Brighten Pty Limited & Ors v Bank of Western Australia Limited & Anor

Brighten Pty Limited & Ors v Bank of Western Australia Limited & Anor - [2010] NSWSC 133 - NSWSC 2010 case summary — Zoe

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541 Kent Street Pty Ltd v Westpac Banking Corporation [2002] NSWSC 147 Appleton Papers Inc v Tomasetti Paper Pty Limited [1983] 3 NSWLR 208 Attorney-General of the Commonwealth of Australia v Breckler (1999) 197 CLR 83 Burger King Corp v Hungry Jack's Pty Ltd [2001] NSWCA 187 Burt v Australian and New Zealand Banking Group Ltd (1994) ATPR (Digest) 46-123 Cameron v Qantas Airways Ltd (1995) 55 FCR 147 Central Exchange Ltd v Anaconda Nickel Ltd (2002) 26 WAR 33 CIT Credit Pty Ltd v Keable [2006] NSWCA 130 Dundee General Hospitals Board of Management v Walker [1952] 1 All ER 896 Foreman v Great Western Railway Co (1878) 38 LT 851 Gisborne v Gisborne (1877) 2 App Cas 300 Hurley v McDonald's Australia Ltd (2000) ATPR 41-741 Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161 Karger v Paul [1984] VR 161 Kham & Nate's Shoes No 2 Inc v First Bank of Whiting (1990) 908 F 2d 1351 L'Estrange v F Graucob Ltd [1934] 2 KB 394 Lets We Forget Ltd v Westpac Banking Corporation (2005) 56 ACSR 126 Londonderry's Settlement, Re [1965] Ch 918 CASES CITED : Lutheran Church of Australia South Australia District Inc v Farmers' Co-operative Executors and Trustees Ltd (1970) 121 CLR 628 Manifest Shipping Co Ltd v Uni-Polaris Shipping Co Ltd [2001] 2 WLR 170 Meridian Retail Pty Ltd v Australian Unity Retail Network Pty Ltd [2006] VSC 223 Murphy, Re Bankrupt Estate (1996) 140 ALR 46 Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197 Overlook Management BV v Foxtel Management Pty Ltd [2002] NSWSC 17 Pan Foods Company Importers and Distributors Pty Ltd & Ors v Australian and New Zealand Banking Group Limited & Ors (2000) 170 ALR 579 Micarone v Perpetual Trustees Australia Limited (1999) 75 SASR 1 Parist Holdings Pty Ltd v Perpetual Nominees Ltd [2006] NSWSC 599; [2000] HCA 20 Parker v South Eastern Railway Co (1877) 2 CPD 416 Pioneer Park Pty Limited (in liq) v Australian and New Zealand Banking Group Limited [2006] NSWSC 883 Qantas Airways Ltd v Cameron (1996) 66 FCR 246 Manistys Settlement, Re [1974] Ch 17 Paulings Settlement Trusts, In re [1964] Ch 303 Stollznow v Calvert [1980] 2 NSWLR 749 Tarzia & Tarzia v National Australia Bank Ltd [1995] ANZ ConvR 159 Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165 Wilkinson v Clerical Administrative and Related Employees Superannuation Pty Ltd (1997) 79 FCR 469 Wilton v Farnworth (1948) 76 CLR 646

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ix. In the majority judgment in Micarone v Perpetual Trustees Australia Limited (1999) 75 SASR 1 in the Full Court of the Supreme Court of South Australia the following was said at paragraph 587:- "The mere existence of disabling factors does not, standing alone, necessarily result in one party being at a special disability vis-à-vis the other, although, of course, the existence of those factors will be relevant factors in determining that question. This is an important issue when considering the obligations of a lender in a money-lending transaction where, as here, there is no allegation that the actual terms of the money-lending transaction itself are unconscientious. For example, an applicant for a loan may have a poor command of English, may lack a proper education, may not understand all of the terms of the document evidencing the transaction, and may be under financial pressure giving rise to the need for the loan. These are characteristics shared by many members of the community. As the Federal Court pointed out in Tarzia v National Australia Bank Ltd [1995] ANZ ConvR 159 par 48: 'It was not suggested in Amadio , and it cannot be the position, that a combination of ignorance of English, age and lack of business experience necessarily puts a person at a special disadvantage in dealings with a Bank on a guarantee. For one thing, the description presumably covers a great number of astute and capable Australians'." x. The High Court of Australia has recently re-affirmed the importance of the act of signing a contractual document. In Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165 at 180 - 181, after having approved the objective approach to the determination of rights and liabilities of contracting parties, the Court comprised of Gleeson CJ and Gummow, Haynes, Callinan and Heydon JJ said at paragraph 42 - 46: "[42 ] Consistent with this objective approach to the determination of the rights and liabilities of contracting parties is the significance which the law attaches to the signature (or execution) of a contractual document. In Parker v South Eastern Railway Co (1877) 2 CPD 416 at 421 , Mellish LJ drew a significant distinction as follows: 'In an ordinary case, where an action is brought on a written agreement which is signed by the defendant, the agreement is proved by proving his signature, and, in the absence of fraud, it is wholly immaterial that he has not read the agreement and does not know its contents. The parties may, however, reduce their agreement into writing, so that the writing constitutes the sole evidence of the agreement, without signing it; but in that case there must be evidence independently of the agreement itself to prove that the defendant has assented to it.' [43] More recently, in words that are apposite to the present case, in Wilton v Farnworth (1948) 76 CLR 646 at 649 Latham CJ said: 'In the absence of fraud or some other of the special circumstances of the character mentioned, a man cannot escape the consequences of signing a document by saying, and proving, that he did not understand it. Unless he was prepared to take the chance of being bound by the terms of the document, whatever they might be, it was for him to protect himself by abstaining from signing the document until he understood it and was satisfied with it. Any weakening of these principles would make chaos of every-day business transactions.' [44] In Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197 at 228 , Brennan J said : 'If a passenger signs and thereby binds himself to the terms of a contract of carriage containing a clause exempting the carrier from liability for loss arising out of the carriage, it is immaterial that the passenger did not trouble to discover the contents of the contract.' [45] It should not be overlooked that to sign a document known and intended to affect legal relations is an act which itself ordinarily conveys a representation to a reasonable reader of the document. The representation is that the person who signs either has read and approved the contents of the document or is willing to take the chance of being bound by those contents, as Latham CJ put it, whatever they might be. That representation is even stronger where the signature appears below a perfectly legible written request to read the document before signing it. [46] The statements in the above authorities accord with the well-known principle stated by Scrutton LJ in L'Estrange v F Graucob Ltd [1934] 2 KB 394 at 403 that

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Firms that have negotiated contracts are entitled to enforce them to the letter, even to the great discomfort of their trading parties without being mulcted for lack of 'good faith'. Although courts often refer to the obligation of good faith that exists in every contractual relation … this is not an invitation to the court to decide whether one party ought to have exercised privileges expressly reserved in the document … knowledge that literal enforcement means some mismatch between the parties' expectation and the outcome does not imply a general duty of 'kindness' in performance, or judicial oversight into whether a party had 'good cause' to act as it did. Parties to a contract are not each other's fiduciaries, they are not bound to treat customers with the same consideration reserved for their families." Unconscionability 36 There is no evidence which supports a prima facie case of the defendant acting unconscionably. As the Full Court of the Federal Court pointed out in Hurley v McDonald's Australia Ltd (2000) ATPR 41-741 at paragraph 22: 'For conduct to be regarded as unconscionable, serious misconduct or something clearly unfair or unreasonable must be demonstrated - Cameron v Qantas Airways Ltd (1995) 55 FCR 147 at 179. Whatever 'unconscionable' means in s 51AB and s 51AC the term carries the meaning given by the Shorter Oxford English Dictionary , namely, actions showing no regard for conscience, or that are irreconcilable with what is right or reasonable - Qantas Airways Ltd v Cameron (1996) 66 FCR 246 at 262. The various synonyms used in relation to the term 'unconscionable' import a 'pejorative moral judgment' - Qantas Airways Ltd v Cameron (1996) 66 FCR 246 at 283-4 and 298.' 37 Unconscionability is something which shows no regard for conscience or is irreconcilable with what is right or reasonable. Further, unconscionability is not to be lightly found. As Bryson J (as he then was) said in Burt v ANZ Banking Group Ltd (1994) ATPR 46-123: The ordinary means of establishing in honesty and fair dealing that a person with whom one is dealing knows the nature and terms of a document which one proposes should be signed is to put the document before that person for signature. The opportunity to find out what is in the document is there, available to that person, who can use the opportunity in whatever manner is thought right. Unless the person with whom one is dealing is known to be at some special disadvantage, this is as much as conscience requires. There is no reason why it is unconscionable per se to deal with and take a guarantee from a person who is closely related to or otherwise well disposed towards a customer; indeed that is the ordinary case in which a guarantee is available. Unconscionability is not a slight matter, and behaviour is only unconscionable where there is some real and substantial ground based on conscience for preventing a person from relying on what are, in terms of the general law, that person's legal rights. Previous judicial experience and established grounds on which reliance on legal rights would be unconscionable are reliable bases on which to act and the Court is not authorised to take idiosyncratic approaches." 38 Notably the immediate above paragraph from Burt was approved by the New South Wales Court of Appeal in CIT Credit supra at paragraphs 75 and 76. Valuation of the resort 39 There is evidence before the Court given by Mr Longmuir [the Director-Hospitality, Commercial Banking for the Bank whom since approximately August 2009, has had the responsibility for the day to day management of the Facility] which bears on the valuation issue. 40 That evidence includes the following:

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d. Brighten's failure, despite numerous letters, visits to the Resort and requests for meetings by the court-appointed receiver, to provide sufficient financial information to enable the court-appointed receiver to form a view as to the future prospects of the business: report at [10.16] In this regard, the court-appointed receiver made various specific complaints in his report: see [9.6]-[9.7], [9.9], [9.13.2], [10.4]-[10.15]. ii. In relation to a letter from Websters Solicitors dated 18 February 2010, which the court appointed receiver said dealt with some of the issues he had raised in specified letters, the court-appointed receiver dealt with various specific issues and maintained his general position that Brighten had consistently failed to cooperate with his request for information: report at [11.1]-[11.10]. 43 It is strictly unnecessary to travel further into the report save to observe that the supplementary report raised very real questions concerning the Council's belief that the circumstances constitute a serious risk to health or safety or an emergency. Likewise the report itself in treating with questions relating to cooling towers not operating effectively dealt with potentially extremely significant public health issues. 44 Whilst the plaintiff's evidence was that it had responded to each of the 25 orders contained in the Council's Fire Order of 23 May 2008 and that subsequent orders had been or were being complied, with the clear inference is that the company has woefully and over a considerable period of time neglected to operate the resort in a competent fashion. Conclusion 45 Having regard to the evidence which has been adduced by the respective parties it is quite plain that the plaintiff's failed dismally in their efforts to show that they have a serious, not a speculative case which has a real possibility of ultimate success. Likewise the plaintiffs failed dismally in their efforts to show that the balance of convenience is in favour of continuing the extant interlocutory orders up to a final hearing.

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46 The evidence makes plain that circumstances have arisen which in the opinion of the bank have had a material adverse effect on the business, assets and financial condition of Brighten and Noble and on their ability to perform their obligations to the Bank. It was entitled to so find in its absolute discretion. 47 Analogously to the position of trustees such a discretion cannot be attacked otherwise than in conformity with the reasoning of the High Court in Attorney-General (Cth) v Breckler (1999) 197 CLR 83 at 99 - 100 paragraph 7:- "[7] In Wilkinson v Clerical Administrative and Related Employees Superannuation Pty Ltd [59], Heerey J set out a passage in which the primary judge in that case (Northrop J) summarised the effect of decisions defining the scope for challenges in courts of equity to the exercise of discretions reposed in the trustee of a settlement. In this Court, the accuracy of that summary was not disputed. It is as follows: 'Where a trustee exercises a discretion, it may be impugned on a number of different bases such as that it was exercised in bad faith, arbitrarily, capriciously (In re Pauling's Settlement Trusts [1964] Ch 303 at 333), wantonly, irresponsibly ( Lutheran Church of Australia South Australia District Inc v Farmers' Co-operative Executors and Trustees Ltd (1970) 121 CLR 628 at 639), mischievously or irrelevantly to any sensible expectation of the settler (In re Manisty's Settlement [1974] Ch 17), or without giving a real or genuine consideration to the exercise of the discretion ( Karger v Paul [1984] VR 161). The exercise of a discretion by trustees cannot of course be impugned upon the basis that their decision was unfair or unreasonable ( Dundee General Hospitals Board of Management v Walker [1952] 1 All ER 896) or unwise ( Gisborne v Gisborne (1877) 2 App Cas 300 at 307). Where a discretion is expressed to be absolute it may be that bad faith needs to be shown ( Gisborne v Gisborne (1877) 2 App Cas 300 at 305). The soundness of the exercise of a discretion can be examined where reasons have been given, but the test is not fairness or reasonableness (In re Londonderry's Settlement [1965] Ch 918 at 928-929; Karger v Paul [1984] VR 161 at 165-166)'." 48 The Bank's rights in this case are to be viewed fairly and commercially. In a similar case Bergin J in 541 Kent Street v Westpac Banking Corporation [2002] NSWSC 147 applied this approach in stating:-

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