• Dobbs v National Bank of Australasia Ltd [1935] HCA 49; (1935) 53 CLR 643;
• ANZ Banking Group Ltd v Walsh Beach J, Supreme Court of Victoria, 8 May 1991, unreported, applied.
• Mailman v Challenge Bank Ltd Supreme Court of New South Wales, Court of Appeal, 12/12/91, BC9101346 at 8, applied.
• Pooraka Holdings Pty Ltd v Participation Nominees Pty Ltd (1991) 58 SASR 184, discussed.
• Blomley v Ryan [1956] HCA 81; (1954) 99 CLR 362;
• Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447, applied.

Judgment No. [2000] SASC 428

[2000] SASC 428

1 DUGGAN J. This is an action commenced by the Commonwealth Bank to enforce three guarantees against the defendant as guarantor. The defendant has resisted the claim on a number of grounds including failure of the plaintiff to act in accordance with alleged representations made to the defendant, non-disclosure by the plaintiff to the defendant of information relating to co-guarantors, unconscionable conduct and misleading and deceptive conduct. The defendant was represented by counsel until shortly before the commencement of the trial. He was unrepresented throughout the trial.

2 At all relevant times, the defendant was a property developer and companies with which he was associated owned buildings in the city and metropolitan area of Adelaide. The three guarantees were provided by the defendant at the time of the purchase of various buildings owned or part owned by companies associated with him. The guarantees have been referred to throughout the trial as the St Christopher guarantee, the Haventide guarantee and the Edinburgh Castle guarantee.

3 In September 1987 the CBA building in King William Street was purchased by St Christopher Pty Ltd as trustee for the St Christopher Unit Trust for approximately $5.5m. The St Christopher Unit Trust was established by a syndicate formed for the specific purpose of purchasing the CBA building. The unit holders of the trust and their percentage holdings were V. Oberdan Pty Ltd as trustee for the Vincent Oberdan Family Trust No. 2 (25 per cent), Ginos Holdings Pty Ltd as trustee for the Ginos Trust (25 per cent), Augathella Pty Ltd (40 per cent) and V & G Piscioneri Investments Pty Ltd as trustee for the Piscioneri Family Trust (10 per cent). V. Oberdan Pty Ltd underwent a subsequent name change to Haventide Pty Ltd and will be referred to by that name throughout these reasons. This company was controlled by the defendant and his family. The Ginos family which controls the Ginos interests referred to above joined in various business undertakings with the defendant through Mr Zisis Ginos who was also a property developer. Augathella Pty Ltd was controlled by the Dimasi family who are related to the defendant through his sister. The Piscioneri family are also related to the defendant through another of his sisters.

4 The purchase of the CBA building was funded by moneys loaned to St Christopher Pty Ltd by the plaintiff. On 17 September 1987 the plaintiff, as creditor, and the defendant and Haventide Pty Ltd as guarantors, entered into the St Christopher guarantee. The guarantors guaranteed the payment of all moneys then and subsequently owed to the plaintiff by St Christopher Pty Ltd. However, the liability of these guarantors, which was joint and several, was restricted to the amount of $1.1m plus interest.

5 Guarantees were also given by the other parties involved in the syndicate. Ginos Holdings Pty Ltd and Mr Zisis Ginos became jointly and severally liable as guarantors to the extent of $1.1m. A guarantee under which they were jointly and severally liable to the extent of $1.76m was provided by Augathella Pty Ltd and members of the Dimasi family. A similar guarantee limited to $440,000 was given by V & G Piscioneri Investments Pty Ltd and Mr Vince Piscioneri.

6 This guarantee was entered into to support loans by the plaintiff to Haventide Pty Ltd in relation to the purchase of various buildings by entities associated with the defendant including Tattersalls building in Grenfell Street and the Fairfax building in Waymouth Street. The first mentioned building was purchased by Begonia Pty Ltd and the latter by Declin Pty Ltd. These companies held the properties in trust for the Begonia Unit Trust and the Declin Unit Trust respectively. The defendant was the sole guarantor under the deed of guarantee which was entered into on 2 June 1988. The guarantee is an all moneys guarantee and, by its terms, all securities then and subsequently executed by the guarantor in favour of the plaintiff were made available to secure this loan.

7 This guarantee is dated 19 December 1988. It was provided by the defendant and his sisters, Teresa Dimasi and Graziella Piscioneri, to support a loan to Haventide Pty Ltd, V & G Piscioneri Investments Pty Ltd and Teresa Dimasi for the purchase by them of the Edinburgh Castle Hotel in Currie Street. The loan was in the form of a bills discount facility in the sum of $400,000 and an overdraft of $50,000. This also is an all moneys guarantee, but other securities provided by the guarantors to the plaintiff were not made available to serve as securities in respect of this loan.

8 The statement of claim alleges that the principal debtors in the case of each guarantee which is the subject of these proceedings defaulted in their obligations to make payments pursuant to the terms of their respective loans.

9 In due course, notices of demand were issued and served on the defendant under each guarantee. The amounts claimed have not been paid. The statement of claim seeks payment of these sums including interest. The amounts claimed against the defendant as at 31 October 2000 are as follows:

10 Apart from tendering a number of documents, the plaintiff called only one witness, Mr Hampton, who is employed by the plaintiff as assistant manager in the credit management department of the bank. The plaintiff tendered certificates prepared by Mr Hampton which set out the amounts due and owing in respect of each of the guarantees. The certificates were prepared pursuant to a clause in each of the guarantees which is to the following effect:

"A statement in writing made up from the books of the Bank and signed by an authorised officer of the Bank of the amount due or owing of the moneys hereby secured at the date mentioned in such statement shall be prima facie evidence that such amount is so due or owing or secured and of all the other matters therein set forth without it being necessary to produce any books or vouchers to verify the same and without retrospection beyond the preceding half-yearly balance of account in the books of the Bank."

(St Christopher Guarantee Clause 18, Haventide and Edinburgh Castle Guarantees Clause 17).

11 Further certificates were tendered on the last day of the trial so as to update the amounts due.

12 It will be seen from the wording of the clauses which authorise the issue of the certificates that they are directed towards establishing prima facie evidence of the facts stated therein and that they do not purport to establish the facts conclusively.

13 The use of certificates of this nature was considered by the High Court in Dobbs v National Bank of Australasia Ltd [1935] HCA 49; (1935) 53 CLR 643 at 651. The clause in the guarantee in that case purported to authorise the bank to provide a certificate which established conclusively the fact and amount of the customer's indebtedness to the bank. The court rejected an argument that the clause was void as being an attempt to oust the jurisdiction of the court and to substitute for the judgment of the court the determination or opinion of an officer of the bank. In the joint judgment of Rich, Dixon, Evatt and McTiernan JJ their Honours said (654):

"It is therefore a mistake to suppose that the policy of the law exemplified in the rule against ousting the jurisdiction of the Court prevents parties giving a contractual conclusiveness to a third person's certificate of some matter upon which their rights and obligations may depend. In Ex parte Young; In re Kitchin (1881) 17 Ch. D. at p 672 James L.J. says:

'If a surety chooses to make himself liable to pay what any person may say is the loss which the creditor has sustained, of course he can do so, and if he has entered into such a contract he must abide by it.'

There are many familiar kinds of contracts containing provisions which make the certificate of some person, or the issue of some document, conclusive of some possible question. The most conspicuous example, perhaps, is the certificate of the engineer or architect under contracts for the execution of works or the construction of buildings.

For these reasons we think the certificate of the officer of the bank is conclusive upon the parties of the amount and existence of the customer's indebtedness."

(See also Australia & New Zealand Banking Group Ltd v Carnegie and Hicks Crockett J, Supreme Court of Victoria, 16 June 1987, unreported).

14 A clause providing for a certificate of prima facie indebtedness is valid and effective for the same reasons (ANZ Banking Group Ltd v Walsh Beach J, Supreme Court of Victoria, 8 May 1991, unreported). If the certificate is properly tendered the onus falls upon the defendant to demonstrate by acceptable evidence that the certificate is incorrect.

15 Mr Hampton said in evidence that his starting points for examining the records of the bank for the purpose of calculating the amounts due in relation to each guarantee were 25 September 1996 (St Christopher Guarantee), 1 October 1995 (Haventide guarantee) and 1 August 1996 (Edinburgh Castle Guarantee).

16 The defendant argued that the certificates were flawed in that the complete history of each transaction from the time of its commencement was not examined for the purpose of preparing the certificates. Indeed there was some evidence that the bank did not keep such records beyond a period of seven years. However, the clauses which authorise the use of the certificates render it unnecessary to refer to records beyond the preceding half-yearly balance of account in the books of the bank. This aspect of the defendant's challenge to the certificates cannot succeed.

17 The defendant then drew attention to evidence which he said established that one component used in the calculation for the amount due under the Haventide guarantee was wrongly included. He relied upon an internal memorandum of the bank dated 14 December 1994 (Exhibit P12) which detailed the amount then owing by Haventide Pty Ltd as follows:

18 Mr Oberdan argued that a debt of the Oberdan Group which was not relevant to the Haventide guarantee had been included and that this could have been carried forward into the figures used for the preparation of the certificate.

19 However, I am satisfied that the amount shown as owing in the books of the bank has not been inflated in this manner. The memorandum was prepared to support a recommendation that certain assets owing by the Oberdan Group of companies should be written off. I accept the evidence of Mr Hampton that this was done for the bank's internal purposes. A debt of the Oberdan Group which was irrelevant to the Haventide guarantee appears to have been included in this procedure for the sake of convenience, but the document was prepared to implement the write off procedure and the total figure shown in it as due by Haventide was not carried over into the records from which Mr Hampton calculated the amount due for the purpose of the certificate. The figure adopted for the indebtedness by Haventide Pty Ltd as at 1 December 1994 for the purposes of the certificate was $432,846 less than the debt for Haventide included in the memorandum prepared for the purposes of the write off.

20 I have also considered the argument raised by Mr Oberdan in the course of his address (T861_f_) that, prior to the commencement date of the figures from which the certificates were prepared, an amount of approximately $400,000 paid from a fixed deposit into the Haventide Pty Ltd account was not credited in the figures used for preparing the certificates. There is no evidence of a failure to give such a credit if it had been due. In the absence of further evidence it cannot be said that the reliability of this certificate has been undermined.

21 I am satisfied that the plaintiff is entitled to rely upon the certificates and that, subject to finding any merit in those aspects of the defence which I discuss shortly, the plaintiff has established its claim for moneys due under the guarantees in the amounts specified in the certificates. The evidence led in the case has not displaced the prima facie proof provided by the certificates.

22 I come then to discuss the matters put forward by the defendant in the course of denying liability under the guarantees. I have said that he resisted the claim on a number of grounds including misrepresentation, non-disclosure of information relating to co-guarantors, unconscionable conduct and misleading and deceptive conduct. In his final submissions, apart from his criticisms of the certificates, the defendant relied solely on the allegations of unconscionable conduct. However, because the other allegations were raised in the defendant's pleadings and, in view of the fact that the defendant is unrepresented, it is appropriate that I should deal with the other matters raised in the statement of claim.

23 The defendant did not give evidence. This aspect was discussed on a number of occasions in open court and it was pointed out to Mr Oberdan that, if he did not give evidence, there would be no material emanating directly from him to support any allegations of representations by the plaintiff and reliance upon them.

24 The defendant tendered a large number of documents, most of them from the records of the bank, and he called officers and former officers of the bank, Mr Zisis Ginos, Mr Vince Piscioneri and the defendant's accountant, Mr Sharpe to give evidence. The evidence given by these witnesses and the documentary material which was tendered fell far short of proving any representation or misrepresentation relied upon to avoid liability under any of the guarantees. I formed the view that all the bank's officers and former officers who gave evidence attempted to recall the events as accurately as they were able, although the passage of time affected precise recollection in the case of most of these witnesses. The same can be said of Mr Ginos and Mr Piscioneri. I comment on the evidence of Mr Sharpe later in these reasons.

25 There was ample evidence to support the defendant's contention that in about 1970 he formed a close working relationship with the bank and that the bank officers regarded him as a particularly good customer, at least up to the time when it appeared to the bank that the entities controlled by the defendant could not fulfil their obligations under various loan agreements. However, there was no evidence to support the assertion, made in the Defence, that the defendant entered into some form of partnership agreement with the bank with the implication that there would be a sharing of losses.

26 A central feature of the assertions made in the Defence is that, from time to time, officers of the plaintiff made what are referred to as "the historical representations" to the defendant. These alleged representations are summarised in para 33 of the Defence as follows:

"33 Officers of the plaintiff made statements to the defendant to the effect that:

33.1 The plaintiff required that security in the form of mortgages over the property ('the mortgage securities') be given by the plaintiff and/or members of the Group in respect of loan transactions;

33.2 The plaintiff would have its own valuers assess the value of properties which were to be the subject of mortgage securities;

33.3 That as a matter of formality, and as part of its standard processes, in addition to the mortgage securities, the plaintiff required that the defendant (and others) give personal guarantees in respect of loan transactions;

33.4 That if there was default in a finance facility, the plaintiff would first realise the mortgage securities and seek to recover from the borrower(s) in respect of that finance transaction before enforcing any guarantees it took;

33.5 That the personal guarantees sought by the plaintiff were securities of last resort in that the plaintiff would not attempt to enforce them until it had exhausted all other means of recovering monies owed to it;

33.6 If there was a default, the plaintiff would not look to the defendant's guarantee alone, but would look to all guarantors.

The statements set out in this paragraph are hereafter called 'the historical representations'".

34.1 Orally by statements to the effect pleaded in the preceding paragraph;

34.2 At meetings at the offices of the defendant at 175 and 178 North Terrace Adelaide, the London Tavern, the offices of Quantic Pty Ltd, and at the plaintiff's Torrensville and Findon branches, and Adelaide offices, and in telephone conversations;

34.3 By officers of the plaintiff, namely its employees Messrs Pomeroy, McArthur, Mullins, Wright and/or Royans;

34.4 In the context of the historical relationship."

"36 By the historical representations, the plaintiff variously meant and meant the defendant to understand, and the defendant understood:

36.1 That the plaintiff made its decision to advance monies for property purchases on the basis of its valuations of the mortgage security properties ('the security representation');

36.2 That the personal guarantees it sought were in the nature of formalities ('the formality representation');

36.3 That the plaintiff would only resort to personal guarantees, if at all, after:

36.3.1 it had realised the mortgage securities for the transaction;

36.3.2 it had pursued the principal debtor or debtors; and

36.4 That the plaintiff would not enforce personal guarantees selectively against the defendant. ('the equality representation');

37 The defendant relied upon the historical representations in signing the Haventide, St Christopher and Edinburgh Castle guarantees."

29 It is appropriate at this point to isolate those aspects of "the historical representations" which allege statements by the bank's officers concerning the approach to be taken to enforce the bank's rights in the event of default by the principal debtor in each of the relevant loans. It is claimed that statements were made to the effect that the bank would first realise the mortgage securities and seek to recover from the borrowers before enforcing any guarantee; that the personal guarantees were securities of "last resort" and that the plaintiff would not attempt to force them until it had exhausted all other means of recovering moneys owed to it; and that, if there was a default, the plaintiff would not look to the defendant's guarantee alone, but would look to all guarantors.

30 As a preliminary to this discussion it is relevant to have regard to certain rights of the bank under the guarantees in the event of default by the principal debtors. They are set out in the following clauses which are part of each of the guarantees now sought to be enforced:

"10. As a separate and independent stipulation the Guarantor agrees that all or any sums of money which may not be recoverable from the Guarantor on the footing of a guarantee whether by reason of any legal limitation disability or incapacity on or of the Debtor any other Guarantor if there is more than one or any other fact or circumstance and whether known to the Bank or not shall nevertheless be recoverable from the Guarantor as sole or principal debtor in respect thereof and shall be paid by the Guarantor on demand together with interest at the rate or rates charged or chargeable by the Bank in respect of the moneys hereby secured immediately prior to the making of such demand from the date of demand until payment.

11. The Bank is under no obligation to hold or take any other or further guarantee or security for the payment of the moneys secured and this Guarantee shall be in addition to and independent of and shall not affect or be affected by any other or further guarantee or security now or hereafter held or taken by the Bank or by any arrangement or transaction between the Bank and the Debtor or any other person or by any loss release discharge abandonment or transfer either in whole or in part and either with or without consideration of any other guarantee or security now or hereafter held by the Bank from the Debtor or from any other person or by any act forbearance or omission by the Bank or by any other act matter or thing.

12. The Bank shall not be under any obligation to resort to any other guarantee or security it may hold for payment of the moneys hereby secured in priority to this or any other guarantee or security.

13. The Bank may at any time and from time to time grant the Debtor or to any other person any time or other indulgence or consideration and may compound with or release the Debtor or any other person or may assent to any assignment to trustees for the benefit of creditors or to any scheme or deed of arrangement and either with or without sequestration of the estate or (if the Debtor is a corporation) the winding up of the Debtor without discharging or affecting the liability of the Guarantor under this Guarantee."

31 These provisions make it clear that the plaintiff may enforce its rights against the defendant without first having recourse to any other rights or taking any other steps against the principal debtor or other guarantors (cf Mailman v Challenge Bank Ltd (Supreme Court of New South Wales - Court of Appeal, 12 December 1991, BC 9101346 at 8).

32 This, of course, does not mean that a guarantor cannot allege reliance on a representation to the contrary by a creditor. However, a statement by a bank officer to a guarantor or prospective guarantor that it is the normal practice of the bank to look first to the property, then the borrower and, lastly, the guarantors will not, without more, provide the basis of a representation or misrepresentation as to what will be done in the case of the guarantee under discussion (Mailman at 8). In the present case, the evidence does not support the assertion that statements were made to Mr Oberdan which travelled beyond an expression of what was normal practice.

33 The allegations in paragraphs 33.1 and 33.2 of the Statement of Claim which are set out above are not disputed by the plaintiff. There was evidence that the plaintiff undertook its own valuation of properties as part of its lending process. However, it was not demonstrated that this practice or the fact that the defendant might have been made aware of it, was in some way relevant to the defendant's liability under any of the guarantees. Furthermore, the plaintiff admits, by way of its Reply, that the plaintiff's officers made statements to the defendant to the effect that, in addition to mortgage securities, the plaintiff required that the defendant and others give personal guarantees in respect of the loan transactions.

34 In an attempt to establish other assertions made in these pleadings the defendant put to a number of witnesses that undertakings had been given that the guarantees would be used as a last resort and that the defendant's guarantees would not be called on until the real estate securities had been realised and the other co-guarantors pursued. He called Mr Mullins, a senior officer employed by the plaintiff. Mr Mullins left the employment of the bank in February 1998 and rejoined it in 1994. Prior to 1998 he had extensive involvement in the defendant's accounts. He agreed that he had discussions with the defendant about the defendant's guarantees, but he said he had no recollection of any conversation in which he said that a guarantee or guarantees "would be a last resort" (T267, 281). He said he may have discussed with the defendant the fact that the bank would normally realise on the security in the form of real estate before the bank would look to the guarantors for any shortfall (T268). He said he had no recollection of any conversation in which he or any other bank officer said that the bank was not too concerned about the defendant's personal guarantee and that it was a bank requirement and more of a formality (T269). Mr Mullins said the bank did not follow any particular practice in relation to the order in which guarantors would be pursued. He said each case would have to be judged on its merits (T271, 343). I have summarised his evidence on the issue of variations to guarantees elsewhere in these reasons.

35 The only material which contains any suggestion of a representation as to what the bank would do to enforce its rights under a guarantee is to be found in a letter addressed to Mr Purcell of Thomsons, solicitors, and signed by Mr Wright, an officer of the bank. Mr Wright was the manager of the Oberdan account from 1986 to 1989. At first, his superior was Mr Mullins. He said that he had a number of discussions with Mr Oberdan during his time as account manager. The letter signed by Mr Wright is dated 16 November 1995. It appears to have been drafted by the defendant's solicitor as part of the preparation for this case. Mr Wright gave evidence that it was prepared by Mr Purcell and signed by the witness. The letter states:

"I confirm that I was a former employee of Commonwealth Bank of Australia and that during the period 1987 to May 1989 when I left the Bank, I was the Bank's Manager responsible for borrowings by the Oberdan Group, headed by Vince Oberdan.

Vince Oberdan and the Oberdan Group were held in very high regard by the Commonwealth Bank and there were numerous banking transactions between them. I recall that I was involved in the Bank's approval for the Oberdan Group to purchase Tattersalls building and Fairfax building which was subject to a guarantee from Vince Oberdan.

It is a reasonable premise that I or another bank officer in my presence gave assurances to Vince Oberdan that the Bank would not call up his guarantee until such time as all of the Bank's securities had been realised and a loss crystallised.

My recollection is that it is not inconceivable that the Bank would have represented to him that his guarantee was a last resort."

36 Mr Wright said in evidence that he had a vague recollection of signing the letter which Mr Purcell prepared after a discussion with the witness. He said in evidence (T630):

"A What I have said there is 'a reasonable premise' that I or another bank officer in my presence gave assurances that the bank would not call up his guarantee until such time all the bank securities had been realised. I agree with that, that's what I said earlier. The general practice was to sell the freeholds first, and then act against the remaining security.

A 'My recollection is that it is not inconceivable that the bank would have represented to him that his guarantee was a last resort'.

A As I said, David Purcell drafted [it], and I was prepared to sign it."

Later in Mr Wright's evidence (T630/37) Mr Oberdan asked the witness further questions about the matter:

"Q Do you recall me asking you 'Is this the last resort'? And your answer was 'Yes, it is'?

A I don't recall those specific words, but in a number of discussions I had with you about guarantees, and this all started when you were concerned about Mr Ginos, I indicated that it was the general banking practice to deal with the freehold securities first, and then perhaps to deal with the guarantees subsequent to that. That wasn't a legal requirement, it was just normal banking practice at that time.

Q You did say to me words to the effect 'This is a last resort'?

Q You have no recollection of that, or are you saying you could have said it?

A I am saying here, my recollection is it is not inconceivable that the bank would have represented [that this] guarantee was a last resort. I am saying I don't specifically recall saying those specific words, but I do recall discussing with you on a number of occasions what the bank's normal practice was.

Q What would you have said to them. What did you say to them?

A If I am trying to recall a specific event, I can't. In the number of discussions that I had with both you and other people, I would have said something to the effect that the bank's general practice, as distinct from the legal situation, was that it would normally deal with the freehold security first before it then looked to its other avenues of recourse."

Later in examination-in-chief (T669) the following evidence was given:

"Q You would have said those words to me that you said earlier?

Q That you would issue a letter of demand to the borrower, you then would go and sell the property and then anything could happen after that. You would have said that to me?

A Words to that effect. I can't recall exactly what I would have said, but it is a reasonable premise, yes, that if I was asked that question I would have said that the bank's usual practice was to deal with the freehold security first and then after it would you know, what other securities were left could be acted against. Securities covers a whole range of things.

Q Did you say to me that my guarantee was a final resort?

Q If I put to you that's what you said, would you disagree?

37 Mr Purcell was called by Mr Oberdan to give evidence, but after a discussion concerning legal professional privilege Mr Oberdan decided not to ask the witness any questions.

38 I am prepared to accept that Mr Purcell wrote down what he understood Mr Wright said to him and that Mr Wright was prepared to sign the document although he said he himself would not have used the words which appear in the penultimate paragraph. However, I also accept the witness's evidence that if he did mention the matter it would have been by way of explaining the usual practice of the bank. The witness has no specific recollection of any conversation dealing with the topic. The reference to "reasonable premise" indicates that some such conversation might have taken place. It is not clear as to when the conversation might have taken place, although the letter states that the witness was involved with the Oberdan Group from 1987 to May 1989. It is not clear what the phrase "last resort" which is used in the letter is meant to convey but, viewed in one way, it is no more than descriptive of the usual practice of a bank which is referred to above.

39 This evidence falls far short of proving an actual representation which was relied upon by the defendant. In the absence of evidence from Mr Oberdan concerning this issue, I do not think the matter can be taken any further.

40 There is no evidence to support another of the "historical representations" alleged, namely, that the personal guarantees were required as a matter of formality. Nor is there any evidence to support the assertion that, if there was a default, the bank would not look to the defendant's guarantee alone but would look to all guarantees.

41 There was no evidence led to establish the representations alleged in paragraph 35.1 of the Defence which were alleged to have been made concerning a property development in Flinders Street. It was not established that the matters referred to in paragraphs 35.2 and 35.3 concerning the Tostado guarantee had any relevance to the defendant's liability in respect of the guarantees relied upon in this action. There is no evidence to establish a representation to the defendant that the plaintiff would not enforce personal guarantees selectively against the defendant (Defence para 36.4).

42 The plaintiff has not proved the making of the other "historical representations" pleaded in the Defence: nor is there any proof of reliance on any relevant representation. There is no proof of the averments set out in para 36 of the Defence. It follows that the plaintiff cannot rely on any of the historical representations to avoid liability under the St Christopher, Haventide and Edinburgh Castle guarantees in any of the ways pleaded in the Defence. It is unnecessary to set out every aspect of the Defence relied upon as excluding liability in respect of each guarantee by reason of the historical representations. As I have said, it is my view that these representations have not been established on the evidence.

43 There is a further allegation in para 39.3.2 of the Defence that the plaintiff offered to lend the moneys advanced under the St Christopher facility upon the security of guarantees provided by or on behalf of the unit holders, limited to their proportion of the sum borrowed in accordance with their proportion of the units held.

44 I have pointed out that the liability of the defendant under the St Christopher guarantee was limited to the amount of $1.1m plus interest. The bank's internal memorandum (D70.2.13) and the letter (D74.2.21-23) relied upon in paragraph 39.3.2 of the Defence do not refer to any limitation of liability based on the proportion of the units held by or on behalf of the unit holders in the St Christopher Unit Trust. There is no other evidence in the case to support a limitation of this nature having been agreed upon between the parties in the case of any of the guarantees relevant to the case. Later in these reasons I discuss in more detail the assertion by the defendant that the plaintiff agreed to vary the terms of the guarantees along these lines.

The financial circumstances of Joseph Dimasi (Defence paras 47-54)

45 I have said that Augathella Pty Ltd, a company controlled by the Dimasi family, provided a guarantee in relation to the St Christopher transaction. Members of the Dimasi family, including Mr Joe Dimasi, also provided guarantees for the same loan. The defendant claims that before he entered into the St Christopher guarantee the plaintiff formed the view that the Dimasi family would have difficulty in honouring their responsibilities under the guarantee and that Joseph Dimasi, in particular, could not do so. This knowledge, so it was said, should have been passed on to the defendant as it may have been relevant to the willingness of the defendant and Haventide Pty Ltd to enter into the St Christopher guarantee. According to the Defence, the plaintiff owed a duty of care to the defendant and Haventide Pty Ltd to disclose what was known of the financial difficulties of the Dimasi family. It was alleged that the non-disclosure was unconscionable and, further that it was misleading and deceptive conduct contrary to the Trade Practices Act.

46 Particular reliance was placed on a letter dated 21 September 1990 addressed to the plaintiff from the Westpac Banking Corporation (D912.2.88) which is in the following terms:

"We consider Directors A Dimasi and D & N Dimasi reliable and we do not consider they would enter into a commitment that companies Findag Pty Ltd or Augathella Pty Ltd or themselves could not fulfil.

If the Guarantors, jointly or severally were called upon to honour the Guarantees then realisation of assets would be required, or at least extended arrangements made to honour liability.

Joseph Dimasi would not be considered good for the amount of the Guarantee if called upon severally.

We consider Group a good risk in regard to provision of $10,000-00 per quarter towards loan commitment.

This opinion is given confidentially and without responsibility on the part of this Bank, the Reporting Bank and their respective Officers."

47 There are a number of answers to these contentions. In Pooraka Holdings Pty Ltd v Participation Nominees Pty Ltd (1991) 58 SASR 184 at 192 King CJ discussed the limited duty of disclosure which might, in some cases, arise in relation to a contract of guarantee. He said:

"A contract of guarantee is not uberrimae fidei. There is however a limited duty of disclosure. Sometimes it is put upon the basis that the relationship between creditor and surety is such that silence on the part of the creditor as to circumstances relating to the transaction which the surety would not expect to exist and which, if known to the surety, might have affected his decision to enter into the contract, would amount to an implied representation that those circumstances do not exist: Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447, per Gibbs CJ (at 455); Lee v Jones [1864] EngR 23; (1864) 17 CB (NS) 482; 144 ER 194, per Blackburn J (at 502-504, 507; 202-203, 204); Union Bank of Australia Ltd v Puddy [1949] VicLawRp 46; [1949] VLR 242 at 247. However that may be, there clearly is an obligation to make disclosure in certain circumstances. The principles governing the circumstances in which the obligation arises are to be found in the judgment of Lord Campbell in Hamilton v Watson [1845] EngR 568; (1845) 12 Cl & Fin 109 at 119; [1845] EngR 568; 8 ER 1339 at 1343-1344:

'But unless questions be particularly put by the surety to gain this information, I hold that it is quite unnecessary for the creditor, to whom the suretyship is to be given, to make any such disclosure; and I should think that this might be considered as the criterion whether the disclosure ought to be made voluntarily, namely, whether there is anything that might not naturally be expected to take place between the parties who are concerned in the transaction, that is, whether there be a contract between the debtor and the creditor, to the effect that his position shall be different from that which the surety might naturally expect; and, if so, the surety is to see whether that is disclosed to him. But if there be nothing which might not naturally take place between these parties, then, if the surety would guard against particular perils, he must put the question, and he must gain the information which he requires.'

In the Amadio case (supra) Gibbs CJ (at 455) quoted with approval a passage from a judgment of Pollack MR in the unreported case of Lloyds Bank Ltd v Harrison (1925) in which the existence of 'some unusual features' is used as the test to determine whether an obligation to make disclosure has arisen. The duty to disclose was stated by Barwick CJ in Goodwin v National Bank of Australasia Ltd [1968] HCA 30; (1968) 117 CLR 173 at 175 as follows:

'The transaction between the appellant and the respondent was not of a class calling for the fullest disclosure - it was not uberrimae fidei. But it is settled law that a bank in the position which the respondent occupied in relation to the appellant is only bound to disclose to the intending surety anything which has taken place between the bank and the principal debtor 'which was not naturally to be expected', or as it was put by Pollock MR, in Lloyds Bank Ltd v Harrison (1925) (unreported), cited in Paget's Law of Banking (7th ed, 1966), p 583 'the necessity for disclosure only goes to the extent of requiring it where there are some unusual features in the particular case relating to the particular account which is to be guaranteed'.'

The duty to disclose appears to arise out of the creditor's 'assumed superiority of knowledge' (Behan v Obelon Pty Ltd [1984] 2 NSWLR 637, per Samuels JA (at 640)). To give rise to the duty there must be, in my opinion, unusual features surrounding the transaction between the creditor and the surety: (1) of which the creditor is or ought to be aware; (2) of which the surety is unaware and (3) which the creditor appreciates or ought, in the circumstances, to appreciate might be unknown to the surety and might affect his decision to enter into the guarantee."

48 In my view, the financial situation of the Dimasi family did not constitute an "unusual feature" surrounding the transaction between the plaintiff and the defendant. Particular reliance was placed on the non-disclosure in relation to Joe Dimasi. However, he was one of four members of the Dimasi family giving personal guarantees. It has been held that creditors can expect each co-guarantor to make his or her own enquiries concerning the credit worthiness of the other guarantors. This is particularly so if they are co-venturers (Behan v Obelon Pty Ltd [1985] HCA 51; (1985) 157 CLR 326).

49 Furthermore, I accept the uncontested evidence on this issue of Mr Royans who has been employed by the plaintiff for approximately 34 years. He first came into contact with the defendant's account in 1987. He gave evidence that he rang the defendant after he received the Westpac opinion and before the relevant guarantees were signed asking him whether he realised he was bringing a weak partner into the transaction (T688). According to Mr Royans, the defendant said he was aware of this consideration, but was confident that it would not cause any problem.

The financial circumstances of the Ginos Group (Defence paras 87-90)

50 A similar point is raised in relation to the Ginos interests. It is pleaded by the defendant that, by no later than 14 June 1990, the plaintiff knew that Zisis Ginos and the Ginos group of companies were in financial difficulty and that Ginos Holdings Pty Ltd was unlikely to be able to meet its liabilities including those liabilities arising out of the St Christopher facility. It is pleaded that if the defendant had been informed of this he would have had the opportunity to sell some or all of his properties and manage his affairs so as to reduce or avoid exposure to liabilities he had incurred.

51 It would seem unlikely that the defendant would not have known that Mr Ginos was experiencing financial difficulties. Mr Royans gave the following evidence in answer to questions from the defendant (T690):

"Q Have you, at any time, discussed Ginos's financial affairs with me?

A Primarily, with Ginos, it would have been late 80s or early 90s, when property values were contracting, Ginos was having difficulty meeting his obligations. In the joint venture deals that you had with him, and also involving joint ventures that you were in with Raptis, there were assets being bought and sold. As assets were being sold, Ginos was always looking for a bit of cash.

Q We have got to get this fairly clear in your mind, and mine. You said you told me about Ginos's affairs. I'd like to know exactly what you told me, if you can remember?

A I may not have mentioned anything specifically about Ginos's affairs. I'm not at liberty, in the context of Ginos in isolation, to discuss any information with you, but in simple terms, the cracks were starting to emerge. Ginos was looking for funds. He would ask, when a property was sold, that we would disgorge some of those funds, and in this regard I'm talking about your joint venture transactions, and there was reluctance on your part, often, to let him have that amount of money.

Q But that would have been usual right through for Ginos to ask for money on properties that were sold on percentage. That was always usual right from the start, wasn't it?

A I can only talk about the period that I was involved with the file.

A From 1987 there would have been times when properties were sold and funds were disgorged. Now, in the later part of the association, towards the late 80s into the 90s, Ginos was looking for more funds to meet his obligations, and there was resistance on your part, often, to let him do that. Often I'd ring you up and say 'Zisis has asked for $200,000'. Because it was a joint venture you would want 200,000 as well.

A Right, in that situation, but you would often say 'No, only give him 100,000'.

A I can't be specific. That happened on a number of occasions.

Q Have you, at any time, disclosed Ginos's bank affairs; his personal structure or affairs?

Q Have you ever discussed with me Ginos's bank affairs; in other words, that he had financial problems. Have you shown me any statement, have you done any of that?

A No, I would only talk to you in the context of the association that Zisis had with the bank.

52 Later in his evidence Mr Royans gave the following evidence (T770):

"A Ginos had facilities with other lenders than us, and I think it was known in the marketplace that, particularly with the demise, or with the reduction in property values, that he was having difficulty.

Q Are you suggesting it was Mr Oberdan who said to you that Mr Ginos was known to have some financial difficulty?

A Mr Oberdan was aware of Mr Ginos's situation, yes.

A Based on discussions I've had with him. At one point he actually mentioned that he had been contacted by other people and asked to try and settle some of his debts. That's actually documented in a file."

Counsel for the plaintiff then referred Mr Royans to a minute which he had written in August 1990 which contained the following statement:

"However, Oberdan is well aware of Ginos's financial situation and with the offers now appearing, is realistic enough to walk away from the project to take in what would appear on paper to be a tidy profit without the ongoing worrying commitment in respect of finance."

Mr Royans said that this was his view at the time he wrote the memorandum.

53 I am of the view that it would be quite inappropriate in the circumstances of a case such as the present to impose upon the plaintiff a duty to keep co-guarantors up to date with the financial standing of co-guarantors during the period of a guarantee. Furthermore, I find that the defendant was aware of the financial difficulties of the Ginos group at the relevant time.

54 Apart from relying on the historical representations to avoid liability under this guarantee, the defendant has pleaded that a series of alleged representations by bank officers referred to as "the Haventide guarantee representations" also render this guarantee void and unenforceable. Reliance is placed upon breach of duty of care and breaches of the Misrepresentation Act (SA) 1971, the Fair Trading Act (SA) and s 52 of the Trade Practices Act (Commonwealth). It is also pleaded that it would be unconscionable and inequitable to enforce the guarantee by reason of failure to comply with the various representations alleged.

55 The statements referred to as "the Haventide guarantee representations" are set out in the Defence as follows:

"59.1 That the plaintiff needed the defendant's guarantee to comply with the plaintiff's formal lending requirements;

59.2 That the plaintiff would have its own valuers assess the values of the properties, by which the plaintiff meant and meant the defendant to understand, and the defendant understood, that the plaintiff was lending to the defendant's companies based on the assessment that the plaintiff had made of the value of the security it had taken or would take;

59.3 That any guarantee taken from the defendant including the Haventide guarantee was a last resort and would never be called up or enforced until the Bank had realised on all securities that it had taken;

59.4 That the plaintiff would never make a claim or pursue an action against the defendant under any guarantee taken from the defendant, including the Haventide guarantee, unless the plaintiff incurred a loss or shortfall after the plaintiff had first in time:

(a) realised on all of its securities and mortgages in relation to all facilities guaranteed by the defendant;

(b) taken all possible legal actions to recover moneys due to it by its borrowers for any debts guaranteed by the defendant;

(c) taken all possible legal action to recover money from any other party that was liable to the plaintiff indirectly for debts guaranteed by the defendant such as co-guarantors."

56 There are obvious similarities between these allegations and the averments which constitute the historical representations. Again, it must be said that, although the evidence is that the bank would normally require guarantees in a case such as the present and that it would obtain its own valuation of the property put forward as security, there was no undertaking given to Mr Oberdan or agreement reached with him whereby the bank, in the event of default under the loan, would enforce the securities in a particular order or wait until incurring a loss or shortfall after realising on the securities before proceeding against the plaintiff or that guarantors would be proceeded against in a particular order. The evidence goes no further than establishing that the bank's normal practice was to attempt to realise first on the property put forward as security.

57 The historical representations and the Haventide representations are also relied upon as rendering the Edinburgh Castle guarantee void and unenforceable. Again, any defence based on these alleged representations must fail for the reasons set out above.

The alleged agreement to vary the terms of the guarantees (Defence paras 82-86)

58 According to the defendant's pleadings, the plaintiff agreed to vary all guarantees given by the defendant and Haventide Pty Ltd so as to limit the defendant's liability in each case to the extent of the percentage interest which the defendant and Haventide Pty Ltd held in the various properties for which the loans were advanced. This issue was pleaded as follows:

82. The St Christopher guarantee provided for a limit of $1.1m on the liabilities of the defendant and Haventide (equivalent to 25% of the principal amount of the St Christopher facility).

83. In and about 1988, at a series of meetings between the defendant and one or more of Messrs Mullins, Wright and/or Royans at the offices of the plaintiff at 100 King William Street Adelaide the defendant and the plaintiff:

83.1 Discussed the variation of all guarantees given by the defendant and Haventide to ensure that their liability was restricted to a proportion (being the proportion of 'their' interest in the underlying properties) of any debt after the properties in question had been sold; and

83.2 The plaintiff agreed that all guarantees given by the defendant and Haventide, including the St Christopher guarantee, would be so varied ('the variation agreement');

83.3 The variation agreement was oral. It comprised requests by or on behalf of the defendant at meetings or in discussions leading up to and at the meeting at which the agreement was made. The agreement was made at a meeting at the offices of the bank [sic] late 1987 or early 1988 at which Mullins agreed in terms of paragraph 83.2;

83.4 During the said period, the defendant met with and spoke with the said officers of the plaintiff on many occasions. He cannot now identify on which occasions the said meetings occurred. The fact of the variation agreement, but not the dates of its negotiation, is supported by inter alia the plaintiffs memorandum of 9 January 1991;

83.5 The consideration which passed for the variation agreement was the defendant's continued conduct of his accounts and those of the companies associated with him with the plaintiff.

84. The variation agreement was intended by both parties to be a binding legal agreement and:

84.1 The plaintiff partly performed the variation agreement by varying, inter alia, a guarantee or guarantees relating to Quantic Pty Ltd; and

84.2 The defendant relied on the variation agreement in continuing to conduct his banking affairs with the plaintiff, and the plaintiff thereby earned fees and interest.

85. In breach of the variation agreement, the plaintiff failed to amend the St Christopher guarantee in the manner agreed.

86. Notwithstanding the variation agreement, and without amending the terms of the St Christopher guarantee or having it re-executed by the defendant, the plaintiff;

86.1 From time to time after 1988 extended, renewed or continued the St Christopher facility, and

86.2 In about 1991 extended the St Christopher facility by an amount of $200,000."

59 It was put to Mr Mullins that, at a meeting in 1987 attended by Mr Mullins, the defendant and another officer from the bank, Mr Sharpe, the defendant's accountant, and Mr Saint, his solicitor, it was agreed that the St Christopher guarantee would be varied. Mr Mullins said he had no recollection of such an agreement. Mr Mullins said in evidence that he did not have a specific recollection of any meeting with Mr Oberdan at which guarantees were discussed. He said he had no recollection of agreeing to vary any guarantee. He said that matters such as variations would not be agreed at a meeting. The procedure would have been to agree to consider a request from a client and, in the case of an account of this size, approval would have to be obtained from another authority within the bank (T360).

60 Mr Wright had dealings with the defendant's account beginning in 1986. His immediate superior was Mr Mullins and he took over Mr Mullins' job in about 1987. He said (T614) that he could remember attending a number of meetings with the defendant at which guarantees were discussed. When asked if Mr Mullins agreed to vary any guarantees at these meetings the witness said (T615):

"A Well, there are two or three points there. Peter [Mullins] wouldn't have been in a position to agree to the variation, assuming hypothetically that the discussion took place. He wasn't empowered to vary them. He might have given you an undertaking to seek approval to vary them, but it wasn't within his power to do so. So, in the event that that discussion took place, he would have normally written a diary note or a file note to that effect, and then would have needed to write a credit paper seeking formal credit approval to do that. So, there should be a chain of correspondence supporting a change in the guarantees, or the mooted change in the guarantees. To answer your final point, assuming that the credit approval was granted, the actual changing of the actual document itself would have been undertaken by Loans Department, not Corporate International.

Q Are you saying that Peter Mullins had no powers whatsoever to make the amendment?

A He wouldn't have had the power to change the nature of the guarantee in his own right, or I don't believe he did.

Q But you don't disagree that the Quantic guarantee and St Christopher guarantee were discussed.

61 The defendant's accountant, Mr Sharpe, gave evidence that he attended a meeting in about 1988 when the Quantic and St Christopher guarantees were discussed. I discuss the Quantic guarantee later in these reasons. He said officers of the bank were present along with Mr Saint, the defendant's solicitor. When asked by the defendant to describe what happened at the meeting Mr Sharpe said (T390):

"The meeting was to discuss the guarantees in relation to joint venture parties. I think the thing that caused the meeting to be called - I am pretty sure this was the case - was the particular borrowing in relation to St Christopher. You didn't want that to be a joint and several borrowing and the crux of the meeting was to try to limit the guarantees to - I think the idea was - to the shortfall, any shortfall after disposal of the property, limited to the percentage interest of each person in what was then the St Christopher Unit Trust."

62 He was asked what Mr Mullins said at the meeting:

"I can't quite now remember what he said, but I can probably talk about what I thought was my memory of the outcome was [sic]. My memory of the outcome was that he would limit the guarantee on St Christopher and the bank would further look at - I don't think he actually gave a firm undertaking - but would look at limiting the other guarantees on the other joint venture arrangements, in particular, the Quantic arrangements."

63 Mr Sharpe said that liability for borrowing was joint and several and that, on his understanding, there was liability for the full amount of the debt of about $4.4m. Mr Sharpe agreed that his recollection as to the terms of the guarantee may have been wrong.

64 I found Mr Sharpe's evidence vague and I am firmly of the view that the bank officers did not there and then agree to some reduction in liability under the St Christopher guarantee. Mr Saint did not give evidence, nor, in subsequent correspondence with the bank, did he claim that such an agreement had been reached. In any event, there was no consideration for any undertaking to vary the guarantee.

65 The documentary material before me discloses that there were discussions about variations to the St Christopher guarantee in late December 1990 and early 1991. It was at about this time that the St Christopher facility was increased by $200,000 and Thomson Simmons raised with the plaintiff the question of a variation to the St Christopher guarantee. There was no assertion made by the defendant or his solicitors at this time that a variation had been agreed, but a proposal was put forward for a variation.

66 In an internal memorandum dated 9 January 1991 (D100.2.124) Mr Royans wrote:

"Thomson Simmons & Co have pointed out the wording of the guarantee is different from those relative to Quantic and Tostado, and their advice to Oberdan is that we should prepare and have him execute a new guarantee covering 10% of any residual debt after realisation of freehold values. It is appropriate to mention that in the case of Quantic and Tostado this approach by Head Office, and the appropriate wording of the guarantee provided by Legal Department. As a result, we could confidently follow past practices in relation to wording.

To amend guarantees at this point in time is not the most desirable option, particularly given our reservations about the strength of Ginos, however, it is the basis on which Oberdan requires us to proceed, and we need to consider his request. In essence, if we are to proceed, we essentially need to have new guarantees taken from guarantors on similar basis to that proposed by Oberdan, with the percentage of residual debt in respect of the guarantee relative to the ownership of St Christopher, which is Oberdan 25%, Ginos 25%, Piscioneri 10% and the Dimasi/Augathella Pty Ltd connection 40%. We are, of course well aware that Oberdan has indicated he would support his brother-in-law Vince Piscioneri if need arose.

Deliberations are really centred on the value of the property at net $6.25 following a revaluation last year versus aggregate debt of some $4.673M, coupled with on-going servicing. In respect of servicing, major tenant in the building, Westpac, is fixed to rentals until leases expire in February 1993, say two years hence, and whilst we will be looking for indications from company of their intentions prior to this date, I believe we can be reasonably comfortable re servicing for the next two years, despite the fact our calculations show a minor shortfall in respect of servicing which is to be made up by the directors/shareholders. As previously mentioned, Ginos is the real concern in the transaction, but I believe his own affairs will be much more clearly known within a much shorter time frame than two years.

The rearrangement of guarantees as sought by Oberdan is, as pointed out, not the most desirable result but one which is still believed to be reasonably acceptable in terms of commercial risk, and I would propose that we proceed to redocument along these lines."

The officer to whom the memorandum was addressed wrote "Agree. Approved" on the memorandum and enquiries were made of the bank's internal legal department concerning the wording of a proposed amended guarantee. The in-house solicitor's reply was forwarded on 18 January 1991 and no objection was raised to the proposed wording which had been submitted to him.

67 It appears from a memorandum of Mr Royans dated 25 February 1991 (D153.5.11) that details of a re-worded guarantee were sent to the defendant's solicitors. The solicitors were not prepared to recommend to the defendant that he agree to a variation in the terms suggested by the plaintiff. The situation is summarised in the following extract from Mr Royans's memorandum:

"Position has been queried further and we now have the attached letter from Thomson Simmons & Co. As pointed out by them there is no commitment on us to realise on the freehold security before calling on the guarantee. This is of course exactly how we require arrangements to be and whilst it could be argued that in the normal course we would always look to realise on the freehold there is of course the possibility that the property may not sell where recovery action was necessary and then we would turn to the guarantors. Under this equation Oberdan's liability would be no greater than $1.1M and in any event we would be required to place the funds in a guarantor/third party mortgagors realisation account pending the ultimate sale of the property.

It would not be CBA's intention to be tied to requirements as set down by Thomson Simmons & Co.

As I see it Oberdan has two choices. Firstly he can accept the original guarantee which limits him to a maximum of $1.1M or take the latest option of being liable for 25% of the debt which essentially limits his liability to $1,1500,00 given the recent increase in facilities to $4.6M net. If therefore he has confidence in the property and the property market generally then he should not perceive a risk on this basis and these arrangements should therefore be acceptable. It would be appropriate to respond to Thomson Simmons & Co along these lines."

68 This impasse was not resolved and the guarantee was not varied.

69 In my view, these events demonstrate that there had not been any concluded agreement to vary the terms of the St Christopher guarantee. This was clearly the case in relation to the events in 1991 and it is of significance that the defendant's solicitors did not claim on behalf of their client that an agreement to vary the guarantee had been made at an earlier point in time.

Compromises with the Ginos and Piscioneri Interests

70 It is not in dispute that the plaintiff entered into agreements with representatives of the Piscioneri interests whereby the plaintiff accepted amounts considerably less than it was entitled to under the relevant guarantees. Mr Ginos obtained a release for his interests in respect of certain guarantees, but it appears that the St Christopher guarantee was not part of a finalised settlement between the Ginos interests and the plaintiff.

71 Clause 11 of the guarantees which is set out above enables the plaintiff to release any guarantor without affecting the liability of a co-guarantor. There is no reason for not giving effect to this clause in the present case. (See the discussion in O'Donovan and Phillips, The Modern Contract of Guarantee (3rd ed) 384-386).

72 It has not been established that this condition was modified in any of the guarantees or that there was any representation made by the officers of the plaintiff which would have any effect on its enforceability. Indeed the evidence is quite to the contrary in relation to the Piscioneris. Mr Oberdan wrote to the plaintiff on 2 March 1995 (P41) in reference to the Edinburgh Castle guarantee in the following terms:

"I have been informed by Mr Vince Piscioneri that he has been negotiating with the Commonwealth Bank for a compromise of the indebtedness of V & G Piscioneri Investments Pty Ltd and any other associated liability of Vincenzo or Graziella Piscioneri. As part of the compromise the Bank requires the consents of all other debtors and guarantors pursuant to advances made to the above entities.

I personally and my company Haventide Pty Ltd have been requested to execute an authority to enable V & G Piscioneri Investments Pty Ltd and Vincenzo and Graziella Piscioneri to be released from any further obligations to the Commonwealth Bank pursuant to the compromise arrangements negotiated with you. Please note that I am supportive of the Piscioneris in negotiating with the Bank to settle any claims in full and final satisfaction without litigation. Whilst my Company and I consent to the release of V & G Piscioneri Investments Pty Ltd and Vincenzo and Graziella Piscioneri, Haventide Pty Ltd and I personally do not necessarily accept any liability in relation to the advances made by the Commonwealth Bank to the above entities and respectfully reserve our rights in these matters. I trust that our execution of the authority under these terms is acceptable to the Bank to enable the compromise with the Piscioneris to be finalised."

73 There is also evidence that Mr Oberdan was favourably disposed to a settlement between the plaintiff and the Ginos interests. On 11 August 1994 Arthur Andersen and Co, writing on behalf of Mr Oberdan, advised the plaintiff:

"We confirm that we have subsequently spoken with Mr Vince Oberdan and requested that he speak with Mr Zisis Ginos. Mr Oberdan will endeavour to speak with Mr Ginos today and again request him to put a proposal to the Bank in full and final satisfaction of the liabilities of the companies and Mr Ginos personally. We cannot guarantee that Mr Ginos will respond but reiterate that any proposal needs to be separately negotiated between Mr Ginos and the Commonwealth Bank and that those negotiations should not prejudice any satisfactory arrangement agreed between the Bank and the clients who we are currently representing."

74 I have set out para 84 of the Defence which asserts that the Quantic guarantee was varied following an agreement by the bank to vary all the guarantees. The Quantic guarantee was a guarantee entered into on 17 August 1988. The defendant and V. Oberdan Nominees Pty Ltd guaranteed a loan by the plaintiff to Quantic Pty Ltd (Quantic).

75 Quantic was formed in 1984 to be used as a vehicle to acquire and develop various interests in the Adelaide CBD. These developments were joint ventures undertaken by the Oberdan and Ginos families. One of the major developments was the Australian Taxation Office building in Waymouth Street.

76 Borrowings by Quantic were guaranteed by the defendant, V. Oberdan Nominees Pty Ltd, Zisis Ginos and Ginos Holdings Pty Ltd. The guarantee provided by the Oberdan interests stated that the total amount payable by the Oberdan interests was not to exceed 50 per cent of the moneys secured from time to time. There was a similar provision in the guarantee provided by the Ginos interests. However, as has been pointed out, this limitation is not present in the St Christopher and Edinburgh Castle guarantees which also involved guarantors from interests other than those associated with the Oberdan family. Nor, as I have found, was there any agreement by the plaintiff to vary these guarantees so as to incorporate provisions similar to the limitation in the Quantic guarantee.

The support representations (Defence paras 91-107A)

77 The defendant was involved in a project at Caravonica, in Cairns. The project was undertaken with funding from Elders Finance Group Limited (Elders). In 1991 the defendant commenced negotiations with the plaintiff with a view to obtaining funds from the plaintiff to re-finance the Caravonica project. It is claimed in the Defence that Elders made a series of demands on the plaintiff between June 1991 and September 1992.

78 On 14 January 1992 Mr Sharpe of Peat Marwick, accountants, wrote to Elders on behalf of the defendant stating that the defendant understood the plaintiff would re-finance the Caravonica project once settlement had taken place in relation to the site which Quantic was preparing for the Australian Taxation Office.

79 According to the defendant's pleading (para 96) Mr Wilson, who was an officer of the plaintiff, gave assurances and undertakings to the defendant that the defendant should focus his efforts on resolving the affairs of Quantic, particularly in relation to the ATO project; that the plaintiff was behind the defendant "100 per cent"; that the plaintiff would never make demands on the defendant similar to those made by Elders; and that the plaintiff would give the Oberdan Group sufficient time to realise properties subject to the plaintiff's mortgages in orderly fashion or to hold them as investment properties in accordance with the best potential of each property.

80 It is also alleged in the Defence that Mr Wilson made representations to the effect that upon settlement of the sale of the ATO site, the plaintiff would look favourably on financing the Caravonica project on a stand alone basis for a normal lending term. The latter representations are referred to in the Defence as "the Caravonica representations".

81 It is further alleged that, in relation to the Edinburgh Castle facility, Mr Wilson stated and represented to the defendant that once a tenancy agreement had been established, the plaintiff would agree to re-finance the hotel in the medium term.

82 All of the above representations, including the Caravonica representations, are described in the Defence as "the support representations".

83 It is unnecessary to set out the extensive pleadings relating to this aspect of the plaintiff's Defence, but the effect of them is that the defendant relied on the various assurances and representations referred to and that he was encouraged to concentrate his efforts in various areas and to continue with developments rather than take steps to reduce his exposure to the plaintiff in respect of the properties which they had financed. It is claimed that expense was incurred in achieving the maximum value of certain specified properties. Further, it is alleged that, in breach of the Caravonica representations, the plaintiff failed to provide funding for the Caravonica property on the terms represented, but rather offered terms that were less advantageous than those comprised in the Caravonica representations.

84 The defendant called Mr Wilson and questioned him about a number of issues including the Caravonica development. Mr Wilson is a former employee of the bank. He commenced working there in 1993. He first had dealings with the defendant when he joined the Corporate and International Banking Section in early 1991.

85 Mr Wilson agreed in evidence that the ATO development was of critical importance to the defendant's situation. He also said that he stated at the time that the bank would consider funding the Caravonica development. He did not agree with the defendant's assertion that the bank made a specific commitment to funding the Caravonica development on a stand alone basis. Mr Wilson said he had no recollection of discussions concerning the lease of the Edinburgh Castle Hotel. There is no evidence that the plaintiff represented to the defendant that the plaintiff would re-finance the hotel as soon as a tenancy arrangement had been established.

86 I have referred to the letter from Mr Sharpe of Peat Marwick to Elders concerning the Caravonica development. The last paragraph of the letter (P63.7.13) reads as follows:

"Mr Oberdan considers that once the settlement has taken place the Commonwealth Bank will favourably look at the re-financing of the Caravonica sub-division. In the circumstances, it is requested that you further extend the existing facility to the 31st March, 1992. Your favourable response will be greatly appreciated."

87 Mr Sharpe said in evidence that he faxed a copy of this letter to Mr White and Mr White advised that "the letter was okay". Mr Sharpe wrote a note to this effect on the front sheet of the facsimile.

88 I accept that there is evidence that Mr White agreed with the contents of the letter. On the other hand, there is no evidence that the plaintiff made a firm commitment to finance the Caravonica development as at the time when Mr Sharpe's letter was written. It was in the defendant's interest to bring the ATO development to a successful conclusion. It has not been established that he acted to his detriment by reason of the plaintiff giving an indication that it would look favourably at re-financing the Caravonica development. In fact the plaintiff did offer to re-finance the development in due course but the defendant rejected the proposal. It is pleaded in the Defence that the plaintiff's offer was not made in good faith, but there is no evidence to support this contention.

89 The claim that the plaintiff made the support and Caravonica representations; that the defendant acted upon the representation; and that these representations constituted misleading and deceptive conduct (Defence para 107A) is not made out. There is simply no evidence to establish these averments. The plaintiff was entitled to commence enforcement action in relation to each of the three guarantees when it did.

90 The defendant devoted most of his written submissions at the conclusion of the evidence to the issue of unconscionability. He relied on the following assertions which he said supported his claim that the plaintiff acted in an unconscionable manner:

1 The defendant was placed at a special disadvantage as guarantor for the St Christopher loan.

2 The plaintiff took unfair advantage of the defendant by not providing him with information concerning the affairs of the Ginos and Dimasi families and their companies which would have revealed that they were in financial difficulty.

3 The plaintiff agreed to the rollover of loans which the Ginos and Dimasi groups co-guaranteed without informing the defendant of the poor financial situation of the co-guarantors.

4 The plaintiff settled its claims against the financially weaker co-guarantors and concentrated its recovery efforts on the defendant.

5 The plaintiff agreed to limit the defendant's liability under the St Christopher guarantee and other guarantees, but the deeds of guarantee were not amended in accordance with such agreement. The defendant nevertheless acted upon the representations that the guarantees would be altered and he conducted his affairs accordingly.

91 The defendant summarised his submissions on this issue by commenting:

"The evidence I have referred to shows that the Bank knew what had been said to me and what I understood about how the Guarantees would be enforced. It shows they deliberately denied me information and strung me along, all the time intending to make me responsible for as much debt as possible. It shows that the Bank did not act in good faith, and its conduct was unconscionable."

92 The jurisdiction to grant relief in equity where one party unconscientiously takes advantage of another who is in a position of special disadvantage was described by Kitto J in Blomley v Ryan [1956] HCA 81; (1954) 99 CLR 362 at 415:

"This is a well-known head of equity. It applies whenever one party to a transaction is at a special disadvantage in dealing with the other party because illness, ignorance, inexperience, impaired faculties, financial need or other circumstances affect his liability to conserve his own interests, and the other party unconscientiously takes advantage of the opportunity thus placed in his hands."

93 This statement was approved in Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447 Deane J summarised the principle in the following way (at 474):

"The jurisdiction is long established as extending generally to circumstances in which (i) a party to a transaction was under a special disability in dealing with the other party with the consequence that there was an absence of any reasonable degree of equality between them and (ii) that disability was sufficiently evident to the stronger party to make it prima facie unfair or 'unconscientious' that he procure, or accept, the weaker party's assent to the impugned transaction in the circumstances in which he procured or accepted it. Where such circumstances are shown to have existed, an onus is cast upon the stronger party to show that the transaction was fair, just and reasonable: 'the burthen of shewing the fairness of the transaction is thrown on the person who seeks to obtain the benefit of the contract' (see per Lord Hatherley, O'Rorke v Bolingbroke (1877) 2 App. Cas., 814 at p823; Fry v Lane (1888) 40 Ch.D. 312 at 322; Blomley v Ryan [1956] HCA 81; (1956) 99 CLR 362 at pp428-429."

94 I have dealt with each of the allegations made by the defendant in relation to this issue when dealing with other pleadings in the Defence. I repeat my view that the plaintiff did not give any binding undertaking that the defendant's obligations under the guarantees would be varied in the manner contended for by the defendant; nor did the plaintiff's officers make any representations that the defendant's obligations would be so varied. Furthermore the plaintiff was under no obligation to provide the information about the financial standing of the co-guarantors which is referred to in the defendant's submissions. For the reasons which I have given, the plaintiff was also entitled to seek enforcement of its rights against the defendant under the guarantees in the manner in which it did. I find that the defendant was not in a position of special disadvantage in the sense discussed in the cases dealing with unconscionable conduct. Throughout the period which is relevant to these proceedings he was a skilled developer with an excellent grasp of the financial affairs of the business interests which he controlled. It has not been established that he had anything but a clear understanding of his obligations under the guarantees which the plaintiff now seeks to enforce. In my view, the plaintiff did not, at any stage, take unfair advantage of the defendant. It is unfortunate that changed economic conditions severely affected the defendant's extensive undertakings in property development.

The Enforcement Procedures (Defence paras 108-110)

95 There is no evidence that the plaintiff failed to take the appropriate procedural steps to enforce its rights under the guarantees as is alleged in para 108 of the Defence. The defendant makes further complaint that the properties which were the subject of the loans guaranteed by the defendant were sold for less than what they were worth. Subject to statutory modifications, the duty towards a guarantor in this respect appears to be confined to acting bona fide. (O'Donovan and Phillips, The Modern Contract of Guarantee (3rd ed) p 407). But in any event, it has not been established in this case that the properties were sold for other than their true market value. There is no evidence of the value of the properties at the time of sale apart from the price realised in each case. The Defence goes further and alleges that, by making and then breaking the "support representations" the plaintiff caused the properties to be sold after a period of decline in their values. However, I have found that the making of these representations and reliance on them has not been proved. The averments on this issue in the Defence must be rejected.

96 The defendant seeks rectification of the three guarantees upon which the plaintiff relies along with declarations that the guarantees are unenforceable in their present form. The matters relied upon as justifying these orders are the same as those referred to in the Defence. As I have rejected these arguments, the counterclaim must be dismissed.

97 The defendant has not put forward any reason why the plaintiff's rights under the guarantees should not be enforced. For the reasons which I have given there will be judgment for the plaintiff in the sum of $11,191,197.06. The counterclaim is dismissed.