Canty v PaperlinX Australia Pty Ltd

Standard terms and conditions of sale 23It is appropriate at this stage to note that the commercial credit application dated 24 May 2004 contained certain "acknowledgements" that TQG had read and agreed to the terms and conditions of sale which formed part of all contracts for the supply of goods to it by Paper Australia, a copy of which was attached to the application. Clauses 2, 3, 4, 6, and 11 of the application provided: "2. I/We hereby apply for the opening of a commercial credit account and provide the above information in support thereof. I/We warrant that the information supplied by me/us is true and correct in all respects. 3. I/We understand that all the trading terms are strictly 30 days and that payment is due by the end of the month following invoice. I/We undertake to pay all accounts on or before the due date and acknowledge that if the account becomes overdue, Paper Australia Pty Ltd at its discretion and without notice, may terminate credit. Upon termination of credit, any balance outstanding becomes immediately due and payable in full. 4. I/We understand that credit may be withdrawn without notice should any authorised credit limit be exceeded. ... 6. I/We have read and agree to the terms and conditions of sale which form part of all contracts for supply of goods to me/us by Paper Australia Pty Ltd, a copy of which is attached. ... 11. In this agreement, references to Dalton Web include Paper Australia Pty Ltd ABN 63 061 583 533 and its related bodies corporate and assigns." 24The standard terms and conditions of sale referred to in cl 6 of the application included, relevantly, cll 3, 5.5, 5.6, 5.9, 8.4, and 8.6 which provided: "3. Acceptance The Buyer shall be deemed to accept the Terms for the purposes of any Order upon a copy of the Terms being sent or delivered by or on behalf of the Seller to the Buyer and the Buyer subsequently placing an Order with the Seller for the Goods. ... 5.5. The Seller shall invoice the Buyer upon delivery of the Goods. Unless notified on the face of the invoice or otherwise in writing by the Seller payment of the price stated on the invoice shall be made by the Buyer on or before the last business day of the month following the month in which the invoice is raised ('the due date'). In the event of any discrepancy between the Terms and any terms and conditions of the Seller appearing on the face of the invoice, the latter shall prevail. Time shall be of the essence in relation to all obligations of the Buyer to make payment for the Goods. 5.6 If the invoice is not paid by the due date:- (i) the Seller is entitled to suspend all further deliveries of the Goods to the Buyer until payment is made in full on all outstanding invoices; and (ii) the price stated on the invoice shall bear interest from the date of delivery of the Goods until the price is paid in full. Interest shall be paid at an annual rate of the aggregate of 4% plus the rate published under the name 'National Australia Bank Reference Rate' (or any rate substituted therefore and serving a similar purpose as that rate) from time to time on the price remaining unpaid and upon any judgment recovered in relation thereof. The certificate of any officer of the National Australia Bank as to the National Australia Bank Reference Rate shall be conclusive evidence thereof. Interest shall accrue on a daily basis and shall be payable on demand. (iii) The Buyer will pay or reimburse to the Seller any costs or expenses incurred by it or its legal advisers, mercantile agents & other parties acting on the Seller's behalf in respect of anything instituted or being considered against the Buyer whether for debt, possession of any products, taking security or otherwise. ... 5.9 Subject to Clause 5.5, the Seller reserves the right at any time to suspend credit or to change credit terms provided to the Buyer when in the Seller's sole opinion the financial condition of the Buyer so warrants. In any such case in addition to other remedies herein or at law, cash payments or satisfactory security from the Buyer may be required by the Seller before dispatch of the Goods, or the due date for payment by the Buyer under any Order with the Seller may be accelerated by the Seller. The Buyer agrees that, subject to the terms of the Privacy Act 1988, the Seller may in its absolute discretion disclose the status of the Buyer's account to any person or corporation. ... 8.4 In the event that the Buyer requests the Seller to withhold delivery of the Goods or any part thereof or if delivery is delayed for any other reason as a consequence of the Buyer's instructions or lack thereof the Seller may in its absolute discretion store the Goods for the Buyer and the Buyer shall pay the Seller all storage charges charged or incurred by the Seller and if the Goods are stored elsewhere all cartage charges incurred by the Seller. ... 8.6 The Seller reserves the right to upon notice to the Buyer at any time to withhold deliveries if the Seller in its sole discretion considers that the financial condition of the Buyer so warrants and that such action is advisable to protect the Seller's interests." 25It was common ground at trial that the standard terms and conditions of sale were also printed on the reverse of each invoice sent by PaperlinX to TQG. Counsel for the appellants accepted that they were the terms on which goods were sold and delivered by PaperlinX to TQG (when PaperlinX took over the supply to TQG in place of Paper Australia in July 2005), although his Honour noted that counsel did not accept that they gained their contractual force from cl 6 of the acknowledgements in the application: at [9].

The Guarantees 26On 16 July 2008 each of Mr and Mrs Canty signed or executed a form of Deed of Guarantee, which was then delivered to PaperlinX. 27Recital F to the Deed of Guarantee provided: "PAUL and DENISE have further offered to jointly and severally indemnify PAPERLINX against all losses, damages, costs, charges, liabilities and expenses which PAPERLINX may at any time suffer or incur directly or indirectly due to any default being made by any or all of The CUSTOMERS in the meeting of its obligations and indebtedness to PAPERLINX." 28The relevant terms of the Deed of Guarantee include cll 1.11, 1.14, 2.1, 3.1.3, 3.1.8, and 4: "1.11 No extension of time, latitude or indulgence given or granted shall operate as waiver of the rights of any party. ... 1.14 This Deed sets forth the entire agreement and understanding of the Parties relating to the subject matter contained herein and merges all prior discussions between the Parties and no party shall be bound by any previous deed, agreement, negotiations, commitments or writings except these expressly embodied herein. ... 2. Guarantee 2.1 In consideration of the supply of goods, products and services by PAPERLINX to The CUSTOMERS from time to time and at the request of The CUSTOMERS (evidence by their execution hereof), each of the CUSTOMERS and PAUL and DENISE hereby jointly and severally unconditionally and irrevocably guarantees to PAPERLINX the due and punctual performance and observation by any or all of The CUSTOMERS of all terms, covenants, conditions and provisions to be performed and observed under any agreement to supply and to the extent (if at all) that this Guarantee and Indemnity may be void or unenforceable by reason of the fact that all or any obligations of The CUSTOMERS to perform any or all terms, covenants, conditions and provisions as aforesaid, may not be or may cease to be enforceable, each of The CUSTOMERS and PAUL and DENISE hereby jointly and severally unconditionally indemnifies PAPERLINX in respect of any failure of any or all of The CUSTOMERS to perform any or all terms, covenants, conditions or provisions as aforesaid. ... 3. Further Provisions 3.1 The Guarantees and Indemnity contained in this Deed: ... 3.1.3 Shall not be considered as wholly or partially discharged by the payment at any time hereafter of any monies on account or by any time, credit or any indulgence or concession extended by PAPERLINX to The CUSTOMERS, PAUL or DENISE or any other person or by any compounding, compromise, release, claim for set off, abandonment, waiver, variation, relinquishment or renewal of any rights of PAPERLINX against The CUSTOMERS, PAUL or DENISE or any other person or by the neglect or omission of PAPERLINX to enforce any rights or by any other dealing, matter or thing whatsoever which but for this paragraph could or might operate to abrogate, prejudice or affect this Guarantee and Indemnity or by any alteration, modification, variation or addition to any agreement to supply; and ... 3.1.8 The CUSTOMERS, PAUL and DENISE hereby acknowledge that they have been given full free and unrestricted opportunity to seek independent legal advice as to the nature and effect of this Deed and their obligations pursuant to it. ... 4. Indemnity 4.1 The CUSTOMERS, PAUL and DENISE jointly and severally unconditionally and irrevocably indemnify PAPERLINX against all losses, damages, costs, charges, liabilities and expenses which PAPERLINX may at any time suffer or incur directly or indirectly because: 4.1.1. It does not for any reason recover from The CUSTOMERS, PAUL and DENISE any money owing to it; 4.1.2. Any obligations arising out of any agreement to supply is or had become void or voidable or unenforceable; 4.1.3 Any moneys payable or any part thereof have become unrecoverable. The CUSTOMERS, PAUL or DENISE will upon demand immediately pay PAPERLINX any amount of loss, damage, cost, charge, liability or expense so indemnified."

Issues on appeal 29The issues on appeal are more limited than those with which the primary judge had to deal at trial. They are: (1)Whether PaperlinX breached the principal contract(s) with TQG, and if so, whether the terms of the principal contract(s) were either expressly or impliedly incorporated as terms of the Deed of Guarantee, with the consequence that the appellants were discharged from their liability to PaperlinX (grounds 3-8). (2)Whether the appellants were denied procedural fairness by the rulings of the list judge of the Commercial List and the primary judge (grounds 1, 1a, 1b, and 2). (3)Whether the Deed of Guarantee also contained an obligation to indemnify PaperlinX (ground 9). (4)Whether the guarantee given by Mrs Canty was unjust within the meaning of ss 7 and 9 of the Contracts Review Act (ground 10). 30It is convenient to deal with the construction questions first, in view of their primary significance to the determination of the first part of the appeal.

Issue 3: Construction of Deed of Guarantee 31The first question of construction is whether the Deed of Guarantee also contains an obligation to indemnify PaperlinX. A related question of construction, raised by issue 1, is whether the terms of the principal contract(s) between PaperlinX and TQG were, either expressly or impliedly, incorporated as terms of the Deed of Guarantee.

(a) Did the Deed of Guarantee also contain an indemnity? 32At trial PaperlinX contended that cl 4.1 of the Deed of Guarantee was an indemnity obligation. The primary judge noted (at [96]) that this issue was academic as he had found that there were no breaches of any agreement between PaperlinX and TQG that would impact upon, or suspend or discharge, the appellants' obligations as guarantors. Nonetheless, his Honour accepted that cl 4.1 created obligations of indemnity: at [97]. 33Although PaperlinX pleaded that cl 2.1 of the Deed of Guarantee also contained an indemnity obligation, the focus of PaperlinX's submissions at trial was on cl 4.1, rather than cl 2.1. 34On appeal the appellants submitted that both cll 2.1 and 4.1 were really no more than obligations of a secondary nature and hence by way of guarantee not indemnity. As to cl 2.1 it was common ground that the first part of the clause created a guarantee obligation. The construction dispute focused on the second half of cl 2.1. It is convenient to again state the relevant portion of cl 2.1, which is reproduced in full at [28] above, as follows: "... and to the extent (if at all) that this Guarantee and Indemnity may be void or unenforceable by reason of the fact that all or any obligations of The CUSTOMERS to perform any or all terms, covenants, conditions and provisions as aforesaid, may not be or may cease to be enforceable, each of The CUSTOMERS and PAUL and DENISE hereby unconditionally indemnifies PAPERLINX in respect of any failure of any or all of The CUSTOMERS to perform any or all terms, covenants, conditions or provisions as aforesaid." 35The appellants argued that since this part of cl 2.1 imposed an obligation in respect of loss, which was conditional upon the guarantee itself being void or unenforceable (because the obligation of the principal debtor had ceased to be enforceable), the obligation was no more than a guarantee and could not be a primary obligation of indemnity. It was acknowledged by the appellants that on this construction the second part of cl 2.1 was superfluous. 36As to cl 4.1, the appellants submitted that the obligation to "indemnify" PaperlinX was conditional on the failure of TQG to perform and accordingly it was also no more than a secondary obligation, and hence was appropriately characterised as a guarantee. It was acknowledged that on this construction, cl 4.1 was also superfluous as it added nothing to the guarantee obligation contained in the first part of cl 2.1.

Distinction between guarantee and indemnity 37Fundamental to the determination of the construction question is the distinction between a guarantee and an indemnity. The general nature of a contract of guarantee was described by Jordan CJ in Jowitt v Callaghan (1938) 38 SR (NSW) 512 at 516 in the following terms: "The contract of guarantee or suretyship is a contract between two persons which is intended by them to secure the performance of the obligation of a third person to one of them." 38Simply stated a guarantee is a binding promise of one person to be answerable for the debt or obligation of another if that other defaults: Sunbird Plaza Pty Ltd v Maloney [1988] HCA 11; 166 CLR 245 at [3]-[10]. The distinctive feature of a contract of guarantee is the secondary nature of the obligation which is assumed by the guarantor. There must be another person who is primarily liable: Turner Manufacturing Co Pty Ltd v Senes [1964] NSWR 692. See also Phillips and O'Donovan, The Modern Contract of Guarantee (loose-leaf, Thomson Reuters) at [1.1100]. 39In contrast, under an indemnity, a person assumes a primary liability. A contract of indemnity is "a contract by one party to keep the other harmless against loss" and is not dependent on the continuing liability of the principal debtor: Yeoman Credit Ltd v Latter [1961] 1 WLR 828 at 830-831; Total Oil Products (Australia) Pty Ltd v Robinson (Total Oil Products) [1970] 1 NSWR 701 at 703. An indemnity is an independent obligation to make good a loss: Sutton v Grey [1894] 1 QB 285 at 288-289 (Lord Esher MR). As Davey LJ said in Guild & Co v Conrad [1894] 2 QB 885 at 896: "... there is a plain distinction between a promise to pay the creditor if the principal debtor makes default in payment, and a promise to keep a person who has entered, or is about to enter, into a contract of liability indemnified against that liability independently of the question whether a third person makes default or not." 40The distinction between a guarantee and an indemnity has important practical consequences. Whereas in the absence of an express provision in the contract of guarantee a guarantor will be discharged from liability by certain types of conduct of the creditor (either towards the principal debtor or the guarantor), such conduct will not necessarily discharge an indemnifier. Here, as already noted, the appellants accept that if liable as indemnifiers the alleged breaches by PaperlinX of the principal contract(s), the terms of which are said to have been incorporated into the Deed of Guarantee, will not discharge the appellants from liability to PaperlinX.

The appellants are liable as indemnifiers 41Whether a document is a guarantee or an indemnity, or whether it imposes a secondary or a primary liability, will always depend upon the "true construction of the actual words used in which the promise is expressed": Moschi v Lep Air Services Ltd [1973] AC 331 at 349C (Lord Diplock). The task should be approached without any preconceptions as to what the document is. The description or heading of a document as a "guarantee" or "indemnity" is simply a label. The question is as to its effect. 42The use of the words "guarantee" or "indemnity" in the document itself may be an indication of the intentions of the parties but they are not decisive, because the essential nature of the agreement must always be considered: Yeoman Credit Ltd v Latter at 833; Total Oil Products at 703.

Clause 4.1 43The appellants drew attention to the different language used in recital F and cl 4.1. Recital F recorded that the appellants had "offered" to indemnify PaperlinX against certain losses due to any default by the Customers (which included TQG) in meeting their obligations and indebtedness to PaperlinX. The appellants contended that the reference to "default" by TQG was more consistent with an intention that the appellants' obligations were only of a secondary nature and were conditional upon default by TQG as the primary debtor. 44On the other hand the operative provision which expressed the parties' "agreement" was cl 4.1, which is reproduced above at [28]. Clause 4.1.1 contained an agreement by the appellants to "indemnify PaperlinX against all losses ..." which it may suffer or incur directly or indirectly as a result of not recovering "for any reason" from the Customers (including TQG) any money owing to it. The object of the clause is to protect PaperlinX against loss - to see it harmless - rather than to make good TQG's liability. There is no promise to be answerable for the debt of TQG. None of the actual obligations of TQG can, if it defaults, be enforced against the appellants. The appellants' obligation does not depend on TQG remaining primarily liable to PaperlinX. It is an independent obligation to save PaperlinX harmless from loss in the stated circumstances. The protection against any loss which PaperlinX may suffer includes any damages, costs, charges, liabilities, and expenses which PaperlinX may incur directly or indirectly. Thus cl 4.1.1 gave PaperlinX different rights from those which they have against TQG under the terms of the commercial credit application or the standard terms and condition of sale applicable to each supply contract. This difference provides some further support for the conclusion that an indemnity was intended. 45Nonetheless, the appellants contended that, when cl 4.1 is read together with recital F, cl 4.1 is ambiguous and that any doubt should be resolved in favour of the appellants as being guarantors only, not indemnifiers. 46Although the recitals to a deed can assist in the construction of a contract, they are not themselves operative terms. Recitals cannot cut down operative words that are clear and unambiguous, even if the recital is also clear and unambiguous and is contrary to the operative provision: Franklins Pty Ltd v Metcash Trading (Franklins v Metcash) [2009] NSWCA 407; 76 NSWLR 603 at [380] (Campbell JA; also Allsop P agreeing at [29]); Chacmol Holdings Pty Ltd v Handberg [2005] FCAFC 40; 215 ALR 748 at [37], [46] and [50]; Avranik Pty Ltd v Lloyd [2013] VSCA 244 at [16]. 47It also needs to be kept in mind, as Campbell JA explained in Franklins v Metcash at [389]-[390], that (at least for recitals not saying that one or other party will carry out a particular action) the recital is merely a means by which the surrounding circumstances and purpose of the transaction can be ascertained. Where the recital is in conflict with the true interpretation of an operative provision then the operative provision prevails. 48In my view the language of recital F is not inconsistent with an intention in cl 4.1.1 that the appellants' promise is to provide an indemnity against loss. In Total Oil Products it was held that the arrangement in that case, whereby the defendants agreed to indemnify the plaintiff against losses from any default on the part of a third party, was an indemnity (see 703-704). Similarly, the reference in recital F to TQG's "default" does not affect the primary nature of the obligation which the recital records the appellants as offering to undertake to PaperlinX - to save PaperlinX harmless from loss as a result of TQG not meeting its obligations to PaperlinX. 49I conclude that the nature of the obligation created by cl 4.1.1 is clear and unambiguous in its natural and ordinary meaning. It is a primary obligation of indemnity. Recital F does not, in my view, indicate a contrary intention. If, however, recital F is in conflict with cl 4.1.1, then the latter must prevail.

Absence of a request by indemnifiers to PaperlinX to supply TQG not relevant 50It is necessary to deal with one further contention raised by the appellants. This was that cl 4.1 is not an indemnity because PaperlinX had not entered into the supply transactions with TQG "at the request of" the appellants. It was said that the obligation in cl 4.1 did not meet the description of an "indemnity" given by Asprey JA in Total Oil Products at 703, where his Honour described an indemnity as: "a contract whereby the promisor (the person giving the indemnity) undertakes to the promisee (the person indemnified) to save the promisee harmless from such loss as the promisee might suffer as the result of entering into a transaction with a third party at the request of the promisor." [Emphasis added.] 51However the words of a judgment should not be construed as if they were statute: Scott v Davis [2000] HCA 52; 204 CLR 333 at 370 [108]-[109] (McHugh J). Accordingly, it should not be thought that Asprey JA was intending to describe a rule of law that an obligation will not be an "indemnity" unless the promisee (person indemnified) has entered into a transaction with a third party "at the request of the promisor" (the indemnifier). His Honour should not be taken to have intended to have circumscribed, by the precise words used, the essential nature of a contract of indemnity. 52A valid and enforceable indemnity obligation does not require a request by the indemnifier that the creditor enter into a transaction with the principal debtor. Provided that there is good consideration for the indemnifier's promise an indemnity may be given where the creditor has already entered into the principal transaction: Guild & Co v Conrad at 896. Here the indemnity in cl 4.1 was contained in a deed which provided sufficient consideration for the appellants' promises as indemnifiers. In addition, cl 2.1 recorded, as further consideration for the appellants' promises, the promise by PaperlinX to supply goods, products, and services to the Customers from time to time and at the request of the Customers (as evidenced by their execution of the Deed). 53I conclude that the absence of a request by the appellants that PaperlinX supply paper to TQG is not inconsistent with cl 4.1 operating as an indemnity.

Clause 2.1 54In view of my conclusion in relation to cl 4.1 it is unnecessary to deal with the arguments directed to the nature of the obligation created in the second part of cl 2.1. It is sufficient to observe two matters in relation to the "indemnity" aspect of this clause. 55First, the subject matter of the "indemnity" contained in the second part of cl 2.1 is loss occasioned by the obligations of the Customers (including TQG) ceasing to be enforceable by PaperlinX. The measure of the indemnity is the extent to which the Customers have failed to perform their obligations to PaperlinX which, by hypothesis, have ceased to be enforceable. The nature of this obligation is unambiguously a primary obligation. It is an independent obligation to make good the loss suffered by PaperlinX in the stated circumstances, namely, if the guarantee obligation in the first part of cl 2.1 is rendered void or unenforceable because the obligations of the primary debtor cease to be enforceable by PaperlinX. 56Secondly, although it is unnecessary to decide, it may be doubted whether the indemnity in the second part of cl 2.1 would have applied in the present case if the appellants had established their contention that they were discharged from liability as guarantors as a consequence of a breach by PaperlinX of an alleged condition of the guarantee. It might be argued that the discharge of the guarantee in those assumed circumstances is quite different and distinct from the circumstances in which the indemnity in the second part of cl 2.1 is said to operate, namely, if the guarantee obligation is rendered void or unenforceable because the obligations of the principal debtor cease to be enforceable.

(b) Incorporation of principal contract(s) into Deed of Guarantee

The discharge principle in Ankar 57In Ankar at 561 the plurality stated that a guarantor is discharged from liability by a creditor's breach of the contract of guarantee, which involves failure to comply with a provision that requires strict performance as a condition precedent to the guarantor's obligation, or at least requires substantial performance of the promise such that the guarantor would not have entered into the contract if it had not been assured that there would not be a breach, such as the breach which in fact occurred, and the guarantor has so elected to terminate the contract for breach. Deane J at 570 agreed with the plurality except that his Honour did not consider that it was necessary for the guarantor to rescind (terminate) the contract for repudiation or breach of an essential or fundamental term of the guarantee. 58As already noted, the discharge from liability argument relied upon by the appellants at trial was based on the proposition that the alleged breaches by PaperlinX of the second credit agreement operated to release the appellants from the guarantees they had given. This consequence was said to flow from an express or implied term of the Deed of Guarantee that PaperlinX would perform its obligations to TQG under the contract for the supply of paper on credit to TQG, being the alleged second credit agreement (par 30, commercial list response). 59The primary judge did not need to deal with this incorporation argument because he found that there was no second credit agreement entered into in July 2008, as alleged by the appellants, nor did PaperlinX otherwise breach its obligations to TQG in the manner alleged by the appellants. Whilst the appellants challenge his Honour's findings of no breaches by PaperlinX of obligations to TQG, they do not challenge the findings rejecting the appellants' case based on breaches of the alleged second credit agreement. His Honour rejected the appellants' case that TQG agreed to procure the guarantees from the appellants if PaperlinX would increase TQG's credit limit to $1.6 million, and that PaperlinX so agreed: at [75]-[78]. 60The appellants sought to surmount the difficulty arising from the absence of any challenge to his Honour's findings at [75]-[78] by arguing on appeal that it was an express or implied term of the Deed of Guarantee that PaperlinX would perform its obligations under the individual supply contracts between PaperlinX and TQG. The individual supply contracts were separate and distinct from the overarching alleged second credit agreement. The appellants submitted that PaperlinX breached the standard terms and conditions of sale on which paper was sold and delivered to TQG, relying upon the same breaches as were alleged at trial, but rejected by his Honour, in relation to the second credit agreement. It was said that the alleged breaches of the individual supply contracts were breaches of the Deed of Guarantee, with the consequence that the appellants were discharged from liability as guarantors. This case was not pleaded or raised in the Court below. It gives rise to two questions on appeal. 61The first is whether this Court should permit the appellants to raise a new point on appeal. The second is whether the terms and conditions of the individual supply contracts were incorporated as express or implied terms of the Deed of Guarantee. It is convenient to deal with the construction question first, before addressing the arguments directed to whether the appellants should be allowed to raise this point on appeal.

Incorporation of standard terms and conditions of sale into the Deed of Guarantee not established 62The contention that the terms of the individual supply agreements were incorporated, either expressly or by implication, into the Deed of Guarantee should be rejected. 63First, the appellants referred to the introductory words of cl 2.1: "In consideration of the supply of goods, products and services by PAPERLINX to The CUSTOMERS from time to time ...", as constituting an express term providing for incorporation of the terms of the individual supply contracts into the Deed of Guarantee. In my view, nothing in cl 2.1, including these words, supports this contention. 64The introductory words of cl 2.1 do no more than identify the subject matter of the agreed consideration for the appellants' promises to PaperlinX, namely, the supply of goods, products, and services (which are otherwise unidentified) by PaperlinX to the Customers as requested by the Customers. There is no identification or specification of the terms upon which those goods, products, and services are to be provided by PaperlinX to, amongst others, TQG. The express term argument is not made out. 65Secondly, insofar as the appellants rely upon an implied term, any such term must satisfy the requirements stated in BP Refinery (Westernport) Pty Ltd v Shire of Hastings [1977] HCA 40; 180 CLR 266 at 283, namely: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term would be implied if the contract is effective without it; (3) it must be so obvious that it "goes without saying"; (4) it must be capable of clear expression; and (5) it must not contradict any express term of the contract. These conditions were approved in Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; 149 CLR 337 at 347. 66Here PaperlinX correctly points out that the terms sought to be implied into the Deed of Guarantee are inconsistent with the express terms, in particular cl 1.14, which is an entire agreement clause. This clause provides that: "This Deed sets forth the entire agreement and understanding of the Parties relating to the subject matter contained therein ... and no party shall be bound by any previous deed, agreement, negotiations, commitments or writings except those expressly embodied therein". The implied terms are also inconsistent with the express terms in cl 3.1.1 of the Deed of Guarantee that the obligations of the appellants "shall be absolute and unconditional in any and every circumstance". The suggested implied terms would contradict these express terms of the Deed of Guarantee. 67Nor do I consider that the suggested terms are necessary to give business efficacy to the Deed of Guarantee. The Deed is not ineffective without them. 68Furthermore the suggested terms are not so obvious that it "goes without saying". Implied terms fill the gaps left by the parties in individual contracts. The implication is said to arise because it represents the unexpressed intention of the parties: Luxor (Eastbourne) Ltd v Cooper [1941] AC 108 at 137 (Lord Wright). Here the implied terms would have significantly qualified PaperlinX's right to call on the guarantees and indemnities given by the appellants. It is by no means obvious that PaperlinX was accepting any such qualification to the otherwise unconditional nature of the appellants' obligations under the Deed of Guarantee.

New point on appeal 69In view of the above conclusion, the objection by PaperlinX to the appellants being permitted to rely upon a new point on appeal may be dealt with briefly. 70First, there is a fundamental factual difficulty with the new point sought to be advanced by the appellants, even if the incorporation argument had been made out. The difficulty is that the paper, the subject of the 50 unpaid invoices upon which PaperlinX relied in making its claim against the appellants under the Deed of Guarantee, was delivered by PaperlinX to TQG and accepted by TQG between January and April 2009. These uncontested facts contradict the appellants' contention on appeal that PaperlinX's alleged breaches of the 50 supply contracts amounted to a repudiation, which TQG accepted. By contrast the appellants' pleaded case at trial was that, as a consequence of PaperlinX's alleged breaches of the second credit agreement, TQG's obligations to pay were suspended and for so long as TQG's obligations remained suspended, so also were the obligations of the appellants as guarantors suspended (paras 13 and 14 of the appellants' response: Red 129K-N). 71Nor was it established at trial, or suggested on appeal, that there was any evidence that the appellants had accepted the alleged breaches by PaperlinX of its "incorporated" obligations under the Deed of Guarantee, so as to bring their obligations as guarantors to an end in respect of the 50 unpaid invoices. Acceptance by the guarantor of the creditor's breach of the contract of guarantee is necessary to discharge the guarantor from liability: Ankar at 555 (Mason ACJ, Wilson, Brennan and Dawson JJ); cf Deane J at 570. 72Secondly, the contention that PaperlinX repudiated each of the 50 supply contracts was not a matter raised on the pleadings. Rather, the appellants' contentions at trial were directed to the alleged repudiation by PaperlinX of the second credit agreement, which was said to be a breach of the Deed of Guarantee (see par 30 of the appellants' response: Red 132H-P). Unsurprisingly, therefore, neither the parties nor the primary judge addressed the issue of alleged repudiation by PaperlinX of the 50 supply contracts as distinct from the alleged repudiation of the second credit agreement. 73Although not addressed by the parties or the primary judge, the unchallenged evidence of the delivery and acceptance by TQG of the paper, the subject of the 50 unpaid invoices, and the absence of any evidence of an election by the appellants qua guarantors to accept the alleged repudiation by PaperlinX of any of the 50 supply contracts, leads me to the conclusion that there is no substance in this new point. 74However, if the evidence at trial was considered to be insufficient to enable that conclusion to be reached, then clearly there was other evidence not before the primary judge which might have been relevant to this issue, had it been raised below. This evidence would include all the communications between PaperlinX and TQG (and the appellants) relating to the order and delivery of the paper the subject of the 50 unpaid invoices. 75A point cannot be raised for the first time upon appeal when it could possibly have been met by the calling of evidence below: Water Board v Moustakas [1988] HCA 12; 180 CLR 491 at 497. The present is such a case if, contrary to my view, the evidence of delivery to and acceptance by TQG of the paper the subject of the 50 invoices was insufficient to conclude that there is no substance in this new repudiation argument. As the High Court has repeatedly emphasised, it is elementary that a party is bound by the conduct of its case. Thus, "Except in the most exceptional circumstances, it would be contrary to all principle to allow a party, after a case had been decided against him, to raise a new argument which, whether deliberately or by inadvertence, he failed to put during the hearing when he had an opportunity to do so": Metwally v University of Wollongong (No 2) [1985] HCA 28; 60 ALR 48 at 71. 76The appellants did not point to any exceptional circumstances existing in this case.

Issue 1: Breach of the principal contract 77Having regard to my conclusions under issue 3, the grounds of appeal advanced under issue 1 do not arise. The appellants' contention (that PaperlinX breached the standard contractual terms applicable to the 50 supply contracts which TQG failed to pay) goes nowhere because those standard contractual terms were not incorporated as terms of the Deed of Guarantee and, in any event, the Deed of Guarantee contained an indemnity by the appellants, which the appellants accepted would be a complete answer to these grounds of appeal.

Issue 2: Procedural fairness 78The procedural fairness complaints may also be dealt with relatively briefly, because even if established they would not justify a new trial, having regard to my conclusions above under issue 3. It is necessary however to refer to some of the background circumstances to explain the context of these complaints. Broadly speaking the complaints can be divided into rulings occurring before trial and rulings made during the trial.

(1) Rulings before trial by the commercial list judge

3 May 2013 - PaperlinX's amended claim 79The appellants' first complaint concerns a ruling by the list judge of the Commercial List (Hammerschlag J) on 3 May 2013 permitting an amendment by PaperlinX of its commercial list statement to delete certain paragraphs, including paragraphs 18 to 21. These paragraphs contained a claim in respect of unpaid storage costs and detention charges for the period 11 February 2009 to 3 June 2009, as listed in Schedule C, in an amount of $91,106.62 (Red 51F-V). The deletion of this claim was part of wider amendments by PaperlinX which introduced their claim for an indemnity. 80The appellants contend that the list judge erred in the exercise of his discretion when granting leave to amend. The error was said to arise because PaperlinX should not have been permitted to withdraw so-called "admissions" made in its commercial list statement, namely, that it had invoiced TQG for storage and detention charges under the terms of trade between the parties, and had asserted its entitlement to do so without the consent of TQG. It was the appellants' case that PaperlinX had no right to charge these amounts to TQG under the standard contractual terms. 81The short answer to this complaint is that the appellants did not object to the withdrawal of these paragraphs of PaperlinX's commercial list statement when the amendment application was dealt with by the list judge on 3 May 2013 (Black 17F-H). In these circumstance there was no error by the list judge in permitting the amendment by PaperlinX. It is otherwise unnecessary to consider whether the amendment involved the withdrawal of so-called "admissions" by PaperlinX.

8 May 2013 - guillotine order 82The next complaint concerns the guillotine order made by the list judge on 8 May 2013. On that occasion the list judge made orders vacating the trial date (which was set down to commence on 20 May 2013), directed the appellants to file and serve all affidavit evidence on which they intended to rely by 31 May 2013, and made a guillotine order precluding the appellants from relying on affidavits not served by that date. 83At the time these orders were made the appellants required leave to rely upon any affidavits not already served, because an earlier guillotine order had been made on 10 August 2012 which precluded them from relying on affidavits not served by 27 September 2012, and no evidence had been filed by that date. 84The appellants contend that the list judge erred by imposing a second guillotine order in respect of any affidavits not filed by 31 May 2013, and by requiring affidavits to be filed so quickly in response to PaperlinX's amended commercial list statement (which had been filed on 6 May 2013) before the full import of PaperlinX's pleading amendments became apparent to the appellants. There is no substance to these complaints. 85First, no House v The King [1936] HCA 40; 55 CLR 499 error has been shown in the list judge's discretionary decision to impose a second guillotine order as a condition of an extension of time to file affidavit evidence. The order was made in circumstances where an earlier direction to file affidavits had not been complied with by the appellants and that default had continued for over seven months. The guillotine order was consistent with the case management procedures employed in the Commercial List for the just, quick, and cheap disposal of proceedings, and s 56 of the Civil Procedure Act 2005 (NSW) (CP Act). So much is also recognised in the relevant Practice Note (SC Eq 3). The Usual Order for Hearing (par 6.1), which applies where no pre-trial directions have been given for the service of affidavits or statements of evidence, includes a guillotine order in relation to evidence not served within 28 days prior to the hearing date. 86Secondly, the time limit imposed for the filing of the appellants' affidavits reflected the extension which had been sought by the appellants' counsel. The list judge initially proposed 24 May 2013, and the appellants' counsel requested 31 May 2013 instead. His Honour acceded to this request (Black 50P, 51E and K). The appellants cannot now be heard to complain that the list judge allowed insufficient time. 87Thirdly, it is not to the point that the appellants assert that it was not until several months later that they came to appreciate that it was necessary to answer more fully by affidavit the amended case advanced by PaperlinX as filed on 6 May 2013. Depending on the length of delay after 31 May 2013, that circumstance may have provided a basis for a subsequent application by the appellants to vary the terms of the guillotine order. It could not however constitute a failure by the list judge to take into account, as a relevant matter, a matter which simply had not arisen at the time of making the guillotine order.

(2) Rulings during trial by the primary judge 88The appellants make four principal complaints in relation to rulings by the primary judge during the trial, the effect of which was to: (a) prevent the appellants from relying upon affidavit evidence of Mr Canty of 8 September 2013 served after the expiry of the guillotine order; (b) prevent the appellants, on the second day of the trial, from amending their commercial list response to rely upon proposed particulars of their "storage and detention charges" defence; (c) prevent cross-examination by the appellants' counsel of two of the respondent's witnesses (Mr Allard and Mr Cameron) on particular matters; and (d) prevent the appellants from relying upon the documentary evidence the subject of the proposed particulars. 89It is convenient to start with the primary judge's decision to refuse leave to add particulars to the appellants' response (par 12). This is because the appellants submitted that if error could be established in relation to this decision then all of the other discretionary decisions founded upon this decision - including those precluding cross-examination of Mr Allard and Mr Cameron and striking out the evidence given by Mr Cameron on the issue of the storage and detention charges defence (to the extent that it concerned the working capital charges issue) and precluding reliance on any documents in evidence to make out the storage and detention charges defence - are self-evidently flawed.

(a) Refusal of amendment 90On the second day of the trial (10 September 2013), the appellants applied for leave to amend their commercial list response to, amongst other amendments, include particulars of the allegations in paragraphs 12(b), (c) and (d), by adding new subparagraph (g) and (h) (Red 159R-161G). The primary judge refused leave to make those amendments: PaperlinX Australia Pty Ltd v Canty (No 5) (Supreme Court (NSW), McDougall J, 10 September 2013, unrep) (Red 199L-203F). 91As to subparagraph (g), his Honour noted that the particulars sought to be added referred to a complaint by TQG in an email of 8 April 2008 about invoicing of paper before delivery. This complaint related to four invoices which were given some months before the Deed of Guarantee was given on 16 July 2008: at [14]. His Honour considered that this particular was irrelevant because it occurred before the guarantees were given and could not concern the alleged repudiatory conduct of PaperlinX as pleaded, which was said to have occurred "in late 2008 and up until late April 2009": at [14]. 92In my view his Honour was undoubtedly correct to conclude that this proposed particular was irrelevant to the appellants' contentions. There was no error in refusing leave to permit this proposed particular. 93As to subparagraph (h), his Honour noted that this particularised a volume of material including a schedule provided by them in the related Victorian proceedings on the claim originally made by PaperlinX for unpaid storage charges which had since been withdrawn, as well as monthly statements of account and a number of internal emails: at [18]. His Honour considered that, if permitted, it would inevitably lead to an adjournment of the hearing to enable PaperlinX's counsel to obtain instructions for the purpose of understanding the proposed defence: at [19]. His Honour took into account the fact that counsel for the appellants accepted (Black 119K-O) that what was now being advanced was something that could have been particularised back in July 2013 when PaperlinX had requested some particulars of paragraph 12 of the appellants' response: at [26]. His Honour concluded that the injustice to PaperlinX of permitting the appellants to rely on this material outweighed the prejudice to the appellants of refusing them leave to rely upon it: at [28]. 94The appellants contend that his Honour misapprehended the distinction between amendments to pleadings and particulars. They also contend that he failed to consider a number of matters including: the prior history of the litigation, which it was said revealed that PaperlinX had refused to discover the invoices relevant to the appellants' storage and detention charges defence; that the appellants had served, as part of Mr Canty's affidavit of 29 May 2013, exhibit PCB1 which was a schedule of the invoices which the appellants contended contained the impugned storage and detention charges; that a request by PaperlinX's solicitors on 3 July 2013 for particulars of the appellants' defence was seeking copies of invoices, and therefore seeking discovery contrary to the rules; and that the appellants had provided the best particulars available to them in exhibit PCB1. 95In my view the appellants' contentions do not establish error on the part of the primary judge in refusing the amendment application. First, whilst it is correct that the amendment strictly involved particulars of the storage and detention charges defence, there was no error in his Honour taking into account considerations of procedural fairness to PaperlinX, including the inevitable vacation of the trial to avoid prejudice to PaperlinX, the concession by the appellants' counsel that the particulars could have been given back in July 2013, and the absence of a sufficient explanation for the appellants' delay in providing these particulars. 96Secondly, I am not persuaded that the primary judge misapprehended any legal principle or failed to take into account any relevant consideration relating to the history of the litigation. The appellants had first raised the storage and detention charges defence in their commercial list response filed on 2 September 2011. Under the heading "Particulars" of what was then paragraph 16 of their response, the appellants stated that they would provide further particulars of the alleged breaches by PaperlinX following discovery by PaperlinX and production of documents on subpoena (Red 66Q-R). 97After complaints about the adequacy of PaperlinX's discovery were pursued by the appellants, it ultimately transpired that PaperlinX had not retained copies of invoices prior to January 2009 (Blue 4/1884). The appellants do not appear to have issued a subpoena for production to TQG. The explanation given at trial was that TQG had gone into liquidation and the liquidator had indicated to the appellants' solicitors that it was unlikely that the documents could be located (AT 30 July 2014, p 34, lines 24-35 and Blue 2/536D-E). Assuming this to be the position, notwithstanding the absence of a subpoena to TQG, the appellants went to trial contending that PaperlinX had issued invoices for storage and detention charges in breach of the standard terms and conditions of sale between PaperlinX and TQG, knowing that they had not particularised this contention, including the documents from which relevant inferences were to be drawn of the alleged breaches by PaperlinX, being the proposed particulars which were given on the second day of the trial. 98Thirdly, in deciding whether or not to allow the amendment, s 58 of the CP Act provides that the Court must seek to act in accordance with the dictates of justice and must have regard to the provisions of s 56 and s 57 of the CP Act which direct attention to the "overriding purpose" of the Act to facilitate the "just, quick and cheap resolution of the real issues in the proceedings". Section 58(2)(b) provides a checklist of factors which the Court may have regard to when considering the dictates of justice. None of these matters are to be given precedence over any other, with each case turning on its own facts: New South Wales v Mulcahy [2006] NSWCA 303 at [29]. 99Here the primary judge correctly took into account: (1)the lack of expedition by the appellants in approaching the proceedings in circumstances where they knew that the allegations in their commercial list response had not been properly particularised; (2)the degree of injustice that would be suffered by the respective parties, including the detriment to the appellants if they were not permitted to run a properly particularised case, and the prejudice to PaperlinX of an inevitable adjournment of the trial; (3)the history of the litigation including the appellants' inadequate response to a request for particulars dated 3 July 2013 of, amongst others, paragraph 12(d) of their response (Blue 4/1903); (4)the appellants' failure to provide, as promised, within 14 days of 8 July 2013, details of the documentary evidence discovered by PaperlinX which was to be tendered on the issues the subject of PaperlinX's request for particulars (Blue 4/1965); (5)the appellants' failure to perform that promise (which was totally unexplained); and (6)the fact that the material sought to be particularised could have been provided by late July 2013, in sufficient time for PaperlinX to consider and deal with it (including, if necessary, by adducing further evidence). 100In all the circumstances, there was no error by his Honour in concluding that the injustice to PaperlinX in permitting the appellants to rely on the material the subject of the proposed particulars outweighed the prejudice to the appellants in refusing them leave to rely on it. The challenge to his Honour's decision declining leave to amend the appellants' commercial list response must fail. 101It follows that there was no error in his Honour preventing the appellants from relying upon the documentary evidence the subject of the proposed new particulars.

(b) Limits on cross-examination 102On the first day of the trial (9 September 2013) counsel for PaperlinX objected to its first witness (Mr Allard) being cross-examined about storage and detention charges (Black 91D-95V). The objection was upheld by the primary judge: PaperlinX Australia Pty Ltd v Canty (No 2) (Supreme Court (NSW), McDougall J, 9 September 2013, unrep). His Honour reasoned (at [14]) that the appellants were effectively seeking to return to the old days of trial by ambush. If permitted to pursue the matter in cross-examination they would be able to gain the very significant tactical advantage of investigating in detail with PaperlinX's witnesses a ground of defence that had never been adequately pleaded or particularised. At [18] his Honour concluded that the appellants had failed to properly particularise the allegations in their response (concerning alleged repudiation by PaperlinX of the second credit agreement), knowing that they should have done so, and having had an adequate opportunity to do so. Accordingly, the interests of justice required that cross-examination on this topic should not be permitted. 103Later on the first day of the trial, counsel for PaperlinX also objected to Mr Allard being cross-examined on a meeting said to have taken place on 1 October 2008. His Honour rejected cross-examination directed to the 1 October meeting or the letter of 3 October 2013 or its consequences because Mr Canty's affidavit of 29 May 2013 had not put any of these matters in dispute : PaperlinX Australia Pty Ltd v Canty (No 3) (Supreme Court (NSW), McDougall J, 9 September 2013, unrep). 104On the morning of the second day of the trial (10 September 2013) the primary judge delivered a further judgment clarifying his reasons for refusing to permit cross-examination of Mr Allard: PaperlinX Australia Pty Ltd v Canty (No 4) (Supreme Court (NSW), McDougall J, 10 September 2013, unrep). His Honour indicated that it was not possible to say in advance that the appellants' counsel should not be permitted to cross-examine on any topic which was not in issue and emphasised that his earlier refusal was directed to the particular form of the question. 105On the third day of the trial (11 September 2013), the primary judge (at Black 212E-M) upheld an objection taken by PaperlinX that cross-examination of its witness, Mr Cameron, on the topic of working capital charges should not be permitted. (This topic related to interest charged for the holding costs of PaperlinX in acquiring paper from overseas suppliers for TQG's orders but not delivered to TQG until it had brought its account with PaperlinX into line with the credit limit of $1.2 million.) His Honour also struck out the previous evidence given by Mr Cameron on this topic. Counsel for the appellants unsuccessfully sought to justify the relevance of this cross-examination as being an aspect of the storage and detention charges defence. 106The challenges to his Honour's rulings preventing cross-examination by the appellants' counsel may be dealt with together. In my view no error has been made out. First, it has not been demonstrated that his Honour took into account an irrelevant consideration in refusing to allow cross-examination on issues which had not been properly particularised (in circumstances where the appellants had previously had an adequate opportunity to do so). 107Secondly, there was no error in not permitting cross-examination on matters which had not been put in dispute by evidence filed by the appellants in accordance with the timetable for preparation for hearing. 108Thirdly, and in any event, his Honour specifically left open in judgment no 4 the possibility of further cross-examination of PaperlinX's witnesses on particular issues, even if not in dispute. The transcript (Black 195L-196T, 200P-211C, 217T-219D - noting that (at Black 263B-D) only some of this evidence was later struck out), reveals that the appellants did pursue some further cross-examination of PaperlinX's witnesses on the topic of storage and detention charges. They cannot now be heard to complain on appeal that they were unduly restricted by his Honour's rulings in advancing their defence at trial.

(c) Refusal to allow late affidavit 109The appellants sought leave, during cross-examination of Mr Allard on the second day of the trial, to rely upon an affidavit of Mr Canty sworn two days previously on 8 September 2013. Leave was required because of the guillotine order made on 8 May 2013. His Honour permitted parts of the second affidavit to be read on the basis that it was supplementing, in admissible form, what was otherwise expressed inadmissibly in Mr Canty's earlier affidavit. He refused leave to rely on the balance of that affidavit because it did not deal with matters properly to be taken as evidence in reply: PaperlinX Australia Pty Ltd v Canty (No 6) (Supreme Court (NSW), McDougall J, 10 September 2013, unrep). 110In my view, no error has been established in his Honour's discretionary decision not to permit parts of the late affidavit of Mr Canty to be relied upon at trial. Significantly, the appellants did not provide an explanation for why Mr Canty had not put in dispute, in his affidavit of 29 May 2009, the 1 October 2009 meeting or the 3 October 2009 letter. 111The appellants challenge this ruling as being unjust or unreasonable because later in the trial in its closing submissions PaperlinX relied on the 3 October letter as evidence of consent by TQG and Mr Canty to the storage and detention charges, which the appellants contended were in breach of the second credit agreement. The appellants complained on appeal that the issue of "consent" was not pleaded by PaperlinX and took them by surprise and is a reason why his Honour should have permitted Mr Canty's late affidavit. However this does not establish error by the primary judge at the time he made his ruling on parts of the late affidavit. 112Notably the appellants do not seem to have objected to this closing submission by PaperlinX at the time it was made, on the ground that the matter had not been pleaded by PaperlinX. Nor did the appellants seek to revisit his Honour's ruling in relation to parts of Mr Canty's late affidavit on the basis that they were now prejudiced, because PaperlinX was seeking to rely on the evidence of the 3 October letter in a manner which had not been foreshadowed in the pleadings. The appellants cannot now be heard to complain on appeal when the matter was not raised at trial. 113In any event, his Honour's findings in relation to these events culminating in the 3 October letter (made in the absence of Mr Canty's late evidence) are not material to the outcome of the appellants "defences", having regard to my conclusions above under issues 1 and 3 above. Accordingly, even if error had been established in respect of this aspect of the ruling, it was not material and has not resulted in a substantial miscarriage justifying a new trial.

Other challenges to rulings on evidence 114The appellants also challenged other rulings on admissibility by the primary judge. In appeal ground 2(c) complaint is made that his Honour refused to determine all of the appellants' supplementary objections to PaperlinX's evidence made on 12 September 2013 (Black 260L-O). This was said to be contrary to the terms of his Honour's earlier judgment on 9 September 2013 (which had admitted certain evidence, the subject of objections by the parties which his Honour had not then determined, on the voir dire and deferred ruling on such objections until closing submissions should either party seek to rely upon such evidence): PaperlinX Australia Pty Ltd v Canty (Supreme Court (NSW), McDougall J, 9 September 2013, unrep). 115As to this complaint, the appellants did not attempt to explain by written or oral submissions what evidence of PaperlinX - to which the appellants had objected at trial, but which his Honour seems not to have determined as neither party subsequently sought the tender of any particular evidence received on the voir dire - was wrongly relied upon by his Honour in accepting PaperlinX's claim under the Deed of Guarantee. No material error has been established. 116In appeal ground 2(d) complaint is made that his Honour permitted PaperlinX to rely on affidavit evidence in reply from Mr Allard and Mr Cameron, which the appellants contend was properly characterised as evidence in chief, whilst denying the appellants an opportunity to respond to that evidence (Black 260P-261D). 117As to this complaint, the primary judge rejected parts of the reply affidavit of Mr Allard which he ruled were not evidence in chief (Black 264U-266H). No objection was taken by the appellants to the reply affidavit of Mr Cameron when it was tendered (Black 171P). The appellants' submissions did not identify what reply evidence of Mr Allard should not have been allowed into evidence, nor how in the absence of any particular reply evidence there would have been a different outcome in relation to his Honour's acceptance of PaperlinX's case or rejection of the appellants' defences. 118These appeal grounds should be rejected.

Principles concerning relief under Contracts Review Act 119In the leading decision not long after the introduction of the Contracts Review Act (the Act), McHugh JA in West v AGC (Advances) Ltd (West) (1986) 5 NSWLR 610 at 620 recognised that a contract can be unjust "because of the way it operates in relation to the claimant or because of the way in which it was made or both". He recognised (at 620) that a contract could be unjust because it contained "substantive injustice" - which arises "because it 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. 120McHugh JA observed (at 621) that if a defendant has not been engaged in conduct depriving the claimant of a real or informed choice to enter into a contract and the terms of the contract are reasonable as between the parties, the contract could not be considered unjust simply because it was not in the interest of the claimant to make the contract or because they had no independent advice. 121However, as Handley JA subsequently observed in Perpetual Trustee Company Ltd v Khoshaba (Khoshaba) [2006] NSWCA 41 at [86], McHugh J left open a significant relevant matter in West with respect to the independent advice issue, when he said (at 629): "A nice question would arise as to whether a contract which did no more than make reasonable provision for the protection of the lender was nevertheless unjust because the lender had not insisted that the borrower get independent advice whether she should borrow money from it. That is, the question would be whether the conduct of the lender was unfair in its dealing with the borrower so as to make the contract unjust. An affirmative finding of an unjust contract in those circumstances would seem to imply that the lender owed a duty to the borrower to ensure that she used the borrowed money wisely or, at all events was able to repay the instalments." 122In Provident Capital Ltd v Papa [2013] NSWCA 36; 84 NSWLR 231 at [7], Allsop P recognised that the broad evaluation of unjustness under the Act involves the normative evaluation of the totality of relevant circumstances, when observing that: "Central to the normative evaluation is the recognition that there is a need for the protection of some people in some circumstances, who are not able fully to protect their own interests against factors that may cause injustice. That vulnerability may come from one or more of many circumstances, such as lack of education or of intelligence, from gullibility, from the predation of fraud and greed, and also sometimes from loyalty and love. The characterisation of a contract as unjust and the sheeting home to the other contracting party of the consequences of its unjustness may be a difficult evaluative exercise. At its heart, however, is the recognition of the inadequacy of one party to protect her or his interests in the circumstances." 123In an application for relief under s 7 of the Act, the Court undertakes a three-stage process: Khoshaba at [99] (Handley JA); at [106] (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.

Appellate review of finding of no injustice 124It is important to bear in mind the nature of the review by an appellate court of a finding that a contract is unjust or not. The determination that a contract is unjust requires an evaluative judgment, based on the primary facts as found. In Khoshaba, Spigelman CJ characterised (at [37]) such a determination as a finding of fact despite its evaluative character. He said (at [403]) it "may be" that an appellate court asked to review a finding that a contract was unjust should apply the principles stated in Warren v Coombes [1979] HCA 9; 142 CLR 531, rather than those applicable to the review of a discretionary judgment stated in House v The King. Handley JA said (at [100]) that appellate review of the indeterminate standard set by s 7 of the Act is to be undertaken in accordance with the principles in Warren v Coombes, at 551-552. Basten JA was of the same opinion (at [107]). 125On this basis, the appellate court, when reviewing a finding that a contract was unjust, is generally taken to be in as good a position as the trial judge to decide on the proper inferences to be drawn from the established facts, although respect and weight will be given to the conclusions reached by the trial judge. 126The third stage involves the exercise of a discretion which is subject to review by the appellate court in accordance with the principles stated in House v The King, at 504-505. In the present case, the primary judge never reached the discretionary determination under s 7 of the Act. Accordingly, this Court would determine the question of relief itself, if otherwise satisfied that there was error in the primary judge's conclusion that the Deed of Guarantee was not unjust.

Mrs Canty's claim of "procedural injustice" 127Mrs Canty contends that the Deed of Guarantee is "unjust" based on the circumstances surrounding her entry into it. Her complaint is limited to "procedural injustice". No complaint is made of "substantive injustice". 128At trial Mrs Canty's case was confined to three matters. The first of these was that she had no actual role in the management of the Quality Group. This was accepted by the primary judge: at [106]. 129The next matter was that she received no material benefit from entry into the Deed of Guarantee. This contention was rejected by the primary judge (at [107]) and his Honour's finding that she received a material benefit is not challenged on appeal (Orange 74G-I). 130The third matter related to the absence of independent legal or financial advice about the effect of her entry into the Deed of Guarantee. His Honour observed that the Deed of Guarantee stated at the head of it, under its title and before its date, in bold capital letters a statement inviting proposed guarantors to seek independent legal advice prior to executing the document (at [108]). He noted that cl 3.1.8 also contained an acknowledgement by each guarantor of "free and unrestricted opportunity to seek independent legal advice as to the nature and effect of this deed and their obligations pursuant to it": at [109]. His Honour found that Mrs Canty did not suggest that she was denied the opportunity at all, let alone by any conduct on the part of PaperlinX or for which PaperlinX should be held responsible: at [110]. Mrs Canty challenges these findings on three bases. 131First, Mrs Canty contends that there was an "onus" on PaperlinX - in effect a duty - to ensure that she obtained independent legal and accounting advice having regard to her lack of information about the affairs of TQG and the other corporate guarantors. 132Secondly, Mrs Canty challenges the relevance of his Honour's findings that the Deed of Guarantee contained a statement (in bold print) inviting the guarantor to seek independent legal advice in relation to the document, and an acknowledgment in cl 3.1.8 as referred to above. 133Thirdly, Mrs Canty challenges his Honour's finding that she did not suggest that she was denied the opportunity to obtain independent legal advice, nor was there any conduct on the part of PaperlinX for which it should be held responsible. 134Before addressing these challenges it is appropriate to refer to the evidence relating to Mrs Canty's entry into the Deed of Guarantee.

Circumstances in which Deed of Guarantee was given by Mrs Canty 135Mrs Canty acknowledged that her signature appeared on the Deed of Guarantee but said that she did not recall signing the Deed. The only direct evidence of the circumstances in which Mrs Canty signed the Deed of Guarantee was given by Mr Canty. He said that he had a conversation with his wife to the following effect when giving her the Deed of Guarantee for signature: "I said: 'Denise this is a directors guarantee for one of Quality paper suppliers you'll need to sign.' Denise said: 'Okay. Where do I sign?'" Mr Canty said that he then observed Mrs Canty sign the Deed on the signature page and their daughter Tracey signed as a witness. He said that Mrs Canty did not read the Deed of Guarantee in his presence and he took the document once she had signed it. Both parties seek to rely on this evidence. Mrs Canty says that it confirms her evidence that, in accordance with her usual practice, she did not read the document before signing. PaperlinX points to Mr Canty's evidence as demonstrating that Mrs Canty willingly signed the Deed of Guarantee at her husband's request and without any threat, intimidation, or duress. This may be accepted and counsel for Mrs Canty did not suggest otherwise. 136Mrs Canty's evidence was that she was aware that her husband owned and operated three printing companies using the name "Quality Print", and had a number of other related companies. At various times over a period of 40 years, at her husband's request, she was appointed director or made shareholder of some of those companies, although she could not recall the detail. She was not a director of TQG or any of the other corporate guarantors who are parties to the Deed of Guarantee. 137Mrs Canty gave evidence of her usual practice when signing documents relating to the Quality Print companies at the request of her husband. On those occasions where the other party required a solicitor's certificate of independent advice, her practice was not to read the documents but simply rely on a solicitor to advise her what the documents contained (Blue 1/322W-323E). On other occasions she said she signed documents at her husband's request without consulting a solicitor and without reading the documents (Blue 1/323F-H). 138Mrs Canty said that had she known in July 2008 that the Quality Group had a dispute with PaperlinX regarding the supply of paper, that the Quality Group was having difficulties paying PaperlinX, and that she would be personally liable for the debts of the Quality Group to PaperlinX, she would not have signed the Deed of Guarantee. 139Mrs Canty was not cross-examined at trial. 140Counsel for Mrs Canty accepted in oral argument (AT 30 July 2014, p 60, lines 8-23) that there was no evidence to show that Mrs Canty did not understand what a guarantee was, nor was there any evidence to show what legal advice might have been given by a reasonably competent solicitor, if one had been retained to advise her in relation to the giving of the Deed of Guarantee. It was submitted however that an inference could be drawn that a competent legal advisor would have asked Mrs Canty about the arrangements between PaperlinX and TQG and why the guarantee was required, and that had she known of the true nature of the trading relationship between PaperlinX and TQG she would not have agreed to give the guarantee (AT 30 July 2014, p 61, lines 15-31).

Procedural injustice not established 141It does not follow from the absence of independent legal or financial advice that the primary judge should have made a finding of unfairness in the methods used to obtain the Deed of Guarantee from Mrs Canty: West at 621. Whether or not independent or other expert advice was obtained by Mrs Canty is simply one factor to be taken into account under s9 (2)(h) of the Act: West at 627. 142Whether there may be circumstances in which the creditor has a duty to the intending guarantor to ensure that he or she has received independent advice before giving the guarantee, does not require decision in the present case. Here Mrs Canty willingly signed the Deed of Guarantee at the request of her husband. She was prepared to do so without reading the document or requiring any further information beyond the brief description given to her by him. She did so in circumstances where it was her practice over many years to sign documents at her husband's request relating to the Quality Print companies. She received a material benefit in giving the guarantee in view of her interest in the business of TQG through the Denise Canty Family Trust, a trust of which she was the nominator and one of the two named beneficiaries. She was quite content to proceed without legal advice and to sign without reading such documents. There was no evidence that she suffered from any relevant disability such as lack of education or intelligence, gullibility, or exploitation by her husband. 143Mrs Canty trusted her husband's business judgment and it was no part of her case that her husband withheld matters from her or misrepresented the transaction to her. She saw her financial interests aligned with those of her husband and the Quality Print companies in which she had a material interest. Her perception of where her interests lay was not shown to be incorrect. 144Nor was it part of Mrs Canty's case that she did not understand the nature of a guarantee. Mr Canty's unchallenged evidence establishes that Mrs Canty was told by him, correctly, that she was signing a guarantee in favour of one of the suppliers of the Quality Print companies. Mrs Canty did not require independent legal advice to explain to her the nature and practical effect of the transaction: cf s 9(2)(i) of the Act. 145The essence of Mrs Canty's case was that she was unaware of the trading relationship between TQG and PaperlinX, or that TQG was having difficulties paying PaperlinX in July 2008. However, there was no evidence from which it might be inferred that Mr Canty would not have revealed those matters to his wife, if she had enquired as to the circumstances in which the guarantee was required by PaperlinX. Mrs Canty did not require independent advice to understand the circumstances in which PaperlinX had requested the Deed of Guarantee. She need only have asked her husband. On the evidence she did not do so. She must take responsibility for her own actions. 146Further, there was no evidence that PaperlinX knew, or ought to have known, that Mrs Canty was unaware of the matters which she said she did not know, and could have but did not ask her husband. The Deed of Guarantee contained a prominent statement, both on the front page under its heading and on the execution page immediately below the place for Mrs Canty's signature, inviting the intending guarantors to seek independent legal advice prior to executing the document. The statement was as follows: "THIS IS A LEGAL DOCUMENT - ALL PARTIES ARE INVITED TO SEEK INDEPENDENT LEGAL ADVICE PRIOR TO EXECUTING THIS DOCUMENT." 147Notably Mrs Canty did not give evidence that she did not see this statement immediately beneath the place for her signature on the execution page. It is most unlikely that she did not see it when she signed the Deed in view of its prominence and proximity to her signature. 148However, even if it be assumed that Mrs Canty did not observe this statement at the time of signing the Deed of Guarantee, both the fact of the statement inviting her to obtain independent legal advice and the acknowledgement in cl 3.1.8 (that she had the opportunity to seek independent legal advice as to the nature and effect of the Deed of Guarantee and her obligations pursuant to it) were relevant considerations for his Honour when evaluating the claim of procedural injustice. 149It may be accepted that the acknowledgement in cl 3.1.8 of the Deed of Guarantee may have been overlooked by any intending guarantor who did not read the document. Nonetheless it was an acknowledgment which Mrs Canty freely signed and which PaperlinX was entitled to rely upon in the circumstances. There was nothing procedurally unfair in the obtaining of the Deed of Guarantee from Mrs Canty. 150Finally, there is the contention that the primary judge erred in finding that Mrs Canty did not suggest that she was denied the opportunity to obtain independent legal or financial advice. This complaint is misconceived. Mrs Canty did not say in her affidavit that she was denied an opportunity to obtain legal or financial advice. 151On the evidence that was advanced in support of her case Mrs Canty simply did not see any need to consult a solicitor, nor ask her husband any questions concerning the trading position of the Quality Print companies, including TQG, when agreeing to give the guarantee. No aspect of the transaction required independent advice. Mrs Canty could have, but did not, ask her husband any questions. She had signed many similar documents over the preceding years with financiers and other suppliers to the Quality Print companies. Mrs Canty was not a person unable to protect herself. She was not shown to be vulnerable for any reason including because of gullibility or loyalty or love. No unfair methods were used to obtain her signature to the Deed of Guarantee. She received a material benefit from giving the Deed of Guarantee having regard to her interest in the business. The circumstances in which Mrs Canty gave the Deed of Guarantee are a long distance removed from the cases to which the Act applies. 152As the challenge to the primary judge's conclusion that the Deed of Guarantee was not unjust fails, there is no occasion for this Court to consider the grant of any relief in favour of Mrs Canty. 153Mrs Canty's separate ground of appeal should be rejected.

Orders 154I propose the following orders: (1)Appeal dismissed. (2)The appellants to pay the respondent's costs of the appeal.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 05 September 2014