The Law Handbook 2024

436 Section 5: Managing your money NAB v Rose [2016] VSCA 169 In the case of National Australia Bank Ltd v Rose [2016] VSCA 169, the Victorian Court of Appeal confirmed that NAB had breached the previous version of the Banking Code by failing to verbally inform a guarantor, Rose, of certain written warnings in the documents (including that the guarantor should seek independent legal advice before signing) in the course of taking five guarantees from him in connection with the purchase of investment properties. The court held that the Banking Code was a term of the guarantee, and so the Banking Code breach constituted a breach of the banker–client contract. The court concluded that NAB’s breaches of the Banking Code caused loss to Rose in the amount of the guarantees. This had the effect that Rose was entitled to set-off damages (i.e. that Rose’s liability under the guarantees should be reduced by the amount of his loss). Doggett v CBA [2015] VSCA 351 In the case of Doggett v Commonwealth Bank of Australia [2015] VSCA 351, the Victorian Court of Appeal confirmed that the equivalent of the current clause 49 in the 2004 version of the Banking Code was a term of guarantees given by two guarantors, and accordingly required the bank to exercise the care and skill of a diligent and prudent banker in assessing whether a borrower would be able to afford and repay a loan. In this case, however, the guarantors were not entitled to a remedy because they had released the bank under a compromise agreement. CBA v Wood [2016] VSC 264 In the case of Commonwealth Bank of Australia v Wood [2016] VSC 264, the guarantor alleged that the CBA breached the Banking Code by giving the guarantee to the debtor, or someone acting on behalf of the debtor, to arrange the signing. The guarantor also argued that the bank failed to ensure that he signed the guarantee when the debtor was not there, and that the breaches gave him the right to terminate the guarantee. The court found that the guarantor had failed to prove that his loss, which was the amount of his liability under the guarantee, was caused by the breach of the Banking Code. So even though the court found that the relevant provisions of the Banking Code were incorporated as contractual terms of the guarantee, and that they were breached, the guarantor was not entitled to a remedy. (See ‘Banking Code of Practice’ in Chapter 5.10: Unauthorised transactions and ePayments Code.) Varying, re-opening and terminating credit contracts Withdrawing the offer A debtor may, by written notice to the credit provider, terminate a credit contract at any time up until credit has been obtained under the contract (s 21 NCC). Changes by the credit provider The credit contract may allow the credit provider to vary essential terms of the credit contract, such as the interest rate and level of repayments. Under Division 1 of Part 4 of the NCC, the credit provider must notify the debtor of these changes so that the debtor can decide whether or not to terminate the facility and obtain credit elsewhere. However, there is no such requirement to give notice regarding: • a change to a new annual percentage rate payable under the contract if both the new rate and when it will take effect is ascertainable from the contract (s 63(2)(a) NCC); • an increase in the amount of repayments, if the increase occurs automatically, as specified by the contract, and both the amount of the increase and when it takes effect are ascertainable from the contract (s 63(2)(b) NCC); • an increase in the term of the credit contract, if the increase occurs only because of an increase in the annual percentage rate or rates payable under the contract (s 63(2)(c) NCC); and • changes made to the contract under Division 3 or Part 4 of the NCC (i.e. changes on grounds of hardship and unjust transactions) (s 63(2)(d) NCC) (see ‘Unjust contracts’, below). Unjust contracts Sections 76 and 77 contain the NCC’s version of statutory unconscionable conduct. These sections allow a court to grant relief to debtors from the consequences of entering into ‘unjust transactions’.