Westpac was owed over $3 million under a bailment agreement and obtained default judgement against the guarantor. The guarantor sought to have the judgement set aside on the grounds that there was an implied term in the bailment facility that:
The bank would do nothing of their own motion to put to an end to the state of circumstances, under which, alone, the financial accommodation arrangements between the Bank and the borrower could be operative (“the Business Efficacy Term”).
The judge noted that for an implied term to be found:
- it must be reasonable and equitable;
- it must be necessary to give business efficacy to the contract;
- it must be so obvious that it goes without saying;
- it must be capable of clear expression;
- it must not contradict any express term of the contract.
He then held:
The implied term is utterly inconsistent with the fifth requirement. It is directly contradictory to the bailment contract. That is, Westpac can take possession of the bail goods at any time, without notice and without default.