s observations usefully identify two key elements of the ordinary meaning of the word ‘prominent’: first, something that is prominent stands out such that it is conspicuous or likely to be noticed; secondly, whether something is prominent must be determined in a context. Those observations are apposite in the present case. The word ‘prominent’ is not defined in the guarantees signed by Rose or in the Banking Code. There is no indication that the parties intended it to bear anything other than its ordinary meaning. A reasonable businessperson would understand it to have that meaning in those circumstances.

Rose also referred to Rolfe,[122] where an issue before the New South Wales Court of Appeal was whether the appellant had knowledge of a contamination issue concerning a chaff product he had purchased. Between his purchase of the contaminated product and the time he fed it to his horses, he revisited the store from which he had acquired it. Evidence had been given that there was a ‘prominent notice’ on the counter warning of the recall of the product at that time. Santow JA, with whom Hodgson JA and McClellan AJA agreed, observed that the evidence did not specify where the sign was located, how visible it was, what it said or whether it was in a location the appellant, as an account customer, would ordinarily have gone to.[123] The appellant gave evidence that he did not see any sign.[124] In the circumstances, Santow JA found there was no sufficient basis for the trial judge to draw an inference that there was a prominent notice in the store. No finding that the appellant knew of the contamination could be made on the basis of the evidence regarding the sign.[125]
[122][2005] NSWCA 252.
[123]Ibid [92].
[124]Ibid [99].
[125]Ibid [100].

Rolfe is of limited assistance to the present case because it concerned the actual knowledge of the appellant rather than the content of any obligation to give him any prominent notice. Indeed, the words ‘prominent notice’ in that case derived from the evidence of a store employee. The evidence that the appellant did not see any sign was plainly relevant to the key issue, being whether he had knowledge of the contamination problem. We do not consider, and it was not submitted, that Santow JA concluded that the prominence of the sign depended on whether the appellant saw it. On the contrary, his Honour reasoned that a finding that the sign was prominent could not be supported without sufficient evidence of the sign’s context. While that conclusion may be accepted so far as it goes, it sheds little light on the interpretive issue in this case. This Court has more detailed evidence available to it in any event.

Before this Court, Rose did not fundamentally dispute NAB’s submission that for the purposes of cl 28.4(a), whether a notice is ‘prominent’ is a matter to be objectively determined.[126] Clearly, that is so. Commercial inconvenience would inevitably result if the prominence of a notice was to be assessed by the recipient, or if the bank had to satisfy itself that the notice had in fact come to his or her attention. Indeed, if that were the requirement, one would expect the contractual stipulation to be far more explicit. Accepting that, however, it remains that whether a notice is prominent is inherently a question of degree and one which must be answered in a context. To understand the cl 28.4(a) obligation, one must ask: how prominent does the notice have to be, and in comparison to what? In answering those questions, considering cll 28.4 and 28.5 together is instructive.
[126]Senior counsel for Rose submitted that the trial judge’s references to D’Angelo’s failure to bring the written warnings to Rose’s attention were part of his exposition of the context in which the guarantees were presented to Rose. In addition, he submitted that the judge’s references to Rose’s level of understanding of his potential liability went to the causation issue rather than the question of breach.

The scheme of cll 28.4 and 28.5 is to allow a prospective guarantor to consider certain key information overnight before signing a guarantee and to seek independent legal and financial advice if he or she wishes to do so. In addition to warranting that it will give the ‘prominent notice’ required by cl 28.4(a), the bank warrants that it will tell the prospective guarantor about the matters set out in cl 28.4(b)–(c), provide a copy of the various documents set out in cl 28.4(d), and give information requested under cl 28.4(e).[127] All such material could affect a prospective guarantor’s assessment of the risks involved in giving the guarantee. If the exception to cl 28.5 applies, because the prospective guarantor has obtained independent legal advice after receiving the information provided by the bank under cl 28.4, then the bank need not allow him or her until the next day to consider the information. In such circumstances the prospective guarantor would in any event be likely to have an understanding of the risks involved in signing the guarantee.
[127]Clause 28.4 is set out at [41] above.

All of these factors indicate that a purpose of the warranties in cll 28.4 and 28.5 is to give the prospective guarantor a minimum threshold opportunity to gain an understanding about the risks that may be involved in signing a guarantee. In that setting, the notice under cl 28.4(a) conveys particularly important messages for the prospective guarantor. It was not a token or trivial requirement. Bearing that in mind, in a context where the cl 28.5 obligation is complied with, a reasonable businessperson would understand ‘a prominent notice’ to be one that stands out from the other information provided by the bank such that it is likely to come to the attention of the prospective guarantor promptly, so as to facilitate and inform the contemplated review.

In the present case, however, it is not disputed that NAB failed to allow Rose until the next day to consider the information it provided to him in respect of each of the guarantees.[128] Whether the notices it gave him were ‘prominent’ thus fell to be considered in a very different context, in light of the substantially curtailed time Rose spent with the documentation, on any view of the evidence. To set that context aside would be to adopt an overly narrow interpretation that fails to take account of the existence and purpose of cl 28.5; if no review by the next day is to take place, it is not reasonable to ignore that fact. In such circumstances, a reasonable businessperson would expect ‘a prominent notice’ to be more markedly noticeable than might otherwise suffice, to reflect the prospective guarantor’s reduced opportunity to review the information he or she has received,[129] and the risk that the notice might otherwise be less likely to come to his or her attention. To put it another way, a notice that might be ‘prominent’ in a context where a day is to be taken for reviewing the information might not be ‘prominent’ in a context where it is not.
[128]The findings of the judge set out at [51] above were not disputed before this Court.
[129]It is not to the point that the bank might allow further time if requested by the prospective guarantor. The obligation under cl 28.5 remains to allow the prospective guarantor until the next day to consider the information before accepting a guarantee, unless the exception applies.

Turning to the requirement that the bank provide a ‘notice’, and NAB’s submission that this necessitated a written communication, it is plainly consistent with the language of the guarantees and the Banking Code and considerations of commercial convenience to consider that NAB could ordinarily meet its obligation under cl 28.4(a) simply by giving Rose a prominent written notice.[130] There is no basis for inferring any general obligation to provide oral notice or explanation of the requisite matters. That is not, however, to say that oral notice could never satisfy the cl 28.4(a) requirement[131] or that one should disregard oral communications forming part of the context in which a written notice is presented. As has been explained, consideration of that context is essential in assessing the prominence of the notice.
[130]It is possible that more may be required if the bank were aware that the prospective guarantor would have a particular difficulty reading a written document, though it is unnecessary to decide the matter in this case.
[131]As has been noted, it is unnecessary to determine that question in this case.

Based on this understanding of NAB’s obligation under cl 28.4(a), it is clear that the trial judge did not err in taking account of D’Angelo’s conduct at least insofar as it was part of the context in which the guarantee documentation was presented to Rose. It is also clear that the judge did not ignore the guarantee documentation. As stated earlier,[132] his Honour found that the documents were not in Rose’s possession except as part of the signing process, that D’Angelo knew Rose had not read the documents, and that D’Angelo never brought the written warning regarding independent legal and financial advice to Rose’s attention. Implicit in his Honour’s findings is a conclusion that the written documentation failed in the context in which it was presented to satisfy NAB’s cl 28.4(a) obligation. The question then is not whether the judge ignored the written documentation, but whether his Honour gave it the appropriate weight in the circumstances.

The written documents

[132]At [46]–[47].

NAB’s submission that it gave Rose a prominent notice of the matters required by cl 28.4(a) relied principally on the written warning on the cover page of each guarantee.[133] It may be accepted that the warning amounted to a ‘notice’ of the required matters. Given the way argument proceeded before this Court, it may also be assumed for present purposes that the guarantee documentation was ‘given’ to Rose for the purposes of cl 28.4(a).[134] The question then is whether it was ‘prominent’ in the requisite sense.
[133]See [34] above.
[134]In NAB’s submission, the written warning was ‘given’ to Rose when each guarantee was ‘delivered’ to him for signature. Such language may be thought inapposite, in view of the judge’s findings regarding the circumstances in which the guarantees were signed. On each occasion, D’Angelo arrived with the guarantee documentation (Reasons [41]–[42], [113]), showed Rose where to sign (Reasons [54], [60]) and, it appears, took the documentation with him without leaving a copy (see Reasons [303]–[307]). However, Rose’s argument proceeded on the basis that the documents were ‘provided’ to him, instead denying that they constituted ‘prominent notice’.

Within the confines of the guarantee document itself, the written warning clearly occupied a prominent position. If it were necessary to do so, we would accept that the warning would likely come to the attention of a person who reviewed the documentation as contemplated by cl 28.5. However, that does not entail that it was prominent in the context in which it was presented to Rose. It is necessary to consider in some detail what that context was, by reference to the factual findings of the judge.

As noted earlier,[135] D’Angelo and Rose had poor recollections of the occasions on which each of the guarantees was signed. The evidence was best in relation to the meeting on 18 June 2007, but even in relation to that meeting, D’Angelo’s account was ‘largely a reconstruction’[136] based on his ‘standard procedures’,[137] and when Rose was taken to the first guarantee in the witness box, he could not recollect actually signing it.[138]
[135]At [23] above.
[136]Reasons [57].
[137]Ibid [44].
[138]Ibid [61].

The trial judge preferred Rose’s evidence that the meeting went for at most 15 to 30 minutes.[139] D’Angelo had brought with him documentation related to three loan facilities. In respect of each loan, that documentation included a letter of offer, a letter in respect of ‘your proposed guarantee’, a mortgage, a guarantee (including a certificate) and a declaration by the guarantor.[140] D’Angelo guided the movement through the documentation.[141]
[139]See [27] above.
[140]See [24] above.
[141]See [25]–[26] above.

The judge observed there was ‘a large discrepancy between what D’Angelo is purported to have said based on his standard practice and what Rose purports to recall not being told by D’Angelo.’[142] If D’Angelo followed his standard procedure, he ‘looked at’ the cover page of each guarantee, and without going through it line by line, summarised it by saying that as a guarantor Rose would be responsible for the debt if the customer defaulted on the loan.[143] He then turned to the details page and outlined who the customer was and who the guarantors were, before turning to the page showing the amount being guaranteed and moving to the certification page.
[142]Reasons [223].
[143]Ibid [50].

The judge did not reach a conclusion as to whether D’Angelo followed his standard procedure on 18 June 2007 or the other relevant occasions. However, his Honour did find that NAB’s contemporaneous records of the meetings were not in a state such that they were able to support NAB’s case that banking procedures had been strictly followed.[144]
[144]Ibid [138]–[139].

The judge concluded that even if D’Angelo followed his standard procedures, NAB would have breached the cl 28.4(a) warranty. In relation to D’Angelo’s summary of the cover page warning, his Honour stated:

Assuming, for the moment, that such a summary of the warning page were given in the terms stated by D’Angelo, it amounted to no more than telling the guarantor that she or he would be responsible for the debt if the customer defaulted on the loan. Amongst other things not covered, such a summary would simply not make any reference to the required warning pursuant to cl 28.4(a)(i) of the Banking Code that independent legal and financial advice should be sought before signing the Guarantee.[145]

[145]Ibid [224].

His Honour later continued:

… D’Angelo did not, when taking Rose through the documents to whatever extent that he did, bring the notice as to independent legal and financial advice to Rose’s attention.
Furthermore, Rose did not read the warning himself. Even on D’Angelo’s account of what occurred in accordance with his standard practice, there is no proper basis to conclude that Rose availed himself of any opportunity to read any of the documents put before him on each occasion. On the contrary, based on the evidence of both D’Angelo and Rose, it is clear Rose never read the documents before signing and that D’Angelo was fully aware of this. At no time were the documents in Rose’s possession before signing, other than as part of the execution process.
Moreover, not only did D’Angelo fail to specifically point out the words “Warning Please Read” at the front of each Guarantee, and fail to tell Rose that Rose should seek independent legal and financial advice, but also Rose was not told he could refuse to sign each Guarantee, or that he had a right to limit his liability under each Guarantee.
NAB submitted that it was not necessary to articulate the warnings orally. So much may be accepted. But to comply with the Banking Code, NAB was required to give Rose “a prominent notice” of such matters. Simply “looking” at the front page and giving the inadequate summary that D’Angelo said formed part of his standard practice, and not inviting Rose to read any of its contents, did not give prominent notice of the required warnings.[146]

[146]Ibid [230]–[233].

It is clear that cl 28.4(a) imposed no obligation on NAB to ensure that Rose read the written warning or to read it out to him. The trial judge did not consider that it did. At the same time, it would defeat the purpose of NAB’s obligation[147] if cl 28.4(a) could be satisfied by the mere provision of the written warning regardless of the opportunity available to read it or the likelihood that it would be read. For the reasons already explained, the objective features of the surrounding context are plainly relevant to whether the written warning constituted a ‘prominent notice’ in the relevant sense.
[147]See [80]–[81] above.

It is clear enough that even if D’Angelo followed his standard practice on 18 June 2007, the written warning would have been on the table in front of Rose for a very limited time. Three sets of documentation were dealt with in the 15 to 30 minute meeting; the guarantee was only one document in each set and the written warning was only one part of that document. Given the volume of material to be dealt with, and the repetitive page-turning involved in the signing of the documents,[148] there was very little time available for any given step of the process. That remains so even allowing for the fact that the written warning appeared on each of the three guarantees signed at that meeting.
[148]By both D’Angelo and Rose’s accounts: Reasons [54], [60].

In addition, during whatever time the written warning was before Rose, D’Angelo was giving a summary of it which was incomplete. Although it is true that the judge made no finding that D’Angelo sought to distract Rose from the warning or to conceal it from him, it remains that while D’Angelo was speaking one would expect that Rose would be more likely to focus on what was being said than to read the written notice. D’Angelo’s summary was another source of information competing for Rose’s attention in the limited time before the page was turned. That is so notwithstanding that it covered some of the same ground as the warning. While the oral summary increased to some degree the likelihood that the written warning would come to Rose’s attention, it also carried the risk that listening to it could be perceived as a substitute for reading the warning.

In this case, although cl 28.4(a) does not require that the proposed guarantor actually reads a prominent notice he or she has been given, it is a matter of some significance that D’Angelo (and thus NAB) knew that Rose was not reading the documents. The meeting proceeded on the basis that he had no need to do so. This necessarily diminished the prominence of the written warning in the objective circumstances.[149] While it is not disputed that Rose could have read the warning if he had wished, that only created the possibility for the warning to be prominent; it does not establish that it was.
[149]See also ibid [275]–[276].

Implicit in NAB’s argument was the proposition that, since it was not incumbent upon D’Angelo to convey the warnings cl 28.4(a) required, Rose ought to have insisted on reading the written warning if he wished to gain an understanding of its contents, even though D’Angelo would have ostensibly summarised it as part of his standard procedure. That proposition disregards the manner in which NAB had Rose sign the guarantees, and overlooks that it was NAB’s obligation to provide a prominent notice of the cl 28.4(a) matters. The question is whether NAB provided Rose with such a notice in the context of the 18 June 2007 meeting. That context included the bank’s choice to convey some information orally and to not leave the documentation with Rose until the next day before obtaining his signature. Since NAB did not deal with Rose on the basis that he would read the documents, it cannot now assert that the prominence of the written warning should be assessed on the basis that he ought to have done so.

In all of the circumstances of the 18 June 2007 meeting as they are revealed by the evidence, we consider that the written warning would not have stood out such that it could be said to be a prominent notice as required by cl 28.4(a); its contents were insufficiently likely to come to Rose’s attention in the circumstances for it to be said that NAB complied with its cl 28.4(a) obligation.

The other written materials relied upon by NAB were not in a relevantly different position. The words under the boxed warning could not have been before Rose for any more time than the warning itself. While it is clear that the signature pages and guarantor certificates were put before Rose, given his signatures or initials appeared on them, the evidence as to how the meeting proceeded does not suggest that any of these pages were before Rose for any significant time. The features of the context earlier described are relevant too in assessing the prominence of these notices. In that context, it could not be said that they were any more prominent than the boxed written warning, or that by covering similar topics they in some way gave the necessary prominence to that written warning, as contended by NAB.

It follows that we do not consider the trial judge erred in finding that NAB did not provide Rose with a prominent notice as required by cl 28.4(a), consisting of the written guarantee documentation D’Angelo presented to Rose for signature.

As should be apparent, the above conclusion does not entail that written notices of the type NAB gave Rose could never constitute a prominent notice for the purposes of cl 28.4(a). If NAB had posted the guarantee documentation to Rose, or delivered it to him for the purposes of overnight review, the context of the written warnings on which it sought to rely would have been very different. It would also have been different if D’Angelo had given the required notice to Rose in person, separately from the other documents and before presenting him with those documents for signature. It is not necessary to determine whether the result in either such case would have been different, but to take such steps could not be considered overly burdensome in the ordinary course of commerce.

The oral communications

NAB urged against a construction of cl 28.4(a) which required or permitted statements made by D’Angelo in his meetings with Rose to constitute the prominent notice it warranted it would provide. However, by its alternative argument it contended that particular statements said to have been made by D’Angelo complemented the written documents, such that it could be said that in the circumstances, NAB gave Rose a prominent notice of certain cl 28.4(a) matters.

First, NAB relied upon D’Angelo’s evidence that as part of his standard procedure he would have asked whether Rose ‘would like’ to seek legal advice or was ‘happy to sign’ each guarantee.[150] We leave to one side the difficulties with the probative value of that evidence, given it was merely a reconstruction of what took place. In relation to these (and similar) statements, the trial judge said:

Self-evidently, such statements are far removed from D’Angelo warning a proposed guarantor that she or he should seek independent legal and financial advice before signing.[151]

[150]See [25] above.

[151]Reasons [225] (emphasis in original).

His Honour’s conclusion was clearly correct. Clause 28.4(a)(i) required NAB to give Rose ‘a prominent notice that [he] should seek independent legal and financial advice on the effect of [each guarantee]’. Although we would accept NAB’s submission that it was not required to insist that Rose obtain such advice, it was nevertheless required prominently to recommend that such advice be obtained. D’Angelo’s statements, if he followed his standard procedure, fell short of doing so, because they did not rise above the level of asking Rose what he wished to do. We reject NAB’s submission that D’Angelo’s question was a ‘natural’ way of recommending that Rose obtain legal advice in the circumstances.

Given that D’Angelo was aware Rose was not reading the documents, for the reasons already explained,[152] NAB’s submission that D’Angelo’s words ‘built upon’ the content of the guarantee document must also be rejected. Moreover, it might be thought that D’Angelo’s words had the potential to cloud the message cl 28.4(a)(i) required, by introducing the idea that signing the guarantees immediately was an acceptable alternative.
[152]See [96]–[97] above.

NAB does not dispute the trial judge’s finding that D’Angelo never expressly told Rose that he ‘should’ seek legal or financial advice on the effect of the guarantees.[153] In the circumstances of the 18 June 2007 meeting, the statements D’Angelo made if he followed his standard procedure, either alone or taken with the guarantee documentation, did not have the effect of giving Rose a prominent notice complying with cl 28.4(a)(i). Nor is there any basis for considering that D’Angelo’s statements had that effect on any of the subsequent occasions on which the guarantees in issue were signed.
[153]See Reasons [227]–[230].

Secondly, NAB relied upon the evidence that D’Angelo’s standard procedure involved confirming the amount to be guaranteed, and explaining that the guarantor would become responsible for paying the debt if the customer defaulted on the loan. We accept NAB’s submission that its obligation under cl 28.4(a)(iii) did not extend to ensuring that Rose was aware of the full extent of risk he was assuming. Rather, it required NAB to give Rose ‘a prominent notice that there [were] financial risks involved [in entering each guarantee]’.

To reiterate, the trial judge expressed his conclusion that cl 28.4(a)(iii) was breached in the following terms:

If D’Angelo followed what he stated was his standard practice and expressly told Rose that Rose could be responsible for the whole of the debt of each borrower, D’Angelo was, implicitly at least, informing Rose that there were financial risks involved. Accordingly, based on the alleged standard practice, clause 28.4(a)(iii) would have been complied with. However, D’Angelo failed to state clearly to Rose on any occasion that Rose would potentially be liable for the whole of the debt under the Guarantees. Further, he failed to state that there were financial risks for Rose in signing the Guarantees. Accordingly, clause 28.4(a)(iii) was also breached.[154]

[154]Ibid [235].

At the hearing of the application for leave to appeal, senior counsel for NAB took the Court to that paragraph and various other paragraphs of the trial judge’s reasons which, it was submitted, demonstrated error in his Honour’s understanding of the cl 28.4(a)(iii) obligation.[155] It was said that the judge progressively developed the obligation from one to give prominent notice of financial risk, to one requiring NAB to give Rose notice of the full potential extent of his liability under the guarantees and to ensure that he properly understood that extent before signing the guarantees. In response, Rose submitted that the judge considered the issue of Rose’s actual understanding because it arose in the context of the dispute as to causation.
[155]Ibid [246]–[248], [256].

With respect to the trial judge, it would appear that there were some difficulties in the way this issue was treated in his Honour’s reasons. As mentioned, his Honour reached an important conclusion in the causation context that if Rose had obtained legal advice, he would most likely have been informed of ‘the true extent of his potential liability’.[156] It appears that there was a degree of blurring between the questions of what NAB was required to tell Rose and what Rose would have learned if he had received legal advice, but ultimately the conclusion on causation renders this of no great consequence.
[156]Ibid [241]; see [52] above.

For present purposes, it is sufficient to observe that if D’Angelo followed his standard procedure on each occasion, he informed Rose of the amount being guaranteed and informed him that as guarantor he would be responsible for the debt if the customer defaulted on the loan. Assuming for the moment that an oral communication could amount to a notice for the purposes of cl 28.4(a), such a statement would, in our view, amount to a notice that financial risks were involved in entering the guarantees, and would have been sufficiently prominent in the context of the meetings to comply with cl 28.4(a)(iii). Although Rose laboured under a misapprehension which meant he may not have taken such a statement to mean that he could be liable for the full debt of each borrowing company, that misapprehension was not known to NAB. There was no objective indication that D’Angelo’s statement might fail to signal to Rose that he was assuming financial risks.

In view of our later conclusions on the issue of causation, it is not necessary to finally resolve the evidentiary difficulties regarding whether D’Angelo’s standard procedure was in fact followed each time, or the question whether a prominent oral communication could be sufficient. However, we record that even if D’Angelo failed to tell Rose expressly that he would potentially be liable for the whole of each borrower’s debt, and failed to tell him expressly that financial risks were involved in entering the guarantees, it would not follow as a matter of necessity that cl 28.4(a)(iii) was breached.[157]
[157]Cf ibid [235] set out at [50] above.

As noted earlier, in relation to cl 28.4(a)(ii) and (iv), NAB acknowledged that there was no evidence D’Angelo told Rose he could refuse to sign the guarantees or that he could limit his liability.

Conclusions as to breach

For the reasons stated above, the trial judge did not err in concluding that NAB breached the guarantees by failing to give Rose a prominent notice of the matters set out in cl 28.4(a)(i), (ii) and (iv). Accordingly, and for the reasons we now turn to explain, although NAB has established some error in the reasoning leading to the trial judge’s conclusion that cl 28.4(a)(iii) was breached, it is unnecessary to determine whether that conclusion was ultimately wrong.

Proposed Ground 2

NAB submitted that the trial judge made no findings that if NAB breached one or other of cl 28.4(a)(ii) or (iv) only, Rose would have declined to execute the guarantees.[158] However, and contrary to the starker position expressed in the proposed grounds of appeal, at the hearing of the application for leave NAB acknowledged that it could not overcome his Honour’s causation findings in respect of cl 28.4(a)(i) or (iii) if breaches of those provisions were established.
[158]It was said that the ‘transient mention’ of the fact that D’Angelo did not tell Rose he could limit his liability at Reasons [259] was not connected to the causation finding which followed.

Rose submitted that if NAB breached cl 28.4(a)(i), NAB’s appeal must be dismissed. He noted that NAB did not dispute the trial judge’s findings that (1) if Rose had been told he should obtain legal advice before signing the guarantees, he would have done so; (2) such advice would most likely have informed him of the true extent of his potential liability under the guarantees; and (3) if he had had that knowledge, he would not have signed any of the guarantees.[159] Rose further submitted that even if cl 28.4(a)(i) were left to one side, his Honour concluded that causation was established by an independent pathway.[160]
[159]Reasons [241].
[160]Rose referred to Reasons [259], set out at [54] above.

It may be accepted that the trial judge’s reasoning did not draw a direct link between the breaches of cl 28.4(a)(ii) or (iv) and Rose’s loss. In view of the other findings his Honour reached, there would not in any event appear to be a basis for a conclusion that Rose had an incorrect belief that he was required to enter the guarantees, or that he was unable to limit his liability under them, which the required prominent notice might have corrected. Rather, Rose’s problem was that he misunderstood the effect of the guarantees, because of what he understood from his discussions with Rice.[161]

[161]See [27] above.

Nevertheless, in view of the judge’s findings it was not necessary for his Honour to individually consider the sub-clauses of cl 28.4(a) in addressing the question of causation. NAB’s obligation under cl 28.4(a) was to give Rose a prominent notice of all of the matters listed in the sub-clauses. If it had done so, it would have given Rose a prominent notice that he should seek legal advice on the effect of the guarantees. While it is not to be assumed that such a prominent notice would necessarily have come to Rose’s attention, it would by its nature have been likely to come to his attention in the circumstances. Since NAB does not dispute the judge’s findings that this would have led to Rose seeking such advice, learning of his true exposure, and refusing to enter the guarantees, its appeal cannot succeed. NAB’s failure to give Rose a prominent notice as required by cl 28.4(a) caused him loss in the circumstances of this case.

Finally, we note that the error in the trial judge’s approach to cl 28.4(a)(iii) flowed through to his alternative conclusion as to causation.[162] Even if NAB did give Rose a prominent notice that financial risks were involved in entering the guarantees as required by cl 28.4(a)(iii), that would not in itself have given Rose such knowledge of the extent of his exposure that he would have refused to sign the guarantees.[163] Instead, it was obtaining legal and financial advice which was likely to give Rose that knowledge. While cl 28.4(a) required that Rose be given a prominent notice which, on the facts of this case, would likely have resulted in him consulting lawyers and being informed of the extent of his potential liability, it did not independently require NAB to inform Rose of the extent of that liability. However, since the judge’s alternative conclusion was independent of his principal findings as to causation, the correctness of those findings means that the error in the approach to cl 28.4(a)(iii) is of no consequence to the outcome of the appeal.
[162]Reasons [259].
[163]The trial judge accepted Rose’s evidence was that if he had been told on 18 June 2007 that there were financial risks involved in signing the first, second and third guarantees, that would have raised a ‘red flag’ in his mind: Reasons n 206. It is not clear that this would have led Rose to refuse to enter the guarantees, as opposed to postpone signing them while he sought legal advice. In respect of the sixth, seventh and eighth guarantees, the judge found that Rose knew he was assuming some risk: Reasons [142]. In cross-examination, Rose frankly conceded that if D’Angelo had said to him on those later occasions ‘there are financial risks for you in signing these documents’, he would have signed them in any event.

Conclusion

For the reasons stated above, we would grant NAB leave to appeal the trial judge’s decision, but would dismiss the appeal.

FERGUSON JA:

I have had the advantage of reading in draft the reasons of the Chief Justice and McLeish JA. I adopt their Honours’ summary of both the facts and the trial judge’s findings. I also adopt the defined terms which they have used.

For the reasons which follow, and with respect, I have come to a different conclusion from that reached by the Chief Justice and McLeish JA. In my opinion, in the circumstances of this case which involves a successful and wealthy businessman as guarantor, NAB did give a prominent notice of the matters set out in cl 28.4(a)(i)–(iv) of the Banking Code. I would grant leave to appeal and would allow the appeal.

I agree with the Chief Justice and McLeish JA that to be prominent the notice must stand out in the sense that it must be conspicuous or likely to be seen. Whether a notice satisfies this requirement must be determined objectively. Whether it is actually seen or read is irrelevant. Whether a notice in a particular form is prominent may vary from case to case. So, for example, a notice may stand out if the person has a day to look at the document in which it appears but that same notice may not be conspicuous if the recipient has less time. Similarly, a notice given to an experienced businessperson may stand out sufficiently (because one would expect them to be familiar with lengthy and sometimes complex documentation containing warnings) when that same notice would not suffice if given to a person who had never been in business. Put another way, whether a notice is conspicuous or stands out is affected by the context in which it is given, including to whom it is given.

Here, the relevant context known to NAB and to Rose when he signed the first tranche of three guarantees on 18 June 2007 was:

(l) Rose had been very successful in business and had been a director of a company which manufactured and sold bike helmets;[164]
[164]Reasons [171], [172(9)]. D’Angelo gave evidence that he was told that Rose had been a successful businessman in the past, he had sold a business and was looking to potentially invest in a joint venture with Rice: T47.6–9; T91.2–4. He also gave evidence that he had been told that Rose had been involved in a helmet business that had been built up and on-sold: T91.5–6.

(m) Rose had net assets of $23 million[165] of which $11 million was in cash and the balance in property;[166]
[165]Reasons [6], [19], [26].
[166]Ibid [26], [172(9)].

(n) Rose was perfectly capable of protecting his own interests and obtaining his own advice if he wanted to do so;[167]
[167]Ibid [172(9)].

(o) there was to be a 50/50 joint venture between Rice and Rose;[168]
[168]Ibid [15]–[17], [172 (3)].

(p) NAB was lending approximately $5.7 million[169] to companies of which Rice and Rose were the directors;[170]
[169]Ibid [35].
[170]Ibid [30].

(q) Rice negotiated with NAB on behalf of himself and Rose (with Rose’s permission);[171]
[171]Ibid [30], [172(4)].

(r) the loan funds were to be used for part of the purchase price for three investment properties in Mermaid Beach;[172]
[172]Ibid [35], [33].

(s) Rose was contributing $5 million in cash towards the purchase of the properties;[173]
[173]Ibid [36].

(t) it was not unusual or unexpected that NAB would seek the securities (including the guarantees) that it did,[174] and Rose knew that he was signing guarantees;[175]
[174]Ibid [172], [187].
[175]Ibid [65], [247], [258].

(u) the first time that Rose saw the loan related documents, including the guarantees, was when D’Angelo brought them to Rose’s home for signing;[176]
[176]Ibid [42], [113], [231].

(v) the meeting during which the documents were signed took approximately 15 to 30 minutes;[177]
[177]Ibid [46].

(w) during the meeting, Rose was attentive to what he was being told;[178]
[178]Ibid [249].

(x) for each loan the documents included a letter of offer (36 pages), a letter addressed to Rice, a 17 page guarantee and indemnity (including the Banking Code), a certificate by guarantor, a declaration by guarantor and a mortgage;[179]
[179]Ibid [42].

(y) there was a notice on the front page of each guarantee setting out the information required to be given under the Banking Code and there was a further notice above where Rose signed each guarantee (copies of those pages from the first guarantee are attached to these reasons);[180]
[180]Rose’s signature and initials also appear on other pages of the guarantees.

(z) NAB agreed that it would not ask Rose to sign the guarantees unless it had allowed him until the next day to consider the information in respect of which it was to give a prominent notice;[181]
[181]Cl 28.5(b) of the Banking Code which applied to the guarantees by reason of cl 5 of the guarantees.

(aa) there was no attempt by D’Angelo to give Rose until the next day to consider the guarantees and the information required to be given;[182]
[182]Reasons [236].

(bb) there were ‘sign here’ stickers on the pages to be signed by Rose;[183]

(cc) in respect of each document, the pages were turned to get to each tagged page that needed to be signed until all relevant pages were signed;[184]

(dd) Rose took no opportunity to read the guarantees.[185]

[183]Ibid [54].

[184]Ibid [54], [60].

[185]Ibid [113], [231].

In this context, objectively considered, there was no evidence establishing that NAB knew that Rose misunderstood his obligations under the guarantees and there was nothing from which it could be inferred that NAB had such knowledge. The judge so held.[186]
[186]Ibid [174].

The judge’s reasons focussed on what D’Angelo said, rather than focussing on the written document. This appears to have distracted the judge from the relevant question to be answered. To my mind, while what D’Angelo said and how the meeting was conducted gives context, it says nothing about whether any part or parts of the guarantees constituted a prominent notice. The only attention which the judge seems to have given to whether the front page of the guarantees constituted a prominent notice appears in the following passage of his reasons:

NAB submitted that it was not necessary to articulate the warnings orally. So much may be accepted. But to comply with the Banking Code, NAB was required to give Rose “a prominent notice” of such matters. Simply “looking” at the front page and giving the inadequate summary that D’Angelo said formed part of his standard practice, and not inviting Rose to read any of its contents, did not give prominent notice of the required warnings.[187]

[187]Ibid [233].

With respect, I do not agree with the judge that ‘simply “looking” at the front page’ would not satisfy the prominent notice requirement here. It must be remembered that the enquiry is whether the notice stands out such that it would be likely to be seen. A copy of the cover page of the first guarantee is attached to these reasons. That page has a large heading in bold font ‘Guarantee and Indemnity.’ Immediately beneath it there is a box which draws attention to the text inside it. That text starts with the word ‘Warning’ in bold font. Beneath it, also in bold, are the words ‘Please Read.’ Those three words, their placement at the top of the boxed section of the page (beneath the description of the document as a guarantee) and the bold font in which the three words appear, would be expected to draw the eye of the recipient to the information that appears below them. That information is set out in dot points in a font size and layout such that it is easily readable. The first four dot points set out the information required by cl 28.4(a)(i)–(iv). Indeed, in the case of the requirement under cl 28.4(a)(iii) to give a prominent notice that there are financial risks involved, the relevant dot point goes further than required by giving an example of the financial risk — ‘for example, it may become necessary for you to sell your assets so that you can pay NAB.’

I do not overlook the fact that the signing meeting was of relatively short duration, that there were many documents to be signed, that the relevant signature pages were tagged but the front page was not and that there was movement from one tag to the next for signing. If the front page was before an experienced businessman, like Rose, who knew he was signing a guarantee as part of the finance for an investment property joint venture, he would be expected to see from a very quick glance at the cover of the document that there was a warning to read the document and the information in the boxed section.[188]
[188]The situation may be different if the cover page was partially obscured or if the bank officer misled or distracted the guarantor. There are no findings to that effect here.

The judge did not, however, make a finding that the front page of each guarantee was before Rose. In my view, this does not matter. This is because of the additional information that was set out on the page that Rose signed. A copy of that page from the first guarantee is attached to these reasons. There are boxed sections of the page which draws attention to it. The font size enables easy reading. Clear language is used. At the top of the page appears the word ‘IMPORTANT’ in bold capitalised print. Beneath that, again in bold capitalised text, appears ‘BEFORE YOU SIGN.’ Immediately below that are three dot points. Although not in bold font, the first is in capital letters — ‘READ THE GUARANTEE AND INDEMNITY AND THE TERMS RELATING TO THE CREDIT CONTRACT OR OTHER FACILITY OR FINANCIAL OBLIGATION TO BE GUARANTEED.’ There then follows the suggestion that the guarantor should obtain independent and financial advice and should make their own inquiries about the customer. There is then another bold and capitalised heading — ‘THINGS YOU MUST KNOW.’ Beneath that appears more dot points. The first deals with personal responsibility of the guarantor; the second deals with financial risk and includes the statement ‘This could mean you lose everything you own including your home;’ the third concerns ability to withdraw from the guarantee and to limit liability with a statement that the guarantor should ask their legal adviser about this before signing the guarantee. This information is positioned in the first third of the page. The guarantor’s signature is a few centimetres below.

The information on the signature page stands out and would be expected to be seen by a person such as Rose when they came to sign the page. This is so even though the page had a ‘sign here’ sticker on it, the pages of the document were flicked through to get to that page and that the information is above rather than adjacent to the signing clause (a fact upon which the judge seems to have placed at least some weight).[189] There is no allegation that when Rose came to sign this page, D’Angelo concealed or otherwise obscured the top portion of it. Nor is there any allegation that he otherwise misled or distracted Rose.
[189]Reasons [276].

The information on the signature page may not include all of the information that must be given by cl 28.4(a). For example, there does not seem to be any specific statement that the guarantor can refuse to enter into the guarantee.[190] Consequently, of itself it may not satisfy the requirement to give a prominent notice of all of the matters specified in cl 28.4(a). But what the information on the signature page does do is direct the guarantor to read the guarantee. In other words, it directs the guarantor to look at the front of the document that has the boxed and clear notice, thus satisfying the giving of a prominent notice requirement.
[190]Clause 28.4(a)(ii).

NAB breached the requirement in cl 28.5(b) to allow Rose until the next day to consider the cl 28.4(a) information. That breach did not cause any loss because it is highly probable that if Rose had been given until the next day to consider the documents on each occasion, he would not have bothered to read them.[191] I agree with the Chief Justice and McLeish JA that where less than the contractual time is given to consider the information, it would be expected that the notice would be more markedly conspicuous than might otherwise suffice. However, the converse of that proposition is that less prominence would be expected than would otherwise be necessary if the information was to be with the recipient until the next day. Consequently, to my mind, neither the inclusion of the warranty in cl 28.5(b) nor its breach assists in determining whether the notice that was given was a prominent notice in the circumstances of this case. For it to be significant, it would first be necessary to establish that the notice included in the document was only the bare minimum required to satisfy the warranty in circumstances where the guarantor was to be allowed until the next day to consider the information. But that premise has not been established. The notice in this case went beyond the minimum required in those circumstances. It is not necessary to specify all the ways in which it did. Two examples suffice. First, it gave both the relevant information on the front page and the further notice on the signature page. Second, if the guarantor was to have until the next day to consider the information, then the boxing of the text on the front page was not essential. Hence, it does not follow that the notice that was given was not sufficient to satisfy the requirement of a prominent notice. The essential enquiry remains whether this notice was a prominent notice in the context described above.
[191]Reasons [281].

While there are differences in the format and content of some of the other guarantees taken after the first three, the position is not materially different in respect of them.[192]
[192]The font size of some of the later guarantees was slightly smaller: Reasons [90]. Other differences included the omission of some of the wording beneath the boxed section on the front page of the guarantee, different positioning and text of the information on the signing page and inclusion in some of the later guarantees of additional material about what a guarantee is.

In view of the conclusion which I have reached, it is not necessary to consider whether a prominent notice could be given by a bank officer explaining the required information. Nor is it necessary to consider the causation issues raised by ground 2.

ATTACHMENTS:

1) Front page of the first guarantee

2) Signature page of the first guarantee

[2016] VSCA 169

21 July 2016