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Judgment Introduction 1In April 2002 the National Australia Bank Limited (bank) provided a facility to Michael Amed (Michael) and Inara Amed (Inara) for $320,000, which was reduced in November 2004 to $210,000 by agreement. The facility was secured by a mortgage dated 5 April 2002 given by Inara over a property at Mortdale. In November 2004 the bank also provided a bill facility to P&M Coastal Developments Pty Limited (the Company) in the amount of $1,880,000. This facility was secured by, amongst other securities, a guarantee and indemnity granted by Inara, Michael, Nina Amed (Nina), Peter Amed (Peter), Lommas Pty Limited (Lommas) and Agevola Pty Limited (Agevola) on 30 November 2004. The Company also operated a business cheque account with the bank. 2The bank claimed that loans were in default and, in accordance with the applicable securities, demanded payment of the outstanding sums in respect both of the primary debts and the guarantees. 3On 2 March 2010 the bank commenced proceedings against the Ameds and the companies and obtained judgment by default on 2 December 2010 against all except Inara, who had filed a defence. Nina, Peter (on 26 February 2011) and Michael (on 10 March 2011) sought orders setting aside the default judgments against them, claiming that they had not been served with the statement of claim and had good defences to the bank's action. Applicable principles 4Rule 36.16(2)(a) of the Uniform Civil Procedure Rules 2005 provides for the setting aside of a default judgment, though it does not specify the grounds upon which this may be done. Essentially, the question is whether the interests of justice require that the defendant should be permitted to contest the plaintiff's claim. In Adams v Kennick Trading (Int) Ltd & Ors (1986) 4 NSWLR 503, Hope JA (with whom Glass JA agreed) said (at 506) - "....The existence of a bona fide ground of defence and an adequate explanation for the failure to defend and any delay are the most relevant matters to consider, but there may be other matters: see, for example, Reinehr Industrial Lease and Finance Pty Ltd v Jordan (Court of Appeal, 4 June 1974, unreported) noted Ritchie's Supreme Court Procedure (NSW) Practice Decisions 8505. A refusal of relief to an applicant is not automatically justified because he has failed to establish one relevant matter, such as an adequate explanation for the failure to defend or for delay; such a failure must be considered in the light of all the circumstances. The absence of an adequate explanation, particularly if it is coupled with prejudice, may justify the denial of relief, but only when considered with the other relevant circumstances of the case, bearing in mind what Lord Wright said in Evans v Bartlam [1937] AC 473 at 489: '... if merits are shown the Court will not prima facie desire to let a judgment pass on which there has been no proper adjudication.'" 5Reinehr was a case in which the defendant sought to set aside judgment following a default in pleading an answer to the plaintiff's declaration. The plaintiff sued the defendant upon a guarantee given by the defendant in aid of a lease of a helicopter by the plaintiff to a company to which the defendant was connected, the company having defaulted in its obligations under the lease. The court noted that there was the "somewhat unusual circumstance" that the company's obligations under its lease agreement were guaranteed by two others who were defending the actions taken against them by the plaintiff on the same grounds as those upon which the defendant wished to rely. This, together with a "sufficient" explanation for the defendant's inactivity, justified setting aside the judgment. 6It is uncontroversial that, so far as the merits of the posited defences are concerned, it is not for me to embark upon determining where the truth lies. Of course, if I concluded that the applicants had deliberately lied about their alleged defences, they would fail to establish a bona fide defence on the merits. As I understand it, although the bank argues that the applicants do not have bona fide defences on the merits, it is not submitted that they have deliberately lied about them. Service of the statement of claim 7The bank relied on the evidence of a licensed process server, Mr Terrence Brightman, in respect of the service of all three statements of claim. Mr Brightman swore an affidavit on 12 March 2010, filed on 18 March 2010, that on Wednesday 10 March 2010 at 8:15am he served Nina with a sealed copy of the statement of claim by delivering it to her personally at 35 Blackbutt Avenue, Lugarno, her usual place of residence. At the time of service he asked, "Are you Nina Amed the person referred to in this document?". He deposed that the female person replied, "Yes", and that he then said, "I have this statement of claim for you" which he handed to her. He then asked, "Were there any people over 18 years of age in occupation of the address [of the mortgaged property at Mortdale] ...as at the date of filing of the statement of claim, 2 March 2010?" and received the reply, "Inara and Michael Amed live there". As it happened, this was correct. In an affidavit of the same date filed on 14 April 2011 Mr Brightman deposed to serving Inara with a statement of claim on 10 March 2010 at 8:00am at the Mortdale property. Inara has defended the Bank's action and service on her has not been questioned. In an affidavit sworn 17 March 2010 and filed on 18 August 2010 Mr Brightman deposed that on Sunday 14 March 2010 at 8:30am he served Michael with a sealed copy of the statement of claim by delivering it to him personally at the Mortdale property. At the time of service he said to the person served, "Are you Michael Hassan Amed the person referred to in this document?" and, on receiving the reply, "Yes that's me" he handed to him the said document saying, "I have this statement of claim for you". He asked, "Were there any people other than Inara Amed and yourself over 18 years of age and in occupation at this address ... as at the date of filing of the statement of claim, 2 March 2010?" and was told, "No". This was correct. Mr Brightman also swore an affidavit on 17 March 2010 (filed 18 Augusts 2010) concerning the service on 13 March 2010 of a statement of claim on Peter, at which similar conversations occurred as had occurred with the other defendants. Also tendered were complete contemporaneous "field reports" concerning service of the statement of claim. 8Mr Brightman gave evidence in the proceedings and was cross-examined. He said, not surprisingly, that he had no actual recollection of serving the applicants and relied upon his contemporaneous or near contemporaneous documents. He agreed that the conversations as he recorded them may not have been verbatim but he invariably asked the same questions and the sense of the answers is correctly noted. Mr Brightman works as a contractor and, as I understand his evidence, is paid the same sum for each attendance, whether the process is successfully served or not. 9Michael gave evidence. He agreed that he was living at the Mortdale property with his wife (Inara) and their grandson on 14 March 2010 and that Inara had been served with a statement of claim in the proceedings, had entered an appearance and filed a defence. He said that he was aware of the statement of claim served on his wife and that, when he read it, he saw that he was named as a party. He said that he did not think that he needed to file an appearance or defence in the proceedings because he had not been served with a statement of claim. Michael, who is a director of Lommas and Agevola and the Company, said that he was aware of proceedings having been commenced against each of those companies. He said that the first he knew that it was claimed he had been served was on 3 March 2011 when he saw the documents that had been sent to Mr Mitry by the bank's solicitors. 10It does not appear to be in dispute that, on 9 February 2011, Nina was served with a bankruptcy notice which attached the judgment of 2 December 2010 against her, Peter, Michael, the Company, Lommas and Agevola. Peter (her husband) deposed that, when he saw the judgment he contacted his solicitor, Mr Mitry, "in a panic" and faxed the documents to him the following day. He said that, before he had seen those papers he was unaware that he was a party to the proceedings, let alone that judgment had been given against him. Two days later, on 11 February 2011, he was served with a bankruptcy notice, attaching the same documents, which he also faxed to Mr Mitry. The bank's solicitors, following contact with Mr Mitry, forwarded sealed copies of the affidavits of service of the statement of claim on Nina, Peter and Michael and asked whether Mr Mitry had instructions to accept service of the bankruptcy notice in respect of Michael. Peter said that he was aware that Inara had been sued under the mortgage. He said that was a "bit of a shock". He said that Michael "was basically looking after the loan" and had told him that "he was having a bit of difficulty" with payments. Michael told him that he would try to get some further funds. Peter did not know why Michael had not told him that his name was on the statement of claim naming Inara. 11Nina also gave evidence saying that it was not until she was served with a bankruptcy notice on 9 February 2011 that she became aware of the proceedings against her or that default judgment had been entered against her. It was only when she saw the documents sent to Mr Mitry by the bank's solicitors that she became aware of a claim that the statement of claim was served on her on 10 March 2010. She said, in substance, that at the purported time of service at 8:30am on Wednesday, 10 March 2010, it is likely that she would not have been at home as she routinely leaves the family home at 8:00am on weekdays to drop her daughter at school. Nina conceded that she had no specific recollection of the morning of 10 March 2010 but that her daughter (13 years of age) never caught the bus or walked to school so that if Wednesday, 10 March 2010, were a school day (which appears not to be contested) she would have been taken to school either by her or Peter and that 99% of the time it was her. In cross-examination, Nina confirmed that she was the only adult female living at the address at the time, that her sister-in-law is Inara and she was aware that Inara was a party to the proceedings, which Inara was defending. She says, however, that she was not aware that she was being sued by the bank until the service of the bankruptcy notice and the associated documents. 12Peter also gave evidence. He said that he only became aware that a judgment had been given against him on 9 February 2011 when his wife Nina was served with a bankruptcy notice. As I have already mentioned Peter said that he contacted Mr Mitry immediately. He said that on 11 February 2011 he was personally served with a bankruptcy notice which annexed the judgment bearing his name. He faxed the documents to Mr Mitry the following day. Peter denies that he was served with the statement of claim and said that had he been served, he would have immediately contacted his lawyers as he did when his wife was served with a bankruptcy notice. He agreed that no other adult males lived at the serviced address and that he was aware that his sister-in-law Inara had been served with process and was a party to the proceedings and that he was aware of this in March 2010 when his brother Michael told him about it. He said that he did not become aware at that time that he also was a party to the proceedings and that he had never read a copy of the statement of claim. He was a director of Agevole and the Company but was unaware in March last year that those companies had been served with a statement of claim at that time. He agreed that he and Inara were on friendly terms and that they visited each other's homes from time to time but not very often. He said that he understood that Inara was being sued for the balance of the money that was owed for the property in Cairns because her property was guaranteeing or securing [as I understand it, the loan in respect of] that property. The original loan that Inara guaranteed was taken out by Peter himself and his wife Nina but Peter said that he understood that Inara's house was security for the property although he and Nina had to sign "the paperwork". He said that when he heard that Inara was sued he "got a bit of a shock" and that he was told by Michael that he was having "a little bit of difficulty" paying the loan. Peter said that he asked, "What are we going to do?" and that Michael responded, "I'll see what's going to secure funds in some way". He said that when Inara was sued Michael told him about it but that he did not tell him that the statement of claim named him, Peter, as one of the defendants and he did not discover that matter until service of the bankruptcy notice with the accompanying documentation. He was unable to explain why Michael had not told him that he, Peter, was named as a defendant in the action against Inara. 13Although in some respects the evidence of Peter, Nina and Michael invites scepticism, I thought they were credible and believable witnesses. Amongst other things, knowing that they were indebted to the bank and that the loans were in default, there would have been no good reason for not defending the proceedings when Inara was doing so, accepting as I do (at least for the moment, bearing in mind that I have not heard from any of the relevant bank witnesses) that they thought the bank would not move against them before the mortgaged property had been sold and proved insufficient to repay the loans. (This matter is discussed below.) At the same time, Mr Brightman also seemed to me to be a credible and believable witness. 14In the end it seems to me that, as an objective matter, the logic of events leads to the conclusion that more probably than not the statements of claim were served as deposed by Mr Brightman. I hasten to add, however, that I am very far from being positively persuaded that Nina, Peter and Michael have lied, although it necessarily follows from my conclusion that the bank has established on the balance of probabilities that, contrary to their denials, they were in fact served. I think that it is most unlikely that Mr Brightman would have invented service on each of the three applicants and created false contemporaneous documents for that purpose. For all he knew, one or more of them might have had an irrefutable alibi which would have immediately exposed him to discovery with the catastrophic consequences for him that this might have entailed. Furthermore, there was nothing especially difficult or complicated about serving these plaintiffs: they all lived at fixed addresses; at one time or another they must have been home and Mr Brightman was paid whether or not he succeeded in serving them. On the other hand, each of the applicants has a motive for denying service and the logic of events suggests, as Mr Colquhoun on behalf of the bank submits, that they did not understand that they were at personal risk in light of the action taken against the mortgaged properties which secured the debts. 15It follows that I must consider the applications to set aside the default judgments upon the basis that there has been no acceptable explanation forthcoming for not defending the proceedings in a timely way. The proposed defences 16The defences to the various claims are raised under the Contracts Review Act 1980, the Trade Practices Act 1974 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth) and by way of estoppel. 17It is convenient to start the discussion with Michael's case. The statement of claim alleges that, in respect of the facility, the bank can at any time give notice of cancellation reducing the limit of the facility to zero followed by a default notice, if applicable and then a demand notice requiring payment of any owed unpaid money. It is alleged that, to the extent that consumer credit legislation applies, the bank has given appropriate notice of default and an appropriate period to remedy it and that pursuant to s11 of the Consumer Credit Code (Code), Michael declared that the moneys advanced under the facility were to be applied wholly or predominantly for business or investment purposes and the Code did not apply to the facility. 18Michael's proposed defence alleges that the facility was unjust in the circumstances at the time it was made as he did not obtain independent legal or financial advice in relation to the documents and the bank could not have reasonably satisfied itself that he had done so. In addition, he does not admit receipt of the cancellation notice or default notice or demand notice. He denies the validity of each of these steps, presumably on the basis that the facility is unjust. He does not admit making the declaration under the Code. 19Since all applicants rely on the Contracts Review Act 1980, it is useful briefly to mention its important provisions. These have been usefully summarised (if I may respectfully say so) by McHugh JA (as his Honour then was) in West v AGC (Advances) Limited (1986) 5 NSWLR 610 at 620-622 - The Contracts Review Act: Section 7(1) of the Act provides that, where the Supreme Court "finds a contract or a provision of a contract to have been unjust in the circumstances relating to the contract at the time it was made, the court may, if it considers it just to do so, and for the purpose of avoiding as far as practicable an unjust consequence or result" make certain orders or refuse to enforce the contract. Section 4 defines "unjust" to include "unconscionable, harsh or oppressive". Injustice has a corresponding meaning. In determining whether a contract or a provision of the contract is unjust for the purposes of s 7(1), the court is directed by s 9(1) to "have regard to the public interest and to all the circumstances of the case" including the consequences or results arising in the event of compliance or non-compliance with any provision of the contract. Section 9(4), however, directs that the court shall not have regard "to any injustice arising from circumstances that were not reasonably foreseeable at the time the contract was made". Section 9(2) sets out specific matters to which, to the extent that they are relevant to the circumstances, the court is to have regard. They include for present purposes whether there was any material inequality in bargaining power between the parties; whether the contract was subject to negotiation or whether it was reasonably practicable to negotiate for the alteration or rejection of any provision; whether or not any provisions of the contract were reasonably necessary for the protection of the legitimate interests of any party; the relative economic circumstances, educational background and literacy of the parties to the contract (other than a corporation); whether or not and when independent legal or other expert advice was obtained; the extent to which the legal and practical effect of the contract was accurately explained; whether undue influence or unfair pressure or tactics was exerted; the conduct of the parties in relation to similar contracts or courses of dealing to which any of them has been a party; and the commercial setting, purpose and effect of the contract. In determining whether it is just to grant relief in respect of an unjust provision the court may also have regard to the conduct of the parties to the proceedings "in relation to the performance of the contract since it was made" (s 9(5)). A question which arises is whether the court is able to consider circumstances which were not known to the party against whom relief is sought even though the circumstances existed when the contract was made. In my opinion the effect of s 9(1), 9(2) and 9(4) is that the court may have regard to any circumstance existing at the time of the contract whether or not a party was aware of that circumstance. But the court cannot have regard to any injustice arising from a circumstance that was not reasonably foreseeable at the time when the contract was made. Indeed counsel for AGC conceded that this was so. Nevertheless, while knowledge of a circumstance by the party against whom relief is sought is not a condition precedent to the consideration of that circumstance, his lack of knowledge may render the circumstance of less materiality than it would if he was aware of it. The operation of the Contracts Review Act: Under s 7(1) a contract may be unjust in the circumstances existing when it was made because of the way it operates in relation to the claimant or because of the way in which it was made or both. Thus a contractual provision may be unjust simply because it imposes an unreasonable burden on the claimant when it was not reasonably necessary for the protection of the legitimate interests of the party seeking to enforce the provision: cf s 9(2)(d). In other cases the contract may not be unjust per se but may be unjust because in the circumstances the claimant did not have the capacity or opportunity to make an informed or real choice as to whether he should enter into the contract: cf s 9(2)(a), 9(2)(e), 9(2)(f), 9(2)(g), 9(2)(i), 9(2)(j). More often, it will be a combination of the operation of the contract and the manner in which it was made that renders the contract or one of its provisions unjust in the circumstances. Thus a contract may be unjust under the Act because its terms, consequences or effects are unjust. This is substantive injustice. Or a contract may be unjust because of the unfairness of the methods used to make it. This is procedural injustice. Most unjust contracts will be the product of both procedural and substantive injustice. The definition of "unjust" in s 4 is not exclusive. It is in my opinion a mistake to think that a contract or one of its terms is only unjust when it is unconscionable, harsh or oppressive. Contracts which fall within any of those categories will be "unjust". But the latter expression is not limited to the so-called "tautological trinity". The Contracts Review Act 1980 is revolutionary legislation whose evident purpose is to overcome the common law's failure to provide a comprehensive doctrinal framework to deal with "unjust" contracts. Very likely its provisions signal the end of much of classical contract theory in New South Wales. Any contract or contractual provision, not excluded from the operation of the Act and which the court considers is unjust in the circumstances existing at the time when it was made, may be the subject of relief under the Act. Moreover, the provisions of s 9(2) do not exhaustively indicate the criteria as to what can be taken into account in determining whether a contract or any of its provisions is unjust. The provisions of s 9(2) of the Act are concerned for the most part with matters of procedural injustice. But the court is entitled to have regard to all the circumstances of the case, subject to s 9(4), and the public interest. In an appropriate case gross disparity between the price of goods or services and their value may render the contract unjust in the circumstances even though none of the provisions of s 9(2) can be invoked by the applicant. Indeed, notions of unfairness and unreasonableness will, I think, generally be present when a contract or any of its provisions is declared unjust. This will particularly be the case where procedural injustice is relied on. If a contract or one of its relevant provisions is neither unfair nor unreasonable so far as the applicant is concerned, it is difficult to see how the existence of inequality in bargaining power or lack of independent advice, for example, can render the contract or a provision of the contract unjust. It is important to bear in mind that it is the contract or its provisions which must be unjust. As Professor Lang has pointed out "it is not the transaction but the contract which must be initially examined": Macquarie University Continuing Education Program, "Contracts Review Act, 1980 - in practice" (22 May 1980) at 32. The Contracts Review Act regulates contracts not investments. During the Second Reading debate the Minister, who introduced the Bill, quoted a statement of Professor Peden who said that the legislation was: "... intended to confer on the courts a new and wide discretion to determine the existence and extent of harshness in a contract, and thereby develop a doctrine of unconscionability suitable to present and future business and community needs and standards" (my emphasis): New South Wales Parliamentary Debates (1980) at 5858. If a defendant has not been engaged in conduct depriving the claimant of a real or informed choice to enter into a contract and the terms of the contract are reasonable as between the parties, I do not see how that contract can be considered unjust simply because it was not in the interest of the claimant to make the contract or because she had no independent advice. The late Professor Peden who was largely responsible for the drafting of the Act has said that in accordance with his recommendation: "...the Act does not include the term 'unfair' since this might have been interpreted to include situations in which, although the contract favours one party, there has been no abuse of power or unfair conduct on his part": Macquarie University Continuing Education Program, "Contracts Review Act, 1980 - in practice" at 17. This passage brings out the important point that, under this Act, a contract will not be unjust as against a party unless the contract or one of its provisions is the product of unfair conduct on his part either in the terms which he has imposed or in the means which he has employed to make the contract. In this respect it stands in marked contrast with the provisions of the Industrial Arbitration Act 1940, s 88F, which provides, inter alia, that the Industrial Commission may declare certain types of contract or arrangements void on the ground that they are "unfair". In his Second Reading Speech the Minister pointed to the mischief which the Act was designed to remedy and the purpose which it sought to achieve. He said that the common law "has failed to develop a general doctrine for relief against unconscionable contracts". He went on to say that it was "Parliament's duty to provide legislative power and guidelines within which justice in the matter of unconscionable bargains can be achieved": New South Wales Parliamentary Debates (1980) at 5531. 20It will be seen that the only allegation made in respect of the claimed injustice of the facility concerns the failure of Michael to obtain legal and financial advice in respect of the relevant documents before entering into the transaction. However, there is no allegation that Michael was not aware of the legal effect or financial implications of the documents or the transaction. The mere omission of legal or financial advice cannot, of itself, create any injustice or make any transaction unjust. To make no admissions as to the steps necessary for the bank to undertake by way of various notices and the like before it is entitled to sue on the facility is not to raise any defence. In addition, so far as the Code is concerned, Michael does not allege that the monies advanced under the facility were not to be applied wholly or predominantly for business or investment purposes. 21Accordingly, Michael has no arguable bona fide defence on the merits to the claim in respect of the facility. The application to set aside the judgment in respect of the debt due under the facility must therefore be dismissed. 22So far as the guarantee is concerned, Michael also denies liability upon the ground that it was unjust in the circumstances that it was made as he did not obtain independent legal or financial advice in respect of the document and the bank could not reasonably have been satisfied that he had done so. It is necessary to consider other linked allegations in the context of this defence. 23Michael alleges that, in or about October and/or November 2004, the bank was negotiating with the Company in relation to the possible provision of financial facilities to the Company for the purpose of its acquisition of real property in Cairns and that, in the course of those negotiations the bank represented to Michael (and Nina and Peter) that, if they entered into the guarantee, it would not be enforced by the bank against them unless the Company defaulted in the performance of its obligations to the bank, the bank sold the Cairns property after such default in exercise of its power of sale and, upon completion of such sale, there remained an amount due by the Company to the bank but unpaid and also that the likelihood of the pre-conditions being satisfied was in the bank's opinion very low. It is alleged that these representations were oral and/or implied and made by an employee or employees of the bank at its Marrickville branch prior to the execution by Michael, Nina and Peter of the guarantee. It is alleged that, in reliance upon the representations, Michael, Nina and Peter signed the guarantee and that, in the circumstances, the bank is estopped from asserting that the guarantee is presently enforceable. A defence is also made pursuant to the Trade Practices Act and the Australian Securities and Investment Commission Act that the conduct of the bank in making the representations was misleading or deceptive or likely to mislead or deceive and in contravention of provisions of the latter Act. 24Peter defends in the same terms. Nina also raises the same defences but adds in connection with the allegation that the guarantee was unjust the circumstances that she was unaware of the practical or legal implications of signing the guarantee, did not obtain independent legal or financial advice in relation to it and the bank could not have reasonably satisfied itself that she had done so, that no enquiry was made by the bank as to Nina's capacity to repay the amounts that might be owed pursuant to the Guarantee and Nina was unaware of the Company's capacity to repay the principal loan. 25Peter swore an affidavit concerning the circumstances in which the transactions came about in which he conceded that he and his brother Michael proposed to undertake a property development in Cairns and Michael told him that he could arrange for bank finance. He said that they went to the Marrickville branch of the bank in late November 2004 with his wife Nina and there was discussion between Michael and the bank manager in the presence of him and his wife which he did not really recall. He said that he did understand that he was to guarantee the loans for the development. He said that later on the same day he went with Michael and his wife to law offices in Lakemba where there was a brief discussion with one of the lawyers after which all three signed the mortgages in his presence and their signatures were witnessed. He said, "I really do not recall the terms of the discussion we had". 26He verified the facts pleaded in the draft defence. 27Michael's affidavit deposes that, on 30 November 2004 he, with Peter and Nina, attended at the Marrickville branch of the bank for the purpose of signing the mortgage documents. They were taken into the manager's office where they discussed the transaction. Michael says that, during the course of the meeting the bank manager said, in effect, that the amount loaned was less than the land value of the [Cairns property], coming in at around $2.25 million. He told them that more equity was needed because on commercial properties the bank only lent 65% of the valuation and that the Mortdale property (owned by Nina) which the bank valued at $1.05 million would need to be provided as security. When asked how the bank valued the property the manager responded that it was done by "drive by". He added that, "there is nothing to worry about because the land is worth more than the loan amount". 28Michael said that other things were said about the loan but he did not remember the full terms of the conversation having regard to the lapse of time. He said that he understood from the meeting that he was guaranteeing the repayments only if the sale of the secured land did not meet the debt and it was never explained that the bank could pursue him on the guarantee without first selling the land securing the debt. Michael deposed in addition that, on the same day as the meeting at the bank he, Nina and Peter attended a solicitor's office at Lakemba with the unsigned documents that had been given by the bank manager to Michael. The conference with the solicitor lasted about five to ten minutes. He informed them of the loan amount and said words to the effect, "This is a standard agreement. The property will be taken away and sold if there is a default". Michael said that it was never explained to him that if there was default interest or that the bank could pursue the debt on the guarantee without first selling the property which secured it. He confirmed that the three persons signed the loan agreement and their signatures were witnessed by the solicitor. 29Nina also swore an affidavit about the circumstances in which the transactions occurred. She confirmed that in late 2004 she attended the Marrickville branch of the bank with Peter and Michael in order to sign the mortgaged documents. She said that she recalled being introduced to the manager and being taken into his office where a discussion occurred "essentially with Peter and Michael" with little involvement on her part. She said that, due to the lapse of time, she did not recall all of the conversation. She also said that she went to the lawyer's office in Lakemba in order to execute the documents and have the signatures witnessed. She said that there was a brief discussion with the lawyer but that none of the conversation was addressed to her and she did not remember what they spoke about. She said that she did not understand the exact nature of the documents she signed apart from the fact that they were some sort of mortgage documents. She said that she never personally received any money from the bank and, as far as she was aware, it all went to the other defendants to assist them with their development. She verified the defence. 30In addition to giving evidence about the service of the statement of claim, Michael was cross-examined about the circumstances of the impugned transactions. Essentially, he said, that he understood that the bank would sell the land first - I think he meant the property in Cairns - and if there was a shortfall the bank could "come after me or Peter". Michael said that he thought the land would repay itself but that he understood that his indebtedness would remain until the land was sold but only to the extent that the sale proceeds did not cover the debt. He was also cross-examined about the terms of the guarantee and said that although he signed the document he had not read it, since he relied on the solicitor in effect, to bring its essential terms to his attention. He said, in addition, under cross-examination, that the solicitor had told them that the bank would act against the property before it would pursue the guarantee. He said that so far as the conversation with the manager was concerned the land valuation obtained by the bank was more than the borrowings from which he inferred that the bank would not proceed on the guarantee until the land was first sold. As to whether Michael drew an inference as to the process of enforcement based upon the statement of the valuation or was specifically told by the bank that it would not move on the guarantee until the property was first sold, he said that this was what the solicitor had told him and he did not recall whether the bank manager had said it but, whatever the conversation was, he left the bank with the impression that it would not sue on the guarantee until the land was sold and the proceeds did not cover the loan. He was however, unable to recall the words that gave rise to this impression. It seems to me that the readiness with which Michael was prepared to qualify his evidence strongly indicates that he was attempting genuine recollection rather than relating a prepared position. 31Nina was also cross-examined about the circumstances in which she entered into the guarantee. She agreed that she had signed the guarantee and indemnity but said that she did not read it. She said that, even if she tried to do so, she would not understand it. She said that she did not ask the solicitor to explain its contents to her because at that meeting her husband and brother-in-law were there. They did not explain it to her and she did not ask them to explain it since she trusted her husband. She said that she did not remember the manager saying at the meeting when the documents were handed over that the bank would not enforce the guarantee until after the property in Queensland had been sold. 32Peter was cross-examined about the transaction. He said that he did not recall the conversation at the bank, that he wasn't really spoken to but the conversation with the bank manager was (as I understand his evidence) with Michael and that, although Peter was present, he really didn't have anything to do with that conversation. He was also cross-examined about reading the guarantee including, in particular, the declaration as to legal advice but said that he did not read the document before it was signed. He said that he presumed that they had gone to the solicitor to get advice on the guarantee. 33It is worth, commenting that an explanation of the guarantee by the solicitor that simply pointed out that the guarantors would be liable in the event of default by the "customer" (meaning the principal debtors) would have been seriously inadequate. For example, clause 3 of the Guarantee contains the following provisions: "3. You acknowledge that: (a) all the terms and conditions of this guarantee and indemnity are set out in these provisions; (b) in deciding to enter into this contract and indemnity the only statements by the bank which you took into account are those contained in this document, and you did not rely on any other statement, document, or promise made by the bank or on behalf of bank; and (c) no other statement, document or promise can affect the operation of this guarantee and indemnity; and (d) no provision can by [sic presumably "be"] varied or waived by the bank except by written notice from the bank..." 34The obligation to pay under the guarantee is created by the default of the customer. This is provided in clause 7.1 of the guarantee - "7.1. You guarantee that the customer will pay the bank all the amounts which the customer owes to the bank at any time. You will agree to pay the bank any of those amounts in respect of which the customer is at any time in default, up to the basic liability as at the time the bank demands that you pay them to the bank." 35As to whether the bank can enforce the guarantee against the guarantors despite its having a mortgage over the property, the guarantee provides - "20.1 Despite any rule of law or equity to the contrary: (a) this guarantee and indemnity is additional to every other security, guarantee, indemnity, right and remedy the bank holds now or later; (b) this guarantee and indemnity and the bank's rights and remedies under it and under any other security, guarantee, indemnity, right, remedy or instrument which the bank has at any time continued to exist separately and do not merge with or effect each other. 20.2 Subject to 7 [set out above] the bank may demand and recover from you any amounts which the customer owes the bank without taking into account any amounts which the bank may owe the customer for any reason." 36It is material to point out that the bank has, pursuant to its mortgage, entered into possession of the Cairns property although that has not yet been sold. Is there a bona fide defence on the merits? 37On the face of it, the mere fact that the bank has entered into possession does not amount to payment of the debt by the principal debtor although, no doubt, in due course an accounting will need to take place of one kind or another if and when the property is sold. It is, of course, self evident that the bank is not entitled to double payment: see Mailman v Challenger Bank Limited (1991) 5 BPR NSW (SC) 11,721 at 11,727 - 11,728; China and South Sea Bank Limited v Tan [1990] 1 AC 536 at 545. In short, the guarantor's obligation is certainly reduced by any payment but not, so far as the terms of the guarantee are concerned, by any security held by the bank such as the mortgages. Mailman also makes it clear that, leaving aside the potential significance of representations about the matter, at common law, the mere fact that a creditor has entered into possession of the mortgaged asset does not prevent it pursuing other guarantors for the debt: see Mailman 5 BPR NSW (SC) at 11,727-8. It seems to me that cl20.1 of the guarantee do not qualify this right. 38The Contracts Review Act 1980 cannot, of course, be excluded by any provision of the guarantee and, where there is an arguable basis for finding the guarantee unjust in the relevant sense, a viable defence will be available. The fact that the guarantee does not deal in terms with the effect, if any, of the bank entering into possession of one of the mortgaged properties securing the principal debt together with the assurances made as to the procedure to be adopted by the bank in the event of default raises to my mind a viable defence, although it is cast in terms of estoppel and misrepresentation and the unjust contract case is limited to the question (at least in Michael's and Peter's cases) of the failure to get legal advice. In this latter respect, Michael and Peter agree that they obtained independent legal advice, although (accepting what they say) it appears that advice was inadequate. However, where a responsible agent of the bank gives an assurance or representation as to the way in which the otherwise unqualified rights of the bank will be enforced, it is arguably unjust to permit the bank to rely on the terms of a clause such as cl3 without bringing its effect expressly to the attention of the guarantor and explaining, say, that the representation is no more than a prediction of the bank's usual approach (such as was, in effect, the case in Mailman ) and will not qualify the bank's rights to pursue the guarantor whether or not it has exercised its rights under the mortgage. 39It is submitted on behalf of the bank that the evidence of the Ameds as to the alleged representations does not give any real support to the pleadings. However, the testing of that matter was not thorough in light, as it seems to me, of the agreed position that, if an arguable defence is shown on the pleading, I should not finally decide it on an application such as the present. It may be that further material evidence from the relevant bank employees or contemporaneous documents might shed light on what transpired and it cannot be assumed that it will not support the case sought to be made by the applicants. Moreover, other material might be forthcoming that can be used to refresh the memories of the applicants in one or more respects. The fact that their evidence is so qualified is, to my mind, strongly suggestive of their honesty. Of course, that cannot fill an evidentiary gap. But it is not for me to try the case at this juncture. 40So far as Nina is concerned, it seems to me also that, by virtue of the matters alleged in her affidavit, concerning her own position relative to Michael and Peter and the mode in which the meeting with the bank representative was conducted, the bank may have been on notice that, from her point of view the contract was unjust and, that she needed to obtain advice that was independent not only of the bank but also of her husband and brother-in-law. It is evident that she did not obtain that advice and in all likelihood the bank would have been aware of it. 41It is evident from what I have already said that, so far as Michael and Peter are concerned, they cannot seek to have the guarantee set aside except to the extent that their obligations under it cannot be enforced until the rights of the bank in respect of at least the mortgage over the Cairns property have been fully exercised by sale. Nina is in a different position since it is arguable that it is unjust to enforce the guarantee against her at all. 42The applicants also seek to defend the bank's action upon the ground that the default interest and/or default charges are penalties and unenforceable. This goes to the calculation of the amount payable under the guarantee rather than the character of that liability. Conclusion 43I am satisfied that, in respect of the guarantee, the applicants have a viable defence under the Contracts Review Act 1980, although it has not been appropriately pleaded in the proposed draft defences. The question is whether the failure to provide an adequate explanation for not defending within time should have the result that they should be prevented from defending at all. I note that the time frame has not been markedly extended by the inaction of the applicants and it is not argued on behalf of the bank that, aside from losing its default judgments against them, any substantive prejudice has been caused by the delay. 44In my view, the interests of justice require that the default judgments in respect of the guarantee obligations be set aside and the applicants permitted to defend upon the bases I have mentioned. In the result, it has not been necessary for me to consider the effect of the Commonwealth legislation. In light of the grant of leave in respect of the Contracts Review Act , it is fair that they be permitted to raise the other defences sought to be promulgated, including that concerning the imposition of default interest. 45Accordingly, the default judgments are set aside. The applicants are to pay the bank's costs of the Notice of Motion. I will give further directions as to the future management of the case in due course.