Fuge v Commonwealth Bank of Australia

Appeal ground 1 (error in construction and application of Code of Banking Practice) 71 Ground 1 of the notice of appeal is in the following terms: The primary judge erred in construing and applying the code of banking practice. 72 At the trial, it was common ground that obligations arising out of the Code of Banking Practice were incorporated into the agreement between the parties: [96] of the primary judge's reasons. The primary judge referred to two versions of the Code of Banking Practice: the 2004 Code and 2013 Code, but the relevant provisions were in substantially the same terms (although numbered differently). 73 The Fuges identified the following four relevant errors: (1) The primary judge's conclusion (at [240] of his Honour's reasons) that the preceding analysis in the judgment below was sufficient to dispose of the Fuges' claims relating to cll 2.2 and 25.1 (of the 2004 Code). (2) The primary judge's adoption of the Bank's case that the standard of good faith was the appropriate basis for his Honour's review of the Bank's "mediation misconduct" and of the Fuges' complaints concerning the HoA. (3) The primary judge's misconstruction or misapplication of cl 2.2 in holding that the clause adds nothing to the general law and accordingly imposed no additional duty of meaningful content on the Bank. (4) The primary judge's failure to give meaningful content to cl 25.2, which required the Bank in undertaking enforcement action at least to work with and not against a customer in financial difficulty and address practical solutions. By the time of the enforcement action, the 2013 Code applied and the relevant provision was cl 28.2. 74 At least as expressed, (1) and (2) above do not identify an error of misconstruction or misapplication of the Code of Banking Practice, being the error alleged by appeal ground 1. 75 MFI 7 refers to the Code of Banking Practice in relation to the pre-mediation and enforcement stages, but not the mediation stage. As appears from cl 1 of MFI 7, the Fuges relevantly alleged that the Bank breached cll 2.2 and 25.1 of the Code of Banking Practice in relation to the provision of the facilities by the Bank prior to the HoA. Clause 1 also refers to cl 25.2, however, the Fuges noted that no case on cl 25.2 was put in relation to the events of 2008 concerning the formation of the credit contract because cl 25.2 related to conduct in connection with a credit facility provided by the Bank. 76 As appears from cl 5 of MFI 7, the Fuges also claimed an entitlement to common law damages by reason of a breach of the Code of Banking Practice arising by reason of the Bank's failure after 17 July 2014 to accept refinance offers made to the Bank on behalf of the Fuges (said to have been offers to discharge their indebtedness to the Bank). 77 At [240], the primary judge summarised the effect of cll 2.2, 25.1 and 25.2 of the 2004 Code. The Fuges did not suggest that the primary judge misstated the effect of cl 2.2 in his Honour's reasons, being an obligation on the Bank to act ethically and reasonably. 78 At [203], his Honour had set out cl 25.1 as follows: Before we offer or give you a credit facility (or increase an existing credit facility), we will exercise the care and skill of a diligent and prudent banker in selecting and applying our credit assessment methods and in forming our opinion about your ability to repay it.

Primary judge's findings concerning provision of the facilities by the Bank 79 The primary judge made the following relevant unchallenged findings and observations: (1) The key issue was the allegation that the Bank's lending was improvident (at [199]). (2) The Code of Banking Practice extended the otherwise previously existing obligations of banks in relation to their lending practices and there is support for the proposition that the duty imposes a requirement that the Bank form a positive opinion about the client's capacity to repay the loan (at [204]). (3) The relevant obligation must be one which depends upon and is informed by the individual circumstances of the lending (at [204]). (4) The Fuges contended that the Bank engaged in improvident lending from 2008 until 2016 (at [207]). (5) Anthony Fuge approached the Bank, through a finance broker, and created a very detailed business plan and proposal, which he considered accurate. In doing so, he represented to the Bank that he believed there to be a rational and reasonable basis for his projections (at [221]). (6) Notwithstanding the obligations imposed by the Code of Banking Practice, it was not unreasonable in the circumstances for the Bank to form its opinion as to the ability of the Fuges to repay based on the large amount of detailed information provided to the Bank, which was not self-evidently deficient or misconceived and indeed looked as though it had been put together with a deal of cogent thought (at [221]). (7) The Fuges made a forensic decision not to lead any expert evidence to illustrate that the Bank's processes demonstrated a departure from prudent lending practice (at [223]). (8) In the absence of any evidence to the contrary, the suggestion that the Bank's FarmPak programme and the way in which the Bank calculated the viability of the loan demonstrated injustice, must fail (at [225]). (9) The loans were approved in circumstances where the Fuges had been with Elders for an extended period, and where the new facilities to be provided by the Bank were at a lower rate of interest. The refinancing delivered an immediate and tangible benefit to the Fuges, a matter clearly relevant to any assessment of improvidence and unjustness (at [229]). (10) In 2008 the Fuges approached at least four other banks with their business plan as to the possibility of refinancing. The Fuges' submission, that the Bank was "desperate" to obtain the Fuges as customers and hence did not carry out proper due diligence, was inconsistent with their claim that the Bank "railroaded" the Fuges into their initial loans in 2008, and a finding that the Fuges had no option to negotiate conditions or terms of the contracts, even though the Fuges approached the Bank and stipulated certain terms, such as the five-year term. Although the Bank did not accept the Fuges' initial terms, there is no reason to conclude that, had the Fuges disagreed with the Bank's counter-offer, they were not in a position to negotiate. This is particularly the case where there is evidence that the Fuges were also in the process of negotiating a refinance with other lending institutions (at [239]). (11) At to post-2008 lending, all roll-overs and advances of further funds occurred at the specific request of the Fuges and in an endeavour to assist them to continue the farming operations and to meet particular expenses. Information was specifically requested and provided in support of the application for further funds and there is no suggestion some contemporaneous issue was raised by the Fuges (or was known to the Bank) as to the Fuges' inability to service the loans (at [233]). (12) Where the Fuges intentionally presented a confident and positive picture of the future of the farming business to the Bank and approached the Bank about further lending (armed with apparently viable information as to how it could satisfy those increases), the Fuges did not prove the allegation that the Bank's lending in the period of 2010-2014 was improvident. The submissions consisted of a series of assertions as to the lending being ill-intentioned, without providing a sound basis upon which the conclusion contended for could be drawn (at [235]).

Did the primary judge's analysis sufficiently dispose of the Fuges' claims under cll 2.2 and 25.1? 80 Although this question is not raised by the notice of appeal, the Court heard argument on the point. 81 The Fuges did not contend that it was not open to the primary judge to find that they failed to demonstrate any breach of cll 2.2 and 25.1 concerning provision of the facilities by the Bank on the facts found by his Honour. 82 By their written submissions, the Fuges asserted, without elaboration, that the primary judge's reasoning "conflated the contractual and statutory tests impairing both". Their written submissions in reply stated several propositions concerning why the Code of Banking Practice (the "contractual" test) and the Contracts Review Act (the "statutory" test) are "different territory" but without identifying any misconstruction by the primary judge of cl 2.2 or cl 25.1, or any failure to address the Fuges' Code of Banking Practice case. The Fuges' submissions in reply added the more specific allegations of error by the primary judge: (1) The primary judge disregarded binding intermediate appellate authority on the construction of cll 2.2 and cl 25.1, being Doggett v Commonwealth Bank of Australia [2015] VSCA 351; 47 VR 302 and National Australia Bank Ltd v Rose [2016] VSCA 169. (2) Unspecified different findings are necessary to be made in respect of the contractual and statutory causes of action, which were not made by the primary judge. (3) It was an injustice not to consider the Fuges' pleaded and argued Code of Banking Practice case and a failure to exercise the accrued jurisdiction of the Court. (4) The primary judge erred by imposing the Contracts Review Act into the matter in circumstances where Federal statutes covered the field. (5) The primary judge wrongly worried about limitation issues which applied only to the unpleaded Contracts Review Act case. 83 Mr King referred to the first instance decision in Commonwealth Bank of Australia v Doggett [2014] VSC 423 at [142] where Hargrave J stated: It is understandable that Mr Digiglio [the Bank officer] had regard to the defendants' assets and income in his credit risk analysis. Such an approach makes commercial sense and, subject to cases of unconscionable 'asset lending', is in my experience standard and acceptable banking practice - especially where the guarantors are, as here, in substance the proprietors of the business which is the subject of the borrowing. However, as appears above, the contractual standard under clause 25.1 of the Code required the Bank to exercise the care and skill of a diligent and prudent banker in forming an opinion about Dogvan's ability to repay the bill facility. The fact that the Bank had regard to the defendants' assets and income in reaching its decision to approve the loan does not necessarily mean that the Bank failed to meet the standard required by clause 25.1. 84 Mr King noted Hargrave J's qualification "subject to cases of unconscionable 'asset lending'", but did not explain how the qualification was significant to the Fuges' case. 85 Mr King submitted that the primary judge failed to deal with the following factual matters relevant to the Fuges' case that the Bank relevantly breached the Code of Banking Practice: (1) In an "Application Report" dated 7 August 2008, the Fuges' loan application was approved with the following comment: I will accept the interest only loan terms for the B/B/L's in view of the fact that other properties or part of the rural properties could be sold in order to reduce debt. The author of the report was not called to give evidence. (2) Another bank officer, Mr Hewitt, gave uncontradicted evidence that, on the material supplied to him by the Fuges, it was not possible for them to repay the interest only loans within five years based on their track record. (3) Once properly analysed, and the income stream was reduced to accord with the actual numbers provided by Mr Fuge, there was negative cash flow. 86 The primary judge did not refer to the evidence set out at (1) above. Mr King submitted that the comment was "completely contrary to the purpose of the transaction", suggesting that it contemplated a sale within the five year term of the proposed loan. We do not accept that interpretation of the comment, which is directed to reduction of the debt and, therefore, the position after the expiry of any interest only loan. Otherwise, Mr King did not explain how the comment could support a finding of a breach of cll 2.2 or 25.1. 87 As to (2) and (3) above, at [224] and following, the primary judge addressed and rejected the Fuges' complaint that the Bank's credit assessment was forward looking and relied upon the Fuges' projections as to future earnings and profit in circumstances where the drought had not broken. Orally, Mr King submitted that the primary judge erred in his Honour's finding (at [225]) that Mr Hewitt's explanation for why the Bank did not only judge the Fuges' serviceability on historical performance made "intuitive sense". The relevant findings are as follows: [224] … The Fuges relied on the fact that the lending guidelines required the Bank to assess both a potential customer's projected cash flows and past financial performance. Extensive cross-examination was carried out in relation to this point, suggesting to Mr Hewitt that past financial performance, being profit and loss, is a better indication of potential customers' ability to service a borrowing than an asserted projected income. Mr Hewitt gave evidence as to his understanding of why this is the case at T696.20-28: So for servicing purposes, it's done on the basis of assuming an average seasonal condition and the production programme that the farmer intends to incorporate using standard commodity prices which are provided by the bank, what the income level is; and the expenses are also assessed on a line by line basis. So without doing that way, with farming being volatile, there are periods of drought when past financial performance are never going to justify debt as they do at the moment in - some people are in drought. And if the banks only judge serviceability on that, you would never support a farmer. [225] This explanation makes intuitive sense. Further, in response to the specific complaints that the Bank did not take into account historical wheat production and water availability, the Bank explained and provided evidence that it had assessed the 2008 finance application against a variety of scenarios which included on the basis that there was no water or irrigation. In the absence of any evidence to the contrary, the suggestion, made at a high level of generality, that the FarmPak programme and the way in which the Bank calculated the viability of the loan demonstrates unjustness, must fail. 88 We do not accept that this passage reveals the suggested error on the part of the primary judge. Mr King did not explain why the primary judge was wrong to conclude that Mr Hewitt's relevant evidence made "intuitive sense". 89 For the reasons given, we are not persuaded that the primary judge's analysis was insufficient to dispose of the Fuges' relevant claims under cll 2.2 and 25.1.

Did the primary judge err in adopting the standard of good faith for reviewing the Bank's "mediation misconduct" and the Fuges' complaints concerning the HoA? 90 According to the Fuges, at [96] of his Honour's reasons, the primary judge found it unnecessary to consider the Fuges' case that the FDMA gave rise to a statutory duty of good faith to mediate, breach of which resulted in nullity of the mediation and linked HoA. Instead, the Fuges submitted that the primary judge accepted the Bank's "concession" (as the Fuges disparagingly described it) that there was a contractual duty to mediate in good faith arising from the Code of Banking Practice. Thus, according to the Fuges, the primary judge "applied a non-existent Bank Code test". 91 Paragraph [96] of the primary judge's reasons states: Although the parties disagreed as to whether there was an obligation to mediate in good faith arising under the FDMA, there is no need to tarry to deal with this issue as it is common ground that obligations arising out of the Code of Banking Practice were incorporated into the agreement between the parties and the Bank accepted, as a matter of contract, it was obliged to act in good faith in relation to the mediation. What is hotly in dispute, however, is the content of such an obligation in circumstances such as the present. It is this issue to which I now turn. 92 The Fuges' complaint goes nowhere because the primary judge rejected the Fuges' case that the Bank failed to mediate in good faith on the facts. 93 At [99], the primary judge noted: The case of the Fuges is that they were "railroaded" into signing the HOA at the mediation and the Bank knowingly took advantage of the Fuges' inequality in bargaining power by forcing them to accept an agreement they neither wanted nor understood. Whatever be the precise metes and bounds of the obligation to participate in a mediation in good faith, it is a necessarily contextual question, and it is unnecessary to dwell on the boundaries further here because if the Fuges make out their "railroading" contention as outlined above, this is not a case at the margins - it would demonstrate a want of participation in the mediation by the Bank in good faith. 94 The primary judge relevantly found: (1) Although Anthony Fuge claimed to have felt like he had been "railroaded", the Fuges did not give any specific examples as to how this was the case, how the Bank flatly refused their offer, or how it was that they were made to feel that they were unable to negotiate (at [126]). (2) While there was very little in the way of back-and-forth between the parties at the mediation, the primary judge did not consider that the evidence should be characterised as the Bank "railroading" the Fuges. This conclusion was strengthened by Anthony Fuge's evidence that the Fuges were first and foremost concerned about refinancing and, when considering the HoA document privately, were trying to think of ways to refinance. The Fuges decided to sign the HoA and use the remaining time to refinance (at [163]). 95 For completeness, we note that the Fuges did not advance this aspect of the appeal by reference to the allegation of bad faith conduct prior to and at the mediation that was addressed at section E.4 of his Honour's reasons, concerning whether the HoA was unjust within the meaning of the Contracts Review Act.

Did the primary judge misconstrue and or misapply cl 2.2 in holding that the clause adds nothing to the general law and imposed no additional duty of meaningful content on the Bank? Did the primary judge fail to give meaningful content to cl 25.2? 96 The primary judge did not make an express finding concerning the scope of cl 2.2, of the kind suggested by the Fuges. In support of their argument, the Fuges referred to [300] of the primary judge's reasons (concerning the Bank's failure to accept the Fuges' refinancing offers), where his Honour said: What appears to be clear, is that the parties did not ever reach a point at which they both understood the others' position with clarity. The Fuges seem to have genuinely believed that they were offering enough money to repay the amount owing to the Bank, and perhaps did not grasp what exactly it was that the Bank was requesting in terms of substantiation. The Bank on the other hand, were, from the beginning, obviously concerned as to the source of those funds and the lack of evidence or certainty that the shortfall after the sale of Kennedia West and the Rabobank loan would be met. Neither of these positions demonstrate a deliberate attempt to negotiate in bad faith. 97 The Fuges' contention that the primary judge concluded that the Bank did not breach cl 2.2 in respect of its enforcement action between 2015 and 2018 because "the parties did not ever reach a point at which they both understood the others' position with clarity" misconstrues his Honour's reasons. 98 At [267], his Honour identified the relevant provision of the 2013 Code as cl 3.2, which required the Bank "to act fairly and reasonably towards you in a consistent and ethical manner [having regard to] your conduct, our conduct and the contract between us". At [294], the primary judge noted that he was required to determine "first, whether the Bank acted fairly and reasonably towards the Fuges in a consistent and ethical manner, having regard to the conduct of both parties, and the contract; and secondly, whether the Bank genuinely tried to help the Fuges overcome their financial difficulties with any credit facility they had with the Bank, for example, by working with the Fuges to develop a repayment plan". 99 The Fuges referred to the primary judge's further observations at [301], which appear to be his Honour's ultimate conclusion on the first question identified at [294], as follows: [301] Not unlike the principle which informs unjust contracts, it is clear that the Bank was within its legal rights to protect its legitimate financial and business interests. It is likely that had the Bank taken a more lenient approach as to a payout figure, an agreement could have been reached which would have seen both parties better off than they are at present, but despite my misgivings that such a pragmatic approach would have been wise with the benefit of hindsight, that does not mean there was a breach of a contractual or other norm regulating the Bank's conduct. 100 The Fuges did not explain how these observations indicate that the primary judge misconstrued or misapplied cl 2.2 of the Code of Banking Practice. 101 At [267], his Honour identified the relevant provision of the 2013 Code as cl 28.2, which stated that "with your agreement and co-operation, the Bank will try to help you overcome your financial difficulties with any credit facility you have with us. We could, for example, work with you to develop a repayment plan". 102 The primary judge reached the following relevant conclusions, at [302] and [303], as to whether the Bank genuinely tried to help the Fuges overcome their financial difficulties with the credit facilities: [302] … it would not be appropriate for me to approach this question purely by considering the negotiations as to refinancing without also taking account of the long history between the parties. The Fuges had a long history of defaults leading up to the mediation and the HOA. [303] For the reasons I have expressed above in relation to cl 2.2, this claim also fails. The evidence of the negotiations between the Bank and the Fuges demonstrates an attempt to reach a settlement agreement. The fact that the Bank did not agree to put in place an agreement which meant it would not receive the total amount owed, cannot equate to a failure to assist the Fuges in overcoming their financial difficulties. Even accepting the woolly, public-relations driven language used in the Code, it must be given legal content. It would be remarkable if the content of this contractual duty legally required a financial institution to forgive debt, but the Fuges effectively contended that this was the case. The Bank offered the Fuges additional time to provide the information it requested on multiple occasions, and identified with specificity what it required in order for the settlement to go ahead. This conduct did not amount to a contractual breach to fail to assist the Fuges in overcoming their financial difficulties. 103 The Fuges did not explain how his Honour's reasoning revealed a failure to give meaningful content to the relevant provision of the Code of Banking Practice. To the contrary, his Honour did give content to the Code by finding that the Bank had engaged in negotiations with the Fuges over a period of nine months (at [299]); by offering the Fuges' time to provide information on multiple occasions (at [303]); and by identifying what it required to reach a settlement agreement (at [303]). The Fuges' submissions referred to various factual matters that were said to indicate a breach of the Code, but did not explain how those matters support a conclusion that the primary judge failed to give meaningful content to the Code. 104 In oral submissions, Mr King claimed that the primary judge found that, in June 2015, the Fuges offered well in excess of the bank debt to buy back the land because they had refinance available from Rabobank. Such a finding would have been directly contrary to the finding (at [303]) that the Fuges' case was, in effect, that the Bank was obliged to forgive a portion of their debt. Mr King did not identify the relevant finding. At [281] to [284] of his Honour's reasons, the primary judge made findings about the Fuges' offers to refinance through Rabobank. Those findings are not consistent with Mr King's claim: to the contrary, they indicate an absence of evidence that the Fuges had satisfied conditions imposed by Rabobank on the availability of funds. 105 Accordingly, ground 1 fails.

Appeal grounds 2 and 4 (error in construction and application of ASIC Act and Contracts Review Act; error in characterisation and application of test of unconscionable conduct) 106 Ground 2 of the notice of appeal states: The primary judge erred in construing and applying the [ASIC Act] and or [the Contracts Review Act]. 107 Ground 4 states: The primary judge erred in characterising and applying the test of unconscionable conduct with respect to the case of asset lending and financial misconduct alleged by the [Fuges] against the [Bank]. 108 Clauses 2(d) and (e) of MFI 7 identified the following issues for determination: (1) Was the HoA an unjust contract within the meaning of s 9 of the Contracts Review Act (for the reasons set out in the schedule to MFI 7) and should an order be made that it is invalid? (2) Should the HoA be set aside because the entry into the HOA amounted to unconscionable conduct contrary to the provisions of s 12CB of the ASIC Act (for the reasons set out in the schedule to MFI 7)? 109 The Fuges noted that cl 1(a) of MFI 7 also referred to their allegation of contravention of the ASIC Act by referring to "unconscionable conduct" in relation to facilities provided by the Bank prior to the HoA, as one or more causes of action arguably released by cl 4.2 of the HoA.

ASIC Act 110 In writing, the Fuges submitted that their claims under the ASIC Act remain unresolved and that the primary judge constructively failed to exercise the Court's jurisdiction. These are different contentions from grounds 2 and 4 of the notice of appeal. 111 The Fuges also made a complaint about [268] of his Honour's reasons, concerning the Bank's alleged failure to accept refinancing offers after 17 July 2014. Paragraph [268] states: It is worth mentioning that at various times throughout their oral and written submissions, the Fuges have attempted to characterise this claim as one going to unconscionable conduct. The analysis does not differ in this regard, and I consider that my reasons below are sufficient to dispose of any such claim if the Fuges were able to rely upon it. 112 This complaint (also different from grounds 2 and 4) was that the primary judge erred by conflating the Bank's contractual duties and its statutory duties under the ASIC Act. 113 At the hearing, Mr King was asked to identify the conduct, said to have been unconscionable, that was not addressed by the primary judge. Mr King responded as follows: The particular matters that we say are relevant here is that the - having entered into the credit contract in breach of the Code of Banking Practice to then [in] 2012 and 2013 pay no regard to its own error in informing the appellants that there would be no extension of finance, no refinance and that they would have to leave and then commencing immediate enforcement action against them - in other words, it was unconscientious to take advantage of their difficult financial circumstances and, in Amadio's case, of course, the High Court has held difficult financial circumstances are a relevant disadvantage for the purposes of the rule, and, in effect, adopt an inflexible approach to asset recovery without regard to, what we submit, good [conscience]. 114 Expressed in this way, the argument was predicated on the Fuges' unsuccessful case of breach of the Code of Banking Practice in connection with the entry into the loan facilities and several factual propositions that were not supported by references to the primary judge's findings. It therefore goes nowhere. 115 Mr King also referred to a document entitled "Appellant's note on ASIC Act/NCC issues", which set out a chronology of events concerning the Fuges' case based, relevantly, on the ASIC Act, including references to the parties' closing submissions at first instance. Beyond asserting that the note "sets out clearly the matters that were raised below" (which the note clearly did not do), Mr King did not further explain the argument in support of appeal ground 2. 116 Finally, Mr King referred to five factual propositions recorded in the Fuges' written submissions in support of their National Credit Code case and leading to the conclusion that: In all the circumstances of the case the credit was unjust in the sense referred to in s 76, and the Court's extensive power to open up the transaction, notwithstanding cl 4.2 of the HoA, were engaged, but the Court never look at the matter that way, although put, and the Credit Code case remained unresolved.

Consideration 117 The Fuges have not identified any error by the primary judge in the construction of the ASIC Act. 118 As to the application of the ASIC Act, at [100], his Honour noted that the Fuges' case required consideration of whether entry into the HoA amounted to unconscionable conduct. The Fuges did not dispute the following statement by his Honour: The parties proceeded on the basis that the same arguments advanced as to why there was a breach of an obligation of good faith also applied to the issues of unjust contracts and unconscionability (in the sense that a breach of the obligation would necessarily be relevant to an assessment of unjustness or unconscionable conduct: see, for example, s 9(1) of the Contracts Review Act). 119 The primary judge rejected those arguments on the facts (except in relation to cll 5.6 and 5.8 of the HoA). At [109], his Honour stated: Throughout the hearing, counsel for the Fuges raised a number of different reasons as to why the HOA was unjust. To ensure that I could be satisfied all of the Fuges' various complaints as to the mediation and the HOA were taken into account, on day 12 of the hearing, the parties agreed to an exhaustive list of reasons as to why the Fuges say the mediation was conducted in bad faith, why the HOA is an unjust contract, and why entry into the HOA amounted to unconscionable conduct. … 120 The "exhaustive list" is set out at [110] of the primary judgment, and is addressed at [113]-[160] of the judgment. 121 Accordingly, ground 2 fails insofar as it concerns the ASIC Act and ground 4 also fails.

Contracts Review Act 122 The Fuges identified the following five errors by the primary judge relating to events prior to the HoA: (1) Finding that the "purpose" of Anthony Fuge's credit application was to achieve a five year loan when that purpose was to achieve a long term credit arrangement for the farming operation managed by him, that is, for a term well in excess of five years; it was only late in the discussions with Mr Hewitt that Anthony Fuge learned that the finance was unavailable for more than five years; his lack of bargaining power led him to accept it. (2) Unduly limiting consideration under the Contracts Review Act commencing at [208] of his Honour's reasons by not considering each credit contract in the circumstances of the Fuges separately. (3) Not considering sufficiently the views of Spigelman CJ in Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41; 14 BPR 26,639, especially at [92] to [96] and misapplying the consideration of indifference under the Contracts Review Act in light of the events which happened. (4) Not considering properly or at all, at [230] to [237] of his Honour's reasons, the errors inserted into the credit assessment by or for the Bank prior to 9 October 2008 which distorted the credit suitability reports. (5) Not considering all the circumstances of the case including the additional matters put under grounds 3 and 4 on the question of the appropriate decision. 123 As to (1), the Fuges' submissions did not identify its evidentiary basis. Nor did they identify any basis for concluding that the primary judge erred in making the contrary finding, at [229], that Anthony Fuges' business plan outlined why the Fuges were only interested in a five year loan period. 124 As to (2), the Fuges' submissions did not explain why the primary judge's analysis under the Contracts Review Act was "unduly limited" or how consideration of each credit contract in the circumstances of the Fuges separately was required. 125 As to (3), in Khoshaba, the Court of Appeal found that the lender had failed to observe its own lending guidelines. At [82], Spigelman CJ found that the most significant failure was that the purpose of the loan was left blank in the relevant section of the standard form application. This indicated that the lender "was content to lend on the value of the security". The passage from Khoshaba cited by the Fuges is as follows: [92] The conflicting considerations are finely balanced. Had the Appellant or its representatives made any inquiries about the purpose of the loan I would have allowed the appeal. I do not mean to suggest that the Appellant had to determine that the proposed investment was reasonable and capable of servicing the loan. It is the indifference, suggesting that the Appellant was content to proceed on the basis of enforcing the security, which I find determinative. [93] The Appellant submitted that this Court should re-exercise the discretion and, in the circumstances, refuse to grant relief under the Act. The Appellant submitted that it was generally unsound to grant relief under s 7 where the party against whom relief is claimed was both innocent and ignorant of the circumstances giving rise to that injustice. [94] The Appellant relied on a number of authorities including the judgment of Meagher JA in Beneficial Finance Corp Limited v Karavas (1991) 23 NSWLR 256 at 277 where his Honour said: There is jurisdiction under the Act to make orders in favour of a party to a contract who proves that at the date of the contract he suffers from a relevant disability even though the other party to the contract is unaware of that disability, although in general it would be unsound to exercise the jurisdiction in those circumstances. ... The reason for that view is that it is hardly just to deprive an innocent person of valuable property, of which contractual rights are a species. Nevertheless such a jurisdiction undoubtedly exists. [95] To similar effect were the observations of Sheller JA in Nguyen v Taylor (1992) 27 NSWLR 48 where his Honour said, after referring to the reasoning of Meagher JA in Karavas: The question of the unjustness of the contract is to be determined in the circumstances relating to the contract at the time it was made and, in this case, without regard to the ignorance or innocence of the appellant. However when coming to determine how the discretion should be exercised the court, in my opinion, is entitled to have regard to additional circumstances and importantly for the purposes of the present case the ignorance and innocence of the appellants ... in the context that it was the respondent's agent who misled him. [96] I do not doubt the existence of the discretion. It falls to be exercised afresh in this Court. In my opinion the Appellant cannot be regarded as an innocent party of the kind referred to in the authorities. Again I place particular reliance on the indifference of the Appellant and its representatives to the purpose of the loan, indicating that it was content to proceed on the basis enforcing the security. This is not a case for the exercise of the discretion to refuse relief. 126 Mr King did not identify any relevant analogy between the facts in Khoshaba and the present case, or otherwise identify how the primary judge erred by failing to consider that decision sufficiently. 127 As to (4), Mr King did not identify any error in the primary judge's reasoning at [230] to [237], and did not identify the errors that were said to have distorted the credit suitability reports. 128 As to (5), Mr King did not attempt to demonstrate any error by the primary judge in failing to consider additional matters. 129 It follows that ground 2 fails insofar as it concerns the case brought pursuant to the Contracts Review Act.

Appeal ground 3 (treating the Fuges' National Credit Code case as abandoned) 130 Ground 3 is as follows: The primary judge erred in treating the [Fuges' National Credit Code] case as abandoned when both parties to the proceedings conducted the matter on the basis that it remained a cause of action for determination by the Court. 131 At [101] and [102] of his Honour's reasons, the primary judge recorded the following: [101] On day 14 of the hearing, at T1239, and after more than a few exasperations on my part as to the necessity of seeking relief under the [Contracts Review Act] and also cognate relief under other statutes, including the [National Credit Code], the following exchange occurred: HIS HONOUR: ... it seems to me, Mr King, that the Contracts Review Act - you're not going to get relief under the other statutes if you don't get relief under the Contracts Review Act and if you get relief under the Contracts Review Act you don't need relief on the other statutes. MR KING: I think that's the way Keane J put it in Paciocco, your Honour. Yes. And Allsop J in Paciocco in the Full court made the point, with respect, but a good one, that the greater learning about this whole area of unjust contracts is, in fact, bound up in the Contracts Review Act and that's where much of the learning is to be found, and we respectfully adopt that, and so we respectfully adopt what has fallen from your Honour - - - [102] Prior to this exchange, Mr King had explained the pleading strategy as "abundant of caution": T518. Although s 76 of the [National Credit Code] is based on the unjust provisions of the [Contracts Review Act], it does not exclude the operation of that Act in relation to credit contracts regulated by the [National Credit Code]. Given this, and the belated narrowing of issues by Mr King, it is unnecessary to deal with the far from straightforward issue of whether the HOA is a credit contract within the meaning of the [National Credit Code]. I will instead turn to considering whether the HOA is an unjust contract within the meaning of the [Contracts Review Act]. (Emphasis in original) 132 At [199], the primary judge reiterated as follows (in connection with the Fuges' improvident lending case): For the reasons I explained at E.3 above, the parties accept it is unnecessary for me to consider both [National Credit Code] and [Contracts Review Act] relief. 133 The Fuges' written submissions did not attempt to explain why, having regard to Mr King's adoption of the primary judge's analysis at the trial, his Honour was wrong to conclude that the parties had accepted that it was unnecessary to address the National Credit Code case separately. Orally, Mr King submitted that the exchange at T1239 concerned only the question of "the test in respect of injustice in respect of contracts", but the primary judge's observation was explicitly directed to the question of relief. 134 The Fuges identified six factual findings that the primary judge ought to have made and which would have supported a conclusion that the relevant transactions were unjust within the meaning of s 76 of the National Credit Code. However, the evidentiary basis for those findings were not clear. By way of example only, the Fuges did not identify the bases for the claim that the Bank knew at a relevant time that the Anthony Fuge gave up his partnership with Matthew Fuge in order to access Federal relief grants; or for the implied proposition that the Bank knew that Anthony Fuge's financial position was "dire" (at an unspecified time but presumably 2008). 135 At [238] and [239], the primary judge addressed the Fuges' final submissions going to the claim that that the agreements pursuant to which facilities were provided amounted to unjust contracts. Mr King did not point to any error in those paragraphs. 136 Accordingly, ground 3 must fail.

Release appeal grounds 137 Appeal grounds 6 and 7 are expressed in the following terms: The primary judge erred in the construction of HoA and in holding that certain provisions of the HoA were plainly unjust and enforcing the release provisions thereof and/or in holding that the HoA was partly rather than wholly unjust and invalid. The primary judge erred in characterising and applying the tests of financial misconduct of the Bank with respect to the making and entry into the release. 138 However, orally Mr King submitted that ground 7 is concerned with the proper interpretation of the release while ground 6 was concerned with the Fuges' contention that the release was unjust and unreasonable (and so invalid). The latter argument was put on two bases: the first being that cl 4.2 was unjust considered as a discrete provision of the HoA; and the second being that the primary judge should have found that the HoA was wholly unjust. 139 These grounds are not capable of advancing the appeal because the Fuges have failed to demonstrate any error in the judgment below concerning their claims for relief in relation to the facilities provided by the Bank prior to the HoA. Accordingly, it is unnecessary to deal with them: cf. Boensch v Pascoe [2019] HCA 49 at [7] and [8].

Matthew Fuge's guarantee (ground 8) 140 Ground 8 of the notice of appeal is that the primary judge erred in not holding that the guarantee given by Matthew Fuge was discharged. 141 The primary judge addressed the Fuges' contention that the guarantee was discharged at [305]-[307] of his Honour's reasons as follows: [305] This issue apparently relates to that already dealt with in Section E concerning the contention the Livestock Mortgage given by Anthony Fuge was either fraudulently made or Anthony Fuge did not have authority to charge the security the subject of that Mortgage. The issue was not developed by the Fuges and was not addressed by the Bank in its written submissions. I have already dealt with the difficulties of the premises underlying the Fuges' argument in section E.1.2.2. This is sufficient to reach the conclusion that the guarantee was not discharged. [306] But there are further aspects of this argument which were not dealt with by the Fuges. It is trite that a guarantee may be discharged by reason of the occurrence of one or more events which, subject to the provisions of the guarantee, effect the automatic revocation of the guarantee by operation of law. But there was no attempt to engage with the notion that the express terms of the guarantee provided, by cl 10.3, that the Bank's rights and remedies under the guarantee were independent of those that the Bank had under any other guarantee or security or cl 10.1 which provided that the Bank's rights under the guarantee were not affected by any act or failure to act by the Bank, including in the event the Bank lost the benefit of any security or did not validly obtain any security. [307] This seems to be a further example of an issue being thrown up by the Fuges without the Court being given any proper articulation of the argument or any assistance as to how it is to be resolved by engaging with legal principle. The guarantee was not discharged as alleged. 142 The Fuges addressed this ground of appeal in their written submissions as follows: The February 2011 Business and Livestock Mortgage to which Matthew was not a party entered into by Anthony through Mr Hewitt with the Respondent involved an adverse variation of Matthew's position and interests including the livestock without consent thereby releasing him. At [307] the Primary Judge held assuming this to be the case, which he did not find, that clause 10.1 or clause 10.3 of the guarantee protected the Respondent. However neither provision affected the basic surety principle as to discharge, and in any event the 'acts' were not of the Respondent. 143 The primary judge did not find that the livestock mortgage was entered into without Matthew Fuge's consent, or that it involved an "adverse variation of Matthew's position and interests". Further, his Honour's reasoning at [306]-[307] was expressed in the alternative. The principal basis for the finding that the guarantee was not discharged appears at [305], namely that the primary judge rejected the contentions upon which the argument was based, namely, that the livestock mortgage was either fraudulently made or Anthony Fuge did not have authority to charge the security the subject of that mortgage. Mr King did not take issue with [305] of the primary judge's reasons. 144 In oral submissions, Mr King made the following contentions: (1) Matthew Fuge was part-owner of the land affected by the livestock mortgage; (2) Matthew Fuge also owned half of the sheep that had been part of the partnership. 145 As to (1), there is nothing to suggest that this contention was argued before the primary judge as a basis for contending that the guarantee was discharged. In any event, Mr King did not demonstrate that, on a proper construction of the livestock mortgage, Matthew Fuge's interest in two of the properties was adversely affected by the mortgage. 146 As to (2), at [81] of his Honour's reasons and following, the primary judge addressed the Fuges' submission that Anthony Fuge lacked authority to provide Matthew Fuge's interest in sheep as security under the livestock mortgage. On this case, any interest held by Matthew Fuge in the sheep was not affected by the mortgage. 147 At [83], his Honour recorded that the Fuges submitted that the brothers were joint owners of the sheep as they had contributed equally to the cost of the purchase of the flock. This is a different contention from the argument put on the appeal that Matthew Fuge owned half the flock. At [85], his Honour recorded the following: Matthew Fuge's evidence was that he understood Anthony Fuge had included the sheep in his own personal financial statements because he was acting as a sole trader. When asked whether Anthony Fuge was the registered owner of the sheep, Matthew Fuge answered that he owned half the sheep, save for those bought by Anthony Fuge after the termination of the Partnership. Matthew Fuge was then taken to [115] of his affidavit, where it reads: "they were not the rightful owners of the livestock; my brother was the registered owner". In response to this, Matthew Fuge acknowledged that his brother was the registered owner, as was the Partnership. 148 At [86], the primary judge recorded a third submission that Anthony Fuge held the sheep on constructive trust for Matthew Fuge. 149 It seems that the Fuges' argument is based on the primary judge's observation (at [89]) that, if Anthony Fuge had no authority to offer security over Matthew Fuge's portion of the livestock, then (at best) Matthew Fuge would have a claim against Anthony Fuge for conversion. However, the primary judge concluded: [89] … It is unnecessary to say anything further on this, since the Fuges do not even reach the stage of proving joint ownership of the livestock and so the possible consequences of such a finding fall away. 150 Mr King's contentions are not made out by the primary judge's findings, and accordingly, the submission goes nowhere. 151 Ground 8 also fails.

Conclusion 152 The appeal will be dismissed. Costs should follow the event. I certify that the preceding one hundred and fifty-two (152) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Gleeson, Anastassiou and Jackson.