See also Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413 at [51]. In my opinion the facts of, and findings in, that case as expounded in [54]-[56] are a far cry from those in the present case.
62 The improvident transaction submission advanced by Mrs Crowe relied for its factual underpinning upon the assertion by Mr George in his memorandum of 9 September 1994, based on Mr Connolly's projection that the first 12 months of operation of the proposed venture would result in a deficit of $106,476, that Darkcm could not service the loan in the short term. It was submitted that on the face of the cashflow as reworked by Mr Connelly, the conduct of the operation could only lead to immediate insolvency of the borrower and the guarantors. Furthermore, it was submitted that this was reinforced by Mr George's opinion that the Bank was
"now committed to a higher level of risk than the Bank would normally seek".
63 Mr George was not correct in this last-mentioned comment, with respect to the Bank's commitment, unless the Bank's offer was accepted within 14 days of its date. As it was not so accepted, it was open to the Bank to withdraw the offer at any time thereafter. It did not do so and it is pertinent to note that Mr George did not suggest in his memorandum that if the offer was not accepted within 14 days then it ought to be withdrawn.
64 More importantly, at Mr George's insistence the cashflow was recast by BBO Griffith to reflect the Rice Board orders and the more up to date information which Messrs Weekley and Maxwell had received from Mr Crowe and which resulted in the reworked cashflow attached to their Office Minute of 27 September 1994. As I have already observed, this reduced the deficit in the first year of operation from $106,476 to $33,455. Furthermore, at no time did the closing balance for the year exceed $54,000. This is to be contrasted with Mr Connelly's comment in his valuation, picked up by Mr George in his memorandum of 9 September 1994, that the proposed cashflow for the first 12 months indicated that the overdraft would be exceeded by up to $40,000 unless another source of funds could be obtained, such as Rice Board orders. It is interesting to observe, albeit in hindsight, that at no time during the first year of operation of the venture did the overdraft exceed its limit by more than $10,039 (see [38] above). Throughout that year the overdraft was at times below its limit and, after January 1995, never exceeded its limit by more than $9,400.
65 Notwithstanding the opinion of Mr George, the final decision of the two Bank officers responsible for approving the facility was that, even though that there would be some trading loss at the end of the first 12 months of the venture, nevertheless both those officers as well as the Bank's valuer, Mr Connelly, considered that Darkcm would generate sufficient income to service and reduce the debt within the period of the proposed rice farm leases as a consequence whereof the venture was worthy of the Bank's support. Given that his Honour was satisfied that this opinion was genuinely held by the Bank's officers in Griffith and one they would reasonably form, I see no error on the part of his Honour in declining to find that the Bank knew or ought to have known that it was likely that Darkcm would be unable to service repayments whether in the short or the long term.
66 Furthermore, what may have been an improvident transaction as originally proposed (when it included the ostrich breeding venture) was rendered provident when that aspect of the venture was deleted from it and when allowance was made for the extra funds which were to be generated from Rice Board orders and the other sources of income referred to in Mr Maxwell's Client Contact Sheet dated 12 October 1994 relating to his discussion with Mr and Mrs Crowe on 7 October 1994.
67 Faced with what was obviously a more optimistic reworked cashflow than that the subject of Mr George's opinion, Mrs Crowe submitted that not only should she have been advised of Mr George's concern but also, in order to place Mrs Crowe in a position where there would be some reasonable degree of equality between her and the Bank, she should have been provided with a copy of the reworked cashflow attached to the Office Minute of 27 September 1994 and required to obtain independent financial advice thereon. Only by taking those steps would she be placed in a position not only to appreciate the risks associated with the transaction but also to exercise a free and informed choice as to whether to proceed with the transaction at all. It was submitted that the reworked cashflow involved a change of circumstances on which she had never received financial (as distinct from legal) advice. If she had received that advice, she would have realised, so it was contended, that there was a greater risk of her losing the property than she had originally appreciated.
68 To make the above propositions good it was, in my opinion, necessary for Mrs Crowe to establish that she lacked assistance and advice where assistance and advice were plainly necessary if there was to be any reasonable degree of equality between herself and the Bank: cf Amadio at 477. However, I am of the opinion that no such assistance or advice was required with respect to the reworked cashflow.
69 Firstly, the risks associated with the amended operation which deleted the ostrich breeding proposal were fewer than those which had attended the cashflow prepared by Mr Anderson and upon which she would have received advice. Secondly, to her knowledge, circumstances had changed in terms of the further funds or income that would be available to the venture given the anticipated Rice Board orders and other sources of income conveyed by Mr Crowe to the Bank on 1 and 6 September 1994 and subsequently. Thirdly, the deficit at the end of the first year of operation (as estimated by Mr Anderson) was $14,167 and, according to the reworked cashflow, $33,455. As I have already observed, I do not regard the difference between these two figures as particularly significant. What is clear is that a deficit of $33,459 is significantly less than the $106,476 deficit upon which Mr George based his critical comments. Of itself this does not negative a requirement for independent financial advice but the other factors to which I refer render it of less importance in terms of Mrs Crowe's stated attitude with respect to the proposed loan.
70 Fourthly, Mrs Crowe was aware of the reworked cashflow as it was discussed with her as well as with Mr Crowe by Mr Maxwell, at the meeting of 7 October 1994. In particular, notwithstanding that the letter of offer stated that the overdraft was repayable on demand, Mrs Crowe was informed that the loan would only be called up "in the last resort" or if there was a default of such a nature that "no ability to service [was] evident". Given that it was common ground that the venture would show a profit in the second and subsequent years of operation and that Mr George's concern was whether the debt could be repaid before the 5 year proposed rice farm lease terms expired, it is not surprising that in these circumstances, as turned out to be the case, no action would be taken by the Bank to declare default under the facility at the end of the first year of operation. Mr and Mrs Crowe, according to the Client Contact Sheet of 12 October 1994, were "adamant" that they would reduce the facility substantially over first two years of its operation. In these circumstances I do not consider that it was incumbent upon the Bank's officers to recommend that Mrs Crowe receive independent financial advice upon the reworked cashflow.
71 But even if one assumes that Mrs Crowe ought to have received such advice, its receipt would have made no difference to her proceeding with the transaction. In this regard, there are two matters that require noting. The first is his Honour's finding (at [301]) that Mrs Crowe trusted the assurances given by her husband as to the success of the farming operation and that she would have proceeded with the loan irrespective of what she was told by professional advisors. It is important to note that Mrs Crowe was not asked whether, had she received financial advice as now advocated by her, her decision to proceed with the 1994 transaction would have been any different to what it was. There is simply no evidentiary foundation to support Mrs Crowe's submission on the appeal that if she had seen the revised the cashflow (which she apparently had) and received advice as to the risks associated therewith, she would have pulled out of the transaction.
72 His Honour's findings that firstly, Mrs Crowe clearly understood the risks associated with the transaction and, in particular, that there was a risk that she could lose the property in the event that there was default in the repayment of the facility; secondly, she understood the purport and effect of the transaction which were explained to her by two solicitors (at [279]); thirdly, she never believed the risk of losing the property would eventuate; and fourthly, she did not enter into the 1994 transaction because she was afraid of her husband and considered that she had no choice but to do so, all point inevitably to the correctness of his Honour's conclusion that Mrs Crowe was not relevantly in a position of special disadvantage vis-à-vis the Bank.
73 The second noteworthy point is that Mrs Crowe was not (unlike Mr and Mrs Amadio) a third party guarantor having no interest in, nor entitled to receive any benefit from, the transaction that she guaranteed. On the contrary, she was both a director and equal shareholder with her husband in Darkcm, which was the borrower. The joint and several guarantee, which the Bank required her and Mr Crowe to execute, was a guarantee by the directors of the borrower company. As such, she and Mr Crowe were, in truth, the real borrowers.
74 In my opinion, the primary judge's conclusion that Mrs Crowe was not entitled to any relief in accordance with the principles in Amadio was correct and her challenge thereto should be rejected.