FEDERAL COURT OF AUSTRALIA
VID 534 of 2016
Date of judgment:
30 September 2019
CONTRACTS – whether release extended to certain claims – application of legal and equitable principles of construction applicable to wide or general words of release.
CONTRACTS – Unjust contracts – When contract or provision of contract is “unjust” – Where money borrowed for farming purposes on basis of business plan prepared on behalf of borrower – Bank applied standard assessment tools and not indifferent to purpose and practicality of loans.
CONTRACTS – Unjust contracts – provisions of heads of agreement settling dispute resulted in the inevitability of default and were unnecessary to protect the legitimate interests of the Bank – provisions “unjust” but were not enforced so no relief declaring the provisions void granted.
BANKING AND FINANCIAL INSTITUTIONS – scope and content of obligation to participate in a mediation in good faith – whether Bank breached its obligations pursuant to the Code of Banking Practice – whether Bank engaged in asset lending – whether Bank breached cll 3.2 and 28.2 of the 2013 Code of Banking Practice in refusing to accept refinancing offers
MORTGAGES – sale of assets under power – remedies of mortgagor - consideration of Bank’s obligations upon sale.
EQUITY – a mortgagor alleging that a mortgagee has exercised a power of sale in such a way that the equity of redemption has been lost discloses no cause of action at common law the proper remedy is a suit in equity for an account on the footing of wilful default – Coroneo v Australian Provincial Assurance Association Ltd (1935) 35 SR (NSW) 391 applied.
EVIDENCE – whether s 18F of the Farm Debt Mediation Act 1994 (NSW) preventing evidence being adduced as to what occurs during a farm debt mediation is picked up by s 79 of the Judiciary Act 1903 (Cth) in respect of proceedings in the Federal Court where admissibility is governed by ss 55 and 56 of the Evidence Act 1995 (Cth) – provision not picked up.
EVIDENCE – no Dobbs v National bank of Australasia Limited (1935) 53 CLR 643 certificate proving debt – Bank tendered some business records and adduced some evidence relevant to proving debt – whether evidence sufficient to prove alleged cross-claim debt.
DISCOVERY – allegation that discovery obligations not complied with such that there could not be a proper testing in evidence of the credit assessments – whether Kuhl v Zurich inference should be drawn
Competition and Consumer Act 2010 (Cth) s 82
Contracts Review Act 1980 (NSW) s 9
Conveyancing Act 1919 (NSW) s 23C
Duties Act 1997 (NSW) s 304
Evidence Act 1995 (Cth) s 55, 56, 144
Farm Debt Mediation Act 1994 (NSW) Pt 2, s 11, s 14, 4, 8, 11AA, s 18F
Farm Debt Mediation Amendment Act 2002 (NSW)
Federal Court of Australia Act 1976 (Cth)
Judiciary Act 1903 (Cth) s 79
Legal Profession Uniform Conduct (Barristers) Rules 2015 rr 64 and 65
National Credit Code
Real Property Act 1900 (NSW) ss 42, 57
Registration of Deeds Act 1897 (NSW)
Transfer of Land Act 1958 (Vic) s 42
Alexander v The Queen (1981) 145 CLR 395
Attorney-General (NSW) v World Best Holdings Ltd  NSWCA 261; (2005) 63 NSWLR 557
Australia and New Zealand Banking Group Limited v Bangadilly Pastoral Co Pty Limited (1978) 139 CLR 195
Australian Competition and Consumer Commission v EDirect Pty Ltd  FCA 1045
Australian Guarantee Corporation Ltd v De Jager  VR 483
Australian Securities and Investments Commission v Hellicar  HCA 17; (2012) 247 CLR 345
Bennett v Elysium Noosa Pty Ltd (in liq)  FCA 211
Blatch v Archer (1774) 1 Cowp 63; 98 ER 969
CIC Insurance Limited v Bankstown Football Club Limited (1997) 187 CLR 384
CCL Secure Pty Ltd v Berry  FCAFC 81
Commonwealth Bank of Australia v Hadfield  NSWCA 350
Commonwealth Bank of Australia v Iinvest Proprietary Limited (No 9)  NSWSC 1276
Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission  FCAFC 132; (2007) 162 FCR 466
Coroneo v Australian Provincial Assurance Association Ltd (1935) 35 SR (NSW) 391
Dixon (Trustee) v Citiline Developments Pty Limited, in the matter of Nasr (Bankrupt)  FCA 1446
Dobbs v National bank of Australasia Limited (1935) 53 CLR 643
Fast Fix Loans Pty Ltd v Samardzic  NSWCA 260
Festa v The Queen  HCA 72; (2001) 208 CLR 593
Gestmin SGPS SA v Credit Suisse (UK) Limited  EWHC 3560 (Comm)
Gibbons v Wright (1954) 91 CLR 423
Grant v John Grant & Sons Proprietary Limited (1954) 91 CLR 112
Hawkesbury Valley Developments Pty Ltd v Custom Credit Corporation  ANZ Conv R 361
Haynes v St George Bank a Division of Westpac Banking Corporation  SASCFC 51
Jones v Dunkel (1958) 101 CLR 298
Julstar Pty Ltd v Hart Trading Pty Ltd  FCAFC 151
Kuhl v Zurich Financial Services Australia  HCA 11; (2011) 243 CLR 361
Kowalczuk v Accom Finance Pty Ltd  NSWCA 343; (2008) 77 NSWLR 205
Lindfield Developments Pty Limited v Shuangxing Development Pty Limited  NSWSC 68
MBF Investments Pty Ltd v Nolan  VSCA 114; (2011) 37 VR 116
McCourt v National Australia Bank  WASC 121
Mealey v Power  NSWSC 1678
Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 6)  FCA 82
Murphy v Overton Investments Pty Limited  FCAFC 129
National Australia Bank Limited v Smith  NSWSC 1605
National Commercial Banking Corp of Australia v Hedley  ANZ ConvR 420.
Nemeth v Australian Litigation Funders Pty Ltd  NSWCA 198
Onassis and Calogeropoulos v Vergottis  2 Lloyd’s Rep 403
Paciocco v Australia and New Zealand Banking Group Limited  FCAFC 50; (2015) 236 FCR 199
Perera v Genworth Financial Mortgage Insurance Pty Ltd  NSWCA 19; (2017) 94 NSWLR 83
Perpetual Trustee Co Ltd v Khoshaba  NSWCA 41; 14 BPR 26,639
Performance Capital Mortgage Pty Ltd v Motive Finance & Leasing Pty Ltd  NSWSC 429
Re Colorado Products Pty Ltd (in prov liq)  NSWSC 789; (2014) 101 ACSR 233
Sarina v Fairfax Media Publications Pty Ltd  FCAFC 190
St George Bank Ltd v Trimarchi  NSWCA 120
Strzelecki Holdings Pty Ltd v Cable Sands Pty Ltd  WASCA 222; (2010) 41 WAR 318
Turner v Windever  NSWCA 73; (2005) ANZ Conv R 214
Ultimate Property Group Pty Ltd v Lord  NSWSC 114; (2004) 60 NSWLR 646
Varma v Varma  NSWSC 786
Waller v Hargraves Secured Investments Limited  HCA 4; (2012) 245 CLR 311
Watson v Foxman (1995) 49 NSWLR 315
West v AGC (Advances) Ltd (1986) 5 NSWLR 610
Ye v Zeng (No 7)  FCA 1478
Tyler, E L G, Fisher and Lightwood’s Law of Mortgage (3rd ed, 2013)
Date of last submissions:
2 April 2019
National Practice Area:
Commercial and Corporations
Commercial Contracts, Banking, Finance and Insurance
Number of paragraphs:
Counsel for the Applicants:
Mr P E King with Mr I Leong
Counsel for the Respondents:
Mr A R Zahra with Mr D J McDonald-Norman
Solicitor for the Respondents:
DATE OF ORDER:
30 SEPTEMBER 2019
THE COURT ORDERS THAT:
1. By 4pm on 4 October 2019 the parties provide to the Court agreed minutes of order reflecting these reasons for judgment or, in the absence of agreement, competing minutes of order identifying the orders for which the parties contend.
2. In the event orders cannot be agreed, the proceeding is to be listed on a date to be notified by the Associate to Justice Lee for the purposes of the Court receiving the submissions of the parties as to the competing orders.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
1 The applicants (Fuges) are a farming family. They feel a great affinity for the land they have toiled and feel a sense of injustice at the prospect of the connexion they have with that soil being severed. What follows is a tale of bad luck, miscalculation and wilfulness from which neither the Fuges nor the first respondent (Bank) emerges unscathed. The difference is that for the Fuges, their miscalculations have been life altering; for the Bank, it will presumably recover the money that is owed to it and move on.
2 This proceeding has several unfortunate characteristics which are recurringly seen by anyone experienced in banking litigation. One is that people experiencing a sense of grievance and in financial distress litigate at length over family property and incur costs which they cannot afford and are not well proportioned to the value of any claim. A second is that claims warranting relief are made on a less than compelling basis. A third is that sage advice encouraging a client to overcome their sense of grievance and salvage what they can from the wreckage, is either absent or not followed. A fourth is the making of a partly absurd claim by lawyers which can serve to distract attention away from other claims which may have merit, and entrenching the hostility of the opposing party. Justice Bryson said in the context of family equity suits in Turner v Windever  NSWCA 73; (2005) ANZ Conv R 214 at 222 , a “Judge in Equity recurringly sees families destroy their economic positions and well-being in similar ways, and it is not in the Court’s power to stop it”. The same can be said for disputes of the present type.
3 The Fuges conducted their farming business on three properties near Forbes in the Central West region of New South Wales. One property (Kennedia West) was owned by Mr Anthony Fuge and the other two properties (Greenfields and Lenborough) were owned by both Anthony Fuge and Mr Matthew Fuge as tenants-in-common in equal shares (I will describe all three properties collectively as the Properties). The Fuges also owned water rights associated with each of the Properties (Water Rights). Until sometime around late 2008, the Fuges conducted a partnership (Partnership) which apparently operated the farming operations. The Partnership dissolved as a trading entity in 2008, from which time Anthony Fuge continued to conduct all farming operations in his own name.
4 Prior to August 2008, the Fuges had various loans with Elders Rural Bank Ltd (Elders). By mid-2008, they used the services of a finance broker, Ms Sue Cohen, to seek to arrange alternative finance. Ms Cohen approached the Bank with a business plan prepared by Anthony Fuge in an effort to refinance with the Bank.
5 The Fuges advance a multitude of claims against the respondents. It is no longer necessary to detail the claims made as against the second and third respondents, as these were belatedly discontinued on the second day of the hearing. As against the Bank, for reasons which will become evident, it is not presently useful to attempt a detailed summary of the pleadings. It is best to begin by outlining in some detail the background to the dispute.
6 In late 2008, the Bank approved the Fuges’ application for finance and two “AgriAdvantage Plus” facilities were established, totalling $1.65 million, namely:
(a) $900,000 AgriAdvantage Plus facility for Anthony Fuge recorded in a letter of offer/facility agreement dated 7 August 2008 (signed by Anthony Fuge on 21 August 2008), comprising:
(i) $750,000 “better business loan” with a 5 year term (with the stated purpose being “refinance of existing finance”); and
(ii) $150,000 overdraft facility with an indefinite revolving term but repayable on demand (with the stated purpose being “working capital”);
(b) $750,000 AgriAdvantage Plus facility for Matthew Fuge recorded in a letter of offer/facility agreement dated 7 August 2008 (signed by Matthew Fuge on 12 September 2008); the facility comprised a better business loan for $750,000 with a 5 year term (with the stated purpose being “refinance of existing finance”).
7 These facility agreements required security to be provided by the Fuges, which comprised:
(a) three registered mortgages over the Properties, all dated 1 October 2008 (being the Kennedia West Mortgage; the Lenborough Mortgage; and the Greenfields Mortgage);
(b) first equitable charges over the three bundles of Water Rights;
(c) guarantee given by Anthony Fuge in respect of the borrowings of Matthew Fuge; and
(d) guarantee given by Matthew Fuge in respect of the borrowings of Anthony Fuge.
(collectively, the 2008 Original Securities)
8 Anthony Fuge executed his documents at Lenborough on 15 September 2008, in the presence of Mr Richard Hewitt, and Matthew Fuge executed his documents in Hong Kong. On 9 October 2008, the refinance of the Fuges’ Elders loans settled and the Bank paid Elders a sum of $1,423,046.90.
9 On 13 October 2008, the Bank wrote to both the Fuges confirming the establishment of the $750,000 better business loans with terms of five years. Over time, a series of changes were made to the original 2008 credit facilities with the 2008 Original Securities largely remaining in place. The changes were in the nature of advancing further funds, rolling-over loans and extending some liabilities. The changes are recorded in various letters of offer/facility agreements, signed by the Fuges as required.
10 In May 2009, the Bank extended a further AgriBusiness Line of Credit facility up to $130,000 to Anthony Fuge. This increase in the facilities required additional security in the form of a business and livestock mortgage to be given by both Fuges over all assets, including Merino sheep at Lenborough, Greenfields and Kennedia West (Business Mortgage). No additional funds were advanced or extended to Matthew Fuge, but the guarantee previously given by him in respect of Anthony Fuge’s liabilities was required to be extended to a new total of $1.03 million.
11 In February 2010, the Bank provided a further AgriAdvantage Plus better business loan in the amount of $100,000 to the Fuges. The security remained the same.
12 By February 2011, the one-year $100,000 better business loan had expired, and the Bank agreed to “roll over” that loan for a further one-year term. The security remained the same, other than the Business Mortgage previously given by both Fuges being replaced with a new mortgage to be given only by Anthony Fuge (Livestock Mortgage).
13 The evidence then discloses further letters of offer/facility agreements dated 22 February 2011, which record the Livestock Mortgage to be given by Anthony Fuge. The Livestock Mortgage appears to have been signed by Anthony Fuge on 25 February 2011, although the FASOC asserts this to be the product of forgery. The Livestock Mortgage was a mortgage over “all assets and uncalled capital including Merino Sheep depastured at” Lenborough, Greenfields and Kennedia West.
14 In March 2012, the $100,000 better business loan was rolled over for a further one-year term. In May 2012, the Bank extended and increased the $100,000 better business loan. The loan was extended to 27 March 2013 and the amount increased to $200,000. Again, the security did not change.
15 By 30 April 2012, the temporary extension of Anthony Fuge’s overdraft facility was required to be reduced back to $150,000. On 27 March 2013, the $200,000 better business loan (from May 2012) expired and was required to be repaid by the Fuges. On 9 October 2013, the $750,000 better business loans granted to each of Anthony and Matthew Fuge in 2008 were due to be repaid. The Fuges did not comply with any of these obligations.
16 On or about 21 February 2014, the Bank issued a notice to the Fuges (s 8 Notice), pursuant to s 8 of the Farm Debt Mediation Act 1994 (NSW) (FDMA). The s 8 Notice identified that a total amount of $2,247,680.83 was then owing by the Fuges and that the Bank intended to take enforcement action. On 21 March 2014, Anthony Fuge sent an email to Mr Hewitt (which was then forwarded to Mr Matthew Maxwell) attaching a notice pursuant to s 9 of the FDMA, in which the Fuges requested a mediation. On the same day the Bank’s solicitors notified the Rural Assistance Authority that a mediation was required.
17 The Fuges engaged Mr Stephen Jay as their Rural Assistance Counsellor to assist them in relation to the mediation and their negotiations with the Bank. Mr Jay, on behalf of the Fuges, proposed that Mr David Bogan be appointed mediator and the Bank agreed.
18 A farm debt mediation took place on 17 July 2014 (Mediation). It was attended by Mr Maxwell and a solicitor from the Bank, as well as the Fuges and Mr Jay. Mr Bogan attended as mediator. The Mediation began at approximately 10am and concluded in the early afternoon. Precisely what occurred at this mediation will be considered in detail in Section E.4.3 below.
19 Unlike in many cases involving mediations, here we know some of what occurred by reason of evidence being adduced by the parties. It is necessary to explain why. The issue is one which I discussed in Dixon (Trustee) v Citiline Developments Pty Limited, in the matter of Nasr (Bankrupt)  FCA 1446 in a different context; that being whether s 79 of the Judiciary Act 1903 (Cth) (JA) picks up s 304 of the Duties Act 1997 (NSW).
20 In the present case, the relevant section, s 18F (previously s 15) of the FDMA provides that:
18F Confidentiality of mediation sessions
(1) Evidence of anything said or admitted during a mediation session and a document prepared for the purposes of, in the course of or pursuant to, a mediation session are not admissible in any proceedings in a court or before a person or body authorised to hear and receive evidence.
(2) In this section, mediation session includes any steps taken in the course of making arrangements for a mediation session or in the course of the follow-up of a mediation session.
(3) This section does not apply to the following documents:
(a) a mediation agreement,
(b) a contract, deed, mortgage or other instrument entered into as a result of, or pursuant to, a mediation agreement,
(c) a summary of mediation under section 18O.
(4) This section does not apply to proceedings commenced with respect to any act or omission in connection with which the information has been disclosed on the basis of preventing or minimising the danger of injury to any person or damage to any property.
21 Of course in this justiciable controversy wholly within federal jurisdiction, the FDMA only applies by operation of s 79(1) of the JA, which provides:
The laws of each State or Territory, including the laws relating to procedure, evidence, and the competency of witnesses, shall, except as otherwise provided by the Constitution or the laws of the Commonwealth, be binding on all Courts exercising federal jurisdiction in that State or Territory in all cases to which they are applicable.
22 The FDMA therefore only operates as surrogate federal law to the extent that it is not inconsistent with either the Constitution or, relevantly here, a law of the Commonwealth. The evidence of what occurred during the mediation is unquestionably relevant to a fact in issue in this case, meaning it is relevant within the meaning of s 55 of the Evidence Act 1995 (Cth) (EA), being the law governing admissibility at this hearing. It follows that pursuant to s 56(1), except as otherwise provided by “this Act” (that is, the EA), evidence that is relevant in a proceeding, is admissible in the proceeding. The s 18F exception preventing admissibility of otherwise relevant evidence, is not “picked up” and applicable in the present circumstances (although it would have had applicability in the event a New South Wales court exercising federal jurisdiction was determining this matter, as another New South Wales Act – rather than a law of the Commonwealth – would be regulating issues of admissibility). When my preliminary view along these lines was drawn to the attention of the parties at the commencement of the hearing when dealing with objections, the objections previously maintained by the Bank as to the admissibility of evidence as to what occurred at the mediation were not pressed.
23 In any event, at the conclusion of the Mediation, a document entitled “Heads of Agreement” was signed by all parties (HOA).
24 The HOA included the following express terms which are of particular note in this proceeding:
(a) the [Fuges] acknowledge and agree that they are in default of the Transaction Documents … by virtue of the Defaults specified in the Section 8 Notice (cl 3.1.1);
(b) the [Fuges] acknowledge and agree that the Amount Owing [being, $2,247,680.83] is immediately due and payable by them to the [Bank] (cl 3.1.2);
(c) the [Fuges] are required to repay to the [Bank] the Amount Owing, together with accrued interest and costs by 30 November 2014 (c 5.1);
(d) the [Fuges] must make a payment of $50,000 to the [Bank] by 20 August 2014 (cl 5.2);
(e) the [Fuges] acknowledge and agree that their obligations to the [Bank] to repay the Amount Owing are secured by the Securities [set out in the s 8 Notice Notice] (cl 3.1.3);
(f) the [Fuges] release and discharge the [Bank] from all claims against the [Bank] arising from or in connection with the Transaction Documents (cl 4.2);
(g) by 31 July 2014, the [Fuges] must obtain market appraisals and sale methodology advice from 3 licensed agents as to the most appropriate method of sale for each of the Properties (on basis of the timeframes agreed within this Agreement) together with sales price guidance for each Property (cl 5.3);
(h) by 7 August 2014, the [Fuges] must provide to the [Bank] copies of the selling agents’ signed agency agreements for the sale of each of the Properties and details of the marketing campaign proposed for the sale of the Properties (cl 5.4);
(i) The [Fuges] must provide the [Bank] … with written fortnightly updates … as to the progress of the sale campaign for the Properties including a list of all interested parties, inspections conducted and any interim offers to purchase the Properties (cl 5.5);
(j) by 15 October 2014, the [Fuges] must provide to the [Bank] for its approval in writing, unconditional contracts for the sale of each of the Properties with a sale price sufficient to repay the Amount Owing, together with accrued interest and costs and a settlement date of not (sic) longer than 42 days from the date of exchange of a signed contract for sale (cl 5.6);
(k) in the event that the [Fuges] fail to comply with a term of this Agreement or commit any further defaults under the Facilities, they agree to:
(i) deliver up vacant possession of all of the Properties;
(ii) consent to judgment in favour of the [Bank] for the Amount Owing plus accrued interest and costs and possession of the Properties;
(iii) not do anything to interfere with the [Bank] taking possession of the Properties; and
(iv) a sale by the [Bank] in its capacity as mortgagee in possession (or by its appointed agents)
(l) the [Fuges] may rescind this Agreement at any time before 5pm on the 14th day after the day on which this agreement is entered into (cl 8.1).
25 Despite the agreement reached at the mediation, the Fuges did not comply with cll 5.1, 5.2, 5.4 and 5.5. The Bank’s solicitors wrote to the Fuges on numerous occasions between August and December 2014 noting the alleged breaches of the HOA, as well as making certain offers.
26 By 19 January 2015, the Bank had not been paid the outstanding debt and issued a formal Notice of Demand to the Fuges, identifying their continuing breaches and demanding payment in the amount of $2,388,315.26 by 4.00pm on 23 January 2015. The Fuges did not make the payment by that deadline.
27 On or around 5 February 2015, the Bank served notices pursuant to s 57(2)(b) of the Real Property Act 1900 (NSW) (RPA) in respect of the Lenborough Mortgage, the Greenfields Mortgage and the Kennedia West Mortgage. On 9 February 2015, the Bank appointed Mr Robert Moodie and Mr Will Griffiths as receivers and managers. On 17 March 2015, the receivers and managers retired and they were instead appointed as agents for the Bank.
28 In August, purchasers were secured for Lenborough and Greenfields. During this period and up until 14 December 2015, the Fuges put various offers to the Bank in an effort to settle the dispute by selling Kennedia West and refinancing the debt owing to the Bank. These offers are detailed in Section H below. On 20 November 2015, Anthony Fuge exchanged a sale contract for Kennedia West with a purchaser. On 14 December 2015, the Bank exchanged contracts in relation to Lenborough and Greenfields and their respective Water Rights.
29 In July 2015, Mr Griffiths sold 214 Merino wether lambs and once the Properties were sold, the balance of the flock pursuant to the Livestock Mortgage.
30 The Bank applied these sale proceeds towards various facilities owing by the Fuges in the manner detailed in the affidavit of Mr Greentree at  with the result that the Bank calculated the amount owing by the Fuges as at 21 December 2017 to be $739,058.49. It will be necessary to resolve the dispute as to quantum below.
31 Regrettably, notwithstanding numerous amendments, the pleadings filed by the applicants were at best obscure and at worst incoherent. At the beginning of the hearing, I indicated to counsel for both sides that in order to obtain clarity in relation to those matters that I was required to determine, it was necessary that the real issues be identified with precision. My resolve to adopt such a course was fortified by the fact that the opening submissions filed in advance of the hearing by both parties demonstrated that there was an asymmetry between them as to precisely what was, and was not, part of the case to be advanced. Repeatedly during the course of the hearing, I made it crystal clear to counsel appearing for the Fuges that unless an issue appeared on the agreed list of issues which reflected the issues to be determined, then I did not propose to determine it. Accordingly, as matters emerged during the course of the hearing and it became clear that the list of issues was in some way incomplete, it was the subject of a specific order amending the list which became known as MFI 7.
32 The ultimate version of MFI 7 was in the following form:
ISSUES FOR DETERMINATION
1. Whether upon a proper construction of clause 4.2 of the Heads of Agreement dated 17 July 2014 (HOA), any causes of action by the applicants against the respondent (Bank) alleging: (a) improvident lending or unconscionable conduct or unjust contract relief or NCC relief in relation to facilities provided by the Bank prior to the HOA (Relevant Facilities); (b) breach of clauses 2.2, 25.1, 25.2, 26.2 and/or 28.5 of the [Code of Banking Practice] in relation to the provision of the Relevant Facilities; (c) negligent advice or omission of advice in relation to the provision of the Relevant Facilities; (d) misleading representations as to Special One Grain; or (e) as to invalidity or discharge by operation of law of any securities or guarantees existing as at 17 July 2014 (Pre-2014 Causes of Action) were released?
2. If one or more of the Pre-2014 Causes of Action would, on a proper construction of clause 4.2, have been released if the HOA was valid, is the HOA invalid because:
a. of some invalidity in the form of the notices pursuant to which the Farm Debt Mediation was convened by reason of the fact:
i. the Business and Livestock Mortgage by Anthony Fuge over all assets and uncalled capital including Merino Sheep purportedly dated 28 February 2011 (MFI 2, 351-355) (Livestock Mortgage) was forged or fraudulently made; or
ii. Anthony Fuge did not have authority to charge part of the Security the subject of the Livestock Mortgage?
b. the HOA was executed in circumstances where the conduct of the Bank in the mediation was contrary to the good faith requirement provided for in Part 2 of the Farm Debt Mediation Act 1994 (NSW) (for the reasons particularised in the schedule to this document)?
c. the HOA is a credit contract to which the National Credit Code applied that is unjust (for the reasons set out in the schedule to this document) and an order should be made that it is invalid?
d. the HOA was an unjust contract within the meaning of s 9 of the Contracts Review Act 1980 (NSW) (for the reasons set out in the schedule to this document) and an order should be made that it is invalid?
e. the HOA should be set aside because the entry into the HOA amounted to unconscionable conduct contrary to the provisions of s 12BC of the Australian Securities and Investments Commission Act 2001 (Cth) (for the reasons set out in the schedule to this document)?
3. In the light of the answers to questions 1 and 2, for such of the Pre-2014 Causes of Action that are able to be maintained, are the applicants entitled to any and, if so, what relief against the Bank?
4. Irrespective of the answers to questions 1 to 3, are the applicants entitled to common law damages or equitable relief by reason of the sale of any security property by the Bank after 17 July 2014 at an undervalue?
5. Irrespective of the answers to questions 1 to 4, are the applicants entitled to common law damages by reason of a breach by the Bank of the Code of Banking [Practice] arising by reason of the Bank's failure after 17 July 2014 to accept refinance offers made to the Bank on behalf of the applicants (being offers to discharge their indebtedness to the Bank)?
6. Whether the guarantee which appears at Exhibit C p 219 was discharged by operation of law by reason of the fact that the livestock mortgage (Exhibit C p 351) was entered into by the Bank and Anthony Fuge without the consent of Matthew Fuge.
7. Is the Bank entitled to the relief it seeks in the cross claim?
33 At the conclusion of the hearing, I directed that the parties make their final submissions in relation to the matters identified in MFI 7. In large part, the parties complied with this order and it is convenient to structure the balance of these reasons by reference to these issues. It should also be noted, however, that this case did not proceed with celerity, and by the time it came to finally reserve my judgment in this proceeding (six months subsequent to the hearing commencing), the parties had provided to the Court a total of no less than 19 different sets of submissions and aide-memoires. To the extent that any submissions of the parties have not been dealt with in this judgment, this is because they were either not substantiated beyond mere assertions or I do not consider that they relate relevantly to the issues specified in MFI 7.
34 The first issue concerns the construction of cl 4.2 of the HOA.
35 The Bank contends that cl 4.2 is a complete release which operates to bar all of the Fuges’ Pre-2014 Causes of Action. Unsurprisingly, the Fuges contend that it does no such thing.
36 The general release in this proceeding was in the following terms:
From the date of this Agreement, the [Fuges] release and discharge the [Bank] from all Claims against the Creditor arising from or in connection with the Transaction Documents.
37 For the purpose of the HOA, Claim is defined in cl 1 to include: “a claim, demand, debt, action, proceeding, suit, cost, charge, expense, damage, loss and other liability”. Transaction Documents are defined to mean the “Facilities and the Securities” which in turn were defined as the Facilities and Securities referred to or set out in the s 8 Notice attached to the HOA. The s 8 Notice referred to those facilities and securities detailed in Section B above.
38 The Fuges do not appear to cavil with the characterisation of the release as general, however, a number of arguments were advanced as to why the release would still not apply. Generally, it was contended that the words of a release are not determinative and the context of both the HOA and its formation must be considered. This is said to be a circumstance where the general release should be read as being constrained or qualified by the pre-existing dispute between the parties – being the repayment of the debts.
39 It is plain that as a general proposition, general words of release may from time to time be limited. At common law, the effect of a release accords with its likely ordinary and natural meaning. Where a release is expressed in general terms, however, principles of construction dictate that the operation of the exclusion will be limited to the subject or occasion to which the agreement, read as a whole, refers: Grant v John Grant & Sons Proprietary Limited (1954) 91 CLR 112 at 123 (Dixon CJ, Fullagar, Kitto and Taylor JJ). The Full Court of this Court recently explained in Sarina v Fairfax Media Publications Pty Ltd  FCAFC 190 at :
Thus, where, as often occurs, a deed recited that the parties have had a particular dispute, but the clause creating the release did not expressly confine its operation to the dispute mentioned in the recitals, the principles of construction at common law read down the wide words of the release to apply only to the dispute in the recitals.
40 As a matter of common law construction, the Fuges submit that: (a) the recital, acknowledgements and mediation agreement at Schedule 1 circumscribe the limits of the dispute; and (b) the s 8 Notice only refers to the Fuges’ defaults rather than the facilities themselves such that the release does not extend to issues as to the facilities. It is convenient to deal with these arguments sequentially.
41 First, the recital and acknowledgement clauses are said to confirm that the only dispute being resolved was the Bank’s claim against the Fuges for failure to repay their loans. The recital is in the following terms:
A. The Creditor provided the Facilities to the Farmers.
B. The Creditor holds the Securities to secure the repayment of the Amount Owing under the Facilities.
C. The parties have participated under the Act to address the issues in dispute among them and have reached an agreement on the terms set out below.
42 The Acknowledgement clause sets out a series of acknowledgements made by the Fuges. This includes:
The Farmers acknowledge and agree that:
3.1.1 they are in default of the Transaction Documents;
3.1.4 the Transaction Documents are valid and enforceable in accordance with their terms and continue in full force and effect;
43 It is difficult to see how, as a matter of construction, these clauses could assist the Fuges’ case given that the acknowledgement and recital expressly put the enforceability of the Transaction Documents in issue. The Fuges insist that the Acknowledgements clause is “absolutely silent” on the Bank’s wrongdoing. This is beside the point. The clause is not silent on the enforceability of the Transaction Documents. As to the Mediation Agreement, the submission made was that it describes the dispute by reference to the s 8 Notice. For that reason, this argument is sufficiently disposed of by my analysis as to the s 8 Notice below.
44 Secondly, it will be recalled that the Transaction Documents were defined in the HOA as the Facilities and Securities “referred to or set out in” the s 8 Notice. The Fuges argued that since the Transaction Documents were defined by reference to the s 8 Notice, and the s 8 Notice’s descriptions of “Facilities” and “Securities” only reference the Fuges’ failure to repay the Facilities, the only matter that “arises from” or “connects with” the Transaction Documents is a failure to pay. This argument does not withstand scrutiny. The only way in which the s 8 Notice feeds into the release clause is in a definitional sense, by giving content to the words “Transaction Documents”.
45 The s 8 Notice is a two-page document that outlines the Bank’s intention to take enforcement action. In detailing the defaults, the s 8 Notice names each of the various loans, and at the bottom of the first page there is a table which details all relevant facilities and their balance at the date of issue of the s 8 Notice. All Facilities outlined in Section B above, are clearly “referred to” in the s 8 Notice. The suggestion that the s 8 Notice should then operate so as to delimit the issues of the HOA to the Fuges’ obligation to repay the Bank, while excluding issues in relation to the enforceability or validity of those facilities and securities, merely needs to be stated to be rejected.
46 It is clear that as a matter of construction, issues 1(a)(b)(c) and (e) are all claims which in their terms explicitly “relate to” the facilities provided by the Bank, and therefore in turn, to the Transaction Documents. Issue 1(d) is slightly more complex and will be considered separately below.
47 In addition to the arguments of construction at common law, the Fuges seek to rely upon the High Court’s (Dixon CJ, Fullagar, Kitto and Taylor JJ) statement of equitable principle in Grant v John Grant at 129–130:
From the authorities which have already been cited it will be seen that equity proceeded upon the principle that a releasee must not use the general words of a release as a means of escaping the fulfilment of obligations falling outside the true purpose of the transaction as ascertained from the nature of the instrument and the surrounding circumstances including the state of knowledge of the respective parties concerning the existence, character and extent of the liability in question and the actual intention of the releasor.
48 In Sarina the Full Court explained at :
[E]quity will restrain a party seeking to enforce a wide or general release where it would be unconscientious for that party to do so in all of the circumstances. In such a case, the court will examine the knowledge and intention of both releasor and releasee as to the subject matter on which the release would operate.
49 The Fuges contend that the equitable doctrine expressed in Grant v John Grant should apply to cl 4.2 because:
there is not an (sic) single iota of any evidence showing that the Fuges knew about, articulated, or complained to the Bank, prior to the Heads of Agreement, that they were dissatisfied with, entitled to, or were thinking about making a claim regarding asset lending, misleading or deceptive conduct, rights under the National Credit Code or Code of Banking Practice, and so on.
50 The difficulty for the Fuges is that it is not to the point whether they were aware of the specific legal claims potentially available to them at the time of signing the release. Equity will only intervene to prevent unconscientious reliance upon the general release. As demonstrated by the contents of the s 8 Notice and the agreement contained within the HOA as a whole, the Fuges were well aware of the fundamental factual bases out of which their Pre-2014 Causes of Action are said to have arisen. The HOA was entered into after the Mediation, which had taken place between the Fuges and the Bank as customers and banker, in relation to a number of loans, mortgages and other charges and guarantees which regulated their relationship.
51 The Fuges did not point to any inequality in knowledge between themselves and the Bank as to the circumstances or factual underpinnings of the facilities and securities, nor was any element of bad faith or disentitling conduct specifically alleged in relation to withholding information pertinent to the Pre-2014 Causes of Action. Equity will not intervene where an agreement was then struck and the Fuges agreed to release all claims against the Bank arising out of such a context. The parties are taken to have intended to resolve or reach a compromise in relation to all extant claims arising from the facilities and securities between them. Equity will not intervene to displace the position at law that issues 1(a)(b)(c) and (e) are released.
52 In order to assess whether this claim was within the scope of the release, it is necessary to outline the details of the alleged misleading representation.
53 The representation is said to have occurred during a conversation between Anthony Fuge and Mr Hewitt. The contextual background being that Anthony Fuge and Mr Hewitt had a telephone conversation during which the issue of pooling grain arose. Anthony Fuge contends Mr Hewitt made a representation to the following effect: “If I had 10,000 tonnes I’d pool it with [Special One Grain] because they’re safe as houses and they’re a customer of ours”: FASOC at [9A(c)]. It is said that in reliance upon this representation, Anthony Fuge pooled a large amount of his harvest with Special One Grain. At [9E] it is alleged that the representation was erroneous in that the investment was an unreliable source of income “to meet his financial commitments including to the Bank”, and the Fuges suffered significant loss and damage in that Special One Grain underperformed.
54 Whether or not this representation was in fact made is not relevant to the present enquiry. The Bank accepts that a claim for misleading representation not associated with the Transaction Documents would not likely be covered by cl 4.2. The Bank provided four reasons as to why the claim was so associated.
55 First, the Bank relies upon the loss and damage element of the claim. The FASOC at [9J] particularises the loss suffered by reason of the misrepresentation as being loss of the Properties and associated Water Rights among other things. This is said to be enough to mean that the claim is “related to” the Transaction Documents, because presumably the Fuges’ claim is that the direct financial loss which occurred by reason of the misrepresentation prevented them from fulfilling their repayments.
56 Secondly, the Bank argues that in any event, the Fuges failed to advance any claim that they suffered loss that was not referable to the Transaction Documents. Thirdly, the alleged losses attributable to the representation were crystallised by the mediation and were therefore susceptible to being released.
57 Although the Fuges have sought to run any loss occasioned by the misrepresentation together with the broader claim, and have inadequately particularised the alleged loss directly referable to the Special One Grain representation, this does not mean, in and of itself, that the only potential loss that can be claimed is in relation to the facilities. To proceed otherwise would be to ignore the statutory words in s 82 of the Competition and Consumer Act 2010 (Cth), that a person is entitled to recover the amount of the loss or damage caused by the contravention. I am not persuaded that due to the wide-ranging particularisation of loss, the claim as to misrepresentation arises from or is in connexion with the Transaction Documents. The claim arises out of alleged advice given as to the investment of the Fuges’ grain harvest. How the Fuges were then planning to use that income is irrelevant.
58 Lastly, the Bank submitted that the FASOC alleges misleading or deceptive conduct “in relation to the provision of financial services”. This does not assist the Bank. The Fuges’ opening submissions make it clear that the financial service being relied upon is the provision of financial and business advice.
59 Notwithstanding the Bank’s submissions, the better view is that the claim as to misrepresentation does not fall within the release. The claim relates to alleged advice given as to the investment of the Fuges’ grain harvest. On an ordinary understanding of this claim and the release, this separate element of the dealings between the Bank and the Fuges was not within the contemplation of the parties at the time of entering into the HOA and was not released; however, for reasons I will explain, if I am wrong on this point, it does not matter as the claim is flawed in any event.
60 This submission rests upon the alleged requirement that a s 8 Notice, such as that issued by the Bank on 21 February 2014, must identify, with respect to a mortgage, “the debt concerned”: Waller v Hargraves Secured Investments Limited  HCA 4; (2012) 245 CLR 311. The Fuges rely upon the proposition that if a s 8 Notice is incorrect, then a valid notice must be re-issued, otherwise the farm debt mediation will be invalid. The s 8 Notice is said to have been invalid by reason of its reference to the Livestock Mortgage, which is said not to be enforceable.
61 Mr King, counsel for the Fuges, accepted during the course of argument, that an invalid s 8 Notice could not, by reason of this fact alone, invalidate an agreement reached at the end of the Mediation such as the HOA, but that the argument could still be relevant to either a larger unconscionability case, or as a defence to the cross-claim, in that the Bank would be statutorily prohibited from taking enforcement action.
62 Despite this concession by Mr King, it is useful to deal with the two substantive allegations made in relation to the form of the notice identified in MFI 7, as my findings in relation to these submissions go on to affect other issues raised in this proceeding.
63 It is trite that allegations of forgery and fraud are not ones which are to be made lightly. As the Full Court (McKerracher, Robertson and Lee JJ) recently explained in CCL Secure Pty Ltd v Berry  FCAFC 81 at :
Under Rules 64 and 65 of the Legal Profession Uniform Conduct (Barristers) Rules 2015, no allegation of fact in any court document settled by the barrister could be made unless the barrister believed on reasonable grounds that the factual material already available provided a proper basis to do so. Moreover, as to allegations amounting to serious misconduct against any person, it was necessary for the barrister to believe on reasonable grounds that: (a) available material by which the allegation could be supported provided a proper basis for it; and (b) the client wished the allegation to be made, after having been advised of the seriousness of the allegation and of the possible consequences for the client and the case if it was not made out.
64 In the present case, serious allegations of deliberate fraud have been made from an early stage in the pleadings and in the sworn evidence. At [10(a)] of the FASOC, it is alleged that the Livestock Mortgage “is a forgery and was obtained by fraudulent means”. The issue of forgery was also raised at a case management hearing on 22 September 2017, which resulted in the original mortgage being taken into the custody of the Court. Mr King contended later that his basis for the allegation of forgery was that the date on the Livestock Mortgage document was not a date on which Anthony Fuge could have possibly signed it. A handwriting expert was then appointed as a referee, who produced a report which was adopted in February of 2018 (Report). The Report concluded that the signature on the document was likely that of Anthony Fuge. Despite the Fuges accepting the finding of the referee, no amendment was sought to be made to the pleadings and Mr King maintained the submission of forgery in opening submissions. During cross-examination on day three of the hearing, Anthony Fuge was shown an original copy of the Livestock Mortgage and agreed that the document bore his signature.
65 It is important here to divagate briefly, to explain the position taken by Mr King shortly before Mr Zahra, counsel for the Bank, reached the point of cross-examining Anthony Fuge as to the Livestock Mortgage documents. An exchange took place during which I expressed my concern as to his choice to maintain an allegation of fraud given his then instructions. It is worth setting it out briefly (T100-101):
MR KING: … Mr Hewitt brought a bundle of documents out and signed them on the kitchen table, I think, on the back of the truck. And it’s not clear – it hasn’t been made clear – or there is an assumption in my friend’s question that he knew what the documents were that he was signing. And I - - -
HIS HONOUR:… So your instructions, effectively, this was all done – he brought out a bundle of documents, then, on 25 February 2011, all signed over a kitchen table, so he wouldn’t have known one way or the other what he signed.
MR KING: Exactly.
HIS HONOUR: If those are you[r] instructions, how can you maintain that on 25 February 2011 there was a forgery, Mr King?
MR KING: Because the – well, two things: firstly, the document which my friend hasn’t yet taken him to was dated 28 February, not 25 February; and, secondly, he disputes that he did sign it.
HIS HONOUR: Yes, but you have already said to me that it was signed – on your instruction[s], it was signed in circumstances where a whole bundle was put out. There are documents here – I mean, it just seems to me, Mr King – this is a very serious allegation.
MR KING: Yes.
HIS HONOUR: It is an allegation which amounts to professional people engaging in criminal conduct. In the light of his answers in respect of signing other documents on 25 February and what you have just told me about how those documents are signed, I must say, I express no final views about it, but I’m concerned about the basis upon which there is currently in the possession of you and your solicitors [which allows you] to maintain an allegation of serious criminal misconduct against somebody.
MR KING: Yes. Well, your Honour, I refer to the authorities before the luncheon adjournment, and we do maintain it.
66 It was not until day six of the hearing that the following exchange took place (at T544-T545):
HIS HONOUR: Well, we know it’s not forged, don’t we? Are you seriously maintaining it’s forged, given what Mr Fuge said in cross-examination?
MR KING: No, I don’t, but we do say it was fraudulently made, having regard to the misrepresentations it contained and the fact that it was registered.
67 One would have thought that this would be the end of any such issue but on day 12, after closing submissions in reply had been filed, which somewhat remarkably included a submission which doubted the veracity of the second original mortgage not shown to the referee, Mr King finally acknowledged no forgery point was now taken (at T1050-1051):
HIS HONOUR: May I say, frankly, Mr King, I think you’re doing Mr Fuge a disservice by running this argument. Mr Fuge, to my mind, when he was dealing with these documents presented as someone who was genuinely trying to give a proper account. He didn’t obfuscate. He said, “That may well have been my signature”, etcetera.
MR KING: He did.
HIS HONOUR: Now, you for months and months and months had been running a case where there was deliberate fraud where someone had forged a signature, something Mr Fuge wasn’t prepared to come to, to his credit. Now, as far as I’m aware, that case still hasn’t been abandoned …
MR KING: we don’t press the contention, for the reasons your Honour has outlined, that this was a forgery by – of his signature on the document.
HIS HONOUR: So … I can take that that’s abandoned?
MR KING: That’s abandoned
68 Despite Mr King’s belated acknowledgment that the claim was abandoned, no application was made to amend the pleading. In any event, the allegation that the document was forged may now be put to one side.
69 Mr King did not, however, abandon any other claims as to fraud. At T1051, it was made clear that the case as to deliberate dishonesty was maintained, specifically, alleging that the Livestock Mortgage was fraudulently made. In closing submissions, it was asserted this was the case for two reasons. First, because the mortgage contains a misrepresentation which the Bank knew to be false at the time of registration. This misrepresentation is said to be that the mortgage is dated “28 February 2011”, when the evidence discloses that it was not signed on that date. It is alleged that the process is not in conformity with any authority that the mortgagor provided. Secondly, the mortgage is said to contain a further misrepresentation, being that Mrs Katrina Noble (née Westcott) witnessed the signature, when in fact, she did not.
70 The first argument is put in such a way that does not require me to make a finding as to whether Mrs Noble did in fact witness the signature. It is said that knowingly dating the mortgage on a date different to that on which Mr Fuge signed it is enough to amount to fraud. Fraud, however, requires actual dishonesty. Even on the Fuges’ case, other than asserting that the Bank knew the date to be incorrect, there is no actual element of dishonesty or malice alleged which can be brought home to the Bank. Beyond ensuring the document was dated prior to registration, there was no dishonest advantage or outcome that the Bank was attempting to achieve.
71 Having regard to the evidence of the witnesses, the most likely chain of events is that the document was signed at Kennedia West, the date was not filled in at that time and it was placed upon the document later by an employee of the Bank working in the securities area of the Bank – hardly a novel state of affairs as would be known to anyone with experience in routine conveyancing (including mortgage) transactions. In any event, how the date of 28 February 2011 came to be on the mortgage document is neither here nor there.
72 The Fuges were not able to provide any relevant authority which supported the proposition that the subsequent dating of the Mortgage was enough to set it aside. The submissions cited two authorities, which do not deal with the issue of incorrect dating: see National Commercial Banking Corp of Australia v Hedley  ANZ ConvR 420; Australian Guarantee Corporation Ltd v De Jager  VR 483. Apart from this, the cases concern the fraud exception to indefeasibility contained in s 42 of the RPA and Transfer of Land Act 1958 (Vic) respectively. Unsurprisingly, indefeasibility does not arise regarding the Livestock Mortgage as it is not governed by the RPA. The Livestock Mortgage was registered pursuant to the General Register of Deeds kept pursuant to the Registration of Deeds Act 1897 (NSW).
73 On no view of it can the subsequent dating of the Mortgage in this case, when the signature and witnessing were carried out according to law, operate as a fraudulent act to invalidate the Livestock Mortgage.
74 In any event, although it was not raised by the parties, it seems quite clear to me that this argument must fail for another reason, being that even if no mortgage could be said to have been validly entered into at common law, the Bank must have a claim for specific performance on the basis that an equitable mortgage exists. Here, the mortgage is in writing; signed by the mortgagor; and identifies the essential terms of the mortgage: see Performance Capital Mortgage Pty Ltd v Motive Finance & Leasing Pty Ltd  NSWSC 429 at -. Moreover, and perhaps more importantly, there are at least two other documents that were signed by both the Fuges by which they agreed that in exchange for the Bank providing certain facilities there would be a suite of securities which included the replacement of a then existing business mortgage and the giving of a new business and livestock mortgage.
75 I now turn to the more serious allegation, that Mrs Noble was untruthful in her evidence and did not in fact witness Mr Fuge signing the document. It is necessary to begin with an assessment of the evidence given by Mrs Noble, Anthony Fuge and Mrs Melanie Fuge.
76 The affidavit evidence of Mrs Noble was that, to the best of her recollection, on at least one occasion she attended a meeting at the Fuges’ property in Forbes with Mr Hewitt. Despite admitting to no longer having an independent recollection of the time or date of that meeting, she did recall Anthony Fuge saying words to the effect of “my wife and I just got married in Eugowra”. She recalled thinking that it must have been uncomfortable weather for the wedding, as she had been in Eugowra at the same time, and it was “incredibly hot”. At the beginning of her evidence in chief, Mr Zahra asked whether Mrs Noble was able to point out Anthony Fuge in the court room, which she then did. Perhaps unsurprisingly, in light of the notorious difficulties with in-Court identification evidence, the Fuges argue that this evidence has very no probative value: see Alexander v The Queen (1981) 145 CLR 395 at 426-427; Festa v The Queen  HCA 72; (2001) 208 CLR 593 at 601 ; however, this is neither here nor there, as I have not placed any weight upon this part of Mrs Noble’s evidence.
77 Mrs Noble gave evidence that the dates on the two letters of offer were written by her, and the witness signature on the Mortgage document belonged to her. In cross-examination, she gave evidence that it was always her practice to witness signatures immediately after the customer had signed the document. When asked to explain why the letter of offer was dated by her on 25 February 2011, but the mortgage was not, she replied that “[f]or some reason, things like mortgages and charges over particular assets, the business lending support team preferred for us to send them back undated and they would take care of that. It was something to do with the registration of the documents”: T587.12-15. I accept this evidence.
78 Anthony Fuge appeared to me to be a witness doing his best to tell the truth and, to his credit, was more circumspect in making allegations of wrongdoing than his Counsel. His oral evidence was consistent with the general assertion made in his affidavit evidence, that he had no recollection of Mrs Noble ever coming to the property in Forbes. Although at the beginning of cross-examination on this point he made an assertion that he positively denied Mrs Noble being at the property, this was later clarified. It became clear he had not understood there to be a difference between Mr Zahra’s question as to his not recollecting her being there, and whether he was able to deny positively that fact. Although Anthony Fuge did make an allegation of forgery as to his signature on the document in his affidavit, his oral evidence was delivered relatively thoughtfully, and he did not try to obfuscate when answering difficult questions. Importantly, as mentioned above, upon being shown the Livestock Mortgage, he accepted that the signature belonged to him.
79 The Fuges contend that Mrs Fuge gave powerful evidence denying that Mrs Noble had ever visited their home at Lenborough. Her evidence was, as best as she could remember, that Mr Hewitt always came to the house alone. If she had prior warning that Mr Hewitt was coming, she would usually bake a cake and they would have a cup of tea. In cross-examination, she told the Court that to the best of her recollection, Mr Hewitt was present at the farm on 25 February 2011, but she did not recall Mrs Noble being there. While Mrs Fuge explained she had no recollection of Mrs Noble ever coming to the farm, her evidence did not rise to a positive denial that Mrs Noble could have been there. I am satisfied that Mrs Fuge was trying her best to tell the truth.
80 Mrs Noble was a truthful witness. She did not present as someone with any interest in coming to Court and telling anything other than the truth. Mrs Noble’s oral evidence under cross-examination was consistent with the account given in her affidavit. At no point did Mrs Noble attempt to avoid the fact that her practice was to send mortgage documents to the Sydney office undated. The corroborative detail concerning her recollection of the weather at the time of the wedding also tends to provide some verisimilitude to her account. Further, in circumstances where the evidence of Anthony Fuge and Mrs Fuge is that they could not positively deny that Mrs Noble was present, there is simply no sound basis upon which to draw a conclusion that Mrs Noble did not in fact witness the signature. This would be the case for proof of any fact in similar circumstances, the proof falls so far short of making out an allegation of dishonesty to be risible. The allegation of forgery should not have been made, and once made, it should never have been maintained.
81 This submission rests on the proposition that despite the termination of the Partnership in late 2008, Matthew Fuge continued to own some of the sheep at the time of entry into the Livestock Mortgage. The Fuges submit that by reason of this, it was impossible for Anthony Fuge to commit his brother’s interest in the same property and it was never his intention to do so.
82 As the Bank notes in its submissions, the Fuges bear the onus of proving the state of affairs as to the ownership of the sheep for which they contend. The following evidence is relied upon by the Bank as demonstrating why that onus has not been discharged:
(a) Anthony Fuge’s financial statements which disclosed that he was the owner of the sheep at all relevant times after the termination of the Partnership;
(b) Matthew Fuge’s evidence that the sheep were never included in his financial statements;
(c) a Notice to Produce was issued to the Fuges calling for production of any documents recording Matthew Fuge as the owner of any sheep and the only documents produced was a record of the Partnership owning the livestock in 2009;
(d) the evidence of Matthew Fuge that he left the care and management of the sheep to Anthony Fuge;
(e) the evidence of Mr Griffiths that Anthony Fuge represented to him that he was the owner of the sheep; and
(f) the representations made by Anthony Fuge by virtue of his financial records that he was entitled to grant a mortgage over the livestock as the sole owner.
83 The Fuges submit that contrary to the Bank’s submissions, the actual state of affairs was that the brothers were joint owners of the sheep as they had contributed equally to the cost of the purchase of the flock. This position did not change after Anthony Fuge became a sole trader. These assets were made available by Matthew Fuge for Anthony Fuge to use as a sole trader, for which Matthew Fuge charged neither rent nor another fee. The evidence relied upon to disprove the correctness of the financial records was said to be: first, the publicly listed documents relating to the livestock ownership. When the livestock’s official NSW Property Identification Code was registered with the Local Land Services, both Fuges were registered as owners. This is also said to be the case when the registration was renewed in both 2009 and 2016.
84 Secondly, the Fuges rely upon their oral evidence in respect of the ownership. Anthony Fuge’s evidence was that he could not afford to pay his brother out for the livestock, and never did. As to the financial records, Anthony Fuge agreed that where livestock were accounted for in his Financial Report for the Year Ended 30 June 2013, this related to all of the livestock on the Properties for the period identified. Anthony Fuge agreed to the proposition that this financial report was not only supposed to set out the income of the Properties, but also provide details as to the true position concerning his assets and liabilities. He said that he did not inform the accountant who prepared the report that his brother jointly-owned the sheep, and that he just kept on breeding the sheep and running the business.
85 Matthew Fuge’s evidence was that he understood Anthony Fuge had included the sheep in his own personal financial statements because he was acting as a sole trader. When asked whether Anthony Fuge was the registered owner of the sheep, Matthew Fuge answered that he owned half the sheep, save for those bought by Anthony Fuge after the termination of the Partnership. Matthew Fuge was then taken to  of his affidavit, where it reads: “they were not the rightful owners of the livestock; my brother was the registered owner”. In response to this, Matthew Fuge acknowledged that his brother was the registered owner, as was the Partnership.
86 Thirdly, it was submitted that in any event, Anthony Fuge held the sheep on constructive trust for Matthew Fuge.
87 There are a series of cascading issues which pervade the Fuges’ submissions as to this point. The position as to the ownership of the livestock is somewhat obscure. Before considering the strength of the arguments summarised above, it is worth identifying the supposed consequences said to flow from a finding that Matthew Fuge jointly owned the livestock. Regrettably, this is another example of legal issues being floated for the Court to work out, without being fully developed in submissions or apparently being thought through.
88 The Fuges contend that Anthony Fuge would not have had the authority to mortgage his brother’s share. Two points should be made about this chain of reasoning. First, the high point of the Fuges’ evidence is the recording of the Partnership on the LPA Register. If that were to be taken as conclusive of ownership, the lawful owner would be the Partnership itself, not the two brothers individually in equal shares. Subject to an agreement to the contrary, it is trite that one partner, acting in that capacity, is entitled to deal with the property of the Partnership. This aspect was not explored at all in the Fuges’ submissions.
89 Secondly, even if I found that Anthony Fuge had no authority to offer security over Matthew Fuge’s portion of the livestock, the Fuges’ submissions do not endeavour to explain how this would legally affect the Livestock Mortgage. It appears to me that at best, Matthew Fuge would have a claim against Anthony Fuge for conversion. No submission was made or developed as to how the Bank’s title would be defeated or impeached. There is no suggestion that the Bank was on notice as to Anthony Fuge wrongfully representing his ownership status as to the livestock, and the proposition that the Bank had some form of obligation to go beyond Anthony Fuge’s representations and check a certificate of registration, cannot be accepted. Further, given the cross-guarantees, the Fuges were jointly and severally liable for the debts in any event. It is unnecessary to say anything further on this, since the Fuges do not even reach the stage of proving joint ownership of the livestock and so the possible consequences of such a finding fall away.
90 Turning now to the submissions, it is necessary to deal with the competing evidence as to ownership. The first and most obvious issue with taking the certificate of registration at face value, is the apparent ownership of the livestock by the Partnership, despite the Partnership having been dissolved in late 2008. Putting this to one side, the certificate cannot be taken as being definitive evidence of ownership in the presence of directly contradictory evidence, being the financial records of Anthony Fuge. Despite how the submissions may attempt to colour it, an LPA certificate of registration simply does not carry with it the legal status of registration pursuant to the RPA. This is not a case of title by registration.
91 As to the financial records, at the time the reports were prepared by the accountant, Anthony Fuge understood that the reports were to set out the true position of his assets, and at no point did he inform the accountant that the livestock was not owned by him alone. No explanation whatsoever was provided by the Fuges as to the discrepancy between the asserted position and the financial records. The Fuges have not established to my satisfaction that the livestock were co-owned and, I am inclined to think the financial records, prepared by a professional accountant, probably represented the true state of affairs. As to the Fuges’ oral evidence, reviewing their evidence fairly, the Fuges seem to believe that the livestock purchased prior to the dissolution of the Partnership was never “bought out” by Anthony Fuge, and as a consequence, remains property of the Partnership. I have already explained above why a finding that the Partnership owned the property would not assist in this claim.
92 For the many reasons I have outlined, this claim must fail.
93 For completeness, I will briefly discuss the final claim made connected to this point as to lack of authority. This being the issue of non est factum. This claim was not identified within MFI 7 and despite being mentioned at various points in the Fuges’ submissions, does not appear to have been pressed in the traditional sense.
94 This common law doctrine allows a mortgage to be set aside where the mortgagor has no understanding of what they are signing: Gibbons v Wright (1954) 91 CLR 423 at 443-444. To make out this defence, the mental incapacity must be such that the mortgagor through no fault of their own, is incapable of understanding the purpose of the document. The plea of non est factum will fail where the mortgagor was capable of understanding the general purport of what they were signing – regardless of whether it was actually explained: Gibbons at 438. The alleged sequence of events here was that Mr Hewitt attended Lenborough on 25 February 2011 and simply placed a pile of documents in front of Anthony Fuge for him to sign. It is said that Mr Hewitt did not take him through the documents, nor was any legal or other independent advice or assistance provided. Anthony Fuge gave evidence that he was unaware that he was signing the Livestock Mortgage on his own account and not conditionally. He explained that he understood the sheep to have been jointly owned by Matthew and himself and he would not have signed the Livestock Mortgage if he had known his brother was not also being asked to sign it.
95 The highest this claim was put in closing submissions was that Anthony Fuge did not understand or was unaware that he was signing the Livestock Mortgage solely on his own account, and not jointly or conditionally with his brother. The Fuges’ closing submissions accept that it is possible that Anthony Fuge understood another business mortgage was required. The argument run was that had Anthony Fuge known that his brother was not going to be asked to sign the document, he never would have. The problem is that this argument presumes that Anthony Fuge understood he was signing a mortgage over the livestock. If this was the case, then the potential liability of Matthew Fuge simply cannot rise to constitute a gap in understanding so significant as to make out a claim of non est factum.
96 Although the parties disagreed as to whether there was an obligation to mediate in good faith arising under the FDMA, there is no need to tarry to deal with this issue as it is common ground that obligations arising out of the Code of Banking Practice were incorporated into the agreement between the parties and the Bank accepted, as a matter of contract, it was obliged to act in good faith in relation to the mediation. What is hotly in dispute, however, is the content of such an obligation in circumstances such as the present. It is this issue to which I now turn.
97 The content of a contractual obligation to mediate in good faith is not clearly defined. It is a concept which is often more easily considered by reference to examples of what constitutes a failure to comply with such an obligation. In Aiton Australia Pty Ltd v Transfield Pty Ltd  NSWSC 996; (1999) 153 FLR 236 at 268  Einstein J provided a non-exhaustive analysis of what constitutes compliance with or failure to comply with an obligation to mediate in good faith:
(1) to undertake to subject oneself to the process of negotiation or mediation (which must be sufficiently precisely defined by the agreement to be certain and hence enforceable).
(2) to undertake in subjecting oneself to that process, to have an open mind in the sense of:
(a) a willingness to consider such options for the resolution of the dispute as may be propounded by the opposing party or by the mediator, as appropriate.
(b) a willingness to give consideration to putting forward options for the resolution of the dispute.
Subject only to these undertakings, the obligations of a party who contracts to negotiate or mediate in good faith, do not oblige nor require the party:
(a) to act for or on behalf of or in the interests of the other party;
(b) to act otherwise than by having regard to self-interest.
98 Given the broad and somewhat amorphous nature of such an obligation, it is unsurprising that at 269 , Einstein J was conscious of the difficulties in attempting to prove a breach by a party of their obligation to mediate in good faith:
That there are in certain situations clear and even grave difficulties in being able to prove the breach by a party of an obligation to negotiate or mediate in good faith, is not to be taken as meaning that those obligations lack necessary identifiable content and are therefore so uncertain as to be unenforceable in law. Certainty or uncertainty of contractual obligation is not to be measured by difficulties of proving breach of contractual obligations. The two fields of discourse ought not be collapsed.
99 The challenge in determining the specific content of a good faith obligation is limited to the specific context of mediation; the difficulty in delineating what conduct would be inconsistent with the obligation can be seen in the context of contractual negotiations more generally: see Strzelecki Holdings Pty Ltd v Cable Sands Pty Ltd  WASCA 222; (2010) 41 WAR 318 at 331-32  per Pullin JA and Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 6)  FCA 825; (2016) 329 ALR 1 at 161  per Edelman J. Whatever else is unclear, one thing is pellucid: the difficulty of attempting to provide some sort of an exhaustive definition. The case of the Fuges is that they were “railroaded” into signing the HOA at the mediation and the Bank knowingly took advantage of the Fuges’ inequality in bargaining power by forcing them to accept an agreement they neither wanted nor understood. Whatever be the precise metes and bounds of the obligation to participate in a mediation in good faith, it is a necessarily contextual question, and it is unnecessary to dwell on the boundaries further here because if the Fuges make out their “railroading” contention as outlined above, this is not a case at the margins – it would demonstrate a want of participation in the mediation by the Bank in good faith.
100 As can be seen from MFI 7, the Fuges ran several arguments attacking the legitimacy of the HOA. Why the argument was put in such a hydra-headed way is difficult to fathom. Issues 2(b)-2(e) require consideration of whether the Bank mediated in bad faith; whether the HOA is an unjust contract pursuant to either the Contracts Review Act 1980 (NSW) (CRA) or the National Credit Code (NCC); and whether entry into the HOA amounted to unconscionable conduct. In the circumstances of this case, the allegation of a want of good faith is put in a way so that it forms a component part of the broader allegation that the contract was unjust in the circumstances in which it was made. The parties proceeded on the basis that the same arguments advanced as to why there was a breach of an obligation of good faith also applied to the issues of unjust contracts and unconscionability (in the sense that a breach of the obligation would necessarily be relevant to an assessment of unjustness or unconscionable conduct: see, for example, s 9(1) of the CRA). For reasons I will explain, it is most convenient to deal with the Fuges’ arguments in this part of their case by reference to the discussion as to the applicability of statutory relief under the CRA at E.4 below.
101 On day 14 of the hearing, at T1239, and after more than a few exasperations on my part as to the necessity of seeking relief under the CRA and also cognate relief under other statutes, including the NCC, the following exchange occurred:
HIS HONOUR: …it seems to me, Mr King, that the Contracts Review Act – you’re not going to get relief under the other statutes if you don’t get relief under the Contracts Review Act and if you get relief under the Contracts Review Act you don’t need relief on the other statutes.
MR KING: I think that’s the way Keane J put it in Paciocco, your Honour. Yes. And Allsop J in Paciocco in the Full court made the point, with respect, but a good one, that the greater learning about this whole area of unjust contracts is, in fact, bound up in the Contracts Review Act and that’s where much of the learning is to be found, and we respectfully adopt that, and so we respectfully adopt what has fallen from your Honour - - -
102 Prior to this exchange, Mr King had explained the pleading strategy as “abundant of caution”: T518. Although s 76 of the NCC is based on the unjust provisions of the CRA, it does not exclude the operation of that Act in relation to credit contracts regulated by the NCC. Given this, and the belated narrowing of issues by Mr King, it is unnecessary to deal with the far from straightforward issue of whether the HOA is a credit contract within the meaning of the NCC. I will instead turn to considering whether the HOA is an unjust contract within the meaning of the CRA.
103 The applicable principles of the CRA were not in dispute between the parties and it is common ground its provisions apply. The question of whether the HOA is an unjust contract requires an assessment of all of the circumstances leading up to the entry into the HOA.
104 The relevant enquiries to be undertaken by the Court have been summarised by Gleeson JA in Nemeth v Australian Litigation Funders Pty Ltd  NSWCA 198 at  (with whom Meagher and Leeming JJA agreed):
In an application for relief under s 7 of the Act, the Court undertakes a three-stage process: Perpetual Trustee Co Ltd v Khoshaba at , per Handley JA; at , per Basten JA. The first stage is to make findings of primary fact. The second stage involves a finding that the contract is or is not unjust. The third stage is the exercise of the power to grant relief under the Act which may, but need not, follow from the conclusion that a contract is unjust.
105 In his detailed discussion on the then relatively new CRA in West v AGC (Advances) Ltd (1986) 5 NSWLR 610, McHugh JA at 621 explained the different ways in which a contract might be unjust. This being because it contains “substantive injustice”, which arises “because its terms, consequences or effects are unjust”; or because of “procedural injustice”, which arises “because of the unfairness of the methods used to make it” – or both. These labels were also adopted by the Full Court in Murphy v Overton Investments Pty Limited  FCAFC 129, and more recently accepted as a correct statement of principle in Paciocco v Australia and New Zealand Banking Group Limited  FCAFC 50; (2015) 236 FCR 199 at 284 . In the same spirit in which the entire proceeding has been conducted, the Fuges’ contentions as to injustice (outlined in the Schedule) spanned both these possible avenues, with multiple contentions advanced in both groups.
106 As to the meaning of “unjust”, the CRA defines the term, non-exhaustively, in s 4, to include “unconscionable, harsh or oppressive”: Kowalczuk v Accom Finance Pty Ltd  NSWCA 343; (2008) 77 NSWLR 205 at 221  per Campbell JA with whom Hodgson and McColl JJA agreed; Perpetual Trustee Co Ltd v Khoshaba  NSWCA 41; 14 BPR 26,639 at 26,658  per Basten JA). Having noted this, it is important to bear in mind that “unjust” has a lower moral threshold than “unconscionable”: Paciocco at 286  citing Attorney-General (NSW) v World Best Holdings Ltd  NSWCA 261; (2005) 63 NSWLR 557 (Spigelman CJ).
107 Sub-section 9(1) provides that in determining whether a contract or a provision of a contract is unjust, the Court shall have regard to the public interest and to all the circumstances of the case, including such consequences or results as those arising in the event of: (a) compliance with any or all of the provisions of the contract; or (b) non-compliance with, or contravention of, any or all of the provisions of the contract. Sub-section 9(2) then outlines a number of specific matters which should be taken into account to the extent they are relevant. In effect, the court is required to undertake a “normative evaluation of the totality of relevant circumstances”: Nemeth at . While Mason P referred to this exercise as “the unjustness calculus”: St George Bank Ltd v Trimarchi  NSWCA 120 at , others have avoided this expression because it suggests that the exercise is mechanistic rather than being largely impressionistic and evaluative: see Khoshaba at  (Handley JA),  (Basten JA).
108 When it comes to determining whether the court should exercise its discretion to grant relief, regard may be had to the conduct of the parties to the proceedings in relation to the performance of the contract after it was made: s 9(5). Section 7 of the CRA then provides for the various ways in which the court may grant relief if it considers it just to do so.
109 Throughout the hearing, counsel for the Fuges raised a number of different reasons as to why the HOA was unjust. To ensure that I could be satisfied all of the Fuges’ various complaints as to the mediation and the HOA were taken into account, on day 12 of the hearing, the parties agreed to an exhaustive list of reasons as to why the Fuges say the mediation was conducted in bad faith, why the HOA is an unjust contract, and why entry into the HOA amounted to unconscionable conduct. This list became the Schedule to MFI 7, and issues 2(b), 2(c), 2(d) and 2(e) are to be considered with regard only to this schedule.
110 It is necessary to set the Schedule out in its entirety:
1. The substantive unfairness (CS ) comprises:
a. The Bank’s uncompromising irrefragable debt claim of $2,247,680.83.
b. The impossibly tight marketing schedule for the [Properties] imposed by the HOA.
c. The disproportionality inherent in the triggers for judgment, vacant possession and sale by the mortgagee imposed by the HOA.
2. The procedural unfairness (CS ) comprises:
a. bad faith conduct prior to and at the mediation by the Bank’s officers and legal representative comprising (CS -):
(i) in the lead-up to the mediation by:
I requiring Matthew Fuge to use an agent if he could not attend personally. This made him take desperate measures;
II communicating unilaterally with the Mediator on 16 July 2014 without copying in Stephen Jay or the Fuges. This meant that the Fuges had no opportunity to consider the 16 July 2014 version in advance.
III presenting a draft HOA the essence of which the Bank never compromised.
IV failing to postpone the Farm Debt Mediation upon Matthew Fuge telling it that he had not slept without verifying that he was impaired from participating.
(ii) at the mediation by:
I conducting the mediation with an incompetent and unqualified representative for the Fuges and knowing that one Fuge [Matthew] was impaired and the other [Anthony] did not have his glasses so could not read the Draft HOA.
II refusing to compromise a single cent.
III assuming, incorrectly, that no financier would facilitate a refinance, and killing off immediately any possibility of refinance.
IV imposing an impossible timetable to sell the [Properties], leading to inevitable default.
V imposing fortnightly notification conditions, which were impossible to meet.
b. The incompetence of Mr [Stephen Jay], the Fuges’ representative.
c. Fatal defects in the Sections 8 and 11 Notices.
d. In contravention of Farm Debt Mediation Act 1994 (NSW) s 11AA failing to conduct the required discussion and to personally prepare the heads of agreement, and instead permitting an amended version of a previous draft prepared by the Bank’s solicitors to be used as a final version.
111 It is clear from the closing submissions of both parties that they proceeded on the basis that the same arguments as to the Schedule applied in relation to all of issues 2(b)-2(d) of MFI 7 and for the reasons I have identified above it is therefore convenient to deal with all relevant arguments raised by reference to the CRA.
112 It is unnecessary for me to expand upon the Fuges’ submissions as to the points in the Schedule in any greater detail for present purposes. It is clear to me that the contentions as to substantive unfairness have more substance than those as to procedural unfairness. For that reason, I will begin by dealing briefly with the latter category.
113 Although contention 2(a) is expressed as being limited to an allegation of bad faith, the Fuges further contend that even if the bar of bad faith is not reached, the culmination of this conduct amounts to the contract having been entered into in unjust circumstances. As I noted above, I will therefore consider the allegation against the lower bar of demonstrating that the methods used to achieve the HOA were unjust. While the submissions were divided into dealing with the allegations set out in 2(a) individually, when considering the issue of unjust contracts, it is more suitable to consider the alleged circumstances and actions taken by the parties together in order to conduct a “normative evaluation of the totality of the relevant circumstances”: Nemeth at .
114 As noted above, the Fuges’ overarching submission is that they were unjustly “railroaded” into agreeing to the HOA. Anthony Fuge described the mediation as “lambs to the slaughter”: T248. It is submitted that the Bank prepared a draft HOA prior to the mediation, which they then required the Fuges to sign and never intended on compromising in any way. The Bank is said to have taken advantage of the Fuges in the way particularised in the Schedule and acted in bad faith such that it should be considered the contract was entered into in unjust circumstances.
115 As to the events leading up to the mediation, what occurred is not entirely pellucid. On 9 May 2014, Mr Bogan circulated to the parties a “Pre-Mediation Conference Notice/Agenda”. On or around 15 May 2014, a teleconference call took place between the mediator, a representative of the Bank and Mr Jay, the representative of the Fuges. On 10 June 2014, Mr Bogan distributed a copy of a Mediation Agreement, and a draft HOA that was said to have been discussed during the call. What the evidence then discloses, is that on 16 July 2014, Mr Daniel Zabow (a solicitor for the Bank) emailed Mr Bogan a “Heads of Agreement with CBA’s proposed amendments incorporated”, stating the “agreement presupposes that agreement will be reached for either a sale of the secured properties, or that a refinancing will occur”. Neither the Fuges, nor their representative appears to have been copied in to this communication. The Bank notes that this amended version left the dates for compliance blank. In response to this email, Mr Bogan replied “looks like a great improvement and as a draft I’m quite happy with it”.
116 For reasons I will explain below, the Bank’s unilateral provision of a draft HOA was less than ideal given the existence of the now-repealed s 11AA of the FDMA. The section is considered below in more detail, but it provided that it is the mediator who “must personally prepare for the consideration of the parties” a document setting out the main points of agreement at the time it appears to a mediator that the parties have, or are about to, agree.
117 The fact that the Bank provided the draft to the mediator in advance of the mediation does not, in and of itself, suggest the Bank or its representative were acting in bad faith. The email did note that the draft was subject to agreement actually being reached. It should be noted that s 11AA only imposes an obligation on the mediator and not the Bank. The precise reason as to why the draft HOA was provided to the mediator and not the Fuges is unclear, however, it is more likely than not a good faith attempt by the Bank’s solicitors to assist in setting out the parameters of what the Bank regarded as the “framework” of any likely agreement. It follows I do not consider the draft HOA was provided for some malign purpose.
118 Further, I do not consider that the preparation of the draft document necessarily demonstrates the Bank went to the mediation with a closed mind: Aiton at 268-269 . I consider the evidence only goes so far as establishing that the Bank came to the mediation prepared with a draft of an agreement that it considered safe-guarded its interests and achieved the desired outcome of recovering the money owed. The draft HOA did not have the various deadlines filled in, and perhaps more importantly, it included a separate section (which was subsequently removed) which set out an option as to re-financing. From the evidence adduced as to how the mediation went, it seems to me that the more likely conclusion is that the document did not end up changing significantly during the course of the mediation because beyond articulating an initial position that the Fuges not repay any of their debts in the immediate future save for interest, the Fuges did not put any counter-offers or attempt to negotiate any changes to the agreement.
119 As to the evidence of what occurred on 17 July 2014, the mediation commenced between 9.30am and 10am with an “opening session” during which both parties were able to explain their positions. Anthony Fuge gave evidence that during that session he explained his offer was that the loans be rewritten such that they were to pay “interest only” on the loans for a few years, to see if they could “get the ball rolling again” or refinance. His evidence was that this proposition was “flatly refused” by the Bank. Anthony Fuge gave evidence that the representatives of the Bank said words to the effect of “you are going to have to sell”. Additionally, Matthew Fuge gave evidence that he did not recall what exactly was said during the opening statement of the Bank, but recalled that Mr Maxwell “was attempting to morally destroy” the Fuges, and there was no attempt to conciliate.
120 Mr Maxwell’s evidence was that the draft HOA was never presented to the Fuges as some final and only offer, and prior to the mediation he had expected that a range of alternatives would be put forward by the Fuges and considered by the Bank. His evidence was, however, that “there wasn’t a lot forthcoming” from the Fuges during the mediation. Mr Maxwell also gave evidence that during his initial opening, he had indicated that he had looked over the financial documents of the business and asked the Fuges how they proposed to meet their ongoing liabilities. The Fuges were said to have responded by indicating they were in the process of trying to get a refinance with ANZ Bank. Mr Maxwell then replied with words to the effect of “unfortunately, in these circumstances, a refinancing may prove difficult and you may need to consider other options including a potential sale of the farm”.
121 After the luncheon adjournment, at around 1.30pm, the draft HOA document was produced for the Fuges to consider. The Fuges’ evidence is that they had “some time” with the document in a break-away room with Mr Jay. As to the discussions that took place, Matthew Fuge’s evidence was that he asked his brother “do you really want to sign this”, and Anthony Fuge replied: “I don’t think we have any other choice”. Anthony Fuge’s evidence was that they spent the time in the room mostly trying to work out how they could fund the debt and refinance. There is no evidence that the Fuges sought to negotiate or indicated disagreement with anything in the HOA once they returned. The mediation concluded around 4pm after the Fuges signed the HOA.
122 As to the Fuges’ chosen representative, Mr Jay, it would be unfair for me to make any finding about his competence. Mr Jay was not called as a witness by either party. The Fuges asserted that Mr Jay was unqualified and incompetent. Beyond this bare allegation, no further assistance or evidence was provided. Although I think it is fair to conclude the conduct of the mediation on behalf of the Fuges was maladroit, there may be a number of reasons why this occurred, and nothing leads me to the conclusion that Mr Jay acted contrary to the instructions given to him by the Fuges.
123 What is highly regrettable is that the Fuges did not choose to retain a solicitor to represent them or to brief counsel at the mediation. Although how Mr Jay contributed at the mediation is unclear, had a lawyer been present, the likely scenario is that the parties would more likely have had a genuine negotiation as to how a refinance could be achieved. The choice not to retain a solicitor, however, does not equate to the Bank taking advantage of the Fuges. There is no evidence the Bank knew or should have known that Mr Jay was not qualified nor up to the task, as the Fuges have alleged. Matthew Fuge agreed during cross-examination that he had been aware they could have had a lawyer present if they had wished. Evidence was also adduced that prior to the mediation, the Fuges were sent a “farm debt mediation kit” which provided information regarding the mediation. As part of that information, it is suggested that farmers might retain a lawyer, and specific information is provided as to the process by which one might retain a certified representative to attend the mediation. Anthony Fuge indicated that he had known the mediation kit encouraged legal representation, however it appears as though Mr Jay was not retained through that process. Mr Jay had been recommended to Matthew Fuge by a family friend before there was any talk of a mediation.
124 Regarding the mental state of both Fuges, Matthew Fuge gave evidence that he had flown overnight from Hong Kong to Sydney in the jump seat and had not slept, which I accept. In his first affidavit, Matthew Fuge stated that “[u]pon arrival … we were met by David Bogan… Daniel Zabow and Matthew Maxwell. These men asked me how I was and when did I arrive. I informed them that I had flown overnight and explained to them what a jump seat was, I also informed them that accordingly I had not slept”: at . This statement was not the subject of cross-examination, however, in his affidavit evidence, Mr Maxwell denied Matthew Fuge ever communicating to him his sleep-deprived state or demonstrating any physical signs of exhaustion throughout the day.
125 Irrespective as to whether this comment was made, it really is not determinative of anything. It is not in dispute that at no point did either of the Fuges ask for assistance or an adjournment. I am not satisfied that even if he had communicated his sleep-deprived state, that this would provide any adequate foundation for a finding that the Bank was aware of the extent of any impairment and there is no suggestion in the evidence that the Bank took advantage of it. I am comforted in reaching this conclusion in knowing that an experienced mediator was present who did not consider it necessary to intervene or require Matthew Fuge to rest before continuing the mediation.
126 As to the general position of the Fuges at the mediation, I accept the Fuges’ evidence that the experience was intimidating and somewhat overwhelming. This is unsurprising. Both of the Fuges appear to have appreciated the importance of the mediation, and the reality of how the outcome of the mediation might affect the future of their farming business and Properties. Although Anthony Fuge claims to have felt like he had been “railroaded”, the Fuges did not give any specific examples as to how this was the case, how the Bank flatly refused their offer, or how it was that they were made to feel that they were unable to negotiate.
127 Contention 2(c) was said to be the existence of “fatal defects” in the s 8 Notice and the s 11 notice.
128 The Fuges first submitted that if the Livestock Mortgage was fraudulently made then the s 8 Notice served by the Bank on 21 February 2014 is void. This argument has been summarised above at E.1. Relevantly, it will be remembered, Mr King accepted during argument that an invalid s 8 Notice would not act as a statutory bar to recovery, and the point must be made in relation to some larger unconscionability or unjustness argument. This argument can be disposed of shortly by reason of my finding above that the Livestock Mortgage was entered into validly.
129 Secondly, an argument was made that the ss 8 and 11 notices were invalid for a separate reason. The consequences said to flow from this invalidity is twofold: (a) the mediation would have proceeded on an incorrect statement as to the debts, and the reliance upon that incorrect calculation would have undermined the mediation making the HOA an unjust contract; and (b) there would be a statutory or equitable bar to recovery of the debts, by reason of the requirement that enforcement action can only validly be taken in respect of a valid “farm” mortgage. I will deal with the second argument at J.4 below, in relation to the Bank’s cross-claim.
130 Dealing then with the only relevant argument – the reliance upon an incorrect statement of debt – it is said that the amount of $130,000 advanced to the Fuges on 14 May 2009 (as an Agribusiness Line of Credit facility) was used to fund Anthony Fuge’s divorce settlement, and was therefore not a “farm” debt as provided for under the FDMA. The s 8 Notice, in summarising the relevant debts, is said to have incorrectly included this $130,000. The Bank then later applied to the NSW Rural Assistance Authority for a certificate pursuant to what was then s 11(1) of the FDMA (since replaced by s 14(2)(3)), which was then issued on 11 August 2014 (s 11 Notice). Section 11(1) was in the following terms:
(1) The Authority must, on the application of a creditor under a farm mortgage, issue a certificate that this Act does not apply to the farm mortgage if:
(a) the farmer is in default under the farm mortgage, and
(b) no exemption certificate is in force in relation to the farm mortgage, and
(c) the Authority is satisfied that:
(i) satisfactory mediation has taken place in respect of the farm debt involved, or
(ii) the farmer has declined to mediate, or
(iii) 3 months have elapsed after a notice was given by the creditor under section 8 and the creditor has throughout that period attempted to mediate in good faith (whether or not a mediation session or satisfactory mediation took place during that period).
131 It is clear from the terms of s 11(1), that an invalid s 11 Certificate, could have had no immediate consequence for the validity of the HOA, being a document created subsequent to a mediation taking place.
132 With respect to the s 8 Notice argument, the way in which this purported misstatement of debts “undermined” the mediation was not explained during the hearing. It was not explained why the inclusion of the 2009 facility in the s 8 Notice was invalid at law, beyond the assertion that the purpose of the loan relates to a “divorce settlement”. The focus of its relevance in the Fuges’ closing written submissions, appeared to relate solely to its utility as a defence to the cross-claim. Further, it was not explained how this inclusion amounted to procedural injustice. Presumably the supposed injustice was that the Fuges entered the mediation under the impression that a larger amount of money was owing, than in fact was owing. The difficulty is that no suggestion has been made that the 2009 facility was not in fact owing. The issue taken by the Fuges is that it may have been owing, but it was not a farm debt. If this is the case, the only immediate consequence is that it would not be the subject of any of the relevant protections offered by the FDMA. While this might be relevant on some technical point as to the validity of the s 8 Notice, as noted above, it has been accepted by Mr Fuge that this cannot affect the validity of the HOA.
133 I have chosen to deal with contention 2(d) as the last of the procedural injustice concerns given real issues arise from its consideration, and it cannot be considered in isolation from the substantive injustice concerns. Contention 2(d) relies upon an alleged breach of the now-repealed s 11AA of the FDMA, which, at the relevant time, required the following:
11AA Heads of Agreement
(1) If it appears to a mediator that a farmer and a creditor who are parties to a mediation have agreed, or are about to agree, on an issue between them, the mediator must personally prepare for the consideration of the parties a document setting out the main points of agreement on the issue.
Note. Failure to comply with this section may result in the withdrawal of the accreditation of a mediator (see section 12 (3)).
(2) If the parties are satisfied that the document sets out the main points agreed on by them during, or within 24 hours of the end of, a mediation, the parties may enter into Heads of Agreement by signing the document.
Note. Under section 17 (3A), a person representing a party to a mediation must have written authority to enter into Heads of Agreement.
134 Section 11AA was introduced into the FDMA by the Farm Debt Mediation Amendment Act 2002 (NSW). The purpose of the provision is clear: to ensure that an agreement is drafted by an independent mediator, which accurately and faithfully records the agreement reached (or about to be reached) between the parties. The second reading speech of the amending Act confirms this purpose: CIC Insurance Limited v Bankstown Football Club Limited (1997) 187 CLR 384 at 408 (Brennan CJ, Dawson, Toohey and Gummow JJ). More specifically, the second reading speech makes it clear the section was designed to give farmers the bargaining power which they lacked with their creditors. The section was introduced in response to a recognition that far from the “early days” of one-page agreements, it had become common practice for farmers to be faced with complicated, legalistic documents and to ensure that the mediators would be given the role of preparing the HOA documents, which would be a document developed as the parties agreed on points throughout the mediation.
135 The section, which has since been repealed, created a positive personal duty on the mediator to form a view, that is, reach a state of mental satisfaction, that the farmer and creditor have agreed or are about to agree an issue. Once that state of satisfaction is reached, then the mediator was to prepare personally a draft document for the consideration of the parties. Regrettably, that is not what happened here.
136 I have summarised the evidence as to the circulation of various drafts of the HOA prior to the mediation at  above. As to what occurred at the mediation, during cross-examination Mr Maxwell agreed to the proposition that the pre-drafted document was then populated and edited on the mediator’s computer during the course of the mediation. In his affidavit evidence, Mr Maxwell explained that after each party gave their openings, the parties separated into their own meeting rooms and he prepared a proposed regime for the sale of the Properties which was later put to the Fuges, “first by [Mr Maxwell], and then by the mediator”: at .
137 I am conscious of the absence of Mr Bogan and there is no reason to believe that he did not perform his role in a way he considered appropriate and in a way that he believed assisted the parties. For all I know, his actions may have reflected common practice. Having noted this, the evidence demonstrates what occurred was unsatisfactory. If the mediator had carried out his role as required by s 11AA, it seems to me that it would have been necessary for there to be some real attempt to engage with the Fuges and get to a point where the mediator understood what it was that the Fuges actually wanted. Or at the very least, the process would have facilitated the parties discussing each relevant deadline, with the paction being documented once agreement was reached, or was about to be reached. As it happened, it appears that except for the opening of the mediation, the Fuges retreated to their room and had no real active engagement with the process.
138 One of the benefits of the regime mandated by s 11AA is that if a mediator is personally required to engage in the process of forming a view as to whether a consensus has, or is about to be agreed, and is then required to document it, this role requires an engagement with the parties to ensure the agreement reflects their wishes and represents a bargain acceptable to them. This is undermined when a mediator passively accepts a document prepared by one of the parties prior to the mediation which is then the subject of “population” of details, or minor alteration, and is then presented for signature.
139 As noted above, it seems likely that the refinancing section of the draft HOA was removed after it became apparent that the Fuges had not prepared a refinancing plan. Despite this, I have no doubt at all that it was refinancing that the Fuges wanted. They had no desire to sell the Properties except as a very last resort, an intention that may have been more apparent if the agreement had been prepared as contemplated by s 11AA. I return to this important point below.
140 As to the details that were “populated” during the mediation, it is unclear whether they were the subject of any negotiation at all, or whether, as appears to be the case from Mr Maxwell’s affidavit, Mr Maxwell inserted the dates as he saw fit, which was then presented in the form of a final document to the Fuges. It is in this way that any procedural injustice occasioned by a lack of compliance with s 11AA by Mr Bogan (participated in by the Bank providing the draft) is interrelated with the substantive injustice concerns I now turn to consider.
141 Issue 1(a), being the insistence on payment of the amount owed being $2,247,690.83, is not sufficient to demonstrate substantive injustice for the reasons I will outline below.
142 It is clear to me that when it comes to substantive injustice, issues 1(b) and (c) are the contentions of substance on this point, amounting essentially to a question of whether “any provisions of the contract impose conditions which are unreasonably difficult to comply with or not reasonably necessary for the protection of the legitimate interests of any party to the contract”: CRA s 9(2)(d).
143 The “impossibly tight marketing schedule” for the sale of the Properties brings the issue of unjustness into sharper focus. The relevant deadlines created by the HOA were as follows:
(a) by 31 July 2014, the Fuges were to obtain market appraisals and sale advice from three licensed agents, together with sales price guidance (cl 5.3);
(b) by 7 August 2014, the Fuges were to provide to the Bank, copies of signed agency agreements from those licensed agents and detailed proposals as to the marketing campaigns (cl 5.4); and
(c) by 15 October 2014, the Fuges were to provide unconditional contracts for sale, with a price sufficient to repay their debts, and with a settlement date of not longer than 42 days from the date of exchange of the signed contracts (cl 5.6).
144 Putting to one side the ability of the Fuges to obtain market appraisals within two weeks of signing the HOA, the Fuges were given just over two months to market, negotiate and sign unconditional contracts for sale for rural land.
145 As to the evidence adduced in relation to this point, the Fuges point to an internal “Property Risk Review” document of the Bank dated 15 October 2013, which adopts various valuation reports stating that the marketing of Lenborough, Greenfields and Kennedia West would “likely” take six months each (PRR Document). The PRR Document was prepared by Mr Fred Ibrahim, a property consultant. Further, the Fuges rely upon the two valuation reports, one which was prepared for Lenborough and Greenfields, and another for Kennedia West. These valuations were conducted by Mr Paul Nipperess on 20 September 2013. In both reports, the following “market commentary” appears:
We note that there is limited sales activity of similar properties close to the subject. The sales shown are a good guide to value but are often varied in nature. There appears to be a reasonable market for these holdings and investor buyers are also sometimes participating. We would expect that a reasonable period to sell the subject would be say a 6-month period, give or take a month or two. Sometimes this selling period can exceed 12 months if the market slows. Droughts can affect sale prospects, as would the lease have mentioned. Recent strong growth in rural holdings in the west has improved the subject value in the short term. The market is slowed in recent months due to recent economic slowing on a local and national level. There has been good rain in recent months. This type of holding has modest to good sales prospects, although in a good season the potential is better to improve sale prospects, and so a spring sale can often be a good time to sell rural holdings in this area.
146 During cross-examination, Anthony Fuge attested to the difficulty faced when selling rural property, describing the deadlines in the HOA as “next to impossible” and “crazy”. Matthew Fuge gave evidence that he “knew it was going to be a slow process”. When I asked whether “in 2014, would it have struck you as being realistic that you could have entered into contracts in under three months … at a price sufficient to pay the amount owing … if you had … turned your mind to it?” his response was “it would have been – nearly been impossible, your Honour”. Lastly, of course, the Fuges urged that I take into account the fact that it took 16 months for Kennedia West to sell, and nine months for Elders to sell Lenborough and Greenfields.
147 The Bank, unsurprisingly, preferred to focus on other evidence. As to the possibility of obtaining marketing appraisals within two weeks, the Bank points out that in 2015, Mr Griffiths was able to obtain three different marketing appraisals from licensed real estate agents within two weeks in circumstances where he had no previous familiarity with the Properties. The Bank also relies on Mrs Noble’s evidence that based on her experience, market appraisals could be obtained within a few days (at most, a week); that a marketing campaign could be conducted within, at minimum, a month; and that a contract for sale at market value could be negotiated within a day to a week thereafter. Further, Mr Maxwell gave evidence that he thought, at the time the HOA was entered into, that it was realistic for the Fuges to enter into unconditional contracts in an amount sufficient to pay the amount owing at market value with a 42 day settlement, in under three months.
148 The Bank also relies upon a number of marketing submissions provided to the Bank in February 2015 by Elders, Landmark Harcourts and Ray White which each recommended sales by auction following marketing campaigns of five, six and five week durations respectively. Each of the marketing submissions also provided valuation estimates which exceeded that needed to repay the Fuges’ total debt to the Bank.
149 The Fuges make a number of contentions in relation to the evidence adduced regarding the quantification of a reasonable amount of time in which the Properties could have been expected to sell.
150 First, the Fuges assert that the contemporaneous documents, being the Bank’s PRR Document and the two valuation reports establish that a period of six to 12 months was a reasonable marketing period for the Properties. Further, given the Nipperess valuations were adopted by the Bank in its PRR document, it should be assumed the Bank knew the Properties would take at least six months to sell.
151 Secondly, they submit that the documents should be preferred to Mrs Noble’s evidence, given that Mrs Noble’s work did not relate to assessing how long farms might take to sell. The Fuges also rely upon Mrs Noble’s response to the following question (at T590):
[His Honour:] … and were there many properties … of a similar type of the farms that are at issue in these proceedings that were … the subject of a marketing campaign that would find buyers within a month or around a month at that time?
[Mrs Noble:] Not that I can recall, no
152 Thirdly, the Fuges rely on their oral evidence given during the hearing. Mr King sought to rely on this evidence during submissions for what he described as his “skinny latte” point. Putting to one side what might be described as certain unnecessary intricacies of the argument, such as a reference to the urban construct of “Pedro the personal trainer”, the essence of the submission was that those employees of the Bank who considered the timetable to be reasonable were seriously out of touch with the farming property market.
153 The Bank made a number of assertions relevant to the disposition of this issue. First, that obtaining marketing appraisals from licensed real estate agents is something that would likely take days rather than three weeks. Real estate agents earn significant commissions from the sale of properties and are anxious to provide marketing submissions and have the opportunity to be appointed selling agent.
154 Secondly, agency agreements are simple standard form agreements and there would have been no difficulty in an agency agreement being entered into within three weeks of the HOA, including a marketing campaign proposal (which proposal would likely have been already included in the agent’s marketing appraisal in any event).
155 Thirdly, and more generally, the evidence does not establish that the parties knew or believed that such a term could not be achieved at the time of the HOA. The fact that the Properties ultimately took longer to sell than the HOA contemplated involves impermissible hindsight analysis which does not demonstrate any lack of good faith in July 2014. As to the Fuges’ submission regarding the PRR document, the Bank submitted that such an inference as to knowledge is not available on the evidence. Further, the document, which is dated nine months prior to the mediation, was said to be little more than an attempt to summarise information from the Nipperess reports. The Bank also invites the Court to draw an inference from the information regarding the recent properties to have sold at auction, as detailed in the Ray White submission. The inference said to be available is that those properties which sold at auction, presumably sold successfully following a similar marketing schedule as that proposed by Ray White.
156 Fourthly, the Bank submits that it is likely that the Fuges had no intention of selling the Properties (particularly Lenborough and Kennedia West) at all and were uninterested in those particular terms. Instead, it is likely that the Fuges were focussed on a desire to obtain a refinance, pay out the Bank and keep the Properties. The Bank relied upon certain evidence to substantiate this claim, which I will outline below when considering relief.
157 As to Issue 1(c), the “disproportionality inherent in the triggers for judgment, vacant possession and sale by the mortgagee imposed by the HOA”, the Fuges asserted that cll 5.5, 5.7 and 5.8 were unjust.
158 The Clauses were as follows:
5.5 The [Fuges] must provide the Creditor … with written fortnightly updates … as to the progress of the sale campaign for the Properties including a list of all interested parties, inspections conducted and any interim offers to purchase the Properties.
5.7 The [Fuges] agree to pay, when due to be paid all statutory charges and levies in relation to the Property (including all utilities, rates and land tax).
5.8 In the event that the [Fuges] fail to comply with a term of this Agreement or commit any further defaults under the Facilities, they agree to:
5.8.1 deliver up vacant possession of the Properties; and
5.8.2 consent to judgment in favour of the Creditor for:
126.96.36.199 the Amount Owing plus accrued interest and costs; and
188.8.131.52 possession of the Properties.
5.8.3 not do anything to interfere with the Creditor taking possession of the Properties; and
5.8.4 agree to sale by the Creditor in its capacity as mortgagee in possession (or by its appointed agents).
159 Putting to one side whether clause 5.5 was as onerous as was submitted by the Fuges, the issue raised here is whether there was a disproportionality between the requirements set out in these clauses, and the right for the Bank to take possession upon default. The Fuges submitted that there was no proportionality between, for example, failing to pay an electricity bill and consenting to judgment, vacant possession and sale by the mortgagee. These aspects of the contract were not reasonably necessary to protect the Bank’s interest.
160 The Bank, however, argued that in circumstances where the Fuges had previously defaulted in payments to third party creditors, and where they were having difficulty paying for water, the Bank had a legitimate interest in preserving and maintaining the Properties and their value. Continued defaults would endanger the value of the Properties and their upkeep.
161 Having made factual findings as to the circumstances in which the HOA was created, I now turn to what Gleeson JA described as the second stage of considering an application for relief pursuant to s 7 of the CRA; making a finding as to whether the HOA was unjust in all the circumstances. In carrying out this analysis, I have had regard to those elements of s 9(2) which I consider to be relevant in the circumstances.
162 The practical effect of procedural injustice has sometimes been described as meaning that in the circumstances, the claimant did not have the capacity or opportunity to make an informed or real choice: West v AGC (Advances) at 621. I do not consider that the Fuges were unable to engage in the negotiation process. Ultimately, there is not a great factual dispute as to what actually occurred at the mediation. I do not consider that the evidence given by the Fuges and Mr Maxwell are irreconcilable. Rather, the issue is one of characterisation. The Fuges urge that I find that the Bank steadfastly refused to entertain any compromise and took advantage of the significant inequality of bargaining power by forcing the Fuges into agreeing to the terms of the HOA. It is worth at this point digressing to note that it is for this reason that I did not consider there to be merit in the Fuges’ submission that the Bank’s failure to call the solicitor who was present, Mr Zabow, should result in a Jones v Dunkel (1958) 101 CLR 298 inference. What relevantly occurred was not really in contest.
163 While I agree that there was very little in the way of back-and-forth between the parties, I do not consider that the evidence should be characterised as the Bank “railroading” the Fuges. This conclusion is strengthened by Anthony Fuge’s evidence that the Fuges were first and foremost concerned about refinancing, and when considering the HOA document privately, were trying to think of ways to refinance. As noted above, I do not believe the Fuges ever contemplated selling voluntarily at or immediately following the mediation. They decided to sign the HOA and use the remaining time to refinance. This was never communicated in terms to either the mediator or the Bank – save for the fact that the mediator might have gleaned these intentions if the HOA had been drafted differently and in accordance with s 11AA; but this is not the fault of the Bank in the sense that they knowingly took advantage of the situation or acted in bad faith.
164 I think it would be too critical to say that the Fuges were deliberately dissembling their intentions; the lack of communication at the mediation was due, in large part, to the Fuges feeling overwhelmed, and the Fuges being suspicious and wary as to the Bank’s intentions. These factors combined with lack of legal representation and the recognition that a detailed refinancing plan was not in place apparently caused the Fuges not to convey adequately what they wanted to achieve.
165 I accept that there was an inequality of bargaining power at the mediation (as there almost always will be at farm debt mediations), however, I do not agree that the evidence demonstrates the use of unfair tactics or pressure. Further, I consider that it was practicable for the Fuges to negotiate the terms of the HOA and the fact that they did not do so is not attributable to the Bank. The Fuges had adequate notice of the mediation in advance, and even had the date of the mediation changed such that it was convenient to both of them. The evidence demonstrates that the Fuges did not attempt to provide a viable alternative to the Bank in concrete terms nor suggest any changes to the Bank’s proposal other than suggesting the loans be paid back on an interest-only basis for a few years. In circumstances where no viable refinancing plan was actually put to the Bank, the fact that the Bank did not offer to compromise on its claims and the debt it considered was legally outstanding does not equate to unjustness.
166 As to the want of compliance with s 11AA and the Bank’s facilitation of this by providing the draft HOA, this fact does go to the injustice of certain terms that were included in the HOA, but in light of my above analysis, I do not consider that any failure to abide by s 11AA by the mediator and any connected conduct of the Bank leads to a finding that the HOA as a whole was unjust.
167 As to the issues of substantive injustice, Issue 1(a) is not capable in and of itself of demonstrating a lack of good faith: FDMA s 11(1B) as at 2014. While the standard of unjustness is obviously lower than that of bad faith, this section of the FDMA reflects the well-known principle of contract law, that a party is entitled to insist upon their legal entitlements. It appears that this principle was intended to be maintained in the circumstance of a statutorily required mediation. While this principle has its limits in relation to unjust contracts, ignoring for the present moment the way in which such rights are attempted to be enforced, a refusal to lower the total amount of the debt cannot, in isolation, be considered unjust. Lastly, although what I say in relation to 1(b) below might be considered to render cl 5.1A wholly irrelevant, it is worth noting for completeness that cl 5.1A did account for a $20,000 deduction from the Amount Owing, if the debt was repaid by 31 October 2019.
168 As to issue 1(b), I have summarised above the relevant evidence which the parties each sought to rely upon. I find the most persuasive evidence on this point to be the Nipperess valuations tendered by the Fuges. The valuations were business records which were accepted into evidence for all purposes. It seems to me that they are contemporaneous representations from someone well-qualified to offer an opinion as to the state of the market. Further, I trust it is not unduly pressing the bounds of s 144(1)(a) of the EA, to say that an estimation of a six to twelve month selling period for rural property of the type with which we are concerned seems to me to accord plainly with common sense. While the Bank attempted to downplay the significance of the Nipperess valuations (asserting that a valuer cannot be taken as an expert in selling periods), it seems to me that the estimate reflects an understanding of the realities of the sale of rural properties.
169 I do not find that the Bank’s competing valuations which were tendered to be persuasive. First, as to the marketing submissions relied upon by the Bank, the trouble is that it seems fair to assume that real estate agents have a real interest in suggesting to prospective clients that the property be sold quickly, and there is little consequence if those initial estimations turn out to be incorrect. Secondly, the inference that those properties as detailed in the Ray White submission which sold at auction sold within a similar marketing timeframe is not probative given the lack of any further evidence as to the characteristics of those properties or the sales.
170 In circumstances where no persuasive evidence was able to be adduced by the Bank which went to demonstrating that the Properties would likely have been sold so quickly, and no expert evidence was led in relation to the market in 2014, I consider that the Nipperess valuations provide a surer guide to determining the length of a reasonable sale period.
171 I accept the Bank’s argument that the evidence does not rise so high as to attribute the estimation in the Nipperess valuations to be knowledge of the Bank, such that they acted in bad faith in setting the relevant deadlines. I consider that what seems to have happened was that there existed a regrettable disconnect between what those involved in drafting the HOA understood about selling rural property, and what the Bank’s own internal documents and research demonstrated (and commonsense required). Mr Maxwell’s evidence was that he genuinely believed the timetable to have been reasonable. Although he was mistaken in his belief, the evidence is well short of demonstrating any form of bad faith on the part of those involved in drafting the HOA.
172 Even though the Fuges never had any intention of selling all the Properties, the rights between the parties were struck by reference to the prospect that they would be given time to do so. Insufficient time was contemplated by the HOA, which inevitably meant that it was highly likely, if not inevitable, that a default would result. Accordingly, I consider that cl 5.6 was unjust at the time the HOA was made. I will consider whether relief should flow below at E.4.7.
173 As to cll 5.3 and 5.4, however, the Fuges have not adduced sufficient evidence to demonstrate that the requirement to obtain market appraisals, sale advice and agency agreements within a matter of weeks was unjust. These provisions fall into a different category.
174 As to issue 1(c), it is uncontroversial that it would not have been illegitimate or unjust for the Bank to impose conditions upon its agreement with the Fuges in order to protect its legitimate interests: Commonwealth Bank of Australia v Iinvest Proprietary Limited (No 9)  NSWSC 1276 at . Whether, however, such serious consequences of default could be considered reasonable to protect the Bank’s legitimate interests is a different question. I consider that it is not. The Bank’s argument would have been more convincing if the defaults which triggered judgment were sufficiently serious enough that their immediate occurrence would have affected the value of the Properties in a significant way. I am very well aware that clauses similar to this are common in memoranda of mortgage, but the HOA went further, was a bespoke settlement agreement and there was simply no proportionality between a failure to pay bills, or the failure to provide a fortnightly list of all parties interested in the properties and consenting to judgment. Accordingly, cl 5.8 was both highly onerous and unjust at the time the HOA was made (insofar as it relates to cll 5.5 and 5.7).
175 Having determined which provisions of the contract I consider to be unjust, s 7 of the CRA is now enlivened. Accordingly, as I explained at E.4.1 above, I must determine whether one of the steps contemplated by s 7 should be taken. In this regard I do not propose to consider the appropriateness of relief by reference to the procedural injustice beyond the impact it likely had on the inclusion of the unjust terms.
176 The Fuges raised an argument in relation to this issue, relying on Stead v State Government Insurance Commission (1986) 161 CLR 141, that once it is found that procedural fairness has not been afforded, a court must not speculate as to how it would have made a difference. This submission confuses the well-known principle that an appellant need only show that a “denial of natural justice deprived him of the possibility of a successful outcome” as being relevant to the conduct of a mediation: at 147. The analogy is plainly inapposite.
177 I do not consider there to be a need for me to render to contract void or vary specific clauses of the contract. This is because the unjustness goes to certain requirements which the Bank did not, as events turn out, enforce, and it is relevant that the Fuges suffered no loss as a consequence of the insertion of the unjust terms. Section 9(5) of the CRA provides that in determining whether it is just to grant relief in respect of a contract or a provision of a contract that is found to be unjust, the Court may have regard to the conduct of the parties in relation to the performance of the contract since it was made.
178 Clause 5.6 required the Fuges to provide unconditional contracts for sale by 15 October 2014. The Bank did not serve s 57(2)(b) notices until 9 February 2015, some seven months after the HOA was signed: Real Property Act 1900 (NSW). At that time, receivers and managers were appointed and steps were taken to sell Lenborough and Greenfields. In the meantime, the Fuges were able to take steps to sell Kennedia West themselves, and did so successfully in November 2015.
179 Moreover, the Fuges have not proven that had the Bank acted fairly, and provided a more realistic timeframe for the sale of the Properties in the HOA, that they would have taken steps to sell the Properties. As mentioned above, the overwhelming evidence is that despite the Bank not enforcing the agreement, the Fuges did not progress the sales of the Properties in a manner consistent with how it would have been progressed if they had genuinely intended to sell the Properties. This finding that the Fuges never intended on selling their Properties at the time of entering into the HOA, or in the immediate months subsequent, is further supported by Anthony Fuge’s evidence that:
(a) in the break-out room at the meditation, they “were trying to just work out how we could fund the debt”;
(b) the Fuges spoke about getting a refinance “all the time”;
(c) he had been making attempts to refinance from as early as 2012 and those attempts continued over time; and
(d) one of the reasons he entered into the HOA was that he hoped to be able to arrange a refinance in the period between 17 July 2014 and the time for making the significant payment to the Bank on 30 November 2014.
180 The conclusion was also strengthened by evidence of how the Fuges acted after signing the HOA:
(a) the slow steps taken by Anthony Fuge to engage Ainsley Toole or to progress any sale of the Properties after the mediation; and
(b) the extensive refinancing attempts detailed in Section H below.
181 I have already explained that s 7 of the CRA provides for identified remedial responses if a contract or a provision of it is found to be unjust. The section does not, of course, restrict the ability of this Court to grant declaratory relief under s 21 of the Federal Court of Australia Act 1976 (Cth) if it is appropriate in all the circumstances. Although this is a case where s 7 relief should not be granted, it is appropriate when making final orders to record the finding that cll 5.6 and 5.8 of the HOA were unjust provisions.
182 There are two types of Pre-2014 Causes of Action: those which I have found to be released by the HOA; and those which were not released. It is convenient to deal with the latter of these initially. Although it is strictly unnecessary to deal with the other, I will explain for the sake of completeness, why they would not have succeeded in any event.
183 I briefly explained the representation which it is said Mr Hewitt made to Anthony Fuge over the phone in December 2010 at D.2 above. The Fuges allege that the Bank breached ss 12DA and 12BB of the Australian Securities and Investments Commission Act 2001 (Cth) relating to “misleading or deceptive conduct” and “misleading representations with respect to future matters” respectively.
184 The onus was on the Fuges to establish with a degree of precision the words spoken constituting the alleged representations: Watson v Foxman (1995) 49 NSWLR 315 at 318, cited with approval by the Full Court of this Court in Julstar Pty Ltd v Hart Trading Pty Ltd  FCAFC 151 at -. For a recent discussion of this principle see: CCL Secure Pty Ltd v Berry  FCAFC 81 at -. The concerns with regard to the fallibility of human memory which exist in any case are only exacerbated in a case such as the present where there was such an extensive delay between the events in question and the giving of the evidence: Julstar Pty Ltd at -; Ye v Zeng (No 7)  FCA 1478; Varma v Varma  NSWSC 786 at - per Ward J; Re Colorado Products Pty Ltd (in prov liq)  NSWSC 789; (2014) 101 ACSR 233 at 237 . As McLelland CJ in Eq famously said in Watson v Foxman at 319, there are “serious difficulties of proof for a party relying upon spoken words as the foundation of a causes of action based on s 52 of the Trade Practices Act ... in the absence of some reliable contemporaneous record or other satisfactory corroboration”.
185 Equally, documents inconsistent with an oral account will point positively against its acceptance. “[W]hat matters most is usually the proper construction of such contemporaneous notes and documents as may exist, and the probabilities that can be derived from those notes and any other objective facts”: Mealey v Power  NSWSC 1678 at . As Leggatt J said in Gestmin SGPS SA v Credit Suisse (UK) Limited  EWHC 3560 (Comm) at :
...the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses’ recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts.
186 It is also important to recall that for the Fuges to succeed, the Court must be actually persuaded that a definite conclusion can be affirmatively drawn that the representation as alleged was conveyed: Berry at . A mere mechanical comparison of probabilities, independent of any belief in the reality of a fact, cannot justify a finding that misleading conduct occurred: see Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission  FCAFC 132; (2007) 162 FCR 466 at 479-482 - per Weinberg, Bennett and Rares JJ.
187 Anthony Fuge and Mr Hewitt both agree on the preliminary facts preceding their diverging versions of Mr Hewitt’s representation about Special One Grain. The relevant grain in question was AH9 grade, meaning it had been harvested in wet conditions. Anthony Fuge had a telephone conversation with Mr Hewitt during which he raised the possibility of investing grain with Special One Grain in the context of undertaking his due diligence.
188 Anthony Fuge contends that the conversation went as follows:
Anthony Fuge: Do you know anything about Special One Grain and are they a good bet?
Mr Hewitt: If I had 10,000 tonnes I’d pool it with them because they’re as safe as houses and they’re a customer of ours.
189 Mr Hewitt contends the following occurred:
Anthony Fuge: Have you heard about Special One Grain? I was thinking of pooling our grain there and I am just doing some due diligence on it.
Mr Hewitt: Yeah I know a little bit about them. Some of my other clients pooled with them last year and were quite happy. They did really well on the AH9 grade pool but you never know what the future will be. You’ll have to decide for yourself what you want to do.
190 In his affidavit evidence, Mr Hewitt explained that in 2010 he did not know enough about Special One Grain to form any view that it was a safe investment and would not have been in a position to make such a statement. As a matter of usual practice, Mr Hewitt did not make bold and conclusive statements to clients. It was not part of his role to give financial or investment advice in relation to investments such as Special One Grain and he did not do so. It was his evidence that he was always conscious not to tell people how to invest. He also did not know at the time of the conversation, or at the time of writing his affidavit, whether Special One Grain was a customer of the Bank and was therefore unlikely to have said so.
191 As to demonstrating reliance, the Fuges relied upon Anthony Fuge’s business plan which demonstrated that prior to investing with Special One Grain Anthony Fuge usually put his wheat with the Australian Wheat Board, and if prices were low, he waited for a better price, storing it in the meantime.
192 The Fuges contend that Mr Hewitt’s recollection of the conversation is unlikely. First, it is said that he is not a man who would use words such as “you never know what the future will be”. The basis for this assertion is wholly unclear and was expressed in written submissions as somehow being based on the positivity of his file notes which record things such as “Tony is very happy with results”. Secondly, it is said that Mr Hewitt would not have known Anthony Fuge’s crop was AH9 grade, and would therefore not have mentioned it. Further, 2009 was not a La Nina (wet) year, so the alleged statement that “last year” his clients did well with their AH9 grade grain is unlikely. Thirdly, it was submitted that in any event, even on Mr Hewitt’s account, his comments constituted an implied representation that if the grain was sent to Special One Grain, Anthony Fuge would be “quite happy” with the result.
193 The Bank contends that Mr Hewitt’s evidence should be preferred for a number of reasons. First, his account is inherently likely and credible. Given that he did not know a great deal about Special One Grain, and it was not part of his role to give investment advice, he would not have done so. Secondly, Anthony Fuge’s recollection of events at about that time was poor. For example, he had no recollection of signing the Livestock Mortgage, and the Court should have reservations about preferring his evidence over that of Mr Hewitt. Indeed, Anthony Fuge conceded that he could not remember specifically what he said to Mr Hewitt about Special One Grain. Thirdly, if Mr Hewitt had made the alleged misrepresentation to Anthony Fuge and caused him to suffer such losses as are alleged, one might think that Anthony Fuge would have blamed Mr Hewitt and thought poorly of him. There is no record of any complaint of this type. Indeed, to the contrary, Anthony Fuge never had any ill feelings towards Mr Hewitt throughout their dealings right up to about 2013 when the file was transferred to Mr Maxwell. As Anthony Fuge said, “I always got on well with Richard. I’ve said that. I’ve – he was good”: at T189.
194 The lack of any contemporaneous documents making reference to the alleged representation does not assist in reaching the requisite level of satisfaction as to Anthony Fuge’s oral account, especially many years after the event in question. I have been asked to find, on the basis of Anthony Fuge’s evidence, that a Bank agribusiness manager whose role did not involve providing investment advice, made a statement as strong as “If I had 10,000 tonnes I’d pool it with them”.
195 The Fuges’ reliance upon Mr Hewitt’s mention of AH9 grade grain as demonstrating fabrication is unpersuasive. It was not put to Mr Hewitt that no mention of AH9 grade grain had been made by Anthony Fuge and it is not inherently improbable that such a mention would have been made, in a discussion about the possibility of pooling a specific type of grain. To the contrary, it seems likely that Anthony Fuge would have told Mr Hewitt he was considering pooling the stored grain. As to the La Nina submission, no evidence was adduced to show that AH9 grade grain could only be harvested in a La Nina year, nor was it explored in cross-examination whether Mr Hewitt’s previous clients had actually harvested the grain in that year.
196 I accept that Mr Hewitt made some comment about Special One Grain. Mr Fuge had told Mr Hewitt he was conducting due diligence as to Special One Grain and was asking Mr Hewitt for an opinion. I find it likely that Mr Hewitt shared his previous experience of clients’ investing with Special One Grain but this is a long way from concluding that I am satisfied Mr Hewitt made comments which could rationally be interpreted as being any kind of assurance or investment advice.
197 I am far from persuaded that Mr Hewitt made a future representation as to the success of any investment with Special One Grain. This is sufficient to dispose of this aspect of the case (and indeed all maintainable pre-2014 Causes of Action); however, I now turn to the other Pre-2014 Causes of Action, which I have already found released.
198 The Pre-2014 Causes of Action which relate to the way in which the Bank provided facilities to the Fuges are framed in MFI 7 in the following terms:
(a) improvident lending or unconscionable conduct or unjust contract relief or NCC relief in relation to facilities provided by the Bank prior to the HOA (Relevant Facilities); (b) breach of clauses 2.2, 25.1, 25.2, 26.2 and/or 28.5 of the Code of Banking Practice in relation to the provision of the Relevant Facilities; (c) negligent advice or omission of advice in relation to the provision of the Relevant Facilities;
199 The key issue which arises from all these claims is the allegation that the lending was improvident. For the reasons I explained at E.3 above, the parties accept it is unnecessary for me to consider both NCC and CRA relief. This issue therefore comes down to whether or not, by reason of the alleged improvident lending, the contracts which provided for the lending were unjust contracts for the purpose of the CRA. This enquiry requires consideration of a non-exhaustive set of factors.
200 It is trite that in some cases, the fact that improvident lending has been found to have occurred might be sufficient to form a conclusion that the contract in question was unjust: Khoshaba; Fast Fix Loans Pty Ltd v Samardzic  NSWCA 260 at ; Kowalczuk v Accom Finance Pty Ltd  NSWCA 343; (2008) 77 NSWLR 205 at 27 . Such cases provide useful guidance as to what is meant by the term “asset lending”. In Khoshaba at 26,660 , Basten JA described asset lending as:
[lending] money without regard to the ability of the borrower to repay by instalments under the contract, in the knowledge that adequate security is available in the event of default…
201 In Egan v Egan  NSWSC 202 at , Davies J found that “asset lending” had occurred where:
[T]here was not at the time the mortgage was entered into, to the knowledge of the plaintiff, any reasonable expectation that the repayments required under the Deed of Loan would be able to be made. That would mean that the only way the loan could be repaid would be by a sale of the property.
202 However, as Allsop P (as the Chief Justice then was) said in Fast Fix at  “asset lending” is not a label or legal frame of reference, it is a convenient descriptive expression. His Honour then continued:
As Campbell JA made clear in Kowalczuk at -, the conclusion of “unjust” for the Act, ss 7 and 9 depends on all the circumstances and not on labels. There is no reason why considerations such as those here [which relate to asset lending] cannot lead to the conclusion that a contract of guarantee is unjust if entered into by a lender who is uncaring of a guarantor’s capacity to repay where there is a real and significant possibility of default by the borrower and the guarantor takes no benefit under the borrowing. This is particularly so in all the other circumstances of this case – most particularly the recognition by the appellant of the only two likely sources of repayment, one (successful refinancing) having a real risk to it. The appellant lent at a significant interest rate, reflecting the underlying commercial risk, appreciating the position the parents had been placed in, without any basis to consider that the parents appreciated the commercial risk or that they could afford to take that risk.
203 As noted above, the fact that the matter relied upon to demonstrate unjustness may also result in there being a breach of a contractual norm is also relevant to the evaluative judgment the court is required to undertake. Clause 25.1 of the 2004 Code of Banking Practice is in the following terms:
Before we offer or give you a credit facility (or increase an existing credit facility), we will exercise the care and skill of a diligent and prudent banker in selecting and applying our credit assessment methods and in forming our opinion about your ability to repay it.
204 The Code of Banking Practice undoubtedly extends the otherwise previously existing obligations of Banks in relation to their lending practices and there is support for the proposition that the duty imposes a requirement that the Bank form a positive opinion about the client’s capacity to repay the loan: Haynes v St George Bank a Division of Westpac Banking Corporation  SASCFC 51 at ; National Australia Bank Limited v Smith  NSWSC 1605. The extent to which work must be undertaken in order to form the Bank’s opinion, however, is less clear cut. It seems to me that the relevant obligation must be one which depends upon and is informed by the individual circumstances of the lending, and I will deal with this issue as it arises on the facts below.
205 As to whether such lending might render a contract unjust, in Khoshaba Basten JA explained at 26,660  that:
there is a public interest in treating such contracts as unjust, at least in circumstances where the borrowers can be said to have demonstrated an inability reasonably to protect their own interests, for the purposes of, for example, s 9(2)(e) or (f). That does not mean that the Act will permit intervention merely where the borrower has been foolish, gullible or greedy. Something more is required…
206 It is not necessary to detail the principled approach to considering whether asset lending in a particular case might amount to an unjust contract any further, given my below findings.
207 The Fuges contend that the Bank engaged in improvident lending from 2008 until 2016.
208 As to the initial facilities granted in 2008, the allegation is that the Bank had no rational basis to believe that the farming business was about to do a “u-turn” and earn the profits required for the loan repayments. The Bank is said to have ignored pertinent information included in the business plan which Anthony Fuge had provided. This information related to past financial reports and income. The Fuges took issue with the basis upon which the Bank conducted its assessment of the Fuges’ proposal, being its tailored programme known as FarmPak, and the “financial wizardry” of addbacks. The Bank is also said to have ignored five important pieces of information, being that: (a) there were dishonours in 2008 on the Elders’ loan which it was refinancing; (b) the cashflow projection for 2008-09 was questionable; (c) the farming business likely had zero water allocation under its Water Rights; (d) the on-going drought was significantly impairing the farming business; and (e) Anthony Fuge’s honest qualitative descriptions of the performance of the farming business. The Bank is said not to have ignored the fact that the Bank’s competitors were “courting” the Fuges, with the Australia and New Zealand Banking Group “seemingly close”, and as a result it is alleged that the Bank rushed its conditional approval.
209 In addition to the submissions I have just summarised, which were set out in the Fuges’ written submissions, a miscellany of complaints was made at various points during the hearing which attacked certain calculations made by the FarmPak programme, and the way in which the credit assessment was undertaken. I do not propose to address these individually. By way of example, some complaints were summarised in a document which was marked MFI 26. This table was said to be a “truth-telling” document, which identified individual considerations said to be incorrectly either taken into account or disregarded by the FarmPak analysis. The result was said to be that the discrepancies in the final calculation were so large that had the calculations been done correctly, the inability of the Fuges to repay the loan would have been obvious.
210 The totality of these arguments as to the 2008 facilities can be grouped together in the following way: first, arguments that assert the way in which the Bank carries out its credit assessment process and the way in which its programme FarmPak operates is flawed in that it ignores pertinent information (FarmPak Arguments); secondly, that the Bank, in conducting its credit assessment, either deliberately or accidentally falsified certain data and changed the numbers so that the assessment would be more favourable than it truly was (Miscalculation Arguments).
211 As to the alleged continued asset lending, the Fuges contend that the Bank unreasonably ignored the financial statements and tax returns prepared by an accountant, Mr Adam Keneally White, and continued to lend because of Mr Hewitt’s personal relationship with Mr Fuge which apparently resulted in file notes being authored “while wearing rose-tinted-glasses”. An allegation was also made that Mr Hewitt’s internal valuations were incorrect and not completed seriously.
212 Further, and in the alternative, the Fuges submitted that even if the lending did not amount to asset lending per se, the Bank’s initial and continued lending was unjust. To support this allegation, the Fuges relied on a number of submissions directed to each of the various s 9(2) factors identified in the CRA (which I will outline below at F.2.1.4).
213 In order to explain my findings with respect to the Fuges’ claims as to improvident lending, it is regrettably necessary to expand upon the findings I have already made and to set out the way in which the Bank assessed the Fuges’ application in much further detail.
214 The initial loan approvals in 2008 were for the purpose of a refinance of the Elders’ loan (with a small increase in the facilities by providing an overdraft facility). The loans were approved in circumstances where the Fuges had been with Elders for an extended period, and where the new facilities to be provided by the Bank were at a lower rate of interest. The application for refinance was supported by a detailed and comprehensive business plan put together by Anthony Fuge. In cross-examination, Anthony Fuge attested to the accuracy of this business plan. Anthony Fuge gave evidence that he had worked hard to put the plan together, in which he wanted to put his best foot forward and present the farms and the farming operations as well as he possibly could but not in a way which presented misleading or false information to the various lenders who were provided with the document.
215 Mr Hewitt received the business plan together with relevant financial documents from Ms Cohen of Waratah Finance in July 2008. Mr Hewitt’s role as Relationship Manager meant that in relation to loan applications, his usual duties were to obtain all documentation and then undertake a preliminary assessment to determine whether the application should proceed to a formal credit assessment. Following receipt of the business plan, Mr Hewitt undertook steps to better understand the Fuges’ financial position and their farming operations. Mr Hewitt’s evidence was that he then undertook a “detailed review” of the business plan and other documentation provided. He prepared a credit submission which was reviewed and approved by the Bank’s credit department. The purpose of such a review is to perform an “independent” assessment, consistent with the Bank’s guidelines, before approving a loan. In the credit department’s “Application Report” dated 7 August 2008, the following comments were made:
(a) a good level of servicing surplus is demonstrated;
(b) the Bank is offered a fully secured position;
(c) Matthew Fuge earns substantial off-farm income which provides income diversity;
(d) the “behaviour test” had been conducted with no failure ;
(e) a “servicing capacity test” was performed to confirm that the Fuges could service the loans; and
(f) various different scenarios were also undertaken, including those with: (1) no irrigation and interest only based only on the farm income; (2) irrigation with principal and interest covering all facilities; (3) irrigation and interest only covering all facilities; (4) no irrigation and interest only covering all facilities; (5) irrigation and interest only covering all facilities; (6) irrigation and interest only based only on the farm income; and (7) irrigation and principal and interest covering the farm only.
216 The Bank arrived at an assessment rating of E1C which gave a combined numerical rating of 4, being a “reasonably strong” rating.
217 As noted above, when conducting a credit assessment for a loan application with respect to a farming business, the Bank used FarmPak to derive income values and conduct the detailed calculations as to how figures such as net profit were arrived at; these figures were then relied upon by the Bank for servicing purposes.
218 In terms of how the Bank arrived at its final credit assessment, an analysis was conducted which involved consideration of the projected future earnings, having regard to the cash flows provided by Anthony Fuge but calculated on the basis of average seasonal conditions and the farmer’s production programme using standard commodity prices. That analysis provided the projected income level for the assessment. The Bank then assessed the expenses on a line by line basis.
219 The Bank submits that the assessment was carried out on a conservative basis, by reason of, inter alia, the following matters: (a) sensitised interest rates were used; (b) conservative FarmPak projections were applied; (c) living expenses were increased above standard “AD” (that is, auto “decisioning”) levels; (d) the income levels used in the assessment process did not included income associated with 2,000 acres of leased property; and (e) the assessment was performed using a variety of scenarios, including on the basis that Matthew Fuge’s off-farm income was not taken into account and on the basis that irrigation water was available and was not available.
220 There may be a very real issue as to limitation periods with respect to these claims, but it is not necessary for me to deal with that because: (a) I have already found that the improvident lending claim was released by the HOA; and (b) the claim, as I will explain, is substantively misconceived.
221 The issue of legal principle relating to this claim was not a complicated one. Plainly there are cases where the fact that the lending was improvident was sufficient to form a conclusion that the contract in question was unjust: Trimarchi; Khoshaba. Those cases, however, are a world away from this case. What occurred here was that Anthony Fuge approached the Bank, through a finance broker, and created a very detailed business plan and proposal, which he considered accurate. In doing so, he represented to the Bank that he believed there to be a rational and reasonable basis for his projections. Although it is possible to imagine a circumstance where projections provided by an applicant for financial accommodation are sufficiently flawed so that it would be unreasonable for the Bank to have accepted them, the Bank has no general duty at common law to provide financial advice, and notwithstanding obligations taken on by the Code of Banking Conduct, I do not consider it was unreasonable in the circumstances for the Bank to form its opinion as to the ability of the Fuges to repay on the large amount of detailed information provided to it, which was not self-evidently deficient or misconceived and indeed looked as though it had been put together with a deal of cogent thought.
222 It is convenient to first deal with the broadest, and most substantive claim made by the Fuges, that in respect of the initial 2008 facilities, for a variety of reasons, the Bank did not have a sound basis on which to conclude that the facilities should be approved.
223 As to the FarmPak Arguments, the first difficulty for the Fuges is that a forensic decision was made not to lead any expert evidence on this point to illustrate that the Bank’s processes demonstrate a departure from prudent lending practice, or as Mason P expressed it in Trimarchi at , “normal and appropriate lending practice”. This provides a suboptimal starting point from which to consider the supposed shortcomings of the Bank’s assessment. What in fact seems to have occurred is that the Bank went through its usual and orthodox steps in respect of the approval process and the data provided in the business plan was put through the FarmPak programme in the way I have explained above. The evidence seems to demonstrate a thorough and apparently rational approach to considering the viability of the application.
224 The Fuges’ principal complaint in this regard, was the forward-looking nature of the credit assessment and the reliance upon the Fuges’ own projections as to future earnings and profit in circumstances where the drought had not broken. The Fuges relied on the fact that the lending guidelines required the Bank to assess both a potential customer’s projected cash flows and past financial performance. Extensive cross-examination was carried out in relation to this point, suggesting to Mr Hewitt that past financial performance, being profit and loss, is a better indication of potential customers’ ability to service a borrowing than an asserted projected income. Mr Hewitt gave evidence as to his understanding of why this is the case at T696.20-28:
So for servicing purposes, it’s done on the basis of assuming an average seasonal condition and the production programme that the farmer intends to incorporate using standard commodity prices which are provided by the bank, what the income level is; and the expenses are also assessed on a line by line basis. So without doing that way, with farming being volatile, there are periods of drought when past financial performance are never going to justify debt as they do at the moment in – some people are in drought. And if the banks only judge serviceability on that, you would never support a farmer.
225 This explanation makes intuitive sense. Further, in response to the specific complaints that the Bank did not take into account historical wheat production and water availability, the Bank explained and provided evidence that it had assessed the 2008 finance application against a variety of scenarios which included on the basis that there was no water or irrigation. In the absence of any evidence to the contrary, the suggestion, made at a high level of generality, that the FarmPak programme and the way in which the Bank calculated the viability of the loan demonstrates unjustness, must fail.
226 Irrespective of the particular calculations carried out by the Bank, as to the matters which were said to have been ignored by the Bank, most of these fall into the category of being indicators of past performance. Unlike other cases, this is not an allegation that the Bank should have inquired further into the financial position of the Fuges, or made a decision without all relevant information available one would expect a prudent lender to consider. The allegation here amounts to one of wilful blindness, where the Bank has deliberately decided to ignore certain information, which the Fuges say clearly demonstrated that they did not have a likely ability to repay the loan. Rolled up in this argument, is an underlying suggestion that the Bank unreasonably relied upon the positive projections of the Fuges and should have conducted better due diligence so as to satisfy itself that the Fuges’ projections and assertions could be accepted.
227 An example of one of the more nuanced arguments which arose during oral submissions was that the business plan had an internal inconsistency as to the revenue figures, and a diligent and prudent banker applying credit assessment methods faced with a business plan which on its face had that internal inconsistency would have at the very least asked questions to satisfy themselves of that discrepancy rather than taking the higher figure. The trouble for the Fuges in relation to this example, is like many other arguments raised throughout the trial, there has not been any substantive evidence adduced to substantiate the claim that this was an irresponsible decision. Counsel for the Fuges did not cross-examine on this point and I cannot be satisfied that the decision to take the higher figure was inappropriate.
228 The evidence the subject of this broader argument does not seem to me to amount to demonstrating a likely inability to repay the loans. This is not a case like Trimarchi where the evidence was that the agreement was inherently risky and “quite probably doomed to fail”: at . In that case, Mr Trimarchi had significant financial difficulties, was desperate to obtain a loan from St George Bank, had repeatedly broken promises concerning reduction of an overdraft, and one of his recent projects had failed to produce the anticipated funds. In addition to this, the security offered was completely separate from Mr Trimarchi’s business assets, being the properties of his parents. The Bank was found to have constructive knowledge of these facts. If Mr Trimarchi’s financial difficulties had continued, it would have seriously impeded his ability to repay St George Bank, at the expiry of his short-term 12 month loan. To this it might be added that the Bank in that case did not call the manager that approved the impugned loan.
229 This is a completely different set of facts, unlike the solicitor Mr Trimarchi, the Fuges conducted a farming business, which is a notoriously volatile endeavour. Assessments of farming enterprises no doubt present real challenges. This is presumably why specialist assessment programmes such as FarmPak exist. With respect, I agree with the comment made by Spigelman CJ in Khoshaba that the purpose for which a loan is advanced is a relevant circumstance when determining whether a contract is unjust: at . I consider that this is also relevant at the present stage, that is, determining whether lending was improvident. As his Honour then continued, at  “[t]he purpose of a loan is a concern of a lender, because it is usually a material consideration in determining whether the particular lender is able to service and repay the loan”. It would be unfair for farmers, and show a remarkable ignorance of how farming operations work in this country, if loans were refused on the basis that the relevant farmer had recently experienced a poor yield. It is presumably for this reason that Anthony Fuge provided a very detailed business plan, which outlined the previous financial returns, and how he expected to turn a profit in the future, and why the Fuges were only interested in a five-year loan period. This could provide time for the Fuges to generate significant earnings, taking into account the inevitability that some seasons will be worse than others. Further, as the Bank pointed out in its written submissions, the purpose of the 2008 loan was to refinance the Elders’ loan with only a small increase in the facilities by including an overdraft facility. The loans were approved in circumstances where the Fuges had been with Elders for an extended period, and where the new facilities to be provided by the Bank were at a lower rate of interest. Hence the refinancing delivered an immediate and tangible benefit to the Fuges, a matter clearly relevant to any assessment of improvidence and unjustness.
230 As to the Miscalculation Arguments, it is necessary to explain briefly the documentation prepared and provided by the parties during the hearing. On day 12 of the hearing, a document marked MFI 23 was handed up by the Bank, which was an annotated statement of the Fuges’ income and expenses (which formed part of the Bank’s credit assessment figures). The Miscalculation Arguments focussed on discrepancies between this document, and the figures provided by Anthony Fuge’s business plan, the allegation being that the Bank had manipulated the figures in order to provide a favourable review. On day 14, in December 2018, having previously requested from both parties that some document be created which provided an “apples for apples” comparison of the various figures, the Bank provided a document which was then marked MFI 25. This has been reproduced as Schedule A to this judgment. This document identifies the relationship between the Bank’s credit assessment figures, and those appearing in the business plan by grouping together the figures used for particular calculations, and removing certain figures that were either used in the business plan and not in the Bank’s calculations, or vice versa.
231 The Bank explained the reasons for which certain elements were either factored in or out of the calculations, and how the number from the business plan resulted in the final projections produced by FarmPak. During cross-examination, Mr Hewitt explained in some detail how the assessment process was undertaken by the Bank using the FarmPak process. He also explained how the numbers appearing in that document and the Credit Application/Assessment document itself could be reconciled with the information that had been provided by Anthony Fuge.
232 Despite this rational and detailed approach taken to assessing the Fuges’ position, based on the information provided by the Fuges, the allegation of improvident lending was persisted in until the end.
233 Finally, as to the arguments directed at post-2008 lending, the roll-over of facilities and advance of further funds, all of these events occurred at the specific request of the Fuges and in an endeavour to assist them to continue the farming operations and to meet particular expenses. Further, the evidence reveals that information was specifically requested and provided in support of the application for further funds and there is no suggestion some contemporaneous issue was raised by the Fuges (or was known to the Bank) as to the Fuges’ inability to service the loans.
234 As to Mr Hewitt’s internal notes, they clearly reflect the positive picture that was painted by Anthony Fuge in his reporting to Mr Hewitt. Anthony Fuges’ evidence was that the drought broke in Forbes in 2010 and in opening submissions the Fuges noted that the position began improving at that point. It seems to me that in the relevant discussions between Anthony Fuge and Mr Hewitt, Anthony Fuge (perhaps unsurprisingly) painted an optimistic picture of the future of the farming operations. The notes set out in the Fuges’ submissions demonstrate the apparently “false assumptions” that were made by Mr Hewitt. These assumptions included, as remarkable as it seems, believing Anthony Fuge when he told Mr Hewitt he was expecting a payment of a certain amount for wool; and believing Anthony Fuge when he said he was owed certain money that he would chase up which could be used to satisfy the increased loan. The Fuges’ apparent case is that Mr Hewitt should not have accepted these representations at face value and should have known that the Fuges were not capable of repaying the increases. The submissions in this regard border on being risible.
235 While reliance on representations of an applicant for finance should not be seen as some sort of bullet-proof defence for lending institutions to hide behind and in some cases it will be necessary to do more; in the present circumstances, where the Fuges intentionally presented a confident and positive picture of the future of the farming business to the Bank and approached the Bank about further lending (armed with apparently viable information as to how it could satisfy those increases), the Fuges have not proved the allegation that the Bank’s lending in the period of 2010-2014 was improvident. The submissions consist of a series of assertions as to the lending being ill-intentioned, without providing a sound basis upon which the conclusion contended for could be drawn.
236 By way of completeness, I should note that the Fuges did make an argument that the internal valuations of Mr Hewitt were not taken seriously. The evidence relied upon was that the 2008 valuations and the 2012 valuations were identical, save for the cover pages. For example, the average annual rainfall data was recorded as being exactly the same for 2008 and 2012.
237 The suggestion that the internal valuations were not taken seriously does not go anywhere. There has been no valuation evidence adduced by the Fuges to prove that the Bank’s valuations were not accurate or carried out properly. Similarly, it is not enough to point to the similarities between two valuations to establish they were necessarily erroneous (to the extent that this is relevant).
238 At the conclusion of the hearing, reflecting the scattergun way in which this case has been conducted, counsel for the Fuges provided a supplementary note of submissions going to the claim that the agreements pursuant to which facilities were provided amounted to unjust contracts. These submissions were divided under headings which each related to the s 9 considerations set out in the Act. They may be summarised as follows: first, there was a material inequality of bargaining power between the parties (which the Bank conceded); secondly, that at the time the contract was made its provisions were not the subject of negotiation (including that on the day the letters of offer were sent, no alternative offers or arrangements were discussed or provided); thirdly, it was not reasonably practicable for the Fuges to negotiate for the alteration or rejection of any of the provisions of the contracts; fourthly, the contracts imposed conditions which were unreasonably difficult to comply with or were not reasonably necessary for the protection of the legitimate interests of the Bank because the Bank was asset lending; fifthly, the Fuges were not able to protect reasonably their interests due to their limited business knowledge and limited capacity to understand the effect of the loan documents; sixthly, independent legal advice was neither offered nor recommended by the Bank; seventhly, the provisions of the contracts and their legal and practical effect were not explained to the Fuges in any way; eighthly, the Bank adopted unfair tactics in treating the business plan as a viable proposal and not indicating to the Fuges that it considered success in the farming business to be unlikely; ninthly, the Bank’s reliance upon FarmPak authorised the adoption of assumptions contrary to the interests of the Fuges but in the interests of the Bank accumulating more wealth; and tenthly, the purpose of the contract for the Bank was mere asset lending.
239 Submissions four, eight, nine and ten are sufficiently dealt with by my analysis above as to improvident lending. The remaining submissions go to the circumstances in which the contracts were negotiated and agreed. What the evidence discloses is that in 2008 the Fuges approached at least four other banks with their business plan as to the possibility of refinancing. The Fuges submit that the Bank was “desperate” to obtain the Fuges as customers and hence did not carry out proper due diligence. This submission is inconsistent with then asking the Court to find that the Bank “railroaded” the Fuges into their initial loans in 2008, and a finding that the Fuges had no option to negotiate conditions or terms of the contracts, even though the Fuges approached the Bank and stipulated certain terms, such as the five-year term. The Fuges were represented and assisted by a mortgage broker who approached the Bank for the purpose of obtaining a refinance on Anthony Fuge’s instructions, and according to a very detailed business plan. The Bank did not accept the Fuges initial terms, but there is no reason to conclude that had the Fuges disagreed with the Bank’s counter-offer, they were not in a position to negotiate. This is particularly the case where there is evidence that the Fuges were also in the process of negotiating a refinance with other lending institutions.
240 As to the allegations of breaches of the Code of Banking Practice, the above analysis is sufficient to dispose of such claims relating to cll 2.2, 25.1 and 25.2. Those clauses relating to the obligation of the Bank to act ethically and fairly, to undertake a prudent and diligent credit assessment and to work to assist the client in overcoming financial difficulties. The remaining relevant clauses, cll 26.2 and 28.5, both relate to the Bank’s obligation to provide information to customers. Clause 26.2 relates to ensuring that co-debtors understand their liabilities and rights, while cl 28.5 relates to ensuring that someone signing a guarantee has had the requisite information explained to them, and that they have been allowed a day to consider the information before signing.
241 As to any failure to ensure the co-debtors understood their obligations, the Fuges’ assertion in opening submissions was that the Bank wholly failed to bring the relevant information to their attention. This submission was not developed any further and I do not propose to deal with it.
242 The Fuges contend that cl 28.5 was breached because Matthew Fuge was not given a day to consider the proposed new guarantees or changes to his existing guarantee. The Fuges rely on evidence which was admitted provisionally on day 10, which is said to go to the speed and rapidity with which documents were sent to Matthew Fuge in Hong Kong for him to sign and return as soon as possible. As I explained during the course of argument to junior counsel for the Fuges, any such breach of cl 28.5 would not impugn the ability of the Bank to enforce the underlying contractual obligation of a surety to repay on demand the amount outstanding: T888. The Fuges’ case is that the facilities themselves are invalid. If the Fuges were to succeed in proving this, the guarantees would then go nowhere, because the underlying debt no longer exists. The same logic does not operate in reverse. The only relevance of a breach of cl 28.5 is limited to my consideration of all the circumstances going to the question of whether there is an unjust contract. The high point of the evidence tendered on this point appears to be an email which says “if you could get this done ASAP it would be greatly appreciated”: T891. This hardly establishes that the Bank did not allow Matthew a day to consider the guarantee. In any event, counsel for the Fuges acknowledged during Matthew’s cross-examination that there was no issue that Matthew had signed the various documents and there was no suggestion that he did not understand them. I do not consider there to be any merit at all in this submission.
243 This issue has been dealt with at E.1 above. As far as it is discernible from the Fuges’ written submissions, the arguments advanced in support of this issue were the same as those advanced as to the alleged invalidity in the form of notices by which the Farm Debt Mediation was convened. That is, the argument relating to the Livestock Mortgage. No discrete argument as to this issue was run.
244 The sale at undervalue case applies only to Lenborough and Greenfields, and their associated Water Rights and livestock. The property of Kennedia West was sold by Anthony Fuge himself. The Fuges bear the onus of proving sale at undervalue on the balance of probabilities.
245 The Fuges framed this case as a common law action for damages, and it fails on this account alone. A mortgagor alleging that a mortgagee has exercised a power of sale in such a way that the equity of redemption has been lost discloses no cause of action at common law: Coroneo v Australian Provincial Assurance Association Ltd (1935) 35 SR (NSW) 391 at 394-5 per Jordan CJ. See also Perera v Genworth Financial Mortgage Insurance Pty Ltd  NSWCA 19; (2017) 94 NSWLR 83 at 94  per Leeming JA, Macfarlan and Simpson JJA agreeing. The proper remedy is a suit in equity for an account on the footing of wilful default: see generally Tyler, E L G, Fisher and Lightwood’s Law of Mortgage (3rd ed, 2013) at [20.20], [20.42] and [39.2] and the cases there cited. I do not propose to complicate this matter further by delving into the historical possibility of an account at common law.
246 However, assuming contrary to my view that it was open to the Fuges to seek orthodox relief, it is worth setting out the relevant principles.
247 The relevant duty imposed on a mortgagee when selling a mortgaged property was explained by McLelland CJ in Eq in Hawkesbury Valley Developments Pty Ltd v Custom Credit Corporation  ANZ Conv R 361 at 363-364:
This is an area of the law where particular phrases used in judgments should not be construed and applied as if embodied in an Act of Parliament … What matters is the underlying equitable principle, which in the modern idiom usually finds expression in terms of unconscionability. The mortgagee is not answerable for what Isaacs J in Pendlebury describes (at 700) as “mere negligence or carelessness in carrying out the sale”. Any departure from reasonable standards must be so serious as to be properly characterised as unconscionable, in order to render the mortgagee accountable. If a failure by a mortgagee to take reasonable steps to obtain a proper price is sufficiently serious to be characterised as unconscionable as that expression is understood in equity, then in the taking of accounts between the mortgagee and the mortgagor, the mortgagee will be accountable on the basis of wilful default for the price which would have been obtained if the mortgagee had not been guilty of unconscionable conduct.
248 As Bryson JA explained in Commonwealth Bank of Australia v Hadfield  NSWCA 350 at  (Giles and Tobias JJA agreeing) the:
[e]xercise of the power of sale is undertaken by a mortgagee in the interest of the mortgagee, although the mortgagee is confined to exercise of the power in good faith for the purpose for which it was conferred; the mortgagee cannot act for any extraneous purpose or bye-motive, and cannot sacrifice the interest of the mortgagor; to do so would be to depart from good-faith exercise of the power, and from the concept of a sale in the exercise of the power. The sale must bona fide be a sale, not a sacrifice, and the mortgagee cannot be indifferent to the price provided only that its debt is paid. In the pursuit of its own interest the mortgagee is entitled to choose the time at which it sells the property.
249 His Honour also provides a useful summary of a collection of judgments which expand upon the duty of the mortgagee: at -. Mere inadequacy in the price obtained will not normally be enough for a mortgagor to upset a sale: see Ultimate Property Group Pty Ltd v Lord  NSWSC 114; (2004) 60 NSWLR 646 at 652 - per Young CJ in Eq; see also MBF Investments Pty Ltd v Nolan  VSCA 114; (2011) 37 VR 116 at 141-143 - and 144-145 . It is important to emphasise that although the sale must not be a sacrifice, there is no positive obligation on the mortgagee to do everything in its power to obtain the best possible price for the property. Any departure from reasonable standards must be so serious as to be properly characterised as unconscionable: Hawkesbury Valley at 363.
250 It will be recalled that Kennedia West was sold by Anthony Fuge. Mr Griffths’ evidence during cross-examination was that as far as he was aware, there was always an offer on foot regarding Kennedia West, even if some were withdrawn, and it did not seem appropriate for the Bank to step in while there were decent offers on the table: T659.1-10.
251 As to the sale of Lenborough and Greenfields, the uncontroversial facts are set out at B.5 above. The Fuges submit that the Court should find that the Bank failed to obtain a proper price for the two properties, and this should be regarded as unconscionable conduct. The evidence upon which the Fuges rely, is an offer from the Fuges themselves, to buy Lenborough for $2,500,000. It is said that the decision to instead accept an offer from Mr Dirk Stevens for $1,458,000 demonstrates reckless behaviour on the part of the Bank, and the Court should find that this demonstrates a loss of at least $1,002,000 on the sale at an undervalue. The Fuges urge the Court to consider the conduct of the Bank as a whole and the impact of that conduct on the financial and non-financial interests of the Fuges. The Fuges further relied upon Mr Hewitt’s acceptance that it was a difficult time to sell rural property, and that a valuation report of 20 September 2013 valued the property well above the eventual sale price. The ultimate submission made was that the Bank should have given the Fuges a chance at “making good on their offer”, and if the Fuges had been unable to make good, then the Bank could have accepted the offer from Mr Stevens without penalty of time. Putting to one side the inherent difficulty in proving undervalue by comparison to an offer put by the applicants themselves, it is useful to now briefly outline the Bank’s submissions.
252 The Bank submits that Mr Griffiths took proper and appropriate steps to investigate the assets and ascertain their value. He appointed a professional valuer (Opteon Property Group Pty Limited) which valued the Properties including the associated Water Rights as follows:
(a) Lenborough and Greenfields market value: $1,900,000;
(b) Lenborough and Greenfields forced sale value: $1,520,000;
(c) Kennedia West market value: $455,000;
(d) Kennedia West forced sale value: $365,000.
253 Mr Griffiths obtained marketing submissions from three reputable real estate agents in relation to the sale of the three Properties, namely Elders, Landmark Harcourts and Ray White. Mr Griffiths gave evidence as to why the Bank chose Elders, these reasons included that the agent had 30 years of experience, the quick turnaround of the submission and the fact that Elders had given a higher estimate for the achievable sale prices than the others.
254 Lenborough and Greenfields was professionally advertised and marketed by Elders and Mr Judge provided regular reports to Mr Griffiths. The marketing campaign ran for about five weeks in the lead-up to the auction on 30 April 2015 and comprised advertisements in various newspaper and magazines and internet advertising; Elders also used its own databases and contacts.
255 A public auction for Lenborough and Greenfields was held on 30 April 2015. Prior to the auction, the Bank set reserve at $2.3 million. Unfortunately, only one bid of $500,000 was made. Mr Peter Wallace, who placed the bid, later increased his offer to $1.1 million but the Bank did not accept it.
256 During the period from 30 April 2015 to about 18 August 2015, Mr Griffiths on behalf of the Bank, with the assistance of Mr Judge of Elders, conducted negotiations with at least seven prospective purchasers, ultimately securing a total realisation from Lenborough and Greenfields of $1,821,770.40, comprising a sale of Lenborough and Greenfields (with improvements) and some of the Water Rights to Superb Developments Pty Limited for $1,462,670.40 and a sale of the balance of the Water Rights associated with Lenborough and Greenfields to Mr Tim and Mrs Sally Watson for $359,100. The gross realisation of Lenborough and Greenfields and the associated Water Rights was at a price above the forced sale valuation of $1,520,000 and within about 4% of the market value of $1,900,000 as detailed in the Opteon valuation.
257 The issue of whether the Bank was within its rights to reject the refinancing offers will be discussed in detail below at H.3, in relation to MFI 7 Issue 5. The issue of relevance here, is whether the Bank’s conduct in marketing and selling the two properties was done with such little regard as to obtaining a reasonable price that it could be considered to be unconscionable. Putting to one side the possibility of another offer, the Bank has adduced evidence which demonstrates the processes that were undertaken in accordance with the submissions I have just summarised. The Fuges bear the onus of proving some delinquency on the part of the Bank: Australia and New Zealand Banking Group Limited v Bangadilly Pastoral Co Pty Limited (1978) 139 CLR 195. There is nothing irresponsible in the approach that was taken, nor does it amount to some conduct which could be stigmatised as being unconscionable. In particular, it is noticeable that the two properties were marketed in accordance with professional advice, and the offer made at the public auction was considered inadequate and not accepted. The final offer which was eventually accepted was within the range of likely outcomes predicted by the valuer.
258 Critically, the Fuges have not adduced evidence (expert or otherwise) to demonstrate any failing on the part of the Bank in the steps it took to sell the two properties or associated water rights. There is no evidence to suggest that some different or better marketing campaign should have been undertaken or that the properties should have been sold more quickly or slowly. I do not consider it amounted to a delinquency for Mr Griffiths to adopt the process he undertook for the sale of the properties, the Water Rights or the sheep, or that he was required to take a different course.
259 As to the submission that Mr Hewitt agreed it was a difficult time to sell rural property, it is trite that a mortgagee is not bound to postpone the sale in the hope of obtaining a better price later: McCourt v National Australia Bank  WASC 121 at . As to the Fuges’ reliance on the 2013 valuation reports, such evidence cannot be considered compelling as to the value upon a mortgagee sale of the properties two years later. In making these findings I am conscious of what I have found above about the unrealistic time frames to sell the Properties given to the Fuges pursuant to the HOA. But what we are dealing with here is different. It is not a period starting from scratch to give a mortgagor vendor sufficient time to maximise the value of property they are selling and avoid defaults, but rather whether a mortgagee engaged in a delinquency by selling following default in accordance with professional advice given to it. It is noteworthy that despite the marketing campaign commencing on 18 February 2015, contracts for the sale of Lenborough and Greenfields were not exchanged until 14 December 2015 with settlement occurring on 7 March 2016. Further, settlement of the sale of the remaining water rights took place on 10 June 2016.
260 The issue which the Fuges appeared to most heavily rely upon in final submissions was the Bank’s failure to accept their counter offer of $2,500,000. The Fuges are not wrong to submit that the possibility of a better offer could be relevant to the present question. Plainly, if it were proven that the Bank rejected a much better offer for no apparently logical reason, this would likely amount to unconscionable conduct. The Fuges’ submissions, however, ignore the obvious logical reason as to why the Bank preferred to accept Mr Stevens’ offer. The Fuges made a series of offers which I explain in some detail below at Section H. For present purposes, it is sufficient to note that what is presented in the Fuges’ final submissions as an outright offer to purchase the two properties for $2,500,000, was in fact a refinancing offer to settle any and all outstanding debts for that price, with the amount made up in various ways, including a loan from another bank and the sale price of the existing securities, including the Livestock Mortgage and Kennedia West. As I detail below, the Bank engaged in long discussions with the Fuges and ultimately came to the conclusion that it was not satisfied that the offers put by the Fuges were secure enough to be preferred to exercising their right of sale. This conclusion could not be regarded as an unreasonable one in the circumstances. The Fuges’ submissions as to the relevant counterfactual (that the Bank would have been better off accepting a $2,500,000 offer), does not withstand scrutiny when the nature of that offer is properly understood. In fact, the Fuges’ closing submissions at  appear to accept that the ability of the Fuges to come good on their offer for Lenborough was not an inevitability.
261 The Fuges contend that the sale of the flock in March and April 2015 at a significant undervalue was in the circumstances both inequitable and unlawful. The ewes and lambs were said to have been “rounded up and treated [as though they were] dog meat” and “flogged-off” for a minimal price.
262 In relation to this issue, the Fuges sought to rely upon a number of submissions: first, the Bank and/or its agents were not the legal owners of the sheep; secondly, the Bank had transported the sheep illegally to market due to a failure to obtain a National Vendor Declaration (NVD); thirdly, the Bank also did not obtain a Property Identification Code (PIC) for the sale; and fourthly, the sheep were treated as of inferior quality for a “quick sale” and sold at an undervalue which resulted in a total loss of $150,000. As I indicated to counsel for the Fuges during the course of the hearing, I fail to understand how these first two submissions relate to the issue as expressed in MFI 7 – being sale at an undervalue. The first argument has been dealt with by my findings as to the ownership of the sheep at E.1.2 above. The second is irrelevant, and it is worth noting that the Fuges did not make any attempt to put forward an argument as to how the alleged failure to hold a NVD for transportation could actually invalidate or affect the sale at law. As to the third argument, it is said that the failure to obtain a PIC meant the sheep could not be sold at market value. Again, however, the legal implications of a failure to hold a PIC at the point of sale was not explained nor was any attempt made to demonstrate how this directly affected the value of the sheep or the consideration obtained upon sale.
263 Turning to the issue of quantum, the Fuges arrive at the figure of $150,000 by calculating what they submit the sheep should have been sold for ($304,304.00), and subtracting the sale amount. The trouble once again for the Fuges is that they rely upon an assertion as to the value of the sheep as at 9 February 2016, without providing any evidence as to why I should take that assertion as being the market value of those particular sheep and why that projected value should be applied to the sheep at the time they were actually sold. The assertion relied upon is in the form of an email from the Fuges’ solicitor to the solicitor for the Bank in February 2016, which states that “so that there is no questioning about current prices” before setting out a variety of prices according to weight and type of sheep under the heading “Forbes Sheep and Lamb Sale Conducted Tuesday 09-02-2016”.
264 In its submissions, the Bank provided a detailed outline of how the sale of the sheep was carried out. By way of brief summary, Mr Griffiths sold 214 Merino wether lambs for approximately $26,000 at $120 per head in July 2015. After the sale of the Properties, the Bank attempted to negotiate a sale of the remaining sheep with the incoming purchaser of Lenborough and Greenfields, but did not reach an agreement. The Bank then engaged Mr Paul Jameson, a Livestock Sales Manager from Elders to assist in the sale, including assessing and transporting the sheep. The sheep were sold at auction on 1 March 2016 for a total of $168,108.80. I accept the evidence adduced to support this account.
265 The issue then becomes, whether the Fuges have demonstrated that the Bank had so little regard for achieving a reasonable price that they acted unconscionably. This is not the case.
266 The evidence is that the sale was conducted using the services of a stock agent and occurred by way of public auction. Ultimately, despite some unsubstantiated allegations as to impropriety as to the treatment of the sheep, there is no actual evidence demonstrating that some better price could have been obtained at the time. In all of the circumstances, it has not been demonstrated that there was any relevant departure from good standards or unconscionable conduct by the Bank in selling the two properties, the Water Rights or the sheep, and to the extent it is open on the pleaded case for the Fuges seek relief in this regard, it should not be granted.
267 Issue five is concerned with whether the Fuges are entitled to common law damages by reason of a breach of the Code of Banking Practice arising by reason of the Bank’s failure after 17 July 2014 to accept refinance offers made to the Bank. The relevant clauses of the 2013 Code of Banking Practice provided:
Cl 3.2 to act fairly and reasonably towards you in a consistent and ethical manner [having regard to] your conduct, our conduct and the contract between us.
Cl 28.2 with your agreement and co-operation, the Bank will try to help you overcome your financial difficulties with any credit facility you have with us. We could, for example, work with you to develop a repayment plan.
268 It is worth mentioning that at various times throughout their oral and written submissions, the Fuges have attempted to characterise this claim as one going to unconscionable conduct. The analysis does not differ in this regard, and I consider that my reasons below are sufficient to dispose of any such claim if the Fuges were able to rely upon it.
269 At the close of submissions, the Fuges were granted leave to provide an aide-memoire which briefly summarised all offers made to the Bank as to refinancing or settling the debt owing (Schedule of Offers). There were eight offers made in total, the first was made on 8 April 2015 and the last on 14 October 2015. These offers arose out of a formal demand issued by the Bank on 19 January 2015 in the amount of 2,388,315.26.
270 The Schedule of Offers can be summarised as follows:
(1) 8 April 2015 – $2,390,000
(2) 28 April 2015 – $2,500,000
(3) 4 May 2015 – $1,800,000 or $2,000,000
(4) 9 June 2015 –$2,295,000
(5) 17 June 2015 – $2,435,000
(6) 24 June 2015 – $2,400,000
(7) 22 September 2015 – $2,400,000
(8) 14 October 2015 – $2,500,000
271 The Fuges submit that each of the offers were refused or deferred in such a way as to amount to a breach of the Code of Banking Practice and unconscionable conduct. It is said that the Bank was attempting to manipulate any and all settlement negotiations by dictating precisely how each element of the settlement figure should be made up and whether any conditions may or may not be attached to each element of funding. Although the offers, presented in this way, seem a very sensible option for the Bank to have accepted to recover its money owed, it is important to understand the actual offers that were being made. They were indubitably not the “slam-dunk” option which counsel for the Fuges tended to suggest.
272 Before dealing with the offers outlined in the schedule, the Fuges’ submissions make reference to an additional offer made on 26 February 2015. The offer contained a proposal that “Kennedia West” and the livestock be sold and the residual debt owing to CBA be refinanced by Rabobank on the terms contained in a conditional letter of offer with a proposed loan limit of $1,400,000. In its response, the Bank noted that the proposal did not “sufficiently outline the basis on which the Bank would be repaid”. It was said that given the valuation estimate of Kennedia West and the livestock, the sale proceeds would not cover the shortfall between the loan from Rabobank and the amount owing. The Bank then went on to note that it would only consider a proposal under which it would be repaid in full. To that end, the Fuges were asked to provide further details as to the sale of Kennedia West, the inventory and likely worth of the livestock and confirmation that Matthew Fuge would include additional sufficient funds available to him to ensure the total amount owing would be repaid.
273 The Fuges characterised this response as an example of how the Bank was “changing the goalposts” and thwarting the settlement process by setting unnecessary requirements when it could have simply accepted the offer. However, considering the terms of the offer made in February 2015, and the Bank’s detailed response, it is clear that the Bank was reasonably requesting clarification as to an offer which at first glance did not appear to involve the full repayment of the amount owing.
274 With the benefit of hindsight it may have been sensible for the Bank to have tried to do all it could to obtain a deal which included the Bank taking an appreciable discount on the amount it was owed, but these contemporaneous requests were not arbitrary nor were they difficult to understand.
275 The 8 April 2015 offer of $2,390,000 was to be made up of a Rabobank loan of $1,400,000 and the proceeds of sale from Kennedia West and the livestock. The offer conceded that it was possible that only a lower figure of $2,000,000 might be achieved. In declining the offer, the Bank explained it was not satisfied due to the uncertainty surrounding timing and the amount to be repaid; the lack of offer by Matthew Fuge to contribute personal funds to meet any shortfall; uncertainty as to the conditional status of the Rabobank offer and the fact that the offer was less than the amount owing.
276 Again, the issue of uncertainty as to the sale of Kennedia West was inextricably linked to the failure to offer to use Matthew Fuge’s personal funds to cover any shortfall. Both these issues had been raised by the Bank on 9 March 2015, with emphasis placed on the need for certainty that the amount owing would be repaid in full. The conditional status of the Rabobank offer does not appear to have been raised by the Bank previously, but that fact alone did not preclude the Bank from raising the issue in April.
277 A more helpful approach then became evident. On 22 April 2015, the Bank proposed a counter-offer, which was to accept $1,950,000 after receiving settlement funds following the sale of Kennedia West subject to: (a) unconditional exchanged contract for Kennedia West for $550,000 with funds to be used to reduce the debt; (b) unconditional letter of approval from Rabobank or another reputable lender for $1,400,000; (c) evidence and timing acceptable to the Bank of a source and amount of residual funds required to achieve the settlement amount; and (d) the offer was to expire on 29 April 2015. In response to this, Matthew Fuge initially replied by saying: “(t)his definitely gives us something to work with”.
278 On 28 April 2015, Matthew Fuge reiterated his original offer, consisting of the Rabobank loan, the sale of Kennedia West for $550,000 or above, the livestock proceeds and their property in Tamworth said to be worth $350,000- $400,000”. Matthew Fuge noted “this is more than enough to meet your payout figure of $2,500,000. The immediate response from the Bank said “I will review the amended proposal and revert however I note that further clarity/evidence requested as part of my last email 22/4 is still not provided”.
279 A further detailed response was then provided by the Bank, which acknowledged that the Letter of Approval from Rabobank had been reissued, but was still conditional on valuation reports being provided and being found acceptable by Rabobank. The email said: “as such, funding may not proceed”. The Bank noted that the equity from the Tamworth property provided additional support to the application, but expressed concern as to the lack of any evidence as to valuation and the amount owing on the mortgage to Westpac, as well as the fact that a second mortgage to the Bank would be in breach of the proposed loan from Rabobank. A further note was also made about the proposed security in the Rabobank letter, which identifies Matthew Fuge as the sole owner despite this not being the case.
280 On 4 May 2015, Matthew Fuge proposed two options: first, that there be a final payout of $1,800,000 in full and a release of all securities back to the Fuges; or secondly, that the Fuges continue to refinance with the Bank, with a final payout figure of $2,000,000 to be reduced to $1,080,000 after the sale of Kennedia West and water entitlements, at which point the parties could continue doing business. The Bank then indicated that it would resume discussions after the conclusion of negotiations with prospective purchasers from the auction, at which point it then requested further particulars and evidence as to the components of Matthew Fuge’s new offer.
281 On 2 June 2015, the Bank once again made a similar offer to that which had made before: that Kennedia West be sold, and the mortgages over Lenborough and Greenfields discharged at settlement of $1,950,000, subject to receipt of an unconditional letter of approval from Rabobank and a few other requirements. At this point, Matthew Fuge replied by indicating his and Rabobank’s confusion as to the Bank’s request, and an excerpt from his correspondence with Rabobank where it was indicated that Rabobank did not want to complete valuations prior to confirmation that the refinance would go ahead.
282 On 3 June 2015, the Bank accepted an offer from Mr Dirk Stevens to purchase Lenborough and Greenfields in the amount of $1,458,000 without water.
283 From this point onwards, there was a significant amount of further correspondence between Matthew Fuge and the Bank. Matthew Fuge continued to propose an offer along the same lines, being the sale of Kennedia West, a loan from Rabobank and sale of the Water Rights and livestock. The Bank continued to propose counter-offers, again on similar lines to those outlined above, but always insisting upon an unconditional letter of offer from Rabobank.
284 On 17 June 2015, the Fuges accepted the offer proposed by the Bank on 11 June 2015, which accounted for a $2,400,000 full and final settlement. The Bank replied noting a range of document and evidence which it looked “forward to receiving”. At this point, Matthew Fuge contacted the Bank noting there must be some confusion regarding the “unconditional approval” and detailing a conversation that had taken place between a representative of Rabobank, Mr Greentree and himself, a conversation which Matthew Fuge understood had resolved the issue. The outcome appears to have been that a representative of Rabobank was going to conduct a valuation and then provide evidence to the Bank that this condition had been fulfilled. On 3 July 2015, Rabobank wrote a letter to the Bank noting that the “valuation” pre-settlement condition had been satisfied but that “all other Pre Settlement Special Conditions … remain unchanged”.
285 The Bank then replied noting that the Fuges had still failed to provide all required information sufficient to satisfy the Bank of their means to meet the repayments, and extended the time by which they required such information. At the same time, Matthew Fuge was attempting to finalise the sale of Kennedia West, but unfortunately the sale fell through for what was now the fourth time. On 17 July 2015, the Bank formally withdrew its offer. Matthew Fuge wrote to the Bank requesting more time. On 28 July 2015, the Bank indicated that while the offer was withdrawn, the Bank would permit the Fuges until close of business the following day to provide a further proposal. On 4 September 2015, the Bank contacted the Fuges noting that all proposals put forward by them have been unable to be completed by the Fuges or considered uncommercial by the Bank. Further, it noted that the Fuges had failed on several occasions to provide the Bank with adequate information when requested to do so. As such, the Bank would not entertain any further proposals and would proceed with the enforcement of its securities.
286 On 10 September 2015, the solicitor for the Fuges contacted the Bank, explaining that they had been recently retained for the purpose of navigating a final settlement with the Bank and asking that the Bank not take any further enforcement steps until a revised proposal could be put. On 22 September 2015, the proposal was sent to the Bank. The proposal was for a total amount of $2,400,000 (despite the Bank’s indication on 10 September that the debt was now in excess of $2,500,000) and its position that it was not obliged at law to accept any less. The Bank’s position in relation to the offer was that it was on no better terms than the offers previously made by Matthew Fuge. The Bank advised that the offer had been rejected and the Bank would continue with the exchange of contracts for Lenborough and Greenfields.
287 On 8 October 2015, the Bank made a further counter-offer, for a total amount of $2,500,000. On 14 October 2015, the Fuges through their solicitors provided a proposal as to the payment of $2,500,000. Upon receiving the proposal, the Bank indicated that their calculations found the proposal to be $40,000 short of the total settlement sum, and also noted that the proposal was not supported by an unconditional approval letter in respect of the stock mortgage, proof of Matthew Fuge’s funds or written evidence of the money to be provided by Matthew Fuge’s “business associates”. For these reasons, the proposal was said not to be capable of acceptance. On 27 October 2015, further time was requested and granted for the provision of relevant evidence and documentation.
288 On 3 December 2015, the Bank sent the Fuges a proposed Deed of Forbearance, which incorporated the Fuges’ proposal to repay to the Bank the total sum of $2,500,000 in full and final settlement. The Fuges were requested to return an executed counterpart by no later than 4pm on 10 December 2015.
289 On 9 December 2015, the Fuges’ solicitor contacted the Bank to inform it that certain steps required by the deed could not be effected in time and that funds would instead be sourced from the SIL Group “though a solar farm capital investment”. The email attached a “letter of intent” from SIL Global dated 8 December 2015; this letter spoke of a possible joint venture agreement with the Fuges in connexion with a solar farm over the Properties but noting that “we are still awaiting information about the connectability to the grid including the nearest junction as well as transmission lines…” The email from Mr Andolfatto sought the Bank’s consent to amend the proposed Deed of Forbearance.
290 On 11 December 2015, the following communication was sent by the Bank to the solicitors for the Fuges:
The Bank has afforded your clients a final opportunity to demonstrate that they have the means and capacity to pay the sum of $2.5M (being the proposed settlement figure) and, at your request, the Bank prepared a Deed which incorporated your clients’ proposal for a refinancing of the sum of $2.5M on the terms detailed in your email dated 19 November 2015.
On 30 September 2015, you advised in the attached email that, “my client has organised the funding and the extra personal funds to settle up with the bank”. The Bank has been seeking since early October 2015 evidence that “the funding” is available to your clients on an unconditional basis, including evidence that:
• the KMWL Stock mortgage is unconditional (and when the funds will be available);
• the funds to be made available to Matthew Fuge from the refinancing of 8 Bartley Street, Forbes and 3 Warwick Road, South Tamworth will be provided on an unconditional basis (and when the funds will be available); and
• Matthew Fuge will be able to pay the residual amount necessary to ensure that the settlement sum of $2.5M will be paid.
We note your below advice that your client’s proposal has collapsed and the request that the Bank now consider a proposal which would involve funds being advanced to the Fuges pursuant to the SIL Global Limited “letter of intent” addressed to you and dated 8 December 2015.
We note that the availability of the SIL Global funding is conditional on such matters as whether your clients’ property can be satisfactorily connected to the grid and on the parties agreeing on the terms of and entering into a JV agreement.
The Bank has advised your clients throughout the negotiations that the campaign to sell Lenborough / Greenfields would continue and that, unless and until a finally concluded agreement was reached and documented in a Deed, the Bank would be entitled to proceed with a sale.
Your clients’ attempts to achieve a refinancing of the debt have been the subject of communications between the Bank (via us) and your clients since early December 2014. Those communications were preceded by the longstanding expiry of your clients' facilities and a complete failure by your clients to comply with the Heads of Agreement entered into at the farm debt mediation convened on 17 July 2014.
In view of the above matters, we are instructed to advise you that the Bank rejects the latest proposal and that it proposes to exchange contracts for the sale of Lenborough / Greenfields and the associated water entitlements on Monday, 14 December 2015.
The Bank reserves all of its rights.
291 It has been regrettably necessary to set out in some detail the lengthy and lamentable history of the negotiations and communications between the Fuges and the Bank as to the possibility of refinancing through the latter half of 2015.
292 Counsel for the Fuges have sought to characterise the Bank’s position as being manipulative, disingenuous and one of bad faith. They have argued that the Bank intentionally made it impossible for the Fuges to enter a settlement deed by virtue of the requirements of an unconditional letter of offer from Rabobank and unconditional exchange of contracts for Kennedia West. The explanation for this is said to be that the Bank wanted the Fuges to continue their best efforts to sell Kennedia West.
293 The Bank on the other hand, provided a detailed account of the communications between the Bank and the Fuges, and unsurprisingly highlighted the number of offers and counter-offers made, the large number of extensions of time provided, and in general, the Bank’s forbearance in not exercising its power of sale over the securities.
294 The question that I must determine, is whether the Bank’s conduct was a breach of the relevant clauses of the Code of Banking Practice. That being, first¸ whether the Bank acted fairly and reasonably towards the Fuges in a consistent and ethical manner, having regard to the conduct of both parties, and the contract; and secondly, whether the Bank genuinely tried to help the Fuges overcome their financial difficulties with any credit facility they had with the Bank, for example, by working with the Fuges to develop a repayment plan.
295 I must begin by noting that neither of these enquiries can be applied to the situation of the refinancing offers devoid of the historical context of the dealings between the parties. It cannot be that the content of the obligations imposed by the Code of Banking Practice remains the same at all stages of a creditor-debtor relationship, if that were the case, a mortgagee would experience great difficulty in being able to exercise its right of sale. As to the first issue, whether the Bank acted fairly and ethically, the simple view of it is that the Fuges’ arguments as to deliberate and consistent attempts to “thwart” the settlement process are overstated and are not supported by the evidence when the correspondence between the parties as to the possibility of settlement of the debt is considered in full and contextually.
296 The Fuges contend that the courting of a buyer for the Properties and the decision to continue negotiating after accepting an offer in principle from Mr Stevens demonstrates a lack of good faith, since the Fuges were under the impression that they had a chance to keep them in the family. Further, the Fuges criticise the Bank’s insistence in wanting to be repaid the debt owing in full. As mentioned above, the Fuges submit that the Bank never genuinely considered entering a settlement with the Fuges and made it impossible for them to do so. The Fuges’ submissions finally focus upon a series of alternative ways in which the Bank could have proceeded. This is not to the point, nor is it relevant to my analysis. It cannot be said that because the Bank could have chosen to accept the offer and then waited to see whether it was fulfilled as promised, that the decision not to do so was a breach of its obligations under the Code of Banking Practice.
297 The Bank asserts that ultimately, the Fuges bear the onus of proving on balance that they were, in fact, in a position to pay the Bank the amount owing to it and that the Bank unreasonably failed to agree to such a proposal. The Bank contends that the Court should draw an inference from the evidence, and in particular from the failure of the Fuges to adduce any evidence demonstrating their ability to repay the debt, that the Fuges could in fact not pay the debt and as a result it was not unreasonable of the Bank to reject their offers. The Bank also relied upon the evidence of Mr Sachlan Fraval who explained that there were a whole range of steps that needed to be undertaken before the funding from SIL Global referred to in the Fuges’ counter-offer of 9 December 2015 would have occurred.
298 The submissions of the Bank go beyond what is necessary for me to determine. The actual fact of whether the Fuges were able to repay the Bank at the time of making their various proposals is somewhat irrelevant. What is relevant, is whether the Bank, in all the circumstances, taking into account what was known to the Bank at the time, acted unconscionably or in breach of the Code of Banking Practice.
299 The Bank engaged in negotiations with the Fuges over a period of nine months. Despite reaching an in principle agreement for sale with a prospective buyer of Lenborough and Greenfields, the Bank continued to engage in discussions with the Fuges until 14 December 2015, when it finally exchanged contracts for sale. Contrary to the Fuges’ argument that this demonstrates an intention to deceive the Fuges, what appears to have occurred, is that the Bank was similarly keen to reach a settlement agreement, and was willing to delay the sale of the Properties in order to do so, albeit an agreement that gave the Bank certainty as to being repaid in full.
300 What appears to be clear, is that the parties did not ever reach a point at which they both understood the others’ position with clarity. The Fuges seem to have genuinely believed that they were offering enough money to repay the amount owing to the Bank, and perhaps did not grasp what exactly it was that the Bank was requesting in terms of substantiation. The Bank on the other hand, were, from the beginning, obviously concerned as to the source of those funds and the lack of evidence or certainty that the shortfall after the sale of Kennedia West and the Rabobank loan would be met. Neither of these positions demonstrate a deliberate attempt to negotiate in bad faith.
301 Not unlike the principle which informs unjust contracts, it is clear that the Bank was within its legal rights to protect its legitimate financial and business interests. It is likely that had the Bank taken a more lenient approach as to a payout figure, an agreement could have been reached which would have seen both parties better off than they are at present, but despite my misgivings that such a pragmatic approach would have been wise with the benefit of hindsight, that does not mean there was a breach of a contractual or other norm regulating the Bank’s conduct.
302 As to the second issue, whether the Bank genuinely tried to help the Fuges overcome their financial difficulties with the credit facilities, it would not be appropriate for me to approach this question purely by considering the negotiations as to refinancing without also taking account of the long history between the parties. The Fuges had a long history of defaults leading up to the mediation and the HOA.
303 For the reasons I have expressed above in relation to cl 2.2, this claim also fails. The evidence of the negotiations between the Bank and the Fuges demonstrates an attempt to reach a settlement agreement. The fact that the Bank did not agree to put in place an agreement which meant it would not receive the total amount owed, cannot equate to a failure to assist the Fuges in overcoming their financial difficulties. Even accepting the woolly, public-relations driven language used in the Code, it must be given legal content. It would be remarkable if the content of this contractual duty legally required a financial institution to forgive debt, but the Fuges effectively contended that this was the case. The Bank offered the Fuges additional time to provide the information it requested on multiple occasions, and identified with specificity what it required in order for the settlement to go ahead. This conduct did not amount to a contractual breach to fail to assist the Fuges in overcoming their financial difficulties.
304 Finally, to the extent that the Fuges ran an unconscionable conduct case on this point, despite it not being an issue in MFI 7, the reasons I have given are sufficient to dispose of that claim.
305 This issue apparently relates to that already dealt with in Section E concerning the contention the Livestock Mortgage given by Anthony Fuge was either fraudulently made or Anthony Fuge did not have authority to charge the security the subject of that Mortgage. The issue was not developed by the Fuges and was not addressed by the Bank in its written submissions. I have already dealt with the difficulties of the premises underlying the Fuges’ argument in section E.1.2.2. This is sufficient to reach the conclusion that the guarantee was not discharged.
306 But there are further aspects of this argument which were not dealt with by the Fuges. It is trite that a guarantee may be discharged by reason of the occurrence of one or more events which, subject to the provisions of the guarantee, effect the automatic revocation of the guarantee by operation of law. But there was no attempt to engage with the notion that the express terms of the guarantee provided, by cl 10.3, that the Bank’s rights and remedies under the guarantee were independent of those that the Bank had under any other guarantee or security or cl 10.1 which provided that the Bank’s rights under the guarantee were not affected by any act or failure to act by the Bank, including in the event the Bank lost the benefit of any security or did not validly obtain any security.
307 This seems to be a further example of an issue being thrown up by the Fuges without the Court being given any proper articulation of the argument or any assistance as to how it is to be resolved by engaging with legal principle. The guarantee was not discharged as alleged.
308 The Bank brings a cross-claim in debt based on the factual matters set out above in Section B. In summary, the Bank relies upon the facility agreements entered into by the Fuges, the various defaults in making payments under those agreements, the HOA, and the various defaults in complying with their obligations under the HOA. As set out at B.5 above, the Bank eventually issued formal demands for payment in January 2015, identifying the Fuges’ breaches and demanding payment of the sum of $2,388,315.26. The Bank now claims that after realising the security assets, the shortfall is $788,918.38, calculated to 2 October 2018. That figure is said to increase by $169.89 each day.
309 The way in which evidence was led to prove the debt has been somewhat convoluted. The Bank adduced evidence by way of affidavit from Mr Greentree as to the amount owing as at 21 December 2017, being $739,058.49. This evidence was not the subject of objection by counsel for the Fuges at the time the affidavit was read. Mr Greentree was not cross-examined directly as to this debt figure, but there was some cross-examination as to quantum.
310 Prior to coming to that cross-examination, it is worth pausing to explain the approach taken to the documentary evidence in this case generally. Prior to the trial, because of the very large number of apparently irrelevant and duplicate documents that were annexed or exhibited to affidavits, I indicated to the parties that I would not accept into evidence documents exhibited to affidavits. Any documents to be tendered were to be included in a chronological court book. As I explained during the hearing, my intention was that prior to any documentary tender, I would ask the parties to go through the process of filleting out irrelevant documents (or parts of documents) in the court book and those documents marked as MFIs that had been neither referred to in submissions, nor utilised during cross-examination: T7, T790. The parties would then electronically file and produce a hard copy of relevant documents or parts of documents in chronological order, and after determining any objections or applications for limitations, I would allow that bundle to go into evidence (as it eventually did, as Exhibit C).
311 Returning to the present issue, the relevant parts of the cross-examination of Mr Greentree are as follows:
MR KING: You knew also under the new credit code – the Code of Banking Practice that applied as from 1 January 2014, replacing the earlier 2003 code, that consistent with your obligations to your customer, it was necessary first to inform the customer of the payout figure and the details of it - - -
MR ZAHRA: I object.
MR KING: You knew that, didn’t you?---Yes.
HIS HONOUR: I will allow it.
MR KING: And that included telling the customer what was the principal sum due and owing?---We’ve provided multiple payout figures across all the negotiations.
Well, just please answer my question. If you were to comply with such a request, it would require you to set out the principal sum?---I’m not fully aware of tha
It would also require you to set out the interest?---In most of my correspondence, I
believe I did advise what the interest was, or interest accrued was.
Including penalty interest?---To my knowledge, there was no penalty interest applied to these accounts. The interest rate applied to the accounts each time I provided a payout figure was around the structured or business rate that was applied to the loans applicable.
And interest, of course, if it had been compounded – that would be needed to be set out too, wouldn’t it?---Not to my knowledge, because that’s the way the loans operate.
And the charges – bank charges?---Again, not to my knowledge.
Receivers’ expenses?---I’m not aware I have to detail all that in each negotiation or advice.
And the – in this case, huge – solicitors’ fees that were added onto the debt?---When I was requested for a detail of that, I did provide it.
HIS HONOUR: Do we know what the amount was outstanding as of 8 October 2015?
MR KING: We don’t. That’s why Mr Andolfatto asked the question, your Honour and he didn’t get a reply.
MR ZAHRA: What may assist your Honour, though, is – I can readily give your Honour a reference at 2 June 2015, which your Honour will see at court book volume 4, page 1827.
HIS HONOUR: 1827?
MR ZAHRA: 1827. There are many examples of this, but that’s one example.
HIS HONOUR: 1827?
MR ZAHRA: 1827. There probably are some closer to October, but I can’t immediately give your Honour them.
HIS HONOUR: Sure.
MR ZAHRA: But I will give them to you in - - -
HIS HONOUR: I just - - -
MR ZAHRA: - - - closing submissions.
HIS HONOUR: I just wanted to get an idea about what – given that the – so it went up from – this is why I was quite interested in that document before, because I want to understand what happened to the debt, because – so it went up, from 1 March 2015, from 2.415, $150,000 between 1 March and 1 June.
MR ZAHRA: Well, that’s what those documents record, your Honour. Yes. I can’t say anything beyond that at this stage.
HIS HONOUR: Yes. Okay. Thank you.
MR KING: You see, there’s no break-up provided by the bank to assist the customer to understand what his or her indebtedness might be, not even on the document that’s MFI14 in front of you on the table, is there?---I didn’t prepare this. I don’t know where this came from, sorry.
312 Hence although the actual quantum figure as at 21 December 2017 was not directly challenged, there was some apparent unarticulated dispute about the issue of quantum. Bearing in mind the cross-examination above, later that day (day nine of the hearing), consistently with my efforts to ensure that all real issues were identified, I asked Mr Leong directly whether the quantum sought on the cross-claim was in dispute. Mr Leong replied, “it could be”. After making reference to the overarching purpose, I indicated to the parties that unless consensus could be reached on the issue, it would be for the Bank to prove the debt, and I would reserve the question of costs (and the basis upon which they need to be paid) depending upon the outcome. At this point, Mr Leong asked whether he could give a final indication as to whether the matter was genuinely in dispute the following week. I reminded Mr Leong that in making such a forensic decision it was no doubt appropriate that those advising the Fuges have regard to the obligations on legal practitioners pursuant to s 37M of the Federal Court of Australia Act 1976 (Cth). The following week, I permitted the Fuges to reserve their position on quantum until further information was provided by the Bank as to what amounts were paid during the life of the facilities.
313 In his closing address, Mr King submitted that the Bank had “failed to prove their own cross-claim” and had refrained from assisting the Court or his clients in understanding precisely how it was calculated. Mr King drew my attention to the Fuges’ attacks on the Bank’s calculations in his written submissions; his cross-examination of Mr Greentree; the fact that Mr Greentree’s schedule and MFI14 did not go into evidence, and insisted that no sound basis for calculating the debt had been put in evidence.
314 I should digress here to note that MFI14, which purported to be a schedule (prepared for the purpose of litigation) which summarised the relevant facility totals and provided particulars of the amount owing, was not included in the court book when it came to the initial tender of Exhibit C: T862. I do not know the reason for its removal, although its omission is unsurprising as it is apparent it was not a business record within the meaning of s 69 of the EA. Further, there was a spreadsheet referred to by Mr Greentree in his first affidavit, which was said to have been prepared to show the payout figure as at 21 December 2017. Presumably because the Bank did not consider it needed to rely upon this document as proof of Mr Greentree’s evidence in closing submissions, this spreadsheet was removed from the court book during the filleting exercise and never tendered as part of Exhibit C. The spreadsheet was later marked as MFI27 when it became clear that it was not in evidence.
315 Of course, at all times, the central question on the cross-claim was whether, in accordance with s 144 of the EA, I feel an actual persuasion, on the basis of the material in evidence, that the amount claimed by the Bank has been proved on the balance of probabilities. When quantum is in issue in a case such as this, proof is usually effected by two modes of evidence not present here. Most commonly, this occurs by the tender of a Dobbs certificate: Dobbs v National Bank of Australasia Limited (1935) 53 CLR 643. As is well known, Dobbs settled a principle which has been long upheld, that where the parties have contractually agreed to a clause which specifies that a certificate of debt signed by a relevant bank manager will be conclusive evidence of the amount of the debtor’s indebtedness, such a document is admissible.
316 No such contractual mechanism was available here. The closest evidence available, was [10.1] of Mr Greentree’s second affidavit, which purported to be a sworn statement of the debt owing, which according to cl A7.5 of the Bank’s “Standard Terms and Conditions” was not conclusive in circumstances where quantum is contested. On this basis, the statement was not admitted into evidence and I indicated that the debt should be otherwise proven unless it could be agreed: T751.
317 In these circumstances, one would have thought the obvious course of tendering all the bank statements under s 69 of the EA would have been adopted by the Bank. Somewhat surprisingly, it was not, and the Bank maintained that its primary position was that Mr Greentree’s evidence as to the debt was unchallenged and quantum could be proven on the basis of his affidavit alone.
318 In any event, apparently after some reflection, in the Bank’s further closing submissions (filed by leave after the close of oral argument, but before the reservation of judgment) an “alternative position” was put forward, in the event that “the Court requires further persuasion as to the amount owing to the [Bank] as at 21 December 2017”.
319 This alternative case included seeking leave to tender parts of MFI2 (a separately marked bundle of business records, the relevant parts of which were removed during the filleting process) into evidence, in circumstances where the Bank was now prejudiced due to its forensic choice not to adduce further evidence (since it was said Mr Greentree’s evidence was not challenged directly during the course of the trial).
320 Following receipt of these submissions and my reservation of judgment, the solicitors for the Fuges contacted my Associate noting that they were “extremely concerned that the [Bank’s further closing submissions] go beyond the scope of leave” granted and were in the process of “preparing an urgent interlocutory application”. In the circumstances, my Associate indicated to the parties that the order reserving judgment would be revoked, and the matter would be relisted at short notice.
321 What then became the Bank’s application to re-open its evidence on the cross-claim was successful for reasons I explained ex tempore at the time of hearing the application; it is unnecessary to repeat those reasons here. In short, the Bank finally tendered some admissible business records to prove the amount of the debt, and I was prepared to receive those records in circumstances where I was satisfied I could alleviate any prejudice to the Fuges through permitting them to request, pursuant to the EA, that the Bank call the maker of the representations made in the business records to give viva voce evidence (so that the Bank’s relevant officers could be cross-examined), and to put on any responsive evidence.
322 On 14 February 2019, I relevantly made the following orders:
2. In the event a request is made pursuant to s 167 of the [EA] on or by 6 March 2019, that the respondents produce either Mr Stevens or Mr Ralston for the purposes of giving evidence, the granting of leave to re-open and tender Exhibit D will be conditional upon the respondents acceding to this request.
3. If no such request is made, leave is granted to the respondents to re-open and tender Exhibit D.
323 On 6 March 2019, my Associate received an email from the solicitors for the Fuges indicating that they did not request the relevant officers (Mr Stevens or Mr Ralston) be called by the Bank, however, they did indicate that they wished to put on further written submissions. Those submissions were received two weeks later, and the matter was then relisted for a final time for the purpose of a formal tender of the documents provided to me as Exhibit D on the reopening.
324 Accordingly, the evidence I accepted on the re-opening (of which, Exhibits D, E and F marked on the reopening became part of a supplemented Exhibit C tendered on the hearing) may be summarised as follows:
Exhibits A, B, C, E and F (being exhibits on the application to re-open) – emails of various dates, which go to showing that a detailed breakdown of the amounts owing in respect of each of the relevant facilities was prepared, together with splitting out bank fees and legal costs. Exhibits E and F were emails which had initially been included in the court book, but not tendered into evidence as they had not been explicitly referred to during submissions.
Exhibit D (on the application to re-open) – a bundle of bank statements, which provide in respect of each of the loan facilities, the relevant bank business record. This exhibit is said to allow the Court to calculate the debt based on the Bank’s primary records, separate from Mr Greentree’s affidavit.
325 In addition to the evidence adduced following the reopening, it is also necessary for me to consider the affidavit of Mr Greentree, the cross-examination, and other contemporaneous business records which mentioned the debt outstanding at various points in time, such as the letter of demand and various other communications referred to in the Bank’s submissions.
326 In considering this evidence it is necessary to bear in mind an important caution. Although the Bank could have sought to prove its case by the tender of all relevant business records, rather than a selection of them, this does not determine the question of whether the evidence tendered should be accepted, except in ways identified by the principles governing onus and standard of proof. Once a fact is put in issue, it “must be decided by a court according to the evidence that the parties adduce, not according to some speculation about what other evidence might possibly have been led”: Australian Securities and Investments Commission v Hellicar  HCA 17; (2012) 247 CLR 345 at 412  per French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ. At 412 -, the Court explained:
Principles governing the onus and standard of proof must faithfully be applied. And there are cases where demonstration that other evidence could have been, but was not, called may properly be taken to account in determining whether a party has proved its case to the requisite standard. But both the circumstances in which that may be done and the way in which the absence of evidence may be taken to account are confined by known and accepted principles...
Lord Mansfield’s dictum in Blatch v Archer [(1774) 1 Cowp 63 at 65] that “[i]t is certainly a maxim that all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted” is not to be understood as countenancing any departure from any of these rules...
(Emphasis in original)
327 Although the point was not articulated by the Fuges, in reaching the conclusion that I could accept the Bank’s evidence, I have considered whether I should draw a Ferrcom inference as to the Bank’s failure to adduce further evidence as to the debt: Commercial Union Insurance Company of Australia Limited v Ferrcom Pty Ltd (1991) 22 NSWLR 389. A Ferrcom inference, being an application of the principle in Blatch v Archer, is an inference that the failure of a party to adduce evidence-in-chief as to some particular topic by a witness who has been called, demonstrates that evidence on that topic would not have assisted that party. Such an inference, however, is not appropriate in the present circumstances. The Bank has established a prima facie case as to the debt, not only from Mr Greentree’s affidavit, but also the exhibits tendered following the re-opening. I have no reason to doubt that when the Bank closed its case in chief on the cross-claim initially, it did not consider it was necessary to tender all the bank statements. Although it may have been possible for the prima facie case established by the records in evidence to be displaced, this would have required calling into question the figures provided by the Bank in some specific way by countervailing evidence or by cross-examination; this was not done nor attempted. Accordingly, although it might have been done far more simply than it was done, the Bank has discharged its onus as to quantum on the cross-claim.
328 Lastly, I must briefly deal with the way in which the Fuges sought to defend the cross-claim. Generally, the cross-claim was defended by effectively repeating the same allegations that were made in the statement of claim. As to an allegation of duress, it was acknowledged by Mr King that in circumstances where other claims such as an unjust contract effectively have a lower liability threshold, I did not need to deal with that claim.
329 The last outstanding issue, however, was a submission that there was a statutory or equitable bar to the Bank taking enforcement action pursuant to the HOA by reason of the fact that enforcement action can only validly be taken in respect of a valid “farm” mortgage. This argument was raised orally by the Fuges during the course of the hearing, and was explained as being a “defence to the cross-claim”.
330 At T1023-1024, on day twelve of the hearing, the following exchange occurred:
HIS HONOUR: Sorry. It’s like mercury on a plate trying to work out what the issues are in this case. This is about the seventh version of this document. I thought the things that you were saying – in your defence for a cross-claim you, effectively, repeat the same allegations that you make before as to why you say the heads of agreement ought be set aside, that is, make a claim under duress, which is something I was going to come to later. Then you say there are further defaults. Where’s the allegation that there was no enforcement action? I have asked this question several times, Mr King, and I made it clear that there is no – that the issue of setting aside the heads of agreement was merely a springboard for you to bring the pre-2014 claims.
There is no free-standing allegation that the enforcement action was invalid because of their – a failure to comply – this is exactly the reason why I have done this, Mr King, to prevent exactly this sort of thing happening. And every time it has been raised I have been insistent that if an allegation is going to be – I have proceeded on the basis that the cross-claim defence – and I don’t mean this pejoratively, it’s entirely usual in a case like this – is parasitic on the way in which you are bringing your principal claim, that is, you are entitled to damages by reason of contravening conduct which has been alleged by reason of the conduct of the bank.
MR KING: Yes. Your Honour, the – if your Honour goes to paragraphs 103/104, we deny the cross-claim at 103 and in paragraph 104, and then say:
…the mortgage is charged as security and variations were invalid or voidable - - -
HIS HONOUR: There’s no pleading there of a breach of the Act, and it was not enforcement action and, therefore, that gives you right to some sort of free-standing claim.
HIS HONOUR: Well, you say the mortgages and the loan agreements should be set aside.
MR KING: Yes.
HIS HONOUR: That’s the case I understand, that’s the case that you have run. But that is a different case. That’s the case that’s pleaded, that’s the case that’s articulated. There is one passing reference to this in your written submissions, which goes nowhere. There is a throwaway line in half a sentence because I looked for it, because you said – you made a passing reference to it yesterday, and I have raised it several – it has been raised by me, before. It’s in the - - -
MR KING: Your Honour, perhaps just to cut to the chase, I - - -
HIS HONOUR: I can’t see. There was one reference to – there’s one reference to section 8 and section 11 but it’s in the context of – effectively in a discussion criticising Mr Zahra’s construction of how the farm debt mediation process works. But there’s no allegation that there has been – that there is some sort of case being run – there’s a breach of the Farm Debt Mediation Act meaning that they can’t – they couldn’t take enforcement action by reason of the fact that the heads of agreement are set aside. If you’re going to run such a case, Mr King, then that’s going to have to be put in MFI7 and you’re going to have to articulate to me what the amendment is that you require and I will hear Mr Zahra as to whether that amendment should be - - -
MR KING: I will do that, your Honour. We say it is picked up at paras 103, 104 and 102(c) but – so I - - -
HIS HONOUR: Sorry, 100 – what – of the pleading?
MR KING: Of the defence to cross-claim.
HIS HONOUR: I reject that. That is simply not there, Mr King. If that case is being run, it is not pleaded properly and - - -
MR KING: But I would take - -
HIS HONOUR: And if you’re going to – but I’m not going to have a debate about- - -
MR KING: No. I understand, your Honour.
HIS HONOUR: - - - pleading rules. But if you want to bring it, then you’re going to have to amend, like you’re going to have to amend - - -
MR KING: Yes.
HIS HONOUR: - - - if you want to bring your section 11AA case. The MFI7 – and you said you were going to think about that, as well.
MR KING: Yes.
HIS HONOUR: So I want to bring this into a landing at 2.15 today.
MR KING: A landing, yes.
HIS HONOUR: So if you’re going to amend in either of those respects, then you should bring in – rather than me having to do all the work.
MR KING: No, no, we will do that, your Honour.
331 Needless to say, no application to amend the defence to the cross-claim was made and I do not consider it is open to the Fuges to run the argument.
332 The final issue to which I must turn, is one of discovery, which does not arise from MFI 7 but which was the subject of argument towards the end of the hearing. There was a great deal of colour and movement in relation to this issue, and a lot of accusations proffered. Before turning to the substance of the submission, it is worth reiterating that the pleadings in this matter were very difficult to understand and had a protean quality. When put together with the submissions, it was difficult to understand what the issues were until discipline was enforced at the hearing.
333 It is important that the Fuges’ submission that the Bank failed to comply with its discovery obligations as to asset lending such that there could not be a “proper testing in evidence of the credit assessments” is seen in this context. In final submissions, what the Fuges eventually submitted was that:
The Court should infer that the failure to produce relevant documents in particular the 2008 credit assessments, and the later 2009, 2010, 2011 and 2012 credit assessments, relating to the issue of asset lending was deliberate;
The calculated risk that the Bank and its advisors took in not producing these relevant documents was that the Court would accept its explanation that the documents were not ‘adverse’ to the Bank and so were not required to be produced under the orders of Lee J in 2017, even if [which is also false] the credit assessments were not required by the discovery categories specified by the orders of Gleeson J at the outset of the matter in 2016 [those categories specifically refer to ‘assessments’];
This is a classic and proper case of applying the leading evidentiary dictum of Heydon, Crennan and Bell JJ in Kuhl v Zurich Insurance Services Pty Ltd  HCA 11 at . There is, from this conduct ‘an implied admission or circumstantial evidence permitting an adverse inference’, in this case of the absence of a defence to the Applicant’s asset lending case: see further below.
The implied admission should be made. The Bank discovered a trolley load of documents produced higgledy piggledy with many thousands of irrelevant documents in chaotic date order making inspection and appreciation more difficult for the Applicants and falling during the critical period from 2008 to 2016, yet could not produce the key documents that undermine its defence.
Worse, and relevant to the Kuhl inference, is the fact that as the Defence case proceeded it has become clear that, even now, after the failure to comply with discovery orders, after the Applicants’ written and oral clearly opening on asset lending as pleaded, after MFI 7, and after the calls for the Bank’s credit assessment documents which Mr Hewitt said existed to support his assessments during cross examination of Mr Hewitt, and after the affidavit of Mr Stevens warranting all relevant documents were discovered , yet still not all such documents that would permit a proper testing in evidence of the credit assessments have been produced. The guidelines were sworn by Mr Stevens in his supplementary discovery affidavit to be pages 29 and 30 in the attachments which the Court correctly described as ‘incomprehensible’ [Tr 691/29]. Yet, the document described by Mr Hewitt as ‘the guidelines…an extensive document’ or ‘policy’ at Tr 688  and 699  was never produced. Instead a dictionary to the 2 pages in Mr Stevens’ affidavit only was produced. The underlying policy and guidelines were never produced. It should be assumed that either such documents did not exist and Mr Hewitt gave false evidence as to the sufficiency of his credit assessments [cf Tr 677 /1-2] or the Bank through Mr Stevens gave false testimony at paragraph 14 of his affidavit as to the completeness of discovery.
In further cross-examination when asked, with pen and paper, to demonstrate and verify his assertion that the Farmpak 2008 analysis was derived from real figures in the prior AKW accounts for 2004 to 2008 he could not, and then said there must be another Farmpak analysis: Tr 716 . Yet no further production of such documents occurred.
Both of the foregoing scenarios reaffirm the appropriateness of the implied admission sought from the failure to give discovery of relevant documents as ordered by the Court.
In addition in any event an order for indemnity costs in respect of the wasted court time, namely of 3 days in week 2 of the hearing conservatively wasted, and 3 days preparation of the Applicants’ case wasted in searching through dense and inaccessible discovery, should be made in any event against the Bank.
334 As to the majority of submissions directed to this point during oral address, the substantive complaint was that the discovery by the Bank as to documents relating to the issue of asset lending, and more specifically the FarmPak programme, were produced late. Although one explanation for this is the confusion in the initial pleadings, the important point is that the documents were produced once it became obvious during the trial that the discovery was insufficient, and no procedural unfairness was occasioned upon the Fuges who had every opportunity to test that evidence. To the extent it is suggested that I should draw an adverse (Kuhl v Zurich Financial Services Australia  HCA 11; (2011) 243 CLR 361) inference against the Bank arising by reason of the late production of such documents, it is unjustified in the circumstances.
335 As to drawing an inference with respect to the documents identified by the Fuges as never having been produced, at T1042, Mr King agreed that the relevant documents were underlying primary material or guidelines which record how various inputs are put into the FarmPak programme, which, together with the materials supplied by the farmers, are used to produce the serviceability analysis.
336 I am satisfied that sufficient material was provided as to the FarmPak programme, and do not consider it appropriate to draw an inference that the Bank must have directly relevant material which provides for the underlying assumptions and calculations carried out by FarmPak additional to that which was provided, such that I can infer the information would not have helped the Bank’s case.
337 This has been a long, tedious and detailed judgment. This has been necessary because of the vast array of factual assertions made by the Fuges and the way in which their legal representatives have advanced their claim for relief. Although I have determined it is appropriate to grant some limited declaratory relief relating to some provisions of the HOA, all other claims for relief made on behalf of the Fuges must be dismissed.
338 Further, I consider the Bank is entitled to the primary relief it seeks in relation to the cross-claim.
339 I commenced this judgment by indicating that neither party comes out of this litigation unscathed. It is a matter of regret that the parties could not have sensibly worked out their differences at around the time of the mediation or at some time thereafter. The problem with litigation, is that it is often a “zero sum game” and this proceeding is a good illustration.
340 Given that it will be necessary for me to hear the parties in relation to the issue of costs, I propose to direct the parties to provide the short minutes of order for which they contend to my Associate. Unless agreed orders are provided, I also propose to list the matter as soon as convenient to deal with the entry of final orders and to resolve any outstanding issues relating to costs.
VID 534 of 2016