Arwon Finance Pty Ltd v Wilson - [2019] WASC 244

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION:   ARWON FINANCE PTY LTD -v- WILSON [2019] WASC 244
CORAM:   KENNETH MARTIN J
HEARD:   29 & 30 APRIL 2019
DELIVERED          :   5 JULY 2019
FILE NO/S:   CIV 2225 of 2017
BETWEEN:   ARWON FINANCE PTY LTD
Plaintiff
AND
FRANK CULLITY WILSON
Defendant

Catchwords:

Loan - Recovery action - Promissory estoppel - Defence - Evaluation of estoppel requirements - Assumption held regarding recovery and recourse to security by foreclosure - Express terms of loan agreement - Insider's corporate knowledge of recovery policy used to found assumption by ex-director and senior administrator - Failure to establish representation or reliance on assumption - No position of detriment established

Legislation:

Corporations Act 2001 (Cth)

Result:

Judgment for the plaintiff

Category: B

Representation:

Counsel:

Plaintiff	:	Mr S K Dharmananda SC & Mr V N Ghosh
Defendant	:	Mr I R Pike SC & Mr T C Russell

Solicitors:

Plaintiff	:	Allens
Defendant	:	McInnes Wilson Lawyers

Case(s) referred to in decision(s):

Australian Goldfields NL v North Australian Diamonds [2009] WASCA 98; (2009) 40 WAR 191
Bell Group Ltd (in liquidation) v Westpac Banking Corporation [No 9] [2008] WASC 239; 39 WAR 1
Birla Nifty Pty Ltd v International Mining Industry Underwriters Ltd [2014] WASCA 180; (2014) 47 WAR 522
Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2016] HCA 26; (2016) 260 CLR 1
Grundt v The Great Boulder Proprietary Gold Mines Ltd [1937] HCA 58; (1937) 59 CLR 641
Hughes v St Barbara Mines Ltd [No 4] [2010] WASC 160
Legione v Hateley (1983) 152 CLR 406
Merilla Pty Ltd v Commonwealth of Australia [2015] WASC 309
State Rail Authority of New South Wales v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
Westpac Banking Corporation v The Bell Group (in liq) [No 3] [2012] WASCA 157; (2012) 44 WAR 1
Woodhouse AC Israel Cocoa Ltd SA v Nigerian Produce Marketing Co Ltd [1972] AC 741

TABLE OF CONTENTS

Introduction

The Loan

Background to the proceedings

The last defence: promissory estoppel

Personal insights to the defendant - Mr Wilson

Quintis and Arwon

Mr Wilson's 'recoverability assumption'

The pleadings

Promissory estoppel defence - 3FAD plea 2(a)(i)

Promissory estoppel defence – 3FAD pleas 2(a)(ii) and (iii)

Promissory estoppel defence - 3FAD plea 2(b)

Promissory estoppel defence - 3FAD plea 2(c)

Promissory estoppel defence - 3FAD plea 2(d)

Equitable (promissory) estoppel: basic principles

Key facts and materials underlying the present dispute

ATO private taxation ruling sought by Mr Wilson

The Policy of Arwon (codified in 2013)

The terms of Mr Wilson's Loan Agreement with Arwon

Further trial evidence of Mr Wilson

Mr Wilson's evidence-in-chief

Background and the structure of Arwon and Quintis

The Loan

Change in Quintis strategy regarding direct ownership of sandalwood plantations

Implementation of foreclosure strategy

The Arwon Loan Policy document

High net worth individuals and a put option

No distinction between sophisticated and retail borrowers

Enforcement of the Arwon Loan Policy

Circumstances surrounding Mr Wilson's entry into the Loan Agreement

Execution of the Loan Agreement

Full recourse loan and ATO private ruling

2018 plantation valuation

Repayments on the unsuitable land

Demand for repayment of loan

Mr Wilson's cross‑examination

Mr Wilson's evidence - conclusions

Conclusion

KENNETH MARTIN J:

Introduction

This is a debt recovery action by the plaintiff lender (Arwon) brought against the defendant borrower (Mr Wilson) pursuing repayment of loan funds advanced to Mr Wilson on 30 June 2014. The advance was made under the terms of a written loan agreement entered into between Arwon and Mr Wilson on that same day (the Loan Agreement). At that time, loan funds in the amount of $13,267,650 were advanced to and received by Mr Wilson (the Loan). Mr Wilson used the funds from the Loan to invest in a tax effective product - an Indian sandalwood plantation.
The written terms of the Loan Agreement were later the subject of a deed of variation of 20 February 2016 between the same parties (the Variation Deed). The variations are immaterial to present arguments underlying this action.

The Loan

Under the Loan Agreement (as originally executed) the Loan amount comprised of the Principal Sum, which itself was comprised of two parts - Principal Sum 1 ($1,206,500) and Principal Sum 2 ($12,061,500).
The express terms of the Loan Agreement provided for the repayment of the Loan by monthly interest (fixed at 10.45% per annum, accruing daily) and principal instalment repayments over an ensuing period of seven years. That scheduled repayment regime would have seen the full amount of the principal of the Loan repaid at 1 July 2021.
Under the Variation Deed, Principal Sum 2 was varied and divided into two tranches. The first tranche was called Principal Sum 2A advancing $7,629,600 (noted as loan agreement A3493). The second tranche was called Principal Sum 2B advancing $4,431,900 (noted as loan agreement A33494).
The Variation Deed also varied the interest rate to be fixed at 7.5% per annum, accruing daily, with the consequence of this being an extension of the scheduled repayment regime. Whilst the repayment of Principal Sum 2A would still be completed at 1 June 2021, repayment of Principal Sum 2B would only be completed as at 1 July 2022.
An express term of the Loan Agreement (as varied) also provided that if there was a default by the borrower in, amongst other things, faithfully rendering the stipulated monthly repayments when required (as per the default regime outlined in cl 7(a)) the borrower's repayment obligations would accelerate to then become a requirement to immediately repay all the outstanding principal under the loan (see the preface to cl 7).

Background to the proceedings

Default and the acceleration of the obligation to repay the entire principal amount were, in fact, what occurred here concerning the Loan, after Mr Wilson ceased to render any monthly repayments of principal and interest after January 2017 and fell into arrears.
By June 2017, Mr Wilson was in significant arrears in respect of the Loan as regards at least six then unmet instalment amount repayments (under the two tranches of Principal Sums 2A and 2B).
Consequently, on 7 June 2017, Mr Wilson was advised by a written notice of demand given to him from Arwon that, unless he repaid all arrears under the six unmet preceding monthly instalments, Arwon would seek the immediate repayment of the full amount of the unrepaid principal on his loans.
But Mr Wilson did not make good his arrears following that notice and so, a further default notice was issued to him by Arwon on 26 June 2017.
In due course, Arwon issued Mr Wilson with a further notice of debt claimed as immediately due and payable. That was on 18 July 2017. This notice advised him that the total amounts owing under his loan had been accelerated to become immediately due and repayable. It demanded that he repay, in effect, all the then outstanding amounts of $6,599,493.71 (under the tranche of Principal Sum 2A) and of $4,510,250.80 (under the tranche of Principal Sum 2B).
Consequently, Arwon was seeking, at 18 July 2017, a repayment of unpaid principal (and interest) from Mr Wilson in the aggregate amount of $11,109,744.51, together with interest at a higher interest rate which was applicable in circumstances of default: see item 6 to the Schedule to the Loan Agreement as varied.
Still, Mr Wilson did not repay Arwon the amount demanded of him.
On 24 July 2017, Arwon commenced these proceedings seeking the repayment from Mr Wilson of $11,109,744.51 plus ongoing interest and costs.
At the commencement of the trial, on the unchallenged evidence adduced on behalf of Arwon, Mr Wilson's indebtedness (subject to his defences) was quantified as being, at 29 April 2019, $13,651,096.96 (inclusive of interest) and with further interest continuing to accrue on that amount at the daily rate post 29 April 2019 of $3,927.03 per day: see exhibits 4 and 5, being the evidence of Grant James Walsh by witness statement dated 18 December 2018 and affidavit sworn 26 April 2019 respectively. Mr Walsh was the head of corporate finance and treasury of Quintis (Australia) Ltd.
I will address the relationship between Quintis (Australia) Ltd and the parties to this proceeding in greater detail later in these reasons. For now it is sufficient to note that Arwon was a subsidiary of Quintis (Australia) Ltd and had a funding role in lending to borrowers who would commit to using the funds in the acquisition of Indian sandalwood plantations as an investment.
By his sustained resistance put against Arwon's debt repayment claim against him under the proceedings pursued in this court, Mr Wilson, by his legal representatives, over time has pleaded out multiple diverse defences. At one stage Mr Wilson pursued a counterclaim against Arwon seeking damages, an account, and a reimbursement of some of the interest paid over in respect of a portion of the Loan. However, Mr Wilson's counterclaim was consensually discontinued shortly before the trial, under his amended defence pleading, filed on 15 April 2019.
By the time of the trial there were pleaded, in effect, only two substantive defensive arguments that were pressed by Mr Wilson and still put by him against Arwon's debt repayment claim.
Under the second of the remaining defence arguments, Mr Wilson had alleged that there had either been a total failure of consideration for the Loan, or that he ought to have received some level of apportionment credit against his debt repayment obligations to Arwon. The argument was predicated upon a contention that some 56 of the 215 hectares of an Indian sandalwood plantation that had been leased to Mr Wilson (acquired using the funds from the Loan from Arwon) by another Quintis related corporate entity, was 'unsuitable land' (Mr Wilson's unsuitable land component defence). That land was allegedly said to be unsuitable due to its flooding history and exposure.
Mr Wilson's unsuitable land component defence had further contended that Mr Wilson had suffered loss by reason of what was roughly a quarter of the leased growing land as was allocated to him for his sandalwood plantation, being, as he put it, 'unsuitable'.
Nevertheless, it is not necessary to grapple with Mr Wilson's unsuitable land component defence at the trial in any greater detail, as it was abandoned by Mr Wilson's senior counsel - at the commencement of his opening address on day one of the trial. By leave, Mr Wilson's unsuitable land component defence pleas were duly excised then from Mr Wilson's defence - on the usual terms as to costs thrown away.
The excision of Mr Wilson's unsuitable land component defence left only one substantively pleaded defence argument as standing against Arwon's debt recovery action. The surviving argument essentially was the one controversial issue that presented for a resolution at the trial. If this defence is not made out, then there is no other surviving basis of legitimate resistance against Arwon's debt recovery action against Mr Wilson.

The last defence: promissory estoppel

The surviving trial resistance argument pleaded against Arwon by Mr Wilson is for him to assert a promissory estoppel against Arwon (the promissory estoppel defence).
Mr Wilson, to that end, pleads that at 30 June 2014, when he entered his Loan Agreement with Arwon, that he was led to believe that if he, as a relevant borrower, ever defaulted in the future by not adhering to his repayment obligations concerning principal and interest payments that Arwon, as lender, for such circumstances had promised to limit its loan recovery options against him to only foreclosing first upon the security that Arwon held over Mr Wilson's plantation investment (ie, the trees). In this case, Arwon held registered security over Mr Wilson's leasehold Indian sandalwood tree plantation which he had acquired using the moneys that were advanced to him by Arwon on 30 June 2014 (the sandalwood trees).
Mr Wilson's as pleaded promissory estoppel defence, broadly summarised, is to the effect that although the written terms of his Loan Agreement (as subsequently varied) contain the fairly typical multitude of recovery options and mechanisms expressed in favour of the lender -and which (see cl 7 and cl 8 of the Loan Agreement) are stated to be wholly unconstrained - that, nevertheless, his lender's recovery options had been narrowed or qualified by the effects of the estoppel he contends for.
In effect, this estoppel plea argument of Mr Wilson is that Arwon, by conduct taking place across many earlier years preceding the making of this particular Loan, had led Mr Wilson to believe that only if there turned out to be a quantified money shortfall on his Loan (which shortfall would be ascertained after Arwon had credited Mr Wilson with the value of his as realised security - held by Arwon over his sandalwood trees), could Mr Wilson then as debtor be personally pursued by Arwon - for any residual shortfall amount on his Loan. Axiomatically, it is put, if there was no asserted shortfall on his loan after the foreclosure and realisation by Arwon of his mortgaged security (by applying a fixed valuation formula to the worth of the growing trees known as SGARA that I will later explain), then there would be no personal pursuit of Mr Wilson as debtor, since there would be no residual indebtedness to pursue.
In these reasons I refer to Mr Wilson's recoverability assumption to the effect that Arwon would apply to him as borrower (as outlined above) as he did, as 'the "trees first" recovery policy'. In adopting this phraseology, I am not suggesting any finding as to the existence or authenticity of such a debt recovery policy by Arwon at this time.
Mr Wilson's promissory estoppel defence essentially is that it would be unconscionable in the eyes of a court of equity for Arwon not to first foreclose on Mr Wilson's sandalwood trees security that it still holds. Mr Wilson says Arwon should be barred from proceeding personally against him as it now does for the full amount of his unrepaid loan indebtedness - until it first exercises the foreclosure rights it holds against his sandalwood trees and credits his loan debt with the proceeds.
It looks also to be a component of Mr Wilson's pleaded promissory estoppel defence arguments that, in going about foreclosing against his sandalwood tree security as held, Arwon must arrive at the value of this security (for the purposes of ascertaining any possible fiscal shortfall amount on the Loan) by applying a valuation formula for 'Self‑Generating and Regenerating Assets' known as SGARA. Mr Wilson contends that applying the SGARA formula presently to work out a value of his interest in his sandalwood plantation trees across 215 hectares of land - would derive a value of in excess of $18 million: see exhibit 1 - witness statement of Frank Cullity Wilson dated 29 April 2019, par 159 (Mr Wilson's witness statement). That sum, Mr Wilson says, is well in excess of his current indebtedness to Arwon. Hence, he contends that the prevailing promissory estoppel inhibits the present scope for Arwon's pursuit of its personal action against him at this time, prior to Arwon first foreclosing against his sandalwood trees as its security.
It will be necessary later to evaluate in greater detail the component aspects of Mr Wilson's promissory estoppel defence contentions, including, in particular, how Mr Wilson has pleaded out his residual defence.
This all arises, of course, in the context of the attempted invocation of a promissory estoppel to negate the force of - or, to take up Mr Wilson's own terminology used at the trial under cross‑examination, to have effectively 'trumped' (ts 104 and 108) - the express written terms of the Loan Agreement (as varied) which, as we will see are to the contrary. This also, of course, is all for underlying circumstances where the Loan Agreement was perfected between sophisticated and well‑resourced commercial parties.
Even before that, however, it is first necessary to render some early observations concerning Mr Wilson's somewhat unique commercial relationships situation at the time of his taking up the Loan with Arwon, in particular by reference to a large number of Quintis Group 'hats' then worn by Mr Wilson at 30 June 2014, when his Loan Agreement was perfected with Arwon.

Personal insights to the defendant - Mr Wilson

The following is primarily extracted from Mr Wilson's own witness statement.
Mr Wilson is an admitted legal practitioner in the State of Western Australia gaining post‑admission expertise in the area of taxation law. He is the founding partner and was the long-term managing partner of the local law firm Wilson & Atkinson.

Quintis and Arwon

Mr Wilson is also the founder of the Quintis Group of corporations - and of which he was over many years, since about 1996, either the executive chairman, or managing director.
Mr Wilson was also involved in Quintis (Australia) Ltd (a company under the Quintis Group) as the chief executive officer (CEO). In these reasons, I refer to the ultimate parent corporation Quintis (Australia) Ltd as 'Quintis' and to the broader corporate group as the 'Quintis Group'.
After 2000, Arwon had operated within the umbrella of the Quintis Group as a wholly owned subsidiary of Quintis.
Around 2006, Quintis became a listed public corporation.
Mr Wilson was not only the founder of the Quintis Group, but over time was also an enthusiastic supporter and investor in its tax effective products.
The corporation Arwon, both before and after becoming a wholly owned subsidiary within the Quintis Group, operated essentially as a lender/financier to persons who chose to apply to borrow money - but for the purpose of then investing those loan funds through Quintis (or a related group entity) in tax effective arrangements the Quintis Group promoted for the funds to be used in the establishment of Indian sandalwood tree plantations, established in various parts of Australia, including in Western Australia and in the Northern Territory.
At 30 June 2014, Mr Wilson was then not only the CEO of Quintis (and managing director of the Quintis Group), he was also the CEO of Arwon itself. Further, at 30 June 2014 the directors of Quintis and of Arwon were common. They comprised Mr Wilson, plus four other directors.
So it was at the time of the Loan and the surrounding investment transactions that Mr Wilson was a director of Arwon and then held what was the foremost senior management position within the whole Quintis Group, Quintis - extending to its wholly owned subsidiary, Arwon.
But Mr Wilson was on both sides of the Loan transaction. He, of course, was also the borrower of the Loan from Arwon, the proceeds of which Loan were received and then deployed by Mr Wilson on 30 June 2014 - into one of the Quintis Group's tax effective investments offered at that time. That investment secured for him for an immediate tax deduction of $12,900,000 to be applied against his assessable income in the 2013/2014 financial year (see trial bundle (TB) volume 1, tab 28 (exhibit 6.28) page 498 and ts 102).
On 27 March 2017, Mr Wilson resigned as a director from all his board positions within the Quintis Group, Quintis and from Arwon.
At the trial Mr Wilson accepted in his oral evidence under cross‑examination that by the middle of June 2017 Quintis was in financial trouble (ts 151).
By January 2018, Quintis had entered into both receivership and administration.

Mr Wilson's 'recoverability assumption'

The pleaded promissory estoppel defence is fundamentally grounded upon Mr Wilson's so-termed 'recoverability assumption' held by him it is said towards the Loan, and which he says he held on a basis under which he had been 'induced' to hold - by reason of the conduct of Arwon exhibited towards him in periods before 30 June 2014.

The basis for Mr Wilson coming to hold his recoverability assumption at 30 June 2014 as regards his loan, however, is founded on Mr Wilson's insider's knowledge - gained over time and whilst Mr Wilson was a board member/CEO of the Quintis Group (including of Quintis and Arwon) over the many prior years before he actually committed as a personal borrower to this loan on 30 June 2014 by the terms of the Loan Agreement he signed then.
Mr Wilson pleads that over a long period prior to 30 June 2014 he, in effect, had learned (as a Quintis Group insider) of a corporate policy that was and would be, he says, invariably applied by Arwon in relation to it pursuing recovery on all defaulting borrower's loans (being the so‑called 'trees first' recovery policy).
Put more simply, Mr Wilson argues that he was 'led', because of Arwon's conduct over the prior years, to assume this 'trees first' recovery policy would always be followed for all circumstances of a borrower's repayment default - and without any possibility of an exception to such recovery policy. This was his alleged state of knowledge gained across all his many prior years of familiarity with the loan repayment circumstances for all prior borrowers who had ever borrowed from Arwon.
According to Mr Wilson's promissory estoppel defence, this was not just a bare aspirational policy statement of Arwon. Rather, it was an inflexible and rigidly applied recovery strategy of Arwon for all defaulting borrowers over all time including, as he would say, should the event ever come to pass, as against himself.
So it is that Mr Wilson pleads that for Arwon in 2017 to take a recovery stance against him of then departing from the inflexible 'trees first' recovery policy, and for Arwon to pursue him personally for all his unrepaid loan debt, as it does, but without first foreclosing against and crediting him with the SGARA ascertained value of his sandalwood trees, is detrimental to him and clear unconscionable conduct by Arwon. That is conduct, according to Mr Wilson, that a court of equity will inhibit under the principles of promissory estoppel.
In what is a present pursuit of a very sizeable unrepaid loan debt by Mr Wilson, Arwon now acts under the control of a fresh board of management - appointed subsequent to its receivership and to the perfection of deed of company arrangement (DOCA) that was accepted by creditors to be perfected during 2018.
As will be seen, whilst advancing his promissory estoppel defence, Mr Wilson glides almost effortlessly between all his many responsibilities arising under various former 'hats' under his former positions as a board member, CEO and as the significant inside management decision‑maker of the Quintis Group (in terms of sources of the alleged acquisition of his knowledge of the 'trees first' recovery policy leading to his assumption), to his different personal interest 'hat' of an allegedly wronged borrower now calling on the assistance of equity to protect his position against detriment. The suggested detriment of Mr Wilson that he contends he would suffer because of Arwon's non‑application vis-a-vis himself of the 'trees first' recovery policy (by pursuit of his debt personally at this time) and instead relying on express terms of the Loan Agreement is, as will be seen, not all that clear.

The pleadings

Given what was a significant truncation by the commencement of the trial in the pleaded defences and in the former counterclaim of Mr Wilson, it may be helpful to capture precisely the last iteration of his pleaded promissory estoppel defence - found set out under his third further amended defence of 29 April 2019 ('3FAD').
The promissory estoppel plea itself manifests under par 2 of the 3FAD. It responds defensively to Arwon's pleas under pars 3, 4 and 5 of Arwon's statement of claim (dated 24 July 2017). They essentially invoked against Mr Wilson, in orthodox debt recovery fashion, recovery terms of his 30 June 2014 Loan Agreement (as varied). I set out the defence plea in full below.
I will also record below Arwon's responses to aspects of the promissory estoppel defence - under the last iteration of its reply pleading, being its second further amended reply dated 24 April 2019 (Arwon's Reply).
During the process, I will also incorporate at places some observations of my own along the way.

Promissory estoppel defence - 3FAD plea 2(a)(i)

The pleaded promissory estoppel defence of Mr Wilson commences at par 2 in these terms:
As to paragraphs 3, 4 and 5 of the statement of claim, the defendant:
(a)says that:
(i)despite executing multiple loan agreements on the same or substantially the same terms as the Loan Agreement (as defined in the statement of claim) (Loan Agreement) with other investors since at least 2007, and despite numerous defaults by those investors, the plaintiff did not seek to recover the debt except by recourse only to the Security Interest (as defined in the Statement of Claim) (Security Interest) in the Collateral (as defined in the Loan Agreement) (Collateral) granted by that investor in circumstances where the value of the Collateral exceeded the debt (the Plaintiff's Loan Policy);
Particulars
Further particulars will be provided following completion of interlocutory steps.
Towards that plea I would render the following observations. First, the plea under par 2(a)(i) can be seen as a plea of conduct by Arwon, as regards 'other investors'. The plea, temporally, is seen to extend back to 'at least 2007'. It reflects implicitly what is a plea by Mr Wilson reliant on a Quintis Group board member's alleged insider's knowledge concerning how Arwon dealt with 'other investors' under the circumstances of their individual repayment defaults from time to time.
The nature of the acquired knowledge contended for by Mr Wilson is that Arwon never took a personal recourse against a debtor 'in circumstances where the value of the collateral exceeded the debt'. So formulated, this reflects an asserted reliance upon Mr Wilson's alleged knowledge gained over time while wearing his 'hat' of senior executive manager of Arwon. He seeks, of course, by this defence to use that insider's knowledge to his personal advantage as a defaulting borrower.
During submissions at the trial, senior counsel for Mr Wilson, Mr Pike SC, did not shy away at all from fully accepting Mr Wilson did rely on his insider's knowledge of Arwon's loan recovery conduct gained over time since at least 2007. Senior counsel contended this was, in the circumstances, of no consequence at all. The source of his acquired knowledge did not diminish Mr Wilson's right to rely upon such conduct by Arwon over time - for a purpose of founding a promissory estoppel defence against Arwon.
It should also be noted that the estoppel plea as now seen formulated above does not contend for any form of 'representation' made by Arwon to Mr Wilson for a purpose of founding this estoppel. Instead, Mr Wilson pleads only as to conduct over time as regards Arwon's (recovery) dealings with the 'other investors' and leading him to his assumption. But the absence of a representation is not, as I will later explain, always a pre-requisite to proving a promissory estoppel.
I would further observe that reference seen at the conclusion of par 2(a)(i) to further particulars being provided following completion of interlocutory steps is ultimately unprofitable. As I was told at the trial, no such particulars were ever provided by Mr Wilson (see ts 216).
Paragraph 2 of Arwon's Reply responds explicitly to par 2(a)(i) 3FAD and in terms whereby Arwon:
(a)admits that it has entered into multiple loan agreements on the same or substantially the same terms as the Loan Agreement with both retail MIS [Managed Investment Schemes] and sophisticated investors since 2007;
(b)says that the defendant entered into the Loan Agreement and Investment Management Agreement in his capacity as a sophisticated investor;
(c)admits that, with respect to those retail MIS investors who defaulted under a loan agreement, in practice, the plaintiff elected to enforce against the sandalwood plantations of those retail MIS investors, rather than seek to recover the debt personally from those investors where the value of those plantations exceeded the debt;
(d)says that the defendant was
(1)not a retail MIS investor for the investments which are the subject of this proceeding;
(2)until the defendant's defaults, no sophisticated investor had previously committed defaults in relation to a high net worth or sophisticated investor project resulting in the plaintiff undertaking enforcement action against that sophisticated investor; and
(3)the plaintiff had no practice with respect to enforcement against sophisticated investors such as the defendant in relation to high net worth or sophisticated investor projects;
(e)denies that the enforcement action described in paragraph 2(c) hereof represents any binding policy adopted or implemented by the plaintiff in respect of the enforcement of loan agreements or investment agreements with either sophisticated investors or retail MIS investors; and
(f)otherwise denies each and every allegation contained therein.
Out of that responsive plea seen under Arwon's Reply, a trial argument emerged concerning whether Arwon, relevantly, had ever had a different enforcement policy as between retail managed investor schemes (MIS) investors, by contrast to a policy for sophisticated or high net worth investors.
For the purposes of the present action, Mr Wilson, in terms of his position as an informed investor, would surely fit the definition under the Corporations Act 2001 (Cth) of a 'sophisticated investor'. But well beyond that characterisation, he would personally manifest some even more unique insider features, given his senior positions at the time of his loan as the CEO and board member of not only Arwon, but also as former board member and as managing director of the Quintis Group itself. In short, Mr Wilson, as regards Arwon, was no ordinary mere outsider borrower.

Promissory estoppel defence – 3FAD pleas 2(a)(ii) and (iii)

I move to look at the second aspect of the promissory estoppel defence, under par 2(a)(ii) and (iii) and to the effect that Mr Wilson asserts that he had acted under his assumption. This plea proceeds:
(ii)the defendant assumed that the plaintiff would apply the Plaintiff's Loan Policy to the legal relationship between the defendant and the plaintiff such that if there was an event of default with respect to the Loan Agreement the plaintiff would seek to recover the Secured Monies (as defined in the Loan Agreement) (Secured Monies) by having first recourse to the Security Interest in the defendant's collateral and would only seek to recover personally from the defendant to the extent that the value of the defendant's Collateral was less than the Secured Monies (the Recoverability Assumption);
(iii)the defendant entered into the Loan Agreement in reliance on the Recoverability Assumption and would not have entered the Loan Agreement but for the Recoverability Assumption (the Defendant's Reliance on the Recoverability Assumption); and
...
Seen pleaded above in par 2(a)(ii), Mr Wilson contends he held his assumption that in the event of a future loan default (by him), Arwon's first recourse would be to the security interest, by reason of Arwon's loan policy conduct.
Paragraph 2(a)(iii) then pleads Mr Wilson's asserted reliance on this assumption. It will be seen that the assumption contended for is directed at a hypothetical future circumstance of an event of a borrowing default. It may be remembered in this context that the Loan Agreement was to run over a future period of seven years, before the last monthly instalment of principal and interest was repaid, thereby extinguishing the Loan.
The assumption plea therefore relates to as hypothesised assumed circumstances of a future repayment default, that is said to be assumed by someone who was at the time not only a board member and the CEO of Arwon, but the managing director of the Quintis Group itself.
Arwon's Reply to the plea of a recoverability assumption and of Mr Wilson's alleged reliance upon it is under par 4. It responds (aside from repeating pleas already made under par 2(a) to (d) of Arwon's Reply), essentially in terms:
(b)refers to the provisions of the Loan Agreement pleaded at paragraph 4(i) of the Statement of Claim -
[ie, to cl 4 of the Loan Agreement] -
which provide that the plaintiff may exercise 'all or any' of its rights set out therein;
(c)says the Recoverability Assumption:
(1)is contrary to the terms of the Loan Agreement pleaded at paragraphs 3(a), 3(d) and 4(b) ...
[of Arwon's Reply, namely cl 15.4 (a no waiver provision), cl 15.2 (a provision by which rights, powers and remedies given to Arwon in the Loan Agreement were stated to be cumulative with and not exclusive of the rights, powers and remedies provided by law), and the already mentioned cl 7 and cl 8 of the Loan Agreement]; and
(2)is, even if it was made by the defendant (which is denied), of no force and effect by reason of the provisions of the Loan Agreement pleaded at paragraphs 3(b) and 3(c) ...
[of Arwon's Reply, namely cl 15.5 (being both a provision that the Loan Agreement constituted the entire agreement clause and a no representation other than matters the subject of the Loan Agreement clause)];
(d)says further that the defendant's reliance upon the Recoverability Assumption is inconsistent with the private tax ruling issued to the defendant in respect of the Plantation including the foundational facts upon which the ruling was issued ...
[referring to Mr Wilson's application on 17 July 2014 to the Australian Taxation Office ('the ATO') seeking a private ruling for him in respect of the income tax deductibility of his investment in sandalwood plantations and to the ATO's private ruling of 15 January 2015 back to Mr Wilson in response]; and
(e)otherwise denies each and every allegation contained therein.

Promissory estoppel defence - 3FAD plea 2(b)

The third element of Mr Wilson's promissory estoppel plea is found at par 2(b) in terms by which he:
says that [Arwon] induced or acquiesced in the Recoverability Assumption and the Defendant's Reliance on the Recoverability Assumption as:
(i)the plaintiff applied the Plaintiff's Loan Policy since 2007; [particulars omitted]
(ii)the plaintiff knew that the defendant held the Recoverability Assumption and of the Defendant's Reliance on the Recoverability Assumption;
(iii)the plaintiff's knowledge pleaded in subparagraph (ii) arose from, further or alternatively is to be inferred from, the following:
(A)Mr Megson [Arwon's former chief financial officer] signed the Loan Agreement on behalf of the plaintiff and, in his capacity as company secretary and former chief financial officer, was aware of the Plaintiff's Loan Policy and was aware that the defendant knew of the Plaintiff's Loan Policy and held the Recoverability Assumption and knew of the Defendant's Reliance on the Recoverability Assumption;
(B)Mr Megson was aware at the time the defendant entered into the Loan Agreement that the plaintiff treated all investors in the same way, including the defendant;
(C)Mr Ian Thompson, a director and head of sales and marketing for the plaintiff, by virtue of his role, was aware of the Plaintiff's Loan Policy, and in or about May 2014 when discussing the policy with the defendant generally said words to the effect to the defendant that the plaintiff would apply the Plaintiff's Loan Policy to the defendant, as it did to all investors, and was aware of the Recoverability Assumption and the Defendant's Reliance on the Recoverability Assumption;
(D)Mr Thompson was aware at the time the defendant entered into the Loan Agreement that the plaintiff treated all investors in the same way, including the defendant; and
(E)at the time of the execution of the Loan Agreement, the defendant was the managing director of the plaintiff and his knowledge of the Recoverability Assumption and the Defendant's Reliance on the Recoverability Assumption ought to be attributed to the plaintiff;
[I observe that the plea seen under par 2(b)(iii)(E) above is another manifestation of Mr Wilson's personal reliance on his board position as an Arwon insider, to impact against Arwon's debt recovery position against him.]
(F)at the time of the execution of the Loan Agreement, Quintis had a strategy to increase its direct ownership of sandalwood plantations, including by resolving to foreclose on loan agreements between investors and the plaintiff, where the loan was in default, by having recourse to the security interest in the investor's collateral (Direct Ownership Strategy). The defendant was aware of the Direct Ownership Strategy as was the board of Quintis Ltd, Mr Megson, Mr Stevens and Mr Thompson; and
(iv)despite the knowledge referred to in subparagraph (ii) above, the plaintiff remained silent and did not correct the Recoverability Assumption or the Defendant's Reliance on the Recoverability Assumption before the execution of the Loan Agreement.
[The plea under par 2(b)(iv) above, as to Arwon 'remaining silent' in circumstances where for all intents and purposes Mr Wilson, as its CEO, was a, if not the most, significant human contributor to the state of Arwon's corporate mind, is rather curious. Knowing of a recovery policy practice by Arwon against borrowers as he pleads, it is suggested Mr Wilson as director was to somehow convene a meeting with himself to break a silence to himself on this issue as regards his personal borrowing position?]
Towards these pleas Arwon's Reply specifically (by pars 6 and 7) addresses the positions of Mr Megson, Mr Stevens and Mr Wilson himself.
For present purposes, it is only necessary to note that Arwon's Reply contends, accurately, as I would find, that Mr Wilson held the position of director of Arwon from 23 January 1996 to 10 November 2011 and later on across the further period from 12 June 2012 to 27 March 2017. Hence, at 30 June 2014 Mr Wilson was not only the CEO of Arwon, but was one of its then five board members (along with Messrs Matthys, O'Connor, Eacott and Atkinson).
Paragraph 7 of Arwon's Reply responds directly against the plea under par 2(b)(iii) concerning the state of Arwon's knowledge. It also accepts Mr Megson signed Mr Wilson's Loan Agreement on behalf of Arwon on 30 June 2014. It accepts that at the time of the execution of the Loan Agreement Mr Wilson was a director of Arwon and, further, that the corporation Quintis then aimed to increase its sandalwood plantation ownership holdings by planting new trees and by purchasing plantations directly from investors.

Promissory estoppel defence - 3FAD plea 2(c)

The next component in the pleaded promissory estoppel defence arises under par 2(c), presenting in the following terms whereby Mr Wilson:
(c) says further that if the plaintiff is permitted to depart from the Recoverability Assumption, the defendant will suffer detriment to the extent that the plaintiff is permitted to seek to recover any outstanding debt from him instead of seeking recourse only to the Security Interests in the Collateral;
Two observations can be made immediately concerning this plea. First, during closing submissions, senior counsel for Mr Wilson accepted the nature of Mr Wilson's contended promissory estoppel defence was such that the word 'only' seen used in this plea was inappropriate and that it required a qualification (see ts 228). This was because it was then accepted by senior counsel that the potential for a recovery against the borrower as an individual was being contended by Mr Wilson to be barred only for circumstances of a calculated loan surplus. For the opposite circumstance of a calculated loan shortfall then the estoppel position as contended for by Mr Wilson was merely that Arwon be permitted to pursue the debtor personally for any shortfall amount, after it (the residual indebtedness on the loan) was ascertained.

A second observation to be made concerning this plea as regards alleged detriment is that the further and better particulars concerning this detriment plea were sought by Arwon before trial. Mr Wilson duly provided particulars of his alleged detriment on 15 November 2018 as follows:
The detriment the Defendant will suffer, to the extent that the Plaintiff is permitted to seek to recover any outstanding debt from him instead of seeking recourse only to the Security Interests in the Collateral, is:
(a)financial loss by reason that the financial value of the Security Interest in the Collateral is likely to be in excess of the money allegedly owed by the Defendant to the Plaintiff under the Loan Arrangement;
(b)his legal and other costs of defending these proceedings; and
(c)further particulars will be provided following discovery and expert evidence.
No greater particulars as promised per (c) above of Mr Wilson's response were provided. Hence, Mr Wilson's alleged detriment position did not go beyond what is seen under (a) or (b) above.

Promissory estoppel defence - 3FAD plea 2(d)

The final pleaded component of Mr Wilson's promissory estoppel defence is found set out under 3FAD par 2(d), in the following terms:
(d)in the premises of the matters pleaded in subparagraphs (a) to (c) above, the plaintiff ought to be estopped from denying the Recoverability Assumption and from seeking to recover any debt from the defendant except by recourse only to the Security Interest in the defendant's Collateral;
[Once again, during closing, senior counsel for Mr Wilson accepted that a qualification was also required to this plea - to add more qualifying words, namely, 'unless there is a shortfall' (ts 228). The concession is accepted and the trial will be determined on that clarified basis.]
That completes my overview of how Mr Wilson's promissory estoppel defence was pleaded out and of the pleaded responses by Arwon in reply to that one remaining defence issue.
Before returning to the trial evidence it may be more helpful first to refresh some core principles concerning the legal requirements to establish a promissory estoppel, particularly towards circumstances where the estoppel is argued to impact against the force of express terms of a commercial contract. To that end, I briefly turn to examine those principles - which were not to any real extent in any contention as between the parties at this trial. Rather, the parties' dispute was purely over the application of those principles to present circumstances, as to which they were in heavy dispute.

Equitable (promissory) estoppel: basic principles

The ingredients to found an equitable or promissory estoppel is a topic that I addressed in 2010 in the reasons for decision in Hughes v St Barbara Mines Ltd [No 4] [2010] WASC 160 [786] - [789], more particularly as regards promissory estoppel at [786].
In those reasons, I cited a comprehensive explanation of estoppel principles by Owen J in Bell Group Ltd (in liquidation) v Westpac Banking Corporation [No9] [2008] WASC 239; 39 WAR 1 (Bell [No 9]) and commencing as regards equitable estoppel principles at [3535] (page 474 of the WAR). Owen J's reasons at [3539] in turn summarised what his Honour there referred to as a 'seminal description' of the doctrine of promissory estoppel by Brennan J (as he then was) in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, 428. Addressing Brennan J's well known six criteria, Owen J had paraphrased them as follows:
1.The plaintiff has assumed that a particular legal relationship then existed between the plaintiff and the defendant or has expected that a particular relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship.
2.The defendant has induced the plaintiff to adopt that assumption or expectation.
3.The plaintiff has acted or abstained from acting in reliance on the assumption or expectation.
4.The defendant knew or intended him to do so.
5.The plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled.
6.The defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise.
Within the same reasons Owen J at [3537], from an historical perspective, explained that the decision in Waltons Stores v Maher had seen the High Court of Australia move a step beyond the position it had earlier recognised in Legione v Hateley (1983) 152 CLR 406, by acknowledging an application of the promissory estoppel doctrine to relationships outside a pre‑existing contract. In State Rail Authority of New South Wales v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170, 193 McHugh JA (then sitting as a Justice of Appeal in the New South Wales Supreme Court) had anticipated the same extension as an aftermath to Legione v Hateley.
Referring to the joint reasons of Mason CJ and Wilson J in Waltons Stores v Maher at page 404, Owen J in Bell [No 9] at [3537] observed that the High Court of Australia had:
... identified a common thread from previous authority, namely, the principle that equity will come to the relief of a plaintiff who has acted to his detriment. The basis for intervention was that one party to a transaction had a basic assumption in relation to which the other party to the transaction had 'played such a part in the adoption of the assumption that it would be unfair or unjust if he were left to ignore it', citing Dixon J in Grundt at 675. Their Honours explained that equity comes to the relief of such a plaintiff on the ground that it would be unconscionable conduct on the part of the other party to ignore the assumption.
Owen J also noted that the joint reasons of Mason CJ and Wilson J in Waltons Stores v Maher at page 408 said:
[T]he doctrine of promissory estoppel extends to the enforcement of voluntary promises on the footing that a departure from the basic assumptions underlying the transaction between the parties must be unconscionable. But mere reliance on an executory promise would not necessarily amount to unconscionable conduct. Something more would be required. That 'something' might be the creation or encouragement by the party estopped in the other party of an assumption that a contract will come into existence or a promise will be performed and that the other party relied on that assumption to his detriment to the knowledge of that first party.
Within his 2015 reasons in Merilla Pty Ltd v Commonwealth of Australia [2015] WASC 309, Beech J (as he then was) also comprehensively re‑examined the general principles underlying an equitable estoppel, at between [199] - [209].
At [199] Beech J referenced the six key elements needed to establish a promissory estoppel, applying the Brennan J taxonomy from Waltons Stores v Maher. His Honour noted that those key elements had been applied in Bell [No 9] by Owen J, and under passages that by that time had been at least twice approved by the Court of Appeal of the Supreme Court of Western Australia. The two Court of Appeal decisions referred to by Beech J were Australian Goldfields NL v North Australian Diamonds [2009] WASCA 98; (2009) 40 WAR 191 [194] (Buss JA) and Birla Nifty Pty Ltd v International Mining Industry Underwriters Ltd [2014] WASCA 180; (2014) 47 WAR 522 [110] (McLure P, Buss & Newnes JJA agreeing).
At [203] of Beech J's reasons in Merilla his Honour relevantly observed:
For estoppels founded on a representation, the representation must be clear and unambiguous.
Footnote 176 at the end of this observation cites, as authority for that proposition Australian Goldfields at [195] (Buss JA), Bell [No 9] [3470] - [3472] and Westpac Banking Corporation v The Bell Group (in liq) [No 3] [2012] WASCA 157; (2012) 44 WAR 1 [1749].
The classic six-fold criteria as identified by Brennan J in Walton Stores v Maher, of course, do not display any overt reference to a need to show a 'representation', in order to establish an equitable estoppel. For the majority of cases, some form of representation, either oral, in writing or by conduct, will present as the usual basis on which a plaintiff's contended assumption or expectation will be generated. However, that is not required in every case. On some occasions, the assumption or expectation to be protected by estoppel can also be founded upon the silence, inaction, or in the conduct that is in the character of an acquiescence - all duly assessed as arising out of a holistic view of all the underlying and surrounding circumstances of a particular dealing or transaction - and that is alleged to have given rise to a plaintiff's assumption or expectation.
The current promissory estoppel plea by Mr Wilson does not on its face present as an estoppel plea grounded on any particular representation allegedly made to him by anyone from Arwon in particular. That feature, however, I find is no theoretical debarment to a potential application of the promissory estoppel doctrine in his favour, if the elements of the doctrine are otherwise made good. I will approach the matter on that basis.
Subsequent to the contemporary exposition of general principles in the area by Beech J in Merilla at between [199] and [209], it is only necessary to make further mention of a 2016 decision of the High Court of Australia in Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2016] HCA 26; (2016) 260 CLR 1 and to the reasons of Keane J who, with French CJ, Kiefel, Bell & Nettle JJ, formed a part of the plurality in that decision.
In Crown Melbourne, certain tenants had contended that, although their respective five-year leases had contained no option to renew, and there was an express condition requiring them to complete a major refurbishment of the premises at their own cost, that they nevertheless had been told by the landlord's representative that if they expended funds (as they then duly did) to achieve a refurbishment of the premises to a high standard, that they would be 'looked after at renewal time'. Upon the landlord issuing notices to the tenants requiring them to vacate their premises after an expiration of their five‑year term, the tenants commenced proceedings alleging, amongst other things, that there was an equitable estoppel applicable in their favour against their landlord and preventing the landlord from denying the existence of an obligation to offer them extended tenancies.
But that promissory estoppel argument failed upon the assessment of the plurality, with French CJ, Kiefel and Bell JJ essentially observing that such alleged extension representation as contended for was insufficiently clear. That was, of course, a failed case of an alleged promissory estoppel under a representation. Nevertheless, French CJ, Kiefel and Bell JJ relevantly observed at [35]:
It has long been recognised that for a representation to found an estoppel must be clear. In Low v Bouverie [[1891] 3 Ch 82 at 106] it was said that the language used must be precise and unambiguous. This does not mean that the words used may not be open to different constructions, but rather that they must be able to be understood in a particular sense by the person to whom the words are addressed. The sense in which they may be understood provides the basis for the assumption or expectation upon which the person to whom they are addressed acts. The words must be capable of misleading a reasonable person in the way that the person relying on the estoppel claims he or she has been misled.
Again referring to Low v Bouverie (at page 113) their Honours continued:
The statement that the tenants would be 'looked after at renewal time' is not capable of conveying to a reasonable person that the tenants would be offered a further lease.
From those observations, a requirement of clinical objectivity in a representation argued to found an estoppel as regards what would be conveyed to the reasonable person, rather than to the particular plaintiff subjectively, is made clear. In my view, that same objective assessment approach must be equally applicable to the assessing of a contended promissory estoppel that is said to emerge out of circumstances other than by an overt representation.
To that same end were observations by Keane J, again made in reference to Low v Bouverie, commencing at [151] of his Honour's reasons in Crown Melbourne.
At [152] Keane J had observed, referring to an English decision Woodhouse AC Israel Cocoa Ltd SA v Nigerian Produce Marketing Co Ltd [1972] AC 741, 756, that:
... Lord Hailsham LC explained that the observations of Bowen LJ [in Low v Bouverie] excluded:
'far-fetched, or strained, but still possible, interpretations, whilst ... insisting on a sufficient precision and freedom from ambiguity to ensure that the representation will (not may) be reasonably understood in the particular sense required.'
After reference to Woodhouse, Keane J explained at [153]:
Observance of this limit on the operation of estoppel in equity ensures that it is not allowed to operate to underwrite unrealistic expectations or wishful thinking. Such an operation would be especially pernicious in a commercial context; but even in a non-commercial context estoppel should not be allowed to operate as an instrument of injustice.
I mention as well from Crown Melbourne the observations of Nettle J at [221]. His Honour had said:
Certainly, as has been explained, before a party charged can be estopped by representation, the party charged must have played such a part in the adoption of the assumption or expectation on which the other party has acted to the latter's detriment that it would be unconscionable for the party charged to be left free to ignore that assumption or understanding.
Footnote 295 following the observation above refers to Dixon J's reasons in Grundt v The Great Boulder Proprietary Gold Mines Ltd [1937] HCA 58; (1937) 59 CLR 641, 674 - 675 and also to observations by Mason and Deane JJ in Legione v Hateley at 437. Nettle J continued:
But it does not follow that, because the claimant has made an assumption or reached an understanding of the meaning of the representation that goes beyond the meaning that could reasonably be attributed to it, the party charged is altogether free to ignore it. Depending on the facts and circumstances of a given case, it may still appear that it would be unconscionable if the party charged were free to depart from the meaning that may reasonably be attributed to the representation. (my emphasis in bold)
The key word 'reasonably' seen in the last sentence above delivers the application of an objective standard of reasonableness said to be used in the evaluation of the contended estoppel.
Following those observations concerning promissory estoppel principles, I can now turn back to Mr Wilson's promissory estoppel defence pleas raised at the present trial.

Key facts and materials underlying the present dispute

Evaluating Mr Wilson's promissory estoppel defence, it is necessary to assemble some key surrounding materials to the Loan transaction, to better understand the context of the arguments. The three areas of materials assembled are these, namely:
(a)an explanation of the context of the Loan Agreement by reference to how Mr Wilson applied his borrowed funds obtained from Arwon. That requires an examination of his conduct around that time. As previously noted, the Loan funds were used to invest in sandalwood trees. A plantation was to be established at a cost of some $66,000 (GST inclusive) per hectare, in circumstances of the allocation to Mr Wilson of rights across some 215 hectares of leased land. A convenient explanation of the investment arrangements is found in advice provided on behalf of Mr Wilson to the ATO in seeking a private taxation ruling for Mr Wilson concerning the income tax deductibility of his investment. Advice was provided to the ATO on Mr Wilson's behalf by his law firm Wilson & Atkinson at the time;
(b)an examination of various written loan default and repayment provisions in the Loan Agreement itself. This is particularly relevant to circumstances where under his promissory estoppel defence Mr Wilson would seek to blunt or, to use his trial evidence terminology, to 'trump', the formal application of the legal terms of his Loan Agreement by the aid of an equitable estoppel; and
(c)the terms of a written (Arwon defaulting borrowers debt recovery) policy of Arwon, which Mr Wilson identified at the trial as being, in effect, the codification at that time of Arwon's long‑standing 'trees first' recovery policy and which was said by him to be universally followed by Arwon as against all defaulting growers (borrowers) who ever failed to meet their scheduled repayments. This document was relied on by Mr Wilson as establishing, in effect, Arwon's inflexible recovery approach by only ever applying the 'trees first' security realisation policy against defaulting debtors.

ATO private taxation ruling sought by Mr Wilson

On 16 July 2014, Wilson & Atkinson requested a private ruling from the ATO concerning Mr Wilson's investment made by his using the Loan proceeds (the Private Ruling Application).
The Private Ruling Application is found in TB volume 1, tab 45 (exhibit 6.45) pages 696 - 707. The document contains a description of the sandalwood trees project that was invested in by Mr Wilson and the nature of the many related services to be provided to him by various Quintis related corporations - and in respect of which Mr Wilson was seeking his ruling about the tax deductibility of this investment.
Of particular importance within the Private Ruling Application is a section under a heading 'Finance' at page 7 of the document (TB page 703). This section displays what was then being put in 2014 to the ATO on Mr Wilson's behalf by Wilson & Atkinson, regarding the nature of the finance arrangements, by reference to eight separate features of the investment as there identified. Supporting documents (of which there were five) are also identified at page 8 of the document (TB page 704).
It is convenient to extract from Mr Wilson's Private Ruling Application a description of the project as it was explained to the ATO in terms (pages 3 - 4 of the document, TB pages 699 - 700):
The project is a forestry managed investment scheme as defined by section 394-15(1) of ITAA97 ('Project') in which the Grower is an initial participant. The Project will be established within the next 18 months as an Indian Sandalwood (Santalum album) plantation. The Project will operate from the date of parties executing the Investment Management Agreement (hereinafter the 'IMA') which was on or before 30 June 2014 ('Commencement Date') to 30 June 2029 ('Relevant Period'). The Grower is entitled to receive the Net Proceeds of Sale (as defined by clause 4.8 of the IMA from the growing and harvesting of the Indian Sandalwood trees.
T.F.S. Corporation Ltd (ACN 092 200 854) ("TFS") has been appointed as the Investment Manager by the Grower under the IMA dated and effective from the Commencement Date. Pursuant to clause 1.3(c) of the IMA TFS will provide Establishment Services to the Grower for the purpose of managing the Project.
The Establishment Services include; acquiring appropriate seeds and seedlings, weed control, surveying, ground preparation, planting of trees and host trees, and irrigate, cultivate, tend cull, prune, fertilise, spray, fumigate and poison vermin in support of planting.
T.F.S Properties (ACN 093 330 977) ("TFS Properties") as Trustee will provide the Investment Services under clause 1.3(a) of the IMA.
...
TFS Properties as Trustee will provide the Selling and Marketing Services under Item 6 of Schedule 1 of the IMA.
...
TFS as Investment Manager will provide Property Management Services under clause 1.3(b) of the IMA.

Investment services said to be provided were elaborated upon. So also were selling and marketing services, described under item 6 of schedule 1 of the IMA. Property management services were specified under cl 1.3(b) of the IMA.
The Private Ruling Application continued at pages 6 - 8 of the document (TB pages 702 - 704):
In return for the services provided, the Grower will pay to TFS and TFS Properties fees during the Relevant Period.
TFS Properties is, or will be, the registered proprietor of the 215 hectares of land located within Australia ("Land") upon which the Indian Sandalwood trees will be planted for the purpose of conducting the afforestation business. The Grower will lease the Land from TFS Properties; see Annexure B of the IMA, being the 2014 Lease Agreement. TFS Properties have carefully selected the Land on the basis of expert advice so as to ensure that it meets the growing conditions suitable for Indian Sandalwood.
It is reasonable to expect that TFS will spend at least 70% of the total receipts from the Grower over the life of the Project on direct forestry expenditure.
When the Project was entered into and the period of the Project
The Project was entered into on the Commencement Date upon execution of the IMA. The length of the Project is approximately 15 years (defined as the 'Relevant Period' above) which is consistent with a long term business investment as opposed to a short term paper transaction which gives rise to immediate tax benefits without any ongoing business plans. The length of the Project and the significant commercial commitments by the Grower counterbalances any implication arising from the timing of the entering into to the Project by the Grower.
The Grower has an election under clause 8.3 of the IMA on 15 September 2018 to sell the Grower's interest in the Sandalwood plantation to TFS Properties Ltd. If the Grower makes this election, the Grower will derive assessable income from the Project in the year ended 30 June 2019. The Grower's income from the sale of the Grower's interest is calculated by reference to the method established by clause 8.1 of the IMA.
Finance
Finance for the Project is being provided to the Grower by Arwon Finance Pty Ltd (ACN 072 486 643) ("Arwon Finance"). The Grower has entered into a loan agreement with Arwon Finance to borrow the required funds for the Project.
Arwon Finance is entitled to a security interest (as defined by section 12 of the Personal Property Securities Act 2009) over the assets of the Grower as security for the repayment of the advanced funds.
The Project does not involve any form of non-recourse or limited recourse financing pursuant to which a Grower can leverage its tax deductions but not be at risk with respect to any of its financial obligations.
A Grower may elect to enter into a loan agreement during the Relevant Period and repay the loan to Arwon Finance. This Private Ruling will not apply if a finance arrangement entered into by the Grower includes or has the following features:
1.there are split loan features of a type referred to in Taxation Ruling TR 98/22 Income tax: the taxation consequences for taxpayers entering into certain linked or split loan facilities;
2.there are indemnity arrangements or other collateral agreements in relation to the loan designed to limit the Grower's risk;
3.'additional benefits' are or will be granted to the Grower for the purpose of section 82KL of the ITAA36 or the funding arrangements transform the Project into a 'scheme' to which Part IVA of the ITAA36 may apply;
4.the loan or rate of interest is non-arm's length;
5.repayments of the principal and payments of interest are linked to the derivation of income from the Project;
6.the funds borrowed, or any part of them, will not be available for the conduct of the Project but will be transferred (by any mechanism, directly or indirectly) back to the lender or any associate of the lender;
7.lenders do not have the capacity under the loan agreement, or a genuine intention, to take legal action against the Grower; or
8.entities associated with the Project, other than Arwon, are involved or become involved in the provision of finance to the Grower for the Project.
Change to Grower's financial position
As a result of entering the Project, the Grower will be financially at risk even after allowing for the taxation benefits associated with the Project. The Grower may elect to sell their interest in the Sandalwood plantation following a 4 year period resulting in the grower deriving income at this point in the Project. Due to the fact that there is no non or limited recourse funding available to the Grower for the Project, the Grower's financial expenditure over the period of the Project far exceeds the taxation benefits which are available to the Grower from the Project. The Grower is at financial risk unless the Project derives sufficient business income for the Grower to recoup the financial outlays on the Project.
Change to other party's financial position
The Project does not involve any parties except the Grower, TFS, TFS Properties and Arwon Finance. TFS as the Investment Manager should make a profit from the management of the Project and this profit will constitute assessable income of that entity.
Other consequences for the Grower
The major consequence for the Grower having the Project carried out is that the Grower stands to make a profit before tax from their interest in the Project over the Relevant Period, or earlier if the Grower elects to sell their interest in the Project. Therefore the Grower should return assessable income over the period of the Project. However, the Grower is also at financial risk until the total business income from the Project exceeds the total financial outlays and obligations under the Project's agreements.
The nature of any connections between the parties
No party which will have their financial position affected by the Grower through the establishment and carrying out of the Project has or had any connection with the Grower.
RELEVANT SUPPORTING DOCUMENTS
The following supporting documents are provided:
1.Investment Management Agreement between Frank Wilson, T.F.S Corporation Ltd and TFS Properties Ltd and Tropical Forestry Services Ltd;
2.Loan Agreement between Frank Wilson as borrower and Arwon Finance Pty Ltd as lender;
3.The Direct Forestry Expenditure Calculations;
4.Tax Invoice dated 30 June 2014; and
5.Bank statement.
Section E of the Private Ruling Application had been applicable given, that the law firm Wilson & Atkinson was lodging this private ruling application on behalf of Mr Wilson, as their client. It read:
If you are an agent, by signing this form you are declaring that:
•this document and any attached documents have been prepared according to information supplied by the client(s) identified in Section B of this form
•you have received a declaration from each client stating that the information provided to you to prepare this application is true and correct, and
•you are authorised by each client to give this application to the Commissioner of Taxation.
If you are a legal personal representative, you are declaring the following by signing this form:
•the information contained in this document, and any attached documents, is true and correct.
> 'Agent' includes a tax agent or tax professional authorised to give this application to the Commissioner of Taxation.
> 'Legal personal representative' means an executor or administrator of a deceased estate, a person holding a general power of attorney or a trustee of an estate of a person under a legal disability.
The Private Ruling Application had been signed for Mr Wilson by a Mr Michael Robson of Wilson & Atkinson and dated 16 July 2014.
During the course of his cross‑examination at the trial Mr Wilson was probed over whether he in fact had ever signed the 'declaration', as was expressly envisaged by the terms of the second bullet point cited from section E seen above. Mr Wilson's answers to this line of questions were, in my view, vague and unsatisfactory. I assessed them as seeking to obfuscate (see ts 145). No such client declaration by him was seen in evidence at this trial, or at least I was not directed to one.
During the course of his whole cross‑examination at trial over this Private Ruling Application, which obviously had been lodged by Wilson & Atkinson on his behalf, my further impression was that Mr Wilson strained unconvincingly to distance himself from it as much as he could, or at least to seek to diminish all personal responsibility for its content but, as well, to divert responsibility to persons other than himself for what was then put to the ATO on his behalf in 2014.
Such evidence from Mr Wilson was less than impressive. It indicated to me a strong effort by Mr Wilson to avoid and direct personal responsibility for his obligations - where that end served his purpose, no matter how tenuous the basis for diversion was.
It may be observed that, out of the information being then provided to the ATO under the 'Finance' heading, that the lending arrangements with Arwon were canvassed. They were there described as not involving any form of non‑recourse or limited recourse financing -pursuant to which a grower (investor) could leverage a tax deduction -without being at personal risk in respect of their financial obligations.
As will be seen when the terms of the so-called inflexible recovery policy of Arwon as regards defaulting borrowers are examined below, the Private Ruling Application put to the ATO, particularly under item 2 of the 'Finance' heading, in terms of an asserted absence of any features in the financing arrangements as regards 'other collateral agreements in relation to the loan designed to limit the Grower's risk', looks to be a less than fulsome disclosure to the ATO. That is particularly so given all of Mr Wilson's trial evidence about a so‑called inflexible Arwon recovery policy, invariably applied favouring all defaulting borrowers as regards Arwon's first recovery recourse step being by way of a foreclosure against the secured tree plantation asset before any personal recourse for residual debt could be pursued against a grower (borrower). But that first recourse against security loan recovery arrangement would stand, by my assessment, as well out of alignment with the presentation of Mr Wilson's borrowing arrangements with Arwon to the ATO, particularly a suggested full recourse financing arrangement.
See also item 7 at the 'Finance' heading (words equally eschewed at trial by Mr Wilson) concerning the asserted position of Arwon put to the ATO, that the borrowing arrangements would not be such that:
7.lenders do not have the capacity under the loan agreement, or a genuine intention, to take legal action against the Grower;
During his trial evidence Mr Wilson sought to rationalise all of the asserted Arwon recovery policy assumptions he now contends for on his estoppel defence as being entirely consistent with his understanding of what was a full recourse loan arrangement. Arwon's (so-called) 'trees first' debt recovery policy was said by Mr Wilson to be in complete harmony with there still being a full recourse loan to him at the end of the day if there was any shortfall. I am dubious about that proposition. But, in the end, I do not need to resolve the question. At minimum, I would have thought that such a significant and inflexible Arwon loan recovery policy (which Mr Wilson described in his evidence as a policy of Arwon that 'effectively trumped what is contained in clause 8 or gave priority to ... what is in clause 8(c)' (ts 104)) ought to have been fully explained and disclosed to the ATO. Clearly, it was not by this document. See also ts 108 - 109, where Mr Wilson was forced to concede under cross‑examination that:
... [I]n reflection, the loan agreement should have made it clearer that 8(c) was effectively the - trumped the 8(a), (b) and (d) that - that's not what the company - not how the company operated. Prior to my situation, I'm not aware of the - it ever becoming an issue because the company didn't ever adopt a position that was contrary to the policy.
See also ts 113 - 114, where Mr Wilson responded with some bravado to a question about Arwon's so-called significant historical practices as regards defaulting borrowers and how Arwon pursued them:
... This was the most important policy and practice of Arwon that I can recall and I could tell you the policy and practice of Arwon blindfolded with or without this policy. The policy simply reaffirmed the practice of this company since 2000.

The Policy of Arwon (codified in 2013)

I turn next to examine the express provisions within an undated policy document found at TB volume 1, tab 43 (exhibit 6.43) headed 'Strictly Private and Confidential, Arwon Finance Ltd, Policy and Procedures' (the Arwon Loan Policy document). This was the document Mr Wilson identified at the trial as the written document embodying Arwon's inflexible 'trees first' recovery policy applied against borrowers (growers) in default of their loan repayments.
I will set out below some extracts from the Arwon Loan Policy document to illustrate the evidence of Mr Wilson, which as just seen, was, in effect, that its terms were a codification of the loan recovery policy Arwon had invariably followed and from long before the Arwon Loan Policy document itself was actually written down in this document at some time during 2013.
Another sub‑issue arose at the trial concerning whether, in fact, the board of Arwon in fact had ever ratified the terms of this document ‑ or merely noted the policy on the board's regular action item list. In accord with the terms of the Arwon board minutes produced at the trial (see exhibit 2: TFS Corporation Ltd - Minutes of Directors' Meeting -21 August 2013), the latter position is my finding. I was not satisfied the trial evidence supported an Arwon board ratification or, to the extent Mr Wilson's evidence suggests verbally that it does, that the Arwon Loan Policy document was more than merely noted by the board.
I now set out below some parts from the Arwon Loan Policy document, so that the trial evidence concerning its suggested application to Mr Wilson's position as a defaulting borrower may be better understood. In part, it says:
1.Lending Policy- General Terms & Conditions
1.1Amount
1.1.1Maximum(preferred) $1,000,000
Loans for larger amounts will be considered in special circumstances.
1.2.Term (Maximum)
1.2.16 years Principal and Interest.
1.3Interest Rate
1.3.1Fixed - Rate as determined.
1.4Repayments
1.4.1Monthly in arrears, commencing on the 1^st day of the month following drawdown.
1.4.2Payments preferred by Direct Debit Authority and Credit Cards will be accepted only in special circumstances.
...
2.Loan Process & Assessment
...
3.Application Assessment
...
7.Loans Arrears - Collections and Enforcement
7.1Events Timing
The following table shows the arrears management timeline.

Day
Action

1-15
Dishonour of direct debit or other payment identified. Phone call/write/email to Borrower(s) advising arrears with a request for immediate payment or provision of an acceptable proposa l to clear arrears.. Diary for required follow up.

16-29
Continue follow up by mail/email/phone

30
Apply default interest rate as considered appropriate. Advise borrower.

45
Further arrears notice to issue with advice of legal action for recovery if an acceptable payment arrangement is not forthcoming.

60 -75
Issue Letter of Demand for arrears outstanding plus interest daily increment. Borrower(s) given 14 days to remedy otherwise further legal action will be taken in terms of the relative Loan Agreement.

Advise Credit House (Veda) of debtors default in payments over 60 days. Re-assess for application of default interest rate.(if not already charged)

90 - 120
Issue Notice Of Default.

4 days to respond.

120 - 150 Issue Notice of Termination . 14 days to respond

150 - 180
Solicitors to issue Notice of Retention of Collateral in terms of the Personal Property Security Act. 14 days to respond.

Confirm issue of Notice with CEO/CFO

210+-

f

Arrange transfer of woodlot/s ownership to Arwon

Determine valuation of woodlot/s (as per adopted method) and seek approval from CEO/CFO in respect to:

(a) Shortfall in assessed woodlot/s value to Arwon Loan - Write
off net Arwon...Loan or take further legal action for recovery from borrower/s and/or guarantor/s.

(b) Surplus in assessed woodlots/value to Arwon Loan - Return of surplus funds to borrower/s.

Arrange transfer of woodlots to TFS.

. -

General Notes on the above:
The above timeline assumes that
(i) any proceedings will not be defended;
(ii)service can be affected on the Borrower(s) in a reasonable time on each occasion that service is required. If an application for substituted service is required, this will take further time.
(iii)during the process loan has not been subject of an agreement with the borrower to accept the security property in full and final payment for loan balance outstanding.
7.2Record Keeping
A complete record is to be maintained in the loan management system of all correspondence with the Borrower(s), including internal notes of all phone calls. This is important during any subsequent recovery actions against the Borrower(s).
7.3Enforcement
Enforcement actions must be handled by a Solicitor or under the direction of a Solicitor practising within the state jurisdiction in which the security property is located.
The duly appointed enforcement Solicitor must be instructed to attend to all required state based legal notices and certify the issuance of such legal notices.
If the debt has not been cleared, including principal, interest, fees and collection/recovery costs, then further action against the Borrower(s)(s) [sic] and/or Guarantor(s) should be evaluated from the perspectives of viability of recover and cost effectiveness.
7.4Liability Disputes
Borrower(s)s [sic] are entitled to dispute whether any amount posted to their account is valid. Investigate any such disputed amount and provide the Borrower(s) with a written explanation calculation as to how it arose and the basis upon which it was levied (even if the claims are regarded as spurious).
It should be noted that it may be at tactic of Borrower(s)s whose accounts are in arrears to dispute liability of amounts in loan statements. The fact that a Borrower(s) may dispute liability of an amount does not give them a legal right to refuse payment. The arrears process, including the issue of written arrears notices, should continue even where a response has not yet been supplied in relation to the disputed amount.
7.5Bankruptcy (Individuals)
Bankruptcy is an event of default under the loan agreement. On receiving notice of bankruptcy, a notice requiring the loan to be repaid in full should be issued and legal action initiated to take possession of the security property.
Consider the need for lodgement of Proof of Debt with the Receiver.

7.6Insolvency (Companies)
Insolvency is an event of default under the loan agreement. On receiving notice of insolvency, a notice requiring the [loan] to be repaid in full should be issued and legal action initiated to take possession of the security property.
8.Write Off Policy
8.1Loans past 180 days due are to be classified as non-accrual. Loans past 90 days due are to be assessed individually with respect to the prospect of recovery and a specific provision for loss must be considered against those loans.

At par 134, Mr Wilson accepts that for 2013 and 2014 the 'Projects were promoted by Quintis without an [information memorandum]'. But it is not suggested that any of the information memoranda referred to at par 133 as issued in other years contained anything at all relevant as regards a likely future application by Arwon of an (inflexible) 'trees first' recovery policy. Absent something of that kind, all the generalised observations seen between pars 133 and 137 simply do not assist Mr Wilson in the establishing of his argued promissory estoppel defence.
Towards Mr Wilson's evidence under pars 138 - 142, the following further observations can be made. First of all, as regards the related discussions with a Mr Quentin Megson, the tenor of this evidence is extremely vague, as related at par 139 by Mr Wilson. Evidence about what he was specifically interested in knowing, does not amount to anything other than a suggestion as to a state of his mind at the time which was left wholly uncommunicated.
Furthermore, this evidence does not appear to relate to Mr Wilson's pleaded formulation of the promissory estoppel defence, which is on the basis of an asserted assumption by him reached about any pleaded representation that he pleads reliance upon.
As regards par 141, that evidence concerning the issue that Mr Wilson was focussed upon, namely, borrowing terms, is rather (negatively) insightful. My end assessment (of the trial evidence as a whole, following Mr Wilson's cross‑examination and re‑examination) is that Mr Wilson was not at all then focussed when he took this loan on 30 June 2014 on any hypothesis of his potential future default exposure as borrower. Mr Wilson was then managing director of the Quintis Group and CEO of Quintis and Arwon and, by his own evidence, an enthusiastic supporter and investor in its tax effective products. It is more likely that a possible future repayment default or, indeed, a loss of his senior positions as a member of the board of Quintis and Arwon would then have been the furthests thing from his mind at that time. To the extent Mr Wilson suggests otherwise, I would reject that evidence.
Last, the vague nature of par 142 as regards 'less favourable terms' also does not assist Mr Wilson. Rather, it is perfectly consistent with an application to him of the express terms of his Loan Agreement with Arwon. There is no evidence that such borrowing terms were any different to the terms of Arwon loan agreements consummated at around this time with other borrowers (investors) from Arwon.
Mr Wilson's real grievance looks to be over the later non‑application by a freshly appointed senior management of Arwon (under or post receivership and administration) of the 'trees first' recovery policy against him upon his repayment defaults. His witness statement says nothing relevant to that issue.

Execution of the Loan Agreement

At pars 143 - 151, under heading 'Execution of the Loan Agreement', Mr Wilson, particularly at par 144, provides some more evidence directed at establishing his suggested reliance upon 'the Arwon Loan Policy and its enforcement' (see par 143). This evidence is:
143.My understanding of the Arwon Loan Policy and its enforcement is set out at 105 above.
144.It was my understanding when I entered into the Loan Agreement on 30 June 2014 that in the event of default Arwon would have first foreclosed on the plantation. However, if the plantations were assessed to have a value that was lower than the amount owing under the Loan Agreement, Arwon would then have taken action to recover the difference from me personally.
145.This understanding was the major influencer in my decision to borrow from Arwon in 2014, and in previous years. In my experience, as an investor, there were always other alternative lenders in the market with much lower interest rates. It was a major influence on my decision to enter into the Loan Agreement that I understood that if I ever defaulted on the loan, Arwon would first foreclose on the plantation to recover its loan. It was my view that the value of my plantation would, absent a material destructive event, always exceed the amount of my loan and this view was fortified by Quintis' valuation of its own trees.

146.Had I been told something different about the terms, in particular had I been told that unlike any other borrower since 2001, Arwon would sue me personally in the event of default rather than first having recourse to the plantation, then I would not have proceeded with the investment.
147.Further, it was my understanding when I entered into the Loan Agreement that the Principal Sums were advanced for the purpose of leasing land suitable for growing Sandalwood trees. I had understood that I would be allocated land suitable for this purpose based on my past experience that Quintis would only allocate to investors and plant Sandalwood trees on land suitable for that purpose.
148.Quentin executed my Loan Agreement on behalf of Arwon.
149.Quentin was the company secretary from January 2006 to February 2018 and was the CFO from 2006 to November 2012. The policy of foreclosure and the implementation of the Arwon Loan Policy fell within his areas of responsibility.
150.Up until his stroke in November 2012, Quentin was directly responsible for the Arwon loan book.
151.Neither Quentin nor anyone else at Arwon or Quintis told me that the Arwon Loan Policy would not apply to my Loan Agreement with Arwon. I had no reason to think that the Arwon Loan Policy would not apply.

I reject Mr Wilson's evidence under pars 144 and 145 as implausible. As earlier indicated, by my assessments, it is more probable that Mr Wilson did not direct his mind at all to any potential hypothesis of his exposures upon a future default as a lender at 30 June 2014. As noted, my assessment is that a hypothetical future default by him as a borrower is likely, as the Quintis Group's most senior figure, to have been the furthest thing from his mind at that time.
I could accept that Mr Wilson at that point, as founder and long‑term CEO of Quintis and Arwon, had acquired and built up over time a body of private knowledge as an insider concerning how, generally, Arwon/Quintis would pursue its defaulting borrowers, especially, viewed in light of the assumed policy of a balance sheet enhancement for Quintis, arising from a foreclosure first approach against defaulting borrowers. But any greater assumption by Mr Wilson that a particular loan recovery approach as regards himself as a defaulting borrower, contrary to the express terms of his Loan Agreement, must necessarily be applied to him by Arwon in the future, would have been personal folly on his part.
I also cannot accept Mr Wilson's evidence seen at par 145 concerning his 'understanding' being a 'major influence' on his decision to borrow from Arwon in 2014. I reject that evidence as unreliable, implausible, self‑serving and inconsistent with what I assess to be the true driver for Mr Wilson's borrowing and investment decisions as implemented by him on the last day of the 2014 financial year, namely to obtain an immediate income tax deduction by his investment of over $12 million at the time - effectively then to be set off against his assessable income in that financial year - to reduce it to a negligible assessable amount at the time: see TB volume 1, tab 28 (exhibit 6.28), being Mr Wilson's submitted tax return for the 2014 financial year.
Moreover, I would conclude that if, in fact, Mr Wilson's contended 'understanding' was any sort of 'influencer' as regards his loan, then such understanding was an uncommercial and unreasonable one for Mr Wilson to have then held, especially as a qualified lawyer. It would have been a wholly mistaken understanding. The contributor to such a mistake concerning inevitable future foreclosure upon a default and to only a consequent minimal personal exposure (merely under a circumstance of ascertained shortfall, applying the SGARA formula), if held, would have been a product of Mr Wilson sheltering exclusively under his Arwon insider's 'hat' leading him to an insider's view about his future possible debt recoverability exposures, wholly inconsistent with the express terms of his Loan Agreement. But Mr Wilson, as a borrower from Arwon, could not take advantage of his own mistake by himself creating (if it were held) a mistaken apprehension about his future borrower's risk exposure - in the event that default circumstances ever manifested for him on his loan from Arwon.
Consequently, I must reject Mr Wilson's evidence at par 146 for essentially the same reasons. At par 146 Mr Wilson looks to be seeking to portray himself as something of a financial victim, as regards his not being 'told something different about the terms'. But who would tell him that from within Arwon at the time? What manifests at this point is Mr Wilson looking to capitalise essentially on a personal ignorance asserted as regards his legal exposures - by reference to a future default hypothesis tied to security foreclosure - an issue about which, acting reasonably, Mr Wilson had no right to make any such an assumption, absent some firmer and better express contractual commitment by Arwon to support him.
Mr Wilson as a lawyer knew, or must be taken to know, what he had signed up to by the terms of his Loan Agreement. He is not a naive or unsophisticated person in business. He is a trained lawyer with high level tax law expertise. Mr Wilson is no victim, other than of his own foolishness.
Paragraph 147 of Mr Wilson's evidence is rendered inconsequential, given the abandonment of his former unsuitable land component defence at the commencement of the trial.

Full recourse loan and ATO private ruling

Paragraphs 152 - 154 of Mr Wilson's witness statement refer to the private ruling obtained from the ATO issued on 15 January 2015 concerning his investment: see TB vol 2, tab 55 (exhibit 6.55).
At par 154, Mr Wilson seeks to rationalise that the Arwon loans were still full recourse - being one of the touchstones for their allowed income tax deductibility and for the ATO ruling to that effect which he obtained. Mr Wilson seeks to rationalise why he says he was not concerned about that. The evidence is irrelevant.
For the purposes of this trial it is not necessary for me to render any final determination concerning whether or not an application by Arwon of a contended inflexible 'trees first' recovery policy, limiting a borrower's personal exposures only to any SGARA value derived shortfall, can be reconciled consistently to the characterisation of such arrangements being full recourse against that borrower. I am inclined to assess such arrangements as better characterised as being 'limited' recourse, rather than full recourse, against such a borrower. In contrast, a full recourse loan, by my assessment, envisages a situation more consistent with that borrower's full exposure under the express terms of clauses akin to clauses 7 and 8 of the Loan Agreement. They display plenary recovery terms, essentially unconstrained against a lender, as regards the pursuing of all loan recovery options against a defaulting borrower.
The truncated loan recovery exposure situation as is now contended for by Mr Wilson, so as to have the arrangements (on his terminology) 'trump' the force of clauses 7 and 8 in his Loan Agreement, do not, on my prima facie assessment, meet the concept of a full recourse loan arrangement. Nevertheless, it is unnecessary to express my final view on that characterisation issue.

2018 plantation valuation

At par 159 of his witness statement Mr Wilson refers to the terms of a document provided to him by Quintis in October 2018. At par 159 he says:
On or about October 2018, Quintis provided me with a valuation of my plantations, that they continue to manage, for insurance purposes. A copy of the valuation is at TB 131, volume 5, pages 2677 - 2678. It specifies that my plantations, the subject of the Proceedings, have a value of over $18 million.
But closer reference to the further text in that document indicates it was issued only for insurance purposes. There is an express qualification made following a table in the document, reading in the following terms (TB volume 5, tab 131 (exhibit 6.131) page 2678):
The total insured value is for insurance purposes only and no reliance should be placed on it. The total insured value applies a 100% ownership of the Sandalwood Lot(s). The value does not take into consideration the deferral of any lease and management fees.
Those words expressly render the information therein not to be relied upon for purposes other than insurance purposes.
To the extent Mr Wilson would present this document to show he has established that the application of the SGARA formula (but which is not referred to in the document) in current circumstances of his loan default, or at least as assessed at October 2018, show Mr Wilson in a situation of overall surplus rather than in shortfall, then this evidence is simply not sufficient to meet that objective given the document's highly qualified express terms.

Repayments on the unsuitable land

Commencing at par 216 under a heading 'Repayments on Unsuitable Land', Mr Wilson relates:
216.As I believed that a substantial part of my investment was on the unsuitable Cadell Land, I ceased making repayments on my loans after I resigned.
217.Shortly thereafter, on a date I cannot specifically recall, I spoke to Julius Matthys (Julius), the current CEO. I cannot recall the exact words used but I advised him that I felt it was unfair that I should be making loan repayments on loans for my plantations that had been established on patently unsuitable land. I told him that I would recommence my loan repayments once the issue had been rectified.
At the commencement of trial the unsuitable land component defence was abandoned. Hence, that rationalisation for Mr Wilson ceasing to make his loan repayments at par 216 was ultimately never ventilated to the court as regards any so-called 'unsuitable Cadell land'. Hence, I was not called to make a finding about the unsuitability of the Cadell land.
The only relevant fact emerging from all this is that Mr Wilson now accepts that he ceased to make repayments to Arwon on his loans after 27 March 2017, but no longer presses at this trial the excuse he offered at the time for ceasing his repayments.
Mr Wilson's evidence under par 217 concerning him advising the current CEO, Mr Matthys, that his loan repayments would recommence upon that land suitability issue being rectified, are also otiose.
The only defence currently pressed, as already now identified, is the promissory estoppel defence.

Demand for repayment of loan

Subsequent components of Mr Wilson's witness statement identify and acknowledge his receipt of letters of demand from Arwon as regards his unrepaid loan arrears, particularly during June 2017, but which it is unnecessary to elaborate upon further: see pars 233 - 236. See also par 250 concerning the notice Mr Wilson accepts he received on 18 July 2017 from Arwon concerning the repayment of his loan debt.

Mr Wilson's cross‑examination

I would assess Mr Wilson's promissory estoppel defence as failing on the basis of his evidence‑in‑chief alone. Cross‑examination only reinforced those deficiencies. Across the course of these reasons so far I have already identified various places where I assessed that Mr Wilson's evidence was exposed by his cross‑examination.
To the extent I need to render any further findings about the reliability of Mr Wilson's evidence at the trial, lest that be required in the future, I would first say that I viewed all of Mr Wilson's evidence cautiously.
Generally, it must be said that Mr Wilson sought to effectively give evidence in his own interest, to deflect or defer his personal repayment obligations to Arwon (as a defaulting borrower). That is for circumstances where he was at the time of taking his loan of 30 June 2014, until his departure from the Quintis Group organisations at 27 March 2017, its managing director/CEO and therefore its most senior and significant managing hand. As seen, Mr Wilson uses private insider-acquired Quintis Group board knowledge to advance his promissory estoppel defence against Arwon. I am cautious, therefore, about accepting self‑serving evidence from Mr Wilson, unless corroborated from a reliable (documentary) source.
Second, as I have already detailed, it is obvious that Mr Wilson at relevant times, until 27 March 2017, wore a number of 'hats' in and around this particular loan transaction. After hearing Mr Wilson's evidence, I hold a significant concern that Mr Wilson lacks capacity to draw an appropriate line between his personal interests as a borrower from Arwon and investor in Quintis's sandalwood tree plantations. That personal interest stands in some contrast to his former positions essentially as founder of the Quintis Group, then as a long-standing board member of both Quintis as parent and contemporaneously of Arwon, its wholly owned subsidiary after 2000. In his capacity as board member and CEO, Mr Wilson owed duties of diligence, loyalty and fidelity to Arwon. My impression is that Mr Wilson struggles to reconcile fiduciary obligations arising from his former positions against his presently exposed position as a self‑interested defaulting borrower vis-â-vis Arwon.
Third, Mr Wilson had presented as a witness at trial as a highly self‑assured man. He appeared as thoroughly convinced of the righteousness of his position and of, in effect, of what he saw as the discriminatory conduct taken against him by his being exposed to a personal recovery suit pursued against him for his debt. At times, Mr Wilson gave evidence in sweeping fashion, lapsing into broad statements of generality. But some generalisations came to be exposed by cross‑examination as lacking in supporting factual detail. Mr Wilson struggled when pressed for the detail and when exposed would seek to obfuscate (see, for example, ts 113 - 114).
In short, in the key areas of his evidence as regards the contended promissory estoppel defence, I do not assess Mr Wilson's evidence as being reliable. I have already referred to transcript examples concerning Mr Wilson's evidence under cross‑examination concerning the so-called 'trees first' recovery policy being applied to 'trump', as he would have it, terms of his Loan Agreement.
I also assessed Mr Wilson's evidence concerning the Private Ruling Application by Wilson & Atkinson on his behalf as regards the application of the proceeds of the 30 June 2014 Loan, as highly unconvincing. It manifested what I assessed as an unconvincing attempt made by Mr Wilson to distance himself under circumstances where that did not reflect well upon him. That evidence constituted an unconvincing attempt to effectively 'pass the buck' to others - a regrettable trait which unfortunately manifested again on other occasions in his cross‑examination as well.
In the end, however, the promissory estoppel defence essentially crumbles, assessed on the state of Mr Wilson's own evidence‑in‑chief.

Mr Wilson's evidence - conclusions

I conclude my assessment of Mr Wilson's evidence noting the essential absence of any real evidence concerning a detriment to him for the purpose of his establishing of his contended promissory estoppel. In other words, if, as Mr Wilson would seem to contend, the contemporary value of his 215 hectares of plantation asset must substantially exceed the amount of the loan debt that is claimed against him by Arwon by something in the order of approaching $6 million, then Mr Wilson has not provided a persuasive basis to suggest how he is disadvantaged by this debt recovery action. To the contrary, he looks to be more disadvantaged under a foreclosure scenario to Arwon which would then deny him an opportunity to reap approximately $6 million in surplus profit (assuming a non return post foreclosure of any ascertained surplus on the debt, as was the approach of Arwon followed under Mr Wilson's board).

Hence, on my assessment, Mr Wilson's promissory estoppel case, even on the basis of all his other evidence being accepted, would still fail predicated upon his failure to establish:
(a)Any representation from Arwon to him communicating the 'trees first' recovery policy he contends for. Indeed, as I assess Mr Wilson's pleading, he has never run an estoppel by representation case.
(b)Accepting for argument's sake that Mr Wilson at some point had persuaded himself in his mind (based upon his 20 years or so of Quintis Group insider knowledge) the uncommunicated to anyone else assumption that Arwon would not pursue him personally until it had first foreclosed and only then if there was a SGARA value ascertained shortfall - then such an assumption was nevertheless an uncommercial and unreasonable assumption for him to hold in all the circumstances. It was commercially naive for Mr Wilson to make that assumption, absent some clearer express written commitment by Arwon confirming such a future position and issued by someone for Arwon other than himself (due to an obvious conflict of interest). But Mr Wilson never discussed obtaining such a written commitment with anyone else at Arwon/Quintis. He never got one. In truth, he simply ignored or took a gamble on the future, in circumstances where he had already obtained a significant tax benefit arising out of this investment by using the proceeds of the loan he received from Arwon. In such circumstances, a 'trees first' recovery assumption, if held, at 30 June 2014 (but which I would find is not proved) would in any event have been unreasonably reached. If anything, this expressed assumption position, I conclude, has emerged only very much later in the circumstances of Mr Wilson's repayment defaults and his cessation in holding board positions with Quintis and Arwon, after 27 March 2017.
(c)In any event, I find no reliance proved by Mr Wilson upon such an assumption in all the circumstances.
(d)I find that Arwon, the corporate entity (absent what would be irrational assumptions made by Mr Wilson as its CEO), made no relevant contributions by reason of its prior recovery conduct actions taken against other defaulting borrowers over time towards the encouraging, acquiescing in, ratifying or providing to Mr Wilson any reasonable basis for him to support a holding by him of the assumption he contends (assuming, contrary to my primary finding such an assumption was ever held by him). Loan recovery actions by Arwon over time against defaulting borrowers as regards favouring asset foreclosure first, relating to other individual defaulting lenders, may be accepted. But such past recovery conduct of itself by Arwon set no precedent. It did nothing to detract against an applicability to Mr Wilson of the Arwon's express full recovery under his Loan Agreement terms. The plenary recovery options thereunder were a matter of discretion for Arwon to pursue as it assessed to be appropriate under the circumstances of Mr Wilson's potential future repayment default as a borrower, should that ever happen.
Furthermore, I conclude from all the evidence that Mr Wilson has not sufficiently established a detrimental position for himself as regards the present debt recovery action by Arwon. Mr Wilson appeared to suggest whilst under cross‑examination at trial that tree plantation assets are illiquid and thus take some time to realise (see ts 155). But that, I conclude, could be no surprise to anyone, let alone to him. It should not have been of any surprise to him, given his position within the Quintis Group.
That sanguine realisation position also stands in some fairly stark contrast to the post‑Moelis report expressed policy of Quintis, which had expressed unbridled optimism, notwithstanding borrower defaults by reason of the enabling of an asset acquisition for Quintis and consequent overall group balance sheet enhancement, from a foreclosure taken against a borrower's sandalwood trees - the illiquid asset.

Conclusion

In light of the failure of the promissory estoppel defence as what was the last bulwark against Arwon's pursuit of Mr Wilson's loan, there should be judgment for Arwon in the amount claimed together with interest accruing since 29 April 2019 at the daily rate indicated.
I will hear the parties as to final orders and as to costs.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
DW
Associate to the Honourable Justice Martin
5 JULY 2019

Day	Action
1-15	Dishonour of direct debit or other payment identified. Phone call/write/email to Borrower(s) advising arrears with a request for immediate payment or provision of an acceptable proposa l to clear arrears.. Diary for required follow up.
16-29	Continue follow up by mail/email/phone
30	Apply default interest rate as considered appropriate. Advise borrower.
45	Further arrears notice to issue with advice of legal action for recovery if an acceptable payment arrangement is not forthcoming.
60 -75	Issue Letter of Demand for arrears outstanding plus interest daily increment. Borrower(s) given 14 days to remedy otherwise further legal action will be taken in terms of the relative Loan Agreement. Advise Credit House (Veda) of debtors default in payments over 60 days. Re-assess for application of default interest rate.(if not already charged)
90 - 120	Issue Notice Of Default. 4 days to respond.
120 - 150	Issue Notice of Termination . 14 days to respond
150 - 180	Solicitors to issue Notice of Retention of Collateral in terms of the Personal Property Security Act. 14 days to respond. Confirm issue of Notice with CEO/CFO
210+- f	Arrange transfer of woodlot/s ownership to Arwon Determine valuation of woodlot/s (as per adopted method) and seek approval from CEO/CFO in respect to: (a) Shortfall in assessed woodlot/s value to Arwon Loan - Write off net Arwon...Loan or take further legal action for recovery from borrower/s and/or guarantor/s. (b) Surplus in assessed woodlots/value to Arwon Loan - Return of surplus funds to borrower/s. Arrange transfer of woodlots to TFS. . -