Bank of Queensland Limited v Banjanin [2017] QSC 209

SUPREME COURT OF QUEENSLAND CITATION: Bank of Queensland Limited v Banjanin & Ors [2017] QSC 209 PARTIES: BANK OF QUEENSLAND LIMITED ACN 009 656 740 (plaintiff) v PETER BANJANIN (first defendant) ATHENA BANJANIN (second defendant) FAVOUR INVESTMENTS PTY LTD ACN 106 666 282 (third defendant by counterclaim) FILE NO: BS742 of 2013 DIVISION: Trial Division PROCEEDING: Trial DELIVERED ON: 27 September 2017 DELIVERED AT: Brisbane HEARING DATE: 13-16 February 2017 JUDGE: Mullins J ORDER: Judgment for the plaintiff on the claim and counterclaim. CATCHWORDS: BANKING AND FINANCE – BANKS – LIABILITIES – FRAUD, UNDUE INFLUENCE AND UNCONSCIONABLE CONDUCT – where the defendants who were married borrowed from the plaintiff in order to refinance their existing loan to complete the construction of their luxury home – where a company of which the husband and wife were directors, borrowed from the plaintiff and purchased land to develop and sell commercial sheds to finance the loans – where the defendants allege the plaintiff acted unconscionably in approving the loan contracts – where the defendants would only be able to repay the loan contracts through selling their property – whether the defendants were subject to a special disadvantage – whether the plaintiff engaged in unconscionable conduct BANKING AND FINANCE – BANKS – LIABILITIES – FRAUD, UNDUE INFLUENCE AND UNCONSCIONABLE CONDUCT – where the defendant wife claimed unconscionability against the plaintiff as a result of reposing trust or confidence in her husband – where the wife was not a -- 1 of 21 -- 2 volunteer – whether the wife was subject to a special disadvantage – whether the plaintiff engaged in unconscionable conduct CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – INTERPRETATION OF MISCELLANEOUS CONTRACTS AND OTHER MATTERS – where the defendants alleged that the loan contracts, guarantees and associated mortgages were unjust transactions pursuant to the National Credit Code – where the defendants did not allege any particular terms of the contracts were unusual – where the defendants relied on their lack of income to service the loans – whether the loan contracts, guarantees and associated securities were unjust transactions Australian Securities and Investments Commission Act 2001 (Cth), s 12CB National Credit Code (Cth), s 76, s 77 Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51; [2003] HCA 18, followed Barker v GE Mortgage Solutions Limited [2013] QCA 137, considered Bodapati v Westpac Banking Corporation [2015] QCA 7, considered Commercial Bank of Australia Limited v Amadio (1983) 151 CLR 447; [1983] HCA 14, followed Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413, considered Garcia v National Australia Bank Ltd (1998) 194 CLR 395; [1998] HCA 48, considered Kowalczuk v Accom Finance Pty Ltd (2008) 77 NSWLR 205; [2008] NSWCA 343, cited Lee v Australia and New Zealand Banking Group Ltd [2013] QCA 284, considered PSAL Ltd v Kellas-Sharpe [2012] QSC 31, considered Tonto Homes Loans Australia Pty Ltd v Tavares [2011] NSWCA 389, cited West v AGC (Advances) Ltd (1986) 5 NSWLR 610, cited Yerkey v Jones (1939) 63 CLR 649; [1939] HCA 3, considered COUNSEL: M D Martin QC and A R Nicholas for the plaintiff S C Fisher for the defendants (direct brief pro bono) SOLICITORS: Mills Oakley Lawyers for the plaintiff -- 2 of 21 -- 3 [1] In 2008 the plaintiff lent the principal sums of $1.1m and $150,000 to the first and second defendants (who are married to each other) under the first and second loan contracts (dated 22 April 2008 and 8 September 2008 respectively) and the principal sum of $425,000 to the third defendant under the third loan contract (first lent in April 2008, but the loan was varied on 29 June 2009) which loan was guaranteed by the first and second defendants under what is described as the first guarantee (given by Mr Banjanin on 22 April 2008) and the second guarantee (given by Mrs Banjanin on 22 April 2008). The fourth loan contract made in August 2011 was for an advance of $50,000 by the plaintiff to the first and second defendants that, in effect, converted arrears of interest in respect of the first loan to principal thereby “absorbing” the interest. At trial the plaintiff was seeking to recover $3,162,781.80 from the first and second defendants and possession of their residential property. The primary issues raised at the trial are whether the plaintiff acted unconscionably in relation to its loans to the defendants and whether the loan contracts were unjust transactions. [2] The specific four factual matters the parties identified as relevant to the primary issues arising from the pleadings are: (1) Did the plaintiff make reasonable enquiries regarding the first and second defendants’ financial situation? (2) Did the plaintiff verify the first and second defendants’ financial situation and their capacity/ability to service any financial obligations? (3) Did the plaintiff assess the first and second defendants’ ability to comply with the financial obligations under the loan contracts, or their ability to comply, except under financial hardship? (4) Did the plaintiff expose the first and second defendants’ to loss of assets (pursuant to the mortgages they gave to the plaintiff) and assumption of debt pursuant to their guarantees in favour of the plaintiff? [3] There was also another factual matter put in issue which was whether the general conditions applying to the guarantees were provided to the first and second defendants before they signed the first and second guarantees. [4] The defendants were self-represented litigants throughout the proceeding, except when they were represented by counsel on one application for leave to withdraw admissions which was unsuccessful and for the direct brief pro bono for the trial undertaken by Mr Fisher of counsel. The assistance provided by Mr Fisher on a pro bono basis streamlined the presentation of the defendants’ case by confining the case to the issues that were arguable and thereby limiting the length of the trial. There was advantage to the defendants in the rigour that Mr Fisher brought to their case. [5] At the commencement of the trial the defendants were given leave to file their second further amended substituted defence and counterclaim. The first and second defendants can resist judgment on the plaintiff’s claim only to the extent they have any success on their counterclaim. -- 3 of 21 -- 4 Background [6] The following background facts are taken from admissions in the pleadings. The first and second defendants owned the land at Forest Glen on which they were building a luxury home. They owed Westpac Banking Corporation about $900,000 secured over that property and approached the plaintiff’s branch at Chancellor Park that was managed by the plaintiff’s agent Mr Brennan (whose company held the franchise for the branch) in early 2008 about refinancing the loan to Westpac and borrowing additional funds to finish the construction of their home. They also had a proposal for the third defendant (a company of which they were both directors) to purchase a commercial property at Hooper Street, Ipswich for $370,000 for which the contract had been signed in January 2008 and on which they proposed to develop commercial sheds for sale, and to fund the holding costs of this property for 12 months (by capitalising interest on the loan). [7] When they approached Mr Brennan, the first and second defendants were self-employed. The first defendant was a plumber by trade and the main income earner and the driver of their businesses. The second defendant was a housewife, but was involved in the businesses conduct by the first defendant on their behalf and the third defendant’s businesses. The plumbing business called “Minc Services” generated a modest income, but their main source of income was from buying, renovating and selling residential properties in Rockhampton, in respect of which they had been making good profits since the 2005 financial year. (In fact, all the Rockhampton properties had been sold by the time the defendants sought loans from the plaintiff.) They had also renovated three residential properties in Mooloolaba which generated rental income. They had a one- quarter interest via another company in an office block at Ipswich and that interest had an approximate value of $586,000. They were looking to replace the activity of buying, renovating and selling residential properties with the proposed development and sale of commercial sheds in Ipswich. Subject to a valuation of their home which they believed to be worth over $3m, they had a high net worth of approximately $3.645m. The first defendant and his sons were doing the construction work on the Forest Glen home. [8] On or about 14 April 2008 the defendants advised the plaintiff that they owned real estate worth $4.646m which was subject to mortgages in the amount of $1.245m, they owned vehicles worth $17,000, furniture worth $100,000 and a business worth $400,000, and they had $10,000 in cash. They also provided the plaintiff with Banjanin Family Trust tax returns for the years ended 2005 and 2006 and each of the first and second defendants’ tax returns for those same years, bank statements for the Westpac loan and a copy of the contract for the purchase of the Hooper Street property. [9] The further background which follows is taken from the documents in the agreed trial bundle (exhibit 1). [10] Although the home at Forest Glen was not completed when the defendants applied to the plaintiff for loans, the first and second defendants were living in the home. The plaintiff obtained a valuation of that property dated 9 April 2008 that included photographs showing the stage at which construction had reached and valuing it on the basis of “on completion”, subject to the works being completed to a good standard and in accordance with the specifications. On that basis the market value was $3.2m. The plaintiff obtained the valuation of the Hooper Street property as at 28 April 2008 for $370,000. The re- -- 4 of 21 -- 5 financing of the Westpac loan through the plaintiff took place and the first and second defendants continued with the construction of their home at Forest Glen. The purchase of the Hooper Street property by the third defendant was completed. [11] The second loan contract for a facility of $150,000 was provided as a secured personal overdraft to the first and second defendants (exhibit 1, tab 40). [12] The original form of the third loan contract was for a business line of credit with a facility limit of $425,000 for a term of one year. The minimum amount of each repayment was specified as the amount which would ensure that the money owing did not exceed the facility limit at any time which required the third defendant to ensure that any interest owing on the loan that would take it over the facility limit was paid from time to time. That line of credit was converted to a fixed term loan of two years pursuant to the offer made by the plaintiff to the third defendant on 26 June 2009 that required interest only repayments of $2,147.71 per month for 12 months and thereafter on the basis of principal and interest repayments to repay the loan by the end of the term (exhibit 1, tab 42). On 29 June 2009 each of the first and second defendants as the guarantor signed a consent to the variation in the third loan from the line of credit to the fixed term loan (exhibit 1, tabs 43 and 44). [13] Mr Brennan completed an application on behalf of the first and second defendants to the plaintiff for financial assistance or hardship dated 29 March 2010 (exhibit 1, tab 46) that was sent to the plaintiff’s office in Brisbane. Mr Brennan recorded the reason for the application as advised by the first defendant: “Client has lost income source due to collapse of insulation industry, is rebuilding cash flow by re-entering market installing solar panels and solar hot water systems and is asking for 3 months hardship relief, so no payments for 3 months and extend each loan term by 3 months is his request.” The application was approved. [14] A second financial hardship application was made in respect of the first, second and third loan contracts on 13 April 2010 (exhibit 1, tab 47) requesting three months’ deferral of payments for the same reason expressed in the first financial hardship application. [15] A third financial hardship application was made in August 2010 (exhibit 1, tab 49) on the basis that the defendants were able to meet current repayments, but were unable to lower current arrears. [16] When Mr Brial who was the then manager of the plaintiff’s Chancellor Park branch was seeking the approval from the plaintiff’s head office for the fourth loan contract, Mr Brial recorded in his email dated 12 August 2011 (exhibit 1, tab 56) the purpose of the loan (which was not disputed at this trial): “Mr Banjanin has effectively obtained approval to refinance our debts, as he requires additional funds for working capital. The catch is he is unable to provide a statement showing his BOQ facility is within arrangements. In an attempt to get this matter resolved one way or another I would like to propose. -- 5 of 21 -- 6 1. We reinstate the original approval to allow the limit increase to $1.15m ($50K increase) however we now limit it to 3 months only, rather than ongoing. 2. Balance of Account is presently below that limit. 3. Limit is input. 4. Customer maintains the facility within arrangements and is able to provide confirmation to his new financier that the account is currently within arrangements. 5. Customer refinances the facility within the 3 month period.” [17] The application for the fourth loan contract was approved and the first and second defendants signed the Home Loan Privileges Package Line of Credit Facility Schedule in respect of the additional facility limit of $50,000 on 26 August 2011 (exhibit 1, tab 57). The loan was technically advanced on 31 August 2011 to regularise or bring the line of credit back in order. [18] On or about 16 December 2011 notice of exercise of power of sale was given to the first and second defendants pursuant to s 84 of the Property Law Act 1974 (Qld) (PLA) in respect of the amounts outstanding pursuant to the first, second and fourth loan contracts. At the same time notices were also given pursuant to s 88 of the National Credit Code. On 5 June 2012 notice of exercise of power of sale pursuant to s 84 of the PLA was given to the third defendant in respect of default under the third loan contract (exhibit 10) and related notices were given to the first and second defendants by virtue of the mortgages given by them that supported the guarantees they had given in respect of the third defendant’s obligations. The evidence relating to the first and second defendants’ entry into the first loan contract and the guarantees and the third defendant’s entry into the third loan contract [19] The first and second defendants had met Mr Brennan in 2006 at the church which they all attended. Mrs Banjanin left school when she was 15 years old and undertook an apprenticeship as a hairdresser for four years. Apart from raising her children, she had worked as a hairdresser and in a sandwich bar. She became a chaplain and did work in the community for a school and as a religious education teacher. (This was in addition to her involvement admitted on the pleadings in the businesses operated by the defendants.) [20] Mr Brennan who did not have authority to approve the loans completed the loan submission for the first and third loans dated 16 March 2008 (exhibit 1, tab 1) from information provided to him by Mr and Mrs Banjanin. Mr and Mrs Banjanin were not in default in respect of the Westpac loan. [21] There are a number of documents in the agreed bundle that were signed by the first and second defendants on 22 April 2008 in the presence of Mr Brennan. These include the document entitled Home Loan Privileges Package Line of Credit Facility Schedule for the facility limit of $1.1m (exhibit 1, tab 5), the acceptance of the letter of offer for the -- 6 of 21 -- 7 facility for $425,000 for the third defendant (exhibit 1, tab 24), the first guarantee (exhibit 1, tab 28), the second guarantee (exhibit 1, tab 29), the mortgage given by the third defendant over the Hooper Street property (exhibit 1, tab 31), and the mortgage given by the first and second defendants over the Forest Glen property (exhibit 1, tab 32). [22] Each of Mr Brennan and the first and second defendants gave evidence about the circumstances in which the documents were signed on 22 April 2008. There is no dispute that the first and second defendants signed the documents, but the question is whether the documents were provided by Mr Brennan to them the day before they signed them, including whether they were provided with the Consumer Lending General Conditions incorporated into the first loan contract and the Unregulated Guarantee and Indemnity General Conditions incorporated into the first and second guarantees before they signed the relevant documents. [23] Although all three witnesses had a recollection of Mr Brennan attending at the first and second defendants’ home at least on one occasion when documents were signed, their detailed recollections are markedly different. Mr Banjanin thought that Mr Brennan came out on one day and left the loan application for the $1.1m facility and that Mr Brennan returned the next day, when the loan application was signed and Mr Brennan took it away with him. It was not apparent from Mr Banjanin’s evidence as to what document he was referring, when he described the document as the loan application. Mr Banjanin recalled that Mr Brennan fell off his motorcycle going out of the driveway. He said (at Transcript 1-26) that he signed the first loan contract on the day he signed the loan application. When shown the Home Loan Privileges Package Line of Credit Facility Schedule (exhibit 1, tab 5), Mr Banjanin confirmed that on the second day, there was “probably” two of those documents that he signed. When asked (at Transcript 1-28) whether Mr Brennan gave him the “General Conditions”, he responded “No, no, not that I remember”. Mr Banjanin did recall that Mr Brennan advised him to get legal advice about the Schedule, but he did not do so. When he was questioned about the first guarantee, Mr Banjanin recalled (at Transcript 1-39) the signing took place on a different occasion than when he received an envelope containing documents. When asked for clarification as to what came first, the signing of the guarantee or getting the envelope, Mr Banjanin responded “I don’t really remember, but I would say signing went first and then envelope second”. [24] In cross-examination, Mr Banjanin was even less certain of what documents were signed at his home on 22 April 2008. When it was suggested to Mr Banjanin that he signed a mortgage when he and his wife signed the loan agreement on 22 April 2008, Mr Banjanin stated “I’m not sure, now. I’m a little confused”. Mr Banjanin said (at Transcript 1-53) that the Consumer Lending General Conditions that applied to the first loan contract were provided to him in an envelope at the branch and not when Mr Brennan had attended at his home on 22 April 2008. [25] Mrs Banjanin had been involved with Mr Banjanin in renovating some of the houses in Rockhampton. She helped with cleaning and the gardens. She knew that she owned 50 per cent of the shares in the third defendant and that she was also a director of that company. She was also aware of the three units at Mooloolaba and that she and her husband had a one-quarter interest via another company in an office block in Ipswich. -- 7 of 21 -- 8 [26] Mrs Banjanin could remember the meeting with Mr Brennan, but not many details of the meeting. She recalled he travelled by motorcycle to get to their home. She also revealed (at Transcript 1-91) that when he left them with a lot of documents, he “probably” told them to read them and, if necessary, get some legal advice. Mrs Banjanin was taken to a number of documents in the agreed bundle that were signed on 22 April 2008, but did not remember specifically the circumstances in which she signed the documents. Mrs Banjanin accepted (at Transcript 1-88) that Mr Brennan had “briefly” explained what the documents were about that she signed, but could not remember what he had said other than it was “financial stuff” and she was “not knowledgeable in that area”. [27] In cross-examination, Mrs Banjanin confirmed (at Transcript 1-90 to 1-91) that she was aware that she and her husband had borrowed $1.1m from the plaintiff in April 2008 to refinance the Westpac mortgage of $900,000 and to have funds available to continue with the construction of their house, and that the third defendant borrowed $425,000 to buy a vacant parcel of land at Ipswich on which the intention was to build commercial sheds that could be sold to pay back the plaintiff. [28] Mrs Banjanin could not remember (at Transcript 1-92) whether the Consumer Lending General Conditions that applied to the first loan contract were amongst the documents delivered on 21 April 2008. Although she accepted that she signed the second guarantee on 22 April 2008, she was not sure whether the document entitled Unregulated Guarantee and Indemnity General Conditions was amongst the documents provided by Mr Brennan on 21 April 2008. She did not remember seeing that document. [29] Mr Brennan recalled (at Transcript 2-47) that he delivered the loan documents to the first and second defendants on 21 April 2008 and then returned the next day to sit with them, as they signed the documents and he witnessed their signatures. He also recalled (at Transcript 2-76) that he left four envelopes of documents, one of which contained the documents that had to be signed and returned, and then there were envelopes for each of Mr and Mrs Banjanin and the third defendant containing copies of the documents. He relied on a form that came from the plaintiff’s head office with the documents that was a checklist (which he did not give to the defendants), but it detailed every document that was to be handed out. [30] Mr Brennan recalled that he rode his motorcycle out on the first day and on one of his visits he fell off his motorcycle. On the second day, his recollection was that the meeting lasted at least half an hour. He was cross-examined on a statutory declaration made by the first and second defendants which he witnessed on 22 April 2008 (exhibit 1, tab 35). This declaration relates to the Banjanin Family Trust No 2 and deals with the power of the trustee to enter into the proposed transaction with the plaintiff. The signatures of Mr and Mrs Banjanin are on the declaration, as is Mr Brennan’s signature as witness and his name stamp. The place and date of the taking of the declaration have been inserted as Sippy Downs and 22nd day of April 2008, but they are not in Mr Brennan’s handwriting. Mr Brennan said (at Transcript 2-79) he explained this document to the first and second defendants when he witnessed their signatures and the place and date must have been completed by another party, possibly his wife who also worked at the branch. [31] Mr Brennan remembered (at Transcript 2-92) that both Mr and Mrs Banjanin were present on 22 April 2008 when he explained the documents and that Mr Banjanin did most of the -- 8 of 21 -- 9 talking in comparison to Mrs Banjanin. It was when Mr Brennan left the documents with them the previous day, he encouraged the first and second defendants to get legal advice before they signed the documents. [32] To the extent that it is necessary to make findings as to whether Mr Brennan delivered to the first and second defendants on 21 April 2008 the documents they signed on 22 April 2008 and at the same time delivered the Consumer Lending General Conditions that applied to the first loan contract and the Unregulated Guarantee and Indemnity General Conditions that applied to the first and second guarantees, I am satisfied that Mr Brennan’s evidence about the detail of what occurred on those two days was much more reliable than the respective recollections of Mr and Mrs Banjanin. That is not a surprising conclusion, as Mr Brennan had the carriage on behalf of the plaintiff of procuring the execution of the relevant documents and was provided with a checklist for the purpose of doing so. It was apparent from the respective evidence of Mr and Mrs Banjanin that neither of them recalled in any relevant detail what occurred when Mr Brennan attended at their house on 21 and 22 April 2008. Mr Banjanin’s evidence suggested that when he did purport to remember something about a document, he had reconstructed what he thought occurred, rather than truly remembering what occurred. The first and second defendants’ concern was in getting the loans from the plaintiff. Their concern was not with the form and content of the documents in a way that would necessarily bring back to mind many years later the details about the timing of when they received each of the documents. The evidence relating to the first and second defendants’ entry into the second loan contract [33] Although Mr Banjanin asserted (at Transcript 1-55) the sum of $150,000 that was the subject of the second loan contract was always intended to be lent by the plaintiff as part of the original arrangement, but it took Mr Brennan until September 2008 to sort it out, it is not in dispute that the first and second defendants obtained a further loan of $150,000. On 3 July 2008 Mr Brennan prepared a submission to the plaintiff’s head office for increasing the lending by $150,000 (exhibit 1, tab 36). The background included in that submission recorded: “Peter has 3 units in Buddina at the moment listed for resale, and has been surprised by the current market doldrums. He had planned on utilising surplus sales proceeds to fund site works for his Hooper St Ipswich land. Client approached the branch to fund the Land Only purchase of an Ipswich development site and client will eventually build 6 tilt slab industrial sheds at that site. Client is applying here for funds to cover initial preparations for this project plus some continued expenditure on his luxury home.” [34] On 7 August 2008 the defendants’ accountant provided Mr Brennan with an estimate of the tax liabilities of Mr and Mrs Banjanin for the 2007 financial year (exhibit 1, tab 39). On the basis that the Banjanin Family Trust would have a total income of $75,000 that was distributed between Mr and Mrs Banjanin, and taking into account that Mrs Banjanin earned wages of $6,000, it was estimated that each of them would have a taxable income for the year ended 30 June 2007 of $40,500. Mr Brennan passed that information onto the plaintiff’s head office. -- 9 of 21 -- 10 [35] Mr Brown who was one of the plaintiff’s risk assessment managers approved the second loan, but instructed Mr Brennan to apply $80,000 of it for completion of the house and $70,000 to interest capitalisation. [36] The second loan was made available to the first and second defendants on 12 September 2008 (exhibit 1, tab 41) and no repayments were required, as long as the balance owing under the facility did not exceed the limit of $150,000. The minimum repayment was specified as the amount to ensure that the balance owing did not exceed the facility limit at any time (exhibit 1, tab 40). [37] Mr Banjanin explained (at Transcript 1-55) that when the further loan of $150,000 became available, he was able to put back some of the money he had drawn on the line of credit to assist in completion of the house. Mrs Banjanin remembered (at Transcript 1-82) that the further loan of $150,000 was for the house. The plaintiff’s assessment of the applications for the first, second and third loan contracts [38] The nub of the first and second defendants’ claim against the plaintiff for unconscionability in relation to the first and second loan contracts and the supporting mortgages and the first and second guarantees given in respect of the third loan contract is that Mr Brennan did not assess whether the transactions were suitable for the first and second defendants having regard to their inability to comply with the financial obligations they assumed under the transactions without substantial hardship, the transactions would not meet the first and second defendants’ requirements or objectives, and their inability to service any debt assumed under the transactions. (Although the allegation is pleaded against both Mr and Mrs Brennan as the managers of the plaintiff’s Chancellor Park branch, it was Mr Brennan who managed the defendants’ loan applications and I will therefore refer only to Mr Brennan.) [39] The allegation is narrow as Mr Brennan did not have authority to approve loans and the assessment was done at the plaintiff’s head office. The allegation therefore relates to the process undertaken by Mr Brennan in putting the submissions together for seeking the head office approvals to the first, second and third loan contracts. Although not articulated in these terms, the effect of the first and second defendants’ express allegations of the failures on Mr Brennan’s part in assessing the suitability of the loans for the first and second defendants is that it is alleged impliedly that those failures resulted in the plaintiff’s approval of the loans. [40] The purpose of the first and third loans in the submission prepared by Mr Brennan (exhibit 1, tab 1) was identified as refinancing an existing loan and to provide a capitalised facility to allow the client to purchase and hold for 12 months an Ipswich industrial property intended for future industrial unit construction. Mr Brennan recorded the means for debt servicing as: “Debt servicing is from minor plumbing service income and capital gains which are a normal part of the clients income based on their activities in the property acquisition area. 6 houses in Rockhampton have been progressively developed and sold and three Mooloolaba units are now for sale.” -- 10 of 21 -- 11 [41] The submission identified the risks and mitigants as follows: Risks Mitigants Is client able to repay the loan? Serviceability is demonstrated on main loan and proposal re industrial land parcel is for a capitalising facility. Is the project able to repay the loan? Land is located in a growth area and would always attract a purchaser. Are the Guarantors/Trustees able to repay the loan? High net worth clients able to cover proposed loan from asset position. Proposal hinges on the value of [the Forest Glen] property. [42] Mr Brennan was cross-examined extensively on the financial information that he incorporated into the submission. Mr Brennan expressly noted “STS and trust figures difficult to analyse”. I infer that STS is a reference to statements in the nature of balance sheets and profit and loss statements. It was not suggested that to the extent the information in the submission was obtained from the first and second defendants or their tax returns that it was inaccurate, but the purpose of the cross-examination appeared to be to challenge Mr Brennan’s calculations on the serviceability worksheet when Mr Brennan did not have any figures for the financial year ending 30 June 2007 and on the basis of the manner in which he dealt with the gains from sale of assets. Mr Brennan calculated that the first and second defendants’ debt service costs annually would be $125,844 and that they had $160,381 cash available for debt service which Mr Brennan had taken from the anticipated sale of a property (as he knew at the time that Mr Banjanin was working on completing the house and had ceased external working). Mr Brennan acknowledged (at Transcript 2-71) that his calculation of cash available for debt service was “a paper figure”. [43] Even though the plaintiff’s file did not include a signed asset and liability statement from Mr and Mrs Banjanin, Mr Brennan considered there would have been such a signed asset and liability statement which he may have completed after questioning them. A blank consumer lending application that enabled personal applicants’ budget and assets and liabilities to be recorded was signed by Mr and Mrs Banjanin on 14 April 2008 (exhibit 6). Mr Brennan could not explain (at Transcript 2-76) why it had not been completed, as he would have expected his handwritten notes to have been transferred onto the application in typewritten form by his wife, but the reason that they had to sign the application was so the plaintiff could do a “Veda search”. [44] On the basis of allowing for a valuation of the house at Forest Glen of $2.5m and reducing that to 70 per cent of its value and quarantining $166,000 on account of the loan to the third defendant, Mr Brennan calculated the lending value of the house at Forest Glen as $1,584,000 which meant that the proposed loan of $1.1m represented 70.1 per cent of the security available for the loan. [45] On 19 March 2008, Mr John Adlard who was a risk assessment manager employed by the plaintiff approved the loan. Mr Adlard endorsed the following comments on the submission from Mr Brennan: -- 11 of 21 -- 12 “This is a deal that is reliant on ‘Property Trading’ for servicing. Gearing is very low and ‘RPData’ confirms ownership(s) Applicants intend a large reduction in debt within medium term which is acknowledged. 2007 saw a number of properties sold.” [46] It is therefore apparent that Mr Brennan’s submission was treated by the plaintiff as supporting the first loan on the basis of the security to be provided and Mr Adlard’s approval expressly noted that the anticipated property trading was the source for servicing the loan. [47] In the submission for the second loan, the risks and mitigants were recorded in similar terms to that for the first and third loans. In addition it was proposed that “Client will provide for additional interest payment on the increase by placing funds on a tied term deposit”. [48] When Mr Brennan made the submission for the second loan, he had the valuation of the Forest Glen property on a completed basis of $3.2m and for the purpose of working out the extent of the plaintiff’s security, took 70 per cent of the market value on completion which resulted in an amount of $2.24m from which he deducted $166,000 on account of the security to support the loan to the third defendant. That resulted in an assessment that the Forest Glen property provided security support of $2.074m which, taking into account the additional advance of $150,000, resulted in a loan to valuation ratio of 60.3 per cent. [49] As for the first loan, Mr Brennan’s submission for the second loan was treated by the plaintiff as supporting the second loan on the basis of the security that was available. [50] It is apparent from the email exchanges between Mr Brown and Mr Brennan that preceded Mr Brown’s approval of the second loan (exhibit 1, tab 39) that the plaintiff was cognisant that servicing of the loans was not evident from income and that the defendants should be encouraged to sell the Mooloolaba units. The plaintiff’s assessment of the application for the fourth loan contract [51] The same allegations that are made against Mr Brennan in respect of the assessment of the applications for the first, second and third loan contracts are made against Mr Brial in respect of the assessment of the fourth loan contract. As Mr Brial did not have authority to approve the loan and the assessment was done at the plaintiff’s head office, the allegation against Mr Brial must relate to the process of putting the submission together for seeking the approval to the fourth loan contract. The initial submission was prepared on 21 January 2011 (exhibit 1, tab 51), but was re-submitted on 12 August 2011 with a proposed expiry date of 30 November 2011 for the fourth loan. The approval was given by Mr Germain who was another risk assessment manager employed in the plaintiff’s head office. [52] At the time of the approval, the balance of the line of credit was $1,149,697 which meant that it exceeded the limit on the facility of $1.1m. By increasing the facility by another $50,000 for a period of three months, the first and second defendants were no longer in -- 12 of 21 -- 13 arrears in relation to that facility. Although styled as a loan of $50,000, it was cancelled out substantially by the amount by which the first and second defendants already owed for arrears of interest on the facility of $1.1m. In other words, the amount of the fourth loan did not increase the first and second defendants’ overall indebtedness to the plaintiff. Expert evidence [53] The first and second defendants retained certified practising accountant Mr Grant Agnew to prepare an expert report on their loan capacity on the basis of the documents they provided to the plaintiff in connection with their loan application and any details that the plaintiff should have requested from them at the time of the application to assess properly their capacity to repay without financial hardship or selling the property. Mr Agnew prepared a written report dated 10 May 2016 which is exhibited to his affidavit filed on 24 May 2016 (a copy of which is exhibit 5). Mr Agnew’s qualifications to give expert evidence were challenged on the basis of his lack of qualifications in the banking industry. Mr Agnew trained and worked as an accountant between 1983 and 1992. He then set up Agnew Wealth Creations which conducted a practice as accountants and financial specialists, but a large part of the practice was financial planning. Mr Agnew also conducted a mortgage broking business from the late 1990s until 2013 which was accredited with a number of lenders and assisted borrowers in making applications primarily for residential finance, but on occasions for commercial finance. Mr Agnew consults currently with a business that assists financial planners, accountants and mortgage brokers to sell their practices. On the basis that particularly through his mortgage broking business, Mr Agnew gained familiarity with the requirements of banks in assessing loan applications and he had some knowledge of the criteria applied by banks in approving an application for finance, I ruled he could give expert evidence, although ultimately the weight to be given to his evidence might be affected by the nature of his relevant experience. [54] Mr Agnew was critical of the plaintiff’s failure to obtain tax returns after 2006 and, in particular, information on the personal and business financial returns for the year of income ended 30 June 2007 should have been obtained prior to the approval of any finance under the first and second loan contracts. On the basis of the information available about Mr and Mrs Banjanin’s 2007 taxable incomes after the first and third loans had been made, Mr Agnew considered that neither Mr and Mrs Banjanin nor their family trusts could afford a loan of any amount at all after paying for their ordinary living expenses. Mr Agnew also noted there was no personal budget provided by the first and second defendants to show their personal expenses were below their after tax income that would have been relevant to the affordability of the loan. Mr Agnew could not see any evidence that the plaintiff had obtained information on the defendants’ current business and personal income and expenses. Mr Agnew’s conclusion was that very little information was supplied to the plaintiff to enable assessment of “the affordability or serviceability of the finance approved and offered” to the defendants. It was his view (at Transcript 2-25) that “security and serviceability” were the two key factors that should have been assessed by the plaintiff. [55] The plaintiff retained Mr James Cossart as its expert. Mr Cossart worked for a number of banks between 1972 and 2008 where he gained experience in major loan transactions, credit assessment and approval. He commenced business as a consultant in February -- 13 of 21 -- 14 2009, particularly for a funds manager, but also undertakes consultancy and advising a range of clients including banks, insolvency practitioners, property development groups, and law and accounting firms. His report is dated 15 November 2016 (exhibit 7). Although Mr Cossart’s expertise was challenged on the basis that his involvement in day to day banking ended by 2009, he had an extensive history in banking prior to 2009 and it was apparent from the content of his report and oral evidence that he was appropriately qualified to express an opinion about whether it was reasonable for the plaintiff to have lent the defendants the amount claimed in this proceeding, particularly as most of the lending to the defendants first took place in 2008. Mr Cossart also expressed an opinion on whether the plaintiff had complied with the Code of Banking Practice, but that was a matter that depends more on fact finding than an opinion about banking practice. [56] In respect of the first and third loan contracts, Mr Cossart noted that part of the plaintiff’s assessment process was to scale the valuations, typically using a loan to valuation ratio of 70 per cent as a benchmark for the purposes of ascertaining the plaintiff’s security risk level. The two properties offered as security at the chosen loan to valuation ratio met the plaintiff’s standard requirement. This formed part of the approval process and was “comfortably” within the plaintiff’s lending policy. On the basis of total security of $3.57m, scaled at the 70 per cent benchmark to support debt of $2.499m, resulted in the loan amounts of $1.525m being well below the plaintiff’s maximum security position. Mr Cossart noted the plaintiff conducted credit searches with two agencies and no adverse features were noted. Mr Cossart observed by reference to the comments noted on the submission for the loans (exhibit 1, tab 1) that the decision to approve them was likely to have been influenced by the prospect of debt reduction in the medium term. In respect of the second loan contract, Mr Cossart also noted from the comments on the submission (exhibit 1, tab 36) that some concern was shown by the approver that was reflected in the tightening of the conditions for the drawdown of the additional loan funds. [57] Mr Cossart concluded the decision by the plaintiff to lend the funds which the defendants sought was reasonable, as the defendants presented as the type of clients most banks would seek as a long term client based on the information they provided and “as experienced business people who had been successful over a period evidenced by their overall financial position and their current business and investment activities”. The transaction therefore met the commercial requirements of a bank and were within normal policy parameters. [58] I found Mr Agnew’s evidence unhelpful as the framework for his opinion was an assumption that a bank should not lend, unless the borrower could show income sources that would adequately cover the servicing of the loan. This assumption was no doubt contributed to by the question which the first and second defendants posed to him to evaluate their “loan capacity on the documents provided to Boq for our loan application”. The first and second defendants therefore sought an opinion from a perspective that departed from the proposal which they had put to the plaintiff through Mr Brennan to borrow on the basis of their “high net worth”, past record, and potential to create funds from property trading at a time when Mr Banjanin was involved in the completion of the construction of the Forest Glen residence and undertaking limited external work to generate income. Mr Cossart’s evidence supports the position (and I accept) that in banking it is reasonable for a bank in an appropriate case to lend on the basis of the assets offered by way of security, rather than an assured income source for meeting repayments. -- 14 of 21 -- 15 The expert evidence does not, however, displace the role of the court in fact finding on the evidence adduced in this proceeding and then applying the relevant legal principles to determine whether the defendants can impugn the appropriateness of the loans made to them. Unconscionability [59] The defendants allege unconscionability pursuant to s 12CB of the Australian Securities and Investments Commission Act 2001 (Cth) (the Act) and the general law in respect of the plaintiff’s conduct. [60] Whether considering statutory unconscionability or unconscionability in equity, the party alleging unconscionability must be able to show that he or she was subject to a special disadvantage or, in other words, the party was subject to a disabling condition or circumstance which seriously affected the party’s ability to make a judgment in his or her own best interests, and the other party knew or ought to have known of the existence of that condition or circumstance and its effect on the party who was subject to that condition or circumstance: Commercial Bank of Australia Limited v Amadio (1983) 151 CLR 447, 462, Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51 at [14]-[15], [55]-[56] and [184]-[185], and Bodapati v Westpac Banking Corporation [2015] QCA 7 at [55]. [61] The threshold condition for establishing unconscionability is that the party alleging unconscionability was subject to a special disadvantage. It is implicit in the manner in which the first and second defendants pleaded their claim of unconscionability that they do not seek to rely on a category of special disadvantage by reference to which successful claims of unconscionability have been made in other cases, but seek to prove their special disadvantage on the basis of falling into a category of persons to whom a bank should not have made a loan, because they were unable to meet the financial obligations under the loans by virtue of their financial position, and the only possible way the loans could have been repaid was by the sale of their assets. In summary, the first and second defendants seek to avoid their obligations to the plaintiff, despite the fact they were advanced the funds for the purposes for which they applied for the loans, merely on the basis that the loans can be characterised as asset-based lending. [62] There are instances of a bank lending on the basis of assets only where equitable intervention based on unconscionability has resulted (such as Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413), but, as was observed by Applegarth J in PSAL Ltd v Kellas-Sharpe [2012] QSC 31 at [88], the mere fact that a loan is asset-based is not sufficient to make it unconscionable: “The fact that a finding of unconscionable conduct requires an examination of all of the circumstances, and is not established simply because a party is in a situation of disadvantage in negotiations, is illustrated by the fact that ‘pure asset lending’ is not necessarily unjust or unconscionable. ‘Pure asset lending’ is ‘to lend money without regard to the ability of the borrower to repay by instalments under the contract, in the knowledge that adequate security is available in the event of default’. The mere fact that a loan is asset based is not, of itself, sufficient to make it unconscionable. There must be -- 15 of 21 -- 16 some other factor that makes the conduct of the lender morally repugnant.” (footnotes omitted) [63] Although the decision Kellas-Sharpe was subject of an appeal which was dismissed, this aspect of Applegarth J’s judgment was not considered on the appeal: Kellas-Sharpe v PSAL Ltd [2013] 2 Qd R 233. [64] Elkofairi was an example of asset-based lending to Mrs Elkofairi where there was evidence of other factors that made the conduct of the lender “morally repugnant”. Mrs Elkofairi was a Syrian immigrant who was illiterate and whose command of English was extremely limited and was in difficult domestic circumstances with her husband. She was on a disability pension and there was no reference to her financial position in any of the information provided to the lender. Mrs Elkofairi and her husband owned the matrimonial home as joint tenants. The purpose of the loan of $746,000 was to refinance the existing loan to another bank of $468,775 in respect of which they were in default and to provide Mr Elkofairi with the balance for his business purposes. It was held that the lender had acted unconscionably and also that the loan agreement was an unjust contract. The mortgage was set aside on condition that Mrs Elkofairi pay to the lender one-half of the amount that was owed under the existing loan at the time the impugned loan was made together with simple interest on the amount to be repaid by Mrs Elkofairi calculated from the date of the impugned loan. [65] Beazley JA (with whom the other members of the court agreed) found at [53] that Mrs Elkofairi was in a special position of disadvantage due to her lack of education, limited English and personal circumstances and the fact that no income was stated for either Mr or Mrs Elkofairi in the application should have sounded a warning bell to the lender in respect of any borrowing. Even though Mrs Elkofairi’s special position of disadvantage was not known to the lender, it was held at [56] that the absence of any relevant financial information was sufficient to put the lender on notice of her lack of capacity to meet the repayment obligations under the mortgage which “left as the only source of repayment the selling of her only asset” which the lender must be taken to have known. Beazley JA stated at [57]: “On its own submission, the respondent was only concerned with its ability to recoup any amount outstanding on the loan in circumstances where it must be taken to have known, because on the only information the respondent had, the appellant had no income, that the appellant, who was exposed to liability for the whole of the loan, had no ability to make even the first payment. The unconscientious nature of the transaction was that she was thereby at risk of losing her only asset. That risk was both immediate and real.” [66] Although literally the identification of the unconscientious conduct on the part of the lender in Elkofairi is described at [57] in terms of Mrs Elkofairi being unable to repay any of the loan and being subject to an immediate and real risk of losing her only asset that was mortgaged to the lender to secure the loan could apply to the first and second defendants’ first and second loans, the important distinction is that Mrs Elkofairi was subject to a special disadvantage and the identification of the unconscientious conduct was dependent on the finding of Mrs Elkonfairi’s special disadvantage. Statements in other cases about the vice of asset-based lending have to be understood in the context and -- 16 of 21 -- 17 application of the relevant principles set out in Amadio and Berbatis. See Kowalczuk v Accom Finance Pty Ltd (2008) 77 NSWLR 205 at [96]. [67] The defendants’ submissions suggested that Allsop P in Tonto Homes Loans Australia Pty Ltd v Tavares [2011] NSWCA 389 at [291] had dispensed with gross moral turpitude as essential to establishing unconscionability. The submissions overlooked the further statement made by Allsop P at [293]: “Spigelman CJ in World Best Holdings at 583 [121] referred to a ‘high level’ of moral obloquy. Whether that is too stringent and whether ‘significant’ or ‘real’ may be preferable need not be decided. What is required is some degree of moral tainting in the transaction of a kind that permits the opprobrium of unconscionability to characterise the conduct of the party.” [68] In considering the first and second defendants’ claim of unconscionability, it is necessary to address the four factual matters which arose from how they pleaded their claim of unconscionability. The questions set out above in [2] are predicated on the assumption that the plaintiff was bound to satisfy itself of the first and second defendants’ capacity to service their obligations from income and not sale of assets. Having regard to the first and second defendants’ own proposals for the extent of the loans sought by them and the third defendant and their plans for repayment which were reflected in the plaintiff’s decision to approve the loans on the basis of the value of the securities offered and the anticipated sale of properties for servicing the loans, questions (1), (2) and (3) can be answered in the affirmative in relation to the first, second and third loan contracts and question (4) should be answered in the negative in respect of the first, second and third loan contracts. There is no purpose in answering the same four questions in respect of the fourth loan contract, as the fourth loan did not alter the existing indebtedness of the first and second defendants to the plaintiff. [69] In any case, addressing these questions has no consequence for the first and second defendants, as the first and second defendants fail at the first hurdle in proving unconscionability, as they cannot show that in their circumstances they were subject to a special disadvantage, as explained in Amadio and Berbatis. Mrs Banjanin’s alternative claim [70] By the end of the trial Mrs Banjanin was no longer relying on the allegation set out in paragraph 56P of the counterclaim that in relation to each of the first, second and fourth loan contracts and the second guarantee, she was a volunteer receiving no consideration for entering into those contracts. Mrs Banjanin did not abandon the allegations in paragraph 56Q of the counterclaim which appear to be based on the second kind of case described in Yerkey v Jones (1939) 63 CLR 649 at 684-685. The second defendant relies on her inexperience in business and lack of ability to protect her own interests separately from the interests of her husband, that she was not given any opportunity by the plaintiff to obtain independent legal advice before signing the relevant security documents and she did not understand their nature, purport and effect, due to her reliance on Mr Banjanin in negotiating with the plaintiff in relation to each of those documents. It is then alleged that, through Mr Brennan, the plaintiff knew or expected that Mrs Banjanin might repose -- 17 of 21 -- 18 trust and confidence in her husband and that it would be unconscionable for the plaintiff to enforce any of the securities against Mrs Banjanin. [71] It should be noted that Mrs Banjanin did not dispute the suggestion that Mr Brennan encouraged both the first and second defendants to get legal advice before they signed the documents that he left with them on 21 April 2008 and that Mr Brennan explained the documents on 22 April 2008 before she signed them. [72] It was proper that Mrs Banjanin abandoned the allegation she was a volunteer, as the first and second loans were obtained for the purpose of refinancing the existing debt secured over the residential property and pursuing the construction of the house on that property that was owned by both the first and second defendants. Mrs Banjanin was a principal for the first and second loans. The fourth loan also related to that residential property. In addition, Mrs Banjanin understood the purpose of the third defendant’s borrowing (for which she provided the second guarantee) was to purchase the Hooper Street property which was a step in the plan to generate income from the sale of industrial units to be constructed on that property to reduce the debt for which she was a principal (and of which she was aware) that had been incurred in connection with the residential property. [73] It was therefore not possible for Mrs Banjanin to bring herself within the second kind of case in Yerkey v Jones, when she was not a volunteer and either benefited or stood to benefit from all loans. As explained in Garcia v National Australia Bank Ltd (1998) 194 CLR 395 at [31]: “Yerkey v Jones begins with the recognition that the surety is a volunteer: a person who obtained no financial benefit from the transaction, performance of the obligations of which she agreed to guarantee.” [74] To the extent that Mrs Banjanin claims unconscionability (apart from the second kind of case in Yerkey v Jones) based on the allegation that she reposed trust or confidence in her husband, that is not sufficient in the circumstances to amount to the essential requirement of a disabling condition or special disadvantage. There circumstances included her own knowledge of and participation in the construction of the massive luxury home on the residential property jointly owned by her with her husband and the third defendant’s purchase of and plans for the Hooper Street property as a means of reducing the debt owed by the first and second defendants to the plaintiff. The second defendant cannot succeed on her separate alternative claim alleging unconscionability on the part of the plaintiff. Unjust transactions [75] The first and second defendants rely on s 76 and s 77 of the National Credit Code to seek reopening of the first, second and fourth loan contracts, the first and second guarantees and the associated mortgages on the basis they are unjust transactions. The National Credit Code was not in force at the time of the entry into the first and second loan contracts, the first and second guarantees and the associated mortgages, but there were equivalent provisions, so that no point is taken by the plaintiff in the defendants’ reliance on the National Credit Code. The first and second defendants plead a number of circumstances on which they seek to rely to allege that these contracts are liable to be -- 18 of 21 -- 19 reopened. The third defendant also seeks relief in relation to the third loan contract pursuant to s 76 and s 77 of the National Credit Code. [76] Section 76(2) of the National Credit Code sets out a number of factors to which the court may have regard in determining whether the term of a particular contract is unjust in the circumstances relating to it at the time it was entered into or changed, as well as having regard to the public interest. The mere fact that one or more of the factors may be present is not sufficient, if the bank has not engaged in conduct depriving the borrower of a real or informed choice to enter into the contract and the terms of the contract are reasonable between the parties: West v AGC (Advances) Ltd (1986) 5 NSWLR 610 at 621. That approach was followed in Barker v GE Mortgage Solutions Limited [2013] QCA 137 where Philippides J (as her Honour then was) stated at [71]-[72]: “[71] The definition of ‘unjust’ in s 76 is not an exclusive one. In considering whether a term of a credit contract or mortgage is unjust in the circumstances relating to it at the time it was entered into the court may consider the matters listed in s 76(2)(a) to (p) and is to have regard to the public interest and all the circumstances of the case. Circumstances not reasonably foreseeable when the contract was entered into are not to be taken onto account. [72] The appellant asserted that she was unable to afford the loan provided by the respondent. But the fact that a party cannot afford a loan has been held to be insufficient on its own to result in a finding that the loan contract is unjust under comparable legislation: see Australian Society Group Financial Services (NSW) Ltd v Bogan [1989] ASC 55-938 in respect of similar legislation. The appellant also contended that there was an inequality in bargaining power between the parties (relying on the equivalent of s 76(2)(b) and (d)). However, mere procedural factors such as inequality of bargaining power without more, such as the lender abusing or taking unfair advantage of that power, is unlikely to be a sufficient basis for a finding that a contract is unjust: see West v AGC (Advances) Ltd (1986) 5 NSWLR 610. As to the provisions referred to by the appellant of the Mortgage Common Provisions, which the appellant submitted were not negotiable, oppressive and protective of the interests “without regard to [her] consumer protection”, there is nothing to suggest that these were other than common and standard type provisions.” [77] All that the defendants have pleaded in paragraph 56K as the circumstances on which they rely to allege the contract are liable to be reopened, are factors taken from the paragraphs of s 76(2) of the National Credit Code without endeavouring to isolate any particular conduct on behalf of the plaintiff or alleged terms of any of the contracts which are alleged to be unjust, other than advancing the same arguments that the defendants were unable to service the loans from the time they were made which were relied on in respect of the claim of unconscionability. [78] As noted in Barker at [72] and West at 621, the existence of inequality of bargaining power without more is not a sufficient basis for a finding that a contract is unjust. The fact the plaintiff made the loans to the defendants for the purposes for which they sought -- 19 of 21 -- 20 the loans and on the securities which the defendants offered, in anticipation that the defendants would reduce their indebtedness in the manner proposed by the defendants, does not suggest the loans were unjust transactions. [79] The defendants have failed to show any relevant conduct on the part of the plaintiff that would justify concluding that any of the loan contracts, guarantees or associated securities were unjust transactions. Breach of the Code of Banking Practice [80] The plaintiff concedes that the Code of Banking Practice (published in 2003 with amendments made in 2004) (exhibit 9) was incorporated into the guarantees. The first and second defendants rely particularly on clauses 2.2 and 28. The breaches that are alleged against the plaintiff are that the plaintiff did not ensure that the first and second guarantees were executed the day after the documents were given to the first and second defendants and that the guarantees were executed in the absence of the debtor, namely the third defendant. In view of the findings I have made about the timing of the delivery of the guarantees by Mr Brennan to the first and second defendants at their home on 21 April 2008 before he returned the following day to witness their execution of those documents in conjunction with the other documents that had been left for their perusal, there was no breach of clause 28.5 of the Code of Banking Practice. It is a nonsensical allegation that clause 28.6 (which requires the bank to ensure the guarantors sign the guarantee in the absence of the debtor when an officer of the bank attends the signing of the guarantee) would be breached by the directors of a company signing guarantees where the directors were the only directors and shareholders of the company and should be treated as being present in the capacity as the debtor company, when they gave their guarantees by virtue of being the directors of the debtor. In any case, no loss is or could be particularised as flowing from the alleged breach of clause 28.6 of the Code of Banking Practice in the circumstances. The first and second defendants fail in proving any actionable breach of the Code of Banking Practice. Costs [81] The relevant clauses in the loan contracts, guarantees and mortgages provide for the plaintiff to recover its costs from the first, second and third defendants on a full indemnity or solicitor and own client basis. The plaintiff therefore submits the court should exercise its discretion to order costs in favour of the plaintiff on an indemnity basis, consistent with the approach recognised in Lee v Australia and New Zealand Banking Group Ltd [2013] QCA 284 at [9]. [82] There is no reason not to exercise the discretion in favour of ordering the plaintiff’s costs to be paid by the defendants on an indemnity basis, in view of the obligation the defendants assumed under the security documents to pay the plaintiff’s costs on a full indemnity basis. Orders -- 20 of 21 -- 21 [83] As the defendants have not succeeded on any of the causes of action in their counterclaim, there should be judgment for the plaintiff on the claim and counterclaim. It will be necessary for the plaintiff to update the calculation of interest to the date of judgment and, on the publication of these reasons, I will hear submissions as to the amount for which judgment should be entered for the plaintiff against the first and second defendants. The plaintiff is entitled to an order recovering possession of the Forest Glen property from the first and second defendants. I will hear submissions on whether any period of time should be allowed to elapse before the first and second defendants must give up possession of that property to the plaintiff. Unless the defendants wish to make any further submissions on the question of costs, I propose to order that the first and second defendants pay the plaintiff’s costs of the claim and the defendants pay the plaintiff’s costs of the counterclaim, in each case to be assessed on the indemnity basis. [84] After the trial of this proceeding and while the decision was reserved, Justice Daubney heard another matter in which the plaintiff was suing borrowers where the loans were initiated through Mr Brennan at the Chancellor Park branch of the plaintiff: Bank of Queensland v Edwards [2017] QSC 191. The parties referred me to that decision. Although that case may have raised similar issues to this matter and is another example of the application of settled principles to the facts found in that case, the issues in this proceeding were decided by reference only to the evidence adduced in this proceeding. -- 21 of 21 --