Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA

Citation : GEORGE 218 PTY LTD -v- BANK OF QUEENSLAND LTD [2015] WASC 434

Banking and finance - Guarantees - Transfer of contractual rights pursuant to certificate of transfer issued under the Financial Sector (Business Transfer and Group Restructure) Act 1999 (Cth) - Whether 'all moneys' guarantee which did not secure any debt owing to the transferring body at the date of the transfer is capable of securing debt subsequently owed to the receiving body - Whether 'indemnity' clause described as an 'additional obligation' enforceable against the guarantor as 'principal debtor' required the giving of a notice of demand

Estoppel - Estoppel by convention - Common assumption - Assumption as to existence of contract of guarantee - Assumption as to mixed fact and law - Sufficiency of evidence

Financial Sector (Business Transfer and Group Restructure) Act 1999 (Cth), s 20, s 22

Respondent : Mr S K Dharmananda SC & Ms C A Petersen

Alpha Wealth Financial Services Pty Ltd v Frankland River Olive Co Ltd [2008] WASCA 119; (2008) 66 ACSR 594

Amalgamated Investment & Property Co Ltd (in liq) v Texas Commerce International Bank Ltd [1982] QB 84

Ankar Pty Ltd v National Westminster Finance (Australia) Ltd [1987] HCA 15; (1987) 162 CLR 549

Australia and New Zealand Banking Group Ltd v Manasseh [2016] WASCA 41

Bofinger v Kingsway Group Ltd [2009] HCA 44; (2009) 239 CLR 269

BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266

Chapmans Ltd v Australian Stock Exchange Ltd (1996) 67 FCR 402

Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337

Commonwealth Bank of Australia v Barker [2014] HCA 32; (2014) 253 CLR 169

Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd [1986] HCA 14; (1986) 160 CLR 226

County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193

Cumerlong Holdings Pty Ltd v Dalcross Properties Pty Ltd [2011] HCA 27; (2011) 243 CLR 492

Equuscorp Pty Ltd v Wilmoth Field Warne (a firm) [2007] VSCA 280; (2007) 18 VR 250

Falinski v Commonwealth Bank of Australia [1998] NSWCA 76.

Farrow Mortgage Services Pty Ltd v Hogg (1995) 64 SASR 450

Ferrier v Stewart [1912] HCA 47; (1912) 15 CLR 32

Filmana Pty Ltd v Tynan [2013] QCA 256

George 218 Pty Ltd v Bank of Queensland Ltd [2015] WASC 434

George 218 Pty Ltd v Bank of Queensland Ltd [2015] WASC 434 (S)

Halford v Price [1960] HCA 38; (1960) 105 CLR 23

Hayne v Cummings [1864] EngR 386; (1864) 16 CBNS 421; (1864) 143 ER 1191

Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298

Leeder v The State of Western Australia [2008] WASCA 192

MK & JA Roche Pty Ltd v Metro Edgley Pty Ltd [2005] NSWCA 39

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104

MS Fashions Ltd v Bank of Credit and Commerce International SA (in liq) [1993] Ch 425

Newbon v City Mutual Life Assurance Society Ltd [1935] HCA 33; (1935) 52 CLR 723

Norwich Union Life Assurance Society v British Railways Board (1987) 2 EGLR 137

Olsson v Dyson [1969] HCA 3; (1969) 120 CLR 365

Queensland Independent Wholesalers Ltd v Coutts Townsville Pty Ltd [1989] 2 Qd R 40

Re Taylor; Ex parte Century 21 Real Estate Corporation [1995] FCA 1335; (1995) 130 ALR 723

Redhill Iron Ltd v API Management Pty Ltd [2012] WASC 323

Riseda Nominees Pty Ltd v St Vincent's Hospital (Melbourne) Ltd [1998] 2 VR 70

Rizhao Steel Holding Group Co Ltd v Koolan Iron Ore Pty Ltd [2012] WASCA 50; (2012) 43 WAR 91

Roads Corporation v Gerkens [1993] 6 VAR 363

Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; [2007] 69 NSWLR 603

Sigiriya Capital Pty Ltd v Scanlon [2013] NSWCA 401; (2013) 97 ACSR 183

TEC Desert Pty Ltd v Commissioner of State Revenue (Western Australia) [2010] HCA 49; (2010) 241 CLR 576

Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2014] WASCA 164; (2014) 48 WAR 261

Terravision Pty Ltd v Black Box Control Pty Ltd [No 3] [2016] WASC 95

The Commonwealth of Australia v Bogle [1953] HCA 10; (1953) 89 CLR 229

The Commonwealth of Australia v Verwayen [1990] HCA 39; (1990) 170 CLR 394

Todd v Alterra at Lloyds Ltd [2016] FCAFC 15; (2016) 239 FCR 12

Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165

W & R Pty Ltd v Birdseye [2008] SASC 321; (2008) 102 SASR 477; [2009] HCATrans 79

Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387

West v Commercial Bank of Australia Ltd [1935] HCA 14; (1935) 55 CLR 315

1 This is an appeal from a decision of Mitchell J: George 218 Pty Ltd v Bank of Queensland Ltd[1] (primary decision). His Honour found that the appellants were liable as guarantors to the respondent.

2 The primary decision was a determination of preliminary issues. The appellants had commenced proceedings seeking declarations to the effect that they were not liable under guarantees originally given to Statewest Credit Society Ltd (Statewest) to secure borrowings by Success Assets Pty Ltd (Success). Success was a company controlled by the third appellant, Ms Bazzo. The respondent (the bank) counterclaimed for the amounts allegedly owing to it under the guarantees in relation to certain amounts advanced by the bank to Success under certain loan agreements in July 2010. Eleven issues were formulated for preliminary determination.

3 The issues at first instance included questions as to the proper construction and application of the Financial Sector (Business Transfer and Group Restructure) Act 1999 (Cth) (Transfer Act) in relation to Statewest's assets, which were transferred to the respondent with effect from 21 September 2008.

4 The primary judge noted that the appellants claimed that they were not liable under the guarantees on two bases. First, it was alleged that the guarantees did not apply to secure the bank's loans to Success in 2010. Secondly, they alleged that they were not liable because the bank and the receiver breached duties owed to them in relation to the appointment of a receiver and the sale of Success' mortgaged properties. His Honour noted that the 'second basis of the action [was] defensive, and the [guarantors did] not seek damages for breach of the pleaded duties'.

5 His Honour concluded that the guarantees, as modified under s 22 of the Transfer Act, operated to secure money owed by Success to the bank under the 2010 loan agreements. Even if the guarantees did not secure that money, a conventional estoppel would preclude the appellants from denying that state of facts. Following the bank's notice of demand, the first, second and third appellants became liable to pay the amount owing by Success to the bank under cl 4 of the guarantees. Also, all of the appellants were liable to pay Success' outstanding debt to the bank under cl 5 of the guarantees.

6 His Honour entered judgment following a further hearing in relation to the formulation of final orders on 27 November 2015. His Honour published supplementary reasons in that regard: George 218 Pty Ltd v Bank of Queensland Ltd[2] (supplementary reasons). Amongst other things, his Honour ordered that the appellants jointly and severally pay the bank the sum of (approximately) $2.555 million.

7 For the reasons which follow, the appeal should be dismissed.

8 In these reasons, we will refer to the first appellant as George 218; the second appellant as Prada; the third appellant as Ms Bazzo; the fourth appellant as Gucce; and the respondent as the bank.

9 At all material times up to 30 June 2012, Ms Bazzo was the sole controller and guiding mind of Success, George 218, Prada and Gucce (the Bazzo companies).

10 On 13 April 2016, Statewest wrote to Ms Bazzo in her capacity as a director of Success, and offered a facility of $1.7 million to assist with the purchase, by Success, of certain land in Jandakot (Jandakot land). Under the offer, Success was to repay the principal sum, interest and other amounts within 24 months from the initial settlement date. The letter proposed that Success' obligation would be secured by an unlimited guarantee and indemnity given by Ms Bazzo and the Bazzo companies. Ms Bazzo accepted the offer on 24 April 2006 on behalf of Success (Statewest Loan Agreement).

11 On 25 May 2006, the loan amount was disbursed by Statewest to Success, and used by Success to purchase the Jandakot land. At the same time, Success granted Statewest a mortgage over the Jandakot land. The amount advanced was debited to account no 244000288, held by Success with Statewest (Statewest Account).

12 As required by the Statewest Loan Agreement, on 24 April 2006, Ms Bazzo executed deeds of guarantee and indemnity on her own behalf and on behalf of each of the Bazzo companies (Guarantees). Each of the Guarantees was unlimited as to amount.

13 By cl 4 of the Guarantees, Ms Bazzo and the Bazzo companies guaranteed the due and punctual payment of the 'Moneys Secured' by Success to Statewest on demand. The term 'Moneys Secured' was defined to include:

(a) all money which is or may become payable to Statewest by Success;

(b) all loans made, agreed to be made, or which in the future Statewest makes to Success; and

(c) all money 'now or in the future' owing and payable to Statewest by Success.

14 Clause 9 provided that a guarantor may stop the Guarantees covering Success' future liabilities to Statewest by notice in writing. Clause 11 provided that the Guarantees were continuing guarantees and indemnities and were not wholly or partially discharged by payment of all or part of the Moneys Secured, by any settlement of account or by any other matter or thing.

15 Clause 12 provided that a guarantor's liability under the Guarantee is not affected by 'anything that might otherwise affect it under the law relating to sureties'. Clause 12(f) specified that this included:

a variation or extension to, or ... replacement ... of any credit, finance facilities or other arrangement ... given to [Success] alone or with any other person, whether with or without the [appellants'] consent or knowledge.

2006 Loan Agreement with Home Building Society Ltd (Home)

16 On 18 December 2006, Home wrote to Ms Bazzo as director of Success and offered Success a 'variation to original facility letter dated 13 April 2006'. The principal effect of the variation was to increase the facility limit by $200,000, from $1.7 million to $1.9 million. On 18 December 2006, Ms Bazzo accepted Home's offer, in writing, on behalf of Success (2006 Loan Agreement).

17 On 20 December 2006, Home wrote to Ms Bazzo and the Bazzo companies attaching the letter dated 18 December 2006. The letters referred to each of Ms Bazzo and the Bazzo companies as a Guarantor under a 'Guarantee dated 24 April 2006 given in respect of money owed to' Home by Success. The letter sought the agreement of Ms Bazzo and the Bazzo companies to the 'variation of the Arrangements which will be subject to your Guarantee'. On 21 December 2006, Ms Bazzo signed the foot of each letter of 20 December 2006 on her own behalf and on behalf of the Bazzo companies.

18 On 27 December 2006, the Statewest Account was reduced to a nil balance by the payment of $1,710,166.04, which sum was debited to a new account opened in the name of Success, account no 244000358 (Home Account no 358). On 29 December 2006, Home wrote to Ms Bazzo as a director of Success indicating that on 27 December 2006, 'your new loan was drawn and funds were disbursed', and that she should contact Home with any inquiries.

19 The effect of this was to discharge the debt owed under the Statewest Loan Agreement, and replace it with a new debt owed by Success to Home.

20 On 19 December 2007, Home wrote to Ms Bazzo, as director of Success, offering to provide a facility of $5,256,000 to assist with the purchase of other properties in Jandakot (additional Jandakot land). The proposed loan was repayable 18 months after the first drawdown of the facility, with provision for capitalisation of interest up to $740,000.

21 The letter also provided that acceptance of the facility offer would create a contract between Home, Success, Ms Bazzo and the Bazzo companies, and that Success, Ms Bazzo and the Bazzo companies would be bound by Home's standard terms and conditions. The letter provided that the security for the facility was to include '[j]oint and several unlimited guarantee and indemnity given by' Ms Bazzo and the Bazzo companies. This was described as an 'existing' security. The letter incorporated a 'Borrower's Acceptance Clause' and a 'Guarantor's Acceptance'. Ms Bazzo signed the Borrower's Acceptance Clause, as director of Success, on 21 December 2007.

22 Also on 21 December 2007, Ms Bazzo signed the Guarantor's Acceptance on her own behalf and as director of the Bazzo companies as 'Guarantor'. The Guarantor's Acceptance included the following provisions:

1. approves the Facilities on the terms set out and referred to in this Facility Offer and the Standard Terms and Conditions;
2. acknowledges that a legally binding contract on the terms set out and referred to in this Facility Offer and the Standard Terms and Conditions is created between the Borrower, the Guarantor and the Lender.

23 Pursuant to the agreement constituted by Ms Bazzo's execution of the documents referred to in the preceding two paragraphs (2007 Loan Agreement), the bank advanced further funds to Success. A new account, no 244000482 (Home Account no 482), was consequently opened with a debit balance of $4,517,124.16 as at 1 January 2008. On 2 January 2008, title to the additional Jandakot land was transferred to Success for a total consideration of $4,350,000, and a mortgage was registered in favour of Home.

24 The 2006 Loan Agreement required repayment within 24 months after the initial settlement, ie, by 24 May 2008.

25 On 7 March 2008, Home offered Success a facility of $2,170,000 for the purpose of repaying an existing facility, providing additional funds for interest capitalisation through to 31 May 2009 and for other purposes approved by Home. The loan expired on the earlier of 18 months after initial drawdown or 31 May 2009. The offer made provision for $305,000 to be capitalised as interest, and required repayment in full at the expiry of the loan. It was to be secured by an unlimited guarantee and indemnity provided by Ms Bazzo and the Bazzo companies. The provision of this guarantee was a condition precedent to the provision of the facility. The letter contained provisions for a contract to arise between Home, Success, Ms Bazzo and the Bazzo companies, generally in the same terms as the 2007 Loan Agreement.

26 Ms Bazzo accepted the offer as a director of Success, and also signed the Guarantor's Acceptance, in terms quoted earlier, on her own behalf and as a director of the Bazzo companies (collectively 2008 Loan Agreement).

27 Home Account no 358 was maintained, and there was no transfer of funds into or out of that account pursuant to the 2008 Loan Agreement.

Assets of Statewest and Home transferred to the bank - September 2008

28 On 21 September 2008, certificates of transfer under s 18(1) of the Transfer Act came into force in respect of the partial transfer of business from each of Statewest and Home, to the bank. Each certificate contained a statement of detail indicating that it was agreed that all assets and liabilities (as defined) of, respectively, Statewest and Home as at 20 September 2008, would be transferred to the bank. The statement also included a provision that (subject to immaterial exceptions):

Each translated instrument, as that term is defined under section 22(5) of the [Transfer] Act, continues to have effect, according to its tenor, as if a reference in the instrument to [Statewest/Home] were a reference to the Bank. (emphasis added)

29 On 21 September 2008, Home Account no 482 (relating to the 2007 Loan Agreement) and Home Account no 358 (established pursuant to the 2006 Loan Agreement, and maintained under the 2008 Loan Agreement) were operated by the bank.

30 The primary judge found that the 2007 and 2008 Loan Agreements and the Guarantees were 'translated instruments' within the meaning of s 22(5) of the Transfer Act, and that by s 22(2) of the Transfer Act, those instruments had effect according to their tenor as if references to Home and Statewest were to the bank.

Default by Success in repayment of 2007 and 2008 loans

31 The debt under the 2008 Loan Agreement was repayable by 31 May 2009, at the latest. The debt under the 2007 Loan Agreement was repayable on 1 July 2009. The debts arising under these agreements were not paid. On 28 August 2009, the bank issued a notice to pay to Success.

32 On 12 November 2009, the bank's solicitors wrote to Success referring to default notices and indicating that the bank was prepared to stay enforcement proceedings on condition that there be monthly payments of interest and reduction of arrears of $50,000.

Bank's consideration of extension of facilities in 2010

33 On or about 6 May 2010, Mr Sara, the bank's 'relationship manager' with Success, prepared, or caused to be prepared, a commercial lending submission to the relevant credit manager, Mr Marmont. In preparing the commercial lending submission of 6 May 2010, Mr Sara spoke to Ms Bazzo, requesting a variety of financial information. The submission proposed the extension of facilities for Success for a one year term to allow sale or refinance of the Jandakot land and the additional Jandakot land (collectively Jandakot properties). The submission noted the assets of Ms Bazzo and Gucce (the latter described as the main operating entity of the Bazzo Group), as well as Success. The group's assets were assessed as exceeding the value of the proposed loan. The commercial lending submission was accompanied by a 'securities schedule' which included as security an existing unlimited guarantee and indemnity by Ms Bazzo and the Bazzo companies.

34 Mr Marmont recommended approval of the commercial lending submission. Because the amount of the facility exceeded Mr Marmont's authority, he wrote a note supporting the transaction which required the approval of the bank's executive credit committee.

35 On 27 May 2010, the bank sent letters to Success offering facilities of $5,144,082 and $2,011,545 to Success. The letter stated that the loans were to 'assist with extension of facilities for [Success] for a term of one year to allow sale or refinance'. The proposal required the payment of interest and a monthly amount in reduction of arrears. In each case, the security required was a guarantee and indemnity to be provided by Ms Bazzo and the Bazzo companies, as a condition precedent to the loan.

36 On 1 June 2010, Ms Bazzo purported to sign her acceptance of the loan offers as a director of Success. However, she made a handwritten correction to the amount of the final payment due under the loan agreements, and thereby her return of the letters of offer took effect as a counteroffer.

37 On 3 June 2010, Ms Bazzo executed, on her own behalf and on behalf of the Bazzo companies as 'the Guarantor', a Deed of Consent (2010 Deed of Consent) in the following terms:

1. Pursuant to the Security Documents, the Guarantor guaranteed to the Bank the repayment by the Customer of the Existing Facility, and may have provided a mortgage or other security for the repayment of the Existing Facility.
2. The Guarantor has requested that the Bank grant to the Customer the Additional or Varied Facility.

1. The Bank has agreed to do so on the condition that the Guarantor signs this deed.

Success Asset Pty Ltd ACN 116 322 091 as trustee for Success Trust of 48 Wickham Street East Perth, WA 6004

The Guarantor consents to the Additional or Varied Facility between the Bank and the Customer.

The Guarantor agrees that the Security Documents continue to be security to the Bank for repayment of the Existing Facility and the Additional or Varied Facility.

38 Ms Bazzo also signed, on behalf of herself and the Bazzo companies, an acknowledgement which included an acknowledgement that they had received and read a memorandum. The memorandum read in part:

The document which you have been asked to sign is a deed of consent to a variation of the banking facilities which you have previously guaranteed. You may also have provided a mortgage or other security (a 'Security') in support of the guarantee.

The effect of the guarantee is that you agreed to pay Bank of Queensland Limited ACN 009 656 740 ('the Bank') all moneys owing to it (including interest and any costs or charges incurred by the Bank) by the person named in the guarantee as the 'Principal Debtor' if the Principal Debtor fails to pay those moneys to the Bank.

The effect of the Security is that if the Principal Debtor fails to repay the moneys owing by it to the Bank then the Bank, may have access to your property to satisfy the debt.

The guarantee and your obligation to repay in relation to existing debts of the Principal Debtor will continue until released or discharged by the Bank and you receive notification of that release or discharge.

The effect of the guarantee is that if the Principal Debtor fails to pay the moneys owing by it to the Bank then the Bank may sue you and obtain judgement against you for the amount of those moneys. The Bank may satisfy that judgement by taking proceedings against you and against your property.

...

The effect of the deed of consent which you are being asked to sign is to continue your obligation as guarantor and under the Security in relation to the additional facilities being offered to the Principal Debtor. The financial circumstances of the Principal Debtor may have changed since you originally gave the guarantee and Security. You should make your own enquiries to satisfy yourself as to the Principal Debtor's capacity to repay the additional facilities. You should read the deed of consent carefully and if you have any queries in relation to the deed of consent or anything in this memorandum, or if you are not signing the deed of consent freely and voluntarily and without coercion from any other person, then you should seek advice immediately from an independent solicitor.

39 In July 2010, emails between officers of the bank noted an error in the repayment schedules. New letters of offer were issued by the bank on 20 and 24 July 2010, and Ms Bazzo signed acceptances of those offers on behalf of Success (2010 Loan Agreements). The correction to the repayment schedules reflected Ms Bazzo's handwritten amendments to the bank's letters of 27 May 2010. References to a fixed and floating charge to be provided by Success, and form fields for additional guarantors, were also deleted. The reference to the appellants as guarantors remained.

40 On 12 August 2010, Home Account no 482 was credited with the sum of $5,113,324.87, and the balance was reduced to zero. A new account was created and held by Success with the bank, no 21488391 (bank account no 391), which was debited with the sum of $5,113,024.87. The result was to discharge the debt due by Success under the 2007 Loan Agreement, and replace it with a new advance under the 2010 Loan Agreements.

41 Also on 12 August 2010, Home Account no 358 was credited in the sum of $1,999,045.09, and the balance was reduced to zero. The same amount was debited to a new account held by Success with the bank, no 21488348 (bank account no 348). The result was to discharge the debt due by Success under the 2008 Loan Agreement, and replace it with a new advance under the 2010 Loan Agreements.

42 Success did not repay principal and interest as required by the 2010 Loan Agreements.

43 On 8 August 2011, the bank's solicitors issued Success with a notice requiring payment of the total arrears of $6,883,364.40 within 30 days. A further notice to pay what were then combined arrears of $6,757,326.88 was issued on 13 December 2011, and served on Success by letter dated 9 January 2012.

44 On 20 July 2012, the bank appointed a receiver to the Jandakot properties. The receiver sold the properties for an amount less than the amount owing by Success under the 2010 Loan Agreements.

45 On 26 March 2013, Ms Bazzo wrote to the receiver in her own capacity and on behalf of Gucce. She referred to the receiver's appointment as receiver of certain parcels of the secured land. Ms Bazzo said:

The guarantors of the facilities of [the bank] (Guarantors) are alarmed at your conduct since your appointment as receiver and manager of the Properties over 8 months ago.

46 After making various complaints, Ms Bazzo concluded:

The Guarantors hereby put you on notice that they will not be liable for any loss or damage that your actions may cause [Success] or [the bank] and will hold you liable for loss caused by your conduct, ultimately, the selling below market value in what is now obviously an improving market.

47 On 6 November 2013, the bank's solicitor issued a 'Notice of Demand on Guarantor' to Ms Bazzo, Prada and George 218. On 19 December 2014, the bank's solicitors issued a statutory demand to Gucce, but the statutory demand was set aside on 18 February 2015.

48 There had been no 'demand' for payment to Gucce for the purposes of cl 4 of the guarantees, and the notice of demand dated 6 November 2013 was the only demand given to the other Bazzo companies.

49 Mr Clarke, a manager of the bank, certified the amounts owing by Success and Ms Bazzo and the Bazzo companies to the bank as at 6 November 2013 and 26 August 2015.

50 For present purposes, the material findings by the judge as to the appellants' liability to the bank were as follows:

(a) The debt owed by Success under the Statewest Loan Agreement was discharged by the end of 2006 and replaced by an advance by Home under the 2006 Loan Agreement.[4]

(b) Nevertheless, the appellants had not terminated the Guarantees under cl 9 of the Guarantees, and they continued to be in existence as at 21 September 2008.[5]

(c) The effect of the transfer certificate in respect of Statewest under the Transfer Act was that, as from 21 September 2008:

(i) Statewest's rights under the Guarantees were transferred to the bank;[6]

(ii) the Guarantees were 'translated instruments' within the meaning of s 22(5) of the Transfer Act, the effect of which was that they thenceforth were to be read on the basis that all references to Statewest were references to the bank.[7]

(d) Accordingly, the bank's loans to Success in 2010 were 'Money Secured' by the Guarantees.[8]

(e) That conclusion is confirmed by the terms of the 2010 Deed of Consent, which referred to the 'Security Documents', being the unlimited guarantee given by the appellants, ie, the Guarantees, continuing to secure repayment of the 'Additional or Varied Facility', being the 2010 Loans Agreements for $5,144,082 and $2,011,545, respectively.[9]

51 As an alternative basis for liability, the judge found that a common law estoppel by convention precluded the appellants from denying that moneys owing under the 2010 Loan Agreements constituted 'Moneys Secured' by the Guarantees.[10]

52 The appellants' case as filed contained seven grounds of appeal. In oral argument, counsel for the appellants said that grounds 2.1, 4, 6 and 7 were abandoned.

53 Ground 1 alleges, in effect, that the primary judge erred in finding that on the proper construction of the 2010 Deed of Consent, the term 'Security Documents' in the 2010 Deed of Consent referred to the Guarantees. The appellants' contentions in this regard were summarised by the appellants under ground 1 as follows:

1. The 2010 Deed of Consent makes no express mention of the Guarantees, or of Statewest.
2. The reference to 'existing facility' as 'Nil' means that the term 'Security Documents' cannot refer to the Guarantees.
3. Statewest is a separate legal entity to the bank.
4. The term 'additional or varied facility' can only refer to the bank.
5. There was no existing facility with the bank to which the 2010 Loan Agreements were additional or varied.
6. The continuing security of an 'unlimited guarantee by you' in cl 3 of the 2010 Deed of Consent is a reference to a guarantee 'to be provided', as that phrase is used in the bank's correspondence dated 27 May, 20 and 24 July 2010.
7. The judge impermissibly read into the Deed of Consent the words 'previously given' and 'to Statewest Credit Society Ltd dated 24 April 2006'.
8. The Guarantees, by their express terms, were said to be given to Statewest only.
9. A letter written by Ms Bazzo to the bank dated 26 March 2013 was not admissible in construing the 2010 Deed of Consent, and in any event does not refer to the Guarantees.
10. In construing the 2010 Deed of Consent, it was not open to the judge to find that there was an absence of evidence contradicting an assumption that the Guarantees applied to the 2010 Deed of Consent.
11. The bank did not plead or run a case at trial that the Guarantees fell within the term 'unlimited guarantee by you' in the 2010 Deed of Consent.

54 Ground 2 alleges, in effect, that the judge erred in finding that the appellants were estopped from denying that the Guarantees were applicable to the 2010 Loan Agreements, in that:

1. that case was not pleaded or run at trial (as noted above, however, this point was abandoned);
2. there was no, or insufficient, evidence of an adoption by the appellants of an assumption that the Guarantees were given as security for the bank's loans;
3. the words 'to be provided' in the bank's letters dated 27 May 2010, 20 and 24 July 2010 'tells against any assumption' that the Guarantees applied to the 2010 Loan Agreements;
4. there was no, or insufficient, evidence to conclude that the bank relied on the Guarantees in relation to the bank's loans;
5. reliance on the Guarantees is inconsistent with the 'Banking Code of Practice' as adopted by the bank; and
6. the bank's estoppel claim is founded on an assumption as to the legal effect of the 2010 Deed of Consent as including a reference to the Guarantees, whereas any assumption as to a legal effect cannot form the basis of an estoppel at common law.

55 Ground 3 alleges, in effect, that the judge erred in law and in fact in finding that the Transfer Act had the effect of allowing the bank to rely upon the Guarantees in relation to the 2010 Loan Agreements, in that:

1. the certificates of transfer issued under the Transfer Act were limited to a transfer of such rights as Statewest had, and Statewest had no rights under the 2010 Loan Agreements; and
2. having found that the debts owed by Success to Statewest were discharged on 27 December 2006, and no further loans were made by Statewest to Success, the judge ought to have found that there were no further rights Statewest had to enforce against Success and thereby Statewest had no relevant 'asset' it could transfer to the bank.

56 Ground 5 is to the effect that the judge erred in law and in fact in finding that the Guarantees included a separate indemnity obligation owed by the appellants, in that:

1. no such case was pleaded or run by the bank at trial;
2. the indemnity clause in cl 5 of the Guarantees, on its proper construction, was not separate or independent from the guarantee obligation under cl 4 of the Guarantees;
3. counsel for the bank conceded for tactical reasons, prior to the appellants' adducing evidence, that the Guarantees could not have effect without a valid notice and, after the appellants had closed their case at trial, the bank was allowed to withdraw the concession, thereby prejudicing the appellants' case at trial; and
4. the primary judge failed to include 'any adequate reasons' why the indemnity given by cl 5 was to be independent from cl 4.

57 Ground 3 alleges, in effect, that the judge misconstrued and misapplied the Transfer Act in finding that the bank could rely on the Guarantees in relation to the 2010 loans.

58 It is convenient to commence with a consideration of ground 3, as the disposition of that ground has implications for the proper disposition of a number of the other grounds of appeal.

59 The Transfer Act defines 'asset' to mean, relevantly, 'a right, of any kind'.

When the certificate of transfer comes into force, the receiving body becomes the successor in law of the transferring body, to the extent of the transfer. In particular:

...

(b) if the transfer is a partial transfer - all the assets and liabilities of the transferring body that are included in the list of assets and liabilities specified in the statement of detail, wherever those assets and liabilities are located, become (respectively) assets and liabilities of the receiving body without any transfer conveyance or assignment[.] (emphasis added)

61 The 'statement of detail' referred to in s 22(1)(b) is the statement provided to the Australian Prudential Regulation Authority (APRA) under s 19 of the Transfer Act.

62 Section 20 of the Transfer Act deals with statements approved by APRA in relation to the transfer of a business. It provides:

Agreements about matters connected with the transfer

(1) The transferring body or the receiving body, or both of those bodies, may provide APRA with a written statement specifying, or specifying a mechanism for determining, things that are to happen, or that are taken to be the case, in relation to assets and liabilities that are to be transferred, or in relation to the transfer of business that is to be effected.

Note: If the transfer is a partial transfer, the statement may be included with the statement of detail under section 19.

(2) APRA may, in writing, approve the statement before issuing the certificate of transfer if APRA is satisfied that:

(a) the statement has been agreed to by the transferring body and the receiving body; and

(b) the matters specified in the statement are appropriate.

63 Section 22(2) of the Transfer Act deals with the legal effect of an approved statement under s 20. It provides:

If there is an approved section 20 statement in relation to the transfer, then:

(a) if the statement specifies that particular things are to happen or are taken to be the case - those things are, by force of this section, taken to happen, or to be the case, in accordance with the statement[.] (emphasis added)

64 The Certificate of Transfer made under the Transfer Act, from Statewest to the bank was a 'voluntary transfer approval' of the 'partial transfer of business' in relation to the 'assets and liabilities' in the attached 'Statement of Detail'. The 'Statement of Detail', provided in accordance with s 19 of the Transfer Act, referred to:

All assets and liabilities, as those terms are defined in the Act, of StateWest as at 20 September 2008[.] (emphasis added)

65 As noted earlier, for this purpose, the 'assets' of Statewest included 'a right of any kind'.

66 The Certificate of Transfer in respect of Statewest also indicated that APRA had approved the statement about matters connected with the transfer in accordance with s 20 of the Transfer Act (Approved s 20 Statement). That statement included, relevantly, the following:

Pursuant to section 20 of the Act, StateWest and the Bank have agreed that the following matters are things that are to happen or taken to be the case on and from a certificate of transfer, issued by APRA, coming into force.

1. The Bank will be substituted for StateWest, and have the same rights as StateWest, in any proceedings (including arbitration proceedings), whether pending or existing in any court, tribunal or Australian Securities and Investments Commission (ASIC) approved external dispute resolution scheme to which StateWest is a party immediately prior to a certificate of transfer, issued by APRA coming into force; and
2. Any documentary or other evidence that would (disregarding the transfer) have been admissible for or against the interests of StateWest, shall be admissible for or against the interest of the Bank; and
3. Each translated instrument, as that term is defined under section 22(5) of the Act, continues to have effect, according to its tenor, as if a reference in the instrument to StateWest were a reference to the Bank[.] (emphasis added)

67 Section 22(5) of the Transfer Act defines 'translated instrument' to mean, relevantly, an instrument subsisting immediately before the certificate comes into force:

(a) to which the transferring body [Statewest] is a party; or

(b) that was given to, by or in favour of, the transferring body [Statewest]; or

(c) that refers to the transferring body [Statewest]; or

(d) under which money ... may become, payable ... to ... the transferring body [Statewest].

68 As at 21 September 2008, the appellants had not stopped the Guarantees applying to future liabilities of Success under cl 9. Statewest's rights under the Guarantees included the right to due and punctual payment of the 'Moneys Secured', which included any money payable to Statewest by Success in the future. That was a 'right of any kind' for the purposes of the definition of 'asset' in the Transfer Act.

69 The effect of the Certificate of Transfer was to transfer that 'asset' to the bank, so that the Guarantees became an 'asset' of the bank, within the meaning of the Transfer Act. Further, by operation of s 20 and s 22(2) of the Transfer Act, and the terms of the Approved s 20 Statement, the Guarantees were 'translated instruments' which were to 'continue to have effect, according to [their] tenor', as if they referred to the bank rather than Statewest.

70 At this juncture, mention should be made of the oral arguments advanced by the appellants. The appellants placed significant store on the words 'according to its tenor' in s 22(5) of the Transfer Act and contended, in effect, that the judge had failed to give due weight to those words. The appellants referred to Cumerlong Holdings Pty Ltd v Dalcross Properties Pty Ltd[11] for the proposition that the word 'tenor' may, according to context, identify either the 'meaning of the words actually used', or the' effect or drift' of a provision. The appellants appeared to contend that the former was the relevant meaning of the word 'tenor' in this context, and that the 'tenor' of the Guarantees was that their operation was confined to the guarantee of existing or future lending by Statewest.

71 The appellants also referred to Roads Corporation v Gerkens[12] for the proposition that the term 'successor in law', which is used in s 22(1) of the Transfer Act, is not a term of art.

72 The appellants also referred to hypothetical examples involving St George Bank and Westpac. It is sufficient for present purposes to record the following example postulated by the appellants. 'A', a creditor, had separate claims against each of St George Bank and Westpac. A then released its claim against St George Bank. St George Bank's business was then subsequently transferred to Westpac. The rhetorical question that was then posed was whether it could have been intended in those circumstances that the transfer of A's release in favour of St George Bank to Westpac should operate so as to release A's separate claim against Westpac.

73 The following observations may be made about these submissions. First, s 22(5) has no relevant application as the transfer from Statewest to the bank was a 'partial transfer' and not a 'total transfer'. Relevantly, for present purposes, the words 'according to its tenor' appear in the Approved s 20 Statement, which is given statutory force by s 22(2) of the Transfer Act.

74 Secondly, the word 'effect' in the phrase 'continues to have effect according to its tenor' in the Approved s 20 Statement would ordinarily be read to mean legal effect. In other words, the Approved s 20 Statement is speaking of an instrument having a continued legal effect, according to its tenor.

75 Thirdly, that would suggest that the words 'according to its tenor' are intended to refer to the meaning of the words conveyed by the instrument, rather than the general 'drift' of the instrument.

76 Fourthly, whether the words 'according to its tenor' are intended to refer to the effect of the instrument, or the meaning conveyed by the instrument (to the extent that there is any relevant difference in this context), in each case the instrument continues to have effect 'as if a reference in the instrument to Statewest were a reference to [the bank]'. Thus, even if one were to have regard to the 'effect' of the Guarantees, their effect was to make the appellants liable as guarantors for existing and future lending to Success, and the Guarantees were to be read as if references to future lending by Statewest were to be read as future lending by the bank to Success.

77 Fifthly, it is difficult to see why, objectively, the Approved s 20 Statement should be read in the manner suggested by the appellants given that the transfer involved a transfer (subject to shares in a subsidiary) of Statewest's business, including its banking business,[13] to the bank.

78 Sixthly, accepting that the term 'successor in law' is not necessarily a term of art in this case, s 22(1) goes on to set out the particular effect of the transfer. By s 22(1)(b) 'all the assets and liabilities of the transferring body ... become ... assets and liabilities of the receiving body without any transfer, conveyance or assignment'.

79 Further, the hypothetical examples do not assist the appellants. In each case, the true scope and meaning of the translated instrument would need to be examined in order to consider the effect it would continue to have according to its tenor when references in the instrument to the transferring body are read as references to the receiving body. In the case of the hypothetical instrument of release, the effect of an approval under s 20 of the Act would, prima facie, merely be that St George's pre-transfer liability to A which is the subject of the release would be read as a liability of Westpac, and that Westpac would have the benefit of the release of that liability.

80 Accordingly, the judge was correct to conclude that under the Transfer Act, the Guarantees had been transferred to the bank and were 'translated instruments', having the effect to which his Honour referred. As from 21 September 2008, the definition of 'Moneys Secured' under the Guarantees was to be read as referring to, relevantly, all money which is or may become payable to the bank by Success; all loans which in the future the bank makes to Success; and all money now or in the future owing and payable to the bank by Success. Ground 3 should be dismissed.

Disposition - ground 1 (proper construction of 2010 Deed of Consent)

81 Ground 1 concerns the proper construction of the 2010 Deed of Consent, and, in particular, cl 3 having regard to the definition of 'Security Documents' in cl 1. Clause 1 defined 'Security Documents' to mean 'Unlimited Guarantee by you'.

82 The words 'by you' in this definition plainly refer to each of the appellants (and not the bank). Thus, when the definition of 'Security Documents' is read into cl 3, as it ordinarily should be,[14] cl 3 of the 2010 Deed of Consent provided that each of the appellants agreed that the Unlimited Guarantee by that appellant continues to be security to the bank for the repayment of the 'Existing Facility', and the 'Additional or Varied Facility'.

83 Further, the 'Existing Facility' was defined in cl 1 as 'Nil'. Albeit in a rather awkward and certainly shorthanded fashion, by defining 'Existing Facility' as 'Nil' for the purposes of cl 3, cl 3 had the effect of only operating upon the 'Additional or Varied Facility'. According to recital C, the appellants had requested the bank to grant Success the Additional or Varied Facility, which was defined in cl 1 as being two Business Term Loans. Facilities for these two respective Business Term Loans were subsequently granted by the bank to Success shortly thereafter in the form of the 2010 Loan Agreements, in July 2010.

84 It might be surmised that, by confining cl 3's operation to the two new Business Term Loans, objectively the parties expected that once these two specified loans were granted by the bank, these loans would replace or otherwise reduce to nil balances the 2007 Loan Agreement and the 2008 Loan Agreement. In any event, whatever the parties' expectations might have been, it is clear from the language adopted in cl 3 that cl 3 is not referring to a guarantee yet to be provided. Clause 3's ordinary meaning is that each of the appellants (who are collectively defined in the document as the 'Guarantor') agrees that its or her Unlimited Guarantee is to 'continue' to secure repayment of the two specified Business Term Loans when granted. This is plainly a reference to an existing unlimited guarantee which was to operate in connection with future specified lending to Success.

85 The question, then, is what reasonable persons as at 3 June 2010 (being the date the Deed of Consent was executed) would have understood to be the instrument being referred to by the term 'Unlimited Guarantee by [each of the appellants]'.[15] Extrinsic evidence, as the judge observed, is admissible to identify the subject matter of a contract.[16]

86 In this case, each of the appellants had, on the evidence, executed only one 'Unlimited Guarantee' to secure present and future borrowings of Success. It was the Guarantee executed in favour of Statewest in 2006. A reasonable person in the position of the parties as at 3 June 2010 would have understood cl 3 to mean that the appellants were agreeing that it was the Guarantees which would continue to operate to secure the repayment of the two new proposed loans to Success. That conclusion is confirmed by the further consideration that in construing the 2010 Deed of Consent, regard may be had to the legal context in which it was executed and within which its provisions, objectively, were intended to apply.[17] That included, in this case, the operation of the Transfer Act and the legal effect of the Guarantee as a 'translated instrument' under that Act.

87 The appellants' contentions to the contrary cannot be accepted. The appellants contended that the 2010 Deed of Consent could not be read as referring to an existing guarantee, but that instead, it contemplated the provision of a new guarantee to be given in the future to support the new lending. Given that this contention could not succeed if cl 3 meant what it said, the appellants submitted in oral argument that cl 3 was evidently an 'error', and was superfluous to the operation of the 2010 Deed of Consent.[18] The arguments in support of this proposition were to the effect that the 2010 Deed of Consent was a 'standard form' document; that the reference to 'Existing Facility' as 'Nil' indicated that the Deed of Consent was a standard form document; that the bank's letters of 27 May 2010 and the 2010 Loan Agreements made reference to a guarantee 'to be provided'; and that insofar as the Memorandum attached to the 2010 Deed of Consent referred to a pre-existing guarantee, its language in that connection was inconsistent with the terminology used in the Guarantees.

88 As to the submission that cl 3 of the 2010 Deed of Consent is superfluous, it is a basic principle of construction that an instrument should be read as a whole, giving weight to all its clauses where possible, and that a court will strain against interpreting it so that a particular clause is rendered nugatory or ineffective.[19] It may be accepted that the scope for the operation of this principle may be more limited in some types of contract than others. It may, for example, have less scope for operation in contracts exhibiting what Lord Hoffmann described as a 'torrential style of drafting',[20] where the drafting technique is an impediment to the search for internal coherence and consistency in the instrument. The principle may also have less scope for operation where the contract is evidently the product of a series of ad hoc additions or variations over a lengthy period of time, again making the search for coherence and consistency elusive. Such features were, at least in earlier times, not uncommon in some conveyancing, leasing, shipping and insurance documentation.[21]

89 In this case, it is true that the 2010 Deed of Consent has indications of it being a banking document derived from a precedent, rather than one drafted as a 'bespoke' instrument from beginning to end. Nevertheless, it is a simple instrument, clothed with the solemnity of a deed. Its evident purpose is to record the conditions upon which the bank is prepared to grant Success the two new facilities that the appellants have requested the bank to grant to Success (Recitals B and C). There are only four clauses of the instrument. One is a definition clause, and another is a costs clause. So, if cl 3 were to be dismissed as superfluous, that construction would effectively deprive the instrument of half of its operative effect.

90 Moreover, the meaning of cl 3 is inescapable on the language of the instrument - that the appellants agreed that the 'Security Documents' (as defined) would 'continue' to be security for the proposed new loans to be granted to Success. It is not only possible to attribute some meaning to cl 3, it is necessary. To fail to attribute any meaning to cl 3, as the appellants contend, would be to subvert the general rule that a person who signs a document which is known by that person to contain contractual terms, and to affect legal relations, is bound by those terms.[22]

91 As to the 11 points subjoined to ground 1 of the appeal, the following observations may be made. The first, third, fourth and eighth points are, in literal terms, true but of no material assistance to the appellants on the question of construction. The second and seventh points are essentially wrong for the reasons given earlier. Also, insofar as the fifth and sixth points allege that, on the proper construction of the 2010 Deed of Consent, the term 'Unlimited Guarantee by you' should be read as referring to an unlimited guarantee yet to be given by the appellants,[23] the construction is inconsistent with the ordinary meaning of the words used in the 2010 Deed of Consent. As noted earlier, an Unlimited Guarantee by the appellants which is to 'continue' to be security for future borrowings is, in its ordinary meaning, an existing guarantee.

92 The ninth and tenth points contend that the judge impermissibly construed the 2010 Deed of Consent by reference to his findings on the estoppel claim. That is not correct. The judge did not use his estoppel findings to construe the 2010 Deed of Consent. His Honour indicated that the findings and reasons in relation to the first and second issues,[24] including the legal effect of the 2010 Deed of Consent,[25] made it strictly unnecessary to deal with the estoppel issue.[26]

93 As to the eleventh point, the appellants' written submissions did not elaborate on the bare assertion that at trial the bank did not plead or run a case that the Deed of Consent should be construed as referring to the Guarantees. They referred to the bank's pleading to the effect that the appellants did not themselves execute guarantees naming the bank as the beneficiary of the guarantee.[27] However, that plea did not, plainly, preclude a claim that the 2010 Deed of Consent, properly construed, referred to the Guarantees. Indeed, such a case, in substance, was pleaded and advanced in submissions by the bank.[28]

94 Accordingly, the judge's construction of the 2010 Deed of Consent was correct. Ground 1 should be dismissed.

96 The determination of this ground of appeal is strictly unnecessary having regard to the disposition of grounds 1 and 3. Nevertheless, the appellants' contentions will be addressed for completeness.

97 It is convenient to note at the outset the forensic context in which the question of estoppel was determined in the primary proceedings.

98 As noted earlier, the appellants had commenced proceedings for declarations to the effect that the bank was not entitled to any payment under the Guarantees.[29] The appellants alleged, amongst other things, that:

(a) the Guarantees were not enforceable by the bank;[30]

(b) the bank's lending under the 2010 Loan Agreements was not secured by any guarantee given by the appellants;[31] and

(c) even if the Guarantees operated as a contract between the appellants and the bank (as opposed to the appellants and Statewest) the bank's lending in 2010 to Success constituted variations to the lending, as a result of which the appellants were discharged from any liability under the Guarantees by operation of the principle in Ankar Pty Ltd v National Westminster Finance (Australia) Ltd.[32]

99 The bank's counterclaim, apart from estoppel, was principally twofold. First, it contended that the Transfer Act operated so that all of Statewest's assets and liabilities were transferred to the bank and that in that regard, at all material times after 21 September 2008, the Guarantees were to be read as if references to Statewest were references to the bank. On this basis, the Guarantees operated to secure the lending to Success under the 2010 Loan Agreements. The appellants' specific consent to the Guarantees applying to that lending was not required. This is because cl 12(f) of the Guarantees provides that the appellants agreed, in effect, that their liability would not be affected by variations or extensions to the facilities granted to Success. (Clause 12(f) is set out in [15] above.) Secondly, it was contended that, in any event, the Ankar principle had no application because the appellants had expressly consented to the Guarantees applying to the 2010 lending by the execution and return of the 2010 Deed of Consent.[33]

100 In relation to the estoppel claim, the bank pleaded in effect that the parties conducted their relationship with each other on the mutual assumption that at all material times after 20 September 2008 (presumably intended to be a reference to the date of the transfer of Statewest's business to the bank), the Guarantees took effect as if they were given in favour of, and could be relied on by, the bank, including as security for all facilities extended by, or advanced to, Success by the bank.[34] The bank's 'further particulars of matters relied upon for estoppel'[35] and its submissions[36] in connection with the estoppel argument included reference to the transfer of Statewest's business to the bank on 21 September 2008. The bank's submissions included contentions to the effect that the assumption was that the Guarantees applied to the lending under the 2010 Loan Agreements.[37]

101 In their reply, the appellants, amongst other things, disputed that the Guarantees were assets of the bank within the meaning of the Transfer Act.[38] They also pleaded, in effect, that the 2010 Deed of Consent did not, on its proper construction, refer to the Guarantees.[39]

102 It appears from this context that the bank's estoppel argument was in the alternative to its principal claims, and applied at two levels. At the primary and fundamental level, the bank's estoppel argument was that even if the Guarantees were not caught by the operation of the Transfer Act, the parties nevertheless adopted the common assumption that the Guarantees applied to secure the money under the 2010 Loan Agreements. Secondly, the estoppel claim also addressed the appellants' specific contention that under the 2010 Deed of Consent, the appellants had not expressly consented to the Guarantees applying to the 2010 lending. This alternative argument assumed that the bank succeeded on the proposition that the Guarantees became assets of the bank under the Transfer Act, but that it would fail (absent an estoppel) on the basis that Ankar applied, and that the 2010 Deed of Consent did not, on its proper construction, operate as an express consent by the appellants to the lending under the 2010 Loan Agreements.

103 The judge in his reasons did not distinguish between the two, but his findings of a common assumption, properly understood, applied with equal force to each of the alternatives.

104 The judge said that had he not found the Guarantees secured money due under the 2010 Loan Agreements, he would have held that a 'conventional estoppel precludes the [appellants] from denying that the Guarantees secure that debt'.[40] In that regard, his Honour found that there was a common assumption that the Guarantees secured the money due under the 2010 Loan Agreements;[41] that by their conduct, including the signing and returning of the 2010 Deed of Consent, the appellants participated in the adoption of the conventional assumption;[42] and that the denial of the assumption would cause detriment to the bank.[43]

105 In relation to the character of the assumption necessary for an estoppel by convention, his Honour said[44] that he would proceed on the basis of the High Court's decision in Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd,[45] and the observations of the High Court in Bofinger v Kingsway Group Ltd.[46] In Con-Stan, the High Court said:[47]

Estoppel by convention is a form of estoppel founded not on a representation of fact made by a representor and acted on by a representee to his detriment, but on the conduct of relations between the parties on the basis of an agreed or assumed state of facts, which both will be estopped from denying. The existence of an estoppel based on a convention between the parties has often been recognised: [Thompson v Palmer [1933] HCA 61; (1933) 49 CLR 507 at 547; Grundt v Great Boulder Pty Gold Mines Ltd [1937] HCA 58; (1937) 59 CLR 641 at 657, 675-677; Legione v Hateley [1983] HCA 11; (1983) 46 ALR 1; 152 CLR 406 at 430-431; Amalgamated Investment & Property Co Ltd (in liq) v Texas Commerce International Bank Ltd [1982] QB 84 at 121, 126, 130-131; Spencer Bower and Turner: Estoppel by Representation 3rd ed (1997) at 157-77.] ... [J]ust as estoppel by representation requires a representation of fact, so too estoppel by convention requires the assumed state of affairs to be an assumed state of fact: Greer v Kettle [[1938] AC 156 at 170]; Spencer Bower and Turner: Estoppel by Representation 3rd ed, pp 167-168. The state of affairs relied on by Con-Stan is that the parties conducted their business relationship on the basis that the broker was alone liable to the insurer for the premiums. That is clearly an assumption as to the legal effect of their conduct, and not an assumption of fact. (emphasis added)

106 In Bofinger, the High Court referred to Con-Stan and said that:[48]

The reference to an agreed or assumed state of facts (not of law) is significant.

107 In the present case, his Honour concluded[49] that an assumption that the Guarantees secured money under the 2010 Loan Agreements, insofar as it involved a mixed question of fact and law, would be an assumption as to 'a state of facts' for the purposes of the doctrine of conventional estoppel.[50] His Honour also observed that in any event, the appellants did not contend that the assumption that the Guarantees secured money under the 2010 Loan Agreements was an assumption of law which could not give rise to a conventional estoppel.[51]

The judge's findings as to the common assumption

108 The judge made the following primary findings of fact which are unchallenged in the appeal:

(a) All of Mr Sara's discussions with Ms Bazzo about guarantees in connection with the 6 May 2010 commercial lending submission proceeded on the basis that the Guarantees were the only guarantees in place, the only guarantees required and the guarantees on which the bank relied in relation to the facilities granted by the bank.[52]

(b) At the time that Mr Marmont recommended approval of the commercial lending submission of 6 May 2010, he was not aware of any challenge by Ms Bazzo and the Bazzo companies to the existence of the Guarantees. Had he been so aware, he would have declined her the support because the security position of the bank would have been unacceptable.[53]

(c) Had Ms Bazzo not signed the 2010 Deed of Consent, Mr Sara would not have recorded the extension of the facilities because Success would not have met the terms of the bank's approval for the grant of those facilities.[54]

109 His Honour also found that the terms of the 2010 Deed of Consent, the terms of Ms Bazzo's letter dated 26 March 2013, and the absence of any contrary evidence, in particular from Ms Bazzo (who was not called as a witness) combined to indicate that, until at least 26 March 2013, Ms Bazzo understood the Guarantees to secure debts due by Success to the bank under the 2010 Loan Agreements.[55]

110 These findings were referred to by the judge in the course of his conclusion that the parties manifested a common assumption that the Guarantees secured money due under the 2010 Loan Agreements. His Honour said, relevantly:[56]

In my view, the Deed of Consent ... manifests the common assumption between the plaintiffs and the Bank that the Guarantees secured money due under the 2010 Loan Agreements. The terms of that deed and its attached memorandum are set out above. If the Guarantees did not secure the 2010 loans, then there would have been no point in preparing and signing the Deed of Consent. The 'background' to the Deed clearly contemplates an existing Guarantee by way of Security Documents, namely an 'Unlimited Guarantee by you'. The Guarantees are the only documents to which the Deed of Consent could refer.

...

I infer from the terms of the Deed of Consent and attached memorandum, prepared by the Bank and adopted by the plaintiffs, that both parties were acting on the assumption that the Guarantees secured money due under the 2010 Loan Agreements. The adoption of that assumption by the Bank is also supported by the reference to an existing unlimited guarantee and indemnity in the commercial lending submission ... and the evidence of Mr Marmont and Mr Sara as to their understanding. I have already found that the plaintiffs, through Ms Bazzo, adopted the same assumption. Each party was operating on the same assumption, and understood the other party to be acting on that assumption. (emphasis added)

The appellants' contentions and the disposition of those contentions

111 The appellants' challenges in this appeal concern the judge's findings as to the common assumption. The appellants' arguments did not, in any orderly way, address the errors asserted in ground 2 of the grounds of appeal. As noted earlier, ground 2.1 was abandoned. Grounds 2.2 - 2.5 essentially deal with the question of whether the judge's findings as to the common assumption were open on the evidence. Ground 2.6 asserts that the assumption found by the judge was, properly understood, an assumption of law which could not give rise to a conventional estoppel. It is convenient to commence with ground 2.6 first.

112 The threshold difficulty with ground 2.6 is that it is inconsistent with the judge's finding of fact, unchallenged in the grounds of appeal, that the appellants did not contend at trial that an assumption of the kind he found was an assumption of law which could not give rise to a conventional estoppel.[57] Accordingly, absent exceptional circumstances, the appellants should not be allowed to raise the point on appeal: Rizhao Steel Holding Group Co Ltd v Koolan Iron Ore Pty Ltd.[58] No exceptional circumstances were shown, save insofar as the court allowed one matter, which became the focus of oral submissions, to be argued.

113 The focus of the oral submissions was a contention that the judge's finding as to the common assumption was not open because properly understood, it was a finding to the effect that the Guarantees were 'varied' or 'novated', and thereby a finding of an assumption which could only ground a promissory (equitable) estoppel, and not a common law estoppel by convention. The appellants relied in particular on the observations of McPherson J in Queensland Independent Wholesalers Ltd v Coutts Townsville Pty Ltd.[59]

114 In Queensland Independent Wholesalers, the plaintiff sued the defendants for goods sold and delivered in late 1985 up to 26 March 1986, under a formal written contract entered into in 1985. By way of background, the parties had been in contractual relationships for a number of years, for the supply of goods, going back to 1977. The defendants resisted the plaintiff's claim on the basis, relevantly, that they were entitled to a price rebate from the plaintiff. The defendants contended that they were entitled to the benefit of a rebate in respect of their purchases on the basis of an estoppel by convention arising from the grant of rebates over the period 1977 to early 1986. This was despite the fact that both the written agreement in 1985, and earlier written agreements, provided that the defendants 'may' be granted a rebate, but was not entitled to one. The court found, in effect, that the previous conduct between the parties in which a rebate had been allowed was equally consistent with the conferral of a discretionary rebate, rather than an assumption that the defendants had an entitlement to a rebate.[60] That was sufficient to dispose of the claim in that case. In addition, in a passage referred to by the appellants in this case, McPherson J also observed:[61]

To my mind therefore, it remains in Australia an open question whether a conventional estoppel is capable of 'adding to' or 'varying' the express terms of a formal written contract, the more so if as here the claimed variation involves the deletion of a specific and quite plainly critical contractual provision. Even if, as I believe to be accurate, the true effect of a conventional estoppel is not to 'vary' the contract but simply to prevent a party from insisting upon its strict literal terms, the defendants are not assisted by the doctrine in the present case. Restricting or even removing from ... the contract ... the provision authorising the plaintiff to exercise its discretion to grant a rebate will not oblige it to allow the rebate but will simply deprive it of its only power to do so. For the defendants to succeed, what is required is the substitution of an entirely new provision affirmatively obliging it to grant the rebate. (emphasis added)

115 The appellants' contentions based on Queensland Independent Wholesalers should be rejected. If the Transfer Act had no application, and the Guarantees were not translated instruments, the assumption found by the judge did not involve an assumption of the kind discussed by McPherson J in Queensland Independent Wholesalers. In that case, McPherson J said that the assumption sought to be relied upon was an assumption that an important operative provision in the parties' subsisting formal written agreement was varied. In this case, if the Transfer Act had no relevant application, there was no subsisting agreement between the bank and the appellants for the giving of a guarantee to secure the 2010 lending. Accordingly, the assumption found by his Honour could not involve an assumption as to the variation of a subsisting contract between the appellants and the bank.

116 Nor did his Honour's finding of an assumption concern a novation, ie, a tripartite agreement[62] between Statewest, the appellants and the bank. There is nothing in his Honour's reasons to indicate a finding that, and indeed there was no evidence that, the parties made any assumption about such a tripartite agreement.

117 The effect of his Honour's finding, on the hypothesis that the Transfer Act did not operate, is that the appellants and the bank, in the conduct of their mutual relations with respect to the lending to Success under the 2010 Loan Agreements, assumed that the Guarantees applied to any such lending as if the bank, rather than Statewest, was the named beneficiary in and throughout the terms of the instrument.[63] That was (adopting the language of Isaacs J in Ferrier v Stewart[64]) the 'given state of things' taken as the assumed basis for the appellants' conduct in requesting the bank to grant the loans to Success, and for the bank's conduct in acceding to that request by entering into the 2010 Loan Agreements and advancing the money to Success.

118 The primary judge's finding of an assumption was, by its terms and in its effect, an assumption as to the existence of a contract of guarantee between the appellants and the bank.[65] An assumption as to the existence of a contract is an assumption of fact for the purposes of the doctrine of estoppel by convention: Waltons Stores (Interstate) Ltd v Maher;[66] Riseda Nominees Pty Ltd v St Vincent's Hospital (Melbourne) Ltd;[67] W & R Pty Ltd v Birdseye;[68] Equuscorp Pty Ltd v Wilmoth Field Warne (a firm).[69]

119 In Waltons Stores (Interstate) Ltd v Maher,[70] Brennan J observed:

If the estoppel relates to the existence of a contract between the parties, the legal relationship between the parties is ascertained by reference to the terms of the contract which has been assumed to exist. If, in the assumed state of affairs, the contract confers a cause of action on the party raising the estoppel, the cause of action may be enforced. The source of legal obligation in that event is the assumed contract; the estoppel is not a source of legal obligation except in the sense that the estoppel compels the party bound to adhere to the assumption that the contract exists.

120 Also insofar as the primary judge's finding as to an assumption concerned the legal effect of the Guarantees for the purposes of the lending to Success requested by the appellants in 2010 and granted by the bank under the 2010 Loan Agreements, that was an assumption of mixed fact and law relating to private legal rights. In Waltons Stores, Brennan J also said:[71]

The assumed state of affairs to which a party may be bound to adhere may be more than a state of mere facts; it may include the legal complexion of a fact as well as the fact itself, i.e., a matter of mixed fact and law.

...

If the subject of the estoppel which binds [the estopped party] is that a binding contract had come into existence, the estoppel extends to the existence not only of the facts which are essential to the existence of a binding contract but also to the existence of a contract which is binding in law. An estoppel in pais may relate ... not merely to facts but to the legal complexion of facts[.]

121 These observations by Brennan J in Waltons Stores appear to be consistent with the High Court's statement in Con-Stan[72] that Amalgamated Investment & Property Co Ltd (in liq) v Texas Commerce International Bank Ltd[73] is authority for the proposition that the law recognises an estoppel based on convention between the parties. His Honour's observations also seem to be consistent with the observations of the High Court in TEC Desert Pty Ltd v Commissioner of State Revenue (Western Australia)[74] where their Honours said, with reference to Con-Stan, that a warranty as to title in an agreement 'provided an agreed hypothesis or convention upon which [the parties] conducted their reciprocal affairs'.

122 Further, an assumption of that kind has been recognised for the purposes of the law of estoppel by convention, by this court: Alpha Wealth Financial Services Pty Ltd v Frankland River Olive Co Ltd.[75] An assumption of that kind has also been recognised by a number of other intermediate appellate courts in relation to estoppel by convention, as the primary judge had observed. These include Coghlan v SH Locke (Australia) Ltd,[76] Farrow Mortgage Services Pty Ltd v Hogg,[77] Falinski v Commonwealth Bank of Australia,[78] MK & JA Roche Pty Ltd v Metro Edgley Pty Ltd[79] and Ryledar Pty Ltd v Euphoric Pty Ltd.[80]

123 The appellant did not challenge the line of authority to the effect that an assumption of mixed fixed fact and law as to private legal rights may be regarded as an assumption of fact for the purposes of the law of estoppel by convention. Rather, the appellants appeared to contend[81] that the assumption found by his Honour could only have grounded an equitable estoppel because it involved a variation or novation of the Guarantees. For the reasons given earlier and in the next paragraph, that contention should not be accepted.

124 Returning to the appellants' submissions on novation, it is true that had the bank, the appellants and Statewest assumed that there existed or would exist a tripartite agreement between them under which the appellants' obligations to Statewest would be discharged and corresponding obligations would be undertaken by the appellants to the bank, and had the other criteria for an equitable estoppel been established,[82] the bank might have relied on an equitable estoppel to recover against the appellants by reference to the assumed tripartite contract. This illustrates the proposition, referred to by Brennan J in Waltons Stores,[83] that an equitable estoppel on the one hand, and an estoppel in pais which relates to an assumption of an existing contract on the other (which his Honour evidently considered to be a common law estoppel), may lead to the grant of similar remedies.

125 Finally, at the secondary level of the bank's claim for estoppel referred to in [102] above, if the Guarantees were translated instruments under the Transfer Act, there could be no scope for any assumption that the Guarantees were varied. The Guarantees merely operated according to their terms, read in the manner required by the Approved s 20 Statement and s 22(2) of the Transfer Act. Insofar as the Guarantees were translated instruments, a finding of an assumption that they secured the lending under the 2010 Loan Agreements is, on the proper construction of the judge's reasons, in the context of which the case was litigated, a finding of an assumption that the appellants had consented to the bank lending the money to Success under the 2010 Loan Agreements. That is an assumption of fact.

127 Returning then to the other points made under ground 2 of the grounds of appeal, the first point under ground 2 was abandoned. The second to fourth points under ground 2 of the appeal, in substance, allege that there was no, or insufficient, evidence that the parties assumed that the Guarantees applied to secure the 2010 Loan Agreements. These grounds called for compliance by the appellants with Practice Direction 7.4 regarding the review of evidence in appeals. The appellants failed to comply with Practice Direction 7.4. The appellants' arguments in support of the second to fourth points in ground 2 in their written submissions appeared to rest on two propositions.[84] One proposition is that a common assumption could not be inferred from the terms of the 2010 Deed of Consent, as the 2010 Deed of Consent made no reference to Statewest, or to Home, and because the bank's correspondence of 27 May 2010 and July 2010 referred to guarantees 'to be provided'. The second proposition is that the bank could not have made the assumption because Mr Marmont had not looked at the Guarantees referred to in the May 2010 credit submission, and had not engaged lawyers to check the position. Those contentions cannot be accepted.

128 In order to succeed on this point, the appellants must positively establish that a factual error was made by the judge: Leeder v The State of Western Australia.[85] For the reasons given earlier, a reasonable person as at 3 June 2010 would have understood the reference to the phrase 'Unlimited Guarantee by you' in the 2010 Deed of Consent to mean the Guarantees. That finding is not determinative of the state of mind of either Ms Bazzo in executing the instrument and returning it to the bank, or of the bank in proffering it for execution and accepting it in its executed form. Nevertheless, it is probative in the sense that the parties' subjective understanding of the subject matter of the 2010 Deed of Consent would ordinarily be expected to accord with the understanding that reasonable persons in the position of the parties would have had. As to Mr Marmont's state of mind, that question is appropriately addressed within the broader context that the judge made a number of findings about the parties' respective states of mind which contributed to his Honour's ultimate finding of the common assumption.

129 The specific findings of fact concerning the state of mind of each of the relevant bank officers, Mr Marmont and Mr Sara, referred to in [108] above, are unchallenged in this appeal.[86] Rather, the contention is, in substance, that those findings could not logically contribute to a finding that the bank made an assumption of the kind found by his Honour.[87] The appellants also contended that the finding as to Ms Bazzo's state of mind, referred to in [109] above, was not open.[88]

130 In relation to the bank, his Honour found, in effect, that the bank officers assumed that the then existing unlimited guarantees (ie, the Guarantees) which the bank held, which had been executed by the appellants to secure lending to Success, applied to secure the loans made to Success under the 2010 Loan Agreements.[89] As the evidence disclosed, there was only one such instrument held by the bank. The drawing of the inference that the bank officers assumed that this instrument, held by the bank, applied to secure the 2010 lending to Success did not logically depend upon any assumption about whether the bank officers had viewed the instrument or had its terms checked by lawyers at the time they made their assumption. The inference that the bank officers in fact assumed that the Guarantees applied to the bank's lending under the 2010 Loan Agreements to Success was open irrespective of their conduct (or, more accurately, absence of conduct) in that regard, even if it were thought to be 'careless'.[90] Also, even if the bank officers (and Ms Bazzo) could not explain in legal terms how the Guarantees applied to any lending under the 2010 Loan Agreements, that does not preclude a finding that such an assumption was actually made. In Waltons Stores, Deane J, in addressing the appellant's (the party estopped's) submission in that case that the buyers could not rationally have assumed that a binding agreement had been made for the sale of land without an exchange of contracts, said:[91]

These different legal analyses of how a binding agreement might have come about notwithstanding the absence of a physical exchange have little direct relevance to the thought processes of the [buyers] who, no doubt, did not seek to analyse or rationalise their belief that a contract had been made. The existence of, and divergence between, possible lawyers' rationalisations of a layman's belief of a legal fact does not negate the existence of the belief or alter its actual content. Whatever the possible legal rationalisation might be, the operative finding for the purposes of the present case was that the [buyers], who were not lawyers, believed that there was a binding agreement between [the putative seller] and themselves.

131 No error of fact in relation to the assumption made by the bank officers, has been established.

132 In relation to Ms Bazzo, it was open, based on the terms of the 2010 Deed of Consent and Ms Bazzo's letter of 26 March 2013, to infer that she too assumed, at least until 26 March 2013, that the Guarantees secured the debts due by Success to the bank under the 2010 Loan Agreements. As the judge noted, the inference is more readily drawn in circumstances where Ms Bazzo did not give evidence at trial, and where there was no explanation for her absence from the witness box.[92]

133 The fifth point under ground 2 of the appeal also challenged the sufficiency of the evidence of the finding of estoppel by (apparently) contending, in effect, that the bank could not have made the assumption because of the application of the Banking Code of Practice (Code), and 'the terms of the [Guarantees] were contrary to the Code's requirements'.[93] In this regard, this submission appears to rely on the proposition advanced by the appellants at trial, and dismissed by the judge, to the effect that the 'Code was breached because the Guarantees were for an unlimited amount and were not endorsed to indicate that the Code was applicable'.[94] The judge dismissed that contention on a number of bases,[95] including that:

(a) there was no evidence that Statewest had adopted the Code at the time the Guarantees were executed; and

(b) there was no evidence that the Code had been incorporated into the Guarantees or into the 2010 Loan Agreements, and the mere fact that the bank had adopted the Code did not cause the Code to be incorporated into the Guarantees or into the 2010 Loan Agreements

134 These findings are not challenged in the grounds of appeal. These unchallenged findings, together with the reasons for dismissing the second to fourth points referred to above, combine to indicate that the fifth point has no merit. Further, as regards the corporate appellants, the judge found, and the finding is not challenged, that even if the Code were to apply, it would only apply to Ms Bazzo, and not to George 218, Prada or Gucce.[96]

136 Ground 5 of the grounds of appeal, which relates to issue no 10 at trial, only concerns the position of one appellant, Gucce.

137 The judge referred to issue no 10 as follows:[97]

The tenth contentious issue requiring my consideration is expressed in the following terms:

1. Does any liability of the plaintiffs to make payment under cl 5(a) of the Guarantees depend on the making of a demand for payment by the Bank?

138 His Honour answered that question in the negative by explaining that cl 5, on its proper construction, does not require the making of a demand.[98]

139 The relevant context for issue no 10 was as follows. In issue no 9, the judge had determined that the bank had made a valid demand for payment giving rise to obligations of George 218, Prada and Ms Bazzo under cl 4 of the Guarantees.[99] However, the bank had accepted that a demand was necessary under cl 4, and that no valid demand under cl 4 had been made against Gucce.[100] Accordingly, in its claim against Gucce, the bank sought to rely on the indemnity under cl 5(a) of the Guarantee. A question then arose as to whether cl 5(a) itself required the making of a demand as a condition of any liability to the bank under that clause.

140 The procedural background to this question was explained by the judge.[101] Amongst other things, his Honour observed that the during the course of opening submissions on the first day of trial, senior counsel for the bank accepted that in the absence of any demand against Gucce, the court could only make a declaration against that company and that in those circumstances, it would be necessary for the bank to issue fresh proceedings after issuing a valid demand (under cl 4).[102] His Honour observed that this concession was withdrawn on the morning of the second day of trial. Senior counsel for the bank indicated that when she had made the concession, she had overlooked the indemnity argument (under cl 5), and submitted that the indemnity did not depend on a demand.[103] The judge continued:[104]

The [appellants] assert that the Bank requires leave to withdraw the concession and that leave should be refused so late in the day. I do not accept that leave is required for counsel to withdraw a concession on a point of law which was mistakenly made and which does not involve the abandonment of a claim. The Bank's claim based on the indemnity had been pleaded and not withdrawn.

I was concerned that the [appellants] have a reasonable opportunity to respond to the submission about the indemnity which had not been anticipated by the Bank's written submissions. I offered the [appellants'] counsel the opportunity to make further written or oral submissions on the issue, or anything else he required to be able to deal with the argument. As the issue is one of construction of the Guarantees, it does not appear that any additional facts could be relevant. The [appellants] did not suggest that they had been deprived of the opportunity to adduce evidence relevant to the issue. The [appellants] did take the opportunity to make additional written submissions. I am satisfied that, in all the circumstances, the [appellants] have been given a sufficient opportunity to respond to this aspect of the Bank's claim. (footnote omitted)

141 It is convenient to set out the relevant provisions of cl 4, cl 5 and cl 7 of the Guarantee (read with the definition of 'Time of Demand' provided in cl 1, inserted into cl 7).

The Guarantor guarantees the due and punctual payment of the Moneys Secured by the Borrower to StateWest and must pay the Moneys Secured to StateWest on demand.

(a) The Guarantor must indemnify StateWest against any loss which StateWest may suffer because for any reason:

...

(ii) the Moneys Secured are not recoverable from the Borrower, or from the Guarantor under clause 4, for any reason whatsoever;

...

(b) This indemnity applies whether or not StateWest knows or ought to have known about any fact or circumstances which gives rise to a claim under it.

(c) This indemnity is an additional obligation of the Guarantors which may be enforced against the Guarantor as principal debtor separately from the guarantee mentioned in clause 4.

(d) This indemnity is not limited or affected by the fact that the Moneys Secured cannot be recovered from the Borrower for any reason.

If the Guarantor does not pay the Moneys Secured immediately on demand then, in addition to its liabilities under clauses 4 and 5, the Guarantor must pay to StateWest on demand:

(a) all bank charges and any other charges ... included in the Moneys Secured incurred between the Time of Demand [being the first time when StateWest demands payment by the Guarantor of the Moneys Secured] and the date of payment;

(b) interest on each amount referred to in paragraph (a) of this clause, from the date when it is incurred to the date of payment ...;

(c) interest on the total amount for which the Guarantor is liable under clauses 4 and 5 ... from the Time of Demand [being the first time when StateWest demands payment by the Guarantor of the Moneys Secured] to the date of payment ...

The appellants' contentions and disposition of those contentions

145 The first point alleged under ground 5 is to the effect that the judge erred in making findings on the operation of cl 5, when '[n]o such case was pleaded or run by the Bank at trial'. The appellants' contention is misconceived. The bank's reliance on cl 5 of the Guarantees was plainly an issue at trial - it was issue no 10. Senior counsel for the bank squarely raised the bank's reliance on cl 5 on the second day of trial. It had, as the judge said, been pleaded in any event.[105] Whilst the appellants apparently contend that the 'basis' of the claimed entitlement under cl 5 had not been pleaded, they do not challenge the judge's findings to the effect that the material facts, and the material terms of cl 5, had been pleaded. This is sufficient to dispose of the appellants' first contention in ground 5. Moreover, and in any event, the appellants were evidently given a further opportunity, after the exchange on the second day of the trial, to deal with the cl 5 issue. The first point has no merit.

146 The second point alleges that cl 5 is 'not separate from or independent of the guarantee obligation under clause 4'. The appellants, in their written submissions, refer to Re Taylor; Ex parte Century 21 Real Estate Corporation[106] and Stadium Finance Co Ltd v Helm.[107] They also refer to Todd v Alterra at Lloyds Ltd[108] for the proposition that, where there is a doubt as to the construction of a provision in a contract of guarantee and indemnity, it should be resolved in favour of the surety or indemnifier. The appellants contend, in effect, that there is no liability under cl 5 without prior demand or notice on the guarantor. They recognise (as they must) that cl 5 contains no express provision for a notice or demand. They do not contend that there is an implied term in fact,[109] or in law[110] that a demand or notice is a precondition for liability under cl 5. Rather, they contend that the 'on demand' requirement found in cl 4 is incorporated into cl 5 as a matter of construction. In oral argument, the appellants also sought to draw support from cl 7, read with the definition of 'Time of Demand'.

147 The appellants' contentions in this regard should be rejected. There is no 'doubt' about the proper construction of cl 5 which requires the doubt to be resolved in favour of the surety or indemnifier. Clause 5 contains no express requirement for a demand. It is to be construed in the context that a demand for liability is not inherent in the nature of suretyship and that, as a general rule, a demand on a surety is not necessary to give rise to liability under guarantee unless the guarantee so provides: Re Taylor,[111] Filmana Pty Ltd v Tynan;[112] see also MS Fashions Ltd v Bank of Credit and Commerce International SA (in liq).[113] Not only does cl 5 contain no express requirement of a demand, but cl 5(a)(ii) provides in terms that the Guarantor must indemnify the Creditor against any loss which it may suffer because, 'the Moneys Secured are not recoverable from ... the Guarantor under cl 4, for any reason whatsoever' (emphasis added). In its ordinary meaning and particularly when read with cl 5(b) and cl 5(d), this would include where the Moneys Secured are not recoverable under cl 4 of the Guarantees because of the bank's failure to issue a demand. These matters combine to indicate that the appellants' obligation under cl 5, unlike their obligation under cl 4, does not depend upon the making of a demand against them.

148 That conclusion is confirmed by cl 5(c) which refers to the indemnity as an 'additional obligation' which may be enforced 'separately from the guarantee mentioned in clause 4'. Further, by cl 5(c), this 'additional obligation' may be enforced against the Guarantor 'as principal debtor'. The reference to 'principal debtor' also serves as a textual indication that the liability under cl 5 is not contingent upon demand.[114] Accordingly, there is nothing within cl 5 which provides any foothold for the contention that the indemnity to which it refers is contingent upon prior demand.

149 Further, cl 7 does not proceed on the assumption, as contended by the appellants, that a demand is required before any liability attaches to the appellants under cl 5. Clause 7 merely provides that the appellants have additional liabilities beyond those contained in cl 4 (which expressly requires a demand) and cl 5 (which does not). It provides, in effect, that where a valid demand has in fact been made for payment of the Moneys Secured and the Moneys Secured have not immediately been paid, then the bank may make further demand in respect of the charges and interest referred to in cl 7, and the appellants must pay those additional amounts on demand. The words 'does not pay the Moneys Secured immediately on demand' in the chapeau of cl 7, and the words 'interest ... from the first time when StateWest demands payment by the Guarantor of the Moneys Secured' in cl 7, refer, in context, to a demand for the Moneys Secured under cl 4. That is because it is under cl 4 that the Guarantors must pay the 'Moneys Secured ... on demand'. Clause 7 does not refer to any demand under cl 5. The effect of cl 7(c) is that the making of a demand under cl 4 conditions the bank's entitlement to interest on the 'total amount' for which the Guarantor is liable under cl 4 and cl 5.

150 The third point alleges that the withdrawal of the concession by the bank on the second day of trial prejudiced the appellants' case at trial. That has not been demonstrated, and there is no attack on the judge's relevant findings as to the course of events concerning the concession and its withdrawal. The third point has no merit.

151 As to the fourth point, the complaint appears to be that the judge's reasons were inadequate in relation to the proper construction of cl 5. This is a remarkable assertion given that the submissions fail to address the judge's reasoning on this topic.[115] The appellants' complaint that the judge's reasons were inadequate, without any attempt to refer to or address the reasoning undertaken by the judge, is entirely without foundation. Ground 5 should be dismissed.

[1] George 218 Pty Ltd v Bank of Queensland Ltd [2015] WASC 434.

[2] George 218 Pty Ltd v Bank of Queensland Ltd [2015] WASC 434 (S).

[3] The recitation of the following background is taken from the judge's findings in the primary reasons. The background facts were largely uncontroversial in this appeal. To the extent that there is any challenge to the findings, they are referred to in the disposition section of these reasons.

[10] Primary reasons [166] - [225].

[11] Cumerlong Holdings Pty Ltd v Dalcross Properties Pty Ltd [2011] HCA 27; (2011) 243 CLR 492 [21].

[12] Roads Corporation v Gerkens [1993] 6 VAR 363.

[13] See definition of 'regulated business', s 4 of the Transfer Act; s 10(1) of the Transfer Act; and Certificate of Transfer; GB 182.

[14] Halford v Price [1960] HCA 38; (1960) 105 CLR 23, 28; Redhill Iron Ltd v API Management Pty Ltd [2012] WASC 323 [127]; Terravision Pty Ltd v Black Box Control Pty Ltd [No 3] [2016] WASC 95 [42].

[15] Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 [40]; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104 [47].

[16] Primary reasons [93], citing County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193 [14] - [16]; Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337, 349 - 350. See also Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2014] WASCA 164; (2014) 48 WAR 261 [176].

[17] Technomin [176] and the cases therein cited.

[19] Chapmans Ltd v Australian Stock Exchange Ltd (1996) 67 FCR 402, 411; Australia and New Zealand Banking Group Ltd v Manasseh [2016] WASCA 41 [237]; Sigiriya Capital Pty Ltd v Scanlon [2013] NSWCA 401; (2013) 97 ACSR 183 [30]; Hayne v Cummings [1864] EngR 386; (1864) 16 CBNS 421; (1864) 143 ER 1191, 427.

[20] Norwich Union Life Assurance Society v British Railways Board (1987) 2 EGLR 137, 138.

[21] cf Kim Lewison & David Hughes, The Interpretation of Contracts in Australia (Lawbook, 2012) [7.03].

[23] By reference to the other instruments, being the letters of 27 May 2010 and the 2010 Loan Agreements.

[24] Primary reasons [146] - [165], Issue 1 being the application of the Guarantees to the 2010 Loan Agreements, and Issue 2 being whether the transfer occurred without consent.

[26] Primary reasons [168] - [169].

[27] Appellants' written submissions, par 18; WB 14.

[28] Second further amended defence and counterclaim (defence and counterclaim), pars 22.5 - 22.10; BB 136; defendant's closing submissions, par 45; BB 212.

[29] Second further re-amended statement of claim (statement of claim), prayer for relief; BB 118.

[30] Statement of claim, pars 8.6, 48; BB 91, 103.

[31] Statement of claim, pars 77 - 79; BB 118.

[32] Ankar Pty Ltd v National Westminster Finance (Australia) Ltd [1987] HCA 15; (1987) 162 CLR 549; and see statement of claim, par 80 read with primary reasons [158] - [159].

[33] See generally defence, pars 8, 44 - 54; BB 131, 151 - 157; defendants' closing submissions, pars 3(a), 12 - 20, 45; BB 203, 205 - 207, 212.

[34] Defence, pars 70.2 - 70.3; BB 166.

[36] Defendant's closing submissions, par 84; BB 221.

[37] Defendant's closing submissions, pars 96, 105, 120; BB 224, 226, 230.

[42] Primary reasons [218] read with [216].

[43] Primary reasons [221] - [225].

[45] Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd [1986] HCA 14; (1986) 160 CLR 226.

[46] Bofinger v Kingsway Group Ltd [2009] HCA 44; (2009) 239 CLR 269.

[49] Primary reasons [208] - [211].

[52] Primary reasons [114] - [118].

[56] Primary reasons [213], [215] - [216], [218] - [219].

[58] Rizhao Steel Holding Group Co Ltd v Koolan Iron Ore Pty Ltd [2012] WASCA 50; (2012) 43 WAR 91 [52] - [88], [153] - [154] and the cases referred to therein.

[59] Queensland Independent Wholesalers Ltd v Coutts Townsville Pty Ltd [1989] 2 Qd R 40, 46.

[60] Queensland Independent Wholesalers (48).

[61] Queensland Independent Wholesalers (46).

[62] See The Commonwealth of Australia v Bogle [1953] HCA 10; (1953) 89 CLR 229, 264 - 265; Olsson v Dyson [1969] HCA 3; (1969) 120 CLR 365, 388.

[63] See, in particular, primary reasons [213], [215] and [225].

[64] Ferrier v Stewart [1912] HCA 47; (1912) 15 CLR 32, 44.

[65] See, in particular, primary reasons [212] - [213], [215].

[66] Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387, 415, 432 (Brennan J); see also 443 (Deane J) and 458 (Gaudron J).

[67] Riseda Nominees Pty Ltd v St Vincent's Hospital (Melbourne) Ltd [1998] 2 VR 70, 77.

[68] W & R Pty Ltd v Birdseye [2008] SASC 321; (2008) 102 SASR 477 [48], [126]; an application for leave to appeal to the High Court was dismissed; W & R Pty Ltd v Birdseye [2009] HCATrans 79 (1 May 2009).

[69] Equuscorp Pty Ltd v Wilmoth Field Warne (a firm) [2007] VSCA 280; (2007) 18 VR 250 [73].

[70] Waltons Stores (415), and see ( 444 - 445) (Deane J) and (458) (Gaudron J). See also Newbon v City Mutual Life Assurance Society Ltd [1935] HCA 33; (1935) 52 CLR 723, 734; and The Commonwealth of Australia v Verwayen [1990] HCA 39; (1990) 170 CLR 394, 500 (McHugh J).

[71] Waltons Stores (415), (432).

[73] Amalgamated Investment & Property Co Ltd (in liq) v Texas Commerce International Bank Ltd [1982] QB 84, 121, 126, 130 - 131.

[74] TEC Desert Pty Ltd v Commissioner of State Revenue (Western Australia) [2010] HCA 49; (2010) 241 CLR 576 [49].

[75] Alpha Wealth Financial Services Pty Ltd v Frankland River Olive Co Ltd [2008] WASCA 119; (2008) 66 ACSR 594 [164].

[76] Coghlan v SH Locke (Australia) Ltd (1985) 4 NSWLR 158, 169 - 170.

[77] Farrow Mortgage Services Pty Ltd v Hogg (1995) 64 SASR 450 459 - 460.

[78] Falinski v Commonwealth Bank of Australia [1998] NSWCA 76.

[79] MK & JA Roche Pty Ltd v Metro Edgley Pty Ltd [2005] NSWCA 39 [71].

[80] Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; [2007] 69 NSWLR 603 [194].

[82] See Waltons Stores (428 - 429).

[84] Appellants' written submissions, pars 31 - 35, 37; WB 18 - 19.

[85] Leeder v The State of Western Australia [2008] WASCA 192 [84].

[90] See, for example, West v Commercial Bank of Australia Ltd [1935] HCA 14; (1935) 55 CLR 315, 319.

[92] Primary reasons [132]; Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298.

[93] Appellants' written submissions, par 36; WB 19.

[95] Primary reasons [230] - [236].

[98] Primary reasons [271] - [272].

[99] Primary reasons [255] - [256].

[101] Primary reasons [273] - [280].

[104] Primary reasons [279] - [280].

[105] The pleading details are set out in primary reasons [274].

[106] Re Taylor; Ex parte Century 21 Real Estate Corporation [1995] FCA 1335; (1995) 130 ALR 723.

[107] Stadium Finance Co Ltd v Helm (1965) 109 SJ 471.

[108] Todd v Alterra at Lloyds Ltd [2016] FCAFC 15; (2016) 239 FCR 12 [22], [25].

[109] BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266, 283.

[110] Commonwealth Bank of Australia v Barker [2014] HCA 32; (2014) 253 CLR 169 [28] - [30], [56], [60], [86], [113] - [114].

[112] Filmana Pty Ltd v Tynan [2013] QCA 256 [37].

[113] MS Fashions Ltd v Bank of Credit and Commerce International SA (in liq) [1993] Ch 425, 436.

[114] See, eg, MS Fashions (436) (Hoffmann LJ), (447) (Dillon LJ, with whom Nolan & Steyn LLJ agreed).