11. Unjust guarantees

Updates and background for this project (Digest)

• Introduction
• Power to reopen unjust guarantees
• General matters to be considered by the court
• Specific matters to be considered by the court
• Granting relief

11.1 The focus of this Report is the establishment of a regulatory regime designed to prevent the occurrence, and reduce the incidence, of disputes that arise where one person guarantees the debts of another. Chapters 6-10 have recommended a regime similar to that of the Consumer Credit (New South Wales) Code (“Consumer Credit Code”) and the Bankers’ Code of Practice. Experience shows, however, that there will inevitably be cases that fall outside the preventive regime where guarantors seek relief on the basis that the guarantee in the context of the guarantee transaction is unjust. The Consumer Credit Code currently allows the court to reopen transactions, including guarantee transactions, which are unjust.¹ This chapter recommends that the Model Law should also make general provision for the courts to deal with guarantees that are, in the circumstances mentioned, unjust and set out what relief the courts may grant.

11.2 Apart from generally catching unjust guarantees that fall outside the preventive regime, two purposes are served by incorporating unjust contracts provisions in the Model Law:

• such provisions particularise the statutory factors generally relevant to unjust contracts under the Contracts Review Act 1980 (NSW) (“Contracts Review Act”) in the context of third party guarantees; and
• such provisions “overcome the common law’s failure to provide a comprehensive doctrinal framework to deal with ‘unjust’ contracts”² by extending protection beyond the traditional categories of unconscionability, undue influence and duress, thereby reducing the need to have recourse to the general law.³

11.4 The identification of guarantees and provisions that are, in all the circumstances, unjust necessarily involves a consideration of the circumstances of individual cases. While this inevitably involves some degree of uncertainty, the proposed model provisions at least provide a framework for the continued development of the law. As Professor Harland has observed:

The statutory provisions in their ‘shopping lists’ of factors to be taken into account have attempted, among other things, to provide some guidance as to how the jurisdiction given to the courts should be exercised. These factors are regularly discussed by the courts (while emphasising that they are not the only factors to be taken into account). It may be that as experience grows the courts (and commentators) will develop, as the reformers intended would be the case, guiding principles that will reduce the uncertainty necessarily caused by indeterminate standards such as those established by the statutes.⁶

11.6 The House of Representatives Standing Committee on Industry, Science and Technology, in its 1997 report, recommended the inclusion in the Trade Practices Act 1974 (Cth) of a list of criteria against which to judge “unfair conduct” in commercial transactions.⁸ The recommendation was made in response to submissions suggesting that a list of criteria for the courts to assess “unfair” or unconscionable conduct would reduce uncertainty.⁹

11.7 However, this is not a view shared by other commentators, who have drawn attention to the indeterminacy and vagueness of the statutory criteria of unjustness,¹⁰ and their potentially adverse impact on the consistency of decision making.¹¹ These arguments suggest that “unjustness” (and, indeed, its general law counterparts, particularly unconscionability) is inappropriate as the primary focus of regulation.¹² However, it is, in our view, an appropriate test to catch cases that fall outside the protective regulatory regime that we recommend by providing, in the “shopping list” of criteria, a reference point for the application of judicial discretion to the facts of individual cases. The courts apply such lists all the time, not only under the Contracts Review Act, Consumer Credit Code and fair trading and financial services statutes, but also, for example, under family provision legislation and de facto relationships laws. It is true that the lists provide a challenge for the courts to ensure certainty and consistency in decision making.¹³ But this challenge is not beyond their abilities.

11.8 The statutory list of criteria may also perform educative and other functions. Professor Peden identified a number of reasons for using a list of specific detailed criteria:

• it will “add emphasis to the intention and avoid ambiguity resulting in narrow construction”;
• it will “facilitate a general improvement in the ethical standards of the business community by spelling out in the clearest terms the potential consequences of harsh and unconscionable dealing”; and
• it will assist people without legal backgrounds to “appreciate the circumstances in which they may be entitled to relief”.¹⁴

11.9 The Consumer Credit Code expresses the court’s power to reopen unjust transactions as follows:

Power to reopen unjust transactions. The Court may, if satisfied on the application of a debtor, mortgagor or guarantor that, in the circumstances relating to the relevant credit contract, mortgage or guarantee at the time it was entered into or changed (whether or not by agreement), the contract, mortgage or guarantee or change was unjust, reopen the transaction that gave rise to the contract, mortgage or guarantee or change.¹⁵

11.10 While the Consumer Credit Code refers to the court finding that a contract, mortgage or guarantee or change is unjust, the Contracts Review Act refers to the court finding that a “contract or a provision of a contract” is unjust. The Consumer Credit Code provision is inconsistent with the phrasing of another Consumer Credit Code provision identifying general matters the courts may consider (which refers to the court determining whether a term of a particular contract is unjust).¹⁹ The two Consumer Credit Code provisions should be made consistent in order to avoid confusion.

Unjust guarantees

11.11 When considered as a document standing alone, the terms of a guarantee may appear to be quite unexceptional. However, a guarantee must be considered in the context of the related loan transaction. The terms of that transaction, or the circumstances in which the guarantee is given, may be such as to render the guarantee, or some of its provisions, unjust in accordance with the tests later mentioned in this chapter.²⁰ The expression “unjust guarantee” where used from now on is to be understood in this context, and to include both the guarantee and its provisions.

11.12 Allowing the court to reopen an “unjust guarantee” as defined above is consistent with the original intention of the Contracts Review Act to give the court a reasonably wide and flexible jurisdiction.²¹ It should be noted that these recommendations relate only to reopening the guarantee and do not in any way seek to disturb the principal loan or to reopen any rights arising between the lender and borrower.

11.13 The power to reopen an unjust guarantee or any of its provisions accordingly includes a power to make such orders or to give such relief as might be appropriate in the light of the transaction as a whole.

RECOMMENDATION 11.1

Where the Court considers that a guarantee or a provision of a guarantee is, in the circumstances, unjust, the court should be able to reopen it.

“Unjust” should include “unconscionable, harsh or oppressive”.

11.14 Both the Contracts Review Act and the Consumer Credit Code require that the court consider the unjustness of the contract at the time it was entered into.²² The time stipulation was first included in the Contracts Review Act in order to avoid ambiguity about the point of time at which the court is to determine the effects of the contract.²³ The Peden Report observed:

Since at the time of making a contract neither party can wholly foresee the effect of every aspect of the contract, it does not seem unreasonable to limit the court’s examination of the provisions of the contract within the framework of the circumstance as they existed at the time the contract was made.²⁴

RECOMMENDATION 11.2

The Model Law should provide that, in determining whether a guarantee or a provision of a guarantee is unjust, the court is to have regard to the guarantee at the time when it was entered into or changed.

11.16 The Consumer Credit Code also provides that, in determining whether a contract is unjust, the court is not to have regard to “any injustice arising from circumstances that were not reasonably foreseeable” when the contract was entered into.²⁵ The Contracts Review Act contains a provision to the same effect.²⁶

11.17 It has been suggested that the reasonable foreseeability test allows the court “a degree of flexibility”:

General movements in prices or interest rates, or a change in a consumer’s health or employment would not normally be foreseeable. However, the effect of a harsh penalty clause in the event of default would be foreseeable.²⁷

The Model Law should provide that, in determining whether a guarantee or a provision of a guarantee is unjust, the court is not to have regard to any injustice arising from circumstances that were not reasonably foreseeable when the guarantee was entered into or changed.

11.18 The Contracts Review Act includes a provision that allows the court, in appropriate cases, to have regard to any arrangements consisting of an “inter-related combination or series of contracts” where the contract being considered is a part of those arrangements.²⁸ This provision has not been carried over into the Consumer Credit Code, presumably because consumer credit contracts would not normally be part of such complex arrangements. It has been suggested that, since the term “contract” has not been defined in the Contracts Review Act, it is otherwise limited to its common law meaning and would not, by itself, include collateral arrangements.²⁹ Some commentators have considered that these arrangements may be encompassed in the term “all the circumstances of the case”.³⁰

11.19 The Commission considers that a provision allowing the court to have regard to interrelated arrangements is a useful provision to include in the Model Law. However, we would propose one adjustment, namely that the interrelated combination or series of contracts must involve the guarantor. This is necessitated by the fact that the unjust guarantee provisions in the Model Law are limited to the guarantee. The provisions are not about reopening the primary contract between the borrower and the lender.

RECOMMENDATION 11.4

The Model Law should provide that, in determining whether a guarantee or a provision of a guarantee is unjust, the court may have regard to any arrangements consisting of an inter-related combination or series of contracts involving the guarantor where the guarantee being considered is a part of those arrangements.

11.20 The Consumer Credit Code, after giving the courts power to reopen unjust contracts, goes on to state what they must consider in making a decision:

In determining whether a term of a particular credit contract, mortgage or guarantee is unjust in the circumstances relating to it at the time it was entered into or changed, the Court is to have regard to the public interest and to all the circumstances of the case …³¹

Public interest

11.21 The Peden Report, in recommending the adoption of the “public interest” criterion, suggested that it was to direct the court’s “attention to the underlying purposes of the Bill, namely to prevent unjust dealings which offend against community standards of business morality”.³⁴ Two considerations have been highlighted in the application of the “public interest”, namely:

• the need to hold parties to their agreement;
• the need to protect consumers.³⁵

11.22 The reference to the “public interest” in the Consumer Credit Code and the Contracts Review Act has become an accepted part of the unjust contracts provisions, and highlights the importance of balancing the public interest. Recommendation 11.5 therefore includes the “public interest” in the matters that the court must consider in deciding whether a guarantee or a provision of a guarantee is unjust.

All the circumstances of the case

11.23 The use of the phrase “all the circumstances of the case” highlights the need to consider the criteria not in isolation but as part of a context. Justice Hunt emphasised this point in a 1989 judgment:

It is important also to emphasise that each of the criteria... must be considered in the context of all of the circumstances of the case. ... Just because the circumstances of a particular case fall within the wording of one or more of the criteria... does not mean that the contract must thereupon be found to be unjust. In very few (if any) cases would it be reasonably practical for the debtor to negotiate for the alteration of, or to reject, any of the provisions of a loan contract with a bank or a finance company. ... It would fly in the face of reality to suggest that the position were otherwise. That factor alone, therefore, cannot be sufficient to make the contract unjust. Indeed, that situation does not give rise even to an arguable case for relief.³⁷

… a contract may be unjust in the circumstance existing when it was made because of the way it operates in relation to the claimant or because of the way in which it was made or both. Thus a contractual provision may be unjust simply because it imposes an unreasonable burden on the claimant when it was not reasonably necessary for the protection of the legitimate interests of the party seeking to enforce the provision. … In other cases the contract may not be unjust per se but may be unjust because in the circumstances the claimant did not have the capacity or opportunity to make an informed or real choice as to whether he should enter into the contract. … More often, it will be a combination of the operation of the contract and the manner in which it was made that renders the contract or one of its provisions unjust in the circumstances. Thus a contract may be unjust under the Act because its terms, consequences or effects are unjust. This is substantive injustice. Or a contract may be unjust because of the unfairness of the methods used to make it. This is procedural injustice. Most unjust contracts will be the product of both procedural and substantive injustice.³⁸

RECOMMENDATION 11.5

In determining whether a guarantee or a provision of a guarantee is unjust, the court is to have regard to the public interest and to all the circumstances of the case.

11.25 The Consumer Credit Code lists a number of specific matters that the court may consider in determining whether a term is unjust. These are dealt with individually below.³⁹

General discussion

11.26 Concerns have been raised about using a non-exhaustive list of factors to identify unjust terms. Some of the criteria are commonly and inescapably associated with many consumer contracts, for example, inequality of bargaining power or lack of opportunity to negotiate. However, as already mentioned, by itself, no one criterion is determinative of unjustness. It is only relevant so far as it helps to show whether a contract or its terms are unjust.⁴⁰

11.27 The list encourages a case by case approach to the question of whether particular contracts or their terms are unjust.⁴¹ The criteria are by no means mutually exclusive and many of the grounds will overlap in particular fact situations.⁴² For example, the question of the relative bargaining power of the parties may also be answered by considering the questions of the guarantor’s age or physical or mental condition, whether he or she received independent advice or understood the effect of the contract.

11.28 A contract may still be unjust even though it does not satisfy any of the criteria listed in s 70(2) of the Consumer Credit Code. A ground that is not specifically covered by the list can still be used to establish that a contract is unjust. This is because the list is inclusive and also because any additional criteria can be taken up under the ground of “any other relevant factor”. This is probably why there has been so little specific criticism about the shortcomings of particular clauses.

A drafting point

11.29 The Consumer Credit Code provision refers to the court determining whether “a term” of a “particular” contract is unjust.⁴³ This is inconsistent with the related Consumer Credit Code provision that gives the court the power to reopen a contract, mortgage or guarantee or change once it has found that that it is unjust.⁴⁴ By contrast, the equivalent Contracts Review Act provision refers only to the court determining whether the contract is unjust. The difference between the Contracts Review Act and Consumer Credit Code provisions may be significant.⁴⁵ One commentary has suggested that “read literally” the Consumer Credit Code provision “does not extend to the court’s determining whether the contract as a whole is unjust”.⁴⁶ Although it seems unlikely that the literal interpretation will prevail, the model provision should state clearly that the court may determine whether a guarantee or a provision of a particular guarantee is unjust.

Consequence of compliance or noncompliance

(a) the consequences of compliance, or noncompliance, with all or any of the provisions of the contract, mortgage or guarantee.

Relative bargaining power

(b) the relative bargaining power of the parties.

11.32 Some commentators have considered it important that the Consumer Credit Code has not adopted the wording of the Contracts Review Act. The Consumer Credit Code formulation is said to reinforce “the notion that existence or otherwise of one or other of the s 70(2) matters does not itself result in an unjust contract but that they are indicia to be considered”.⁵¹ The Commission, therefore, prefers the inclusion of the Consumer Credit Code formulation in the Model Law.

Whether provisions were subject of negotiation

(c) whether or not, at the time the contract, mortgage or guarantee was entered into or changed, its provisions were the subject of negotiation.

11.34 This is similar to a provision in the Contracts Review Act, except that the Contracts Review Act also refers to negotiation prior to the time the contract was made.⁵³ The omission from the Consumer Credit Code of a reference to negotiations prior to the time the contract was made is understandable since consumer credit transactions are most likely to be subject to standard form contracts.⁵⁴

11.35 Allowing a consideration of prior negotiations is important because it may be more difficult to overturn a guarantee as unjust if a party has had adequate time to consider the effect of the negotiations before the guarantee is finally entered into. A guarantee that was entered into immediately following negotiations might be easier to attack.⁵⁵ No other provision allows a direct consideration of the time taken to enter into a guarantee. It is appropriate, therefore, to reinsert the Contracts Review Act phrase so that the provision in the Model Law reads “prior to, or at the time the guarantee was entered into…”.

Capacity and willingness to negotiate

(d) whether or not it was reasonably practicable for the applicant to negotiate for the alteration of, or to reject, any of the provisions of the contract, mortgage or guarantee or the change.

Unreasonable or unnecessary provisions

(e) whether or not any of the provisions of the contract, mortgage or guarantee impose conditions that are unreasonably difficult to comply with, or not reasonably necessary for the protection of the legitimate interests of a party to the contract, mortgage or guarantee.

Age, or physical or mental condition

(f) whether or not the debtor, mortgagor or guarantor, or a person who represented the debtor, mortgagor or guarantor, was reasonably able to protect the interests of the debtor, mortgagor or guarantor because of his or her age or physical or mental condition.

11.39 Section 70(3) is also relevant to this provision:

For the purposes of subsection (2)(f), a person is taken to have represented a debtor, mortgagor or guarantor if the person represented the debtor, mortgagor or guarantor, or assisted the debtor, mortgagor or guarantor to a significant degree, in the negotiations process prior to, or at, the time the credit contract, mortgage or guarantee was entered into or changed.

Form and intelligibility of the guarantee

(g) the form of the contract, mortgage or guarantee and the intelligibility of the language in which it is expressed.

Independent or other expert advice

(h) whether or not, and if so when, independent legal or other expert advice was obtained by the debtor, mortgagor or guarantor.

11.42 The time at which the advice was obtained is also important since advice obtained early in negotiations may be of little use if new terms are later adopted.⁷⁰

11.43 It has been suggested that this provision is too narrow in that it fails to take account of cases where the party is offered an opportunity to seek independent advice, but declines to do so.⁷¹ It seems reasonable to allow the court to consider whether, and under what circumstances, the guarantor was given the opportunity to seek legal advice, and to include this criterion in the Model Law.

Accurate explanation and degree of understanding

(i) the extent to which the provisions of the contract, mortgage or guarantee or change and their legal and practical effect were accurately explained to the debtor, mortgagor or guarantor and whether or not the debtor, mortgagor or guarantor understood those provisions and their effect.

11.45 This provision will not impose a positive obligation upon a party to explain the guarantee to the other party. It acts as a complement to the previous provision in allowing a consideration of the quality of the advice and the party’s understanding of the guarantee he or she is about to enter into.⁷⁴

11.46 The Consumer Credit Code is silent on who may offer the explanation, whereas the Contracts Review Act makes it clear that any person may offer the explanation, not only the lender. This may work in favour of a lender which has failed to offer an explanation if another person has offered an accurate explanation.⁷⁵ The Model Law provision should, therefore, make it clear that any person may offer the explanation.

Unfair pressure, undue influence or unfair tactics

(j) whether the credit provider or any other person exerted or used unfair pressure, undue influence or unfair tactics on the debtor, mortgagor or guarantor and, if so, the nature and extent of that unfair pressure, undue influence or unfair tactics.

11.48 “Undue influence” is intended to cover undue influence at general law,⁷⁹ while “unfair pressure” and “unfair tactics” will extend the coverage of the provision to cover such matters as:

pressure and tactics applied outside of the recognized fiduciary relationships, for example, high pressure selling techniques and psychological pressure arising out of personal, social, political or religious sensibilities.⁸⁰

Ensuring an understanding of the nature and implications of the guarantee

(k) whether the credit provider took measures to ensure that the debtor, mortgagor or guarantor understood the nature and implications of the transaction and, if so, the adequacy of those measures.

11.50 In creating a potential liability for the failure to give information, it has been subject to some criticism. Some commentators have suggested that it gives a lender a poor choice between providing some information and running the risk of the content of that information being challenged as inadequate or not providing any information and running the risk that a court will find that the failure to provide information was material.⁸²

11.51 The Commission’s recommendations about providing information to guarantors⁸³ should prevent many of the circumstances that are the concern of this provision. However, there may be exceptional cases in which the lender should be expected to do more and these will be covered by this provision, if it is included in the Model Law.

Capacity to satisfy the debt

(l) whether at the time the contract, mortgage or guarantee was entered into or changed, the credit provider knew, or could have ascertained by reasonable inquiry of the debtor at the time, that the debtor could not pay in accordance with its terms or not without substantial hardship.

11.53 The second reading speech in New South Wales referred to this provision as addressing the problem of “overcommitment”. The aim of the provision was to ensure no more than that the lender makes a proper assessment of the borrower’s ability to pay.⁸⁶

11.54 The provision may be aimed at preventing lenders from relying on guarantees in such circumstances, since no lender is likely to enter into a contract that the borrower cannot pay without the support of a guarantor.⁸⁷ This provision should be included in the Model Law.

Justification of terms and conduct in light of the risks undertaken by the lender

(m) whether the terms of the transaction or the conduct of the credit provider is justified in the light of the risks undertaken by the credit provider.

Comparable guarantee transactions

(n) the terms of other comparable transactions involving other credit providers and, if the injustice is alleged to result from excessive interest charges, the annual percentage rate or rates payable in comparable cases.

11.57 The Contracts Review Act has a complementary provision which allows the court to consider “the conduct of the parties to the proceedings in relation to similar contracts or courses of dealing to which any of them has been a party”.⁹² The fair trading and financial services statutes also contain provisions which allow the Court to consider the extent to which a supplier’s conduct is consistent with their conduct in other similar transactions.⁹³

11.58 The Consumer Credit Code provision would appear merely to consider the extent to which the lender falls short of the practices of “other credit providers” in the industry in relation to comparable transactions. This is understandable on the grounds that the Consumer Credit Code offers protection in the context of consumer credit transactions. The Contracts Review Act provision, which concentrates on previous dealings of the parties, has different aims, such as identifying lenders who have engaged in a pattern of oppressive conduct (so that injunctive relief can be taken against them) or identifying a lack of care on the part of the borrower or guarantor in similar circumstances.⁹⁴

11.59 The Commission considers that each of the forms of conduct mentioned above may be relevant in different circumstances. The courts should be able, where relevant, to consider not only the practices of other lenders but also the past conduct of the lender which has accepted the guarantee in question. It is also important to be able to consider whether there is anything in the conduct of a guarantor which may have a bearing on the court’s decision. Provision should be made accordingly in the Model Law.

Any other relevant factor

(o) any other relevant factor.

11.61 The Commission believes that this criterion should be retained to emphasise the fact that the list is inclusive, not exhaustive.

Other factors not covered by the Consumer Credit Code

11.62 There are a number of other matters the courts could consider, which have not been included in the Consumer Credit Code but which are included in the lists in the Contracts Review Act and the fair trading and financial services statutes.

Relative economic circumstances, educational background and literacy

11.63 The Contracts Review Act states that the court shall have regard to the “relative economic circumstances, educational background and literacy” of the parties and any person who represented any of the parties to the contract.⁹⁶ The consideration of this factor is intended to cast light on such other factors as relative bargaining power and the ability to negotiate.⁹⁷

11.64 The omission of this provision from the Consumer Credit Code has not been explained. It is possible that such considerations are incorporated in factors such as relative bargaining power, ability to negotiate and understanding. However, one of the aims of the proposed list is to provide guidance to lenders about the types of situations and characteristics of guarantors that they should be alert to. Such a provision should, therefore, be included in the Model Law.

Setting, purpose and effect of the guarantee

11.65 The Contracts Review Act states that the Court shall have regard to the “commercial or other setting, purpose and effect of the contract”.⁹⁸ This criterion was inserted with the aim of limiting the impact of the Contracts Review Act on purely commercial contracts. The Peden Report stated:

...it is not intended that the legislation should affect purely commercial transactions between two or more commercial enterprises which are equally capable of protecting their own interests. By having regard to the “commercial setting, purpose and effect” of such transactions the court will readily take account of that capacity and the equality of bargaining power.⁹⁹

Relevant industry codes

11.67 The fair trading and financial services statutes state that the courts may have regard to the provisions of any applicable industry code or any other industry code where a person reasonably believed the other party would comply with them.¹⁰¹ The House of Representatives Standing Committee on Industry, Science and Technology proposed these provisions in 1997.¹⁰² The aim was to provide a limited legislative backing to industry codes. The provisions were introduced at the same time as amendments that sought to give legislative underpinning to ensure the effective operation of codes of practice and to achieve desired behavioural change in some industries.¹⁰³

11.68 Such a provision would prove useful in cases where an industry code, such as the Banking Code of Practice, may be applicable. It should be included in the Model Law, with relevant adjustments so that it applies only to such codes as may have an impact on the relationship between the guarantor and the lender.

Compliance with terms of the Model provisions

11.69 Neither the Consumer Credit Code nor the Contracts Review Act expressly provides that the court may have regard to any contravention of their provisions.

11.70 In 1991, Victoria amended the provisions of its Credit Act 1984 (Vic) to state that in determining whether a contract was unjust, the Victorian Civil and Administrative Tribunal is “not excluded from considering any conduct relating to the contract or mortgage by reason only that the conduct constitutes or may constitute a contravention of this or any other Act”.¹⁰⁴ This was, however, a response to a judgment which suggested “that a breach of the Act which results in a civil penalty may not be able to be considered by the tribunal in determining whether a contract should be reopened”.¹⁰⁵ The amendment was made to overcome an interpretation that was never intended and that would “severely limit the operation of the provision and result in major unfairness to consumers”.¹⁰⁶ Commentators have suggested that, notwithstanding the absence of such a provision in the Consumer Credit Code, conduct in contravention of the Act may still be considered a relevant circumstance if it is productive of injustice.¹⁰⁷ The courts have supported this position, noting that “there must have been relevant and actual injustice, not merely a failure to comply with provisions of the Credit Act, before a contract can be held to be unjust”.¹⁰⁸

11.71 One commentator has noted that the Victorian provision is redundant, but adds that the Consumer Credit Code’s (implied) position is that “proof that the credit provider has contravened the statute may be relevant in determining whether a contract is unjust, but by itself cannot be decisive”.¹⁰⁹ This is the same position with respect to the other criteria outlined above in so far as no one criterion, by itself, is decisive.

11.72 Ensuring compliance with the prescriptive provisions proposed elsewhere in this report is, at least in part, about avoiding unjust outcomes. Contravention of any of the prescriptive provisions could, conceivably, be relevant to determining whether a guarantee or a particular term is unjust. In addition, there would appear to be no reason why compliance with similar provisions in other statutes should not also be considered. The Commission, therefore, recommends that compliance, or otherwise, with the provisions of the Model Law or any other applicable statute should be included as one of the criteria that the courts may consider in deciding whether a guarantee or a provision of a guarantee is unjust.

RECOMMENDATION 11.6

In determining whether a guarantee or a provision of a guarantee is unjust in the circumstances relating to it at the time it was entered into or changed, the court should have regard to the public interest and to all the circumstances of the case, including such of the following as it considers relevant:

(a) the consequences of compliance, or noncompliance, with all or any of the provisions of the guarantee;

(b) the relative bargaining power of the parties;

(c) whether or not, prior to, or at the time the guarantee was entered into or changed, its provisions were the subject of negotiation;

(d) whether or not it was reasonably practicable for the guarantor to negotiate for the alteration of, or to reject, any of the provisions of the guarantee or the change, including the extent to which the lender was willing to negotiate the relevant terms and conditions;

(e) whether or not any of the provisions of the guarantee or change impose conditions that are unreasonably difficult to comply with, or not reasonably necessary for the protection of the legitimate interests of the lender;

(f) whether or not the guarantor, or a person who represented the guarantor, was reasonably able to protect the interests of the guarantor because of his or her age or physical or mental condition; (A person is taken to have represented a guarantor if the person represented the guarantor, or assisted the guarantor to a significant degree, in the negotiation process prior to, or at, the time the guarantee was entered into or changed.)

(g) the relative economic circumstances, educational background and literacy of the parties to the guarantee, and of any person who represented any of the parties to the guarantee;

(h) the form of the guarantee and the intelligibility of the language in which it is expressed;

(i) whether or not, and under what circumstances, the guarantor was given the opportunity to seek legal or other expert advice;

(j) whether or not, and if so when, the guarantor obtained independent legal or other expert advice;

(k) the extent to which any person accurately explained the provisions of the guarantee or change, and their legal and practical effect, to the guarantor and whether or not the guarantor understood those provisions and their effect;

(l) whether the lender or any other person exerted or used unfair pressure, undue influence or unfair tactics on the guarantor and, if so, the nature and extent of that unfair pressure, undue influence or unfair tactics;

(m) whether the lender took measures to ensure that the guarantor understood the nature and implications of the guarantee and, if so, the adequacy of those measures;

(n) whether at the time the guarantee was entered into or changed, the lender knew, or could have ascertained by reasonable inquiry of the borrower at the time, that the borrower could not pay in accordance with the terms of the guaranteed loan or could only do so with substantial hardship;

(o) whether the terms of the guarantee or the conduct of the lender are justified in the light of the risks undertaken by the lender;

(p) the terms of other comparable guarantees involving other lenders and, if the injustice is alleged to result from excessive interest rates or other charges, the annual percentage rate or rates or other charges for which guarantors might become liable in comparable cases;

(q) the requirements of (i) any applicable industry code, or (ii) any other industry code with which the guarantor reasonably believed the lender would comply;

(r) whether, in entering the guarantee, the parties complied with the provisions of the Model Law or any other relevant statute;

(r) the conduct of the parties to the proceedings in relation to similar contracts or courses of dealing to which any of them has been a party; and

(s) any other relevant factor.

11.73 Under the Consumer Credit Code and Contracts Review Act, once the court has found that a contract or any of its provisions is unjust, it must decide whether or not to grant relief. In doing so, the court may refer to post-contract conduct.¹¹⁰

Justification for a statutory regime

11.74 The Commission’s recommendations ensure that a flexible range of remedies is available to the courts in granting relief in the case of guarantees or provisions of guarantees that are found to be unjust. In equity, the remedies available to the court include setting aside the contract completely or rescinding the contract in whole or in part. There is no jurisdiction in equity to remodel the agreement. It has been observed that remedies available in particular cases might well have been “less ample” had it not been for the availability of the statutory remedies such as those under the Contracts Review Act.¹¹¹

11.75 The Contracts Review Act provides for a wider and more flexible range of remedies in a number of ways. First, it provides more options than setting aside the contract. Secondly, the relief it offers need not be constrained by equity. At general law, relief for unconscionable dealing is equitable, therefore, the court can look to the conduct of the guarantor and decline relief in some cases where it might otherwise be warranted. The Contracts Review Act also allows some measure of relief where courts may otherwise have been unwilling to grant it because of the consequences of setting aside a contract in its entirety. This was because the injustice to the lender in setting aside the contract was often seen as outweighing the injustice to the guarantor in enforcing it.¹¹²

11.76 The relief available under the Contracts Review Act is divided into principal and ancillary relief.

Principal relief

11.77 The Consumer Credit Code makes provision for orders that may be made on the reopening of a transaction:

The Court may, if it reopens a transaction under this Division, do any one or more of the following, despite any settlement of accounts or any agreement purporting to close previous dealings and create a new obligation—

(a) reopen an account already taken between the parties;

(b) relieve the debtor and any guarantor from payment of any amount in excess of such amount as the Court, having regard to the risk involved and all other circumstances, considers to be reasonably payable;

(c) set aside either wholly or in part or revise or alter an agreement made or mortgage given in connection with the transaction;

(d) order that the mortgagee takes such steps as are necessary to discharge the mortgage;

(e) give judgment for or make an order in favour of a party of such amount as, having regard to the relief (if any) which the Court thinks fit to grant, is justly due to that party under the contract, mortgage or guarantee;

(f) give judgment or make an order against a person for delivery of goods to which the contract, mortgage or guarantee relates and which are in the possession of that person;

(g) make ancillary or consequential orders.¹¹³

(a) it may decide to refuse to enforce any or all of the provisions of the contract,

(b) it may make an order declaring the contract void, in whole or in part,

(c) it may make an order varying, in whole or in part, any provision of the contract,

(d) it may, in relation to a land instrument, make an order for or with respect to requiring the execution of an instrument that:


(i) varies, or has the effect of varying, the provisions of the land instrument, or

(ii) terminates or otherwise affects, or has the effect of terminating or otherwise affecting, the operation or effect of the land instrument.¹¹⁵

11.80 However, some specific provisions of the Consumer Credit Code may have some utility. For example, s 71(a) overcomes the ordinary rule that an account stated is binding on the parties unless there is fraud or some other ground that allows an agreement to be set aside.¹¹⁹ Section 71(b) is a useful statement phrased broadly enough to allow the court to relieve a guarantor from such additional amounts as deferral charges, default interest and enforcement expenses.¹²⁰

11.81 The Commission, therefore, considers that the Contracts Review Act provisions, including the list of ancillary powers, should be adopted, taking into account any useful elaborations in the Consumer Credit Code. The provisions in relation to land instruments, in conjunction with s 19 of the Contracts Review Act and the ancillary powers to order the transfer of property, are intended to deal with the principle of indefeasibility under the Torrens system of land registration.¹²¹

RECOMMENDATION 11.7

The Model Law should provide that, in reopening a guarantee, and in order to avoid as far as practicable an unjust consequence or result, the court may do any one or more of the following, despite any settlement of accounts or any agreement purporting to close previous dealings and create a new obligation—

(a) reopen an account already taken between the parties;

(b) refuse to enforce any or all of the provisions of the guarantee;

(c) set aside any provision of the guarantee in whole or in part,

(d) vary any provision of the guarantee in whole or in part;

(e) relieve a guarantor from payment of any amount in excess of such amount as the court, having regard to the risk involved and all other circumstances, considers to be reasonably payable

(f) in relation to a land instrument given by the guarantor, make an order for or with respect to requiring the execution of an instrument that:


(i) varies, or has the effect of varying, the provisions of the land instrument, or

(ii) terminates or otherwise affects, or has the effect of terminating or otherwise affecting, the operation or effect of the land instrument.

11.82 The ancillary relief provisions in the Consumer Credit Code¹²² are not as expansive as the ancillary and consequential provisions under the Contracts Review Act. The Contracts Review Act provides that, in addition to any orders under s 7, the court “may also make such orders as may be just in the circumstances for or with respect to any consequential or related matter”. The orders may include any of the following:

(a) the making of any disposition of property,

(b) the payment of money (whether or not by way of compensation) to a party to the contract,

(c) the compensation of a person who is not a party to the contract and whose interest might otherwise be prejudiced by a decision or order under this Act,

(d) the supply or repair of goods,

(e) the supply of services,

(f) the sale or other realisation of property,

(g) the disposal of the proceeds of sale or other realisation of property,

(h) the creation of a charge on property in favour of any person,

(i) the enforcement of a charge so created,

(j) the appointment and regulation of the proceedings of a receiver of property, and

(k) the rescission or variation of any order of the court under this clause, and such orders in connection with the proceedings as may be just in the circumstances.

Mediation

11.83 Professor Peden, in his early commentary on the Contracts Review Act, suggested that a useful ancillary power might be for the court to order the parties to submit their dispute to arbitration. However, he also noted that even without an express power, “courts have always been able to suggest to the parties appropriate lines upon which a settlement may be negotiated which could then form the basis for a consent order”.¹²³ Since the Contracts Review Act was enacted in 1980, mediation has become an accepted part of the orders that courts may make in seeking to resolve a matter.¹²⁴ Indeed, many courts in New South Wales may now order mandatory mediations.¹²⁵ Nevertheless, the Commission considers that it would be useful to include a mediation provision in the list of possible ancillary orders.

RECOMMENDATION 11.8

The Model Law should provide that the court may also make such orders as may be just in the circumstances for or with respect to any consequential or related matter, including any of the following:

(a) the making of any disposition of property,

(b) the payment of money (whether or not by way of compensation) to a party to the guarantee,

(c) the compensation of a person who is not a party to the guarantee and whose interest might otherwise be prejudiced by a decision or order under the Model Law,

(d) the sale or other realisation of property,

(e) the disposal of the proceeds of sale or other realisation of property,

(f) the creation of a charge on property in favour of any person,

(g) the enforcement of a charge so created,

(h) the appointment and regulation of the proceedings of a receiver of property,

(i) the rescission or variation of any order of the court under this clause, and

(j) the submission of any aspect of the matter in dispute to mediation,

and such other orders or relief in connection with the proceedings as may be just in the circumstances.

11.84 The Consumer Credit Code allows the court, in deciding whether to grant relief, to have regard to the “conduct of the parties to the proceedings in relation to the contract… since it was entered into”.¹²⁶ The Contracts Review Act contains a provision to the same effect,¹²⁷ although, arguably, the Consumer Credit Code provision is broader than the Contracts Review Act because the Contracts Review Act refers to conduct “in relation to the performance of the contract”.¹²⁸

11.85 This allows the court to consider post-contract conduct of the parties, such as breach, repudiation and election to rescind. It was envisaged that such a provision would “enable the court to examine conduct which is not itself an actual breach of contract but which may reflect upon the effect of the contract in practice and assist the court to fashion an appropriate form of relief”.¹²⁹ For example, the court could take into account a lender’s lenient application of an otherwise harsh repayment clause.¹³⁰ A similar capacity to refer to such conduct should be included in the Model Law.

RECOMMENDATION 11.9

The Model Law should provide that, in deciding whether to grant relief, the court may have regard to the conduct of the parties to the proceedings in relation to the guarantee since it was entered into.

1. Consumer Credit Code s 70.

2. AGC (Advances) Ltd v West (1984) 5 NSWLR 610 at 621 (McHugh JA).

3. See para 2.21-2.24.

4. J R Peden, Harsh and Unconscionable Contracts (Report to the Minister for Consumer Affairs and Co-operative Societies and the Attorney-General for New South Wales, 1976).

5. Consumer Credit (New South Wales) Code s 6(1). See para 2.34.

6. D Harland, “Unconscionable and Unfair Contracts: An Australian Perspective” in R Brownsword, N Hird and G Howells, Good Faith in Contract: Concept and Context (Dartmouth Publishing Company, Alderscot, 1998) at 265.

7. J R Peden, The Law of Unjust Contracts including the Contracts Review Act 1980 (NSW) (Butterworths, Sydney, 1982) at 122.

8. Australia, House of Representatives Standing Committee on Industry, Science and Technology, Finding a Balance: Towards Fair Trading in Australia (Report, 1997) at 181-182.

9. Australia, House of Representatives Standing Committee on Industry, Science and Technology, Finding a Balance: Towards Fair Trading in Australia (Report, 1997) at 169, 172, 180.

10. A J Duggan and E V Lanyon, Consumer Credit Law (Butterworths, Sydney, 1999) at 367-368; M McHugh, “The Growth of Legislation and Litigation” (1995) 69 Australian Law Journal 37 at 43.

11. M McHugh, “The Growth of Legislation and Litigation” (1995) 69 Australian Law Journal 37 at 43.

12. See para 2.49, 4.20-4.22.

13. J Paterson, A Robertson and P Heffey, Principles of Contract Law (2nd ed, Lawbook Co, Sydney, 2005) at 602.

14. J R Peden, The Law of Unjust Contracts including the Contracts Review Act 1980 (NSW) (Butterworths, Sydney, 1982) at 121.

15. Consumer Credit (New South Wales) Code s 70(1).

16. Consumer Credit (New South Wales) Code s 70(7).

17. Contracts Review Act 1980 (NSW) s 4(1).

18. On the difference between the definitions of “unjust” under the Credit Act 1984 (NSW) and the Contracts Review Act 1980 (NSW), see, eg, Custom Credit Corporation Ltd v Lupi [1992] 1 VR 99 at 103, 113.

19. See para 11.29.

20. See para 11.30-11.72.

21. See J R Peden, The Law of Unjust Contracts including the Contracts Review Act 1980 (NSW) (Butterworths, Sydney, 1982) at 117.

22. Contracts Review Act 1980 (NSW) s 4(1) and Consumer Credit (New South Wales) Code s 70(1).

23. J R Peden, Harsh and Unconscionable Contracts (Report to the Minister for Consumer Affairs and Co-operative Societies and the Attorney-General for New South Wales, 1976) at 26.

24. J R Peden, Harsh and Unconscionable Contracts (Report to the Minister for Consumer Affairs and Co-operative Societies and the Attorney-General for New South Wales, 1976) at 26.

25. Consumer Credit (New South Wales) Code s 70(4).

26. Contracts Review Act 1980 (NSW) s 9(4).

27. J R Peden, The Law of Unjust Contracts including the Contracts Review Act 1980 (NSW) (Butterworths, Sydney, 1982) at 140. See also J R Peden, Harsh and Unconscionable Contracts (Report to the Minister for Consumer Affairs and Co-operative Societies and the Attorney-General for New South Wales, 1976) at 26.

28. Contracts Review Act 1980 (NSW) s 15.

29. J R Peden, The Law of Unjust Contracts including the Contracts Review Act 1980 (NSW) (Butterworths, Sydney, 1982) at 147.

30. Consumer Credit (New South Wales) Code s 70(2). See D McGill and L Willmott, Annotated Consumer Credit Code (LBC Information Services, Sydney, 1999) at 461-462.

31. Consumer Credit (New South Wales) Code s 70(2).

32. Contracts Review Act 1980 (NSW) s 9(1).

33. Trade Practices Act 1974 (Cth) s 51AB(1); Australian Securities and Investments Commission Act 2001 (Cth) s 12CB(1); and Fair Trading Act 1987 (NSW) s 43(1).

34. J R Peden, Harsh and Unconscionable Contracts (Report to the Minister for Consumer Affairs and Co-operative Societies and the Attorney-General for New South Wales, 1976) at 28. The words in this quote have been picked up in one of the main judgments on the old Credit Acts: Custom Credit Corporation Ltd v Lupi [1992] 1 VR 99 at 105 (Murphy J).

35. See D McGill and L Willmott, Annotated Consumer Credit Code (LBC Information Services, Sydney, 1999) at 462-463; Baltic Shipping Company v Dillon (1991) 22 NSWLR 1 at 20 (Kirby P); Perpetual Trustees Co Ltd v Khashoba [2006] NSWCA 41 at para 128 (Basten JA); Permanent Mortgages Pty Ltd v Cook [2006] NSWSC 1104.

36. Australian Securities and Investments Commission Act 2001 (Cth) s 12CB(2), 12CC(2); Fair Trading Act 1987 (NSW) s 43(2). See also: Trade Practices Act 1974 (Cth) s 51AB(2), 51AC(3).

37. Esanda Finance Corporation Ltd v Murphy (1989) ASC ¶55-703 at 58,354-58,355.

38. West v AGC (Advances) Ltd (1986) 5 NSWLR 610 at 620 (McHugh JA). See also Perpetual Trustees Co Ltd v Khashoba [2006] NSWCA 41 at para 1263-70 (Spigelman CJ).

39. Para 11.30-11.61.

40. A J Duggan and E V Lanyon, Consumer Credit Law (Butterworths, Sydney, 1999) at 338.

41. See T M Carlin, “The Contracts Review Act 1980 (NSW)-20 years on” (2001) 23 Sydney Law Review 125 at 136-137.

42. See J R Peden, The Law of Unjust Contracts including the Contracts Review Act 1980 (NSW) (Butterworths, Sydney, 1982) at 123.

43. Consumer Credit (New South Wales) Code s 70(2).

44. D McGill and L Willmott, Annotated Consumer Credit Code (LBC Information Services, Sydney, 1999) at 457-458.

45. See Clayton Utz, The New Consumer Credit Code Explained (CCH, Sydney, 1994) at 91.

46. D McGill and L Willmott, Annotated Consumer Credit Code (LBC Information Services, Sydney, 1999) at 457.

47. Contracts Review Act 1980 (NSW) s 9(1).

48. Australian Securities and Investments Commission Act 2001 (Cth) s 12CB(2)(a), 12CC(2)(a); Fair Trading Act 1987 (NSW) s 43(2)(a). See also: Trade Practices Act 1974 (Cth) s 51AB(2)(a), 51AC(3)(a).

49. Contracts Review Act 1980 (NSW) s 9(2)(a).

50. See J R Peden, The Law of Unjust Contracts including the Contracts Review Act 1980 (NSW) (Butterworths, Sydney, 1982) at 124. See also A Beatty, A Smith and A Barclay, Annotated Consumer Credit Code and Regulations (2nd edition, Butterworths, Syndey, 2000) at 133.

51. S Edwards, D Brogan, A Tierney, Accessing the Consumer Credit Code (FT Law & Tax, Melbourne, 1996) at 169.

52. See A J Duggan, S W Begg, E V Lanyon, Regulated Credit: The Credit and Security Aspects (Law Book Company, Sydney, 1989) at 554-555.

53. Contracts Review Act 1980 (NSW) s 9(2)(b).

54. D McGill and L Willmott, Annotated Consumer Credit Code (LBC Information Services, Sydney, 1999) at 455.

55. See J R Peden, The Law of Unjust Contracts including the Contracts Review Act 1980 (NSW) (Butterworths, Sydney, 1982) at 125.

56. Contracts Review Act 1980 (NSW) s 9(2)(c).

57. Australian Securities and Investments Commission Act 2001 (Cth) s 12CC(2)(j). See also: Trade Practices Act 1974 (Cth) s 51AC(3)(j).

58. A J Duggan, S W Begg, E V Lanyon, Regulated Credit: The Credit and Security Aspects (Law Book Company, Sydney, 1989) at 555.

59. Contracts Review Act 1980 (NSW) s 9(2)(d); Australian Securities and Investments Commission Act 2001 (Cth) s 12CB(2)(b), 12CC(2)(b); Fair Trading Act 1987 (NSW) s 43(2)(b). See also: Trade Practices Act 1974 (Cth) s 51AB(2)(b), 51AC(3)(b).

60. A J Duggan, S W Begg, E V Lanyon, Regulated Credit: The Credit and Security Aspects (Law Book Company, Sydney, 1989) at 557.

61. Consumer Credit (New South Wales) Code s 70(2)(m).

62. Contracts Review Act 1980 (NSW) s 9(2)(e).

63. Eg, Wilton v Farnworth (1948) 76 CLR 646; Blomley v Ryan (1956) 99 CLR 362; Commonwealth Bank of Australia v Amadio (1983) 151 CLR 447. See also A J Duggan, S W Begg, E V Lanyon, Regulated Credit: The Credit and Security Aspects (Law Book Company, Sydney, 1989) at 558.

64. Contracts Review Act 1980 (NSW) s 9(2)(g).

65. A J Duggan, S W Begg, E V Lanyon, Regulated Credit: The Credit and Security Aspects (Law Book Company, Sydney, 1989) at 559.

66. See, eg, para 11.38-11.39, 11.44-11.46, 11.49-11.51, 11.63-11.64.

67. See J R Peden, The Law of Unjust Contracts including the Contracts Review Act 1980 (NSW) (Butterworths, Sydney, 1982) at 133.

68. Contracts Review Act 1980 (NSW) s 9(2)(h).

69. A J Duggan, S W Begg, E V Lanyon, Regulated Credit: The Credit and Security Aspects (Law Book Company, Sydney, 1989) at 559.

70. J R Peden, The Law of Unjust Contracts including the Contracts Review Act 1980 (NSW) (Butterworths, Sydney, 1982) at 134.

71. A J Duggan, S W Begg, E V Lanyon, Regulated Credit: The Credit and Security Aspects (Law Book Company, Sydney, 1989) at 559; J R Peden, The Law of Unjust Contracts including the Contracts Review Act 1980 (NSW) (Butterworths, Sydney, 1982) at 135.

72. Contracts Review Act 1980 (NSW) s 9(2)(i).

73. Australian Securities and Investments Commission Act 2001 (Cth) s 12CB(2)(c), 12CC(2)(c); Fair Trading Act 1987 (NSW) s 43(2)(c). See also: Trade Practices Act 1974 (Cth) s 51AB(2)(c), 51AC(3)(c).

74. A J Duggan, S W Begg, E V Lanyon, Regulated Credit: The Credit and Security Aspects (Law Book Company, Sydney, 1989) at 559-560.

75. D McGill and L Willmott, Annotated Consumer Credit Code (LBC Information Services, Sydney, 1999) at 456.

76. Australian Securities and Investments Commission Act 2001 (Cth) s 12CB(2)(d), s 12CC(2)(d); Fair Trading Act 1987 (NSW) s 43(2)(d). See also: Trade Practices Act 1974 (Cth) s 51AB(2)(d), s 51AC(3)(d).

77. Contracts Review Act 1980 (NSW) s 9(2)(j). See also B Zipser, “Unjust Contracts and the Contracts Review Act 1980 (NSW)” (2001) 17 Journal of Contract Law 76 at 86.

78. Consumer Credit Law Commentary (CCH Australia Ltd) at ¶67-390.

79. See para 2.8-2.11.

80. J R Peden, The Law of Unjust Contracts including the Contracts Review Act 1980 (NSW) (Butterworths, Sydney, 1982) at 136.

81. See S Edwards, D Brogan, A Tierney, Accessing the Consumer Credit Code (FT Law & Tax, Melbourne, 1996) at 171.

82. R McDougall, “An Introduction to the Consumer Credit Code” (1996) 15 Australian Bar Review 4 at 28-29.

83. Para 6.3-6.50.

84. Although there is a provision that requires the court to consider, amongst other things, the “relative economic circumstances” of the parties to the contract: Contracts Review Act 1980 (NSW) s 9(2)(f).

85. Australian Societies Group Financial Services (NSW) Ltd v Bogan (1989) ASC ¶55-938. See Clayton Utz, The New Consumer Credit Code Explained (CCH, Sydney, 1994) at 93.

86. NSW, Parliamentary Debates (Hansard) Legislative Assembly, 23 May 1995, at 759. See also S Edwards, D Brogan, A Tierney, Accessing the Consumer Credit Code (FT Law & Tax, Melbourne, 1996) at 171.

87. R McDougall, “An introduction to the Consumer Credit Code” (1996) 15 Australian Bar Review 4 at 29. In such circumstances it is assumed that the borrower has assessed the guarantor as having the ability to satisfy the debt, otherwise there would be no point in seeking the guarantee.

88. Contracts Review Act 1980 (NSW) s 9(2)(l).

89. See para 11.65-11.66.

90. Australian Securities and Investments Commission Act 2001 (Cth) s 12CB(2)(e), 12CC(2)(e); Fair Trading Act 1987 (NSW) s 43(2)(e). See also Trade Practices Act 1974 (Cth) s 51AB(2)(e), 51AC(3)(e).

91. See D Harland, “Unconscionable and Unfair Contracts: An Australian Perspective” in R Brownsword, N Hird and G Howells (ed), Good Faith in Contract: Concept and Context (Dartmouth Publishing Company, 1998) at 254.

92. Contracts Review Act 1980 (NSW) s 9(2)(k).

93. Australian Securities and Investments Commission Act 2001 (Cth) s 12CC(2)(f). See also Trade Practices Act 1974 (Cth) s 51AC(3)(f).

94. J R Peden, The Law of Unjust Contracts including the Contracts Review Act 1980 (NSW) (Butterworths, Sydney, 1982) at 136.

95. Contracts Review Act 1980 (NSW) s 9(2); Australian Securities and Investments Commission Act 2001 (Cth) s 12CB(2), 12CC(2). See also Trade Practices Act 1974 (Cth) s 51AB(2), 51AC(3). See West v AGC (Advances) Ltd (1986) 5 NSWLR 610 at 620-621 (McHugh JA).

96. Contracts Review Act 1980 (NSW) s 9(2)(f).

97. J R Peden, The Law of Unjust Contracts including the Contracts Review Act 1980 (NSW) (Butterworths, Sydney, 1982) at 131.

98. Contracts Review Act 1980 (NSW) s 9(2)(l).

99. J R Peden, Harsh and Unconscionable Contracts (Report to the Minister for Consumer Affairs and Co-operative Societies and the Attorney-General for New South Wales, 1976) at 31.

100. See NSW, Parliamentary Debates (Hansard) Legislative Assembly, 19 March 1980 at 5536. See also J R Peden, The Law of Unjust Contracts including the Contracts Review Act 1980 (NSW) (Butterworths, Sydney, 1982) at 139.

101. Australian Securities and Investments Commission Act 2001 (Cth) s 12CC(2)(h) and (i). See also Trade Practices Act 1974 (Cth) s 51AC(3)(g) and (h).

102. Australia, House of Representatives Standing Committee on Industry, Science and Technology, Finding a Balance: Towards Fair Trading in Australia (Report, 1997) at 182-183.

103. Australia, Parliamentary Debates (Hansard) House of Representatives, 30 September 1997 at 8801.

104. Credit Act 1984 (Vic) s 147(4)(b), inserted by Credit (Further Amendment) Act 1991 (Vic) s 10.

105. Victoria, Parliamentary Debates (Hansard) Legislative Assembly, 6 June 1991 at 3117. It was suggested that the view appeared to be “based on the premise that as a civil penalty applies in that case, to also allow the contract to be reopened would involve a doubling-up of remedies”.

106. Victoria, Parliamentary Debates (Hansard) Legislative Assembly, 6 June 1991 at 3117.

107. D McGill and L Willmott, Annotated Consumer Credit Code (LBC Information Services, Sydney, 1999) at 451, 465.

108. Custom Credit Corporation Ltd v Gray [1992] 1 VR 540 at 561. See also Custom Credit Corporation Ltd v Lynch [1993] 2 VR 469 at 481; Morlend Finance Corporation (Vic) Pty Ltd v Westendorp [1993] 2 VR 284 at 309.

109. A J Duggan and E V Lanyon, Consumer Credit Law (Butterworths, Sydney, 1999) at 360.

110. See para 11.84-11.85.

111. Peters v Commonwealth Bank of Australia (1992) ASC ¶56-135 at ¶57,366.

112. D Harland, “Unconscionable and Unfair Contracts: An Australian Perspective” in R Brownsword, N Hird and G Howells (ed), Good Faith in Contract: Concept and Context (Dartmouth Publishing Company, 1998) at 262.

113. Consumer Credit (New South Wales) Code s 71.

114. Credit Act 1984 (NSW) s 146(2).

115. Contracts Review Act 1980 (NSW) s 7(1).

116. See para 11.82. See also D McGill and L Willmott, Annotated Consumer Credit Code (LBC Information Services, Sydney, 1999) at 513-514.

117. Contracts Review Act 1980 (NSW) s 7(1).

118. See D McGill and L Willmott, Annotated Consumer Credit Code (LBC Information Services, Sydney, 1999) at 513.

119. D McGill and L Willmott, Annotated Consumer Credit Code (LBC Information Services, Sydney, 1999) at 518.

120. D McGill and L Willmott, Annotated Consumer Credit Code (LBC Information Services, Sydney, 1999) at 518.

121. See J R Peden, The Law of Unjust Contracts including the Contracts Review Act 1980 (NSW) (Butterworths, Sydney, 1982) at 118.

122. Consumer Credit (New South Wales) Code s 71(g).

123. J R Peden, The Law of Unjust Contracts including the Contracts Review Act 1980 (NSW) (Butterworths, Sydney, 1982) at 119.

124. See, eg, NSWLRC, Community Justice Centres (Report 106, 2005) at para 1.13.

125. Civil Procedure Act 2005 (NSW) Part 4; Consumer, Trader and Tenancy Tribunal Act 2001 (NSW) Part 5 Div 2. See also para 12.24-12.33.

126. Consumer Credit (New South Wales) Code s 70(5)

127. Contracts Review Act 1980 (NSW) s 9(5).

128. See D McGill and L Willmott, Annotated Consumer Credit Code (LBC Information Services, Sydney, 1999) at 509; and Antonovic v Volker (1986) 7 NSWLR 151 at 157.

129. J R Peden, The Law of Unjust Contracts including the Contracts Review Act 1980 (NSW) (Butterworths, Sydney, 1982) at 142. It should be noted that the provision, as originally proposed, was intended as one of the criteria for determining whether a contract or a provision of a contract is unjust: J R Peden, Harsh and Unconscionable Contracts (Report to the Minister for Consumer Affairs and Co-operative Societies and the Attorney-General for New South Wales, 1976) at 26.

130. See, eg, Gibson v Finance Corporation of Aust Ltd (1980) ASC ¶55-066 at 56,143.