Bankwest (a division of CBA) v Mann
[2015] WASC 187
•28 MAY 2015
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: BANKWEST A DIVISION OF COMMONWEALTH BANK OF AUSTRALIA -v- MANN [2015] WASC 187
CORAM: ACTING MASTER GETHING
HEARD: 20 APRIL 2015
DELIVERED : 28 MAY 2015
FILE NO/S: CIV 2092 of 2014
BETWEEN: BANKWEST A DIVISION OF COMMONWEALTH BANK OF AUSTRALIA
Plaintiff
AND
KEVIN ROBERT MANN
Defendant
Catchwords:
Summary judgement - Plaintiff's application - Whether affidavits verify all the facts on which the claim is brought - Misleading conduct - Unconscionable conduct - Estoppel - 'Some other reason' for there to be a trial of the claim
Legislation:
Australian Consumer Law, s 18, s 21, s 22, s 23, s 236, s 237, s 243
Rules of the Supreme Court 1971 (WA), O 14
Result:
Application dismissed
Category: B
Representation:
Counsel:
Plaintiff: Ms E J Cavanagh
Defendant: In person
Solicitors:
Plaintiff: Minter Ellison
Defendant: In person
Case(s) referred to in judgment(s):
Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552
Ansearch Ltd v Wavtech Pty Ltd [2006] WASC 184
Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VLR 332
Bank of Western Australia v Stein [2005] WASC 43
Barrick Gold of Australia Ltd v F L Smidth Inc [2007] WASC 186
Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; (2006) 226 CLR 256
Commonwealth Bank of Australia v Shaddick [2011] WASC 205
Eng Mee Yong v Letchumanan [1980] AC 331
Fazio v Fazio [2010] WASC 263
Field Camp Services Pty Ltd v Site Accommodation Pty Ltd [No 2] [2012] WASCA 27
Fremantle Port Authority v DP World Australia Ltd [2007] WADC 202
Gallo v Dawson [1990] HCA 30; (1990) 64 ALJR 458
GEL Custodians Pty Ltd v Dewar [2014] WASC 177
Glew v Frank Jasper Pty Ltd [2010] WASCA 87
Hee v Nyoni [2014] WASC 44
Helmers v Como [2014] WASC 394
HSBC Bank Australia Ltd v Mavaddat [2015] WASC 153
Hughes v St Barbara Mines Ltd [No 4] [2010] WASC 160
Ibrahim v The Honourable Justice Carolyn Martin [2012] WASC 338
Jacka Nominees Pty Ltd (in liq) v Edwards Karwacki Smith & Co Pty Ltd (Unreported, WASC, Library No 920512, 12 October 1992)
Johnson v Hallam [2015] WASC 149
Miles v Bull [1969] 1 QB 258
Morgan v Pallister [2004] WASC 188
Moscow Narodny Bank Ltd v Mosbert Finance (Aust) Pty Ltd [1976] WAR 109
Permanent Mortgages Pty Ltd v Vandenbergh [2010] WASC 10; (2010) 41 WAR 353
Perpetual Trustee Company Ltd v Burniston [No 2] [2012] WASC 383
Prefumo v Sutton [2011] WASC 151
RHG Mortgage Corporation Ltd v Schafer [2014] WASC 297
Smart v Prisoner Review Board (WA) [2012] WASC 48
The Bell Group Ltd (in liq) v Westpac Banking Corporation [No 9] [2008] WASC 239; (2008) 39 WAR 1
Tipperary Developments Pty Ltd v The State of Western Australia [2009] WASCA 126; (2009) 38 WAR 488
Tobin v Dodd [2004] WASCA 288
Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387
Webster v Lampard [1993] HCA 57; (1993) 177 CLR 598
Wentworth v Rogers (No 5) (1986) 6 NSWLR 534
Westpac Banking Corporation v The Bell Group Ltd (in liq) [No 3] [2012] WASCA 157
Westwind Air Charter Pty Ltd v Hawker De Havilland Ltd (1990) 3 WAR 71
ACTING MASTER GETHING: For the better part of the last three decades Kevin Mann has been involved in the management of hotels and nightclubs. At the end of 2012 he and his business partners, through a number of companies, owned two nightclubs in Rockingham, a lease of the Reef Hotel in Bunbury, development land on Victoria Street in Bunbury, the Geraldton Hotel and the Zuu Nightclub (also in Geraldton). One of those companies was Prodale Pty Ltd. The Victoria Street property and the Geraldton properties were acquired using finance facilities from Bankwest, which is now a division of Commonwealth Bank of Australia (Bankwest), the borrower being Prodale (Prodale Facilities). Mr Mann guaranteed the Prodale Facilities.
Bankwest asserts that there were breaches of the facility agreements entitling it to issue notices of default and terminate the Prodale Facilities. In August 2011 it imposed penalty interest of 5% on the Prodale Facilities. In December 2012 it appointed receivers to Prodale and proceeded to sell its assets. Prodale has since been placed in liquidation. By writ filed on 5 August 2014, Bankwest commenced an action against Mr Mann seeking to enforce the guarantee. It also seeks to terminate and recover two home loans made to Mr Mann personally, as well enforcing as a mortgage securing those home loans.
By application dated 23 December 2014, Bankwest applied for summary judgment against Mr Mann pursuant to Rules of the Supreme Court 1971 (WA) (RSC) O 14 r 1. As the application was filed more than 21 days after the date on which Mr Mann entered his appearance, Bankwest has applied for leave to bring the application.
The application was argued before me on 20 April 2015. At the hearing it became apparent that the parties should be given a short opportunity to file supplementary affidavits and submissions on two issues on which evidence was sought to be given from the bar table. I made directions for this to occur.
Mr Mann filed a defence on 20 November 2014 and an amended defence, adding a counterclaim, on 15 January 2015. By application dated 20 February 2015 Bankwest sought orders striking out the counterclaim. Mr Mann also filed five affidavits in opposition to the application for summary judgment, sworn 6 February 2015, 4 May 2015, 15 May 2015, 18 May 2015 and 19 May 2015.[1] He also relies on an affidavit by a potential purchaser of the Geraldton Hotel, Lindsay Cannon, sworn 30 April 2015.[2] Mr Mann contests the entitlement of Bankwest to have imposed penalty interest on the facilities and to have issued default notices. He says that no loan repayments were ever missed and that each of the businesses was operating at a healthy profit. Mr Mann makes a number of assertions of illegality and misconduct against Bankwest.
[1] Which I will refer to as the 'First Mann Affidavit', 'Second Mann Affidavit', 'Third Mann Affidavit', 'Fourth Mann Affidavit' and 'Fifth Mann Affidavit' respectively.
[2] Which I will refer to as the 'Cannon Affidavit'.
As Mr Mann is a litigant in person, it is appropriate that I approach the documents in which he articulates his defences with some flexibility.[3] He may require, and be given, some leniency in relation to compliance with the rules set out in the RSC.[4] I need to be astute to ensure that, in a poorly expressed or unstructured document setting out his defence, there is no viable defence which, with appropriate amendment or permissible assistance from the court, could be put into proper form.[5] The way I have given effect to these principles in the present case is to look at the defence and counterclaim in the context of the affidavits filed by Mr Mann. To the extent that the defence and counterclaim are defectively pleaded, if there are facts in the evidence before me which could, if properly pleaded, form an arguable defence, it is appropriate that I not grant summary judgment and allow Mr Mann the opportunity to replead his case.
[3] Wentworth v Rogers(No 5) (1986) 6 NSWLR 534, 536 ‑ 537 (Kirby P), 543 (Hope & Samuels JJA agreeing); Smart v Prisoner Review Board (WA) [2012] WASC 48 [10] (Pritchard J).
[4] Glew v Frank Jasper Pty Ltd [2010] WASCA 87 [10] (Reasons of the Court).
[5] Ibrahim v The Honourable Justice Carolyn Martin [2012] WASC 338 [21] (Beech J); Tobin v Dodd [2004] WASCA 288 [15] (EM Heenan J, with whom Murray & Le Miere JJ agreed); Wentworth (536 ‑ 537).
For present purposes, Mr Mann's pleadings and affidavits disclose three causes of action which require detailed review: misleading conduct,[6] estoppel[7] and unconscionable conduct.[8] The misleading conduct arises as Mr Mann says he was misled by an officer of Bankwest as to the significance of EBIT[9] information about the businesses which he gave to Bankwest as part of the information provided to obtain the facilities. The estoppel and unconscionable conduct arise in relation to the manner in which Bankwest sought to enforce the Prodale Facilities, in particular requiring Prodale to pay penalty interest over a 16 month period whilst renovations were being completed at the Geraldton Hotel, and then appointing receivers and managers once those renovations were completed, but before Mr Mann and his business partners could complete steps then in train to refinance the Prodale Facilities.
[6] Counterclaim (1).
[7] First Mann Affidavit [477] ‑ [485].
[8] Counterclaim [3].
[9] In general terms, 'earnings before interest and tax'. See the definitions of 'EBIT' and 'EBITDA' in the conditions applicable to the Prodale Facilities set out in the affidavit of Gaetano Giorgio Di Gregorio affirmed 22 December 2014 (67).
On the material before me, eight issues arise for determination:
•Should Bankwest be granted leave to bring its summary judgment application?
•Has Bankwest established its claim?
•Does Mr Mann have an arguable defence based on misleading conduct?
•Does Mr Mann have an arguable defence based on estoppel?
•Does Mr Mann have an arguable defence based on unconscionable conduct?
•Is Bankwest entitled to summary judgment?
•Should Mr Mann's counterclaim be struck out?
•What final orders are appropriate?
Should Bankwest be granted leave to bring its summary judgment application?
An application by a plaintiff for summary judgment may be brought within 21 days after appearance, or at any later time by leave of the court.[10] Mr Mann's appearance was filed on 20 October 2014. The application was filed on 23 December 2014, hence leave is required and has been sought.
[10] RSC O 14 r 1(1).
The policy rationale for the time limit is to ensure that summary judgment applications are brought at an early stage of proceedings before unnecessary expense has been incurred.[11] The discretion to extend time is given for the sole purpose of enabling the court to do justice between the parties, and may be exercised in favour of an applicant where strict compliance with the rules will work an injustice upon the applicant.[12] In order to determine whether the rules will work an injustice, it is necessary to have regard to the history of the proceedings, the conduct of the parties, the nature of the litigation and the consequences for the parties of the grant and refusal of the application for the extension of time.[13]
[11] Johnson v Hallam [2015] WASC 149[9] (Gething AM); GEL Custodians Pty Ltd v Dewar [2014] WASC 177 [17] (Gething AM); Prefumo v Sutton [2011] WASC 151 [33] (Corboy J); Barrick Gold of Australia Ltd v F L Smidth Inc [2007] WASC 186 [10] (Templeman J); Jacka Nominees Pty Ltd (in liq) v Edwards Karwacki Smith & Co Pty Ltd (Unreported, WASC, Library No 920512, 12 October 1992) (Adams M).
[12] Gallo v Dawson [1990] HCA 30; (1990) 64 ALJR 458, 459 (McHugh J); Johnson [9]; GEL Custodians [17]; Bank of Western Australia v Stein [2005] WASC 43 [53] (Commissioner Siopis SC).
[13] Gallo (459); Johnson [9]; Bank of Western Australia [53].
Bankwest does not explain the delay in making the application, nor provide any evidence, nor any submissions, in relation to the exercise of this discretion.
The onus is on Bankwest as the party seeking the favourable exercise of the discretion to satisfy the court that it is appropriate to exercise the discretion. In the absence of any explanation for the delay by Bankwest, I am not prepared to extend the time within which the application may be brought.
Be that as it may, in the circumstances of this case, it is appropriate that I proceed to determine the application. As will become apparent, I am not prepared to grant summary judgment to Bankwest, and propose to grant Mr Mann unconditional leave to defend.
Has Bankwest established its claim?
In order to enliven the jurisdiction of the court to award summary judgment, Bankwest is required to support its application by 'an affidavit verifying the facts on which the claim … is based'.[14]
[14] RSC O 14 r 2(1).
In support of its application for summary judgment, Bankwest initially filed an affidavit of Gaetano Giorgio Di Gregorio affirmed 22 December 2014.[15] Mr Di Gregorio is a manager employed by Bankwest. Bankwest relies on four further affidavits in support of its application:
•A supplementary affidavit from Mr Di Gregorio affirmed 27 February 2015;[16]
•An affidavit sworn 27 February 2015 by Emma Jane Cavanagh, a solicitor employed by Bankwest's lawyers;[17]
•An affidavit sworn 5 May 2015 by Ms Cavanagh;[18] and
•An affidavit sworn 18 May 2015 by Ms Cavanagh.[19]
[15] Which I will refer to as the 'First Di Gregorio Affidavit'.
[16] Which I will refer to as the 'Second Di Gregorio Affidavit'.
[17] Which I will refer to as the 'First Cavanagh Affidavit'.
[18] Which I will refer to as the 'Second Cavanagh Affidavit'.
[19] Which I will refer to as the 'Third Cavanagh Affidavit'.
Mr Di Gregorio's evidence is that there are four agreements pursuant to which Bankwest seeks orders against Mr Mann:
•A guarantee initially executed in January 2006 (Guarantee), and increased from time to time, in relation to obligations of Prodale under a facility agreement entered into in July 2008 in the amount of $3.52 million (First Advance Facility) and under a facility agreement entered into in December 2008 in the amount of $715,000 (Second Advance Facility).
•A home loan entered into in February 2006 in the amount of $200,000 (First Home Loan).
•A home loan entered into in November 2007 in the amount of $58,000 (Second Home Loan).
•A mortgage securing the First Home Loan and the Second Home Loan (Mortgage).
Bankwest’s evidence in relation to these agreements is as follows.
First Advance Facility
The First Advance Facility was a variation to an existing finance facility which Prodale had with Bankwest. The offer was contained in a letter from Bankwest to Prodale dated 27 June 2008. The offer involved two components. The first was a Business Cheque Overdraft Facility in the amount of $120,000. The second was a Commercial Advance Facility with a limit of $3.4 million. On or about 21 July 2008, Prodale executed and thereby accepted the offer made in the letter of 27 June 2008 (being the First Advance Facility).[20]
[20] First Di Gregorio Affidavit [6] ‑ [7], (20 ‑ 29), (30 ‑ 29).
The stated purpose of the First Advance Facility was to purchase the Geraldton Hotel and the Zuu Nightclub ($3.4 million) and to provide working capital ($120,000).[21]
[21] First Di Gregorio Affidavit (21).
The term of the $120,000 overdraft facility was 6 months, and the $3.4 million facility 156 months from original drawdown.[22]
[22] First Di Gregorio Affidavit (21).
After the offer was signed, Bankwest continued to advance funds to Prodale pursuant to the First Advance Facility.[23]
[23] First Di Gregorio Affidavit [7].
In December 2008, the parties varied the agreement for the First Advance Facility to include Bankwest's General Terms for Business Lending December 2007 (General Terms).[24]
[24] First Di Gregorio Affidavit [8] ‑ [10].
Mr Di Gregorio's evidence verifies that Prodale entered into the First Advance Facility.
Second Advance Facility
By letter dated 16 December 2008, Bankwest offered to vary the terms of the existing financial accommodation with Prodale. The variation was to provide a Commercial Advance Facility with a limit of $715,000. On or about 18 December 2008, Prodale executed and thereby accepted this offer (being the Second Advance Facility). The terms of the Second Advance Facility included the General Terms.[25]
[25] First Di Gregorio Affidavit [15] ‑ [17], (78 ‑ 84).
The agreement for the Second Advance Facility does not state the purpose of the funds. Mr Mann's evidence is that its purpose was to finance the purchase of the Victoria Street property in Bunbury in January 2006.[26] The December 2008 agreement appears to be a rollover of the initial facility. The term of the Second Advance Facility was 12 months from drawdown.[27]
[26] First Mann Affidavit [37] ‑ [42].
[27] First Di Gregorio Affidavit (78).
Mr Di Gregorio's evidence verifies that Prodale entered into the Second Advance Facility.
Guarantee
By agreement dated 19 January 2006, Mr Mann entered into a guarantee and indemnity in favour of Bankwest (being the Guarantee).[28] The initial extent of liability was $715,000. At the same time as the execution of the First Advance Facility, Mr Mann executed a guarantor's acknowledgement.[29] This, coupled with the terms of the Guarantee, had the effect of increasing his liability to $4,235,000. Mr Mann likewise signed a guarantor's acknowledgement at the same time as executing the Second Advance Facility, though this did not increase his liability as it related to the initial $715,000 facility.[30]
[28] First Di Gregorio Affidavit [22] ‑ [24], (88 ‑ 103).
[29] First Di Gregorio Affidavit [7], (27).
[30] First Di Gregorio Affidavit [16], (84).
Mr Di Gregorio’s evidence verifies that Mr Mann entered into the Guarantee.
Home loans and mortgage
By an agreement dated 8 February 2006, Bankwest agreed to lend Mr Mann $200,000 under the style of a 'Bankwest Home Loan Lite' (being the First Home Loan). The terms of the First Home Loan included the terms set out in Part A & B of Bankwest's Home Loan Terms and Conditions Booklet (version 04/2005).[31]
[31] First Di Gregorio Affidavit [30] ‑ [31], (107 ‑ 124).
By an agreement dated 13 November 2007, Bankwest agreed to lend Mr Mann $58,000, again under the style of a 'Bankwest Home Loan Lite' (being the Second Home Loan). The terms of the Second Home Loan included the terms set out in Part A & B of Bankwest's Home Loan Terms and Conditions Booklet (version 04/2006).[32]
[32] First Di Gregorio Affidavit [36] ‑ [37], (129 ‑ 150).
Both the First Home Loan and the Second Home Loan were secured by a mortgage granted by Mr Mann in favour of Bankwest over property at Unit 51, 132 Mandurah Terrace, Mandurah (being the Mortgage). The Mortgage is registered with Landgate.[33]
[33] First Di Gregorio Affidavit [42], (155 ‑ 160).
Mr Di Gregorio's evidence verifies that Mr Mann entered into the First Home Loan, the Second Home Loan and the Mortgage.
Events of default
In his first affidavit, Mr Di Gregorio states:[34]
As at May 2013, the Borrower [Prodale] was in default pursuant to the terms of the First Advance Facility Agreement for the reasons pleaded at paragraphs 11 to 17 of the Amended Statement of Claim.
[34] First Di Gregorio Affidavit [11].
He makes a similar statement in relation to the Second Advance Facility, referring to pars 11, 12 and 21 of the amended statement of claim.[35]
[35] First Di Gregorio Affidavit [18].
Paragraphs 11 to 16 of the amended statement of claim set out terms of the General Terms. Paragraph 17 provides that as 'at 30 November 2012 the Borrower had failed to pay the Plaintiff an amount of money payable to the Plaintiff under the First Advance Facility Agreement'. Paragraph 21 is to similar effect for the Second Advance Facility.
Bankwest provided no evidence as to what amount Prodale was due to pay, but failed to pay. Mr Mann's evidence is that the amounts due on 10 November 2012 had been paid, and that the next payments were due on 10 December 2012.[36]
[36] First Mann Affidavit [460] ‑ [463].
In relation to the Home Loans, in his first affidavit, Mr Di Gregorio refers to pars 36 ‑ 39 and 45 ‑ 48 of the amended statement of claim.[37] The salient portion of these paragraphs is an allegation that as at 18 March 2014 Mr Mann had failed to pay an amount to Bankwest on time.[38] Mr Mann's evidence is that neither loan was in default and that there were funds able to be drawn down.[39] He annexes a bank statement supporting this position.[40]
[37] First Di Gregorio Affidavit [32], [38].
[38] Amended Statement of Claim [39], [48].
[39] First Mann Affidavit [508] ‑ [513].
[40] First Mann Affidavit (324).
In his second affidavit, Mr Di Gregorio identified two further acts of default.[41] The first is that on 31 August 2011 Goldfort Corporation Pty Ltd ACN 106 117 444, another guarantor of the First Advance Facility and the Second Advance Facility, was placed into liquidation. This is an event of default pursuant to cl 16.1(p) of the General Conditions.[42] The second is that on 3 September 2012, the Australian Taxation Office filed a winding up application with respect to Prodale. This is an event of default pursuant to cl 16.1(o) of the General Conditions.[43] Further, the failure to comply with a demand issued in relation to the Guarantee meant that Mr Mann was in breach of the terms of the First Home Loan and the Second Home Loan entitling Bankwest to enforce the Mortgage.[44]
[41] Second Di Gregorio Affidavit [9].
[42] First Di Gregorio Affidavit (61).
[43] First Di Gregorio Affidavit (61). See also: Second Cavanagh Affidavit [5].
[44] First Di Gregorio Affidavit (118) (cl A21.1) and (142) (cl A21.1).
Although the manner in which Bankwest presents its case is less than satisfactory given the inconsistency between the position in the amended statement of claim and the evidence of Mr Di Gregorio, this can be cured by amendment. Mr Di Gregorio's evidence verifies that an event of default occurred on the First Advance Facility, Second Advance Facility, Guarantee, First Home Loan, Second Home Loan and Mortgage. However, the events of default for the last three facilities are dependent upon failure to comply with the demand served on Prodale, which in turn depends on valid service of the notice of demand.
Service of the notices of default
In order to demand full payment under the First Advance Facility and the Second Advance Facility, Bankwest was required to serve a notice on Prodale.[45] The evidence of Mr Di Gregorio and Ms Cavanagh is that notices dated 3 December 2012 were issued in relation to the First Advance Facility, the Second Advance Facility and the Guarantee.[46] Ms Cavanagh's evidence is that the notices of demand were sent for both Prodale and Mr Mann by registered mail.[47] Mr Mann says he never received the notices.[48]
[45] General Conditions, cl 16.1; First Di Gregorio Affidavit (61).
[46] First Di Gregorio Affidavit (74, 85, 104); First Cavanagh Affidavit and Second Cavanagh Affidavit generally.
[47] First Cavanagh Affidavit [7], [12]; Third Cavanagh Affidavit (508).
[48] First Mann Affidavit [501] ‑ [502]; Third Mann Affidavit [1] ‑ [20].
Although Bankwest could have sent to notices by pre‑paid post[49], it chose to use registered mail. At the hearing on 20 April 2014, I enquired whether Minter Ellison (Bankwest's solicitors) had received confirmation of delivery notices from Australia Post. I gave Bankwest the opportunity to file a supplementary affidavit to place this information before the court. The Second Cavanagh Affidavit addressed the issue. Ms Cavanagh's evidence is that having conducted searches of the records of Minter Ellison she was not able to locate any notification to confirm that the notices issued to Prodale were collected by Prodale or anyone authorised by Prodale to collect the notices on its behalf.[50]
[49] General Conditions cl 19.2(c); First Di Gregorio Affidavit (64).
[50] Second Cavanagh Affidavit [6].
Counsel for Bankwest referred to the decision of Commonwealth Bank of Australia v Shaddick,[51] which is said to be authority for the proposition that it is not a defence for a defendant to say that he did not receive a notice that has been issued in accordance with a finance agreement. However, that case concerned the interpretation of Transfer of Land Act 1893 (WA) s 106. The master specifically declined to follow authority on the interpretation of Corporations Act 2001 (Cth) s 109X, commenting:[52]
14There is a clear distinction between the two sections in relation to the posting of demands. Section 106 of the Transfer of Land Act anticipates the use of registered post. Section 109X simply refers to 'posting' a document to a company's registered office. In my view, the difference between the two sections is such it is inappropriate to use the case law in relation to s 109X as a guide to the proper interpretation of s 106.
15The point can be illustrated in this way. From time to time, a party seeking to service a statutory demand may post the demand and the accompanying affidavit by registered mail. As Master Bredmeyer said in Giustginiano Nominees Pty Ltd v Redan Pty Ltd [1999] WASC 95, this was not 'delivery in the ordinary course of post'. The learned master then went on to conclude if the demand had not actually come to the attention of the company, service had not been effected. But clearly that case and others to the same effect turn upon the particular wording of the section.
16In my view, nothing in the decided cases dealing with s 109X in any way affects the proper interpretation of s 106.
[51] Commonwealth Bank of Australia v Shaddick [2011] WASC 205.
[52] Shaddick [14] ‑ [16].
The decision in Shaddick does not provide conclusive authority for the proposition advanced by counsel for Bankwest. It is not appropriate that this issue be determined in a summary manner, in particular without discovery and all the evidence being before the court.
As I have indicated, Bankwest's lawyers have not been able to locate the confirmation slips for the registered mail. Given Mr Mann's specific evidence, I am not satisfied that the evidence filed by Bankwest has verified the fact that the notices of demand were served on Prodale. If no notice of demand was validly served, then Bankwest was not entitled to require payment of all outstanding amounts pursuant to cl 16.1 of the General Conditions.
I am thus not satisfied that the evidence placed before the court by Bankwest verifies all the facts on which Bankwest’s claim is based as required by RSC O 14 r 2(1). It has not satisfied the requirements in RSC O 14 in order to enliven the jurisdiction for the court to award summary judgment in its favour.
Does Mr Mann have an arguable defence based on misleading conduct?
In case I am wrong in my assessment that Bankwest has not verified the facts on which the claim is based, it is appropriate that I proceed to consider the defences raised by Mr Mann. If Bankwest had satisfied all the requirements of RSC O 14 so as to give it a prima facie right to summary judgment, then the burden would have shifted to Mr Mann to satisfy the court why judgment should not be given against him.[53] He would have had to satisfy the court 'with respect to the claim … that there is an issue or question in dispute which ought to be tried, or that there ought for some other reason to be a trial of that claim'.[54] He does not have to show a defence on the balance of probabilities, but must at least show cause why there is an arguable defence.[55] This is an evidentiary burden, the overall legal burden of persuasion remaining on Bankwest as the applicant.[56]
[53] HSBC Bank Australia Ltd v Mavaddat [2015] WASC 153 [24] (Gething AM); Hee v Nyoni [2014] WASC 44 [25] (Gething AM); GEL Custodians [25]; Westwind Air Charter Pty Ltd v Hawker De Havilland Ltd (1990) 3 WAR 71, 74 (Murray J); Moscow Narodny Bank Ltd v Mosbert Finance (Aust) Pty Ltd [1976] WAR 109, 110 (Brinsden J).
[54] RSC O 14 r 3(1).
[55] Field Camp Services Pty Ltd v Site Accommodation Pty Ltd [No 2] [2012] WASCA 27 [4] (Reasons of the Court).
[56] HSBC [26]; Hee [25]; Morgan v Pallister [2004] WASC 188 [4] (Pullin J); Westwind (74).
An application for summary judgment is to be determined on the basis that the version of the facts put forward by the respondent to the application, assuming that it is not inherently incredible, would ultimately be accepted at the trial of the action.[57] The court is not bound to accept uncritically as raising a dispute of fact calling for further investigation every statement in an affidavit, however equivocal, lacking in precision or inconsistent with contemporary documents or other statements by the deponent.[58] If after argument there remains real uncertainty as to the applicant’s right to judgment without further investigation of the facts, summary judgment must be refused.[59]
[57] Webster v Lampard [1993] HCA 57; (1993) 177 CLR 598, 608 (Mason CJ, Deane & Dawson JJ); HSBC [27]; RHG Mortgage Corporation Ltd v Schafer [2014] WASC 297 [28] (Chaney J); Hee [26].
[58] Eng Mee Yong v Letchumanan [1980] AC 331, 341 (Reasons of the Court); HSBC [27]; Hee [26]; Ansearch Ltd v Wavtech Pty Ltd [2006] WASC 184 [28] (Newnes M).
[59] Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VLR 332, 335 (Herring CJ, Lowe & Fullagar JJ); HSBC [27]; Hee [26]; Ansearch [28].
In his counterclaim, Mr Mann alleges that Bankwest engaged in conduct which was misleading or deceptive, an allegation which he also relies on by way of defence.[60] Mr Mann refers in his counterclaim to the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act). This legislation contains a prohibition on misleading conduct 'in relation to financial services' (s 12DA). There is a parallel prohibition in Australian Consumer Law (ACL) s 18.[61] As will be apparent from the discussion in relation to unconscionable conduct, the ACL covers the provision of banking services.[62] The present claim does not relate to a 'financial service' as defined in the ASIC Act s 12BAB and is thus not excluded from the operation of the ACL.[63] Accordingly, I will assess Mr Mann's defence pursuant to ACL s 18.
[60] Defence [61]; Counterclaim (1).
[61] Competition and Consumer Act 2010 (Cth) (CCA), sch 2.
[62] Permanent Mortgages Pty Ltd v Vandenbergh [2010] WASC 10; (2010) 41 WAR 353 [363] (Murphy JA), with the definition of 'services' now being in ACL s 2.
[63] CCA s 131A.
ACL s 18 relevantly provides that a 'person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive'.[64]
[64] CCA sch 2.
The purpose of the prohibition on misleading and deceptive conduct 'is to enforce a standard of conduct by corporations that meets community expectations of fair dealing in business activity'.[65] The conduct 'is measured against an objective view of what constitutes fair dealing in trade or commerce in the given circumstances'.[66] There must be a 'likelihood that the conduct of a corporation would be misleading or deceptive having regard to all relevant circumstances'.[67]
[65] Perpetual Trustee Company Ltd v Burniston [No 2] [2012] WASC 383 [190] (Edelman J) (Burniston); Westpac Banking Corporation v The Bell Group Ltd (in liq) [No 3] [2012] WASCA 157 [473] (Lee AJA).
[66] Burniston [190]; Westpac Banking Corporation [474].
[67] Westpac Banking Corporation [474].
If it is established that Bankwest contravened ACL s 18, then, subject to issues of causation and discretion, the court has power to set aside the Guarantee or decline to enforce it.[68] The court also has the power to award damages.[69]
[68] ACL s 237, s 243
[69] ACL s 236.
When negotiating the Second Facility, Mr Mann dealt with Shane Earl, a Bankwest employee based on Bunbury. It is clearly arguable that in all his dealings with Mr Mann, Mr Earl was acting within the scope of his authority and that his conduct would be attributable to Bankwest.[70]
[70] CCA s 139B.
The loan proposal information provided by Mr Mann to Mr Earl included past, current and predicted turnover and profit figures. Mr Earl requested Mr Mann to increase the predicted turnover figures to make it easier to secure the loan. Mr Mann did so and the loan was approved. Mr Earl told Mr Mann that the EBIT figures were 'only estimates' and would be used 'only as a guideline for the bank', in terms of assessing the borrower's ability to repay the loans.
In order determine whether there was misleading conduct, it is instructive to quote the relevant parts of Mr Mann's First Affidavit in full:[71]
[71] First Mann Affidavit [75] ‑ [86]; [106] ‑ [123].
75.To secure the [First Advance Facility] I put together a loan proposal document detailing the Directors experience and the future plans for the businesses. It was a comprehensive brochure with photos and anticipated turnovers and profits.
76.I knew what the hotel was turning over from figures supplied by the sales agent but the night club had now been closed for about 18 months and had no current trading figures. We could only estimate those figures but I had operated night clubs since 1987 and I had substantial experience and knowledge in operating those types of businesses.
77.My estimations were from past experience and the proposed plans and renovations we had in mind. We were the experienced Directors of Prodale and our experience was in night club management.
78.The only time I had a meeting with Earl about the loan was in about September 2007 at his office in the Tower Bunbury. At that meeting, that went for about half an hour I handed the brochure to Earl personally.
79.I attended that meeting with Blake and Smith [being Mr Mann's business partners] at Earl's office on Victoria Street Bunbury on about the 8th floor. It was not a bank branch but simply a commercial office of Bankwest.
80.The loan proposal brochure I had produced was in a ring binder and had some 30 or 40 pages of stories and financial predictions. Those financial details were a combination of predictions and past and present trading from our current businesses and cash flows.
81.After I left the document with Earl I received a phone call about 3 of 4 days later saying that 'things looks pretty good and he (Earl) was confident he could to the loan himself through Bankwest'. Earl did say he had a fair degree of autonomy but had to run the final figures past his boss.
82.In that phone call Earl said to me 'that if the bottom line was a bit fatter it would be easier to get the loan across the line'. I believe that he suggested that because the night club was closed and we could strengthen the predicted turnover figures of the night club and that would in turn increase the ultimate nett profit.
83.I increased the predicted turnover of the night club and that in turn increased the final profit. A new brochure was produced in my office in Rockingham by our secretary and taken to Bunbury by a staff member. It was taken to Earl by Stanich our manager at the Reef Hotel at that time.
84.The 14th October 2007 Earl called me on the phone and told me 'the loan was now approved unconditionally so we could put in the offer and acceptance'. I later received the letter of offer dated 16th October 2007 from Bankwest signed by Earl.
85.I remember this date well as Earl informed me that the loan had been approved the day prior to my 50th birthday. I was having a large party at the Hyatt Hotel in Perth on the 15th October 2007 and amongst the guests all of the Directors attended and we celebrated drinking French champagne.
86.I believed this purchase was life changing and we had purchased substantial asset that would be my superannuation and create an income through to my retirement and beyond.
…
106.In my conversations with Earl we discussed proposed turnovers of the businesses in Geraldton. I told Earl of the amounts I believed we could turn over and the profits we could possibly make.
107.Earl acted all excited and was just agreeing with everything I told him or asked for. In hindsight I believe the excitement was coming from the large commission that he was about to receive.
108.When I had supplied the first loan book for Geraldton to Earl, he asked for estimated cash‑flow and profit projections. Earl asked me to produce cash flow charts on all 3 existing businesses and to adapt the projections for Geraldton in the loan proposal book.
109.I produced the cash flow charts Earl requested and sent them to him. Earl said to me they did not meet the required format that Bankwest had. Earl supplied me with an Excel spread sheet based template for the presentation of those cash‑flow estimates.
110.The figures I used for the Rockingham and Bunbury businesses were estimates and did not correlate to the financial statements from historical trading of the businesses. Earl asked me if I could 'up the projected cash flows so it looked better'.
111.I had supplied the trading statements prepared by our accountants MBE Accounting for Starglow Pty Ltd (Starglow) and Prodale that showed good but moderate profits nowhere near the estimates in the proposed future cash‑flows and profits requested by Earl. Starglow was at the time the management company for the Rockingham night clubs.
119.We sat at a wooden table in the bar area and Earl complained of lack of light. I suggested that his eyes would readjust to the low light in a few minutes. Zeldas had very little lighting as the normal trading light was created by the spotlights. The spot lights were not turned on as it was in the morning and the club was not trading when Earl was there.
120.Earl said the EBIT's were listed as examples of the proposed cash‑flow and profits and were to assist the bank in determining that the loan could be repaid. Earl said at that meeting in Rockingham when I was signing the loan agreement 'it is just standard practice to include the EBIT's'.
121.Earl never discussed the consequences of the EBIT's and in fact said they were only guidelines. Earl was extremely keen on me signing the contracts and said everything was fine as Bankwest never really used the EBIT's anyway.
122.Earl said 'that they were only estimates anyway'. Earl was fully aware of the cash‑flow predications and profit estimates. Earl knew they did not correlate to the historical trading figures and were simply inflated to get the 'loan across the line'.
123.When I said the EBIT's on the loan contracts Earl fobbed it off as unimportant and that the bank doesn't take them into consideration except for internal use. Earl never offered me time to get independent legal advice on the effect the EBIT's did or might have had on the loan contract.
The true position is that it was a term of the agreement for the First Advance Facility that Prodale satisfied minimum EBITDA[72] requirements for each of the businesses (EBIT Condition). Specifically, the agreement provided:
[72] In general terms, 'earnings before interest and tax, plus depreciation and amortisation': First Di Gregorio Affidavit (67).
Financial Undertakings
You must ensure that you satisfy the requirements of each of the following financial undertakings each time it is measured. See clause 22.1 of the General Terms for the meaning of the term used.
Financial Undertaking
How measured
Requirement
When measured/period
Minimum EBITDA
Zeldas Nightclub & The Vibe Nightclub - combined $225,000 per annum
Geraldton Hotel $300,000 per annum by 30 June 2008
Zuu Nightclub Geraldton $250,000 per annum by 30 June 2008
Reef Hotel Bunbury $250,000 per annum
All the measured quarterly with 45 days after the end of each quarter
As events transpired, it was a breach of the EBIT Condition which was used by Bankwest to place pressure on Mr Mann to change banks. By this time Mr Earl had left Bankwest and Mr Mann was assigned a new bank manager, Tom Antonio. Mr Mann gives evidence of a conversation in June 2010 with Mr Antonio:[73]
208.In or about June 2010 I was called to the Bankwest Office in West Perth for a meeting with Antonio. Antonio made me wait about half an hour in a small waiting area at the top of the stairs. I thought he did this deliberately.
209.At that meeting Antonio, who had other staff with him but I don't recall their names, said that we had not met our EBIT's and this breached a term of the Geraldton loan contract.
210.I said that trading was still strong and we were paying the loan every week. Antonio agreed but said 'that isn't the point and you have to meet every part of the loan contract'.
211.I told Antonio the EBIT's we were working on were only estimates or as I called them guestimates as we made them up with Earl in the loan application as the night club had been closed for some time before we took over.
212.Antonio was to the point and said 'you have to go and get yourself another bank. You just don't fit our type of lending anymore'. Antonio said 'your company has to leave Bankwest and get finance somewhere else'.
213.I complained vigorously with Antonio about our paying the loan even though we did not meet the EBIT's made up by Earl to get the loan 'across the line'.
214.Bankwest never issued a default notice in relation to this alleged default. Bankwest never took any action over the alleged breach of failing to meet our EBIT's. There was never any demand made to Prodale or myself.
[73] First Mann Affidavit [208] ‑ [214].
The breach of the EBIT Condition also appears to have been used by Bankwest as the justification for charging penalty interest. This is apparent from a conversation described by Mr Mann in February 2011 between himself, Mr Antonio and one Barry Vanderputt, a Bankwest Risk Manager:[74]
[74] First Mann Affidavit [218] ‑ [227], [237] ‑ [241].
218.I about February 2011 I was summons to Antonio's office in West Perth again and this time I met Barry Vanderputt a Bankwest Risk Manager. I believe but I am not sure that I had met Vanderputt before. I think he was my temporary manager between Earl and Antonio.
219.That meeting was quite firm and Vanderputt did most of the talking. Vanderputt stated that 'we no longer fit the criteria required by the bank to have commercial loans'. Vanderputt did not elaborate that statement but said 'your companies need to navigate a path away from Bankwest'.
220.Vanderputt also said 'that if you didn't look at leaving Bankwest sooner rather than later we are going to put an additional penalty interest margin on our loans of 5%'. Vanderputt said at that meeting 'the 5% increase should encourage you to go to another bank'.
221.Vanderputt never told me this was an 'overdue rate'. Vanderputt said it was a penalty rate for not meeting our EBIT's. Vanderputt said the bank was entitled to charge an extra rate because we were a greater risk because we did not meet our EBITs.
222.This was done with no offer of variation of facilities and was not signed by myself of the companies I represented. I believe this penalty interest was and is illegal.
223.I was called back into the Bankwest office in or about June 2011 and met with Vanderputt at Antonio's office. Antonio was not at this meeting and I only met with Vanderputt.
224.Vanderputt seemed reasonable at this meeting and asked how the business was going and what we were doing to leave the bank. I told him were talking with Brown at Mortgage Gallery but with the Geraldton Hotel under repair most other banks wanted the new and improved trading figures.
225.Vanderput said 'I have heard all of this before but what you really need to do is leave the bank'. I told him we just needed more time.
226.I reiterated again at that meeting that we had not missed a payment and again I was met with the response that that was not the important part. Vanderputt stated again that he wanted us to leave the bank and go elsewhere.
227.Vanderputt was extremely adamant although pleasant that we find a new bank and that we had to leave Bankwest. Vanderputt said he was appointing a forensic accountant to look into our books and our trading.
...
237.Shortly after meeting with Vanderputt, on or about the 10th August 2011 Antonio telephoned me and said that Bankwest was imposing a penalty interest because of the additional risk, of 5% pa. Antonio appeared to enjoy telling me this as he had a little chuckle audible over the phone.
238.I remember this well as it really irritated me and I told Antonio that it wasn't fair as we never missed a payment on the loans. Antonio didn't care or acknowledge my point of view. Our interest payment went from about $5,500.00 per to $9,000.00 per week.
239.I instructed our office manager to start banking $9,000.00 into the Prodale Pty Ltd Victoria Street Account every week. We commenced paying the interest immediately.
240.I believe the penalty interest was charged to our account illegally (Prodale Pty Ltd Victoria St Account) and was an unjust enrichment for Bankwest. This amount charged was not to offset any extra charges that Bankwest received.
241.Bankwest made extra money out of us for no legitimate reason and simply increased its profit on our financial arrangements without proper authority. The bank never told me how it arrived at the additional 5% interest.
If an event of default occurs, Bankwest has an entitlement to change interest at the 'Overdue Rate', which appears to be up to an additional 7%.[75]
[75] General Conditions cl 16.3; First Di Gregorio Affidavit (62, 70).
Mr Mann estimates that Prodale paid $280,000 to $300,000 in penalty interest over approximately 70 weeks.[76] He also gives evidence that the additional interest of some $4,000 per week for this period could have been used to finish the renovations more quickly. This in turn would have increased the net income of the companies and would have allowed the companies to expand and make further loan reductions.[77] It is also evident to me that had the renovations been finished earlier, it would have arguably enabled the companies to complete the proposed refinancing with ANZ prior to the appointment of the receiver and manager.
[76] First Mann Affidavit [476].
[77] First Mann Affidavit [475].
In my view, it is arguable that:
(a)Mr Earl represented to Mr Mann that the EBIT information was only required as background information to allow Bankwest to assess whether the borrowing companies had the capacity to repay the loans (EBIT Representation);
(b)as Mr Earl was an employee of Bankwest, his conduct in making the EBIT Representation is attributable to Bankwest;
(c)in receiving the EBIT Representation, Mr Mann was acting both as a director of Prodale and in his own right as a guarantor;
(d)in reliance on the EBIT Representation, Mr Mann provided amended, increased, EBIT figures to Bankwest;
(e)the EBIT Representation was false in that the EBIT predictions formed part of the terms of the First Advance Facility, being the EBIT Condition;
(f)by reason of the breach of the EBIT Condition, Bankwest imposed penalty interest on Prodale, thereby causing it to suffer loss and damage by reason of the misleading conduct of Mr Earl.
There is an issue as to whether Mr Mann ought to have appreciated the significance of the EBIT information when executing the documentation for the First Advance Facility, however, this is an issue for trial.
I also consider it arguable that had the EBIT Representation not been made, Mr Mann would not have provided the amended, increased EBIT figures to Mr Earl. This in turn raises the prospect either that Bankwest would have declined to provide the facility or that it would have done so based on the initial amounts, which the businesses may well have met. However, for present purposes, I do not need to determine these issues; it is sufficient that the position is arguable. This in turn makes it arguable that this is an appropriate case in which to grant relief pursuant to ACL s 237 and s 243 in relation to the First Advance Facility and the extension to the Guarantee. The assertion in relation to misleading conduct may thus be raised both as a defence and a counterclaim.
Does Mr Mann have an arguable defence based on estoppel?
For the purposes of determining the summary judgment application, it is sufficient for me to refer to the oft cited summary of the elements of promissory estoppel from the decision of Brennan J in Waltons Stores (Interstate) Ltd v Maher:[78]
In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant, or expected that a particular legal 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 acts or abstains 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; and (6) the defendant has failed to act to avoid the detriment whether by fulfilling the assumption or expectation or otherwise.
This passage has been endorsed in a number of decisions in this jurisdiction.[79]
[78] Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387, 428 ‑ 429.
[79] See for example: Tipperary Developments Pty Ltd v The State of Western Australia [2009] WASCA 126; (2009) 38 WAR 488 (McLure JA, with whom Newnes JA agreed); Fazio v Fazio [2010] WASC 263 [445] (Martin CJ); Hughes v St Barbara Mines Ltd [No 4] [2010] WASC 160 [786] (Kenneth Martin J); The Bell Group Ltd (in liq) v Westpac Banking Corporation[No 9] [2008] WASC 239; (2008) 39 WAR 1 [3535] ‑ [3549] (Owen J).
On Mr Mann's evidence, it appears that from early 2011 Bankwest was actively, even aggressively, encouraging Mr Mann to refinance the Prodale Facilities with another bank. The imposition of the 5% penalty interest rate was expressly stated to have been put in place to 'encourage' this move.[80] Shortly prior to this, Mr Mann and his partners had decided to renovate the Geraldton Hotel, which they predicted would substantially increase turnover. The work was commenced in 2010 and was due for completion in December 2012.[81]
[80] See for example: First Mann Affidavit [206], [212], [220].
[81] First Mann Affidavit [178] ‑ [183].
Mr Mann says that for the 16 months from August 2011 to December 2012, Bankwest encouraged Mr Mann and his fellow directors to adopt an assumption that the loans would continue to be rolled over and that Bankwest would not seek to enforce its contractual rights, provided Prodale was paying the penalty interest and Mr Mann was working towards refinancing with another bank. He gives evidence of conversations to this effect in February 2011, June 2011, August 2011, June 2012 and October 2012.[82]
[82] First Mann Affidavit [218] ‑ [319].
There was then a further representation in November 2012 that, if Mr Mann and his business partners signed a Deed of Forbearance, Bankwest would take no action until 31 January 2013. He says that Bankwest in appointing receivers and managers 'some 2 weeks after we executed the Deed of Forbearance was unconscionable and that it did not act in good faith'.[83]
[83] First Mann Affidavit [435] ‑ [442], [477] ‑ [485].
The key action taken by Mr Mann in reliance on the representations was to continue to fund the redevelopment of the Geraldton Hotel using his personal finances during the course of 2012. His evidence is that he personally financed a 'good proportion' of the $620,000 spent on the renovations, which was recorded as a loan in the accounts of Prodale. [84] Mr Mann also took steps to refinance the loans with the ANZ.[85]
[84] First Mann Affidavit [183].
[85] First Mann Affidavit [215] ‑ [217], [278] ‑ [291].
Mr Mann also gives evidence that Bankwest employees knew that the re‑development of the Geraldton Hotel was proceeding.[86]
[86] See for example: First Mann Affidavit [258], [262].
The detriment Mr Mann suffered as a result of his expectation not being fulfilled is twofold. First, he continued to expend his personal finances to complete the redevelopment of the Geraldton Hotel by making loans to Prodale. Prodale is now in liquidation so there does not seem to be any prospect of Prodale having the funds to repay Mr Mann. The second is that he and his business partners were denied the opportunity to complete the refinancing with ANZ. Had the refinancing occurred, Bankwest would not now be seeking to enforce the Guarantee. The likelihood or otherwise of this refinancing being completed by the end of January 2013 is not an issue which it appropriate to resolve in a summary manner.
Finally, it is arguable that Bankwest failed to act to avoid the detriment by appointing receivers to Prodale in early December 2012, rather than defer this course until the end of January 2013.
Counsel for Bankwest submitted that the Deed of Forbearance undermines the estoppel argument. It does provide the following:[87]
Forbearance
Without prejudice to any of its rights in relation to the Debt or pursuant to the Facilities and the Securities, and subject to strict compliance with the terms of this deed by the Borrower and the Security Providers, the Bank agrees to forbear from enforcing its rights against the Borrower and the Security Providers pursuant to the Facilities, Securities and in relation to the Debt until 4 pm on 31 January 2013.
[87] First Mann Affidavit (248 ‑ 249).
The Deed of Forbearance also provided that, in consideration of the forbearance to be provided by Bankwest, the 'Security Providers' (which for present purposes includes Mr Mann) agreed, among other things, to by no later than 4.00 pm on 30 November 2012, 'cause a Form 519 to be lodged at ASIC with respect to the dismissal of the application to wind up the Borrower', that is, Prodale. This relates to the application commenced by the ATO on 3 September 2012 to wind up Prodale.[88] Mr Mann signed the Deed of Forbearance on 26 November 2012.[89] The ATO's application against Prodale was not dismissed by 30 November 2012. This, says Bankwest, entitled it to cease the forbearance agreed to in the Deed of Forbearance.
[88] Second Di Gregorio Affidavit [9].
[89] First Mann Affidavit [315].
However, the execution of the Deed of Forbearance needs to be viewed in the context of the ongoing representations by officers of Bankwest. Mr Mann's evidence is that after he had agreed to sign the Deed of Variation, Mr Vanderputt 'went all nice' and said 'seeing that you are so close with ANZ I will give you until the 31st January 2013 to be gone'.[90] This is arguably a continuation of the conduct that is said to constitute the estoppel. The issue of whether the Deed of Forbearance undermines the claim for estoppel is one that ought to be left for trial.
[90] First Mann Affidavit [310].
The foundation of an equitable estoppel is a finding by the court that it would be unconscionable in the circumstances of the case for one party to exercise its legal rights against another.[91] Arguably, this is such a case. More specifically, I am satisfied that it is arguable that Bankwest was estopped from terminating the loans to Prodale, appointing receivers over its assets and enforcing the Guarantee when it did in early December 2012. The estoppel may be raised as a defence. It may also be pleaded in the counterclaim.
[91] Waltons Stores (419).
I am satisfied that Mr Mann has an arguable defence based on equitable estoppel.
Does Mr Mann have an arguable defence based on unconscionable conduct?
Mr Mann also alleges that he is entitled to relief under ASIC Act s 12CA, s 12CB and s 12CC, each of which relates to unconscionable conduct. As set out above, I propose to analyse Mr Mann's defence under the parallel provisions of the ACL, being ACL s 20, s 21 and s 22.
For present purposes, it is sufficient to just deal with perhaps the widest of the three sections, ACL s 21. ACL s 21(1) relevantly provides that a person must not, in trade or commerce, in connection with the supply of services to a person 'engage in conduct that is, in all the circumstances, unconscionable'. The 'services' to which ACL s 21 applies includes contracts between and bank and its customer.[92] ACL s 21(2) sets out a number of factors that the court may have regard to for the purposes of s 21(1). One remedy for a contravention of ACL is for the court to refuse to enforce a contract entered into as a result of the contravention.[93]
[92] Permanent Mortgages [363], with the definition of 'services' now being in ACL s 2.
[93] ACL s 237, s 243.
ACL s 21 is in identical terms to the former Trade Practices Act 1974 (Cth) s 51AC, the law in relation to which is conveniently summarised in the judgment of Murphy JA in Permanent Mortgages:[94]
In s 51AC of the Trade Practices Act, the word 'unconscionable' is not limited to unconscionable behaviour under the general law or s 51AA of the Trade Practices Act: Australian Competition & Consumer Commission v 4WD Systems Pty Ltd[2003] FCA 850; (2003) 200 ALR 491 [183] - [185].
Like s 12CC of the Australian Securities & Investments Commission Act 2001 (Cth), it is intended to build upon, and not be constrained by, the general law: Australian Securities & Investments Commission v National Exchange Pty Ltd (2005) 56 ACSR 131 [30].
The word 'unconscionable' should be given its natural and ordinary meaning, ie 'doing what should not be done in good conscience': ASIC v National Exchange [33], [39].
It is necessary to show more than unreasonableness, unfairness or simply misleading or deceptive conduct: ACCC v 4WD Systems [185]. The term imports a perjorative moral judgment or moral obloquy: Hurley v McDonald's Australia Pty Ltd [1999] FCA 1728; [2000] ATPR 41-741, 40,585; ASIC v National Exchange [43].
It requires a consideration of whether the conduct is 'contrary to the norm of conscientious behaviour' or 'offends against basic notions of good conscience and fair play': ASIC v National Exchange [44].
Section 51AC(3) provides that the 12 factors referred to therein are factors to which the court may have regard 'without in any way limiting' the matters to which the court may have regard for the purpose of determining whether a contravention of s 51AC has occurred: Australian Competition & Consumer Commission v Oceana Commercial Pty Ltd [2004] FCAFC 174; [181]. Further, in considering the potential application of s 51AC, it is not permissible to 'search through the twelve criteria set out … find one that seems to fit the case in hand, and then move to a conclusion of unconscionable conduct': ACCC v Oceana [181]. All of the circumstances must be considered.
[94] Permanent Mortgages [356] ‑ [361].
The misleading conduct alleged against Mr Earl set out above is relevant to whether Bankwest's conduct was, in all the circumstances, unconscionable. So is the conduct relied on to establish the defence of equitable estoppel.
For present purposes, it is sufficient to identify one further aspect of the conduct of Bankwest which adds to the argument that its conduct was unconscionable. Mr Mann gives evidence of the undue pressure and unfair tactics adopted by Bankwest, which is a specifically identified factor in ACL s 21(2)(d). This includes the imposition of penalty interest to encourage Prodale and Mr Mann to leave Bankwest. [95] Mr Mann was told repeatedly throughout 2011 and 2012 that he had to leave the bank, notwithstanding that Prodale was up to date with its interest payments, including penalty interest.[96] His evidence is that in a meeting with Bankwest employees in October 2012 he felt intimidated.[97] At a meeting on 1 November 2012 he says he was presented with a deed of forbearance and was the subject of considerable pressure to sign it on the spot.[98]
[95] See for example First Mann Affidavit [206], [212], [220].
[96] See for example: First Mann Affidavit [218] ‑ [227], [237] ‑ [238], [268], [253] ‑ [254], [274] ‑ [277].
[97] First Mann Affidavit [274] ‑ [277].
[98] First Mann Affidavit [292] ‑ [299].
I am satisfied that it is arguable that the conduct of Bankwest was, in all the circumstances, unconscionable. Accepting Mr Mann's evidence, Bankwest's conduct offends against basic notions of good conscience and fair play. I am also satisfied that, if this finding were made at trial, it is arguable that an appropriate remedy would be for the court to refuse to enforce the Guarantee, the First Home Loan, the Second Home Loan and the Mortgage pursuant to ACL s 243(c). I am thus satisfied that Mr Mann has an arguable defence to Bankwest's claim based on unconscionable conduct in contravention of ACL s 21.
Is Bankwest entitled to summary judgment?
The onus is on Bankwest to persuade the court that the claim is an appropriate one for which to award summary judgment.[99] As set out above, there are three reasons why Bankwest has not satisfied this onus, and is not entitled to summary judgment:
(a)it has not made out a case for an leave to file the application outside the 21 day period allowed in RSC O 14 r 1(1);
(b)it has not verified all the facts on which the claim is based as required by RSC O 14 r 2(1), in particular, the fact of service of the notices of default on Prodale; and
(c)Mr Mann has satisfied me that there are a number of issues or questions in dispute which ought to be tried for the purposes of RSC O 14 r 3(1), in particular that he has arguable defences based on misleading conduct, estoppel and/or unconscionable conduct on the part of Bankwest.
[99] HSBC [26]; Hee [25]; Morgan [4]; Westwind (74).
There is a further reason not to award summary judgment to Bankwest. On an application pursuant to RSC O 14, the court may decline to award summary judgment if the defendant satisfies the court 'that there ought for some other reason to be a trial of that claim'.[100] In Miles v Bull, Megarry J said with reference to this phrase:[101]
If the defendant cannot point to a specific issue which ought to be tried but nevertheless satisfies the court that there are circumstances that ought to be investigated, then I think that those concluding words are invoked. There are cases when the plaintiff ought to be put to strict proof of his claim, and exposed to the full investigation possible at a trial; and in such cases it would, in my judgment, be wrong to enter summary judgment for the plaintiff.
[100] RSC O 14 r 3(1).
[101] Miles v Bull [1969] 1 QB 258, 265 ‑ 266.
This passage was endorsed by O'Brien DCJ in Fremantle Port Authority v DP World Australia Ltd[102] and by me sitting as the Acting Master in Helmers v Como[103] and HSBC Bank Australia Ltd v Mavaddat.[104]
[102] Fremantle Port Authority v DP World Australia Ltd [2007] WADC 202 [48].
[103]Helmers v Como [2014] WASC 394 [59] ‑ [61].
[104] HSBC [95].
As I have noted, I am to determine the application for summary judgment on the basis that the version of facts put forward by Mr Mann, assuming that it is not inherently incredible, would ultimately be accepted at the trial of the action.[105] I do not consider that his version of the facts is inherently incredible. Mr Mann has raised a large number of concerning issues about the manner in which Bankwest dealt with the loans made to Prodale and with him personally as a guarantor and a borrower. For reasons which are not apparent to me, Bankwest seems to have gone to inordinate lengths to terminate its relationship with Mr Mann and his business partners, even though Prodale was never in default of its repayment terms. Mr Mann's concerns are not limited to the allegations of misleading conduct, estoppel and unconscionable conduct set out above. Mr Mann also raises concerns about the haste with which the receivers appointed by Bankwest sold the Geraldton Hotel and Zuu Nightclub, and that fact that no serious consideration appears to have been given to offers nearly double the offer ultimately accepted.[106] The sale of the Geraldton Hotel is dealt with in detail in the Fifth Mann Affidavit, the Third Cavanagh Affidavit and the Cannon Affidavit. I am of the view that the present case is a prime example of the type of case referred to by Megarry J, one in which 'the plaintiff ought to be put to strict proof of his claim, and exposed to the full investigation possible at a trial'. Were the other grounds insufficient, I would have also declined to award Bankwest summary judgment on this basis.
[105] Webster (608); HSBC [27]; RHG Mortgage Corporation [28].
[106] First Mann Affidavit [408] ‑ [422]; Second Mann Affidavit.
In short, I do not have the high degree of certainty about the ultimate outcome of the action if it went to trial so as to make the action a proper one in which to grant summary judgment.[107]
[107] Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552 [57] (Gaudron, McHugh, Gummow & Hayne JJ); Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; (2006) 226 CLR 256 [46] (Gleeson CJ, Gummow, Hayne & Crennan JJ); Hee [47].
Should Mr Mann's counterclaim be struck out?
Mr Mann's current pleading is an amended defence and counterclaim dated 15 January 2015. By application dated 20 February 2015, Bankwest sought orders striking out the counterclaim.
Mr Mann's defence and counterclaim goes much of the way towards notifying Bankwest of the case it has to meet at trial. However, it does require some revision in order to comply with the RSC and fully notify Bankwest of the case it has to meet at trial. The appropriate course is to allow Mr Mann a period of time within which to file and serve a substituted defence and counterclaim. No doubt the analysis set out in these reasons will be of assistance to Mr Mann in framing his defence and counterclaim, though it has not been necessary for me to address all the causes of action on which he appears to rely. At this stage he may, of course, amend his pleadings without leave.[108] However, a substituted document may allow him to restructure the defence and counterclaim in a more logical manner. I do not think that there is much utility in reviewing the defence and counterclaim in detail from a pleadings perspective until this occurs. In repleading the counterclaim Mr Mann will need to ensure that he only pleads causes of actions relevant to losses sustained directly by him, and not losses sustained by Prodale.
[108] RSC O 21 r 3(1).
Bankwest's application should be adjourned sine die, with liberty to have it relisted upon the expiry of the time period set out for Mr Mann to file an amended or substituted defence and counterclaim.
What final orders are appropriate?
My preliminary view is that the following orders appropriately reflect the reasoning set out above:
1.The plaintiff's application for summary judgment dated 23 December 2015 be dismissed.
2.The defendant have unconditional leave to defend the claim.
3.By 24 June 2015 the defendant file and serve an amended or substituted defence and counterclaim.
4.The plaintiff's application dated 20 February 2015 to strike out the counterclaim be adjourned sine die.
5.The plaintiff have liberty to relist its application to strike out the counterclaim after 24 June 2015.
6.The application be listed for a status conference on 30 July 2015 at 11.00 am.
I will hear from counsel for Bankwest and Mr Mann on the final form of the orders and on costs.
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