Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA

Citation : WESTPAC BANKING CORPORATION -v- PALANIAPPAN [2014] WASC 475

Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA

Citation : WESTPAC BANKING CORPORATION -v- PALANIAPPAN [No 2] [2015] WASC 227

Practice and procedure - Summary judgment - Demand under guarantee for shortfall on sale of secured land - Alleged breaches of duty in sale of secured land - Whether reasonably arguable claim for relief under Australian Consumer Law varying the guarantee or restraining enforcement - Equitable set-off - Whether suspension clause applied to an equitable set-off - Whether Master erred in granting summary judgment

Rules of the Supreme Court 1971 (WA), O 18 r 2, O 20 r 7

Supreme Court Act 1935 (WA), s 24(2)

Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99

Batiste v Lenin [2002] NSWCA 316; (2002) 11 BPR 20,403

Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2006] NSWCA 238; (2006) 67 NSWLR 9

Capital Finance Australia Ltd v Airstar Aviation Pty Ltd [2003] QSC 151; [2004] 1 Qd R 122

Coca-Cola Financial Corporation v Finsat International Ltd [1998] QB 43

Commonwealth Bank of Australia v MLD Financial Services & Management Pty Ltd [2015] NSWSC 1476

Connaught Restaurants Ltd v Indoor Leisure Ltd [1994] 1 WLR 501

Daewoo Australia Pty Ltd v Porter Crane Imports Pty Ltd [2000] QSC 50

Demagogue Pty Ltd v Ramensky [1992] FCA 557; (1992) 39 FCR 31

Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640

Elite Promotions & Management Pty Ltd v 5A Investments Pty Ltd [2011] NSWSC 590; (2011) 80 NSWLR 686

Fryer v Plucis [1967] WAR 161

GE Capital Australia v Davis [2002] NSWSC 1146; (2002) 180 FLR 250

Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689

Grant v New Zealand Motor Corporation [1988] NZCA 135; [1989] 1 NZLR 8

Hausman v Abigroup Contractors Pty Ltd [2009] VSCA 288; (2009) 29 VR 213

Hawes v Dean [2014] NSWCA 380

Hazcor Pty Ltd v Kirwanon Pty Ltd (1995) 12 WAR 62

HP Mercantile Pty Ltd v Dierickx [2013] NSWCA 479; (2013) 306 ALR 53

International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3; (2008) 234 CLR 151

J & S Holdings Pty Ltd v NRMA Insurance Ltd [1982] FCA 78; (1982) 61 FLR 108

James v Bank of Western Australia Ltd [2004] WASCA 234

James v Commonwealth Bank of Australia [1992] FCA 420; (1992) 37 FCR 445

Mottram Consultants Ltd v Bernard Sunley & Sons Ltd [1975] 2 Lloyd's Rep 197

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 89 ALJR 990

Murphy v Zamonex Pty Ltd (1993) 31 NSWLR 439

National Australia Bank Ltd v C & O Voukidis Pty Ltd [2015] NSWSC 185

National Westminster Bank Ltd v Halesowen Presswork & Assemblies Ltd [1972] AC 785

Norman; Re Forest Enterprises Ltd v FEA Plantation Ltd [2011] FCAFC 99; (2011) 195 FCR 97

O'Brien v Bank of Western Australia Ltd [2013] NSWCA 71; (2013) 16 BPR 31,705

Oswal v Commonwealth Bank of Australia [2013] WASCA 58

Primewest (Mandurah) Pty Ltd v Ryom Pty Ltd [2014] WASCA 28

Red Hill Iron Ltd v API Management Pty Ltd [2012] WASC 323

Sandbank Holdings Pty Ltd v Durkan [2010] WASCA 122

Seven Network News Ltd v News Ltd [2007] FCA 1062

St George Bank Ltd v Field [2007] NSWSC 902

Stewart v Latec Investments Ltd [1968] 1 NSWR 432

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

Ultimate Property Group Pty Ltd v Lord [2004] NSWSC 114; (2004) 60 NSWLR 646

Westpac Banking Corporation v Helicopters Brisbane Pty Ltd [2012] QSC 263

Westpac Banking Corporation v Murray Riverside Pty Ltd [2013] WASC 433

Westpac Banking Corporation v Palaniappan [2014] WASC 475

Westpac Banking Corporation v Palaniappan [No 2] [2015] WASC 227

1 MARTIN CJ: Leave to amend ground 1 of this appeal should be granted, but leave to appeal should be refused and the appeal dismissed for the reasons given by Corboy J, with which I agree.

2 BUSS JA: The respondent as plaintiff commenced proceedings against the appellant as defendant in the General Division of the Supreme Court. The respondent claimed amounts allegedly due and payable by the appellant pursuant to a written guarantee and indemnity (the Guarantee) executed by the appellant on or about 9 July 2008.

3 The Guarantee secured, relevantly, all amounts owing or payable from time to time by Murray Riverside Pty Ltd (Murray Riverside) to the respondent.

4 The respondent applied for summary judgment on its claim. Ultimately, by orders made on 7 August 2015, Master Sanderson entered partial judgment in the sum of $15,184,557.75. See Westpac Banking Corporation v Palaniappan [2014] WASC 475; Westpac Banking Corporation v Palaniappan [No 2] [2015] WASC 227.

5 The appellant has appealed to this court against the master's decision.

6 I agree with the orders proposed by Corboy J (with whose reasons Martin CJ has expressed his agreement), but I will state my own reasons for judgment.

7 The background facts, the reasons of the master and the submissions of the parties are set out in Corboy J's reasons. I will not repeat them except to the extent necessary to explain my reasons.

8 Murray Riverside was the registered proprietor of three pieces of land near Pinjarra, which it intended to develop (the Properties).

9 In July 2011, a division of the respondent, St George Bank, provided Murray Riverside with a loan facility in an amount exceeding $18 million. Murray Riverside's obligations in relation to the facility were secured by equitable charges, registered mortgages over the Properties and the Guarantee. The appellant was a director of Murray Riverside.

10 The respondent was the successor to St George Bank's rights and interests as mortgagee of the Properties and as the beneficiary of the Guarantee.

11 In February 2012, the respondent issued notices of demand to Murray Riverside consequent upon Murray Riverside's default under the loan facility.

12 On 28 February 2012, the respondent sent the appellant a notice of demand under the Guarantee for $20,161,864.08.

13 In July 2012, the respondent appointed receivers and managers over the Properties and other property of Murray Riverside. The receivers and managers entered into a contract to sell the Properties for about $13.1 million.

14 On or about 4 October 2013, Murray Riverside lodged caveat M422576C (the Caveat) against the titles to the Properties.

15 On 23 October 2013, the respondent commenced proceedings in the General Division of the Supreme Court for the removal of the Caveat.

16 In November 2013, at a hearing before Beech J in relation to the Caveat, Murray Riverside alleged that the sale of the Properties by the receivers and managers was in breach of their duty and at an undervalue, and that the sale would increase Murray Riverside's liability to the respondent under the loan facility.

17 On 4 December 2013, Beech J ordered that the Caveat be removed. His Honour found that there was no serious question to be tried as to the alleged breach by the receivers and managers of their duty in the exercise of the power of sale. See Westpac Banking Corporation v Murray Riverside Pty Ltd [2013] WASC 433 [47] - [61].

18 On 12 December 2013, the sale of the Properties was completed and amounts totalling $11,107,553.31 were paid to the respondent at settlement.

19 On 23 January 2014, the respondent sent the appellant a notice of demand under the Guarantee for $14,683,764.37.

20 By a writ of summons, indorsed with a statement of claim, filed on 4 March 2014, the respondent claimed the amount it alleged was owing under the Guarantee as at 28 February 2014, being $14,966,604.82.

21 On 28 March 2014, the appellant filed a defence. It comprised bare denials.

22 On 20 June 2014, the respondent filed its application for summary judgment, including an application for an extension of time to apply for summary judgment.

23 On 6 October 2014, the appellant filed an amended pleading, being an amended defence, counterclaim and set-off.

The appellant's amended defence, counterclaim and set-off

24 In his amended defence, the appellant alleged, relevantly, that:

(a) The receivers and managers, by their conduct, constituted themselves as the respondent's agent (par 12).

(b) By reason of that agency relationship, the respondent was responsible for any breaches of the duty of the receivers and managers to act in good faith in exercising their power of sale of the Properties (par 12A).

(c) The duty of the receivers and managers to act in good faith arose 'as a matter of equity' under the common law and s 420A of the Corporations Act 2001 (Cth) (par 12B).

(d) Any shortfall from the proceeds of sale of the Properties against the amount allegedly due and payable by the appellant to the respondent under the Guarantee 'is to be reduced by such amount which reflects the consequences of the ... breach [by the receivers and managers] of their duty of good faith' (par 13).

(e) In breach of their duty of good faith, the receivers and managers:

(i) marketed and sold the Properties in one line rather than marketing and selling and/or selling the Properties individually;

(ii) between August 2012 and February 2013, failed to market the Properties with a listing price;

(iii) failed to engage consultants to pursue and address various conditions imposed by the Western Australian Planning Commission in granting approvals for a new outline development plan for Murray Riverside's development of the Properties;

(iv) failed to proceed and obtain the stages 9 and 10b subdivision approvals, based on Murray Riverside's planning applications, which had been lodged with the Western Australian Planning Commission on or about 21 March 2012;

(v) failed to proceed and obtain the super lot subdivision approval, based on Murray Riverside's planning applications, which had been lodged with the Western Australian Planning Commission on or about 21 March 2012;

(vi) failed to obtain a market valuation report to determine the market value of the Properties in the event that the super lot subdivision was completed;

(vii) failed to object to the rezoning of nearby land applied for by the Alcoa Pinjarra Refinery in or about November 2013;

(viii) having accepted an offer from entities associated with Paul Letari to purchase the Properties for $15 million subject to a due diligence condition, the receivers and managers failed to advertise the Properties at or around that reduced asking price in order to obtain alternative or competing offers from other potential buyers; and

(ix) having received an offer from another interested party in or about August 2013, being Sky Land Development, the receivers and managers failed to investigate that offer (par 13A).

(f) The respondent instructed the receivers and managers to act or fail to act in the manner pleaded in par 13A (par 13B).

(g) The respondent's conduct, as pleaded in par 13B, was contrary to the advice and/or recommendations of the receivers and managers and/or consultants engaged by the receivers and managers (par 13C).

(h) The sales price accepted by the respondent for the Properties was below their market value or, alternatively, the best available price (par 13G).

(i) By reason of, relevantly, the respondent's conduct as described above, and 'as a matter of equity', the respondent:

(i) is not entitled to enforce the Guarantee against the appellant; or, alternatively

(ii) is only entitled to enforce the Guarantee to the extent of the shortfall after deduction of the amount that reflects the consequences of the breach by the receivers and managers of their duty of good faith (par 16A).

25 The appellant had pleaded in par 15 of his amended defence that the amount claimed by the respondent in its notices of demand under the Guarantee included amounts that were, in effect, penalties at law. However, the plea in par 15 was abandoned (appeal ts 9).

(a) The appellant repeated his amended defence and alleged that, to the extent that the appellant had any liability to the respondent under the Guarantee (which was denied), the respondent was unable to enforce the Guarantee against the appellant 'by reason of [the respondent's] conduct pleaded below' (par 19).

(b) The appellant repeated pars 12 and 13A of his amended defence and alleged that the instructions to the receivers and managers, as the respondent's agent, to act contrary to the receivers and managers' recommendations 'were acts of prejudice to [the appellant] as guarantor, by reason that the Sales Price was less than it ought to have been if those acts of prejudice had not occurred' (par 20).

(c) The appellant alleged that he had suffered loss and damage in that, by reason of those instructions, there was a shortfall in the amount received by the respondent upon sale of the Properties and the amount received was insufficient to discharge the indebtedness secured by the Guarantee (par 21).

(d) The appellant claimed the amount of his alleged loss and damage from the respondent (par 22).

27 Further, in his counterclaim the appellant alleged, relevantly, that:

(a) In the period commencing on or about 3 July 2012 the appellant was in a position of 'special disadvantage' as against the respondent by reason that:

(i) the respondent instructed the receivers and managers as to how they were to undertake their role as receivers and managers; and

(ii) following 3 July 2013, and as a consequence of the conduct pleaded in par 13 of the amended defence, the receivers and managers, to the respondent's knowledge, were acting solely in the respondent's interests and did not have regard to Murray Riverside's and the appellant's interests, which were to ensure that the market value or, alternatively, the best obtainable price was obtained for the Properties (par 23).

(b) The respondent acted unconscionably against the appellant by reason of the matters pleaded in pars 13, 13A, 13C, 13D and 13G of the amended defence (par 24).

(c) The appellant has suffered loss and damage by reason of that unconscionable conduct (par 25).

28 Further, in his counterclaim the appellant alleged, relevantly, that:

(a) The conduct of the respondent pleaded in par 21 was, in the circumstances referred to in par 20, conduct in trade or commerce, in relation to 'financial services' within s 12CA of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act), in connection with the supply or possible supply of 'financial services' within s 12CC of the ASIC Act (par 26).

(b) The respondent contravened s 12CA and/or s 12CC of the ASIC Act by its conduct pleaded in par 23 which was unconscionable in the circumstances referred to in par 20 (par 27).

(c) The appellant has suffered loss and damage by the respondent's conduct pleaded in par 27 (par 28).

(d) In the circumstances, the appellant is entitled to damages pursuant to s 12GF or s 12GM of the ASIC Act (par 29).

29 Further, in his counterclaim the appellant pleaded in pars 30, 31, 32 and 33 a cause of action for damages, to the same effect as the cause of action for damages pleaded in pars 26, 27, 28 and 29, in reliance on s 991A of the Corporations Act.

30 Further, in his counterclaim the appellant alleged, relevantly, that:

(a) The conduct of the respondent pleaded in par 23 was, in the circumstances referred to in par 20, conduct in trade or commerce (par 34).

(b) The respondent contravened sch 2 s 20 and/or s 21 and/or s 22 of the Competition and Consumer Act 2010 (Cth) (CCA) by its conduct pleaded in par 23 which was unconscionable in the circumstances referred to in par 20 (par 35).

(c) The appellant has suffered loss and damage by the respondent's conduct pleaded in par 35 (par 36).

(d) In the circumstances, '[the Guarantee] should be declared void ab initio and/or [the appellant] is entitled to damages pursuant to s 82 and sch 2 s 23(6) and sch 2 s 237 of the CCA' (par 37).

31 In his prayer for relief the appellant claimed, relevantly:

1. A declaration that the guarantee is unenforceable and that the notices of default purportedly issued pursuant to it are void and of no effect.
2. A declaration that [the respondent] engaged in unconscionable conduct under the common law and/or the Corporations Act, ASIC Act or CCA as pleaded above.

1. An order under the Corporations Act, ASIC Act or CCA and/or equitable relief that [the respondent] compensate [the appellant] [in] an amount equal to the diminution in value of the Properties by reason of [the respondent's] conduct in effecting a sale of the Properties at below their market value.

1. Further and alternatively, an inquiry and account of all monies paid and received by [the respondent] and the receivers and managers.

1. Damages.
2. Equitable damages and set-off.
3. An equitable set-off of any amounts due under the counterclaim against any amounts due on [the respondent's] claim against [the appellant].
4. Damages under s 12GF of the ASIC Act and/or s 991A of the Corporations Act and/or the CCA.
5. Such other relief as this Honourable Court thinks fit.

32 The master dealt with the appellant's allegations in relation to the receivers and managers having breached their duty of good faith and the respondent having engaged in unconscionable conduct, as follows:

The [appellant] maintains the receivers did not act in conformity with their duties in disposing of Murray Riverside's assets. This argument faces considerable difficulties given the fact Beech J found in the caveat proceedings there was no serious question to be tried. But for the moment it can be accepted the [appellant] has a case to put against the [respondent].

The second aspect of the [appellant's] claims might broadly be characterised under the rubric unconscionable conduct. The [appellant] says the [respondent] has acted in the provision of financial services in such a way the [appellant] has a right of action either under the Competition and Consumer Act 2010 (Cth), the Corporations Act 2001 (Cth) or the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act). For present purposes I need not detail with precision these claims. Suffice it to say it can be assumed the [appellant] does have such a right of action [14] - [15].

33 The master then referred to the appellant's amended defence, counterclaim and set-off and said that the alleged rights of action had been 'properly pleaded as [a] counterclaim and set-off' [16].

34 The master held, however, that, whether or not the counterclaim and set-off had any merit, cl 9 of the Guarantee was effective 'to postpone the rights of [the appellant] to agitate [the] alleged [counterclaim and] set-off' [17]. He saw 'no basis upon which any claim [the appellant] may have can stand in the way of [the respondent] obtaining judgment' [18]. There was no defence on the merits [20].

35 The master granted the respondent an extension of time and, as I have mentioned, entered partial judgment on its claim in the sum of $15,184,557.75.

You unconditionally and irrevocably guarantee payment to us of the guaranteed money. If the customer does not pay the guaranteed money on time and in accordance with any arrangement under which it is expressed to be owing, then you agree to pay the guaranteed money to us on demand from us (whether or not we have made demand on the customer).

37 The term 'guaranteed money' was defined in cl 28. It is sufficient, for present purposes, to note that the definition included the amounts for which the master entered partial judgment.

38 By cl 2.2, the guarantee in cl 2.1 was 'a continuing obligation' and extended to 'all of the guaranteed money'.

39 Clause 3.1 provided for the appellant to 'unconditionally and irrevocably indemnify us against' and to 'pay us on demand for, liability, loss or costs we suffer or incur' if, amongst other things, 'the customer does not, is not obliged to, or is unable to, pay us the guaranteed money in accordance with any arrangement under which it is expressed to be owing' or 'you are not obliged to pay us an amount under clause 2'.

40 By cl 3.2, the indemnity in cl 3.1 and the other indemnities in the Guarantee were 'continuing obligations, independent of your other obligations under [the Guarantee]'.

As long as any of the guaranteed money remains unpaid, you may not, without our consent:

(a) reduce your liability under this guarantee and indemnity by claiming that you or the customer or any other person has a right of set-off or counterclaim against us; or

(b) exercise any legal rights to claim to be entitled to the benefit of another guarantee, indemnity, mortgage, charge or other security given in connection with the guaranteed money or any other amount payable under this guarantee and indemnity ... ; or

(c) claim an amount from the customer, or another guarantor of the customer's obligations, under a right of indemnity; or

(d) claim an amount in the insolvency of the customer or another guarantor of the guaranteed money (including a person who has signed this guarantee and indemnity with you).

You must pay us the guaranteed money in full without set-off, counterclaim or deduction.

43 At the hearing of the appeal, counsel for the appellant sought leave to amend the respondent's ground of appeal to allege:

The learned Master erred in law and found by reasons [sic] of a contractual suspension of the right to bring a counterclaim or set-off the respondent was entitled to summary judgment. The learned Master ought to have found that the appellant had an arguable claim that the terms of clause 9 of the guarantee relied on by the respondent (the 'Guarantee') did not prevent the appellant from maintaining a defence that the conduct of the respondent in relation to the circumstances by which the assets of Murray Riverside Pty Ltd were undersold gave rise to statutory causes of action pursuant to the Competition and Consumer Act entitling the appellant to seek relief pursuant to section 87 of the Competition and Consumer Act including at a trial of the within proceedings for this Honourable Court to make orders:

1.1 varying the contract of guarantee including clause 9 and clause 3.1 relied upon by the respondent;

1.2 refusing to enforce all or any of the provisions of the guarantee including clause 9 and clause 3.1 relied upon by the respondent.

44 The particulars of the proposed amended ground of appeal state:

(a) A finding was made to the effect that the appellant had a case to be put to the respondent arising out of the conduct of the receivership and the sale of Murray Riverside Pty Ltd's assets (PJ [14], [15]).

(b) The case was pleaded by way of defence to the respondent's claim, as well as by way of counterclaim and set-off (Amended Defence [13], [13A] to [13G] and [16A]).

(c) The learned Master should have found that on a proper construction of the Guarantee the contractual suspension in clause 9 did not apply in circumstances where the respondent interfered and directed the receivers of Murray Riverside how to conduct the receivership to the appellant's prejudice.

(d) Further, the learned Master should have found the appellant had an arguable case to the effect that even if the contractual suspension did apply, if the respondent had engaged in the conduct alleged, it would be unconscionable for the respondent to rely on clause 9 of the Guarantee.

(e) Further, the learned Master should have found that on a proper construction of the Guarantee the contractual suspension in clause 9 did not apply in circumstances where the appellant had a statutory entitlement to such orders pursuant to section 87 of the Competition and Consumer Act 2010, (Cth).

45 At the hearing of the appeal, counsel for the appellant acknowledged that the references in the proposed amended ground of appeal to s 87 of the CCA should have been to s 237 read with s 243 of the Australian Consumer Law (appeal ts 5, 8, 10).

46 The respondent was not relevantly prejudiced by counsel for the appellant's late application for leave to amend. I would therefore grant the appellant leave to amend in terms of the proposed amended ground.

47 The respondent filed a notice of contention in which it alleged that the master's decision should be upheld on the following additional grounds:

(a) the respondent had a claim pursuant to the indemnities in cl 3.1 of the Guarantee and that claim was not impeached by the causes of action asserted by the appellant in his counterclaim; and

(b) cl 13.1 of the Guarantee, in addition to cl 9(a), prevented the appellant from raising his claims against the respondent either as claims giving rise to a defence of equitable set-off or as a counterclaim.

The merits of the proposed ground of appeal

48 The issues raised by the proposed ground of appeal are these:

(a) Did the appellant's plea as to the respondent's alleged conduct in relation to the sale by the receivers and managers of Murray Riverside's assets constitute a reasonably arguable defence under the Australian Consumer Law, including a reasonably arguable claim by the appellant for orders under s 237 read with s 243 of the Australian Consumer Law varying cl 9, cl 3.1 and cl 13.1 of the Guarantee or prohibiting the enforcement of those clauses?

(b) If so, was this defence able to be run despite cl 9 of the Guarantee?

49 The critical aspects of the appellant's pleaded case were, in summary, as follows:

(a) In par 13 of his amended defence, the appellant pleaded, in effect, an equitable set-off. The equitable set-off was based on the receivers and managers, by their conduct, having allegedly constituted themselves as the respondent's agent (par 12); the receivers and managers having allegedly breached their duty to act in good faith in exercising their power of sale of the Properties (par 13A); and the respondent having allegedly instructed the receivers and managers to act or fail to act in the manner pleaded in par 13A (par 13B) and in the circumstances pleaded in par 13C. The amount sought to be set-off was, in effect, the amount by which the appellant's liability to the respondent under the Guarantee had been increased by the receivers and managers' failure to sell the Properties for their market value or, alternatively, the best available price (the Set-Off Amount).

(b) In par 16A of his amended defence, the appellant pleaded, in effect, that, 'by reason of the conduct pleaded above and as a matter of equity', the respondent was not entitled to enforce the Guarantee or, alternatively, was only entitled to enforce the Guarantee after taking into account the Set-Off Amount.

(c) In pars 20, 21 and 22 of his counterclaim, the appellant pleaded, in effect, that the respondent acted to his prejudice, as alleged in pars 12 and 13A of the amended defence, and that consequently the appellant has suffered loss and damage, being the Set-Off Amount.

(d) In pars 23, 24 and 25 of his counterclaim, the appellant pleaded, in effect, that he was in a position of 'special disadvantage' as against the respondent, the respondent acted unconscionably against him by reason of the matters pleaded in the amended defence and that he has suffered loss and damage by reason of that unconscionable conduct, being the Set-Off Amount.

(e) In pars 26 - 36 of his counterclaim, the appellant pleaded, in effect, various causes of action against the respondent pursuant to the ASIC Act, further or alternatively the Corporations Act, further or alternatively the CCA. It was alleged, in effect, that the respondent engaged in unconscionable conduct by reason of the matters pleaded in pars 20 and 21 of the counterclaim and that the appellant has suffered loss and damage by reason of that unconscionable conduct, being the Set-Off Amount.

(f) In par 37 of his counterclaim, the appellant pleaded, in effect, that, '[i]n the circumstances', the Guarantee should be declared void ab initio pursuant to, in effect, s 237 read with s 243 of the Australian Consumer Law.

(g) In his prayer for relief, the appellant claimed, amongst other things, a declaration that the Guarantee is unenforceable, a declaration that the respondent engaged in unconscionable conduct and an equitable set-off of any amounts due under the counterclaim against any amounts due on the respondent's claim against the appellant.

50 An equitable set-off is available where the party claiming the set-off can establish a recognised equitable ground for being protected, to the relevant extent, from the other party's demand. The set-off must essentially be bound up with and go to the root of, challenge, call in question or impeach the title of the other party. The mere existence of a cross-claim or cross-demand is not sufficient to establish an equitable set-off. There must be a recognised ground for equitable intervention (beyond the mere existence of a cross-claim or cross-demand) so that the equity of the party claiming the set-off impeaches the title of the other party to the legal demand which it is seeking to enforce. See J & S Holdings Pty Ltd v NRMA Insurance Ltd [1982] FCA 78; (1982) 61 FLR 108, 127 (Blackburn, Deane & Ellicott JJ); James v Commonwealth Bank of Australia [1992] FCA 420; (1992) 37 FCR 445, 457 - 462 (Gummow J); Hazcor Pty Ltd v Kirwanon Pty Ltd (1995) 12 WAR 62, 67 - 68 (Kennedy J, Malcolm CJ & Murray J agreeing); HP Mercantile Pty Ltd v Dierickx [2013] NSWCA 479; (2013) 306 ALR 53 [136] (Emmett JA, Beazley P relevantly agreeing & Meagher JA agreeing); Hawes v Dean [2014] NSWCA 380 [59] - [65] (Barrett JA, Bathurst CJ & McColl JA agreeing).

51 A set-off, including an equitable set-off, may be pleaded as a defence on the basis of misleading or deceptive conduct in contravention of a statutory provision such as s 18(1) of the Australian Consumer Law. See Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2006] NSWCA 238; (2006) 67 NSWLR 9 [11] (Hodgson JA, Tobias JA agreeing), [97] - [104], [124] - [127] (Basten JA, Tobias JA agreeing); HP Mercantile [135] - [139]. Similarly, in my opinion, a set-off, including an equitable set-off, may be pleaded as a defence on the basis of unconscionable conduct in contravention of a statutory provision such as s 20(1) of the Australian Consumer Law.

52 Section 24(2) of the Supreme Court Act 1935 (WA) provides:

If any defendant claims to be entitled to any equitable estate or right or to relief upon any equitable ground against any deed, instrument, or contract, or against any right, title or claim asserted by any plaintiff or petitioner in such cause or matter, or alleges any ground of equitable defence to any claim of the plaintiff or petitioner in such cause or matter, the Court, and every judge thereof, shall give to every equitable estate, right, or ground of relief so claimed, and to every equitable defence so alleged, such and the same effect, by way of defence against the claim of such plaintiff or petitioner, as the Court in its equitable jurisdiction ought to have given if the same or the like matters had been relied on by way of defence in any suit or proceeding instituted by the Court for the same or the like purpose before the commencement of the Supreme Court Act 1880.

53 By O 20 r 17 of the Rules of the Supreme Court 1971 (WA) (RSC):

Where a claim by a defendant to a sum of money (whether of an ascertained amount or not) is relied on as a defence to the whole or part of a claim made by the plaintiff, it may be included in the defence and set-off against the plaintiff's claim, whether or not it is also added as a counterclaim.

54 Order 20 r 17 did not displace the established principles of equitable set-off. See Hazcor (69).

(1) Subject to rule 5(2), a defendant in any action who alleges that he has any claim or is entitled to any relief or remedy against a plaintiff in the action in respect of any matter (whenever and however arising) may, instead of bringing a separate action, make a counterclaim in respect of that matter; and where he does so he must add the counterclaim to his defence.

(2) Rule 1 shall apply in relation to a counterclaim as if the counterclaim were a separate action and as if the person making the counterclaim were the plaintiff and the person against whom it is made a defendant.

(3) A counterclaim may be proceeded with notwithstanding that judgment is given for the plaintiff in the action or that the action is stayed, discontinued or dismissed.

(4) Where a defendant establishes a counterclaim against the claim of the plaintiff and there is a balance in favour of one of the parties, the Court may give judgment for the balance, so, however, that this provision shall not be taken as affecting the Court's discretion with respect to costs.

56 By O 18 r 5(2), if it appears on the application of any party against whom a counterclaim is made that the subject matter of the counterclaim ought for any reason to be disposed of by a separate action, the court may order the counterclaim to be struck out or may order it to be tried separately or make such other order as may be expedient.

57 In Fryer v Plucis [1967] WAR 161, Hale J (Virtue & Nevile JJ agreeing) said in relation to O 19 r 3 of the Rules of the Supreme Court 1909 (WA), which was the precursor to O 18 r 2 of the RSC, that the rule had not obliterated the distinction between set-off and counterclaim: 'set-off always has been and remains a defence to the claim, either wholly or in part, but a counterclaim is truly a cross-action' (163 - 164).

58 The provisions of O 18 r 2 and O 20 r 17 of the RSC, to the extent they confer rights on a defendant, are permissory and not mandatory.

59 I will assume, for the purposes of this appeal (favourably to the appellant but without deciding), that the appellant has a reasonably arguable defence in respect of his pleas of unconscionable conduct based on the receivers and managers having allegedly, by their conduct, constituted themselves as the respondent's agent; the receivers and managers having allegedly breached their duty to act in good faith in exercising their power of sale of the Properties; and the respondent having allegedly instructed the receivers and managers to act or fail to act in the manner pleaded in par 13A and in the circumstances pleaded in par 13C of the amended defence. On the basis of that assumption, it is reasonably arguable that the respondent's title to demand the amount secured by the Guarantee was impeached, in the relevant sense, at least to the extent of the Set-Off Amount.

60 By cl 3.1 of the Guarantee, the appellant, amongst other things, 'unconditionally and irrevocably' indemnified the respondent against, and promised to pay to the respondent on demand for, any liability, loss or costs the respondent suffered or incurred if Murray Riverside did not, or was not obliged to, or was unable to, pay the guaranteed money to the respondent in accordance with any arrangement under which it was expressed to be owing or the appellant was not obliged to pay to the respondent an amount under cl 2.

61 By cl 13.1 of the Guarantee, the appellant must pay the respondent the guaranteed money 'in full without set-off, counterclaim or deduction'.

62 Clause 9 of the Guarantee reinforces cl 3.1 and cl 13.1. By cl 9(a), '[a]s long as any of the guaranteed money remains unpaid', the appellant may not, without the respondent's consent, 'reduce [the appellant's] liability under this guarantee and indemnity by claiming that [the appellant] or [Murray Riverside] or any other person has a right of set-off or counterclaim against [the respondent]'.

63 The construction of a written agreement involves ascertaining what a reasonable person would have understood the parties to the agreement to mean. The rights and liabilities of the parties under a provision of the agreement are to be determined objectively. Consideration should ordinarily be given not only to the language of the agreement, but also to the apparent purpose and object of any transaction created by or evidenced in the agreement. See Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 [40] (Gleeson CJ, Gummow, Hayne, Callinan & Heydon JJ); International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3; (2008) 234 CLR 151 [8] (Gleeson CJ), [53] (Gummow, Hayne, Heydon, Crennan & Kiefel JJ); Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 89 ALJR 990 [46] (French CJ, Nettle & Gordon JJ).

64 It is necessary, in determining the meaning of the provisions of a commercial contract, to ask what a reasonable businessperson would have understood those provisions to mean. That inquiry will require consideration of the language of the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract. See Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 [35] (French CJ, Hayne, Crennan & Kiefel JJ); Mount Bruce Mining [47].

65 The words of a clause in a written agreement are to be given the most appropriate meaning which they can legitimately bear. A court must have regard to all of the provisions of the agreement with a view to achieving harmony among them. See Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99, 109 - 110 (Gibbs J).

66 In The 'Fedora' [1986] 2 Lloyd's Law Rep 441, a bank held, as security for three loans, personal guarantees of the defendants. The bank sued the defendants as guarantors of the indebtedness of the principal debtors under the loan agreements. It was not in dispute that the amounts claimed were properly due from the defendants under their guarantees. However, the defendants contended that they had valid cross-claims for damages in respect of the loan agreements on the ground that the bank had negligently or unreasonably failed to carry out its duties as the holder of mortgages granted by the borrowers in respect of vessels owned by them and, consequently, had failed to realise a proper value for the vessels either on sale or pending sale and, in addition, in the case of one of the loan agreements had acted recklessly. The guarantees in question were not in identical terms but each of them included a provision to the following effect:

All payments by the Guarantor under this Guarantee shall be made without set-off or counterclaim and without deductions or withholdings whatsoever.

67 The primary judge, Evans J, held that the cross-claims asserted by the defendants were reasonably arguable and that they should proceed with them by way of counterclaim. However, by reason of the clause in the guarantee that I have reproduced, the cross-claims were not available by way of set-off. The Court of Appeal (Parker & Nourse LJJ & Sir Roger Ormrod) dismissed the defendants' appeal.

68 Parker LJ, who delivered the judgment of the Court of Appeal, rejected a submission by the defendants that the clauses in question should be treated in the same way as exclusion clauses. His Lordship said:

[T]here is no good reason for treating such clauses in the same way as exclusion clauses. The latter purport to exclude liability altogether. These clauses do not touch liability. The guarantors can still prosecute their claims to judgment. They are, if the clauses are effective, merely prevented from holding up payments admittedly due under the guarantees whilst disputed cross-claims are litigated. This being so the principle which lies behind the narrow construction given to exclusion clauses, that specific words or the use of all embracing words such as 'whatsoever' are necessary to enable a party to exclude liability for his own negligence has no application (444).

69 In Norman; Re Forest Enterprises Ltd v FEA Plantation Ltd [2011] FCAFC 99; (2011) 195 FCR 97, a Full Court of the Federal Court (Jacobson, Nicholas & Yates JJ) construed a covenant by a lessee to pay the rent 'without any deductions whatsoever' in accordance with the ordinary principles applicable to the construction of commercial contracts [197] - [198]. See also Sandbank Holdings Pty Ltd v Durkan [2010] WASCA 122 [35] - [36] (Murphy J, Pullin & Newnes JJA agreeing); Elite Promotions & Management Pty Ltd v 5A Investments Pty Ltd [2011] NSWSC 590; (2011) 80 NSWLR 686 [82] - [95] (Brereton J).

70 Two features of cl 9(a) of the Guarantee may be noted.

71 First, the words '[a]s long as', in the chapeau of cl 9, impose a temporal limitation on the period during which the appellant's 'right of set-off or counterclaim against [the respondent]' is suspended.

72 Secondly, the requirement in the chapeau of cl 9 that the guaranteed money 'remains unpaid' (and continues to be unpaid) conditions the circumstances in which the suspension of the appellant's 'right of set-off or counterclaim against [the respondent]' operates.

73 Subject to any statutory provision to the contrary, a right of set-off, including a right of equitable set-off, may be excluded by express or implied agreement. See National Westminster Bank Ltd v Halesowen Presswork & Assemblies Ltd [1972] AC 785, 803 - 805 (Viscount Dilhorne), 808 - 809 (Lord Simon of Glaisdale), 817 - 818 (Lord Cross of Chelsea), 821 - 824 (Lord Kilbrandon); Coca-Cola Financial Corporation v Finsat International Ltd [1998] QB 43, 51 - 53 (Neill LJ, Morritt & Hutchison LJJ agreeing); St George Bank Ltd v Field [2007] NSWSC 902 [17] (McDougall J); Hausman v Abigroup Contractors Pty Ltd [2009] VSCA 288; (2009) 29 VR 213 [17] - [30] (Weinberg & Bongiorno JJA & Williams AJA); Oswal v Commonwealth Bank of Australia [2013] WASCA 58 [45] (Pullin JA, Newnes JA agreeing).

74 A suspension provision of the kind embodied in cl 9 of the Guarantee does not oust the jurisdiction of the courts. It suspends, but does not otherwise impair, the rights of the party bound by the provision. That party is entitled to enforce the rights in question provided it conforms with its primary obligation to make payment to the other party. See GE Capital Australia v Davis [2002] NSWSC 1146; (2002) 180 FLR 250 [93] (Bryson J); Westpac Banking Corporation v Helicopters Brisbane Pty Ltd [2012] QSC 263 [24] (Martin J).

75 The apparent purpose or object of cl 9(a) of the Guarantee is to ensure immediate payment by the appellant to the respondent, if Murray Riverside does not pay, of the whole of the amount due and payable by Murray Riverside to the respondent, without any deduction on account of any set-off or counterclaim. In The 'Fedora', Parker LJ said 'the commercial purpose of the [guarantee] transaction [in question] is that, upon default by the borrower the bank should be paid quickly, and ... that all set-offs and counterclaims are excluded' (444). A little later, his Lordship observed:

We can see no relevant distinction between the guarantee in [Intraco Ltd v Notis Shipping Corporation [1981] 2 Lloyd's Rep 256] and the guarantees presently under consideration. The purpose of both was to ensure immediate payment if the principal debtor did not pay. Indeed the present cases make it the more necessary that the Court should not interfere, for here the parties have specifically provided both in the loan agreement and the guarantees that payment should be made free of any set-off or counterclaim. It would defeat the whole commercial purpose of the transaction, would be out of touch with business realities and would keep the bank waiting for a payment, which both the borrowers and the guarantors intended that it should have, whilst protracted proceedings on the alleged counterclaims were litigated (445).

76 Clause 9(a) of the Guarantee refers, relevantly, to the appellant claiming 'a right of set-off or counterclaim against [the respondent]'. It does not specifically refer to a right of equitable set-off. However, the ordinary and natural meaning of the expression 'a right of set-off', in the context of a contractual provision that suspends the making of a claim of 'a right of set-off' by a party to the contract, includes all forms of set-off. See The 'Fedora' (444); Norman [181] - [202]; Oswal [54]; O'Brien v Bank of Western Australia Ltd [2013] NSWCA 71; (2013) 16 BPR 31,705 [94] (Ward JA, Beazley P agreeing). In my opinion, the reference to 'set-off' in cl 9(a) includes an equitable set-off.

77 In O'Brien, the bank advanced money to a borrower under a facility agreement. The amount owing from time to time by the borrower to the bank was secured by securities provided by the borrower. The repayment of the borrower's indebtedness was also guaranteed by two guarantors, namely Mr O'Brien and Bakota Holdings Pty Ltd. The borrower did not repay when the bank made demand. The bank enforced the securities provided by the borrower and applied the proceeds of enforcement in partial repayment of the outstanding indebtedness. The bank then made demand on the guarantors for the balance. The guarantors did not comply with the demands. At first instance, the bank obtained summary judgment against the guarantors. The Court of Appeal of New South Wales (Beazley P, Macfarlan & Ward JJA) allowed the guarantors' appeal.

78 Each of the guarantees included a suspension clause which provided, relevantly:

As long as any of the guaranteed money remains unpaid, you may not, without our consent:

(a) reduce your liability under this guarantee and indemnity by claiming that you or the debtor or any other person has a right of set-off or counterclaim against us.

79 The guarantors argued that the bank had represented to the borrower and to them that the bank would maintain the loan facilities after the repayment date specified in the facility agreement. The guarantors also argued that the bank had agreed to advance additional money to enable the borrower to complete a property development it had undertaken. Consequently, so the guarantors argued, neither the borrower nor the guarantors had sought refinancing from another lender. According to the guarantors, the bank had known that the borrower and the guarantors had relied in that manner on the bank's alleged representations. The guarantors asserted that, in the circumstances, the bank had acted unconscionably in enforcing the securities provided by the borrower.

80 The guarantors submitted, on appeal, that summary judgment should not have been entered against them because the bank was not entitled to claim repayment of the loan facilities made available to the borrower and was therefore not entitled to make demand under the guarantees. No event of default that would have entitled the bank to make demand for repayment had occurred; alternatively, the bank was estopped from relying on any such event of default. By reason of the bank's conduct, the loan facilities were not due and payable. The guarantors claimed relief in equity and under the ASIC Act and the Trade Practices Act 1974 (Cth) (now repealed).

81 Macfarlan JA (Beazley P agreeing) held that the suspension clauses were not applicable because the guarantors' defences were not confined to asserting set-offs or counterclaims which did not impeach the indebtedness claimed by the bank. The guarantors asserted in their defences that at material times the indebtedness was not due and payable. Suspension clauses do not protect a creditor against such a defence. They are concerned with 'reliance by a guarantor on claims of its own to meet a creditor's claim for an undisputed debt' [14] (emphasis added).

82 Macfarlan JA also held that summary judgment should not have been entered because it was at least reasonably arguable that the suspension clauses did not apply in that they were expressed to operate only when the guaranteed money 'remains unpaid' and this meant, arguably, 'unpaid and due'. If so, the guarantors' defences that the indebtedness was not, for various reasons, payable at material times would, if established, indicate that the suspension clauses were inapplicable [15].

83 Ward JA (Beazley P agreeing) held that the suspension clauses did not operate if, as the guarantors contended, no indebtedness was due and payable at the relevant time. If no indebtedness was due and payable at the relevant time then the suspension clauses did not operate to preclude the guarantors raising a defence based on the indebtedness not being payable at the relevant time by reference to the matters pleaded in their defence [91].

84 In Capital Finance Australia Ltd v Airstar Aviation Pty Ltd [2003] QSC 151; [2004] 1 Qd R 122 [17] - [19] (Holmes J), Field [18] and Helicopters Brisbane [22] - [26] it was said that a suspension provision of the kind embodied in cl 9 of the Guarantee may not preclude the guarantor from defending the plaintiff's claim by impugning the validity of the guarantee or asserting the complete discharge of the guarantor's liability under the guarantee. See also Daewoo Australia Pty Ltd v Porter Crane Imports Pty Ltd [2000] QSC 50 [9] - [11] (White J); O'Brien [75] - [77].

The clause here is equally unambiguous. Its effect is to preclude the defendants here from setting off any claim for damages against their liability for the monies guaranteed. Those claims must be dealt with independently of this proceeding. However, there are matters raised in the counter-claim which are, as Ms Skennar submitted, more properly matters of defence: allegations of misrepresentation or misleading conduct, and breaches of conditions which may lead to vitiation of the guarantees or discharge of the guarantors' liability under them. The counter-claim should be struck out, because insofar as it constitutes a true counter-claim, the respondent defendants have contracted not to bring it, and the balance contains pleading not properly the subject of counter-claim. But the latter, going to invalidity or complete discharge of the guarantees, could properly be repleaded in the defence [17].

86 In my opinion, on the facts and in the circumstances of the present case, the appellant does not have a reasonably arguable claim by way of defence for orders under s 237 read with s 243 of the Australian Consumer Law varying cl 9, cl 3.1 and cl 13.1 of the Guarantee or prohibiting the enforcement of those clauses. On the facts and in the circumstances of the present case, it is not reasonably arguable by way of defence that the respondent's reliance on cl 9, cl 3.1 and cl 13.1 of the Guarantee should be restrained or the subject of other relief under s 237 read with s 243 of the Australian Consumer Law. My reasons are as follows.

87 First, even if (which I will assume without deciding) the appellant has a reasonably arguable defence (based on the matters pleaded in his amended defence) that the respondent engaged in unconscionable conduct in connection with the sale by the receivers and managers of the Properties, the appellant does not plead in his amended defence or otherwise assert that his execution of the Guarantee or his agreement to the inclusion of cl 9, cl 3.1 and cl 13.1 in the Guarantee was procured by unconscionable or other vitiating conduct on the part of the respondent.

88 Secondly, the appellant does not plead in his amended defence or otherwise assert facts or circumstances that support a reasonably arguable case that the respondent's reliance on cl 9, cl 3.1 and cl 13.1 of the Guarantee is unconscionable.

89 In particular, the appellant's case on unconscionable conduct, as pleaded in his amended defence, relates to the sale of the Properties; that is, to facts and circumstances which occurred after the execution of the Guarantee and before the respondent made any demands under the Guarantee or commenced enforcement action in relation to the Guarantee. Those facts and circumstances allegedly caused the appellant to suffer loss and damage.

90 However, it is not reasonably arguable, on the appellant's pleaded case or the affidavits before the master, that the respondent's reliance on cl 9, cl 3.1 and cl 13.1 of the Guarantee is unconscionable.

91 Thirdly, the appellant does not impugn the validity of cl 9, cl 3.1 or cl 13.1 of the Guarantee or the Guarantee generally.

92 Fourthly, the appellant does not assert that his liability under the Guarantee has been completely discharged.

93 Fifthly, the appellant does not allege that Murray Riverside was not indebted to the respondent or that the indebtedness the subject of the respondent's demands against Murray Riverside and the appellant was not due and payable.

94 Sixthly, the relevant matters pleaded by the appellant in his amended defence are, in substance, a claim for damages (primarily, for the Set-Off Amount). If that contested claim is reasonably arguable then it can be prosecuted, but, by cl 9 of the Guarantee, the appellant cannot defer payment of any of the indebtedness which is due and payable to the respondent under the Guarantee pending the litigation and determination of his claim. Clause 9 precludes the appellant from asserting any right of

set-off (including any right of equitable set-off) that might be available, and from exercising any procedural rights under O 18 r 2 or O 20 r 17 of the RSC, because the appellant's obligation to pay the indebtedness to the respondent in accordance with the Guarantee has not been satisfied.

95 Seventhly, none of the respondent's alleged unconscionable conduct relates or attaches to the suspension or deferral imposed by cl 9 of the Guarantee. If there is any merit in the relevant matters pleaded in the amended defence and the appellant obtains a judgment for damages or other monetary relief, the appellant can be properly compensated (for example, by an award of interest) for being kept out of his money. It was not suggested, and it could not reasonably have been suggested, that the respondent is not able to satisfy any judgment which the appellant might obtain on his claim.

96 As I have mentioned, the appellant should be granted leave to amend in terms of his proposed amended ground of appeal. However, the proposed amended ground is without merit. Accordingly, leave to appeal should be refused and the appeal dismissed. It is unnecessary to deal with the issues raised in the respondent's notice of contention.

97 The appellant is a director of Murray Riverside Pty Ltd. A predecessor in title to the respondent, St George Bank Ltd, granted overdraft and loan facilities to Murray Riverside. The facilities were secured by a fixed and floating charge, real property mortgages and a guarantee and indemnity given by the appellant (the Guarantee).

98 The respondent demanded payment of amounts owing under the facilities. The demand was not met and the respondent appointed receivers and managers (the Receivers) to Murray Riverside. The Receivers realised the company's assets but the proceeds of sale were insufficient to discharge the indebtedness of Murray Riverside. The respondent made a demand under the Guarantee for payment of the shortfall. That demand was not met and the respondent commenced proceedings to enforce the Guarantee.

99 Summary judgment was entered against the appellant for what the Master understood to be the whole of the amount claimed in the action.

However, the respondent subsequently applied to amend the summons for judgment and its statement of claim. The effect of the amendments was to clarify that the judgment was only a partial judgment, the respondent alleging that the appellant remained liable for the Receivers' fees and disbursements and for penalty interest. The Master allowed the respondent's application.

100 The appellant appeals from the Master's decision to grant summary judgment. The appellant's amended case pleaded four grounds of appeal. However, three grounds were abandoned and the appellant applied to amend the remaining ground (ground 1). That application was opposed and the question of whether leave to amend should be granted was reserved.

101 The appellant relied on ground 1, as pleaded, if leave to amend was refused. Accordingly, the parties were invited to make their submissions in the alternative to reflect the possible outcomes of the application for leave to amend.

102 I have concluded that leave to amend ground 1 should be allowed but that leave to appeal should be refused and the appeal dismissed for the following reasons (the appellant required leave to appeal as the amended judgment was not for the full amount claimed by the respondent).

103 Ground 1 of the appeal as pleaded in the appellant's case (which I will refer to as the 'pleaded ground') alleged that:

The learned Master erred in law in finding that by reason of a contractual suspension of the right to bring a counterclaim or set off, the respondent was entitled to summary judgment. The learned Master ought to have found that appellant had an arguable claim that the terms of clause 9 of the guarantee relied on by the respondent (the 'Guarantee') did not prevent the appellant from maintaining a defence that the amount by which the assets of Murray Riverside Pty Ltd were undersold should reduce his indebtedness under the Guarantee.

(a) A finding was made to the effect that the appellant had a case to be put to the respondent arising out of the conduct of the receivership and the sale of Murray Riverside Pty Ltd's assets (PJ [14], [15]).

(b) The case was pleaded by way of defence to the respondent's claim, as well as by way of counterclaim and set off (Amended Defence [13], [13A] to [13G] and [16A]).

(c) The learned Master should have found that on a proper construction of the Guarantee the contractual suspension in clause 9 did not apply in circumstances where the respondent interfered and directed the receivers of Murray Riverside how to conduct the receivership to the appellant's prejudice.

(d) Further, the learned Master should have found the appellant had an arguable case to the effect that even if the contractual suspension did apply, if the respondent had engaged in the conduct alleged, it would be unconscionable for the respondent to rely on clause 9 of the Guarantee.

(e) Further, the learned Master should have found that on a proper construction of the Guarantee the contractual suspension in clause 9 did not apply in circumstances where the appellant had a statutory entitlement to raise a counterclaim and set off.

105 The proposed amended ground (which I will refer to as the 'proposed ground') alleged that:

The learned Master erred in law and found by reasons of a contractual suspension of the right to bring a counterclaim or set off the respondent was entitled to summary judgment. The learned Master ought to have found that the appellant had an arguable claim that the terms of clause 9 of the guarantee relied on by the respondent (the 'Guarantee') did not prevent the appellant from maintaining a defence that the conduct of the respondent in relation to the circumstances by which the assets of Murray Riverside Pty Ltd were undersold gave rise to statutory causes of action pursuant to the Competition and Consumer Act entitling the appellant to seek relief pursuant to section 87 of the Competition and Consumer Act including at a trial of the within proceedings for this Honourable Court to make orders:

1.1 varying the contract of guarantee including clause 9 and clause 3.1 relied upon by the respondent;

1.2 refusing to enforce all or any of the provisions of the guarantee including clause 9 and clause 3.1 relied upon by the respondent.

106 The proposed ground incorporated the particulars to the pleaded ground, except that par (e) was amended to allege that 'the learned Master should have found that on a proper construction of the Guarantee the contractual suspension in clause 9 did not apply in circumstances where the appellant had a statutory entitlement to such orders pursuant to s 87 of the Competition and Consumer Act 2010 (Cth)'.

You unconditionally and irrevocably guarantee payment to us of the guaranteed money. If the customer does not pay the guaranteed money on time and in accordance with any arrangement under which it is expressed to be owing, then you agree to pay the guaranteed money to us on demand from (whether or not we have made demand on the customer).

108 Clause 2.2 provided that the guarantee was a continuing obligation and extended to all of the guaranteed money. The term 'guaranteed money' was comprehensively defined by cl 28 of the Guarantee. It was not in issue that the amount for which judgment had been entered was an amount that came within the definition of 'guaranteed money' for the purpose of cl 2.1 and cl 2.2.

109 Clause 3.1 required the appellant to indemnify the respondent for liability, loss or costs suffered if, among other things, Murray River did not, was not obliged to, or was unable to pay the guaranteed money in accordance with any arrangement under which it was expressed to be owing or if the appellant was not obliged to pay the respondent an amount under cl 2 of the Guarantee.

As long as any of the guaranteed money remains unpaid, you may not, without our consent:

(a) reduce your liability under this guarantee and indemnity by claiming that you or the customer or any other person has a right of set-off or counterclaim against us; or

(b) exercise any legal rights to claim to be entitled to the benefit of another guarantee, indemnity, mortgage, charge or other security given in connection with the guaranteed money or any other amount payable under this guarantee ...

(c) claim an amount from the customer, or another guarantor of the customer's obligations, under a right of indemnity; or

(d) claim an amount in the insolvency of the customer or another guarantor of the guaranteed money (including a person who has signed this guarantee and indemnity with you).

111 Clause 13.1 of the Guarantee provided that the appellant was required to pay the guaranteed money 'in full without set-off, counterclaim or deduction'. Clause 9(a) and cl 13.1 deal with the same subject matter and should be read together and as complementary to each other: and see GE Capital Australia v Davis [2002] NSWSC 1146; (2002) 180 FLR 250 [19].

112 The primary assets of Murray Riverside comprised land referred to as the 'Murray River Country Estate' (the Estate Land). The Estate Land was initially divided into three lots: lots 9010, 9510 and 9006. In March 2012, Murray Riverside applied to subdivide lot 9010 into a large number of lots. The Western Australian Planning Commission approved part of the proposed subdivision a few days after the appointment of the Receivers (appellant's affidavit, pars 20 - 25; GAB 1, 263 - 264).

113 The Receivers sold the Estate Land in December 2013 to Toscana (WA) Ravenswood Estate Pty Ltd and Ivo Nominees Pty Ltd (the Purchasers). The appellant alleged that the Purchasers were associated with Mr Paul Letari (appellant's affidavit, par 111; GAB 1, 277).

The appellant's defence, counterclaim and set-off

(a) The Receivers owed duties of good faith in equity, at common law and by s 420A of the Corporation Act 2001 (Cth) in selling the Estate Land (defence, par 12B).

(b) The Receivers had breached those duties (defence, par 13A). Further, they had acted as the respondent's agent in selling the Estate Land so that the respondent was responsible for the breaches of duty (defence, pars 12 and 12A).

(c) The respondent had provided the Receivers with instructions in relation to the sale of the Estate Land. The instructions were contrary to advice and recommendations given by the Receivers or by consultants that had been engaged to advise on the sale (defence, pars 13B - 13E).

(d) The Estate Land had been sold to the Purchasers at less than its market value or the best available price had the Receivers not breached their duty (defence, pars 13F and 13G).

(e) The amount, if any, owed by the appellant under the Guarantee should be reduced by an amount that reflected the consequences of the Receivers' breaches of duty (par 13). Further, by reason of the Receivers' breaches of duty and its conduct, the respondent 'as a matter of equity':

(i) was not entitled to enforce the Guarantee (defence, par 16A.1); or

(ii) was only entitled to enforce the Guarantee to the extent of the shortfall after deducting amounts that represented the consequences of the Receivers' breaches of duty (defence, par 16A.2).

115 The appellant pleaded a counterclaim in which he alleged that the respondent had acted unconscionably and engaged in unconscionable conduct contrary to the Australian Securities and Investments Commission Act 2001 (Cth), the Corporations Act and of the Australian Consumer Law by giving instructions to the Receivers, including instructions to accept the Purchaser's offer to purchase the Estate Land at an undervalue. The appellant further alleged that he had suffered loss or damage as a result of the respondent's conduct as there was a shortfall in the amount owing under the facilities granted to Murray Riverside following the sale of the Estate Land. He claimed equitable damages and set-off; an equitable set-off in any amount due under the counterclaim against any amount due on the respondent's claim against him and a declaration that the Guarantee was void and unenforceable pursuant to s 237 of the Australian Consumer Law.

116 It is relevant to note two aspects of the appellant's submissions to the Master. First, the appellant objected to parts of the evidence relied upon by the respondent to prove the amount claimed under the Guarantee (GAB 1, 4 - 6). The appellant also contended that the respondent's evidence was vague and did not substantiate the amount claimed. The Master ruled that the whole of the evidence relied on by the respondent was admissible and (by implication from the Master's reasons) that it proved the amount claimed as payable under the Guarantee. There was no appeal from those rulings and findings once grounds 2 - 4 were abandoned. Consequently, there was no issue in the appeal concerning the amount claimed by the respondent as owing under the Guarantee.

117 Second, the appellant submitted at the hearing of the respondent's application for summary judgment that the Guarantee would not be enforceable, or would not be enforceable to 'some extent', if he succeeded in his claims of unconscionability. Counsel for the appellant submitted:

Now, if that's correct, which it is - the court does have that power - and there is the possibility that this guarantee may be held to be unenforceable, all of these provisions - this is the first argument - all of these provisions saying, 'Well, you can't have a set-off and you can't bring a claim,' they can only get those provisions, or the benefit of those provisions, if the guarantee is enforceable.

If we are right, and it's not enforceable, then they've got no right to stop us bringing this claim, claiming a set-off. So, for that reason, for us to be able to properly enforce our rights under the statute, it can't be contended that this action can't proceed or we shouldn't be allowed to bring that case. Because nothing that's agreed in a guarantee can, of course, cut across the force of the statutory provisions. You know, those provisions about unconscionability and so forth, can't be contracted out of that (GAB 1, 36).

118 The Master observed that the allegation that the Receivers had breached their duties in selling the Estate Land faced 'considerable difficulties' in light of findings that had been made by Beech J in proceedings for the removal of caveats lodged against the Estate Land: Westpac Banking Corporation v Murray Riverside Pty Ltd [2013] WASC 433 (Beech J held that there was not a serious question to be tried on whether the Receivers had acted in bad faith or without reasonable care in disposing of the Estate Land). However, the Master assumed that 'for the moment it can be accepted the defendant has a case to put against the plaintiff' [14]. Similarly, the Master was willing to assume that the appellant had a right of action on the allegation that the respondent had engaged in unconscionable conduct [15].

119 However, the Master concluded that the appellant's claims were 'quite properly pleaded as counterclaim and set-off' and that they could not defeat the respondent's right to obtain a judgment having regard to cl 9 of the Guarantee. The Master accepted and applied the statement by Pullin JA in Oswal v Commonwealth Bank of Australia [2013] WASCA 58 that the expression 'without set-off' in a payment clause of a loan agreement:

excludes all form of set-off, no matter what jurisprudential basis might exist for the set-off. Thus it excludes statutory set-off and equitable set-off. It excludes all of the four kinds of equitable set-off that the authors of Meagher, Gummow and Lehane's Equity: Doctrines and Remedies (4th ed, 2002) have detected [54].

120 The appellant's primary submission on the proposed ground was that the Master had erred in characterising a claim for relief under s 237 of the Australian Consumer Law as a statutory set-off. The section, read with s 243, provided the court with a 'smorgasbord' of remedial orders: see Seven Network News Ltd v News Ltd [2007] FCA 1062 [3174] and Demagogue Pty Ltd v Ramensky [1992] FCA 557; (1992) 39 FCR 31 (47). The right to relief under s 237 did not constitute a statutory set-off but rather (citing Cooper J in Demagogue (47)):

[S]ection 87(2)(a) ... and 87(2)(ba) [of the Trade Practices Act 1974 (Cth)] ... take as their point of focus the denial of the benefit of a contract to a person whose proscribed conduct has caused loss or damage to the other party. Such an order has the consequential effect of releasing the innocent party from the obligations imposed by the contract. In the context of providing compensation it is the obligations imposed by such a contract which is the loss or damage which the order seeks to redress.

121 The reference in the appellant's submissions to the judgment of Sackville J in Seven Network News was to a finding made in that case that relief under s 87 of the Trade Practices Act 1974 (Cth) (TPA) should be granted to a cross-claimant by refusing to enforce a particular clause of an agreement (rather than declaring the agreement void) in circumstances where the cross-claimant would not have entered into an agreement containing the clause but for the misleading conduct of the other party.

122 It was submitted that cl 9 of the Guarantee could not operate so as to require the appellant to suffer loss and damage (by the Guarantee being enforced) before a claim seeking orders pursuant to s 237 to set aside the Guarantee had been determined.

123 The appellant contended on the pleaded ground that the Master had erred in construing cl 9 as:

(a) The clause referred only to the appellant reducing his liability by claiming a right of set-off or counterclaim and did not prevent the appellant from alleging matters as a defence to any claim to enforce the Guarantee. The appellant would be entitled to set-off in equity the amount by which the Estate Land had been sold at an undervalue if his allegations were established. An equitable set-off impeached the title of the creditor in the sense that it would be unconscionable for the creditor to enforce the guarantee: Norman v FEA Plantation Ltd [2011] FCAFC 99; (2011) 195 FCR 97.

(b) An equitable set-off was not dependent on obtaining a judgment in order for the set-off to extinguish or diminish a plaintiff's claim: Stewart v Latec Investments Ltd [1968] 1 NSWR 432.

(c) The Master ought to have found that cl 9 did not apply to the equitable set-off alleged by the appellant. The clause did not expressly refer to an equitable set-off: compare, for example, the clause considered by the Court of Appeal in Sandbank Holdings Pty Ltd v Durkan [2010] WASCA 122, which provided that a tenant was to pay rent 'without set-off (whether arising at law or in equity)'. It would have been a simple matter to draft cl 9 to include an equitable set-off had that been the parties' intention.

(d) There were several reasons why it was not appropriate on an application for summary judgment to simply adopt and apply the reasoning of Pullin JA in Oswal - the decision was not binding authority as it involved a different contract made between different parties; there was no discussion in the judgment of Pullin JA in Oswal as to why the words 'without set-off' embraced all forms of set-off; the decision in Coca-Cola Financial Corporation v Finsat International Ltd [1998] QB 43, on which Pullin JA relied, proceeded on materially different factual and legal assumptions; the reasoning in Oswal did not recognise the distinction between a case where a set-off impeaches the asserted liability and where the set-off is claimed against an admitted liability and McLure P had dissented on the proper construction of the relevant clause.

124 The focus of the pleaded ground was an allegation that the appellant was entitled to assert as a defence to the respondent's claim an equitable set-off for an amount represented by the difference between the sale price for the Estate Land and its market value or the best price available if the Receivers had not breached their duty. The issue to be determined on that ground was whether cl 9 applied so that any right that the appellant might possess against the respondent was suspended until he had paid the amount owing under the Guarantee (on the assumption made by the Master that it was arguable that the Receivers had breached their duties).

125 The proposed ground did not allege that the appellant was entitled to assert a money claim in answer to the respondent's claim. Rather, the ground alleged that the appellant was entitled to bring a statutory claim for relief to vary or set aside the Guarantee, including cl 3 and cl 9. That claim, so it was argued, was not caught by cl 9 as it did not operate as a set-off.

126 The appellant's counsel conceded that the proposed ground raised the question of whether the appellant could demonstrate that he had an arguable defence based on his allegations of unconscionability. As will be seen, I have not found it necessary to consider that question. The more acute issue, in my view, is whether the allegations made by the appellant could support a claim for relief to vary or set aside the Guarantee even if it is accepted that the matters alleged demonstrated an arguable case of unconscionability.

127 The operation of an equitable set-off as a 'true' or 'substantive' defence to a money demand is explained in Derham SR, Derham on the Law of Set-off (4th ed 2010) at 4.29 - 4.30:

However, a characteristic of the form of equitable set-off which arises in a case of closely connected cross-claims is that it operates as a true, or substantive, defence ... It may be set up by a person indebted to another, not merely as a means of preventing that other person from obtaining judgment, but as an immediate answer to his or her liability to pay the debt otherwise due ...

Notwithstanding various judicial statements which on their face may suggest the contrary, the view that the defence is substantive does not mean that it operates as an automatic extinguishment of cross-demands. The availability of an equitable set-off operates in equity to impeach the title to a demand. It affects the conscience of a creditor, so as to impugn the creditor's right to assert that any moneys are owing by the debtor to the extent of the debtor's cross-claim. At law the cross-demands remain in existence and retain their separate identities until extinguished by judgment or agreement. But as far as equity is concerned, it is unconscionable for the creditor, even before judgment, to assert that moneys are due to it from the debtor, or to proceed on the basis that the debtor has defaulted in payment, if and to the extent that circumstances exist which support an equitable set-off. In this sense, it operates in equity as a complete or partial defeasance of the plaintiff's claim.

128 The concept of impeachment has not been precisely defined but conventionally the defendant has been required to show a sufficiently close connection between the demands so that it would be unjust to allow the plaintiff to enforce its claim without taking into account the defendant's cross-claim: Derham on the Law of Set-off, 4.02 and 4.03 and also at 4.19 and following; Murphy v Zamonex Pty Ltd (1993) 31 NSWLR 439; Commonwealth Bank of Australia v MLD Financial Services & Management Pty Ltd [2015] NSWSC 1476; and see also the discussion of the impeachment test in Norman v FEA Plantation [135] and following.

129 There has been some attempt in English cases to expand the scope of the defence by redefining the basis on which an equitable set-off may be claimed: Derham on the Law of Set-off, 4.09. However, in Australia impeachment of title remains the accepted basis for equitable set-off: see, for example, Hazcor Pty Ltd v Kirwanon Pty Ltd (1995) 12 WAR 62.

130 There is no ground of public policy that prevents the parties to a contract agreeing to exclude or suspend a defence of equitable set-off: Derham on the Law of Set-off, 5.95; Coca-Cola Financial; GE Capital [95] and following; Oswal [55] (Pullin JA; Newnes JA agreeing). As Bryson J observed in GE Capital, a suspension clause does not oust the court's jurisdiction: 'there is no limit on the right to resort to the courts if the guarantor first meets the obligation the protection of which is the primary purpose of the guarantee and indemnity, and pays the amount of the debt' [98]. The principle was explained by O'Donovan J and Phillips J, Modern Contract of Guarantee (2015, looseleaf) at [11.550]:

The terms of the guarantee may not completely exclude the guarantor's right to raise any cross-claim or set-off available to the principal debtor. But the guarantee may prevent the guarantor from raising any cross-claim or set-off until after the creditor has been paid the guaranteed debt. In such a case the guarantor's cross-claim or set-off will not prevent the creditor from obtaining summary judgment in an action to enforce the guarantee. Hence, a clause excluding a guarantor's set-off or cross-claim does not oust the jurisdiction of the court to determine the set-off or cross-claim; it merely defines and limits the parties' legal rights within the permissible scope of contractual obligations.

131 Although this appeal raises questions concerning the proper construction of cl 9 and cl 13.1 of the Guarantee, it is not necessary to summarise the principles relevant to the construction of contracts (as the Chief Justice observed in Primewest (Mandurah) Pty Ltd v Ryom Pty Ltd [2014] WASCA 28 '[i]t is unnecessary to regurgitate well-established principles of contractual construction every time such an issue arises' [55]). It is only necessary to note that there have been some differences in approach to interpreting suspension clauses in English cases. In particular, Lord Diplock suggested in Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689 that there was a presumption that the parties to a contract did not intend to exclude the defences of set-off and abatement and that clear words were required to rebut the presumption. Against that, Lord Cross of Chelsea (with whom Lord Hodgson and Lord Wilberforce agreed) stated in Mottram Consultants Ltd v Bernard Sunley & Sons Ltd [1975] 2 Lloyd's Rep 197 that the question of whether a contract excludes or restricts the defences of set-off and abatement was to be determined solely upon a proper construction of the relevant provisions of the contract without any predisposition in favour or against the existence of, or a restriction on, the right of set-off (and see also the judgment of Lord Morris of Borth-y-Gest in Gilbert-Ash).

132 It has been suggested that, at least in English cases, there has been a tendency to refer to Lord Diplock's judgment as setting out the relevant principles: Derham on the Law of Set-off, 5.96. However, the approach identified by Lord Cross in Mottram Consultants more closely accords with the approach to be taken to the proper construction of contractual terms in this jurisdiction: see the related discussion of the meaning of the expression 'without deduction' in Norman v FEA Plantation and in the reasons of Murphy J (as his Honour then was) in Sandbank Holdings. The principles to be generally applied in construing a contract are summarised by Beech J in Red Hill Iron Ltd v API Management Pty Ltd [2012] WASC 323 [106] - [112].

133 A suspension clause in a form such as cl 9 of the Guarantee will not apply where the guarantor alleges a defence that denies the debt or the enforceability of the guarantee (rather than asserting a claim that it would be unconscionable for the creditor to enforce an otherwise valid guarantee). So, for example, a guarantor will not be required to 'pay now and litigate later' where it alleges that the creditor was estopped from asserting that the debt was payable or from making a demand for payment. Nor will a suspension clause apply where the creditor has allegedly engaged in misleading or deceptive conduct by making a demand for payment after representing that a loan facility would be extended and rolled over on the expiry date: O'Brien v Bank of Western Australia Ltd [2013] NSWCA 71.

134 Relevant to the appellant's proposed ground of appeal, a suspension clause will also not apply where the creditor's dealings with the guarantor might result in the guarantee being discharged or set aside for invalidity - for example, where the creditor has engaged in misleading or unconscionable conduct in connection with the giving of the guarantee. Further, statutory relief for misleading or unconscionable conduct may operate to void or vary a contract retrospectively.

135 Accordingly, there is a distinction between a defence that alleges that a guarantee should be set aside or varied and a defence that pleads an equitable set-off. The distinction is illustrated in the reasons of Holmes J (as her Honour then was) in Capital Finance Australia Ltd v Airstar Aviation Pty Ltd [2003] QSC 151; [2004] 1 Qd R 122.

136 The defendant guarantors alleged that the plaintiff had engaged in unconscionable and misleading conduct by breaching warranties allegedly given at the time the relevant loan and guarantee agreements were negotiated. They further alleged that the plaintiff had breached a duty owed as mortgagee in realising the secured property, as a result of which they had suffered loss and damage in the form of a shortfall on the debt claimed. The defendants sought a declaration that the guarantees be discharged and damages. The defence pleaded a set-off in relation to the damages claim. The guarantees given by the defendants included a suspension clause which provided that, 'Guarantor must not exercise any right of set-off, withholding, deduction or counterclaim which reduces or extinguishes the obligation of Customer or Guarantor to pay the Money'.

137 Holmes J referred to the observation of Bryson J in GE Capital that the guarantors in that case had 'unequivocally agreed to the effect that they will not make such claims as they now make in their cross-claim unless and until they have paid the whole of the guaranteed moneys'. Her Honour continued:

The clause here is equally unambiguous. Its effect is to preclude the defendants here from setting off any claim for damages against their liability for the moneys guaranteed. Those claims must be dealt with independently of this proceeding. However, there are matters raised in the counter-claim which are ... more properly matters of defence: allegations of misrepresentation or misleading conduct, and breaches of conditions which may lead to vitiation of the guarantees or discharge of the guarantor's liability under them. The counter-claim should be struck out, because insofar as it constitutes a true counter-claim, the respondent defendants have contracted not to bring it, and the balance contains pleading not properly the subject of counter-claim. But the latter, going to invalidity or complete discharge of the guarantees, could properly be repleaded in the defence [17].

138 Ward JA referred to that passage with apparent approval in O'Brien. Her Honour observed:

This tends to support the conclusion for which the Guarantors contend, in that they argue that the suspension/preservation clauses do not preclude the raising of an affirmative defence based on allegations of conduct that, if successful, may lead relief that would have the effect that no amount was payable by the borrower as at the relevant date [77].

139 With respect, that conclusion must be right as a matter of construction. A suspension clause in a form such as cl 9 of the Guarantee does not refer to a defence that denies the debt or the enforceability of the Guarantee, but only to a set-off or cross-claim. As Ward JA observed in O'Brien:

[W]hether or not the reference to set-off or counterclaim in the suspension clauses extends beyond monetary cross-demands to claims based on estoppel/misleading and deceptive or unconscionable conduct, the suspension clauses are predicated on an amount being (due and) unpaid and if there is an arguable defence that (by reason of circumstances before or after the date on which, under the facility agreement, the sum was to be due) there was no sum due and payable at the date demand was made of the borrower, then there is no right/liability upon which the suspension clause can operate [94].

140 A further example of the distinction between an affirmative defence and a defence based on a plea of set-off is to be found in the decision of McDougall J in St George Bank Ltd v Field [2007] NSWSC 902. The guarantee considered in that case included a clause that provided that:

Guaranteed Money must be paid in full without any deduction. The Guarantor waives all rights of set-off, combination or counterclaim in relation to payment of Guaranteed Money.

141 McDougall J considered that the clause prevented the defendant from raising in answer to the plaintiff's application for summary judgment allegations of misleading or deceptive conduct, breach of s 420A of the Corporations Act, breach of good faith and conduct that resulted in the bank failing to obtain the best price for assets held on security. His Honour stated:

There is an important distinction to be drawn between a defence that impeaches the guarantee itself, and a defence that impeaches the exercise of rights under the guarantee. Clauses of the kind to which I have referred may not prevent a defence being raised to liability under a guarantee where it is said (for example) that the taking of the guarantee was itself affected by some vitiating circumstance. But no such issue is raised in this case. There is no challenge to the validity of the guarantee. The allegations that I have summarised seek to attack the exercise of rights under it. In my view that is the kind of exercise prohibited by the terms of the guarantee which terms ... are to be enforced according to their wording [18].

142 It is to be noted that the appellant accepted this distinction in his written submissions (par 23.4).

143 The legal framework for the proposed ground of appeal is provided by a combination of the width of the remedial discretion conferred by s 237 and s 243 of the Australian Consumer Law and the distinction drawn above between a defence that denies the enforceability of a guarantee and a defence that asserts an equitable set-off. However, the question that remains is whether the allegations of unconscionable conduct made by the appellant establish an arguable case that he is entitled to have the Guarantee varied to strike down cl 3, cl 9 and cl 13.1 or to an order preventing the respondent from enforcing those clauses.

144 The appellant's counsel alleged that the respondent had engaged in unconscionable conduct by unfairly interfering in the sale of the Estate Land for the benefit of a prospective customer that it was 'actively pursuing'. The unfairness of the respondent's conduct had resulted in the Estate Land being sold at an undervalue. It was said that emails attached to an affidavit made by the appellant in opposition to the respondent's application for summary judgment indicated that there had been a connection between a low offer made for the Estate Land and the ultimate acceptance by the Receivers of that offer on instructions from the respondent (ts 15 - 16).

145 It was not in issue that the respondent provided finance to fund the purchase of the Estate Land from the Receivers. The emails to which the appellant's counsel referred also disclosed that the respondent had negotiated with entities associated with Mr Letari about providing finance for at least one other project (Franklin River Olive Company) and there were references to the possibility of finance for another proposal (Port Geographe). It can be reasonably inferred from the emails that the respondent was keen to foster a relationship with Mr Letari and his associated companies.

146 However, in my view none of the allegations made by appellant establish an arguable case, or a case that ought to be investigated, that he would be entitled to relief under s 237 and s 243 of the Australian Consumer Law to vary the terms of the Guarantee, including cl 3 and cl 9, or for an order restraining the respondent from enforcing the Guarantee or any of its provisions. The conduct alleged does not concern the making of the contract of guarantee. Rather, the respondent is alleged to have acted unconscionably in giving instructions to the Receivers in respect of the sale of the Estate Land for the purpose of benefitting itself and another party. As such, the allegation merely enlarges the claim that the Receivers acted in breach of their duties in disposing of the Estate Land with the result (on the appellant's case) that the land was sold at an undervalue.

147 In my view, the allegation of unconscionable conduct stands on no different footing to the allegations of breach of duty when considering the effect of cl 9 and cl 13.1 of the Guarantee. Each set of allegations concerns the exercise of rights under the securities given by Murray Riverside and both the respondent's unconscionable conduct and the Receivers' breach of duty are alleged to have resulted in the Estate Land being sold at an undervalue. As such, the allegations of unconscionable conduct and breach of duty constitute claims that merely offset or reduce the appellant's liability under the Guarantee. The allegations do not give rise to an affirmative defence. Clause 9 and cl 13.1 apply so that the appellant is required to pay the guaranteed money before he can pursue the claim that the respondent engaged in unconscionable conduct in relation to the sale of the Estate Land.

148 As I have indicated, the proposed ground of appeal is, in substance, merely a reformulation of the pleaded ground. In my view, it does not lead to a materially different analysis or result and I do not consider that the respondent would be unfairly confronted with a new case if the appellant was granted leave to amend his appeal notice. That is especially in light of the submissions made to the Master which included a claim that the appellant was entitled to relief under the Australian Consumer Law to avoid the Guarantee. Further, the proposed ground was adumbrated in the particulars to the pleaded ground and the appellant's written submissions on that ground. Accordingly, I would grant the appellant leave to amend the ground of appeal.

149 I have assumed that the appellant could bring a claim against the respondent for unconscionable conduct. In Ultimate Property Group Pty Ltd v Lord [2004] NSWSC 114; (2004) 60 NSWLR 646, Young CJ in Eq held that a breach of the equitable duty owed by a mortgagee in exercising a power of sale could be expressed in terms of unconscionability. A claim for unconscionable conduct under the Australian Consumer Law and similar statutes may be pleaded as an equitable set-off: see Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2006] NSWCA 238; (2006) 67 NSWLR 9.

150 It has not been necessary for me to consider whether the appellant has established that there is a question that ought to be tried on whether the respondent engaged in unconscionable conduct in realising its security (although I note that Young CJ considered that a claim for unconscionable conduct would not be established merely by showing that a mortgagee sold the secured property at an undervalue). I have assumed that a claim for unconscionable conduct by the appellant could impeach the respondent's title to a demand on the Guarantee, at least to the extent of the alleged undervalue in the sale price for the Estate Land. However, such a claim would not be for a 'statutory set-off' as that expression is ordinarily understood.

151 The appellant cited no decision in which the word 'set-off,' when used in a suspension clause, had been strictly construed to only refer to a legal set-off. Reference was made to the suspension clause considered in Sandbank Holdings, which expressly referred to legal and equitable set-offs, coupled with the submission that it would have been a simple matter for the parties to have done likewise in cl 9 of the Guarantee had that been their intention.

152 The only support that I could find for the distinction sought to be drawn by the appellant was in a comment made in Modern Contract of Guarantee:

Even if there is a specific provision in the guarantee purporting to exclude a right of set-off, a failure to distinguish between the different types of set-off (for example, legal as distinct from equitable) might lead to a restricted interpretation that excludes some set-offs but not others [11.550].

153 It may be significant that the comment appeared in a section that commenced with a reference to Gilbert-Ash. As has been noted, the reference in the judgment of Lord Diplock to a presumption about the parties' intentions and the need for clear words to displace that presumption do not accord with the approach taken to the construction of contracts in this jurisdiction. That approach is reflected in several decisions that have considered whether a term of a loan contract or a guarantee restricts the right of a defendant to plead and rely on an equitable set-off in proceedings to recover a debt or to enforce a guarantee: GE Capital; Capital Finance Australia v Airstar Aviation; St George Bank v Field; National Australia Bank Ltd v C & O Voukidis Pty Ltd [2015] NSWSC 185 (in which Davies J struck out parts of the guarantor's defence pleading a claim based on s 420A of the Corporations Act); Daewoo Australia Pty Ltd v Porter Crane Imports Pty Ltd [2000] QSC 50 (in which White J held that the defendant could not rely on a defence of set-off, including in respect of possible relief under s 87 TPA, where a dealership agreement contained a clause that provided that 'all payments ... will be made free of any set-off or counterclaim and without deduction or withholding') and see also, James v Bank of Western Australia Ltd [2004] WASCA 234 [16].

154 In GE Capital, Bryson J had no difficulty in construing the suspension and payment clauses which were substantially identical with the terms of cl 9 of the Guarantee as excluding a right of equitable set-off. His Honour stated:

The effect of the obligations in cl 8.1 is that the guarantors were contractually bound to pay the amount of money owing by the debtor when it was demanded. It was a contract to make an amount of money available when it was demanded. It was not an element of the obligation that it was subject to or limited by any process of ascertaining whether the debtor should be allowed any credits or set-offs, in respect of the security or of any other matter. Irrespective of the existence of security, and irrespective of the state of progress of any attempt at realising the security, it was and remains the obligation of the guarantors to provide to GE Capital the money amount of the debtor's obligation. The provisions relating to suspension of the guarantor's rights including cl 8.1 give effect to the amplitude of this obligation, and remove the possibility that the guarantors might in any way compete with GE Capital in attempts to recover from the debtors. Clause 8.1 does not bar the guarantors from making any claims or enforcing any rights against either GE Capital or the debtors; it suspends those rights so long as the guaranteed money remains unpaid, and the suspension can be ended at one if the guarantors meet their contractual obligation and pay the amount of the guaranteed money [93].

155 The Full Court of the Federal Court in Norman v FEA Plantation considered the effect of a clause that provided for payment of rent 'without any deductions whatsoever'. The court noted that the Court of Appeal of England and Wales and the New Zealand Court of Appeal have held that clear words are required to exclude a tenant's right of equitable set-off against rent and that the words 'without deduction' were not sufficiently clear to have that effect: see Grant v New Zealand Motor Corporation [1988] NZCA 135; [1989] 1 NZLR 8 and Connaught Restaurants Ltd v Indoor Leisure Ltd [1994] 1 WLR 501. However, the court also noted that the modern approach to the construction of commercial contracts was to interpret them in a way that was consistent with business common sense. The meaning of the words used by the parties is to be determined by what a reasonable person would understand by the language in which the agreement has been expressed and accordingly, the court concluded that:

When considered in light of these principles, it is difficult to see how the words 'without any deductions whatsoever' are consistent with an entitlement to maintain an equitable set-off. A commonsense businesslike approach to the construction of what reasonable people would understand by this expression is that the parties intended that FEAP could not make any deduction of any kind from rent, including a deduction by way of equitable set-off.

As Bryson J said in Batiste v Lenin [(2002) [2002] NSWSC 233; 10 BPR 19,441], when construing the phrase, which did not include the emphatic word 'whatsoever', it is difficult to see what else the parties to the lease would have achieved by the use of this phrase [199] - [200].

156 It should be noted, however, that on appeal in Batiste v Lenin, Sheller JA (with whom Giles and Santow JJA agreed) observed that he was not persuaded that Bryson J's view of the meaning of 'without deduction' was correct, although his Honour did not go on to decide the question: Batiste v Lenin [2002] NSWCA 316; (2002) 11 BPR 20,403. It should also be noted that the Full Court in Norman v FEA Plantation referred with apparent approval to the reasons of Murphy J in Sandbank Holdings in which his Honour identified a number of authorities to the effect that the expression 'clear of all deductions' and cognate phrases, such as 'without deductions', were to be given their literal and ordinary meaning and that they excluded any right of set-off recoupment.

157 The appellant sought to rely on the judgment of McLure P in Oswal to contend that there was an issue to be tried concerning the meaning and effect of cl 9. In Oswal, Garuda Aviation Pty Ltd and the respondent had entered into a loan agreement. Garuda's obligations under the agreement were guaranteed by the appellant. The respondent obtained summary judgment against the appellant pursuant to the Guarantee. The judgment sum included an amount for outstanding break costs (costs allegedly incurred by the respondent in terminating facilities granted to Garuda). On appeal, all members of the court agreed that it was reasonably arguable that part of the break costs were not payable by Garuda. However, Pullin JA (with whom Newnes JA agreed) held that the appellant's claim in respect of the break costs could only be brought as a counterclaim or set-off and that it was caught by a clause (cl 6.1(c)) in the loan agreement which provided that:

All payments to be made by the Borrower under this Agreement will be made without set-off or counterclaim and free and clear of any withholding or deduction for any Tax, unless prohibited by law. If the Borrower is required to make any deduction or withholding from any payment made to the Bank, the Borrower must [pay] such additional amounts as are required to ensure that the Bank receives a net amount which is equal to the amount the Borrower was obliged to pay.

158 As has been noted, Pullin JA held that the words 'without set-off' excluded all forms of set-off, no matter the jurisprudential basis for the set-off. However, that was not the point of difference between his Honour and McLure P. Rather, the President considered that it was reasonably arguable that any overpayment of break costs by Garuda would result in a direct reduction of its indebtedness to the respondent so that no issue of set-off arose [14] - [15]. That was because the amount claimed was a liquidated amount that had been paid by Garuda as principal debtor to the respondent which arguably ought to have been appropriated by the respondent to the guaranteed debt.

Moreover, I would need to be persuaded that cl 6.1(c), on its proper construction, is not confined to simply identifying the scope of the borrower's obligation in relation to the making of individual payments due under the Loan Agreement. That is, it is arguable that cl 6.1(c) says nothing about the way in which the borrower (or derivatively the guarantor) can defend legal proceedings for damages for breach of the Loan Agreement or alternatively a claim in debt, particularly after the Loan Agreement has been terminated (albeit prospectively) [16].

160 Accordingly, the terms of cl 6.1(c) were, on her Honour's reasoning, materially different from cl 9 of the Guarantee. Further, her Honour considered that the claim asserted by the appellant gave rise to a defence and not to a counterclaim or set-off [14].

161 In my view, the meaning and effect of cl 9 and cl 13.1 is clear. The clauses provide that the appellant is not entitled to assert a set-off in law or in equity until the respondent has been paid the 'guaranteed money'.