Astram Financial Services (Astram) was established to enter into a franchise agreement with the Bank of Queensland (the Bank) to operate a franchise in Campbelltown. The Bank provided credit to Astram to enable it to conduct the franchise. Performance of Astram’s obligations was guaranteed by Mr and Mrs Ramsey (the Ramsey’s) who gave a mortgage over their home.
The franchise failed. Astram and the Ramseys alleged that the business failed because the Bank misrepresented the prospects for success of the business and/or the level of support which it would provide to it. Astram never achieved the targets stated in a business plan including writing $4 million in loans per month. Astram and the Ramseys alleged that the Bank assured them that such a target was achievable and knew of no reason why it would not be achieved. Mr Ramsey asserted that he relied on the Bank in that regard and would never have entered into the arrangement otherwise.
The judge found for the bank summarizing his reasoning as follows:
The central defect in the applicants’ case, which was never satisfactorily addressed, lies in the fact that the commitments which they each made were based on written statements (some contractual) about the rights and obligations of the parties which were clear and relevantly unqualified. In each case the “assurances” upon which the applicants relied were contradicted by the express written contractual terms which they executed, and by intermediate written statements of the Bank’s position. Not only the contractual terms, but also the intermediate written statements, were accepted by Mr Ramsey on behalf of Astram and endorsed as understood by him. The applicants’ case elevated the asserted contents of introductory discussions (of which there was no written record) to a position of overriding importance. It reduced the significance of every inconsistent or contradictory written statement or contractual term effectively to one of no, or insignificant, weight or legal content. There is no foundation in legal principle, statute or commercial practice for such an approach and the applicants’ case was therefore bound to fail.
The guarantors also argued that they were not personally bound because they signed as trustees of a family trust. This was rejected with the judge noting:
Under the general law there is no distinction to be made, so far as third parties are concerned, between a trustee in his personal capacity and a trust he administers as trustee. It is not sufficient, to exclude personal liability, that a trustee executes a document with a statement that he does so as trustee. The trustee remains personally liable, even if he may have a claim against the trust assets.
His Honour then citied a gaggle of authorities that supported the proposition that any trustee who wished to limit his liability to the assets of the trust would need to use clar and unambiguous words:
In Helvetic Investment Corporation Pty Ltd v Knight (1984) 9 ACLR 773 Glass JA (with whom Samuels JA agreed) accepted the following two propositions:
A trustee who enters into a contract will normally incur unlimited personal liability unless by appropriate language or expressed stipulation such liability is restricted.
A mere description of the capacity in which he contracts as that of trustee is insufficient to exclude full personal liability.
In Elders Trustee and Executor Co Ltd v E G Reeves Pty Ltd  FCA 332 Gummow J said:
It is fundamental that the common law does not recognise a trustee as having assumed an additional or qualified legal personality. This means that the liability of the trustee for debts he incurs includes those incurred in the course of performance of the trust. His liability to creditors is not limited or quantified by reference to the extent of the trust assets … The debts are his debts … clear words are necessary to achieve a result whereby what is prima facie the unlimited personal liability of a trustee is … qualified.
In Re Interwest Hotels Pty Ltd (in liq) (1993) 12 ACSR 78 Eames J held:
Where a trustee acting on behalf of a trust entered a contract then as a matter of law the trustee would be taken to be personally liable as well as having made the trust liable under the contract. Clear and unambiguous words would be required before the court would accept that the personal liability of the trustee had been excluded.
In the case of a trust, the trust has no separate existence – what exists is the trustee and its liabilities are its alone although it has a right of indemnity out of the trust assets.