Oliver v Commonwealth Bank of Australia

AND: COMMONWEALTH BANK OF AUSTRALIA ABN 48 123 123 124

JUDGE: PERRAM J DATE OF ORDER: 15 DECEMBER 2011 WHERE MADE: SYDNEY

1. The parties bring in short minutes of order at least seven days prior to 31 January 2012 to give effect to these reasons. 2. The matter be listed for directions on 31 January 2012 to chart its future course or resolve any debate about the orders. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1044 of 2010

AND: COMMONWEALTH BANK OF AUSTRALIA ABN 48 123 123 124

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1826 of 2010

AND: COMMONWEALTH BANK OF AUSTRALIA ABN 48 123 123 124

JUDGE: PERRAM J DATE: 15 DECEMBER 2011 PLACE: SYDNEY

REASONS FOR JUDGMENT I. Introduction [1] II. The Nature of the Cases [4] (a) Dr Oliver [5] (b) Dr Irving [15] III. Principles governing summary disposal [17] IV. The pleading of good faith [26] (a) Implied term [27] (b) Inadequate specificity [35] (c) Absence of mala fides [38] (d) The creation of a margin loan structure with which Dr Oliver could not comply [43] V. The pleading of the Strategy [48] VI. The pleading of the Margin Loan Breach [61] VII. The pleading of causation [73] VIII. The unconscionability issue [81] IX. Orders [100]

I. Introduction 1 Dr Oliver and Dr Irving sue the Commonwealth Bank of Australia Ltd (the 'Bank') over the manner in which they contend it closed out margin loan facilities held by them with it. They have each commenced a separate proceeding but, at least for present purposes, the two claims are substantially the same. The Bank has applied to dismiss parts of their claims on a summary basis either under the former Order 11 rule 16 of the Federal Court Rules (now r 16.21) or under s 31A of the Federal Court of Australia Act 1976 (Cth). 2 In summary, the Bank claims that the pleadings which have been filed on behalf of the applicants exhibit five distinct difficulties: first, Dr Oliver and Dr Irving's pleadings depend, in part, on a pleading of a duty of good faith. The Bank submits, and Dr Oliver and Dr Irving deny, that the pleadings impermissibly seek to use this concept in a way which contradicts, or at least qualifies, the operation of the express terms of the contracts in question, a course the Bank says is foreclosed by authority. Secondly, the Bank notes that part of the case put against it concerns an alleged agreement on its part to give effect to a particular strategy in certain circumstances. The Bank submits, and Dr Oliver and Dr Irving deny, that their respective pleadings do not disclose a coherent legal basis for relief in that circumstance. Thirdly, the Bank complains that Dr Oliver and Dr Irving have alleged that various acts and omissions by the Bank were breaches of express terms of the contracts in question but that recourse to those terms leaves it quite unclear how any such conduct could have been a breach. Fourthly, the Bank submits that some of the losses claimed do not appear to be causally connected to the conduct which Dr Oliver and Dr Irving impugn. Fifthly, Dr Oliver and Dr Irving's pleadings place some reliance upon equitable and statutory forms of unconscionable behaviour. The Bank submits, and Dr Oliver and Dr Irving deny, that the matters pleaded are not capable of meeting the legal standard for such a case. 3 For the reasons which follow the Bank should be granted some, but not all, of the relief which it seeks.

II. The Nature of the Cases 4 It is useful to sketch, if only in outline, the nature of the cases pleaded by Dr Oliver and Dr Irving. In what follows I have omitted reference to the fact that what appears in the pleadings are, of course, merely allegations; so much should be understood.

(a) Dr Oliver 5 Dr Oliver entered into a margin loan agreement with Colonial Limited (which was subsequently acquired by the Bank) as long ago as December 1998. I will make no further reference to Colonial Limited treating it, for present purposes, as equivalent to the Bank. Dr Oliver was advised to enter into this arrangement by Cassimatis Securities Pty Ltd in November 1998. Cassimatis Securities Pty Ltd subsequently changed its name to Storm Financial Limited which I will refer to simply as 'Storm'. The margin loan was to be governed on the terms contained in a booklet. The purpose of the margin loan was for the Bank to advance loan monies to Dr Oliver and for Dr Oliver to use those monies to acquire units in funds or securities approved by it. At any time it was possible to calculate the ratio of the amount owing under the margin loan and the market value of the units or securities which had been purchased. By cl 4.1 of the margin loan agreement where that ratio exceeded a particular ratio specified by the Bank then Dr Oliver would be required to take steps to reduce the ratio of the loan to the market value of units and securities to another ratio specified by the Bank. This second specified ratio was known as the 'the base loan-to-security ratio' and was defined to mean the ratio between the weighted average of the total amount the Bank would lend against each security and the total market value of the units or securities in question. The first specified ratio was known as the margin call loan-to-security ratio which was defined to be the base loan-to-security ratio plus 10%. In substance, and cutting out some detail, if the Bank were willing to lend to 70% of the market value of a certain class of security then upon the loan becoming 80% of the market value of the securities held Dr Oliver would be required to restore that ratio to 70%. 6 Clause 4.1 contemplated that this might be done by giving the Bank further security or by repaying part of the loan. There is a controversy as to whether the Bank was obliged to issue a margin call to Dr Oliver before exercising security rights over the security property. Dr Oliver does not allege in his pleading any express obligation on the part of the Bank to do so but its alleged failure subsequently to issue margin calls does form part of the contract claim of his case. 7 The facts giving rise to the present dispute are this. By 30 June 2008 Dr Oliver's margin loan totalled $11,134,700.96. On or around that day Dr Oliver decided to pre-pay the interest due under the loan for the financial year ending 30 June 2009 no doubt with the intention of obtaining a substantial deduction in the year ending 30 June 2008. It is not possible to pre-pay interest on a variable rate loan for reasons which will be obvious. Ultimately, therefore, the transaction took the form of a further advance by the Bank of an amount for the interest ($1,194,720.99) which was then added to the loan balance to arrive at a total loan balance of $12,329,421.95. That loan was then fixed for the balance of the financial year to 30 June 2009. 8 During the same period Dr Oliver also maintained with the Bank an account in credit known as the Accelerator Cash Account (the 'cash account'). For completeness, it should be noted that the proceeds of the margin loan had been used to acquire units in a number of indexed trusts operated by Storm. 9 As is well known, beginning in the middle of 2008 there commenced a contraction in liquidity in the global credit markets and this, it would be fair to say, affected Dr Oliver. By 31 July 2008, as the crisis loomed, the loan-to-security ratio of Dr Oliver's margin call facility was equal to or exceeded 90%. The base ratio, at that time, was 80% and the margin call ratio was 10% more, that is, 90%. Consequently, Dr Oliver became obliged by cl 4.1 to restore the state of affairs so that the loan-to-security ratio returned to 80%. Thereafter, on the advice of Storm, Dr Oliver sold down some of his positions and reduced the amount of his debt. 10 However, the liquidity crisis continued and, says Dr Oliver, on 16 October 2008 Storm instructed its fund managers to redeem Dr Oliver's investments in the various Storm funds and to pay the proceeds of the sales into Dr Oliver's cash account. Pausing there, it might be observed that the fact that the margin loan was by this time fixed prevented that loan being the subject of early repayments. Dr Oliver alleges that this instruction by Storm to its fund managers was approved by the Bank. This Dr Oliver refers to as 'the Strategy'. 11 An important element of Dr Oliver's case concerns his next contention that the Bank - and these are the precise words used in the pleading - 'was aware of, agreed with and advised Storm that it would implement the Strategy'. To put the matter shortly, Dr Oliver seeks to contend that the Bank had agreed to permit Storm to sell down his position and for the proceeds of sale to be paid into his cash account. 12 It is what happened next which generates the immediate cause of the present litigation. Although some investments were redeemed on 28 October 2008 and the proceeds of $2,881,651.14 paid into Dr Oliver's cash account, a different course appears to have been taken subsequently. On 6 November 2008 further redemptions occurred which resulted in sale proceeds of $5,443,001.99. Of this, $11,140.96 was paid into a variable component of Dr Oliver's margin loan (which had been created during the course of, and by charges on, the redemptions of Dr Oliver's investments during August and September 2008) completely paying it out and leaving a balance of $5,431,861.03 which was paid into the cash account. 13 Dr Oliver alleges that on 25 November 2008 the Bank determined that it would no longer give effect to the Strategy. On 28 November 2008, the Bank determined to close Dr Oliver's fixed loan, charged him a break fee of $277,584.27 for doing so, transferred the balance of the loan to a variable loan at 7.3% per annum and refunded to him a component of the pre-paid interest amounting to $700,466.55 but did so by applying it to the outstanding balance of the variable loan. In the result, Dr Oliver ended up with a variable margin loan of $11,906,592.46. Thereafter, the Bank progressively sold down Dr Oliver's investments until they had been entirely sold and paid the proceeds into the variable margin loan. This was completed by 2 December 2008 by which time the variable margin loan had been reduced to $10,154,167.59. Unfortunately, Dr Oliver had no capacity to meet the repayments on such a loan (which was then at 7.3%). By 31 December 2008 the margin loan balance had increased to $10,221,606.62 with an interest rate of 8.05%. Dr Oliver did, fortunately, have $10,221,800.55 in his cash account which was then used to pay out the variable margin loan on 31 December 2008. At the end of this process Dr Oliver was left with $193.93. 14 Putting the matter perhaps somewhat compendiously Dr Oliver's complaint is that it was not right of the Bank to sell his securities without giving him a margin call; that it breached an agreement by failing to abide by the Strategy; that it breached the margin loan agreement by closing the fixed loan and charging him the sum of $277,584.27 as a break fee and by refunding the prepaid interest by means of a reduction in the variable loan. He says the conduct of the Bank, in various ways, was not in good faith or was unconscionable.

(b) Dr Irving 15 The position of Dr Irving, apart from matters of detail, is largely the same. In particular, he too wished to prepay interest on 30 June 2008 and this resulted in a fixed 1 year loan of $15,248,353. Subsequently he alleges the same 'Strategy' between Storm and the Bank to sell down his position which he contends the Bank did not observe. As with Dr Oliver he alleges that his fixed loan was converted to a variable loan at considerable expense and the proceeds of his investments sold down to reduce the variable loan. Unlike Dr Oliver, Dr Irving did not ultimately have sufficient funds in his cash account to close out the variable loan. Accordingly, he has been left with a debt of $1,006,873.66. Other than that, his allegations are essentially the same. 16 It is useful to turn to the Bank's application for summary relief.

III. Principles governing summary disposal 17 The Bank's attack upon Dr Oliver and Dr Irving's pleadings was based upon two distinct sources. The first was the former Order 11 rule 16 of the Federal Court Rules 1979. That rule largely ceased to apply on 1 August 2011 and was replaced by r 16.21. Order 11 rule 16 provided that: 16 Embarrassment etc Where a pleading: (a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading; (b) has a tendency to cause prejudice, embarrassment or delay in the proceeding; or (c) is otherwise an abuse of the process of the Court; the Court may at any stage of the proceeding order that the whole or any part of the pleading be struck out. 18 Tamberlin J observed in Shelton v National Roads and Motorists' Association Ltd (2004) 51 ACSR 278 at 284 [18], that the concept of embarrassment in (b) 'refers to a pleading that is susceptible to various meanings, or contains inconsistent allegations, or in which alternatives are confusingly intermixed, or in which irrelevant allegations are made that tend to increase expense. This is not an exhaustive list of situations in which a pleading may be embarrassing'. 19 The Federal Court Rules 2011 contain a transitional provision in r 1.04 which by sub-rule (1) provides that those rules apply to proceedings commenced after 1 August 2011 (not this case) or by sub-rule (2) 'to a step in a proceeding that was started before 1 August 2011, if the step is taken on or after 1 August 2011.' In this case, the Bank's notices were filed on 2 May 2011 so that the former Order 11 rule 16 continues to apply. 20 Speaking of O 11 r 16 Tracey J, with respect, provided a useful summary of the principles to be applied in Wright Rubber Products Pty Ltd v Bayer AG (2008) 30 ATPR 42-258 at 49,621 [5]: The principles governing the exercise of the Court's power summarily to dismiss a claim on the ground that it discloses no reasonable cause of action, the principles which govern pleadings in this Court and the relevant authorities are conveniently summarised by Weinberg J in McKellar v Container Terminal Management Services Ltd (1999) 165 ALR 409 at 415-421. It is not necessary to restate, at length, his Honour's exposition of the relevant rules and the statements of principle which emerge from the cases to which he refers. It is sufficient, for present purposes, to note that: The power to dismiss a claim because it discloses no reasonable cause of action will not lightly be exercised: see Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91; General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 128-130; Webster v Lampard (1993) 177 CLR 598 at 602-603. The purpose of pleadings is to define the issues with sufficient clarity such that respondents understand, and have the opportunity to meet, the case made against them: see Dare v Pulham (1982) 148 CLR 658 at 664; Mitanis v Pioneer Concrete (Vic) Pty Ltd [1997] ATPR 41-591 at 44, 151ff. A statement of claim must plead all the material facts necessary for the purpose of formulating a complete cause of action. If it does not it is liable to be struck out: Mitanis; Bruce v Odhams Press Ltd [1936] 1 KB 697 at 712-713. It is not sufficient for the pleader to state conclusions drawn from unstated facts: see Trade Practices Commission v David Jones (Australia) Pty Ltd (1985) 7 FCR 109 at 114-5. There will be cases in which the power to strike out pleadings will not be exercised notwithstanding a failure to plead all material facts. Such restraint will be appropriate where the deficiency causes no confusion and does not raise issues of substantive principle (HECEC Australia Pty Ltd v Hydro-Electric Corp [1999] FCA 822 at [59]), and where deficiencies can be overcome by ordering the provision of particulars or the furnishing of affidavits (State of Queensland v Pioneer Concrete (Qld) Pty Ltd (1999) ATPR 41-691 at 42,828-9). Not all conclusionary pleadings will be struck-out as being deficient: see Charlie Carter Pty Ltd v The Shop, Distributive and Allied Employees' Association (WA) (1987) 13 FCR 413 at 417. Whether or not such a pleading should be struck out will depend on whether or not the facts are pleaded at too great a level of generality: see Kernel Holdings Pty Ltd v Rothmans of Pall Mall (Australia) Pty Ltd [1991] FCA 557. 21 The Bank, however, did not rest on those principles alone. It also invoked s 31A of the Federal Court of Australia Act which provides: 31A Summary judgment (1) The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if: (a) the first party is prosecuting the proceeding or that part of the proceeding; and (b) the Court is satisfied that the other party has no reasonable prospect of successfully defending the proceeding or that part of the proceeding. (2) The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if: (a) the first party is defending the proceeding or that part of the proceeding; and (b) the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding. (3) For the purposes of this section, a defence or a proceeding or part of a proceeding need not be: (a) hopeless; or (b) bound to fail; for it to have no reasonable prospect of success. (4) This section does not limit any powers that the Court has apart from this section. (5) This section does not apply to criminal proceedings. 22 It is not appropriate to seek to parse the expression 'no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding' which is to be applied as an expression 'as a whole': Spencer v Commonwealth (2010) 241 CLR 118 at 141 [59]-[60] per Hayne, Crennan, Kiefel and Bell JJ. Nevertheless, it is a power, as might naturally be expected, 'not to be exercised lightly' nor, on the other hand, to be limited necessarily to the kinds of case formerly governed by traditional summary judgment procedures (at 141 [60]). 23 It is true, as Finkelstein J noted in Imobilari Pty Ltd v Opes Prime Stockbroking Ltd (2008) 252 ALR 41 at 43 [4], that O 11 r 16 (and, therefore, now r 16.21) is concerned with the adequacy of the pleading so that the application is to be approached on the basis that the facts alleged are correct. Section 31A is not necessarily concerned with such matters and authorises an examination ranging beyond the pleadings to determine whether a claim or part of a claim has no reasonable prospects of success. In Imobilari Finkelstein J thought that s 31A not only permitted such an inquiry but, indeed, required it (at 44 [6]). With respect, whilst in many cases this will be probably true, it is not inevitable. There will be cases where the absence of reasonable prospects may be apparent merely from what is alleged; that is to say, the nature of the allegations made will dictate, without the possibility of a different view being taken, that there are reasonable prospects of only one outcome. For example, a claim in tort against a visiting head of State may, I think, be disposed of under s 31A without any need to move beyond the pleadings because it will be apparent that a plea of sovereign immunity will certainly succeed. 24 Of course what is also important to note is that O 11 r 16 (and now r 16.21) authorises the striking out of pleadings but not the entry of judgment which can, by contrast, be achieved under s 31A. This proposition led French CJ and Gummow J to observe in Spencer (at 132 [25]) that where 'the success of a proceeding depends upon propositions of law apparently precluded by existing authority, that may not always be the end of the matter. Existing authority may be overruled, qualified or further explained. Summary processes must not be used to stultify the development of the law.' Nevertheless their Honours thought that a case which depended upon 'a proposition of law which would contradict a binding decision of this Court, the court hearing the application under s 31A could justifiably conclude that the proceedings had no reasonable prospects of success'. 25 I turn then to the first of the Bank's criticisms which are concerned with the pleading of an implied term of good faith.

IV. The pleading of good faith 26 I will deal with Dr Oliver's pleading which, apart from one matter, is for the purposes of the present topic, the same as Dr Irving's. Paragraph 15 pleads that it was a term of the contract between Dr Oliver and the Bank that the Bank 'had a duty to act in good faith and with reasonableness in performing its obligations and exercising its rights pursuant to the express terms and conditions of [Dr Oliver's] Margin Loan Agreement (the 'Good Faith Term')'. The Bank took no issue with this but instead focused its submissions on the manner in which Dr Oliver's case that this term had been breached was put later in the pleading.

(a) Implied term 27 The Bank submits that the 'mere exercise of a contractual right or a breach of a contractual obligation can never, of itself, involve a breach of the implied obligation of good faith'. 28 It then points to paragraph 73 which, relevantly, alleges that 'in performing its obligations and exercising its rights pursuant to the express terms of [Dr Oliver's] Margin Loan Agreement particularised in parenthesis at the end of each of sub-paragraphs (a) to (n) below (or any other express term on which [the Bank] relies in respect of the conduct pleaded in each of sub-paragraphs (a) to (n), as to which [Dr Oliver] is not aware), [the Bank] breached the Good Faith Term by failing to act in good faith and reasonableness'. There then followed 14 subparagraphs with individual allegations. What is important for present purposes is the reliance by the pleader on the breach of the duty of good faith being constituted by the manner in which the Bank went about 'performing its obligations and exercising its rights pursuant to the express terms' of the margin loan agreement. 29 The question then is whether, as a matter of law, the Bank is correct to submit that the duty of good faith and reasonableness can never be breached by the exercise of some contractual right, or forbearance from taking some action, under a contract. The fons et origo of the Bank's submission was Metropolitan Life Insurance Co v RJR Nabisco, Inc 716 F Supp 1504 (1989). There, in the course of discussing a similar implied covenant under the law of New York, Walker J was moved to observe that 'the implied covenant will only aid and further the explicit terms of the agreement and will never impose an obligation "which would be inconsistent with other terms of the contractual relationship"' (at 1517). That statement had been cited with approval not only by the Court of Appeal of Western Australia in Central Exchange Ltd v Anaconda Nickel Ltd (2002) 26 WAR 33 at 52 [64] per Steytler J (with whom Malcolm CJ and Wallwork J agreed) but also by the New South Wales Court of Appeal in Burger King Corporation v Hungry Jack's Pty Ltd (2001) 69 NSWLR 558 at 570 [173]. 30 In the absolute form in which it is put forward, this submission cannot be what was actually held in Burger King. That case was concerned with the operation of cl 4.1 of an agreement under which Hungry Jack's operated as a master franchisee for Burger King. Clause 4.1 specified, in great detail, the standard expected of Burger King restaurants. Burger King had purported to terminate the arrangement on the basis of breaches of cl 4.1 to which Hungry Jack's had rejoined that Burger King's reliance on cl 4.1 was not in good faith. Despite having referred with apparent approval to what was said in Metropolitan Life Insurance Co the Court ultimately concluded as follows (at 573 [183]): 183 In our opinion, Hungry Jack's Pty Ltd's submission must be correct. There is such an extraordinary range of detailed considerations, particularly in relation to whether operational requirements have been satisfied, contained within cl 4.1(a), that unless there was an implied requirement of reasonableness and good faith, Burger King Corporation could, for the slightest of breaches, bring to an end the very valuable rights which Hungry Jack's Pty Ltd had under the Development Agreement. Further, contrary to Burger King Corporation's submissions, cl 4 does not contain only objective criteria against which the discretion is to be exercised. There are many subjective, evaluative notions involved. The reflection of "an acceptable Burger King image" is one example. Senior counsel's example is another. 31 The Court accepted, therefore, that the operation of cl 4.1 was subject to an obligation of good faith. The example it proffered - the clause requiring Hungry Jack's to maintain its stores in 'an acceptable Burger King image' - was expressly cut across by the good faith term. A store might not be maintained in an image acceptable to Burger King - a direct enlivenment of cl 4.1(a) - but the term could still not be relied upon unless in good faith. That consequence is antithetical to the Bank's submission. 32 Nor do I think that Central Exchange requires a different outcome. In that case a complex contract had provided detailed machinery for resolving, by expert determination, a particular dispute which could arise under the contract. The appellant contended that there was a duty of good faith implied into the contract which required Anaconda to provide it with information and documentation to determine whether it should sue in respect of some matter. Steytler J's invocation of Metropolitan Life Insurance Co was bent to the end of demonstrating that any such duty could not be used to supplant the detailed contractual machinery the parties had already agreed upon to resolve that question: 52 [65]. 33 For those reasons I do not accept that the authorities the Bank relies upon justify the relief which it seeks. 34 I decline, therefore, to strike out paragraph 73 of Dr Oliver's pleading on that basis or paragraph 88 of Dr Irving's pleading. For the same reasons, I would decline relief under s 31A on this ground.

(b) Inadequate specificity 35 The Bank submits that an allegation that it acted in breach of the duty of good faith is an allegation of some seriousness and therefore attended by a concomitant obligation on Dr Oliver's part to plead the claim with specificity. I accept this. The term pleaded by Dr Oliver at paragraph 16 (and Dr Irving at paragraph 14) was that the Bank would act in good faith and with reasonableness. The course of authority in this country suggests that these are but two elements of the same underlying concept: Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 268 at [15] per Allsop P. Nevertheless that concept is informed by notions which can take into account conduct which involves bad faith. I do not mean thereby to suggest that every breach of the duty of good faith and reasonableness will be in bad faith; only that the concept involved is located sufficiently far along the spectrum of misconduct that it is to be seen as an allegation requiring pleading with an appropriate degree of specificity. Plainly this will be so where actual bad faith is alleged. But it will be true also of allegations of a breach of the duty of good faith falling short of actual dishonesty. 36 What then is the Bank's criticism of the pleading? I have set out already the initial part of the pleading of the breach of the duty of good faith at paragraph 73 of Dr Oliver's pleading. Subscribed within it are 14 subparagraphs each of which sets out a particular breach. To take the shortest example, paragraph 73(c) alleges that the Bank breached the duty of good faith in 'not giving to [Dr Oliver] any notice of default at any of the times pleaded in sub-paragraph (a) or at any other time (clause 22.2) and, or in the alternative' (emphasis added). It is the last emphasised portion which grounds the Bank's submission. Those words appear at the end of subparagraphs 73(a) to 73(m) but not in paragraph 73(n). 37 The fact that each of the subparagraphs is in the alternate caused the Bank to submit that paragraph 73 in fact concealed around 200 different cases. I think it involves very many more but this does not increase the strength of the Bank's submission which I am not disposed to accept. The principle that allegations of misconduct must be adequately particularised does not operate as a bar on the making of alternative claims. No further want of particularity was alleged from which it follows that I reject the argument that paragraph 73 of Dr Oliver's pleading should be struck out or judgment given against him on this basis. The same reasoning applies to paragraph 88 of Dr Irving's pleading.

(c) Absence of mala fides 38 At paragraph 73A of his pleading Dr Oliver alleges that the Bank failed to act in good faith by, inter alia, failing to redeem his investments when it had a power to do so (a number of other allegations, not conceptually distinguishable for present purposes, are also made). The Bank submits that the pleading fails to articulate 'any tenable basis for an allegation that the Bank acted either dishonestly or with infidelity to the bargain' with Dr Oliver. It is, of course, literally true that paragraph 73A does not expressly allege any matters involving what might loosely be called dishonest conduct; but it does allege that: the Bank did not notify Dr Oliver that his loan-to-security ratio had exceeded the relevant limit; the Bank thereby deprived him of the opportunity to act within the various time periods specified in cl 4.2 of the margin loan agreement. For clarity's sake, that clause required Dr Oliver to adjust the position of the loan if he received a 'margin call' from the Bank. The difficulty was that the Bank was not obliged to issue such a notice; the Bank did not give Dr Oliver notice of being in default; and the Bank had altered the margin call ratios without informing Dr Oliver. 39 The immediate question is whether failing to redeem Dr Oliver's investments, given all of those matters, was other than in good faith. Because good faith is, for reasons I have already given, intermingled with notions of unreasonableness I do not accept that the allegation that the duty of good faith has been breached rises necessarily quite so high as dishonesty or the presence of mala fides, although I am not to be taken thereby as embracing the notion that infidelity at some level is not involved. The question for present purposes is whether the four matters relied upon in paragraph 73A are capable of sustaining a conclusion that there was an absence of good faith. Because the question arises in the context of a pleading debate the question is not whether those four matters do sustain such a finding but rather only whether they could. It is akin in a sense to the inquiry which arises when it is said that a matter should be taken away from a jury. 40 Viewed through that prism I am not prepared to conclude that the matters pleaded could not sustain such a conclusion. That, so it seems to me, is a triable issue. It will follow that paragraph 73A should neither be struck out nor the subject of summary judgment. The same conclusion applies to paragraph 89 of Dr Irving's pleading. 41 A related submission by the Bank applied only to paragraph 73A(f) of Dr Oliver's pleading. Like paragraph 73A(e) it is an allegation of a breach of the duty of good faith. Unlike that paragraph, however, it does not itself contain any substantive direct allegations of fact. Instead it is cross-referenced to those parts of Dr Oliver's pleading where breaches of contract are alleged. In terms, the breach of duty is said to arise 'by reason of the matters pleaded in sub-paragraphs 73(e) to (n)'. The Bank's first point about this was that the matters alleged in paragraphs 73(e)-(n) cannot constitute sufficient matters to amount to dishonesty or mala fides. For the reasons I have given in relation to the remainder of paragraph 73A I reject this argument. 42 The Bank's second point is that this adds nothing: if it breached the margin loan agreement in the manner alleged in subparagraphs 73(e)-(n) it is superfluous to say that this was also a breach of the duty of good faith. That argument assumes, however, that the factual matters alleged in subparagraphs 73(e)-(n) are found to be breaches of contract. If that were found to be so then there would be a doubling up as the Bank notes. But if Dr Oliver succeeds in establishing the factual matters in subparagraphs 73(e)-(n) but does not succeed in proving that these were breaches of contract, then paragraph 73A(f) does not involve redundancy. In any event, I do not accept that just because one claim is redundant if another claim succeeds provides a basis for its striking out. Often enough, a claim based upon misleading and deceptive conduct will render a negligent misstatement allegation pointless but that is not regarded as a proper reason to strike it out as a pleading. As an aspect of the same argument the Bank also submitted that paragraph 73A(f) was unsustainable because the duty of good faith was concerned with the performance of the margin loan agreements. The point is it was understood that if the matters in sub-paragraphs 73(e)-(n) were established then what Dr Oliver would have proved was how the contract had not been performed. That argument assumes that the matters in sub-paragraphs 73(e)-(n) are factually established and that it is shown they are breaches of contract. For reasons already given, that assumption, at a pleading level, cannot be accepted. Paragraph 73A(f) should not be struck out and summary judgment should not be given on it. Paragraph 89(f) of Dr Irving's pleading should be treated the same way.

(d) The creation of a margin loan structure with which Dr Oliver could not comply 43 Paragraph 74 of Dr Oliver's pleading alleges: In addition, or in the alternative, to the matters pleaded at paragraphs 73 and 73A above, in circumstances in which the conduct set out in sub-paragraphs 73(a) to (i) had occurred, [the Bank] breached the Good Faith Term by creating, on or about 28 November 2008, and without the knowledge or authorisation of [Dr Oliver], a margin loan structure containing obligations with which [Dr Oliver] could not comply. 44 The Bank submits that this allegation is 'unmoored from any contractual performance by the Bank' and that it is an attempt to use the implied duty of good faith as 'a springboard for other implied terms'. In that last regard, reliance was placed upon the reasons for judgment of McLelland J in United States Surgical Corporation v Hospital Products International Pty Ltd [1982] 2 NSWLR 766 where his Honour quoted with approval from Restatement of Law: Contracts (2d) a passage to that effect. His Honour also went on to say: So considered, such an implied obligation would appear not to demonstrate any material divergence from the law of new South Wales, and in substance probably represents the principle stated by the High Court of Australia in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 53 ALJR 745, at p 749; 26 ALR 567, at p 577, quoting the words of Griffith CJ in Butt v McDonald (1896) 7 QLJ 68, at pp 70,71: "It is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract." 45 To that one might add the famous dictum of Lord Blackburn in Mackay v Dick (1881) 6 App Cas 251 at 263 and Cockburn CJ in Stirling v Maitland (1864) 122 ER 1043 at 1047. There may be much to be said for the view that it is this term - neither new nor unsurprising - which lies under the good faith term and that they should be co-terminous. Gummow J examined s 205 of Restatement of Law: Contracts in Service Station Association Ltd v Berg Bennett & Associates Pty Ltd (1993) 45 FCR 84 at a time when the implication of the good faith term was not quite as entrenched at an intermediate appellate level as it presently is. His Honour's treatment of the matter is, with respect, useful for two reasons. First, his Honour suggested that the good faith term might consist of the negative implication in Mackay v Dick (at 93) together with the negative covenant not to hinder or prevent the fulfilment of the purpose of an express promise (at 94) citing Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359 at 378 per Dixon J. Secondly, he observed (at 93), without criticism, Professor Farnsworth's view that many of the uses 'to which the new concept of good faith is put today do not go beyond those to which the traditional techniques of interpretation and gap filling were put in yesteryear'. 46 On the other hand, recent authority has suggested that the principle might be broader. In Macquarie International Health Clinic Pty Ltd Allsop P summarised the content of the term this way (at [12]): The usual content of the obligation of good faith that can be extracted from Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234, Hughes Bros Pty Ltd v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (1993) 31 NSWLR 91, Burger King Corporation v Hungry Jack's Pty Ltd [2001] NSWCA 187; 69 NSWLR 558; Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349 and United Group Rail Services Limited v Rail Corporation New South is as follows: (a) obligations to act honestly and with a fidelity to the bargain; (b) obligations not to act dishonestly and not to act to undermine the bargain entered or the substance of the contractual benefit bargained for; (c) an obligation to act reasonably and with fair dealing having regard to the interests of the parties (which will, inevitably, at times conflict) and to the provisions, aims and purposes of the contract, objectively ascertained. 47 The third aspect in (c) is somewhat broader than the first two. I am confident that the term alleged in paragraph 74 could not fall within (a) or (b) but I find myself unable to be dogmatic about (c). Assuming that (c) represents the law, it invites a consideration of aims and purposes of the contract which task is properly to be seen as a matter for trial. For that reason I decline to strike out paragraph 74 of Dr Oliver's pleading or to give judgment to the Bank on it. There was no analogue to this paragraph in Dr Irving's pleading.

V. The pleading of the Strategy 48 Dr Oliver alleges that Storm instructed its fund managers 'as approved by [the Bank], to redeem [his] investments' and to deposit the proceeds into his cash account and this the pleading refers to as the Strategy. It will be observed at the outset that the Strategy was something initially existing between Storm and the Bank. 49 How does this relate to Dr Oliver? Paragraph 46 alleges: On and from 16 October 2008, CBA was aware of, agreed with and advised Storm that it would implement the Strategy. Particulars The best particulars which the Applicant can provide at this stage is an email and attachment thereto dated 16 October 2008 from Julie Cassimatis of Storm, to John Clothier and Kamal Arnaout each of CGI, and an email in reply dated 16 October 2008 from Kamal Arnaout, of CGI, to Julie Cassimatis of Storm. Further particulars will be provided after discovery. 50 For clarity, CGI is pleaded to be a division of the Bank. It is not immediately clear what the impact of this awareness, acquiescence and agreement about the Strategy might be. But paragraph 72A provides the answer for there it is made clear that Dr Oliver alleges the Bank breached its contract with him by doing the various actions alleged in paragraph 72A(a)-(f) 'in circumstances in which [the Bank] had agreed to implement the Strategy'. This suggests the existence of an enforceable agreement with the Bank to give effect to the Strategy. Paragraph 78A confirms this construction of paragraph 72A. It claims breach of contract damages in these terms (relevantly): 'In the alternative to paragraphs 77 and 78, had [the Bank] not breached its agreement to implement the Strategy, as pleaded in paragraph 72A above: (a) [the Bank] would have redeemed or caused to have been redeemed all [Dr Oliver's] investments….'. Plainly then the pleading contemplates that the contract between the Bank and Dr Oliver required the Bank to implement the Strategy. 51 The Bank submitted that there was no pleading by Dr Oliver of anything which might give rise to such a contractual obligation. This was so because paragraph 46 (which is set out above) at best alleged the awareness, acquiescence or agreement of the Bank with Storm and not Dr Oliver. Further, it might be noted it is not alleged that Storm was Dr Oliver's agent. 52 This submission is sound and should be accepted. In the written submissions filed on Dr Oliver's behalf it was said (at paragraph 94) that: 'To the extent that [the Bank] submits that the Applicants cannot rely on the Strategy itself (and solely) as a basis for loss, the Applicants do not press paragraph 78A.' That means that Dr Oliver does not claim that the obligation to give effect to the Strategy is part of the contract. It follows that paragraph 78A must be struck out (and, correspondingly, paragraph 97A of Dr Irving's pleading). 53 What, then, is the relevance of the Strategy if it be not to erect a claim in contract? Dr Oliver submitted that the existence of this non-contractual agreement to implement the Strategy was germane to the allegations concerning good faith and unconscionable conduct. It was also submitted that they were relevant to the allegation of breach of contact and not just those allegations concerning the implied term of good faith. Specific reference was made to paragraph 72A from which I take that it is alleged that a failure to implement the Strategy was a breach of contract. For the reasons I have already given (and for the reason Dr Oliver did not press paragraph 78A) the words in paragraph 72A 'in circumstances in which [the Bank] had agreed to implement the Strategy' connote a contractual obligation owed by the Bank to give effect to the Strategy. As the Strategy is presently pleaded this is not maintainable and must be struck out; the only agreement alleged is with Storm. The same words should be struck out of paragraphs 87A of Dr Irving's pleading. 54 That leaves unresolved Dr Oliver's use of the agreement to implement the Strategy, not as a contractual agreement, but as a non-binding agreement between the Bank and Storm. In principle, I accept that an arrangement to that effect between the Bank and Storm could potentially be relevant to whether the Bank acted in good faith towards Dr Oliver. Paragraph 73 (which pleads breach of the good faith term) alleges in subparagraph (f) actions by the Bank contrary to the Strategy. But precisely the same language is used in paragraph 72 (the breach of contract allegations) in subparagraph (f) and in that case it cannot be referring to a non-enforceable agreement. 55 This suggests that the current form of the pleading does not adequately plead this non-enforceable agreement. The most likely cause is paragraph 46 itself which fails to identify the person with whom the agreement was made or whether what is alleged is a contract or merely an understanding. If Dr Oliver wishes to put a good faith/unconscionability case which depends in part on the existence of a non-binding arrangement between Storm and the Bank then this needs to be clearly pleaded. 56 The appropriate course then is to strike out paragraph 46 and the words 'contrary to the Strategy' when appearing in paragraphs 72, 72A , 73 and 83. I would also strike out the words 'as approved by CBA' in paragraph 45. I would, however, grant leave to replead the non-contractual agreement between Storm and the Bank so that its non-contractual nature is made quite plain as well as the identity of the parties to it. There is presently no occasion to give judgment with respect to this issue. 57 The Bank also submitted that the pleading was defective because paragraph 54 alleged that on 25 November 2008 the Bank had indicated that it was no longer implementing the Strategy. It was said that it made no sense to allege, as Dr Oliver did, that after 25 November 2008 there had been breaches of the Strategy. In that regard, it is to be noted that paragraph 72A does allege breaches of the Strategy on and after 1 December 2008. I do not accept this submission. I have not permitted a contractual case on the Strategy to go forward because no agreement is alleged on that topic between the Bank and Dr Oliver. If there had been it would not follow that it could not be breached after 25 November 2008 when the Bank indicated it was no longer going to implement it. All that would result is the Bank being in breach. Unless and until Dr Oliver terminated the agreement the obligation would remain on foot and it would not, in those circumstances, being meaningless to allege breaches on and after 1 December 2008. 58 On the other hand, if the matter is approached on the basis that the agreement in relation to the Strategy was non-contractual then it is no less meaningful to say that the arrangement (to use a neutral word) was breached on 1 December 2008 than it is to say it was breached on 25 November 2008. The unilateral declaration by one party of its intention not to be bound does not discharge the arrangement. 59 The Bank made further complaints about the use of the words 'was aware of, acquiesced in agreed with' in paragraph 46. I do not need to resolve this but the Bank's point is not without force. 60 The same position should be taken with respect to Dr Irving's pleading.

VI. The pleading of the Margin Loan Breach 61 The Bank submits that the manner in which Dr Oliver and Dr Irving have pleaded that the margin loan agreement was breached is deficient. The complaint falls into three categories which it is useful to treat separately. 62 The first concerns cll 3.1, 3.2, 3.4 (3.6 in Dr Irving's margin loan agreement), 25.3 and 25.5 of the agreements. Those clauses provide: 3.1 You must repay to us all the money you have borrowed under this agreement either at the time that you nominate under clause 3.3 or the time that we specify under clause 3.2. 3.2 You must pay us the amount owing, on the date we specify, if: (a) you are in default (see Part V); or (b) we send you a notice requiring you to do so. We will always give you at least 5 working days notice if we do this. … 3.4/3.6 You must pay all amounts due under the transaction documents (that is, your loan, the interest payments on it, and any fees we charge) in full, in immediately available funds, without setting off amounts you believe we owe you or a Guarantor, and without counterclaiming amounts from us. All payments must also be free of any withholding or deduction for taxes, unless the law prevents this. Such payments must be made by 10am (Sydney time) on the day that payment is due. If the due date falls on a non-working day, then you must pay us on the previous working day. We may set off any money we owe against any money you owe us. If at any time any of the amount owing is due, but has not yet been paid, you authorise us to apply any credit balance in any account you have with us (including the Colonial Margin Lending Deposit Facility) towards satisfaction of the payment that is due. 25.3 If at the time we receive payment, any part of the amount owing is not then due for payment, we may retain an amount equal to that part. We must hold it in an interest bearing account and use it (as well as any interest) to pay the amount owing when it becomes due for payment. … 25.5 We must pay any money remaining after the amount owing is paid either to you or another person entitled to it. In particular, we may pay it to a person with a subsequent registered or unregistered security interest without incurring any liability to you or the Guarantor. 63 Dealing for the time being with Dr Oliver, the Bank takes aim with paragraph 72(k) of the pleading. It alleges that the Bank breached the contract by 'applying the sum of $700,466.55 as pleaded in paragraph 55(d) on or about 28 November 2008 to reduce the balance of [Dr Oliver's] Margin Loan, rather than placing the sum into [Dr Oliver's] Accelerator Cash Account as pleaded in paragraph 58 above, without notice to or the authorisation of [Dr Oliver] as pleaded in paragraph 59, in breach of clause 3.1, clause 3.2, clause 3.4, clause 25.3 and clause 25.5 of [Dr Oliver's] Margin Loan Agreement.' 64 The Bank submits that it is difficult to understand how the action alleged - applying $700,466.55 to reduce the margin loan - is a breach of the nominated clauses. I agree. In his written submissions counsel for Dr Oliver explained the matter more fulsomely: Dr Oliver was not in default so the Bank had no right to take the $700,466.55; accordingly, when it received that money cl 25.3 meant that it should have been paid into Dr Oliver's cash account. 65 That explanation reveals that the only breach actually alleged is a breach of cl 25.3. Clauses 3.1, 3.2 and 3.4 do not impose obligations on the Bank which Dr Oliver contends were breached and nor, for that matter, does cl 25.5. Further the argument reveals the lynchpin of the matter is the circumstances in which the Bank came to sell Dr Oliver's investments. None of this is currently pleaded at all. I do not accept that paragraph 72(k) presently pleads a case which can be followed. Paragraphs 72(f), (l) and (n) suffer from the same vice. In my opinion they should be struck out with leave to replead. There should, however, be no judgment under s 31A. The same reasoning applies to paragraphs 87(f), 87(g), 87(h), 87(m), 87(n), 87(o), 87(p) and 87(q) of Dr Irving's pleading. 66 The Bank's second complaint concerns cll 2.1 and 2.4 of the agreement. 2.1 You must pay us interest charges on all the money we lend to you at the rate we specify (which may be a fixed rate or a variable rate), for the period, and in the manner that you and we agree to. We will advise you of the rate at the time you first borrow money from us, and then will keep you advised as to any changes in this rate by newspaper advertisement or notice. … 2.4 Depending on the type of interest rate we have agreed to, if you ask and we agree you may pay us interest on your loan in advance, either in multiples of months or yearly. The prepayment may be made on the part of the loan balance we agree. Any interest you prepay to us is not refundable, even if you repay early. 67 Paragraph 72(g) of Dr Oliver's pleading alleges that the Bank breached those express terms of the agreement by 'closing the fixed rate loan component of [Dr Oliver's] Margin Loan on or about 28 November 2008, as pleaded in paragraph 55(a) above without the knowledge or authorisation of [Dr Oliver] as pleaded in paragraph 56, in breach of clause 2.1 and 2.4 of [Dr Oliver's] Margin Loan Agreement'. The Bank submits that it is not possible to see how either cll 2.1 and 2.4 have been breached. 68 Dr Oliver submits that he had agreed with the Bank under cl 2.1 that part of the loan would be fixed for one year. The terms of the submission are instructive: 'on a proper construction of clauses 2.1 and 2.4, there was no basis for [the Bank] carrying out the conduct pleaded'. That, however, is not what paragraph 72(g) pleads - there is a distinction between alleging that the Bank had no authority to do something and alleging that it breached an express term. I do not think cll 2.1 and 2.4 contain any promise by the Bank not to close the fixed loan component. Consequently, paragraph 72(g) should be struck out with leave to replead. There should, however, be no judgment under s 31A. The same conclusion should be reached in relation to paragraphs 72(h), 72(i) and 72(j) which exhibit the same problem. Insofar as Dr Irving is concerned similar reasoning applies to paragraphs 87(i), 87(j), 87(k) and 87(l). 69 The Bank's third complaint concerns cll 1.1, 1.2(a), 1.2(e) and 1.2(f) of the margin loan agreement. These provide: 1.1 We agree to lend you money up to the credit limit to invest in securities in one of two ways: (a) Gearing Facility - where we lend you the money when you ask us to do so; or (b) Regular Gearing facility - where we lend you the money (and you are obliged to borrow the money) in instalments that you and we agree. 1.2 However, we will only lend you money if: (a) you have given us the following documents in a form which is satisfactory to us: (i) the transaction documents, appropriately signed; and (ii) all title documents relating to the secured property; and (iii) any other document we reasonably require; and … (e) we are satisfied that immediately after we make the loan to you the amount owing will not exceed the base security value; and (f) we have obtained all the credit and personal information about you that we consider necessary, and have approved your application. 70 Clause 1.1 is invoked twice in Dr Irving's pleading, cll 1.2(a) and (f) are also invoked in Dr Irving's pleading and cll 1.2(e) and (f) are invoked in paragraph 72(e) of Dr Oliver's. There he contends that the Bank breached the express terms of the margin loan agreement by 'increasing [Dr Oliver's] Margin Loan on account of the money obtained by [Dr Oliver] pursuant to the Home Loan and the Additional Loans without making any enquiries regarding whether [Dr Oliver] had the ability to service the increase to [Dr Oliver's] Margin Loan as pleaded in paragraphs 26 to 28 above, in breach of clause 1.2(e) and clause 1.2(f) of [Dr Oliver's] Margin Loan Agreement'. 71 The Bank submits that the facts alleged cannot easily, or at all, be understood as a breach of these clauses. The force of this submission is difficult to evade. Dr Oliver's written submissions did not advance a substantive explanation of these clauses. It seems to me that paragraph 72(e) should be struck out. I do not presently understand there to be a viable way of repleading it so I would not grant leave to replead. It would not, however, be appropriate at this stage to give judgment on the issue under s 31A. 72 Paragraph 87(e) of Dr Irving's pleading alleges that it was a breach of cll 1.1, 1.2(a), 1.2(f), 2.1 and 2.4 to transfer $30 to Dr Irving's fixed loan. Again, that conduct is simply not prohibited by the nominated clauses. The same remark may be made about paragraph 87(r) of Dr Irving's pleading which alleges it was a breach of cl 1.1 to lend Dr Irving more than his credit limit. I simply cannot read cl 1.1 as a prohibition on the Bank; what it is specifying is the limit of its obligation to lend. The paragraph should be struck out without leave to replead. There should be no judgment under s 31A.

VII. The pleading of causation 73 Paragraph 79 of Dr Oliver's pleading alleges a series of events which would have occurred had the Bank not committed the alleged breaches of the duty of good faith or of contract. On its face it takes the well-known form of a 'but for' pleading. Rather than setting the whole paragraph out I will note the important features of the proposed counter-factual: but for the breaches Dr Oliver's loan would have been kept as a fixed loan on and after 28 November 2008; on or prior to 28 November 2008 the Bank would have served a margin call on Dr Oliver informing him that the current loan-to-security ratio had exceeded 90%. Upon receipt of that margin call Dr Oliver would have redeemed all of his investments and received $3,489,938.01 which he would have deposited into his cash account; alternatively, he might have redeemed some of the investments and paid the proceedings into his cash account and supplemented those proceeds with other cash to meet the requirements of the margin call; thereafter, Dr Oliver would have reinvested the funds held in his cash account and/or paid down the (presumably) fixed loan and would thereby have derived economic advantage. 74 The Bank first submits that some of the breaches relied upon by Dr Oliver post-date 28 November 2008. The breaches contained in paragraphs 72(l), (m) and (n) are complaints that when the Bank, in December 2008, sold Dr Oliver's investments it breached the agreement by failing to pay the proceeds into the cash account and instead using it to reduce the, by then, variable loan. 75 There is force in the Bank's contentions that there is no connexion between those breaches and Dr Oliver's case that, had the margin calls been issued, he would have met them. In that regard, the pleading is defective insofar as it alleges such a causal connexion. 76 Not all of the breaches alleged, however, post-date 28 November 2008. Paragraphs 72(e)-72(k) concern matters either arising before or on 28 November 2008. Dr Oliver submits that the matters in paragraph 79 may legitimately be seen as causally connected to those allegations. Paragraph 79 paints a counterfactual world whose endpoint ultimately lies in two places: first, the proposition that Dr Oliver would have averted the capital losses he actually suffered because he would have acted on the margin calls and sold his investments at an earlier time than the Bank did and therefore at a better price. At least on this limb of the case the amount which it is alleged would have been realised is not less than $3,489,936.01. This allegation is most clearly seen in paragraphs 79(b)-(c). Secondly, he would have continued thereafter to enjoy the benefits of holding and investing that or some similar sum. This is most clearly seen in paragraphs 79(g)-(h). This, one imagines, is to be compared and contrasted with the $193.93 left in the events which transpired in the actual world. 77 Paragraph 79 identifies two sources of funds for Dr Oliver's future (and hypothetical) investment activities. The first is the sale of the investments which he himself would have undertaken which is to be found in paragraph 79(c). The second which is expressed, inter alia, to be 'in addition' to those proceeds is some unidentified 'additional funds' which Dr Oliver says he would have deposited into his cash account for the purpose of further investments. Regardless of source, it is alleged that all of these monies would have found their way to Dr Oliver's cash account and thereafter into the form of investments (paragraph 79(f) and (g)). What is not alleged in paragraph 79 is what would have happened if the Bank had sold Dr Oliver's investments in a more timely fashion. However, the reason for that is that that part of Dr Oliver's case is not found in paragraph 72 or 79 but, instead, in paragraphs 77, 78 and 78A. Once that is appreciated it seems to me that there is no general difficulty of the kind identified by the Bank. 78 The Bank, however, has a number of more particular complaints. Paragraph 72(e), for example, is an allegation that the Bank breached the agreement on 20 April 2008 by increasing the limits of Dr Oliver's margin loan without making any inquiries as to his capacity to service the loan. The Bank submits that by itself it is difficult to see how that default can be seen as causally connected to the chain of events pleaded in paragraph 79(a)-(i). I think that this submission should be accepted. What is missing from the pleading is any allegation of what would have happened if the putative inquiries had been made. Unless it be alleged that, upon inquiry, an extension of the margin loan would not have occurred there is an insurmountable problem. Even if that can be alleged the issues rapidly become complex because, of course, even without the extensions Dr Oliver would have still held investments. On that view of affairs, the counterfactual needs to embrace - in order to give effect to paragraph 72(e) - the non-increase in the margin loan. In any event, however, there is no allegation that inquiries would have caused the increase not to occur. 79 The Bank submits that paragraph 72(f) suffers from a related problem. It alleges that the Bank breached the agreement by not paying the net proceeds of redemptions which occurred on 6 November 2008 into the cash account. How, the Bank asks, can that payment into the cash account have in any way prevented Dr Oliver from redeeming more of his investments in the period prior to 28 November 2008 - that being a critical part of the allegation contained in paragraph 79. I accept this submission. In reality Dr Oliver's case that he would have been able to redeem his investments earlier hinges on the making of margin calls not on what the Bank did, or did not do, with the proceeds of the redemption which occurred on 6 November 2008. A similar problem afflicts paragraph 72(h). It alleges that the Bank charged Dr Oliver a $277,588.27 break fee on the switching of the fixed rate loan to a variable loan. But it is not possible to see how that event, by itself, prevented Dr Oliver from early redemption. The same problem arises with paragraph 72(i) which alleges that the whole of the balance of the fixed loan was then transferred to a variable loan - this cannot have prevented Dr Oliver from early redemption. Paragraph 72(j) alleges that the Bank refunded to Dr Oliver a portion of the amount of the pre-paid interest. Once again, I cannot see how that prevented Dr Oliver from redeeming his investments. It is possible to imagine a case in which these matters are alleged to cause loss. For example, it could be alleged in paragraph 79 that the break fee would not have been incurred. The difficulty as a matter of pleading style is that all the matters in paragraph 72 have been rolled together with all of the matters in paragraph 79 which is not conducive to clarity. 80 In those circumstances, the appropriate course is to strike out paragraph 79 with leave to replead. There should be no judgment under s 31A.

VIII. The unconscionability issue 81 Dr Oliver and Dr Irving both invoke notions of unconscionability in their respective pleadings. Each relies upon an allegation that the Bank had engaged in conduct which was unconscionable within the meaning of the unwritten law. Dr Oliver alleges this in paragraph 83 where he sets out 18 individual matters said to have been unconscionable. These include all of the matters alleged to constitute breaches of the margin loan agreement together with a few additional matters. For example, it is alleged in paragraph 83(k) that it was unconscionable for the Bank to refund a proportion of Dr Oliver's prepaid interest. 82 This is hopeless and should be struck out. Equity's jurisdiction in this area focuses upon the relief of special disadvantages. It requires an unconscientious exploitation by one party of some special disadvantage suffered by another. The usual list of such special disadvantages was set out by Fullager J in Blomley v Ryan (1956) 99 CLR 362 at 405 and includes 'poverty or need of any kind, sickness, age, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary'. But this list is not closed for, as Mason J observed in Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 461 'it is impossible to describe definitively all the situations in which relief will be granted on the ground of unconscionable conduct'. One matter is, however, quite clear and this is that a disadvantage is not special merely because it reflects a difference in relative bargaining position: what is necessary is that the disabling circumstance 'is one which seriously affects the ability of the innocent party to make a judgment as to his own best interests, when the other party knows or ought to know of the existence of that condition or circumstance and of its effect on the innocent party' (Amadio at 462 per Mason J). 83 There is no express pleading of such a matter in paragraph 83 and that is sufficient to justify the striking out of the corresponding claim. In the written submissions filed on Dr Oliver's behalf it was submitted that it was 'plain from that context that the Applicants were at a special disadvantage'. The 'context' was said to be 'the pleaded facts and circumstances in their entirety'. That does not identify any special disadvantage at all. I see no reason to permit this to stand. If special disadvantage is to be pleaded - and it is difficult to see how it might be - it needs to be pleaded properly. 84 The equitable claim was mentioned under the auspices of s 12CA of the Australian Securities and Investments Commission Act 2001 (Cth) (the 'ASIC Act') which proscribes in certain circumstances conduct which is unconscionable within the meaning of the unwritten law. The reference to s 12CA at paragraph 83 will be struck out. Not without some hesitation, I will permit repleading. The same course will be taken in relation to the reference to s 51AA of the formerly entitled Trade Practices Act 1974 (Cth). 85 Paragraph 83 also puts forward all the same matters as being unconscionable 'in all the circumstances' and thereby invokes both s 12CB of the ASIC Act and s 51AB of the Trade Practices Act. The Bank submits that these claims cannot succeed because both of those provisions are limited in their operation to the supply of goods or services 'ordinarily acquired for personal, domestic or household use' (see s 12CB(5) of the ASIC Act and s 51AB(5) of the Trade Practices Act). 86 The documentation originally provided to Dr Oliver included a business loan declaration by which Dr Oliver declared that that loan was to be used predominantly for business or investment purposes. This declaration had the effect of potentially reducing Dr Oliver's protections under the former Consumer Credit Code (NSW). However, the evidence before me did not establish that Dr Oliver had signed the declaration. On the other hand, Dr Irving does appear to have done so. The signing of such a statement is not conclusive of the purpose of the loan: see ss 11(2) and 11(3) of the Consumer Credit Code. Dr Irving is not therefore legally bound by the declaration although cross-examination about how he came to sign it may readily be foreseen. In those circumstances, I do not think that the business loan declaration provides a basis for giving judgment against either Dr Oliver or Dr Irving. This is clear in the former's case but even in the latter's I do not see why the business loan declaration should prevent a trial on what the purpose of the loan was. 87 The Bank submitted that Leveraged Equities v Goodridge (2011) 191 FCR 71 at 121 [416] was authority for the proposition that borrowing money for the purposes of buying securities was not a household or domestic purpose. That is not how I read [416]. What Jacobson J said in that paragraph was that Mr Goodridge had signed a business loan declaration and this meant that the loan in that case was not for household or domestic purposes. 88 Whilst I have some sympathy with the idea that a margin loan facility is not for household or domestic purposes I was taken to no authority for that proposition beyond Goodridge which does not establish it. In those circumstances, this appears to me to be a triable issue. 89 Paragraph 83 puts forward the same matters on a third alternative basis, invoking both s 12CC of the ASIC Act and s 51AC of the Trade Practices Act. Of those, the Bank submitted that the authorities on statutory unconscionability (such as that pleaded in relation to ss 12CB and 12CC of the ASIC Act and ss 51AB and 51AC of the Trade Practices Act) required a high degree of moral turpitude citing, inter alia, Attorney-General of NSW v World Best Holdings Ltd (2005) 63 NSWLR 557 at 583 [121] per Spigelman CJ. It was submitted that none of the allegations contained in paragraph 83 of Dr Oliver's pleading contained any claim of what might be called unethical or immoral behaviour. 90 It is true that in paragraphs 83(a)-(r) the pleader has not alleged that each action was unethical or used some other vituperative adjective but Dr Oliver does allege that each of these matters was unconscionable. Whether at trial Dr Oliver succeeds in demonstrating that it was 'highly unethical' (or some other such standard) for the Bank, for example, not to give him notice of a margin call is a matter for debate. I do not think, however, that it is a debate apt to be resolved on an interlocutory basis. 91 The Bank also attacks paragraphs 83(s)-(w). Those paragraphs are as follows: By reason of the matters pleaded in (a) to (r) above, [the Bank]: (s) required [Dr Oliver] to comply with conditions that were not reasonably necessary for the protection of the legitimate interest of [the Bank]; and, or in the alternative (t) exerted undue influence or pressure on, or using unfair tactics against, [Dr Oliver]; and, or in the alternative (u) failed to disclose to [Dr Oliver]: (i) any intended conduct of [the Bank] that might affect the interests of [Dr Oliver]; and, or in the alternative (ii) any risks to [Dr Oliver] arising from [the Bank's] intended conduct, being such risks which [the Bank] should have foreseen would not be apparent to [Dr Oliver]; and, or in the alternative (v) failed to comply with the requirements of an applicable industry code with the meaning of section 51AC(3)(k) of the [Trade Practices Act] in that [the Bank] failed to comply with Part B, clause 2 of the Code of Banking Practice, in particular by not acting fairly and reasonably towards [Dr Oliver] as required by Part B, clause 2.2 of the Code of Banking Practice, and or in the alternative by failing to comply with Part D, clause 25 of the Code of Banking Practice, in particular by not exercising the care and skill of a diligent and prudent banker and not helping [Dr Oliver] overcome his financial difficulties with [Dr Oliver's] Margin Loan; and or in the alternative (w) failed to act in good faith within the meaning of section 51AC(3)(k) of the [Trade Practices Act]. 92 The Bank's principal point is short: one is left in the dark as to what any of the matters underlying these allegations are. This submission should be accepted. It is true that the pleading refers to 'the matters pleaded in (a) to (r) above' but those paragraphs do not identify any of the 'conditions' referred to in (s), the 'undue influence' referred to in (t) or the absence of fairness or reasonableness referred to in (w). More generally, it is difficult to see what the point of this pleading is unless it performs some kind of role as particulars to (a) to (r). In any event, in its present unparticularised form it cannot go forward and should be struck out. 93 The Bank also submitted that the fact that each of the sub-paragraphs was in the alternative led to 530 possible cases. Again, I believe the number is very much higher than that but there is, as I have said, nothing wrong with alternate pleading. 94 The Bank also submitted that, having regard to the seriousness of the allegation paragraph 83 was not sufficiently particularised. I do not accept that in relation to (a)-(r) but for reasons already given, I do accept it in relation to (s)-(w). 95 Dr Oliver and Dr Irving separately pursued a distinct unconscionability claim based around what was called the 'Storm Business Model'. This appeared in paragraphs 83A-83L of Dr Oliver's pleading. Those paragraphs made various allegations about the way that Storm did business. The critical allegations against the Bank are contained in paragraph 83B which is in these terms: 83B [The Bank] knew of and agreed with, or in the alternative acquiesced in, or in the further alternative did not dispute and, or in the further alternative, facilitated the implementation of, the Storm Business Model. Particulars The best particulars that can be provided currently are: (1) the paper entitled "Quantitative Research & Investment Strategy -STORM Risk Analysis" dated 23 March 2007 by Commonwealth Securities Limited; (2) the fact that [the Bank] had been lending money to Storm clients pursuant to CGI Margin Loans, including [Dr Oliver], to be invested in the Investment Funds from at or about June 2000; and (3) the fact that from 18 May 2007, [the Bank] set a base loan-to-security ratio of 80% and a margin call loan-to-security ratio of 90% to apply to the CGI Margin Loans of Storm clients, including [Dr Oliver], pursuant to the letter referred to in the particulars to paragraph 20(d) above. Further particulars will be able to be provided after discovery. 96 The Bank criticises the first four ways the Bank is said to have been involved - knowledge, agreement, acquiescence and non-disputation - and submits that these cannot constitute 'conduct'. That concept matters because the prohibitions in ss 12CB, 12CC, s 51AB and s 51AC are all directed at conduct. Reliance was placed by the Bank on Rhone-Poulenc Agrochimie S.A. v UIM Chemical Services Pty Ltd (1986) 12 FCR 477 at 489-490 per Bowen CJ but his Honour does not appear there to embrace any proposition which assists the Bank. Indeed, Bowen CJ plainly accepted that silence could be conduct for the purposes of the former s 52 of the Trade Practices Act in appropriate circumstances. As his Honour explicitly noted in that case 'conduct' was defined in the former Trade Practices Act in s 4(2) to include refraining from doing an act, a definition which is repeated in s 12BA(2)(c) of the ASIC Act. In any event, it is impossible to see how the Bank's alleged affirmative agreement to the Storm Business Model is not a form of conduct. 97 The Bank's final submission was that the words 'facilitated the implementation of' were not adequately particularised. This seems to me to be correct. It is no answer, as was put in Dr Oliver's behalf, that these are the best particulars which can presently be provided. 98 The appropriate result then is that the words 's 12CA' and 's 51AA' should be struck out of paragraph 83 together with subparagraphs (s)-(w). In paragraph 83B the words 'and, or in the further alternative, facilitated the implementation of' should be struck out. There should be leave to replead. 99 In Dr Irving's case a similar course is to be taken. The reference to ss 12CA and 51AA in paragraph 102 should be struck out together with subparagraphs (x)-(zb). The words 'and, or in the further alternative, facilitated the implementation of,' should be struck out of paragraph 104. There should be leave to replead.

IX. Orders 100 The parties are to bring in short minutes of order to give effect to these reasons. The matter will be listed for directions on 31 January 2012 to chart its future course and the short minutes should be provided at least seven days prior to that date. If there is contention about the orders it may be dealt with on that date. My present view is that each party has had a measure of success and there should be no order as to costs but if the parties wish to ventilate the issue that can also be dealt with at that time. I certify that the preceding one hundred (100) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram.