Plaintiff v Defendant

2 Accordingly, on or about 17 December 2015, Ruthven signed a deed of guarantee for 'all amounts owing' by the Company. The guarantee said:

The Maximum Amount which may be recovered under this guarantee, together with any amount recovered under the guarantee/s of PHILIP GEORGE WEBB and STUART JOHN ROGERS (which guarantee/s also support/s the Guaranteed Agreement) is limited to $400,000 plus under clause 6 of this guarantee, compounding interest on that amount from the date of our demand at the rate then payable under the Guarantee Agreement and our enforcement expenses.

3 Despite that reference to the liability being together with Webb and Rogers, that does not make it a joint guarantee; that is, it was not a single contract to which the three directors were co-promisors. This guarantee on which the Bank sues names only Ruthven as guarantor. Webb and Rogers each signed a separate guarantee in identical form. Thus, this was a situation of three people each giving a separate guarantee for the debts of the same principal debtor and up to the same limited amount. In short, the three of them were liable severally as guarantors.

4 In each guarantee there were clauses that preserved the Bank's rights against an individual guarantor even if it released another guarantor from his guarantee. Clause 11.1 stated where relevant -

11.1 Our rights and your liabilities under this guarantee are not affected by any act or failure to act by us or by anything else that might otherwise affect our rights or your liabilities under law relating to guarantees, including:

...

(c) the fact that we release, lose the benefit of or do not obtain any other guarantee or any mortgage, security interest or other security;

...

(e) the fact that we release any Person who guarantees the Borrower's obligations under a Guaranteed Agreement;

...

(g) the fact that any Person who was intended to guarantee (either in this guarantee or another guarantee) the Borrower's obligations under a Guaranteed Agreement does not do so or does not do so effectively; or

...

11.2 We are not obliged to take any other or further guarantee, mortgage, security interest or other security for the obligations of the Borrower under a Guaranteed Agreement.

5 Each guarantee also stated that 'Relevant provisions of the Code of Banking Practice apply to this guarantee'. [1] The Code requires such a statement to be made.[2] The Code is a voluntary code of conduct for adopting banks which 'sets standards of good banking practice for us to follow when dealing with persons who are, or who may become, our individual and small business customers and their guarantors.' The part of the Code that applies specifically to a guarantee is clause 31. It applies to -

... every guarantee and indemnity obtained from you (where you are an individual at the time the guarantee and indemnity is taken) for the purpose of securing any financial accommodation or facility provided by us to another individual or a small business ...

6 Other provisions of clause 31 state a number of things that a bank must do 'before we take a Guarantee from you'. That includes giving a prominent notice stating amongst other things that: the guarantor should seek independent legal and financial advice on the effect of the guarantee; the guarantor can refuse to enter into the guarantee; there are financial risks involved; and there is a right to request information about the facility to be guaranteed. The guarantor must also be told about any demands made upon the debtor, or if the bank has cancelled or dishonoured any of the debtor's facilities, or give other information concerning or relating to security contracts of the debtor. The Code also states that the guarantor can by written notice withdraw from the guarantee at any time before the credit is first provided.

7 There are other provisions of clause 31 which are not relevant for present purposes. What matters is that clause 31 of the Code is concerned with things that a bank must do before obtaining a guarantee. There are other provisions of the Code that deal with subsequent financial matters such as notification of variations to the charging of fees or the calculation of interest. Otherwise, the Code says nothing about ancillary or prospective legal matters such as the situation where there is more than one guarantor for the same debt; or the rights of contribution between co-guarantors; or the effect of releasing one of a number of guarantors for the same debt. I would think that is so because they are not matters of 'banking services', but matters for legal advice to be taken before a guarantor signs the guarantee. The relevant content of the law in that regard would not be a matter for voluntary codification by banks.

8 In this application for summary judgment against Ruthven as guarantor, the Bank alleges (and it is not disputed) that by 18 May 2017 the Company as principal debtor was in default under the loan. In October 2017, the Bank gave the Company written notice of the default, which was not remedied and made the total amount under the loan immediately due and payable. In turn, in December 2017, the Bank gave Ruthven written notice under the guarantee demanding payment of all moneys owing under the loan within 30 days. As at 8 May 2018, the guaranteed debt was $318,233.71 with interest accruing at the rate of 6.94 per cent per annum which is about $61 per day.

9 The Bank has not sued the other guarantors Rogers and Webb. It is not bound to because each guarantor is liable severally. In the ordinary case, the doctrine of contribution recognises that the common burden of suretyship is a co-ordinate liability to be borne equally so that no guarantor can be required, as between guarantor and the co-sureties, to pay more than his due share. Accordingly if one guarantor pays the principal debt he can claim contribution from the co-sureties.[3]

10 Ruthven does not dispute giving the guarantee. He does not dispute receiving the demand. He does not dispute that he has not complied with it. Under the guarantee he is plainly liable for the Company's debt. The issue on this application is not concerned with that liability or anything that occurred in the procuration or signing of the guarantee by him at all. One would not think a finance broker could plead ignorance or mistake or personal exploitation about an understanding of the legal nature and effect of a guarantee. Rather, the issue concerns rights of contribution between guarantors.

11 In circumstances I shall expose, Ruthven as sole director and secretary of the Company gave the Bank a signed request to release the other two guarantors because they ceased their directorship of the Company and wanted to end their shareholding and involvement with it, and the plan was to find someone else to step in as additional shareholder and director but until then, Ruthven was sole director and guarantor. Someone else was found, a Mr Russo, but he did not go ahead. The Company went into administration and then liquidation. Ruthven now apprehends that the express release of the Rogers and Webb will disentitle him from claiming an equitable right of equal contribution from them for the company's guaranteed debt. He has not claimed contribution in this proceeding. There is no evidence of what steps he has taken against them, if any, and what their attitude is to the 'disentitling' effect of the release on his right of contribution.

12 As I say, Ruthven is plainly liable under his guarantee regardless of any question of contribution. But, he resists summary judgment on the ground that it is unconscionable for the Bank to hold him to his signed request that the two others be released, if that means a loss of a right of contribution. He, a finance broker, says that contrary to an implied obligation of the Bank under the Code to him as guarantor, the Bank did not tell him to get legal and financial advice before signing that request for a release. He, a finance broker, does not say he did not understand or was disabled from understanding the release. He says he assumed ― not from anything said to him by the Bank or from anything he or anyone else stipulated to the Bank ― that the signed release would not be acted on until another investor and replacement guarantor was found so that he would not be left as sole guarantor. Ruthven does not say he is discharged from liability under his guarantee. He has not brought contribution proceedings. Nevertheless he says he is entitled to an equitable release on payment of one third of the guaranteed debt, or at least there is a question to be tried whether he is so entitled. This is all based on his case for an implied term in the Code and an assertion of unconscionability.

13 Lysaght[4] has determined that the test for summary judgment under s 63 of the Civil Procedure Act is whether the respondent has a 'real' as opposed to a fanciful prospect of success, and adherence to statutory text means oblivion to the 'old' summary judgement test of whether the defence was hopeless or bound to fail. But, faithful to the old test, Lysaght adds that the power to summarily terminate should not be exercised unless it is clear that there is no real question to be tried. To that I would add that s 64 of the Act recognises in its own way that even if there is no real prospect of success, the nature of the dispute is such that 'only a full hearing on the merits is appropriate'. That brings into thinking the conception of refusing summary judgment, in the interests of justice, if there is a case to be investigated.

14 I would grant this application. It is plain that Ruthven is liable to the Bank under the guarantee. Ruthven's defence radically altered from initially raising an estoppel by representation against the Bank to contending on this application that before the defendant signed the release of the other guarantors, there was an implied requirement under the Code that the Bank give him (a finance broker) a prominent notice that he should seek independent legal and financial advice on the effect of the release and the financial risks. That implication was said by counsel to be capable of being instilled into the Code according to the doctrine of implied terms in contract under the well-known tests in Codelfa.[5] That is, the implied term must be reasonable and equitable; it must be necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it; it must be so obvious that it goes without saying; it must be capable of clear expression; it must not contradict any express term of the contract.

15 In my view, that proposed defence is dubious to the point that it has no real prospects of success. Such an implication cannot be written into a voluntary banking Code because it cannot be said it was so obvious that it went without saying. Nor is there a basis for construing the Code that way. Although the predicament that Ruthven has obtained for himself may isolate him as liable to the Bank, his liability existed under the terms of his own guarantee regardless of the release. The Bank had nothing to gain from the release as sought. Any question of contribution is between Ruthven and the other guarantors. He is looking to hold the Bank responsible for not telling him to get legal advice on the possibility of the release impairing his right to claim contribution from the other guarantors. But that was something Ruthven wanted to do as part of the disconnection of Webb and Rogers from the Company. The release was not something put on him by the Bank, or done by the Bank to disadvantage him. I think there is nothing on the evidence to enable it to be concluded that the Bank has acted unconscionably. The evidence shows that the Bank was responding to moves initiated by the principal debtor, Ruthven and others in the company to reorganise the company's ownership and directorships. The Bank did not gain by the release of the other guarantors.

16 On close analysis, I see no injustice in the summary enforcement of the guarantee on its terms. Any collateral action for contribution is a matter for Ruthven, in which it can be determined whether the circumstances of him giving the release truly does disentitle him to contribution from Webb and Rogers. If not, I do not see on the facts how that disentitlement is something for which the Bank ought be held responsible or which it ought be made to remedy.

17 The facts are a little peculiar and require detailed exposure.

18 The guarantees were signed as security for the $400,000 facility to the Company offered by letter addressed to the directors dated 25 November 2015.[6] The offer stipulated the security this way -

Security

Security for all Facilities is as follows (unless otherwise specified):

General Security Interest by LINDON FINANCIAL GROUP PTY LTD ACN 604 820 911 comprising:

First ranking charge over All Present & After Acquired Property.

Guarantee limited to $400,000 by Glenn William James Ruthven

Guarantee limited to $400,000 by Philip George Webb.

Guarantee limited to $400,000 by Stuart John Rogers.

19 At the time that Ruthven, Webb and Rogers each signed their separate guarantees (December 2015), each of them was a director and had an economic interest in the company as shareholder. However, Rogers ceased to be a director on 30 June 2016 and ceased to be a shareholder on a date not seen in the materials. Webb ceased to be a director on 9 August 2016 and later ceased to be a shareholder on a date not seen in the materials. After their directorships ceased, Ruthven then signed a pre-printed document from the Bank type dated 23 August 2016 called a 'Customer Authority to Release Security Documents'. That document ('the Release Authority') refers to the loan account in the name of the company and says -

I/We hereby request you to release the following guarantor/s from their liability under the guarantee as indicated

Guarantor's name Guarantee dated

STUART JOHN ROGERS 17/12/2015

PHILIP GEORGE WEBB 17/12/2015

20 The Release Authority was signed by Ruthven for the company as sole director and sole company secretary. Above his signature are the words applying to him as signatory: 'I/we acknowledged and agree that my/our guarantee remains in full force and effect'. I do not think it really matters, but there is no handwritten date for his signature. The significance of the Release Authority is that, in form, it is a request by a guarantor to the creditor for it to release other guarantors. Ordinarily, a creditor would not accede to such a thing as it is a twofold reduction of its security. If a creditor was asked, or wished for itself, to release two guarantors one would expect replacement securities to be put in place so as to preserve its position before it was willing to give any release.

21 There is no evidence from the Bank explaining the circumstances in which the Release Authority came into existence. In evidence is a letter from the Bank to Ruthven dated 23 August 2016 (the same date shown on the Release Authority) stating that 'We are pleased to advise that your application to vary your Facility has been approved, subject to the terms set out in this letter.' The apparent purpose of that letter was to recite the variation and have the customer sign a declaration acceding to the variation. In this case, the loan was the 'Unchanged Existing Facility' quantified at $349,583. The only variation was to the details of the security, stated this way:

Security

This section sets out details of the Security as varied:

General Security Interest by LINDON FINANCIAL GROUP PTY LTD ACN 604 820 911 comprising:

First ranking charge over All Present & After Acquired Property.

Guarantee limited to $400,000 by Philip George Webb.

Guarantee limited to $400,000 by Glenn William James Ruthven.

Guarantee limited to $400,000 by Stuart John Rogers.

22 The declaration in that variation letter was signed by Ruthven on 6 September 2016 as sole director.

23 Attention has been drawn to the word 'release' rather than 'released' to question whether 'release' connotes a prospective event. I shall put that to one side for the moment, but say that apart from the letter, there is no additional evidence from the Bank to signify an actual release. The oddity of this letter of variation is that, faithful to the Release Authority, it acknowledges release of Rogers' guarantee yet to the contrary, it shows Webb's guarantee as 'existing'. The only affidavit on behalf of the Bank in this application is from a Bank manager Ryan Malloy. He was not involved in this account at the time but is responsible for recovery actions such as this one. He has sworn the supporting affidavit based on banking records. He says the reference in that letter to an 'existing' guarantee from Webb was an error. He says that the Bank sent to Ruthven another variation letter dated 15 September 2016 which, following the same form as the previous letter, stated the details of the security this way:

Security

This section sets out details of the Security as varied:

General Security Interest by LINDON FINANCIAL GROUP PTY LTD ACN 604 820 911 comprising:

First ranking charge over All Present & After Acquired Property.

Guarantee limited to $400,000 by Glenn William James Ruthven.

Guarantee limited to $400,000 by Stuart John Rogers.

Guarantee limited to $400,000 by Philip George Webb

Within that letter, the declaration of acceptance of those details was signed by Ruthven and dated 15 September 2016.

24 The next document put in evidence by the Bank is a letter to Ruthven dated 24 January 2017 in which the Bank offered the Company, as 'Facilities New or Varied', a Commonwealth Bank Corporate Charge Card for $25,000.[7] The letter confirmed the 'Unchanged Existing Facilities' as the Better Business Loan for $349,583. The importance of this letter is that for the new and existing facilities the securities were varied to include a new guarantor for all facilities, namely Joseph James Russo. He is described elsewhere in the defendant's materials as having previously provided financial backing to the Company. The security details in this letter showed:

Security

This section sets out details of the Security as varied:

Guarantee limited to $374,583 by Joseph James Russo

General Security Interest by LINDON FINANCIAL GROUP PTY LTD ACN 604 820 911 comprising:

First ranking charge over All Present & After Acquired Property.

Guarantee limited to $374,583 by Glenn William James Ruthven.

Guarantee limited to $400,000 by Stuart John Rogers.

Guarantee limited to $400,000 by Philip George Webb

25 This additional charge card facility did not proceed to a grant. Joseph Russo did not become a guarantor. There is no evidence from either party explaining what had happened.

26 The state of affairs is that Ruthven is the sole director. He is sued for $318,233.71 as at 8 May 2018. The terms of his guarantee obviously make him liable for the principal debt whether or not the Bank also sues Webb and Rogers, or, whether or not they have been released. But of course, in the ordinary case, a guarantor may seek equitable contribution from co-guarantors as they ordinarily are under co-ordinate liabilities to make good the one loss. What isolates Ruthven is that the Release Authority that he gave the Bank. As I see the Bank's case, it is saying: 'We are suing Ruthven because it was he who asked us to release the other two'.

27 The case that the Bank came to meet on this application was stated in a defence filed by Ruthven before the application for summary judgment was filed. The defence was prepared by solicitors who have since ceased acting for him. In that defence, he admits all the material facts concerning the giving of his guarantee and the default of the principal debtor. He also specifically acknowledges, without reference to the signed Release Authority, that the Bank released Roger's guarantee. But, there is no acknowledgment by him that Webb was also released. Ruthven alleged the following facts to allege an estoppel by representation against the Bank -

...

(e) In or about January 2017, the Plaintiff represented to the Defendant that it would only release the guarantee given to it by Webb on the basis that a replacement guarantee was provided to by Joseph James Russo ('Representation').

PARTICULARS

The said representation was in writing and is contained in a letter from the Plaintiff to LFG [i.e. the Company] dated 24 January 2017.

(f) In breach of the Representation, the Plaintiff released the guarantee given to it by Webb without ensuring that a replacement guarantee was put in place (given either by Joseph James Russo or any other person).

(g) As a result of the Plaintiff's conduct in releasing the guarantee given to it by Webb without first ensuring that a replacement guarantee was put in place, the quantum of its claim against the Defendant in this proceeding is twice as large as it would have been if there was a second guarantee in place.

(h) Alternatively, if the Plaintiff had not released the guarantee given to it by Webb, the Plaintiff would have a cause of action against Webb for an amount equal to one half of his liability to the Plaintiff under the December 2015 Guarantee.

(i) In the premises, the Plaintiff is estopped from relying upon the December 2015 Guarantee to its full force and effect.

28 The defence is all directed to the release of Webb. It does not touch or concern the release of Rogers and, as I read it, accepts there has been a release. It says the Bank released Webb 'without ensuring that a replacement guarantee was put in place' thus removing Webb as a source of contribution for 50% of the common debt which in effect made Ruthven solely liable for the guaranteed debt, seeing as Rogers had already been released. The defence does not seek a discharge of the guarantee. Rather, the estoppel is to prevent the Bank from relying upon the guarantee to its full extent. That is, having allegedly deprived him of a right of contribution from Webb, the estoppel defence required the Bank remedially to make good its representation and equitably release him from his obligations as guarantor to the extent of 50% of the guaranteed debt. Pausing there, that position has Ruthven accepting he is liable for 50% rather than 33%.

29 It does not call for decision, but it appears to me on the available documents that the pleaded case of an estoppel by representation was, on its face, unsustainable. An estoppel by representation requires at least a clear and unequivocal representation. The representation is said to be made in the 24 January letter. But, nothing in that letter contains a representation, express or implied, that the release of Webb's guarantee was conditional upon obtaining a guarantee from Russo or any other person. Secondly, the 24 January 2017 letter was after the Release Authority dated 23 August 2016. Thirdly, under clause 11.19(c) and (g) of the guarantee the Bank's rights are not affected by a release of any other guarantee or 'the fact that any Person who was intended to guarantee ... the Borrower's obligations ... does not do so...'

30 The opposition to this application for summary judgment, in effect, disowned the estoppel defence. Ruthven has engaged new solicitors. Despite the embarrassment, the interests of justice means a defendant is not bound by the defence as filed, and may seek to show a question to be tried according to a new or different defence according to affidavit evidence.

31 There were three affidavits filed belatedly in opposition to the application. The first was an affidavit by Ruthven. In substance he said the following.

32 In March 2016 Rogers was in dispute with the company. A settlement agreement was made in July 2016 by which Rogers was to be relieved of his liabilities as guarantor. Rogers ceased to be a director on 30 June 2016 and Mr Steve Heavey took over from him as Chief Executive Officer. Subsequently Webb also wanted to sever his ties with the company and to be released as a guarantor. He was willing to transfer his shares in the company to JESC Holdings Pty Ltd of which Joseph Russo was director. Russo was someone who had already provided financial backing for the company.

33 Ruthven says the person liaising with the Bank to effectuate these dissociations and changes was the company's Chief Financial Officer, Mr Scott Dutson. Ruthven's affidavit says (with my underlining):

The "Customer Authority to Release Security Document" ...was executed by me at Mr Dutson's request. Mr Dutson was responsible for obtaining signatures on documents required to rearrange the security for the Company's accounts with the Plaintiff. I told both Mr Heavey and Mr Dutson that I was not prepared to be the sole guarantor to the Company's banking facilities with the Plaintiff. I knew from my experience as a Finance Broker that in order to release a guarantor, the Plaintiff would need to review the security position for the Company's banking facilities and provide a number of documents for execution. I assumed that the release authority would be held by Mr Dutson until all of the documents necessary to put the new guarantee arrangements in place had been executed. I did not meet or talk with any of the plaintiff's employees in relation to the release authority or in relation to the company's banking facilities other than one meeting in March 2015 just after the company's bank accounts had been established. I did not obtain any legal advice about signing the release authority.

34 Thus, I understand Mr Ruthven's position to be that: contrary to his own assumption under which he signed the Release Authority ― an assumption not engendered by anything said or done by the Bank but arising within the internal affairs of the company ― Russo never executed a new guarantee in place of Webb, and contrary to his wishes he has been left as the sole guarantor of the company's liability on the loan. Yet, the Release Authority was executed at the request of his colleague Dutson who was looking to arrange the disconnection of Rogers and Webb from the company as a matter of internal reorganisation.

35 In a second affidavit sworn on 14 June 2018, Ruthven states that neither Dutson nor the Bank ever told him that: he should seek independent legal advice or financial advice about the effect of the Release Authority; he could refuse to sign it; there were financial risks involved in him signing it; the Bank was not obliged to put new guarantees into place; and by signing the authority he as sole director would also become the sole guarantor. Ruthven states that he did not obtain any 'financial advice' on the effect of the release because:

... I had already told both Mr Heavey and Mr Dutson that I was not prepared to be the sole guarantor of the Company which at that stage was already indebted to the plaintiff and on the basis of that conversation with Messrs Heavey and Dutson, I assumed that the release authority would be held until Mr Russo formally replaced Mr Webb.[8]

36 All this is internal to the Company. But there are e-mails to and from the Bank put in evidence by Dutson which throw some light on the subject.

37 In an e-mail from the Bank to Dutson on 26 October 2016 (that is, after the Bank sent the second letter of variation showing Webb's guarantee as 'release') it appears as though the Bank was already processing the company's application for the $25,000 charge card facility.[9] The e-mail said:

I have followed up the Credit Card facility and it appears as though we have been awaiting the update of the Company Search to remove Philip Webb. It appears as though Craig had put both the documented release of Philip Webb, Stuart Rogers and the new Credit Card in the same application.

I have just done a VEDA search to confirm Philip [Webb] is still listed as a shareholder. Once this has been updated we can proceed with sending through the docs.

38 That suggests that the processing of the company's credit card facility was awaiting Webb's transfer of shares in the Company. In an email dated 21 December 2016 from Dutson to the Bank, he said:[10]

Please note the change in shareholding was effected last week.

Would you please confirm and forward facility details as soon as possible.

I would like to get these signed by the end of the week.

39 An e-mail from the Bank to Dutson on 30 December 2016 then said[11] -

Based on the change of ownership, updated Company Search (attached) confirms shareholders are Glenn Ruthven & JESC Holdings Pty Ltd both of which own 50% each.

New Shareholder, JESC Holdings Pty Ltd, Sole Director/Shareholder and Beneficial Owner is Joseph Russo.

This entity has not yet been identified and as such, we require the attached AML/KYC Form to be completed.

The reason for this form is to identify the respective shareholders and beneficial owners.

Documents cannot be issued until this form is returned.

Given that Joseph is 50% shareholder of Lindon Financial Group, we would also be seeking his guarantee as part of the existing Business Loan and New corporate charge card facility. I assume this will be okay?

We will make sure that document(s) are ready to be sent once we receive the AML/KYC Form back.[12]

40 This culminated in the sending of the letter of offer dated 24 January 2017 in which the Bank approved the charge card and added Russo as guarantor for the new and the existing loan facility, an offer which did not proceed.

41 Thus, the evidence shows that Dutson as Chief Financial Officer was looking to rearrange the company's financial affairs to add a corporate charge card facility to the pre-existing bank loan. The idea was for Russo's company to become a shareholder in the company; for the charge card facility to be sought for working capital; and for Russo to become co-guarantor with Ruthven. According to the last of the correspondence from the Bank, it appears Rogers was truly 'out of the picture'. But, it appears, Webb could not be actually released until the Bank was satisfied he was no longer a shareholder and until there was a change of share ownership so as to make Russo's company an equal shareholder with Ruthven. For reasons not explained by either party, the additional charge card facilities was never granted, and Russo never became a guarantor. It is not clear whether Webb has actually been released by the Bank. Ruthven swears 'On a number of occasions in the months after the Company went into liquidation I spoke to Mr Webb about the guarantees to the Plaintiff and he told me that he was concerned that he had not been released from his guarantee to the Plaintiff.'[13] If Webb has not been released, then it appears he is amenable to contribution.

42 Ruthven now contends that 'the conduct of CBA in requiring the Release Authority to be executed by Ruthven is in all the circumstances, unconscionable'.[14] To say something is unconscionable is a conclusion. The new case put by counsel is now squarely predicated on the Code of Banking Practice and goes along the following lines -

(a) Ruthven believed or assumed that upon a replacement guarantee being provided by Russo, the release of the guarantees by Rogers and Webb would be effective;

(b) before signing the Release Authority, Ruthven had an equitable right of contribution from Rogers and Webb as the three of them had liabilities of the same nature, and to the same extent, and for the same principal debtor, and in equity the common obligation or co-ordinate liability should be shared equally, that is one third each;

(c) equitable relief for contribution may be withheld if there is disentitling conduct by a guarantor;

(d) it was 'strongly arguable' that in requesting the Bank to release Rogers and Webb under the Release Authority and agreeing to remain solely liable as guarantor, Ruthven has acted in a way to disentitle him from seeking contribution from Rogers and Webb;

(e) it is to be implied under the Code that where the Bank was requiring Ruthven to execute a document that would injuriously affect him by, in effect, taking away his rights to contribution, he ought to have been given a prominent written warning by the Bank on the Release Authority (in the same way as a guarantee) to obtain legal or financial advice as the financial burden of the situation called for the same conduct as if the burdens of a sole guarantee was being procured.

(f) the Bank's failure to properly warn him about the consequences of signing the Release Authority entitles him to seek the relief and remedy of an equitable release from his guarantee on payment of one third of the guaranteed debt.

43 Rogers, Webb and Ruthven each signed a separate guarantee. Let it be assumed that this was not a situation of joint liability but of several liability. When it comes to contribution by co-sureties, there is a distinction between joint and several liability.[15] In a situation of joint sureties, at common law the matter is governed by a rule in the law of contract that in a joint contract, release of one promisor discharges the others. The reason for that rule was one of legal logic: the joint promise was regarded as single, so that if it was discharged for one it was discharged for all.[16] But where there are guarantors for the same debt under different instruments, any claim by a guarantor in a situation where other guarantors have been released by the creditor requires the claiming guarantor to fall back on his equitable right of contribution. The burden is upon that claiming guarantor to show that the creditor has so dealt with the other guarantors as to affect his right of contribution against them. But even then, he is discharged only pro tanto and not wholly. But, equitable relief may be refused if there is 'disentitling conduct' by the claimant for contribution. That is, although equity is equality, equity may deny a right of contribution where it would be inequitable for a guarantor surety to claim contribution from co-guarantors. Under the terms of his guarantee, Ruthven was liable to the Bank even if the Bank released another guarantor or even if another guarantor who was supposed to come forward did not.

44 The overarching submission for Ruthven was that the Bank was under an obligation, even though the Code does not say so, to have given him as guarantor a prominent notice (as is given when a guarantee is obtained) telling him to seek independent legal and financial advice because of the financial risks involved in releasing the co-guarantors. The risk was that in signing such a release it was 'strongly arguable' that it disentitled him to contribution. It was submitted that although the Code does not require a warning to be given in these circumstances, by parity of reasoning, if the Code had provisions dealing with notice requirements for variation of the guarantee for matters such as the changing of fees or charges or the calculation of interest, then such an obligation ought be implied where the Release Authority was given to Ruthven to sign. As I have said in the introduction, the implication was said by counsel to be capable of being instilled according to the doctrine of implied terms in contract, which is capable of being reduced to its foundation by asking if was so obvious that it went without saying. Or put another way, if someone at the time of the contract pointed to its absence and asked for its insertion, the other party would concede 'Of course'.

46 First, I cannot see how it goes without saying that the Code, which explicitly concerns itself with the obtaining of a guarantee at its origination is also taken to concern itself mutatis mutandis with the release of a guarantee in a situation of several guarantors. The submission is looking to have the Court not construe the Code, but to in effect write in provisions on a distinct subject matter that is patently not within its existing clauses. That is not to suggest there is a 'gap' in the Code to be filled by implication. Rather, it is to suppose that those preparing the Code did not see it fit to include the subject of releases of a guarantee, preferring instead to leave it to the terms of the guarantee or by operation of law. By its very nature, the question of releases brings with it rules at law and equity which are not to be codified but left to their normal operation depending on the circumstances of any particular case.

47 Secondly, it is plain legally that Ruthven is liable under the guarantee. He does not say he is not. He is looking to reduce his liability to the Bank by holding the Bank responsible for his apprehended loss of a right to contribution from two guarantors. Yet, on the documented facts concerning the offer for the charge card facility, Ruthven proceeded on the overt basis that he and Russo would be 50 per cent liable consonant with Ruthven and Russo being equal shareholders. The lead up to that offer shows the Bank was awaiting confirmation that Webb's shareholding had been transferred to Russo. Thus, Rogers is out of the picture and as Russo did not become guarantor, it is a matter for Ruthven to claim contribution against Webb who, according to the Ruthven has told him that he does not believe he has been released. Whether or not he has been released is a question in any contribution proceeding between Ruthven and Webb. But on his own evidence Ruthven was to be was to be 50% liable with Russo.

48 Fourthly, I see no basis for an unarticulated case of unconscionability in equity or in the statutory equivalents. On the facts that are before me, I simply cannot conclude that there is any sign of what I will call exploitative conduct or unfair practice. Nor was it a case of situational disadvantage where Ruthven, a finance broker, was in no position to conserve his interests. The Bank did not stand to gain by releasing guarantors. It was not the Bank that was initiating any release. Rather it was Dutson who with Heavey was looking to bring about a situation where Rogers and Webb would be released and then eventually a new financial arrangement made to include Russo. It was Dutson that asked Ruthven to sign the Release Authority.

49 To my mind all this derogates very much from a situation where Ruthven, a finance broker, can truly say that he was in a position of disadvantage, that is, situational disadvantage, where it ought to have been brought to his attention by the Bank that in effecting the release that he and Dutson sought, he could well be disentitling himself to contribution from the others. I think a preferred assessment of the facts is that Ruthven and his colleagues were looking to bring about a commercial resolution to the need for Rogers and Webb to be released in the expectation that Russo would then become a new director and shareholder and become a replacement guarantor. The problem that has arisen for Ruthven is that Russo's involvement did not come to pass and he is now left as sole guarantor. And there is doubt from Ruthven whether Webb has actually been released.

50 On the facts, much of what occurred leading up to the Release Authority and thereafter leading up to the application for the credit charge facility was happening, as Mr Carew of counsel for the Bank put it, 'in the tent' of the principal debtor and the Bank was not 'in the tent'.

51 Fifthly, the facts coming from Ruthven show that he was acting under an assumption that Dutson would hold the Release Authority until the arrangements for the new guarantee arrangement had been put in place. Dutson says nothing about such an assumption. There is no evidence that such an assumption was induced or affirmed by the Bank or communicated to it. If there was an assumption, and if Dutson knew about it, then it appears any conduct contrary to the assumption was by Dutson who administered the dealing with the Bank contrary to the assumption.

52 For all those reasons, I think the proposed defence has no real prospects of success. Whilst there are some incidental facts that are not clear or obvious or are unusual, I do not think that ought prevent summary judgment on the basis of the salient facts and , I think, the untenable implied term argument that was at the forefront of counsel's submissions.

53 Under clause 19 of the guarantee, 'A written statement signed by one of our Authorised Officers about an amount owing under this guarantee is sufficient evidence of the amount...' Paragraph 24 of Malloy's affidavit states that as at 8 May 2018 the debt was $318,233.71. I will allow the plaintiff to adduce such a statement by affidavit and file it (by delivery to my Associate) and serve it, to then enable the Court's order to state the amount of the judgment.

54 Unless there are submissions to be made about costs, I will also order that the defendant pay the plaintiff's costs of the proceeding.

[1] Legal incorporation into contractual relations is assumed. See Doggett v Cth Bank of Australia [2014] VSCA 351.

[3] See generally J C Phillips, The Modern Contract of Guarantee (2nd ed, Sweet and Maxwell, 2010) p 776 ff.

[4] Lysaght Building Solutions v Blanalko [2013] VSCA 158; (2013) 42 VR 27, 40 [34].

[5] Codelfa Constructions v State Rail Authority of NSW (1982) 149 CLR 337, 347.

[6] The letter of offer is Exhibit RM-3. The guarantees are exhibit RM-7, 9 and 10.

[13] Affidavit of Glenn William James Ruthven sworn 13 June 2018 [10].

[14] Defendant's written submissions [13].

[15] See Ward v National Bank of New Zealand (1883) 8 App Cas 755.

[16] Glanville Williams, Joint Obligations (Butterworths, 1949) 106.