Commonwealth Bank of Australia v Kojic [2016] FCAFC 186 | Case summary

Federal Court of Australia (Full Court)|2016-12-21|Before: Edelman JJ

The Kojics paid over $436,000 to help buy development land from a long-time associate, expecting a half share. The Bank's mortgage covered the whole property and all the associate's other debts. When the venture failed the Bank sold the land. The trial judge said the Bank acted unconscionably because two of its managers together knew the Kojics did not realise they were left with no real equity. The Full Court disagreed on two grounds. First, even combining what the managers knew did not show the Bank knew the Kojics were ignorant or vulnerable; they were experienced business people with their own conveyancer. Second, you cannot add together separate pieces of knowledge from different staff to create corporate unconscionable conduct when no single person behaved badly. The appeal succeeded, the damages order was overturned, and the claim against the Bank was dismissed.

What happened

In late 2008 Southern Construction Services Pty Ltd (SCS), a company associated with Mr Smelisha Blanusa, contracted to purchase land at Old Reynella for subdivision into housing allotments. By mid-2009 settlement had been repeatedly delayed. The Commonwealth Bank of Australia (the Bank) refinanced SCS's existing facilities and advanced $480,000 toward the $850,000 purchase price. That advance was secured by a first registered mortgage over the whole of the land, a charge over SCS's assets, and a limited guarantee from Mr Blanusa. Critically, the mortgage contained an all-moneys clause securing not only the $480,000 but all present and future indebtedness of SCS to the Bank, which at the time included an approved overdraft of $500,000, a corporate charge card facility of $25,000 and other facilities secured over additional assets and guarantees ([6]-[10]).

The Kojics, who had known Mr Blanusa since 1980 and had previously invested with him in property ventures, were approached in early November 2009 to provide the balance of the purchase price (approximately $436,162 after allowing for Mr Cotton's $90,000 equity contribution) in return for a 50% interest in the land. Mrs Kojic, the principal actor and an experienced property developer, spoke with Mr Blanusa on 10 November 2009 and agreed to provide half the funds for a half interest. She immediately telephoned Mr Coombe, her long-standing relationship manager at the Bank since 2002, to alert him that a large sum would be required for a bank cheque. She told him the Kojics were buying a half interest, that Mr Blanusa was borrowing the other half from the Bank, and that she was not seeking advice. She did not ask Mr Coombe to investigate the proposal ([14]-[15]).

Mrs Kojic also contacted the conveyancer, Mr McDonald, who was acting for SCS and, it was found, for the Kojics. On 12 November 2009 Mr McDonald told Mrs Kojic that the Bank's mortgage was over the whole of the property. He did not, however, explain that the all-moneys clause extended to SCS's other borrowings. Mr Blanusa separately told Mrs Kojic that the Bank would not alter the security documents in time for settlement to place the Kojics on title. The primary judge accepted that Mrs Kojic was not told the full significance of the all-moneys clause and that she believed her payment would secure a half interest with residual equity ([21]-[24]).

Settlement occurred on 17 November 2009. The Kojics' payment was used to complete the purchase. In 2011, after SCS defaulted, the Bank took possession and sold the land for $975,000. The Kojics commenced proceedings alleging, among other things, that the Bank's participation in the settlement while possessing knowledge (through Mr Coombe and Mr Barnden, the relationship manager for SCS) that the Kojics did not understand the mortgage's full effect was unconscionable contrary to ss 51AB and 51AC of the Trade Practices Act 1974 (Cth) (TPA). The primary judge accepted that neither officer individually had the composite knowledge ultimately attributed to the Bank but held that the knowledge could be aggregated because the matter involved one transaction. On that aggregated basis his Honour found at [183(2)] that the Bank knew the Kojics believed they were acquiring a half interest with equity but were in substance making an unsecured loan, and that this was unconscionable ([31], [183]-[190]).

The Full Court (Allsop CJ, Besanko and Edelman JJ) allowed the Bank's appeal. All three judges held that the primary judge's central factual finding at [183(2)] could not stand: there was no evidence that either officer knew the Kojics were ignorant of the mortgage's reach, and the Bank was entitled to assume that experienced developers with a conveyancer had informed themselves ([41]-[48], [70]). Independently, Edelman J (with whom Allsop CJ and Besanko J substantially agreed) held that the knowledge of the two officers could not be aggregated to establish corporate unconscionability when no individual had acted unconscionably ([92]-[153]). The orders awarding damages against the Bank were set aside and the application dismissed with costs.

Why the court decided this way

The court's reasoning rests on two independent and mutually reinforcing pillars. First, the primary judge's factual conclusion that the Bank knew the Kojics did not understand the practical effect of the all-moneys mortgage was unsupported by the evidence. Allsop CJ observed that Mrs Kojic knew the mortgage was over the whole property because Mr McDonald had told her so on 12 November 2009. She was an experienced developer who had dealt with Mr Blanusa for decades and had the benefit of a professional conveyancer. Neither Mr Coombe nor Mr Barnden had been asked for advice; Mr Coombe was simply instructed to provide a bank cheque. The Bank could therefore assume that either Mr Blanusa or Mr McDonald had explained the critical terms or that the Kojics would make their own enquiries ([41], [22]-[23]). The notion of "no residual equity" was itself problematic because it ignored other securities held by the Bank, the doctrine of marshalling, and the anticipated uplift from the subdivision. No case had been pleaded that the venture was known to be valueless ([39]-[47]).

Second, and of broader doctrinal importance, the court held that corporate unconscionability cannot be established by aggregating pieces of knowledge held by separate officers so as to create a state of mind no individual possessed. Edelman J traced the historical development of corporate attribution from Lennard's Carrying Co v Asiatic Petroleum Co Ltd [1915] AC 705 through Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500 and Bilta (UK) Ltd (in liquidation) v Nazir [2015] UKSC 23. He emphasised that attribution rules must be tailored to the statute and the particular substantive rule. Section 84 of the TPA, enacted in 1986 and in force when ss 51AB and 51AC were introduced, extends liability by deeming conduct and states of mind of directors, employees and agents acting within authority to be those of the corporation. It does not, however, contemplate a general principle of aggregation that would create near-strict liability ([108]-[111]).

All three judges stressed that unconscionable conduct is a normative standard, not a rule capable of mechanical application. Allsop CJ reproduced extensive passages from his reasons in Paciocco v ANZ Banking Group Ltd [2015] FCAFC 50 to explain that the evaluation must be reasoned by reference to the values and norms recognised by the legislation: honesty, rejection of trickery, protection of the vulnerable, fidelity to bargains, and good faith in commerce ([55]-[60]). On the facts there was an "entire absence of predation, of trickery, of any lack of honesty, of sharp practice, of vulnerability, of known mistake, of weakness, of a lack of good faith, of disability, or of any of the considerations in s 51AC(3)" ([60]). Besanko J added that the statutory factors in s 51AC(3) must be considered where relevant and that the risk of error increases if the court focuses on only one or two matters at the expense of all the circumstances ([72]).

The court was careful to ground its conclusion in the precise way the case had been run. The Kojics had not alleged that the Bank knew the venture was doomed or that their money would inure solely to the Bank's benefit. Mr Coombe's hindsight evidence that he would not have drawn the cheque had he known the true position could not be translated into a finding of contemporaneous unconscionability ([51]-[52]). Because senior counsel for the Kojics conceded that success on either ground was fatal, the appeal was allowed and the primary orders set aside.

Before and after state of the law

Prior to this decision Australian courts had developed the statutory unconscionability provisions by reference to equitable doctrine while recognising that ss 51AB and 51AC extended beyond the equitable doctrine of unconscionable dealing. In Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 the High Court had required a special disadvantage known to the stronger party and exploitation of that disadvantage. Kakavas v Crown Melbourne Limited [2013] HCA 25 confirmed that equitable unconscionability in a commercial arm's-length dealing required a predatory state of mind amounting to victimisation. The statutory provisions, however, were not so confined. In Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd [2003] HCA 18 the High Court emphasised that the statutory concept is broader and context-specific. Finn J in Australian Competition and Consumer Commission v Radio Rentals Ltd [2005] FCA 1133 described the doctrine as relieving against abuse of power arising from a position of special advantage.

The TPA provisions themselves had been enacted against the background of s 84, which the court in Trade Practices Commission v Tubemakers of Australia Limited [1983] FCA 99 interpreted as extending rather than limiting corporate liability. Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500 had clarified that rules of attribution are not universal but are to be derived from the particular statutory rule in question. Australian courts had applied that insight in Director of Public Prosecutions Reference No 1 of 1996 [1998] 3 VR 352 and Director General, Department of Education and Training v MT [2006] NSWCA 270.

This judgment confirms and refines that framework. It rejects any requirement for "high degree of moral obloquy" as a substitute for the statutory language, endorsing instead the evaluative approach set out in Paciocco v ANZ Banking Group Ltd [2016] HCA 28 (which approved Allsop CJ's Full Court reasons). It clarifies that Krakowski v Eurolynx Properties Limited (1995) 183 CLR 563 does not authorise the creation of a notional corporate state of mind by aggregation of knowledge held by different officers. The decision in Westpac Banking Corporation v The Bell Group Ltd (in liq) (No 3) [2012] WASCA 157 is said to have misunderstood Krakowski by treating it as establishing a general "one transaction" test for aggregation ([147]-[149]).

After the decision the law is clearer on two points. First, statutory unconscionability remains an open-textured standard to be applied by close examination of all circumstances against the values and norms of the statute and equity; courts must avoid both idiosyncratic moral judgment and mechanical checklists. Second, corporate liability for unconscionable conduct will ordinarily require that the natural person or persons through whom the corporation acts themselves engaged in conduct meeting that description. Aggregation of disparate pieces of knowledge to manufacture a corporate scienter that no individual possessed is not available, at least in the context of ss 51AB and 51AC (and their successors in the Australian Consumer Law and Australian Securities and Investments Commission Act 2001 (Cth)). The judgment leaves open whether aggregation might occur where there is a positive duty to communicate information, but emphasises that no such duty existed between Mr Coombe and Mr Barnden ([66], [153]).

Key passages with plain-English translation

Paragraph [32] (Allsop CJ): "Lest it be thought, however, that the Bank has escaped criticism by the application of some technical rule, it is appropriate to explain why I disagree with the primary judge's conclusion as to unconscionability, even if (contrary to principle) the Bank is to be fixed or attributed with a composite or aggregation of what Messrs Coombe and Barnden knew. I will come to the meaning of unconscionability and the proper approach to the evaluation of conduct as to whether it is unconscionable in the statutory sense shortly. Suffice it to say at this point, the task requires a careful weighing of all attendant circumstances."

Plain-English translation: The Chief Justice is saying that the result is not a mere technicality. Even if the court pretended the two managers' knowledge could be glued together, the facts still would not show unconscionable conduct. The job is to look at every connected fact and measure the bank's behaviour against what the law expects of honest commercial dealing.

Paragraph [41] (Allsop CJ): "There was no basis to find that the Bank knew (whether one adds knowledge together or not) that the Kojics were unaware of the borrowings secured by the mortgage... The Bank was entitled to assume (it certainly should not be found to know the contrary) that either Mr Blanusa or Mr McDonald informed the Kojics of the terms of the mortgage or that the Kojics would have enquired about such matters and been given proper answers."

Plain-English translation: Experienced business people with their own conveyancer are presumed to have asked the obvious questions or been told the obvious answers. The bank does not have to prove they were told; the Kojics have to prove the bank knew they had not been told. There was simply no evidence of such knowledge.

Paragraph [60] (Allsop CJ): "Using that approach here, the facts, as I have set them out, bespeak an entire absence of predation, of trickery, of any lack of honesty, of sharp practice, of vulnerability, of known mistake, of weakness, of a lack of good faith, of disability, or of any of the considerations in s 51AC(3). No behaviour of any bank officer bespoke any lack of business conscience or ethics. Even if one could combine the knowledge of Mr Coombe and Mr Barnden, there was no basis to conclude that the Bank acted inappropriately or unfairly in any way whatsoever."

Plain-English translation: When you measure what actually happened against the standards Parliament had in mind—honesty, no sharp practice, protection of the weak—nothing the bank officers did comes close to unconscionable conduct. There was no victimisation, no known mistake being exploited. Adding the two managers' knowledge together still leaves an empty set.

Paragraph [112] (Edelman J): "It is not easy to see how a corporation, which can only act through natural persons, can engage in unconscionable conduct when none of those natural persons acts unconscionably. Similar reasoning has led courts to reject submissions that a corporation has acted fraudulently where no individual has done so (in instances of deceit) and that a corporation has acted contumeliously where no individual has done so (in cases of exemplary damages)."

Plain-English translation: A company is not a person; it can only do things through its staff. If none of the staff behaved unconscionably, it is very hard to say the company itself did. The same logic stops companies being found fraudulent or deserving of punitive damages when no human being involved was fraudulent or deserving of punishment.

Paragraph [134] (Edelman J, quoting Krakowski): "A division of function among officers of a corporation responsible for different aspects of the one transaction does not relieve the corporation from responsibility determined by reference to the knowledge possessed by each of them."

Plain-English translation: The High Court in Krakowski was simply saying that you look at what each relevant person knew and did. It was not inventing a new rule that lets lawyers add up bits of knowledge from different people to create a single dishonest corporate mind that nobody actually had.

What fact patterns trigger this precedent

This decision will be triggered whenever a claimant seeks to impose statutory unconscionability liability on a corporation by combining pieces of information known to different employees or officers none of whom individually possessed the full state of mind said to make the conduct unconscionable. Typical scenarios include large financial institutions with specialist relationship managers for different customers participating in the same transaction, conveyancing or settlement transactions where one officer knows the customer's intended use of funds and another knows the security structure, and cases in which a claimant argues that "the bank as a whole" knew something that no single employee knew.

The precedent is engaged only where the statute in question is one that proscribes unconscionable conduct in trade or commerce (such as the Australian Consumer Law ss 21 and 22 or ASIC Act ss 12CB and 12CC) and the claimant relies on aggregation rather than vicarious liability or a single directing mind. It will not apply where the corporation has a positive duty to communicate information between staff, or where the procedures of the corporation are themselves said to be reckless as to whether relevant knowledge is disseminated. The court expressly left that narrower question for another day ([66], [153]).

The facts must also involve parties who are not in a position of special disadvantage known to the corporation. Where the claimant is an experienced commercial party with independent professional advice, the presumption that they have informed themselves is strong. Conversely, the decision does not disturb the established principles that apply to vulnerable consumers or where a bank has actual knowledge of a customer's ignorance and nevertheless proceeds.

How later courts have treated it

Although the judgment itself cannot cite its own subsequent treatment, its analysis of prior authority has been used to cabin the circumstances in which aggregation is argued. The court's reading of Krakowski as limited to cases in which the relevant individuals each possessed the knowledge necessary for the cause of action has been treated as restoring the orthodox position that corporate scienter requires identification of a natural person whose state of mind is attributed to the company. The rejection of the Western Australian Court of Appeal's interpretation in Westpac Banking Corporation v The Bell Group Ltd (in liq) (No 3) has narrowed the circumstances in which "one transaction" is said to justify aggregation.

The emphasis on s 84 of the TPA (and its equivalents) as an extending rather than exhaustive rule of attribution has reinforced that statutory context remains paramount. Courts applying the Australian Consumer Law unconscionability provisions have continued to require a normative evaluation that begins with the text and the statutory factors rather than a search for moral obloquy. The Paciocco framework endorsed in this judgment has become the standard reference point for the evaluative exercise.

The insistence that unconscionability ordinarily requires the corporation's conduct, through its human agents, to be unconscionable has been influential in claims against large organisations. Attempts to construct corporate liability from disparate pieces of employee knowledge without a duty to communicate have met with scepticism. The judgment's caution that aggregation could produce near-strict liability inconsistent with the statutory purpose has been cited to reject overly broad collective-knowledge theories.

Still-open questions

The judgment expressly leaves several issues for future decision. First, whether there are circumstances in which a positive duty to communicate information between officers could lead to aggregation of knowledge for unconscionability purposes. The court noted that neither Mr Coombe nor Mr Barnden owed any such duty, but did not foreclose the possibility in other contexts where the source, nature and extent of the duty might justify treating the corporation as possessing composite knowledge ([66], [83]).

Second, the precise interaction between s 84 of the TPA (and its successors) and any residual common-law principle of aggregation remains unresolved. The court observed that s 84 was intended to extend liability and that the common law can develop in tandem, but left open whether a development that would have been unavailable at the time the statute was enacted could nevertheless ground liability under the statute ([111]).

Third, the circumstances in which a corporation's internal procedures themselves could constitute unconscionable conduct—such as systems deliberately or recklessly designed to prevent any individual acquiring full knowledge—were flagged as potentially giving rise to liability even if no single employee acted unconscionably ([153]). The judgment suggests these cases may be better analysed as unconscionable failure to ensure communication rather than as aggregation of knowledge, but the point was not decided.

Finally, the boundary between attribution of knowledge for the purpose of establishing unconscionable conduct and the use of constructive or imputed notice in equitable claims remains open. The court noted that aggregation might resemble constructive knowledge, which is not ordinarily sufficient for equitable fraud in commercial transactions (Garcia v National Australia Bank Ltd [1998] HCA 48; Kakavas v Crown Melbourne Limited [2013] HCA 25), but did not finally determine the point.

These open questions ensure that the decision will continue to generate litigation about the limits of corporate scienter in consumer-protection statutes. The core holding, however, is clear: statutory unconscionability is a demanding normative standard that looks to the conduct and knowledge of the corporation as manifested through natural persons, not to an artificial composite constructed by lawyers after the event.

Introduction to the two issues: (i) unconscionable conduct and (ii) aggregation of knowledge

Unconscionable conduct 84 The facts of this case are summarised in the reasons for decision of Allsop CJ. I agree with his Honour's reasons and his conclusion at [48] concerning the lack of support for the primary judge's conclusion at [183(2)]. The Chief Justice concludes, and I agree, that the Bank did not act unconscionably within the meaning of s 51AB or s 51AC of the Trade Practices Act. In particular, as the Chief Justice explains, the success of the second ground of appeal means that the Bank did not act unconscionably. This is so, even if the knowledge of Messrs Coombe and Barnden were aggregated and attributed to the Bank. 85 At [54]-[59] of the Chief Justice's reasons, with which I agree, he explains the accepted approach in Australia to the assessment of statutory proscriptions against unconscionable conduct for which s 51AB and s 51AC of the Trade Practices Act were the progenitor provisions. These provisions are examples of open-textured provisions about which it is likely that no precise or universal test for application will ever be stated. There are numerous examples in Australia and overseas. An example in the United Kingdom, considered by the Supreme Court in Plevin v Paragon Personal Finance Ltd [2014] UKSC 61; [2014] 1 WLR 4222, is a legislative provision that permitted reopening of credit transactions where the relationship between the creditor and the debtor was "unfair". In the United States, there has long been legislation, now in all fifty states, giving effect to the open-textured concept of "good faith" in s 1-304 of the Uniform Commercial Code which provides that, for commercial contracts, "[e]very contract or duty within the Uniform Commercial Code imposes an obligation of good faith in its performance and enforcement". 86 Like other instances of open-textured criteria, there is no unitary test for the application of a statutory proscription of unconscionability. One reason for this is that a judicial conscience is not a yardstick capable of direct application. In the context of estoppel in Commonwealth v Verwayen [1990] HCA 39; (1990) 170 CLR 394, 445, Deane J said that unconscionability "must be resolved not by reference to some preconceived formula framed to serve as a universal yardstick but by reference to all the circumstances of the case". Professor Birks once lamented that this was a "counsel of despair". He saw the concept of unconscionability as no more useful than the category of "small brown bird" to an ornithologist. He described the great variety of circumstances where conduct might be said to be unconscionable: not keeping promises; failing to take money found on the street to the police; taking advantage of a vulnerable person; and charging tourists money for worthless trinkets: Birks P, "Equity in the Modern Law: An Exercise in Taxonomy" (1996) 26 UWAL Rev 1, 16, footnote 148. In other words, unconscionability expresses a conclusion which is capable of application to an almost infinite variety of factual scenarios. As Gummow and Hayne JJ said in Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd [2003] HCA 18; (2003) 214 CLR 51, 73 [43], relying upon remarks of John McGhee QC, the broad use of terms like unconscionable and unconscientious "may have masked rather than illuminated the underlying principles at stake". And, as Gaudron, McHugh, Gummow and Hayne JJ said in Garcia v National Australia Bank [1998] HCA 48; (1998) 194 CLR 395, 409 [34], "the statement that enforcement of the transaction would be 'unconscionable' is to characterise the result rather than to identify the reasoning that leads to the application of that description". 87 Birks' criticisms of unconscionability would have great force if unconscionable conduct were to be applied in every instance solely by reference to the circumstances of each particular case without reference to other authority or guiding principles including from the statute itself. But the concept of unconscionability in the Trade Practices Act and its successor, the Australian Consumer Law (Schedule 2 of the Competition and Consumer Act 2010 (Cth)), is not determined solely by reference to the circumstances of each particular case. The assessment of conscience in those circumstances will have regard to underlying principles governing the concept of unconscionability in its particular statutory context, including the list of factors prescribed for consideration. Hence, a transaction might not be unconscionable in equity, or under s 51AA, but it might still be unconscionable under s 51AB or s 51AC where more factors are considered and the statutory context changes. Further, as the body of authority which has applied s 51AB and s 51AC grows, guidelines will develop from the underlying principles. Analogies and comparisons will be drawn with established cases. The law in this area has far to develop. But this is unsurprising. As Holmes CJ said in Stack v New York, NH& HR Co 58 NE 686 at 687 (Mass, 1900), "the improvements made by the courts are made, almost invariably, by very slow degrees and by very short steps". 88 In this case, the parties did not focus upon previous authority. Nor did they focus upon many of the underlying factors in s 51AB and s 51AC of the Trade Practices Act. And other than an emphasis in submissions on moral obloquy, about which I agree with the remarks of the Chief Justice, the parties did not make any submissions concerning any guidelines to applying the statutory proscriptions or the emphasis to be placed on different factors or the manner in which those factors should be assessed. As the Chief Justice has explained, this case can be decided on the basis (essentially the second ground of appeal) that, on any approach to knowledge of the Bank, there was an absence of unconscionable conduct. I would also decide this case on the first ground of appeal which is that the knowledge of Messrs Coombe and Barnden cannot be aggregated for the purposes of a determination that the Bank acted unconscionably. This point was argued with great clarity by both counsel, and in considerable detail. Senior counsel for the Kojics accepted that the appeal must also fail if this ground were upheld. The remainder of these reasons are concerned with the issue of aggregation of knowledge.

Attribution to a corporation of aggregated knowledge of its officers or employees 89 The first two grounds of this appeal focused upon a key integer of the primary judge's finding that the Bank had engaged in unconscionable conduct contrary to s 51AB or s 51AC of the Trade Practices Act, or the equivalent provisions of the Australian Securities and Investments Commission Act 2001 (Cth). Although the relevant provisions might be those in the latter Act, this appeal was argued by reference to the Trade Practices Act and on the assumption that the context of the provisions in each Act was the same. The key integer upon which the first two grounds of appeal focused was that the knowledge of Messrs Coombe and Barnden could be aggregated and attributed to the Bank. This approach to attribution is relatively novel. It may have originated in the United States but it now has little support there. Its currency in Australia has been due to a misunderstanding in Westpac Banking Corporation v The Bell Group Ltd (in liq) (No 3) [2012] WASCA 157; (2012) 44 WAR 1 of the decision of the High Court of Australia in Krakowski v Eurolynx Properties Limited [1995] HCA 68; (1995) 183 CLR 563. The primary judge followed the decision in The Bell Group. In this Court, the decisions in Krakowski and The Bell Group were subjected to close scrutiny. The decision in The Bell Group on this issue cannot survive that scrutiny. Whether or not a concept of aggregated corporate knowledge becomes permissible in other areas, it is not a concept that can be applied in order to reach a conclusion that the corporation has acted unconscionably contrary to statutory proscriptions.

The decision of the primary judge on the issue of aggregation 90 The first ground of appeal was that the primary judge erred in finding at [180], [183] and [190] of his reasons that the knowledge held by the Bank's employees should be aggregated so as to found a claim for unconscionable conduct in contravention of s 51AB and s 51AC of the Trade Practices Act, and the equivalent provisions of the Australian Securities and Investments Commission Act. Although it is arguable that the applicable provisions are those in the latter Act, the focus of submissions on this appeal was on the provisions of the Trade Practices Act. It was assumed by all parties that the result would be the same in relation to both Acts. I also proceed on that assumption. 91 The question upon which the primary judge said that his conclusions depended was whether the Bank "by reason of its collective knowledge through [Messrs] Coombe and Barnden, in any event acted incorrectly" ([164]). The primary judge held that the knowledge could be aggregated and concluded (at [190]) that "it was contrary to good conscience for the [Bank] to take part in the settlement of the property and to accept the Kojic payment when it knew that the Kojic payment, as a payment by one of its clients, was intended by the Kojics to secure a half interest in the property (by arrangement with SCS) but would not do so because of the terms of its proposed registered mortgage" ([190]). The primary judge's conclusion that the knowledge of Messrs Coombe and Barnden could be aggregated relied upon the decision of the Western Australian Court of Appeal in The Bell Group and the approach that the Court of Appeal took to the High Court decision in Krakowski.

The reason why aggregation of knowledge was impermissible in this case

The aggregation issues on this appeal 92 Before the primary judge the argument concerning unconscionable conduct was presented as one which was concerned with the direct liability of the Bank. The case was never pleaded or argued on the basis of vicarious liability, in the sense in which that concept involves the attribution of the liability of its officers: see Pioneer Mortgage Services Pty Ltd v Columbus Capital Pty Ltd [2016] FCAFC 78 [48]-[57]. Apart from any other obstacle to this vicarious liability, the hurdles for a finding that either Messrs Coombe or Barnden had acted unconscionably were insurmountable. 93 Senior counsel for the Kojics conceded on this appeal that the appeal must be allowed unless the Court was satisfied that the primary judge was correct to aggregate the knowledge of Messrs Coombe or Barnden to reach a conclusion that the Bank had acted unconscionably. The primary judge had concluded that although no individual had acted unconscionably, within the meaning of s 51AB and s 51AC of the Trade Practices Act, the Bank had acted unconscionably because the knowledge of the two officers could be aggregated and then attributed to the Bank.

Rules of corporate attribution 94 There is very little historical support for a concept of aggregation of the knowledge attributed to a company through various officers. One obvious reason for this is that the concept of attribution of knowledge itself only became established in the last century. As Lord Sumption observed in Bilta (UK) Ltd (in liquation) v Nazir [2015] UKSC 23; [2016] AC 1, 26 [65], in the early years of English company law powerful voices spoke against the possibility of attributing knowledge to a corporation for the purposes of showing that it had committed a tort. Perhaps the strongest of these was Lord Bramwell's speech in Abrath v North Eastern Railway Co (1886) 11 App Cas 247, 251, where his Lordship spoke of a corporation acting through its agents and said that "it is impossible that a corporation can have malice or motive". 95 After attribution became accepted in the late 19th and early 20th century, the usual rule of attribution permitted an agent's knowledge to be attributed to the corporation where the agent was a person so centrally concerned with the corporation's operations such as to be considered its "directing mind and will": Lennard's Carrying Co v Asiatic Petroleum Co Ltd [1915] AC 705, 713-714 (Viscount Haldane LC); H L Bolton (Engineering) Co Ltd v T J Graham & Sons Ltd [1957] 1 QB 159, 172 (Denning LJ); and Tesco Supermarkets Ltd v Nattrass [1972] AC 153, 171 (Lord Reid), 180 (Lord Morris), 187 (Viscount Dilhorne), 190 (Lord Pearson). 96 Although the "directing mind and will" rule of attribution involves an anthropomorphism which can be misleading, in many cases it presents no difficulty. However, as a rule of attribution it was never intended to be a universal rule. In Lennard's Carrying itself, the House of Lords was concerned with the construction of the Merchant Shipping Act 1894 and the rule of attribution in that context. In any event, whether or not that rule was intended to be a universal rule, it could never have survived as such. Legislation might expressly provide for a very different rule of attribution. And even if it did not, in a statutory context, rules of attribution must be shaped by the text and context of the statute. The task of statutory construction begins and ends with a consideration of the text itself: Alcan Alumina v Commissioner of Territory Revenue (2009) HCA 41; (2009) 239 CLR 27, 46 [47] (Hayne, Heydon, Crennan and Kiefel JJ); and Commissioner of Taxation of the Commonwealth of Australia v Consolidated Media Holdings Ltd [2012] HCA 55; (2012) 250 CLR 503, 519 [39] (French CJ, Hayne, Crennan, Bell and Gageler JJ). 97 The rejection of the "directing mind and will" rule as a universal rule of attribution occurred in Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500. In that case, the question for the Privy Council was whether a corporation, Meridian, knew that it had become a substantial security holder within the terms of s 20 of the Securities Amendment Act 1988 (NZ). The New Zealand Court of Appeal held that Meridian had that knowledge through its chief investment officer, Mr Koo. Meridian appealed, arguing that it was the board, not Mr Koo, who was the directing mind and will of Meridian. 98 Lord Hoffmann (delivering the judgment of the Privy Council) dismissed the appeal. His Lordship held that it was not necessary to ask whether Mr Koo was the directing mind and will of Meridian because it "is a question of construction in each case as to whether the particular rule requires that the knowledge that an act has been done, or the state of mind with which it was done, should be attributed to the company" (511). The relevant rule of attribution must be tailored to "the terms and policies of the substantive rule" (512) and the rules of attribution in a particular case depend on the construction of the particular statutory provision of attribution (511). In the context of the Securities Amendment Act, the policy was to compel immediate disclosure, in fast moving markets, of substantial security holders in public issuers. Mr Koo was the person who, with authority of the company, acquired the relevant interest. He was a person whose knowledge should be attributed to the company. 99 The reasoning in Meridian was adopted in Australia in Director of Public Prosecutions Reference No 1 of 1996 [1998] 3 VR 352; (1997) 96 A Crim R 513. Callaway JA, with whom Phillips CJ and Tadgell JA agreed, said (517): Lord Hoffman[n]'s approach to the problem of corporate liability [in Meridian] was correct… It merely provides a framework for analysis and dispels the notion that, for all offences, the person with whom a corporation is identified must be its directing mind and will. This passage was cited with apparent approval in Director General, Department of Education and Training v MT [2006] NSWCA 270; (2006) 67 NSWLR 237, 244 [23] (Spigelman CJ; with whom Ipp JA and Hunt AJA agreed). 100 In Bilta v Nazir, Lords Toulson and Hodge JJSC developed a threefold taxonomy of corporate attribution of acts (65-66 [187]-[190]): (i) attribution based upon provisions in company legislation, company constitutional instruments, and non-statutory rules that a company can act through its board of directors and certain resolutions of shareholders; (ii) attribution based upon general rules of agency law; and (iii) attribution where a rule of law impliedly excludes the general principles above. However, as their Honours also emphasised, in each case it is necessary to consider the context in which the question is being asked (66 [191]). Indeed, where the question is one which involves statutory liability of a corporation, the starting point should be the statute rather than the general principles of company law or agency although those principles will almost always become part of the assessment. 101 Throughout the last century of this development of the rules of corporate attribution, whether seen as statutory rules or general law rules, there has been scant support in England and Australia for a doctrine which permits attribution to a corporation of an aggregate of the knowledge of various different agents. I return to the Australian authority later in these reasons. The issue may have first arisen in the United States. 102 The most famous case in the United States was the decision of the First Circuit Court of Appeals in 1987 in United States v Bank of New England, NA, 821 F 2d 844 (1st Cir 1987). That was an appeal from a conviction of the respondent bank following a jury trial concerning felonies under legislation requiring reporting of currency transactions. A felony occurred where the violation was "wilful". All of the officers of the bank were acquitted. But the bank was found liable and convicted of 31 violations. The trial judge had directed the jury that there were "two modes of establishing [the bank's] knowledge - either through one of its individual employees or through the aggregate knowledge of all its employees." Bownes J delivered the opinion of the Court saying that a "collective knowledge instruction is entirely appropriate in the context of corporate criminal liability" because "the knowledge obtained by corporate employees acting within the scope of their employment is imputed to the corporation" (856 [10,11]). Bownes J proceeded to quote Dalton J in United States v T.I.M.E.-D.C., Inc., 381 F Supp 730 (1974) at 738: [A] corporation cannot plead innocence by asserting that the information obtained by several employees was not acquired by any one individual employee who then would have comprehended its full import. Rather, the corporation is considered to have acquired the collective knowledge of its employees and is held responsible for their failure to act accordingly. 103 The decision in the Bank of New England has been the subject of considerable dispute. It has been argued that the decision did not involve any aggregation of the knowledge of individual employees but instead was concerned with collective knowledge in order to show the corporation's wilful blindness: Hagemann T and Grinstein J, "The Mythology of Aggregate Corporate Knowledge: A Deconstruction" (1997) 65 Geo Wash L Rev 210. As Abril and Olazabal have argued, "Collective knowledge is therefore best applied in settings where it is clear that corporate management sought to avoid liability by intentionally avoiding the acquisition of knowledge. In this way, the concept of willful blindness mitigates the doctrine's tendency toward overinclusiveness": Abril P and Olazabal A, "The Locus of Corporate Scienter" (2006) Colum Bus L Rev 81, 121. 104 Professor Bondi has observed that since 1994 seven circuits have rejected collective knowledge in favour of the traditional approach to corporate knowledge which requires attributed knowledge of an individual: Bondi BJ, "Dangerous Liaisons: Collective Scienter in SEC Enforcement Actions" (2009) 6 NYUJL & Bus 1, 8. One firm rejection was by the Ninth Circuit Court of Appeals in In re Apple Computer, Inc. 243 F Supp 2d 1012 at 1023 (ND Cal, 2002). The Ninth Circuit Court of Appeals dismissed an appeal from a decision of the District Court which had dismissed claims of securities fraud against Apple and its CEO, Mr Jobs. In succinct, unreported reasons for decision the Ninth Circuit said that: [i]t is not enough to establish fraud on the part of a corporation that one corporate officer makes a false statement that another officer knows to be false. A defendant corporation is deemed to have the requisite scienter for fraud only if the individual corporate officer making the statement has the requisite level of scienter… 105 Ultimately, therefore, although there has been some support for aggregation of knowledge in the United States, that support is limited. Before this relatively novel concept is accepted, the starting point must be the terms of the legislation which impose liability.

Obstacles to aggregation of knowledge for s 51AB and s 51AC liability 106 The starting point for questions of attribution must be the terms of s 51AB and s 51AC of the Trade Practices Act, and their statutory context. Those terms and context present four obstacles to a novel approach of aggregation of knowledge. 107 The first obstacle arises from a tension between the concept of aggregation and the operation of s 84 of the Trade Practices Act which was an express rule of attribution which applied to sections including s 51AB and s 51AC. In November 2009, s 84 of the Trade Practices Act relevantly provided: 84 Conduct by directors, employees or agents (1) If, in: (a) a prosecution for an offence against section 44ZZRF or 44ZZRG in respect of conduct engaged in by a body corporate; or (b) a proceeding under this Part in respect of conduct engaged in by a body corporate, being conduct in relation to which section 44ZZRJ, 44ZZRK, 46 or 46A or Part IVA, IVB, V, VB or VC applies; it is necessary to establish the state of mind of the body corporate, it is sufficient to show that: (c) a director, employee or agent of the body corporate engaged in that conduct; and (d) the director, employee or agent was, in engaging in that conduct, acting within the scope of his or her actual or apparent authority; and (e) the director, employee or agent had that state of mind. (2) Any conduct engaged in on behalf of a body corporate: (a) by a director, employee or agent of the body corporate within the scope of the person's actual or apparent authority; or (b) by any other person at the direction or with the consent or agreement (whether express or implied) of a director, employee or agent of the body corporate, where the giving of the direction, consent or agreement is within the scope of the actual or apparent authority of the director, employee or agent; shall be deemed, for the purposes of this Act, to have been engaged in also by the body corporate. … (5) A reference in this section to the state of mind of a person includes a reference to the knowledge, intention, opinion, belief or purpose of the person and the person's reasons for the person's intention, opinion, belief or purpose. 108 Section 84, in its current version, was substituted by the Trade Practices Revision Act 1986 (Cth), which relevantly commenced on 1 June 1986. It was in force when s 51AB and s 51AC commenced, respectively, on 21 January 1993 and 1 July 1998: see Trade Practices Legislation Amendment Act 1992 (Cth); Sch 2 of the Trade Practices Amendment (Fair Trading) Act 1998 (Cth). 109 It was common ground on this appeal that s 84 supplements the general rules of attribution. It does not replace them. Those general rules continue to apply to provisions including s 51AB and s 51AC. That has been the accepted position for at least three decades. In Trade Practices Commission v Tubemakers of Australia Limited (1983) 76 FLR 455, 475, Toohey J explained that s 84(1) appears to disclose a legislative intention to extend, rather than limit, the liability of corporations for the actions of others as expressed in cases such as Lennard's Carrying Co Ltd and Tesco (relying in part upon Trade Practices Commission v Queensland Aggregate Pty Ltd (1982) 44 ALR 391, 404 (Morling J)). For instance, the "directing mind or will" theory contained in Lennard's Carrying Co Ltd and Tesco was extended to circumstances including those where an employee (who might not be a directing mind or will) acts within the scope of actual or apparent authority: see also Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (No 2) [2001] FCA 1861; (2001) 119 FCR 1 (Goldberg J); and Australian Competition and Consumer Commission v Prysmian Cavi E Sistemi SRL (No 12) [2016] FCA 822 [218] (Besanko J). 110 It is possible, although unnecessary to decide in this case, that although s 84 is generally broader than the common law rules of attribution, is a narrower rule in one respect. That respect, considered in detail later in these reasons, is the lack of a requirement in cases of fraud for the person who makes the representation to be the same person who knows of the fraud. If s 84 means that attribution to the corporation requires the conduct to have been committed by the same person who has the relevant state of mind then it would be narrower than the common law in this respect. 111 It suffices to say that s 51AB and s 51AC were enacted against an understanding of general rules of corporate attribution, which rules had generally been extended by s 84. Although s 84 did not replace general rules of corporate attribution that apply to s 51AB and s 51AC, and although the common law general rules of attribution can therefore develop in tandem with s 84, there is a tension between the role of s 84 as generally expanding the general rules of attribution and the recognition of a new general rule of attribution, based on aggregated knowledge, which travels well beyond the terms of s 84 and which was not contemplated by the general law in 1986 when s 84 was introduced. This is not to deny that the general law rules concerning attribution can develop. It is only to say, without finally deciding, that there may be difficulty with a conclusion of statutory unconscionability being based on a development of the general law concerning attribution where (i) that conclusion would not have been reached on the general law concerning attribution at the time the statute was enacted, and (ii) the statute had itself developed the general law in some respects. 112 The second obstacle is perhaps the most basic difficulty with the introduction of a principle of aggregation of knowledge into s 51AB and s 51AC of the Trade Practices Act. This is that an aggregation principle could undermine the fundamental question to be asked in both cases: "is the conduct unconscionable"? It is not easy to see how a corporation, which can only act through natural persons, can engage in unconscionable conduct when none of those natural persons acts unconscionably. Similar reasoning has led courts to reject submissions that a corporation has acted fraudulently where no individual has done so (in instances of deceit) and that a corporation has acted contumeliously where no individual has done so (in cases of exemplary damages). 113 In Anglo-Scottish Beet Sugar Corporation Ltd v Spalding Urban District Council [1937] 2 KB 607, 625, Armstrong J, in a passage later described by Singleton LJ in Armstrong v Strain [1952] 1 KB 232, 243 as a "masterly analysis", said "I cannot myself see how a principal can be held liable for fraud when there has been no element of fraud either on the part of himself or on the part of any one for whose acts he is responsible". The same point was made by Devlin J at first instance in Armstrong v Strain [1951] 1 TLR 856, 872. His Lordship said that "you cannot add an innocent state of mind to an innocent state of mind and get as a result a dishonest state of mind". The approach in these decisions was followed in Australia in Frank Hammond Pty Ltd v Huddart Parker Ltd [1956] VLR 496 and In the matter of Wan Ze Property Development (Aust) Pty Ltd (in liquidation) [2013] NSWSC 189, [93]-[96] (Black J). Similarly, in the context of a claim for exemplary damages for trespass, a theory of aggregation of knowledge was rejected in Port Stephens Shire Council v Tellamist Port Stephens Shire Council v Tellamist Pty Ltd [2004] NSWCA 353; (2004) 135 LGERA 98, 199-200 [407]-[408] (Ipp JA; Giles JA agreeing). Justice Ipp said (200 [408]) that an aggregation of knowledge "would result in constructive contumely, and that is not what exemplary damages is aimed at". 114 A third obstacle is that aggregation of knowledge could permit a conclusion which travels far beyond the purpose of s 51AB and s 51AC which is the proscription of conduct which is sufficiently serious to attract the description as unconscionable. In Violet Home Loans Pty Ltd v Schmidt [2013] VSCA 56; (2013) 44 VR 202, the Court of Appeal approved the remark of Hargrave J in Director of Consumer Affairs Victoria v Scully (No 3) [2012] VSC 444 at [31] that unconscionable conduct "must be more than negligent. It will usually involve some deliberate wrongdoing, although there may be cases where recklessness will suffice". A fortiori, unconscionable conduct is not strict liability. 115 As Professor Bondi has said, in order to avoid liability under an attributed knowledge regime, corporations would "be required to speak with each and every employee and former employee (for the pure version of collective scienter) or each and every member of management (for the weak version of collective scienter) to ensure that no one possesses any knowledge that, when coupled with an unknowing misstatement, would give rise to collective scienter": Bondi BJ "Dangerous Liaisons: Collective Scienter in SEC Enforcement Actions" (2009) 6 NYUJL & Bus 1, 23. Hence, even if it were assumed, contrary to the second obstacle discussed above, that it were possible to aggregate the knowledge of individuals to form a new corporate knowledge that no individual possessed, this aggregation could lead to a conclusion that a corporation had acted unconscionably when as a matter of practical reality there was little or nothing that it could have done. 116 This case is a good example of the near-strict nature of the liability that aggregation of knowledge could impose on a respondent. Senior counsel for the Kojics conceded that this was not a case in which there was any duty between Messrs Coombe and Barnden to communicate to each other the information that each possessed. So, how could the Bank have acted differently in order to avoid liability for unconscionable conduct? When senior counsel for the Kojics was asked this question, he submitted that the Bank should have rearranged its structure so that only one officer dealt with any aspect of the transaction (ts 90). No submissions were made about how this would be achieved. It would seem that the Kojics' submission must be that either Messrs Coombe or Barnden should have refused to deal with the client for whom each was the relationship manager and should have referred their client to the other person. But Mr Barnden had been managing the relationship between the Bank and the Blanusas interests. He knew all aspects of the transaction from their perspective. And, since 2002, Mr Coombe had been managing the relationship with the Kojics. Mr Coombe did not become aware that Mr Barnden was the relationship manager for the Blanusa interests until some time between 10 and 16 November 2009 (the week before settlement of the delayed transaction). 117 The fourth obstacle is that even if the Bank could practically have had processes in place so that a relationship manager could be replaced when other Bank employees were involved in the same transaction, a rule which generally required the Bank to act in this way might be inconsistent with other legal norms. Professor Davies has argued that the "technique" of aggregation aims to put the company "under legal pressure to have effective systems in place not only to monitor potential wrongdoing by its agents or employees, but also to distribute the knowledge of any one employee to all those within the organisation for whom it may be relevant, so they may avoid illegality": P Davies, Introduction to Company Law (2nd ed, Oxford University Press, 2010) 35. However, as Davies also observes, there are instances where proper and conscionable conduct by a corporation would confine information rather than disseminate it. One example is where the information is confidential. Another is where there is a duty not to disseminate the information (for reasons such as market sensitivity). 118 For these four reasons, unless there were binding authority to the contrary, I would conclude that the primary judge erred by aggregating the knowledge of Messrs Coombe and Barnden in order to conclude that the Bank had acted unconscionably under s 51AB or s 51AC of the Trade Practices Act. However, since much of the focus on this appeal was on the authorities concerning aggregation, it is necessary to explain why (i) there is no binding authority which is directly applicable to s 51AB or s 51AC of the Trade Practices Act, and (ii) contrary to the approach taken by the Western Australian Court of Appeal in The Bell Group, which was applied by the primary judge, the decision of the majority of the High Court in Krakowski does not support aggregation of knowledge.

Analysis of the decision 119 At the heart of the Kojics' case was the decision in Krakowski. It is necessary to consider that decision in detail. In Krakowski, Mr and Mrs Krakowski agreed to purchase a shop premises from Eurolynx. The negotiations for the purchase took place between Mr Krakowski's nephew and a selling agent for Eurolynx called Mr Cini. The nephew told Mr Cini and a director of Eurolynx, Mr Ryan, that the Krakowskis wanted a leased property which would provide them with a reliable return of 10% per annum. Mr Cini told the nephew that a tenant had been found who would provide a 10% return. The Krakowskis agreed to purchase the shop premises. They made it a fundamental condition of purchase that the tenant sign a lease prior to completion of the sale including lease terms of six years with a six year option, bi-annual rent reviews and a commencing rent of $156,000 per annum. The solicitors for Eurolynx provided the Krakowskis with a lease and a vendor's statement (required by s 32 of the Sale of Land Act 1962 (Vic)). However, unknown to Mr and Mrs Krakowski or their nephew, the tenant had entered a separate agreement with Eurolynx which granted the tenant an initial three months' rent free and the payment of a sum equivalent to the first year's rent for fitting out and stocking the shop. Two days after the contract of sale was executed, the nephew delivered requisitions on title to the solicitors for Eurolynx. One requisition asked who was in possession of the property and under what right, and sought production of all leases and agreements relating to the tenancy. The solicitors suggested answers which omitted reference to the separate agreement. Those answers were adopted by Eurolynx and sent to the nephew. 120 The Krakowskis subsequently brought an action against Eurolynx which included allegations that it had committed the tort of deceit. A majority of the High Court (Brennan, Deane, Gaudron, and McHugh JJ; Toohey J dissenting) held that the tort had been committed. As the majority explained (573), there were three issues for determination: (i) what was the representation made by Eurolynx; (ii) was that representation false to the knowledge of Eurolynx; and (iii) did that representation induce the purchasers to enter into the contract of sale? 121 As to the first issue, there was considerable difficulty with identifying the precise nature of the alleged representation said to found the claims for deceit. This was especially because the pleading of the alleged representation was not clear. Also, the requisitions had occurred after the contract and so could not have been relied upon in entry into the contract (although the adoption of the answers to the requisitions by Eurolynx was evidence from which an inference could be drawn about the company's state of mind). The trial judge and the Full Court reached different conclusions about the representation. The majority of the High Court held, as the Full Court had found, that the representation made by Eurolynx was that the lease contained the whole of the agreement between the defendant and the tenant. That amounted to a representation to the effect that the rent reserved by the lease annexed to the contract of sale was a market rent (and therefore uninfluenced by any side agreement). That representation was false. 122 The second issue became the focus of the reasons of the majority. This was whether Eurolynx acted fraudulently because the representation was false to the knowledge of Eurolynx. The majority explained that (i) "the sense in which the representor intended the representation to be understood is relevant to the question whether the representation was made fraudulently" (577) and (ii) "a representee must prove, inter alia, that the representor had no honest belief in the truth of the representation in the sense in which the representor intended it to be understood" (578). 123 The Full Court held that there was no fraudulent intention because neither Eurolynx nor its solicitors (who prepared the conveyance) "set out deliberately to induce the plaintiffs to enter into the contract of sale" by inducing in the Krakowskis a "misapprehension that the lessee had no collateral agreement with the defendant" (579). The question was whether "Eurolynx' mind should be held to have adverted to the making of that representation" (582). 124 The majority referred to the evidence from an officer of Eurolynx, Mr Gilbert, who was responsible for giving instructions to the solicitors for Eurolynx. Mr Gilbert gave evidence that he relied on the solicitor's advice, and that he did not refer to the separate agreement because he did not believe that it was anything to do with the purchase. He did not realise until settlement that the rent-free period was still extant. However, the majority held that the mind of Eurolynx did not depend upon the acceptance only of the evidence of Mr Gilbert. It was necessary also to consider the knowledge of the selling agent (Mr Cini) and the director (Mr Ryan). They knew that the Krakowskis were willing to buy at a price 10 times the amount of the rent which the property itself would yield. And their knowledge was the knowledge of Eurolynx, for they were the persons who were responsible for the initial negotiations and who had set the scene in which the representation that had been made by the s 32 statement and the contract of sale. 125 The majority's reference to the knowledge of Messrs Cini and Ryan being the knowledge of Eurolynx was not a finding that the knowledge of Messrs Cini and Ryan should be aggregated. They both had the same relevant knowledge which would amount to the fraudulent intention. The point being made by the majority was that Mr Gilbert's lack of fraudulent knowledge did not dispose of the enquiry. Messrs Cini and Ryan were also persons who were agents of the company whose knowledge could be attributed to Eurolynx. 126 Although this context suggests that the High Court was not concerned with any question of aggregation of knowledge, the Kojic parties relied upon two passages from the reasons of the majority which, they submitted, suggested that the majority had recognised that knowledge could be aggregated and attributed to a company. 127 The first passage upon which the Kojic parties relied was a quotation by their Honours from Bright J in Brambles Holdings Ltd v Carey (1976) 15 SASR 270, 279: Always, when beliefs or opinions or states of mind are attributed to a company it is necessary to specify some person or persons so closely and relevantly connected with the company that the state of mind of that person or those persons can be treated as being identified with the company so that their state of mind can be treated as being the state of mind of the company. This process is often necessary in cases in which companies are charged with offences such as conspiracy to defraud. 128 Although the Kojic parties relied heavily on this quotation, it does not involve the majority endorsing a concept of aggregation of knowledge. The importance of this quotation is not for any suggestion that the knowledge of Messrs Cini and Ryan needed to be aggregated. It is for the test for attribution of the knowledge of either Messrs Cini or Ryan. That test, which had historically been posed as whether the person was the directing mind and will of the company, was instead expressed in the terms above, including closeness and relevant connection to the company. 129 The Kojic parties also relied upon a footnote where the majority in the High Court referred to various pages in the reasons for decision in Brambles Holdings Ltd of the other two judges: Bray CJ (275-276) and Mitchell J (281-282) (see 582, footnote 39). At those pages, Bray CJ said the following: … in my view, it is a fallacy to say that any state of mind to be attributed to a corporation must always be the state of mind of one particular officer alone and that the corporation can never know or believe more than that one man knows or believes. This cannot be so when it is a case of successive holders of the office in question or of the holder of the office and his deputy or substitute during his absence. Let us suppose that a piece of information, x, is conveyed to one officer of the company, A. Then A goes on holidays and B takes his place and a further piece of information, y, is communicated to him. It is a fallacy to say that the company does not know both x and y because A only knows x and B only knows y. As a matter of fact, it may well be B's duty when he is told about y to find out about x. 130 Mitchell J said: There may be some cases in which the knowledge of one officer of a company may be all that is to be attributed to the company in order to determine whether the company has any, and if so what, belief as to any particular state of facts, and whether such belief is reasonable. There are others in which it is necessary to consider the information of individual officers as a composite. This is one of those cases. 131 The context in which Bray CJ and Mitchell J made those remarks was whether a company had a defence of honest and reasonable mistake of fact to a charge that its low loader vehicle carrying a rig was overweight on its rear axles. The driver (John) who was responsible for loading the rig on the low loader vehicle had been instructed carefully by the heavy haulage supervisor (Mr Hope) about "winching down" the rig to distribute the weight from the rear axles of the low loader. But John was injured so a relief driver was sent (Mr Wells). Mr Wells was not instructed about winching down. But the company argued that Mr Hope had told the operations manager of the need for Mr Wells to be instructed and that Mr Hope honestly and reasonably believed that the operations manager had instructed Mr Wells. 132 The reason why Mitchell J considered that it was necessary to consider the information of the individual officers as a "composite" was not so that the knowledge of the officers could be aggregated. The reason was the opposite. The point that her Honour was making was that the knowledge or belief of Mr Hope could not be attributed to the company because the operations manager's knowledge, which was attributed to the company, was that Mr Wells had not been instructed about winching down. 133 In the context of the discussion by the majority, the quote from Bright J, and the reference to Mitchell J, it is very difficult to read the decision of the majority as endorsing a broader point about aggregation from the decision of Bray CJ. His Honour's decision did seem to suggest that the company had not acted reasonably because the knowledge of the operations manager and the knowledge of Mr Hope could be aggregated. But this aggregation was not necessary for the Chief Justice's conclusion. Further, the suggestion that knowledge might be attributed where it is B's duty when he is told about y to find out about x may raise issues of attributed notice (sometimes called "constructive" knowledge) rather than attributed (actual) knowledge. 134 The Kojic parties relied upon a second passage from the majority reasons in Krakowski which was also said to support aggregation of knowledge and attribution of that aggregated knowledge to the company (583): A division of function among officers of a corporation responsible for different aspects of the one transaction does not relieve the corporation from responsibility determined by reference to the knowledge possessed by each of them. Neither [Messrs] Cini nor Ryan was called to give evidence. It is erroneous to make a finding as to the company's intention or willingness to misrepresent the contractual arrangements with [the tenant] without reference to the knowledge of [Messrs] Cini and Ryan. (Footnotes omitted.) 135 The point being made by the majority was not that the knowledge of Messrs Cini and Ryan could be aggregated. The point being made was that it did not matter that neither Messre Cini nor Ryan made the representation. As Besanko J said in Australian Competition and Consumer Commission v Prysmian [224], after citing this passage from the majority, "[i]n other words, there may be more than one directing mind and will of a company and who it is will depend on the circumstances in which the particular question of attribution arises". 136 The point being made about the division of function might not have been limited to the attribution of the requisite knowledge of either Messrs Cini or Ryan. The further point concerned whether a corporation could be liable for deceit if the function was divided between (i) one officer who, with authority, made the representation but was not fraudulent, and (ii) another officer, or officers, who knew of the representation and knew that it was false. The majority concluded that it could. 137 Apart from these two matters, there are several reasons why the majority was not making any broader point about aggregation of knowledge in its reference to the division of function among officers of a corporation. 138 The first reason is that immediately after the quotation the majority explained that "[s]o to approach the question of Eurolynx' liability is not to regard the negotiations with [Messrs] Cini and Ryan as containing the actionable misrepresentation" (583). In other words, regard could be had to the knowledge of Messrs Cini and Ryan even though neither of them made the actionable misrepresentation in the exercise of their functions. 139 A second reason which supports this assessment of the reasons of the majority is that the quotation relied upon by the Kojic parties was part of a section where the majority explained that the solicitor for Eurolynx had no fraudulent knowledge. 140 A third reason which supports the conclusion that the majority were making a limited point about aggregating the knowledge of (i) the person who makes the representation and (ii) the person or persons who have fraudulent knowledge is that footnote 40 cited Dunlop v Woollahra Municipal Council [1975] 2 NSWLR 446, 485 and Tesco Ltd v Nattrass [1972] AC 153, 170. At the cited page in the first of those decisions, Wootten J had explained that evidence of individual states of mind was admissible in addition to evidence of corporate resolutions because "[c]orporations must be held responsible through those who act on their behalf, whether an act is performed by one person or by a number." And in the latter case, Lord Reid said that "[a] living person has a mind which can have knowledge or intention or be negligent and he has hands to carry out his intentions. A corporation has none of these: it must act through living persons, though not always one or the same person". 141 Finally, a fourth reason which suggests that the majority were not suggesting that the knowledge of Messrs Cini and Ryan could be aggregated is because the majority doubted whether a corporation could be liable where no individual person was fraudulent. The majority concluded the section upon which the Kojics relied by saying that it "may be that a principal who does not authorise an agent to make a particular representation in performing the duties of the agency will not be held personally liable in fraud if the representation is in fact made by an agent who is innocent of fraud, even though the principal knows the facts which make the representation false" (585). 142 An authority which the majority cited for this proposition was the decision in Cornfoot v Fowke (1840) 6 M & W 358; 151 ER 450. That case concerned a lease of premises from the plaintiff to the defendant. The defendant spoke with the plaintiff's father, who was the plaintiff's agent for letting the house. The defendant asked the plaintiff's father if there was anything objectionable about the house. The father replied "Nothing whatever". The defendant later discovered that the house next to it was "a brothel of the worst description". The majority of the Exchequer Chamber held that no fraudulent misrepresentation had been made and the contract could be enforced. Parke B (at M & W 373, ER 456) said that it was not enough to constitute fraud that "the plaintiff knew of the existence of the nuisance, and that the agent, who did not know of it, represented that it did not exist".

Consistent interpretations of the decision in Krakowski 143 A number of subsequent decisions have understood the reasons of the majority in Krakowski in the same way as expressed above. For instance, in Macquarie Bank Ltd v Sixty-Fourth Throne [1998] 3 VR 133, a mortgagor submitted that a bank could be found to have acted fraudulently by aggregation of the knowledge of its employees, none of whom had individually acted fraudulently. The mortgagor relied upon the decision in Krakowski. The Victorian Court of Appeal rejected this submission. Referring to the passage in Krakowski quoted above at [134], Tadgell JA said at 144-145 (see also at 160-161 (Ashley AJA)): That passage, so it was said on behalf of the respondent, authorises the aggregation of all the knowledge of officers of a corporation in order to determine a fraudulent state of mind of the corporation. The answering submission by counsel for the appellant is in my opinion correct. Neither that passage in Krakowski nor any other principle justifies the simple aggregation of the knowledge of a number of persons individually unaware of fraud, or facts which ought to disclose it, to create a notional person with a dishonest intent. The High Court in Krakowski was not purporting in the passage relied on to lay down any such principle but to authorise a consideration of the knowledge and circumstances of all relevant persons - including what may properly be inferred - in order to ascertain the mind of the corporation. The argument for the respondent in reliance on Krakowski should therefore be rejected. 144 In Emhill Pty Ltd and Brian James Cook v Bonsoc Pty Ltd (No 2) [2007] VSCA 108 [31], Warren CJ approved a similar analysis of the primary judge, Nettle J, in Emhill Pty Ltd v Bonsoc Pty Ltd [2003] VSC 337 [11]-[13], as "plainly correct", and also cited the passage from Tadgell JA quoted above. 145 Again, in Australian Competition and Consumer Commission v Radio Rentals Ltd [2005] FCA 1133; (2005) 146 FCR 292, 325-326 [176], Finn J considered a submission by the ACCC that Radio Rentals could be liable for contravention of s 51AA and s 51AB of the Trade Practices Act by aggregating the knowledge of different call centre operators. The ACCC relied upon Krakowski in support of this submission. Finn J described the submission as "startling" (326 [177]). His Honour rejected the submission although he noted that the records of individual call operators in that case concerned unrelated events, transactions and communications. His Honour preserved the possibility that in other situations, such as where there was a duty to communicate information, the knowledge might be aggregated.

Misreadings of Krakowski 146 The contrary view of Krakowski, supported by the Kojics, is not entirely without support. Some judges, albeit without substantial argument, have understood the majority as supporting aggregation of knowledge: Port Stephens Shire Council v Tellamist [316] (Santow JA). Perhaps the strongest support for this view of Krakowski is the decision in The Bell Group. 147 In The Bell Group, the Court of Appeal of Western Australia considered whether it was permissible to aggregate the knowledge and states of mind of 10 individual bank officers for the purposes of concluding that each respondent bank had a sufficient degree of knowledge for a claim for knowing receipt. At 396 [2183], Drummond AJA, with whom Lee AJA agreed, held that the majority in Krakowski had found deceit to have occurred by aggregating the knowledge of Messrs Cini and Ryan, on the one hand, with the knowledge of Eurolynx' solicitor on the other. Drummond AJA concluded that "what justified aggregation of the knowledge of these various officers and employees and external agents was that they had responsibility to act for the company in different aspects of the one transaction". This decision misunderstands the reasoning in Krakowski in three respects. 148 First, the knowledge of Eurolynx' solicitor was irrelevant. The solicitor made the representation. All of the necessary knowledge was possessed by each of Mr Cini and Mr Ryan. Secondly, there was no suggestion by the majority in Krakowski that any assessment of aggregation was based on a "single transaction" principle. Thirdly, Drummond AJA appeared to state the approach to aggregation as a general test. That cannot be correct. As I have explained, questions of attribution of knowledge in relation to a statutory contravention will be coloured by the terms and context of the statute. 149 The Bell Group decision is only of indirect relevance in this case. The focus of Drummond AJA and Lee AJA was upon aggregation for the purposes of a claim for knowing receipt. It was in that different context that their Honours relied upon the decision in Krakowski, which was concerned with a claim for deceit. Neither was concerned with statutory unconscionability which depends on statutory terms and context. In any event, even if Krakowski were a decision which is binding on this Court, it would bind this Court directly. This Court would not be bound indirectly by another court's interpretation of what the High Court said: see, in a different context, Hasler v Singtel Optus Pty Ltd [2014] NSWCA 266; (2014) 87 NSWLR 609, 631 [98] (Leeming JA). Nevertheless, if it were necessary to do so, I would conclude that the decision on this point by the majority in The Bell Group decision is plainly wrong.

Conclusion 150 I agree with the orders proposed by Allsop CJ. The appeal must be allowed for two independent reasons. 151 The first, which corresponds with the second ground of appeal and is considered comprehensively by the Chief Justice, is that on any view the conduct of the Bank was not unconscionable. 152 The second reason, which corresponds with the first ground of appeal, is that the primary judge erred in aggregating the knowledge of Messrs Coombe and Barnden in order to determine whether the Bank acted unconscionably. As senior counsel for the Kojics conceded, the success of this ground means that the Bank cannot be liable. 153 Although this is not such a case, it is possible that there could be examples where a corporation acts unconscionably even though no individual has acted unconscionably. For instance, in a case where no individual has the knowledge required to establish wrongdoing, it might be difficult for a corporation to avoid a finding that it has acted unconscionably if it puts into place procedures intended to ensure that no particular individual could have the requisite knowledge. The same might be true if a corporation's procedures were such that those formulating them were reckless about serious consequences. It may be that references in cases such as Radio Rentals to the possibility of unconscionable conduct by a corporation arising from a breach of its duty to communicate are better understood as references to the unconscionable failure to ensure communication of that information rather than as unconscionability based upon an aggregation of knowledge. But that issue can be left to a case in which it arises. I certify that the preceding seventy (70) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Edelman.

Trade Practices Act 1974(Cth)

Australian Consumer Law (Schedule 2 of the Competition and Consumer Act 2010 (Cth)) Australian Securities and Investments Commission Act 2001(Cth)ss 12CA, 12CB, 12CC

Trade Practices Amendment (Fair Trading) Act 1998(Cth)

Trade Practices Legislation Amendment Act 1992(Cth)

Trade Practices Revision Act 1986(Cth)

Sale of Land Act 1962(Vic)s 32

Australian Securities and Investment Commission v National Exchange Pty Ltd [2005] FCAFC 226; 148 FCR 132 Bilta (UK) Ltd (in liquation) v Nazir [2015] UKSC 23; [2016] AC 1 Brambles Holdings Ltd v Carey (1976) 15 SASR 270 Commissioner of Taxation of the Commonwealth of Australia v Consolidated Media Holdings Ltd [2012] HCA 55; 250 CLR 503 Commonwealth v Verwayen [1990] HCA 39; 170 CLR 394 Cornfoot v Fowke (1840) 6 M & W 358; 151 ER 450 Director General, Department of Education and Training v MT [2006] NSWCA 270; 67 NSWLR 237 Director of Consumer Affairs Victoria v Scully (No 3) [2012] VSC 444 Director of Public Prosecutions Reference No 1 of 1996 [1998] 3 VR 352; (1997) 96 A Crim R 513 Dunlop v Woollahra Municipal Council [1975] 2 NSWLR 446 Emhill Pty Ltd v Bonsoc Pty Ltd [2003] VSC 337 Emhill Pty Ltd and Brian James Cook v Bonsoc Pty Ltd (No 2) [2007] VSCA 108 Frank Hammond Pty Ltd v Huddart Parker Ltd [1956] VLR 496 Garcia v National Australia Bank [1998] HCA 48; 194 CLR 395 H L Bolton (Engineering) Co Ltd v T J Graham & Sons Ltd [1957] 1 QB 159 Hasler v Singtel Optus Pty Ltd [2014] NSWCA 266; 87 NSWLR 609 In re Apple Computer, Inc. 243 F Supp 2d 1012 (ND Cal, 2002) In the matter of Wan Ze Property Development (Aust) Pty Ltd (in liquidation) [2013] NSWSC 189 Jenyns v Public Curator (Qld) [1953] HCA 2; 90 CLR 113 Kakavas v Crown Melbourne Limited [2013] HCA 25; 250 CLR 392 Kojic v Commonwealth Bank of Australia [2016] FCA 368; 113 ACSR 220 Krakowski v Eurolynx Properties Limited [1995] HCA 68; 183 CLR 563 Lennard's Carrying Co v Asiatic Petroleum Co Ltd [1915] AC 705 Macquarie Bank Ltd v Sixty-Fourth Throne [1998] 3 VR 133 Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500 Paciocco v ANZ Banking Group Ltd [2015] FCAFC 50; 236 FCR 199 Paciocco v ANZ Banking Group Ltd [2016] HCA 28; 333 ALR 569 Pioneer Mortgage Services Pty Ltd v Columbus Capital Pty Ltd [2016] FCAFC 78 Plevin v Paragon Personal Finance Ltd [2014] UKSC 61; [2014] 1 WLR 4222 Port Stephens Shire Council v Tellamist Pty Ltd [2004] NSWCA 353; 135 LGERA 98 Re Chisum Services Pty Ltd (1982) 7 ACLR 641 Stack v New York, NH& HR Co 58 NE 686 (1900) Tesco Supermarkets Ltd v Nattrass [1972] AC 153 The Juliana (1822) 2 Dods 504; 165 ER 1560 Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389 Trade Practices Commission v Queensland Aggregate Pty Ltd (1982) 44 ALR 391 Trade Practices Commission v Tubemakers of Australia Limited [1983] FCA 99; 76 FLR 455 United States v Bank of New England, NA, 821 F 2d 844 (1st Cir 1987) United States v T.I.M.E.-D.C., Inc., 381 F Supp 730 (1974) Violet Home Loans Pty Ltd v Schmidt [2013] VSCA 56; 44 VR 202 Westpac Banking Corporation v The Bell Group Ltd (in liq) (No 3) [2012] WASCA 157; 44 WAR 1; 270 FLR 1 Abril P and Olazabal A, "The Locus of Corporate Scienter" (2006) Colum Bus L Rev 81 Birks P, "Equity in the Modern Law: An Exercise in Taxonomy" (1996) 26 UWAL Rev 1 Bondi BJ, "Dangerous Liaisons: Collective Scienter in SEC Enforcement Actions" (2009) 6 NYUJL & Bus 1 Davies P, Introduction to Company Law (2nd ed, Oxford University Press, 2010) Eastwood A, "Corporations and the aggregation of knowledge" (2013) 87 ALJ 553 Hagemann T and Grinstein J, "The Mythology of Aggregate Corporate Knowledge: A Deconstruction" (1997) 65 Geo Wash L Rev 210 Stone J, The Province and Function of Law (Harvard University Press, 1950)

Outcomeappellant

Disposition:

Appeal allowed; orders 1 and 3 of the primary judge dated 2 May 2016 set aside and in lieu the application against the Bank dismissed with costs; first and second respondents to pay the appellant's costs of the appeal.

ALLSOP CJ: 1 The appellant, the Commonwealth Bank of Australia (the Bank), appeals from orders made by the primary judge for the payment of $636,796.47 in damages to the first and second respondents, plus costs. The order was made under s 82 of the Trade Practices Act 1974 (Cth) (the Act) consequent upon a conclusion that the Bank had engaged in conduct that was, in all the circumstances, unconscionable contrary to ss 51AB and 51AC of the Act. See Kojic v Commonwealth Bank of Australia [2016] FCA 368; 113 ACSR 220. 2 For the reasons that follow I would allow the appeal, set aside the orders against the Bank and in their place order that the application against the Bank be dismissed with costs. 3 The events directly in question took place in the first half of November 2009. They concerned the participation by Mrs Marija Kojic and her husband, Mr Dragutin Kojic, to the extent of $436,161.97, in a land development venture with the corporate vehicle of a person well known to them, Mr Smelisha Blanusa. 4 The Kojics first met Mr Blanusa in about 1980. In the years following, the Kojics had invested in property development ventures with Mr Blanusa. They had, by 2009, a close relationship. Mrs Kojic was the principal actor on behalf of herself and her husband in the events in question and as described below. To the knowledge of the Bank, she had experience as a property developer with her husband. 5 In October 2008, Southern Construction Services Pty Ltd (SCS), a corporate vehicle of Mr Blanusa and a business associate, Mr Smith, agreed to buy land at Old Reynella for $850,000; a deposit of $25,000 was paid. Settlement was initially scheduled for late March 2009. The property was purchased for the purpose of commercial development by subdivision into 14 individual housing allotments. 6 By the middle of 2009, settlement had not taken place. At this time, Mr Blanusa sought a suite of banking facilities with the Bank. The Bank's credit analysis in mid-June 2009 recounted that SCS had been operating for about eight years. It had commenced doing residential building construction, but had in the preceding 12-18 months diversified into more specialised commercial construction. Mr Blanusa, Mr Smith and SCS had banked principally with another bank (BankSA), though they had some business with the Bank. They desired to consolidate their borrowings. The approach to the Bank was to refinance the BankSA indebtedness ($920,000 personal and $500,000 business) and assist with the purchase of several properties (for $850,000 and $400,000). 7 The assessment of the relevant officer, Mr Steven Barnden (who was the relationship manager for SCS and Mr Blanusa and related parties) of the proposal was that the "servicing position [was] considered acceptable"; "[c]lients are in a comfortable financial position and have built up a sound equity base, which provides a strong security backstop and capacity to clear/reduce debts from sale of assets should it be required". There was a reference to the "account conduct [not having been] what we would prefer to see", but a recognition that "clients have been upfront with causes of this and explanations appear reasonable". 8 The refinancing took place in July 2009. 9 It is unnecessary to examine the financial position of Mr Blanusa and SCS in minute detail. The Bank was sufficiently comfortable with what they saw to provide overall facilities to the various parties of $2,796,297. This included facilities for persons related to Mr Blanusa and SCS, including a Mr Cotton, who had agreed with Mr Blanusa to take a 10% interest in the Old Reynella development for $90,000. This was formalised in a deed of assignment dated 30 June 2009. 10 Relevantly, on or about 22 July 2009, the Bank approved a loan to SCS for $480,000 to purchase the Old Reynella property. The security for this was a first registered mortgage over the property, a first registered charge over SCS's assets and undertakings, and a guarantee by Mr Blanusa for, and limited to, $480,000. Other borrowings (of $500,000) of SCS were also approved on that date and were secured on SCS's assets, other land and a personal guarantee of Mr Blanusa. The mortgage over the Old Reynella property secured not only the $480,000 loan, but also all indebtedness present and future of SCS to the Bank. 11 During the period from August to November 2009, there were further delays in settlement. The primary judge found at [26] of his reasons that Mr Blanusa and SCS had great trouble in finding the resources to pay the balance of the purchase price (of $436,161.97) (after taking account of the Bank's loan of $480,000) even with Mr Cotton's $90,000 contribution (which was paid in September). 12 At this point it is to be noted that the second respondent to the proceeding (the third respondent on the appeal), the conveyancer Mr McDonald, knew of Mr Blanusa's and SCS's difficulties in raising the balance of the purchase price. Mr McDonald was the conveyancer for SCS. The primary judge found (and there is no appeal from the finding) that Mr McDonald in due course also acted for the Kojics, through acting for Mrs Kojic. 13 By about October 2009, Mr Blanusa had told the Kojics about his plans for the Old Reynella property. He told them about Mr Cotton's 10% interest and that the Bank could finance only about 50% of the purchase price. 14 On 9 November, the vendors gave an ultimatum for settlement on 13 November. On the following day, Mr Blanusa showed Mrs Kojic the plans for the subdivision and asked her whether she and her husband would be interested in purchasing a half interest in the property. After Mrs Kojic spoke to her husband, who was working in Darwin, on 10 November, she told Mr Blanusa that they would provide 50% of the funds for a "50% interest in the property". She knew from earlier conversations that there was some urgency in meeting the settlement date required by the vendors and that it was soon approaching. In this conversation on 10 November, Mrs Kojic told Mr Blanusa that she would speak to Mr McDonald to find out how much she needed to pay for a half interest, and that she would speak to Mr Coombe (who was the Kojics' relationship manager at the Bank) to let him know of their decision to invest and to alert him to the need to arrange payment. During the conversation there was no discussion of the borrowings by SCS to finance the purchase, or of the nature of the security required by the Bank, although she knew that the bank could only finance 50% of the purchase. (Mrs Kojic, with her experience, however, could not have reasonably assumed other than that the Bank was lending half the purchase price on the security of at least a mortgage over the subject property.) 15 Mrs Kojic then called Mr Coombe on that day, 10 November. She told him that she and her husband had decided to invest in the property with Mr Blanusa in exchange for joint ownership of the property. She told him that Mr Blanusa was borrowing part of the purchase price from the Bank, that he could only get 50% of the purchase price from the Bank and that the Kojics would be buying the other 50%. She told him that they would shortly require a significant sum to purchase their half share. It is to be noted that the Kojics had banked with the Bank for many years and Mr Coombe had been their relationship manager since 2002. He and the Bank knew that they were dealing with people experienced in property development and that this investment with Mr Blanusa was another property development venture with him. Mr Coombe was not asked by Mrs Kojic to look into the proposal or to give any advice to her or them; he was being alerted to the transaction because a cheque would be soon required. The Kojics had available cash to fund the payment of over $400,000. 16 On that same day, 10 November, Mrs Kojic rang Mr McDonald, the conveyancer. She told him that she and her husband were purchasing a half interest in the property and requested copies of all settlement statements. She asked him about the amount she would need to provide. Mr McDonald then faxed the proposed settlement statements to Mrs Kojic. 17 On the following day, Mr Blanusa spoke to Mr McDonald and told him of the Kojics' involvement. Mr McDonald agreed to make enquiries with the Bank about the Kojics being placed on the title as co-owners. (It is to be recalled that settlement was but days away, which was either 13 November or the (yet again) rescheduled date of 17 November.) Mr Blanusa explained the equity split to Mr McDonald. 18 On the following day, Mr McDonald spoke to Mr Barnden who advised Mr McDonald that if the Kojics were to go on the title, the Bank would require changes to the security structure (being mortgages of their interest in the land and personal guarantees from them) which would not be possible by 17 November (if for no other reason than that the bank would need to examine their financial position). 19 Mr Barnden was aware that the Kojics were, and had been for some time, customers of the Bank. He knew (through Mr McDonald) they were proposing to take a half share in the property and that Mr Coombe was their relationship manager (just as Mr Coombe knew that Mr Barnden was Mr Blanusa's relationship manager). Mr Barnden, however, did not speak to Mr Coombe. There was no call for him to do so. In the light of the communication with Mr McDonald that the Kojics could not be placed on the title, he assumed (correctly) that the purchase was to go ahead in its current form. He passed the file to the Bank's settlements team. This ended his participation in the transaction. He did not concern himself with the balance of the settlement sum and assumed that whatever had been previously arranged was to go ahead. 20 On the same day, 12 November, Mr McDonald reported to Mr Blanusa that it would not be possible for the Kojics to be placed on the title by the settlement date. Mr Blanusa was not surprised and said he would speak to Mrs Kojic about it. 21 Mr Blanusa then spoke to Mrs Kojic and told her of the inability to put her on the title in time. (Given the tightness of time, it would seem reasonable to assume that Mr Blanusa's lack of surprise would have been shared by Mrs Kojic.) Mr Blanusa's evidence, which the primary judge accepted, indicated a conversation between him and Mrs Kojic at this time which was not strained, but one in which he told her of the Bank's unwillingness to alter the documents, made a joke about her being "ripped off" and in which they agreed to proceed with the settlement (now five days away). There was no discussion of the Bank mortgage in this conversation. Mrs Kojic remarked to Mr Blanusa that, despite the inability to be then placed on the title, the Bank (through Mr Coombe) knew that the property was to be half owned by the Kojics. The arrangement between them remained. The Kojics would provide half the purchase price and take a half interest in the property. 22 At this point, it is worth noting that as between the purchasers there could be no doubt that SCS would hold its nominal 90% interest on resulting or constructive trust for the Kojics as to 50%, holding only 40% beneficially for itself. 23 This conversation was important for the primary judge and is important for the Kojics on the appeal. The primary judge said (at [136] of his reasons) that Mr Blanusa "should have pointed out, but did not…, the extent to which the borrowings of the Blanusa interests were secured by the mortgage. He was aware of it. As an experienced property investor he should have understood its significance". At [137] of his reasons, the primary judge said that Mr Blanusa "gravely misled" Mrs Kojic by not telling her that the other borrowings of SCS secured by the mortgage left "no residual equity" in the property; though the judge accepted that Mr Blanusa may not have appreciated this. I will deal with the found ignorance of Mrs Kojic of the all-moneys nature of the Bank's mortgage in due course. But it is appropriate to say at this point, from the perspective of the Bank, that it would be entirely reasonable for the Bank to assume that experienced property developers (as the Bank knew the Kojics and Mr Blanusa to be) were well able to inform themselves about the nature and essential detail of critical aspects of the relevant arrangements. Why, it may be asked rhetorically, would not the Bank assume that Mr Blanusa and Mrs Kojic had discussed the nature of the Bank's intended first registered mortgage, the fact of which Mrs Kojic was aware on 12 November? 24 On that day (12 November) or possibly the day after, Mrs Kojic called Mr McDonald and discussed the settlement statements. She said that she was not prepared to pay any of the default interest shown in the statements. In this conversation, Mr McDonald also told her of the Bank's inability to put her on the title in time if the settlement date was to be held. Mrs Kojic replied that this was acceptable as they could be put on the title in due course. After she said that, Mr McDonald told Mrs Kojic that the Bank's mortgage was over the whole of the property. The primary judge accepted that this was said: see [142] of the reasons - but found that he did not tell Mrs Kojic that the all-moneys nature of the mortgage meant that it covered other borrowings of the Blanusa interests apart from the $480,000 Bank loan for the 50% of the purchase. 25 Mr McDonald sent a settlement statement dated 13 November to Mrs Kojic on 16 November when she was in Darwin. Accompanying this statement was a note which recorded that $480,000 was the loan amount from the Bank. This may have been the first time Mrs Kojic knew the precise figure of the lending, but she already knew of its approximate amount from the discussion with Mr Blanusa, and she knew that it was secured over the whole of the property by a first registered mortgage. The sheet also identified the amount of the Kojics' financial responsibility on the purchase: $436,161.97. In a brief conversation on 16 November, Mr McDonald reassured Mrs Kojic about the default interest payments not making up part of their share. 26 Mrs Kojic then called Mr Coombe and gave him instructions for the transfer of money to be made available for the bank cheque and to make the bank cheque available to Mr McDonald. Mr Coombe spoke with a Ms Aikman in the Bank to arrange for a cheque which he said was for a settlement being arranged for a client of Mr Barnden. 27 Settlement took place on 17 November 2009. 28 In February or March 2010, Mrs Kojic contacted a conveyancer (not Mr McDonald) to have her name put on the title and was informed that this would involve stamp duty of $50,000 to $60,000. She did not pursue the matter. 29 In late March 2011, the Bank moved to exercise its rights as mortgagee over the property. In April 2011 it took possession of the property and shortly thereafter sold the property for $975,000 (settlement taking place on 4 July 2011). 30 The financial history of SCS and the development of the Old Reynella property after 17 November 2009 were not the subject of investigation in the hearing. 31 The conclusion that the primary judge reached on the unconscionability of the Bank's conduct rested on the aggregation of the knowledge of Mr Coombe and Mr Barnden. I agree with Edelman J that his Honour erred in aggregating the knowledge in this way. 32 Lest it be thought, however, that the Bank has escaped criticism by the application of some technical rule, it is appropriate to explain why I disagree with the primary judge's conclusion as to unconscionability, even if (contrary to principle) the Bank is to be fixed or attributed with a composite or aggregation of what Messrs Coombe and Barnden knew. I will come to the meaning of unconscionability and the proper approach to the evaluation of conduct as to whether it is unconscionable in the statutory sense shortly. Suffice it to say at this point, the task requires a careful weighing of all attendant circumstances. 33 Turning to the knowledge of Mr Coombe first, it is critical to appreciate the context in which he received knowledge. He and the Bank was, and were, not asked for a facility by the Kojics. They had available cash to put into the commercial venture in which they had decided to participate. Mr Coombe was told of their participation (a half interest in the property to be developed) in the context of being asked to arrange for a bank cheque. He was not asked for advice; there was no occasion for him to think that advice was required; his customers were business people who were engaging in a commercial transaction of the kind which was familiar to them; he did not assume any responsibility to attend to the Kojics' interests in the transaction. 34 Mr Coombe knew what he was told in the conversation in [15] above, and the short conversation on the day before settlement: [26] above. He knew that Mr Blanusa and SCS were customers of the Bank and that Mr Barnden was their relationship manager. But Mr Coombe and Mr Barnden did not speak during the transaction. Mr Coombe assumed that the Kojics' payment would result in a 50% equity in the property. Mr Coombe was aware that the Bank was to finance half the purchase price but not that such was secured by a first mortgage securing other borrowings of the Blanusa interests. 35 Mr Barnden knew of all aspects of the transaction from the perspective of his customer SCS. As to the Kojics, he knew what is set out at [19] above. 36 The approach of the primary judge to the finding of unconscionability of the Bank is to be found in [183] to [190] of his reasons, as follows: [183] The position therefore is that the CBA knew, at the time of the settlement that: (1) its client, the Kojics, was making the Kojic payment to enable the settlement to proceed, but in the belief that their payment was as between themselves and SCS for one half interest in the property which SCS had available to it to provide; (2) even though the Kojics knew that they would not be recorded at the time of settlement as the part registered owners, they did not understand that the CBA's first mortgage would secure not only the amount the CBA was advancing towards the settlement, but additional borrowings of the Blanusa interests from the CBA, so that in essence there was no residual equity in the property; (3) the Kojic payment was therefore effectively an unsecured loan to the Blanusa interests. [184] I also conclude that, if the Kojics had known the real practical nature and effect of their payment, they would not have made the Kojic payment. There was little cross-examination of Kojic to explore whether she would have made such an advance in the circumstances. No doubt, she would have denied that. But in any event, she would not have done so without inquiry about Blanusa's capacity to repay, and the only information she had (as exposed in the evidence) was that Blanusa had trouble paying for the balance of the purchase price. [185] It follows that, as Coombe recognised by his evidence about what he would have done if he had understood the nature of the Kojic payment, the CBA was in a position where its interest (in the settlement proceeding and the proposed mortgage being registered) conflicted with that of its client. The submission of the CBA recognises that the rights of SCS were in play, but its submission as a corollary that the CBA may have been in breach of its contract with SCS if it declined to advance its $480,000 is specious. It would have advanced the funds if SCS could otherwise settle. SCS could not otherwise have settled. The settlement would not have proceeded, because SCS had no resources (other than the Kojic payment) to enable it to do so. [186] I do not think it is necessary to address separately all the causes of action pleaded against the CBA. I do not regard any particular cause of action, if established, as generating an entitlement to relief which, in any practical sense, would be materially different from that granted under other available causes of action. I address the issue of contribution later in these reasons. [187] I do not therefore propose to address the competing contentions about whether, in the circumstances, the CBA was or became subject to a resulting or constructive trust by reason of the settlement in respect of the proceeds of sale of the property, or the existence or extent of any fiduciary or common law duty owed to the Kojics, or whether the CBA conduct gave rise to misleading and deceptive conduct which caused the Kojics' loss, or was in breach of its contract with the Kojics. [188] In my view, the CBA's conduct because of the knowledge it had was unconscionable, as that expression is used in ss 51AB and 51AC of the TPA as relevantly in force in 2009. Those provisions are now in ss 21 and 22 of the Australian Consumer Law in Sch 2 to the Competition and Consumer Act 2010 (Cth). Nor is it necessary to debate whether those provisions, or ss 12CB and 12CC of the ASIC Act apply. The provisions are relevantly the same. [189] In Radio Rentals, Finn J said: Central to the purpose of the doctrine of unconscionability is to relieve against taking "an unconscientious advantage": Amadio at 462; or "exploitation" or "victimisation" of another: O'Connor v Hart at 1024; Bridgewater v Leahy at [75]-[76]; Louth v Diprose at 638. In short, it is to relieve against an abuse of power possessed by one party over the other by virtue of the other's position of special advantage. [190] In my view, it was contrary to good conscience for the CBA to take part in the settlement of the property and to accept the Kojic payment when it knew that the Kojic payment, as a payment by one of its clients, was intended by the Kojics to secure a half interest in the property (by arrangement with SCS) but would not do so because of the terms of its proposed registered mortgage. Even at a lower level, reflecting Coombe's appropriate response, it was contrary to good conscience for the CBA to take part in the settlement of the property under which the Kojic payment was made, because it was a payment by a client of the CBA to the clear detriment of the client and to the clear benefit of the CBA when the client did not understand that that was the case. 37 Central to the primary judge's conclusion of unconscionability was the finding (or were the findings) in [183(2)]. The appellant attacked that finding or those findings. For reasons that follow, that attack is successful. The success of that attack undermines (as senior counsel for the Kojics accepted on the appeal) the conclusion of unconscionability in [188], founded as it was on the knowledge of the Bank. The successful attack on [183(2)] also undermines the conclusions reached at [190]. 38 The relevance of the Bank mortgage is expressed differently by the primary judge in different parts of his reasons. First, there is on occasion reference to it being over the whole interest in the property, not just over the one half interest of SCS and Cotton. Secondly, there is reference (and critically so in [183(2)]) to the amount secured being more than the $480,000 advanced for this particular purchase and including additional borrowings of the Blanusa interests from the Bank. Thirdly, there is reference to it in statements that the wider group of borrowings, so secured, meant that there was "no residual equity in the property [for the Kojics]": see [183(2)]; and, thus, that the Kojic payment was "effectively an unsecured loan to the Blanusa interests." 39 Some comments should be made about these matters. The first matter (that the mortgage was over the whole property, not just SCS's and Mr Cotton's half interest) was known to the Kojics. Mr McDonald told Mrs Kojic this on 12 November. The second matter was true; the extent of the borrowing secured is examined below. The third matter should be approached with due caution. It is one thing to say that at the time of settlement the total amounts secured by the mortgage exceeded the purchase price of the land; it is quite another to say that meant that the Kojics' interest in the land (by the resulting or constructive trust against SCS) was valueless or that there was no residual equity. One would need to understand the value of other securities for all the borrowing and perhaps consider the operation of the doctrine of marshalling. Further, what his Honour meant by "residual equity" must be examined. The words "so that" in [183(2)] indicate that it is a conclusion based on the sum of the borrowings and the apparent value of the land represented by its price of $850,000. What the phrase "residual equity" is not to be taken to mean is the equity or prospective equity in the land should the land development venture be successful. It is not a phrase to be equated with a notion that the Kojics' interest was valueless presently and prospectively. This is plain from how the case was pleaded and run. 40 The complaint of the Kojics in their pleading did not contain any assertion that it was the fact or the Bank knew it was the fact that the Kojics were hazarding their money on a valueless venture. Paragraphs 39 to 42 of the further amended statement of claim identified the nature of the conduct of the Bank that was impugned. This conduct included complaints that the "Arrangement", being that the applicants would purchase a half interest in the property for paying half the purchase price, was inconsistent with the Bank's security that would use the whole of the property to secure all existing and future debts of SCS. No case was made that it was the fact or the Bank knew it to be the fact that the venture was worthless or likely to be worthless to the Kojics. 41 Turning directly to the attack on [183(2)]. There was no evidence that either or both Messrs Coombe or Barnden knew that the Kojics did not understand the reach of the Bank's mortgage. It can be accepted that neither told Mrs Kojic of its reach; but that is not to say they knew she was ignorant of it. She was not an unadvised or incompetent person with any apparent vulnerability or disability, special or other. She was an experienced property developer, who knew Mr Blanusa well and was involving herself in a transaction in which there was a professional conveyancer. Mr Coombe knew that she had not sought advice from him and thus the Bank; Mrs Kojic had only sought to give instructions as to payment. Through Mr Barnden, the Bank knew that Mr McDonald had inquired in relation to the matter on Mrs Kojic's behalf and that Mr McDonald was dealing in the matter in a way that could reasonably suggest to Mr Barnden that Mrs Kojic had the advantage of a professional conveyancer. The Bank was entitled to assume (it certainly should not be found to know the contrary) that either Mr Blanusa or Mr McDonald informed the Kojics of the terms of the mortgage or that the Kojics would have enquired about such matters and been given proper answers. 42 There was no basis to find that the Bank knew (whether one adds knowledge together or not) that the Kojics were unaware of the borrowings secured by the mortgage. 43 As to the question of residual equity, to draw such a conclusion one would need to examine the borrowings secured by the mortgage and the other securities that secured those same borrowings. 44 The clause in the mortgage was to the effect that SCS's debts (present and future) were secured by the property. The evidence revealed that the other loans to SCS in June/July were an approved overdraft of $500,000 and a corporate charge card of $25,000, as well as the $480,000 loan on the purchase. These borrowings were secured not only by the subject mortgage over the property but also by a charge of SCS over its undertaking and assets, certain guarantees and several mortgages over properties owned by "the principal" (being impliedly Mr Blanusa or the Blanusa interests). Other facilities were variously secured. But on 17 July 2009, Mr Barnden noted in relation to SCS's facilities: Valuations already completed and updated valuations included in Security position. Earlier in the same document it was stated that: Valuations are now all held and have been updated into CCL. All proposed facilities are either on, or better than, SOM. 45 There was no evidence as to the meaning of the acronym "SOM" but the inference plainly is that the Bank was satisfied with its security position. 46 The above entries can be read with the slightly earlier entries at [7] above. 47 Without an investigation of valuations and a cross-referenced analysis of all security (which was not done at the time and which his Honour did not purport to do) a conclusion as to a lack of residual equity is not meaningful. It is a conclusion taken from an examination only of the mortgage and SCS's present debts, without regard to other securities. Mr Barnden was not cross-examined about his knowledge of any deficiency in equity. 48 In my view, the finding against the Bank in [183(2)] cannot be supported. That necessarily undermines the conclusion in [183(3)] that the Kojics were effectively making an unsecured loan. That latter conclusion was not the subject of specific attack; but with respect, it is manifestly wrong. First, there could be no dispute as to the existence of a resulting or constructive trust as against SCS. Secondly, it cannot be shown that at the time of the lending there was no equity in the property if one takes account of all the securities. Thirdly, there was no pleading and no case made that the loan and the security were valueless, especially in the context of the anticipated development of the property. It cannot be concluded that this was an unsecured loan or, more relevantly, that the Bank knew that. 49 Mr Robertson SC accepted that if the appeal was successful on ground 2 (as to [183(2)]), there was no basis to the finding of unconscionability. 50 Nevertheless, the expression of the reasoning in [190] and the remarks in [185] require some comment. First, the mortgage did not prevent the obtaining by the Kojics of a half interest in the property. They did obtain such an interest. Secondly, it was not a payment that was to the "clear detriment of the client" from what could be seen by the Bank. As far as the Bank could see, professional property developers made a decision to invest in a development with a long time business colleague, in circumstances where, for the reasons expressed above, it was not open to conclude that there was no residual equity in the property. Of course, if the Bank had known that the money the Kojics were investing was being placed into a doomed and valueless investment and would inure only to the Bank's advantage, a powerful case would be made for unconscionable conduct. The facts are not, however, that. 51 Some emphasis was put on an answer Mr Coombe gave to some questions of the primary judge, as referred to in [185]. But that evidence must be seen in context. These answers were given in hindsight - the hindsight of the failure of SCS. At Tpp 183, l.36 - 184, l.8, the following exchange took place between the primary judge and Mr Coombe at the end of Mr Coombe's cross-examination: Mr Coombe, I just want to ask you one thing with the wisdom of hindsight. It's a terrible thing, hindsight. You now know, I think, that what happened to this $436,000 was that it was not applied to acquire any interest in this property. You know that, don't you?---I'm aware of that, your Honour. If you had known that at the time you got this instruction, would you have done something about it?---I would not have drawn the cheque if I had known that, your Honour. Yes. That's what I thought you would say. And let us assume that, in fact, the proposal was that the Kojics were to buy a half interest in this property and that was worth about $436,000 and the other half interest for Mr Blanusa was to come from borrowings from the bank to be secured by mortgage and the mortgage was not limited to the Blanusa's half or the interest on the Blanusa's half, but extended to cover Blanusa's other borrowings, would you have done anything about it then?---If I was aware there were borrowings against the property, yes, I would have done so, your Honour. 52 In [185] the primary judge referred to the Bank's position of conflict. With respect the comment is liable to mislead. The Bank held no fiduciary position; it had not been asked to give advice; it was a lender to one of the developers. There was no occasion to introduce notions of conflict of interest and duty, or of duty and duty. 53 This success of ground 2 of the appeal concerning [183(2)], the success of ground 1 as disclosed in the reasons of Edelman J and the concession by counsel that success on either ground fatally undermines the conclusion as to unconscionability. Nevertheless, because of the seriousness of a finding of unconscionable conduct to a financial institution, it is appropriate to deal with the question of unconscionability on the basis of the aggregated minds of the Bank officers, contrary to the conclusion of Edelman J. 54 The appellant approached the appeal in the written submissions by putting the proposition (though in oral address senior counsel drew back from the proposition) that unconscionable conduct required a "high degree of moral obloquy". Reference was made to the reasons of Gageler J in Paciocco v ANZ Banking Group Ltd [2016] HCA 28; 333 ALR 569 at [188], Attorney-General of NSW v World Best Holdings Ltd [2005] NSWCA 261; 63 NSWLR 557 at [121] (Spigelman CJ), Australian Securities and Investment Commission v National Exchange Pty Ltd [2005] FCAFC 226; 148 FCR 132 at [43] (Tamberlin, Finn and Conti JJ), and Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389 at [291] (Allsop P, Bathurst CJ and Campbell JA agreeing). 55 In Paciocco v ANZ Banking Group Ltd [2015] FCAFC 50; 236 FCR 199, with the agreement of Besanko J (at 289 [371]) and Middleton J (at 295 [398]), at 265-276 [259]-[306] I sought to explain the approach to deciding upon "unconscionable conduct" as an evaluative statutory standard, and at 281-283 [325]-[347] I explained why there was no unconscionable conduct in that case. The aim of the former explanation was to identify the danger that lies in replacing a word chosen by Parliament ("unconscionable") with a synonym ("moral obloquy" or "moral obliquity"). In the High Court, Keane J dealt with the question of statutory unconscionability (at [292]-[294]). French CJ (at [2]) and Kiefel J (at [70]) agreed with Keane J. At [292], Keane J set out my concluding paragraph (at [347]). From the reasons, it can be taken that that conclusion, drawn as it was by applying the method or approach earlier set out, was taken as correct. There is nothing in Keane J's reasons on unconscionability that throws any doubt upon the approach I took to evaluating whether there had been unconscionable conduct in the statutory sense. 56 In Paciocco 236 FCR at 265-266 [259]-[262], I discussed the proper place of a phrase such as "moral obloquy", at 266-268 [263]-[269] I referred to the values and norms that were recognised in the statute that bore upon the question (there the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act) ss 12CA and 12CB), at 268-271 [270]-[284] I referred to the place of norms and values in Equity and commercial law, and at 272-274 [285]-[295] I referred to the guidance in the statute itself as to values that bore upon the question. It is critically important to appreciate the proper judicial technique in reaching the evaluation. It is not a search for some synonymous definition or rule, rather it is the use of the technique of Equity that involves a careful examination of all attendant circumstances against the statutory norm. The approach was described in Jenyns v Public Curator (Qld) [1953] HCA 2; 90 CLR 113 at 119 where Lord Stowell's generalisation in The Juliana (1822) 2 Dods 504 at 522; 165 ER 1560 at 1567 was quoted: A court of law works its way to short issues, and confines its views to them. A court of equity takes a more comprehensive view, and looks to every connected circumstance that ought to influence its determination upon the real justice of the case. (Emphasis added.) 57 The following can be said about the approach to the evaluative judgment in question (see Paciocco 236 FCR at 274-276 [296]-[299] and [304]-[306]): [296] ….. The evaluation of conduct will be made by the judicial technique referred to in Jenyns. It does not involve personal intuitive assertion. It is an evaluation which must be reasoned and enunciated by reference to the values and norms recognised by the text, structure and context of the legislation, and made against an assessment of all connected circumstances. The evaluation includes a recognition of the deep and abiding requirement of honesty in behaviour; a rejection of trickery or sharp practice; fairness when dealing with consumers; the central importance of the faithful performance of bargains and promises freely made; the protection of those whose vulnerability as to the protection of their own interests places them in a position that calls for a just legal system to respond for their protection, especially from those who would victimise, predate or take advantage; a recognition that inequality of bargaining power can (but not always) be used in a way that is contrary to fair dealing or conscience; the importance of a reasonable degree of certainty in commercial transactions; the reversibility of enrichments unjustly received; the importance of behaviour in a business and consumer context that exhibits good faith and fair dealing; and the conduct of an equitable and certain judicial system that is not a harbour for idiosyncratic or personal moral judgment and exercise of power and discretion based thereon. [297] ….. It should be emphasised, however, that faithfulness or fidelity to a bargain freely and fairly made should be seen as a central aspect of legal policy and commercial law. It binds commerce; it engenders trust; it is a core element of decency in commerce; and it gives life and content to the other considerations that attend the qualifications to it that focus on whether the bargain was free or fair in its making or enforcement. [298] The normative standard of a business conscience referred to in the statute is permeated with accepted and acceptable community values: Australian Competition and Consumer Commission v Lux Distributors Pty Ltd [2013] FCAFC 90 at [23]; Perpetual Trustee Company Limited v Khoshaba [2006] NSWCA 41 at [64] and Australian Securities and Investment Commission v National Exchange Pty Ltd [2005] FCAFC 226; 148 FCR 132 at 139-140, esp [30]. [299] These considerations may involve behaviour that is best evaluated relationally in a transaction; they may involve conduct that can be evaluated against normative or ethical standards, apart from any particular transaction: see, for instance, National Exchange. … [304] In any given case, the conclusion as to what is, or is not, against conscience may be contestable. That is inevitable given that the standard is based on a broad expression of values and norms. Thus, any agonised search for definition, for distilled epitomes or for shorthands of broad social norms and general principles will lead to disappointment, to a sense of futility, and to the likelihood of error. The evaluation is not a process of deductive reasoning predicated upon the presence or absence of fixed elements or fixed rules. It is an evaluation of business behaviour (conduct in trade or commerce) as to whether it warrants the characterisation of unconscionable, in the light of the values and norms recognised by the statute. [305] The task is not limited to finding "moral obloquy"; such may only divert the normative inquiry from that required by the statute, to another, not tied to the words of the statute. The clearest example of the lack of need for dishonesty, at least in Equity in unconscionable conduct (in the unwritten law), is the lack of criticism of the bank manager in Amadio by Deane J: 151 CLR at 478. See also Johnson v Smith [2010] NSWCA 306 at [5] and Aboody v Ryan [2012] NSWCA 395 at [65]. Such is not to deny that, in many cases of unconscionable conduct in Equity, a degree of moral criticism may attend the evaluation that the relevant conduct was unconscionable. [306] As Deane J said in Muschinski v Dodds 160 CLR at 616, property rights (and the same can be said of jural relations in trade or commerce) should be governed by law, and not some mix of judicial discretion or the subjective views as to who should win based on the formless void of individual moral opinion. Nothing in Subdiv C and ss 12CB and 12CC or the other statutes with which this case is concerned should be seen as requiring this. The notions of conscience, justice and fairness are based on enunciated and organised norms and values, including the organised principles of law and Equity, taken from the legal context of the statutes in question and the words of the statutes themselves. Employing judicial technique involving a close examination of the complete attendant facts and rational justification, the Court must assess and characterise the conduct of an impugned party in trade or commerce against the standard of business conscience, reflecting the values and norms recognised by Parliament to which I have referred. 58 Over time, as the standard is applied, the courts will develop principles and legally relevant considerations that will give comfortable form to fact situations. Just as the courts in New South Wales over thirty six years have given structure and content to the Contracts Review Act 1980 (NSW) (a statute which utilises a standard or norm of fairness) without a loss of contractual and commercial stability, so the courts will work through the notion of a business conscience. This is not something foreign to the judicial process; it is a task at the very heart of the judicial process. Professor Stone referred to standards such as unconscionability as legal standards of indeterminate reference: see Stone J, The Province and Function of Law (Harvard University Press, 1950) at 185-186 [22], where "judgment cannot turn on logical formulations and deductions, but must include a decision as to what justice requires in the context of the instant case"; and see Jenyns 90 CLR at 118-119. The problem of indeterminacy is dealt with, however, by close attention to the statute and the values derived from it, as well as from the general law, Equity in particular, to undertake the evaluative judgment. 59 Some contrast may be seen with a standard or norm that carries within its textual expression a reference or framework for logical analysis. For instance, a provision that proscribes misleading or deceptive conduct has within its terms a framework of meaning that is, to a degree, self-referential. It is a norm or standard, but one that carries within its expression meaningful criteria for application. A provision that proscribes unconscionable conduct is directed to a standard or norm of right behaviour that is less precise. Its assessment requires a body of values against which to make the evaluative judgment of what is right or conscionable in the circumstances, and how far the departure from such should be to warrant the characterisation of unconscionable. The formation of that judgment requires guidance from considerations not part of the direct reference of the immediate language that expresses the standard - but which are the relevant values to bring to bear on the evaluative judgment. Thus, the standard or norm of unconscionability is more diffuse than the standard or norm embodied in a phrase such as misleading or deceptive, but the former takes its stability from the informing values of the statute and the law, Equity in particular. For instance, in Kakavas v Crown Melbourne Limited [2013] HCA 25; 250 CLR 392, the Court at 439-440 [161], in speaking of an arm's length commercial transaction and the operation of the equitable doctrine within s51AA of the Trade Practices Act, said that a predatory state of mind was required given that the (equitable) principle was concerned with victimisation or exploitation. More directly, the statute (here in s 51AC) sets out considerations that may bear, in any given case, on the evaluation. 60 Using that approach here, the facts, as I have set them out, bespeak an entire absence of predation, of trickery, of any lack of honesty, of sharp practice, of vulnerability, of known mistake, of weakness, of a lack of good faith, of disability, or of any of the considerations in s 51AC(3). No behaviour of any bank officer bespoke any lack of business conscience or ethics. Even if one could combine the knowledge of Mr Coombe and Mr Barnden, there was no basis to conclude that the Bank acted inappropriately or unfairly in any way whatsoever. There was no basis for even this aggregated mind to think that in some fashion Mrs Kojic, as an experienced businesswoman, was in a position such that for the Bank to lend this money on a standard form of security was somehow acting unconscionably, or even unfairly. 61 The primary judge did not consider it necessary to decide whether the statutory norm of unconscionable conduct came from the Trade Practices Act or the ASIC Act. The provisions are substantially identical. In the end the appellant submitted that the ASIC Act was the correct statute to apply, but it did not submit that such made any difference to the outcome. 62 I have read the reasons of Edelman J in relation to aggregation and attribution. Subject to the following comments I agree generally with his Honour's reasons. 63 The question of aggregation will generally arise in a particular statutory context or in the context of a particular substantive rule. In Lennard's Carrying Co Ltd v Asiatic Petroleum Co Ltd [1915] AC 705 the statutory context was the phrase "his actual fault or privity" in the test for the breaking of the limitation of liability for shipowners under s 502 of the Merchant Shipping Act 1894 (UK). The use of the "mind or will" of the company was utilised beyond this particular statutory context: see H L Bolton (Engineering) Co Ltd v TJ Graham & Sons Ltd [1957] 1 QB 159 at 172; Tesco Supermarkets Ltd v Nattrass [1972] AC 153 at 170-174, 179-181, 186-187 and 190-191. Nevertheless, the statutory context or the context of the relevant substantive rule will be critical, as the Privy Council pointed out in Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500 at 506-512. It is unnecessary to discuss the effect on Meridian of Bilta (UK) Ltd (in liquidation) v Nazir [2015] UKSC 23; [2016] AC 1. 64 In the context of the legislation here, s 84 of the Trade Practices Act provides a framework for the establishment of the state of mind of a company that was intended to extend, not limit, the liability of corporations: Trade Practices Commission v Tubemakers of Australia Ltd [1983] FCA 99; 76 FLR 455 at 475. I would not necessarily see s 84 as limiting the application of any relevant general law principle concerning aggregation or attribution of knowledge. 65 I agree with Edelman J that the central question against which the analysis takes place is whether or not the conduct of the Bank was unconscionable. That enquiry may, and generally will, require understanding what the Bank knew as a corporation. I agree with the analysis of Edelman J of Krakowski v Eurolynx Properties Limited [1995] HCA 68; 183 CLR 563 and with his criticisms of the relevant parts of the reasons of the Western Australian Court of Appeal in Westpac Banking Corporation v The Bell Group Ltd (in liq) (No 3) [2012] WASCA 157; 44 WAR 1. 66 Depending upon the relevant statutory context or substantive rule, it may be that separate information held by an officer or agent may be aggregated with information held by another if there is a duty and opportunity to communicate it to the other: Re Chisum Services Pty Ltd (1982) 7 ACLR 641 at 649-650; Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133 at 161-62; and Australian Competition and Consumer Commission v Radio Rentals Ltd [2005] FCA 1133; 146 FCR 292 at 327 [182]. The relevance and legitimacy of any such approach may well depend upon the statutory context or the relevant substantive rule. In any event, here, neither Mr Coombe nor Mr Barnden was under a duty to inform the other, or anyone else, of what he knew. 67 Here, in the circumstances of this case, there is no relevant principle of law that leads to aggregation. Further, to the extent that it cannot be put that either bank officer behaved in a way deserving of any criticism, it would be a startling proposition that the Bank itself acted unconscionably. 68 The orders that I would make are:

Appeal allowed.
Orders 1 and 3 made by the Court on 2 May 2016 be set aside and in lieu thereof order that the application against the first respondent be dismissed with costs.
The first and second respondents pay the costs of the appellant of the appeal. I certify that the preceding sixty-eight (68) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Chief Justice Allsop.

BESANKO J: 69 I have had the advantage of reading the reasons for judgment of the Chief Justice and of Edelman J. I agree with the orders proposed by Allsop CJ. Subject to the following observations, I agree with the reasons of the other members of the Court. 70 The starting point on the appeal is to identify the conduct which the primary judge found to be unconscionable within ss 51AB and 51AC of the Trade Practices Act 1974 (Cth). It comprised a level of knowledge in the appellant bank and conduct described at one point by the primary judge as a failure to counsel the Kojics against making the Kojic payment (at [167]), and at another point as taking part in the settlement of the property and accepting the Kojic payment (at [190]). However the conduct is described, the knowledge in the appellant bank is crucial to the success of the cause of action and, in particular, the paragraph 183(2) finding that the appellant bank knew at the time of settlement that the Kojics did not understand that the bank's first mortgage would secure, not only the amount the bank was advancing towards the settlement, but additional borrowings of the Blanusa interests from the bank so that, in essence, there was no residual equity in the property. Before the primary judge, it was accepted that no one officer of the appellant bank had that knowledge. Coombe knew that the Kojics had decided to provide finance for the purchase of a property in exchange for joint ownership of the property. He did not know that the appellant bank was to finance about one-half of the purchase price and to take a registered first mortgage over the property securing that advance and other advances to the Blanusa interests. Barnden knew about the appellant bank's all monies mortgage and he knew five days before settlement that there was an arrangement between the Kojics and the Blanusa interests whereby the Kojics proposed to purchase a one-half interest in the property which would be recorded on the title. He knew that and he indicated to McDonald that it was not possible to do that in the time available. Thereafter, he passed the file on to the settlements section of the bank. 71 The primary judge combined that knowledge and attributed it to the appellant bank and then drew the inferences identified in paragraph 183 of the primary judge's reasons about what the appellant bank knew about the Kojics' state of mind. I agree with the Chief Justice for the reasons he gives that the inference identified as the paragraph 183(2) finding should not have been drawn. The appeal must be allowed on this ground. I also agree with the Chief Justice's observations about the concept of unconscionable conduct. 72 It is difficult to identify in the abstract the defining features or characteristics of unconscionable conduct under the statute. In equity, there is the requirement of a special disability or disadvantage (Kakavas v Crown Melbourne Limited [2013] HCA 25; (2013) 250 CLR 392 ("Kakavas")) and what Finn J described in Australian Competition and Consumer Commission v Radio Rentals Ltd [2005] FCA 1133; (2005) 146 FCR 292 ("Radio Rentals") at [17] as central to the purpose of the doctrine being the abuse of power possessed by one party over the other by virtue of the other's position of special advantage. Unconscionable conduct under a statute such as the Trade Practices Act (now the Competition and Consumer Act 2010 (Cth)) extends beyond that in equity, is to be determined by reference to all the circumstances and is informed, and will continue to be informed, by the factors identified by Parliament in the statute. For example, one matter which will inform the determination in any particular case is the extent to which each party has acted in good faith, a matter which clearly goes to the substance of the doctrine. The list of matters, although they received little attention in this case, are important. They must be considered where they are relevant on the facts (i.e., the "may" is conditional not permissive) (Paciocco and Another v Australia and New Zealand Banking Group Ltd [2016] HCA 28; (2016) 333 ALR 569 ("Paciocco") at [189] per Gageler J) and the risk of error increases if the focus is on one or two matters at the expense of the others and all the circumstances (Paciocco at [293]-[294] per Keane J). 73 With respect, the primary judge erred in aggregating the knowledge of Coombe and Barnden. His Honour considered that it was appropriate to aggregate the knowledge because the case involved one transaction and the authorities of Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 ("Krakowski") and Westpac Banking Corporation v The Bell Group Ltd (in liq) (No 3) (2012) 270 FLR 1 supported aggregation (in his Honour's view) where there was one transaction. His Honour considered that there was one transaction because the Kojic payment would not have occurred without the settlement, and the settlement would not have occurred without the Kojic payment. 74 The one transaction test appears to be based on the following passage in Krakowski (at 583): A division of function among officers of a corporation responsible for different aspects of the one transaction does not relieve the corporation from responsibility determined by reference to the knowledge possessed by each of them. 75 In my opinion, Krakowski is authority for a more limited proposition and there are, in any event, significant difficulties with a one transaction test. 76 In Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133 ("Sixty-Fourth Throne"), Tadgell JA said, after referring to the passage from Krakowski set out above, (at 145): Neither that passage in Krakowski nor any other principle justifies the simple aggregation of the knowledge of a number of persons individually unaware of fraud, or facts which ought to disclose it, to create a notional person with a dishonest intent. The High Court in Krakowski was not purporting in the passage relied on to lay down any such principle but to authorise a consideration of the knowledge and circumstances of all relevant persons - including what may properly be inferred - in order to ascertain the mind of the corporation. The argument for the respondent in reliance on Krakowski should therefore be rejected. 77 Ashley AJA drew a distinction between a case where a representation had been made by a servant of the company (which representation was evidently false) and the attribution of the actual state of mind of a servant or agent of the company which was to be treated as the company's state of mind on the one hand, and saying that certain facts known to different servants or agents of the company may be aggregated so as to give rise to "a factual totality from which a dishonest corporate intent, held by none of the individuals, may be inferred", on the other. (See the article by Mr Andrew Eastwood "Corporations and the aggregation of knowledge" (2013) 87 ALJ 553). 78 I agree with Edelman J's analysis of Krakowski. In the course of that analysis, his Honour refers to the decision of the South Australian Full Court in Brambles Holding Ltd v Carey (1976) 15 SASR 270. I do not think that that decision supports the aggregation of knowledge of different company officers. That was a case about whether a company was to be excused in the case of a traffic offence on the basis that it had made an honest and reasonable mistake of fact. The passage from the reasons for judgment of Bright J cited by the High Court in Krakowski was, as Edelman J observes, addressing attribution, not aggregation. The question was whose belief should be attributed to the company for the purposes of the defence. As Bright J said (at 280): I agree that the guilty mind of a senior officer of a company may in a proper case be imputable to the company so as to make the company guilty. It does not follow that in cases such as the present a belief held by one senior officer will necessarily exculpate. It may do so if that belief can be imputable to the company. But I fail to see how that belief can be imputable to the company if another senior officer, especially if he is superior to the first mentioned officer, knows that that belief is ill-founded. 79 Although Bray CJ appeared to accept aggregation in some cases, perhaps limited, I do not think Mitchell J approached the case in that way. Her Honour did refer to composite information, but I think she did so for the purpose of deciding whose belief should be attributed to the company for the purposes of determining whether the company should be excused on the basis of an honest and reasonable mistake of fact. Her Honour said (at 282): It would not be correct to attribute to the appellant the belief of Mr Hope that the load would be winched down, in view of the fact that the operations manager knew, or should have known, that instructions to winch down had not been given to the relief driver. 80 In any event, even if aggregation is possible in some circumstances, I do not think the so-called one transaction test is a useful one. I say that because it does not seem to me to describe the reasons one would aggregate in some circumstances and not others. There are considerations underneath the test, such as a duty to communicate in the case of one transaction, which if there is to be aggregation should be expressly stated. 81 Justice Edelman has identified four obstacles to the aggregation of knowledge. I agree with three of the four matters identified by his Honour. As presently advised, I do not see s 84 and the law as it was at the time it was enacted, as an obstacle to the aggregation of knowledge in the case of unconscionable conduct under the statute. I say as presently advised because the possible effect of s 84 was not fully argued in this case. As to the other matters his Honour identifies, I note that Finn J in Radio Rentals shared similar concerns when he said in a short passage (at [181]): If the ACCC's submission were to be accepted to its full extent as put, it would have potentially alarming consequences for large, multi-function, corporations. It could also raise, potentially, rather significant privacy issues. 82 Furthermore, the aggregation of knowledge might be seen as similar to constructive knowledge which is not, ordinarily at least, successfully deployed where equitable fraud (of which unconscionable dealing is a species) is in issue in the context of commercial transactions (Garcia v National Australia Bank Ltd [1998] HCA 48; (1998) 194 CLR 395 at 410-411; Kakavas at [154]-[162]). 83 Finally, whether aggregation is possible where there is a duty to communicate was not argued in this case. It was accepted that Coombe and Barnden did not have a duty to communicate with each other. I would wish to reserve this issue for consideration in a case where it arises. When it does arise, it will, I think, raise a number of other questions concerning the type of duty in terms of source, nature and extent of the duty that might lead a court to conclude that separate pieces of knowledge should be aggregated (Sixty-Fourth Throne at 161-162 per Ashley AJA). I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko.

Commonwealth Bank of Australia v Kojic

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