Bendigo and Adelaide Bank Limited v Brackenridge - [2020] SASC 114

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
BENDIGO AND ADELAIDE BANK LIMITED v BRACKENRIDGE
[2020] SASC 114
Judgment of The Honourable Justice Doyle
24 June 2020
MORTGAGES - ESTATE, RIGHTS AND LIABILITIES OF MORTGAGOR AND MORTGAGEE - POSSESSION
GUARANTEE AND INDEMNITY - ENFORCEMENT OF GUARANTEE AND RELATED MATTERS
BANKING AND FINANCE - BANKS - DUTIES OF BANKS - OTHER MATTERS
The plaintiff (‘the Bank’) seeks possession of a property (‘the Property’) of which the defendant is the registered proprietor. The defendant granted two mortgages (‘the 2007 Mortgage’ and ‘the 2010 Mortgage’) over the Property in favour of the Bank. The Bank contends that these mortgages secure the defendant’s obligations under a guarantee executed by the defendant on 20 April 2010 (‘the Guarantee’). The Bank further contends that the Guarantee covers the indebtedness of Apex Property Solutions Pty Ltd (‘Apex’) under a facility (‘the 2016 Facility’) established through the February 2016 Apex Agreement and extended by the August 2017 Apex Variation Agreement. The funds advanced under the 2016 Facility were used to construct a luxury dwelling on the Property.
The 2016 Facility expired in December 2017 and the full amount fell immediately due and payable. Nothing has been paid, and the amount currently outstanding is approximately $4 million.
The Bank contends that Apex and the defendant have defaulted under the facility granted to Apex, the Guarantee and the Mortgages. In particular, the Bank contends that the defendant is liable for the debt as guarantor of Apex's obligations under the 2016 Facility, that this liability is secured by the Mortgages, and that the Bank is thus entitled to take possession of the Property.
The Bank’s primary claim is advanced pursuant to the contractual arrangements referred to above. However, the Bank also relies upon an alternative case in estoppel; namely, that even if the Guarantee or Mortgages were found not to extend to Apex’s liability under the 2016 Facility, the defendant is nevertheless estopped from denying that to be the case. The estoppel is said to arise by convention or by representation.
In addition to challenging various aspects of the Bank’s primary and alternative cases, the defendant raised a number of positive answers to the Bank’s claim, including contentions to the effect that:
•       his former wife has an equitable interest in the Property and ought to have been a party to the action;
•       the 2016 Facility was subject to the National Credit Code, and that the Bank did not comply with various of its provisions;
• the Bank supplied unsolicited financial services to Apex in contravention of s 12DMA of the Australian Securities and Investments Commission Act 2001 (Cth) (‘the ASIC Act’);
•       the Guarantee had expired when Apex’s overdraft account which it was then securing went temporarily into credit in late September 2010;
•       the Bank breached an essential term of the Apex Variation Agreement, and thereby also the Guarantee and Mortgages, by failing to advance certain funds to the defendant in November 2017;
•       the Bank breached its prudential obligation under the Code of Banking Practice when granting Apex an $80,000 overdraft facility in 2010, or when granting or varying the 2016 Facility pursuant to the Apex Agreement or Apex Variation Agreement; and
• the Bank contravened s 12DJ of the ASIC Act by using coercion in connection with the supply or possible supply of financial services.
Held (per Doyle J), upholding the Bank’s claim for possession:
1.      Apex is indebted to the Bank under the 2016 Facility, as established under the Apex Agreement and extended through the Apex Variation Agreement.
2.      The Guarantee covers Apex’s indebtedness under the 2016 Facility, and hence the defendant is liable to the Bank under that Guarantee for that indebtedness.
3.      Both the 2007 Mortgage and the 2010 Mortgage secured the defendant’s liability under the Guarantee.
4.      The 2016 Facility having expired, the defendant breached his obligation to comply with the demand for payment under the Guarantee, and was also in default under the 2007 Mortgage and the 2010 Mortgage.
5. The Bank provided the notice required under s 55A of the Law of Property Act 1936 in respect of the 2007 Mortgage, and it is appropriate to exercise the Court’s discretion under s 55A(2a) to make an order dispensing with the requirements of that section in respect of the 2010 Mortgage.
6.      The Bank is thus entitled to possession of the Property, subject only to the positive ‘defences’ relied upon by the defendant.
7.      In the alternative to the above, the Bank has established both the conventional estoppel and estoppel by representation for which it has contended. Thus, even if the Bank had failed in its primary case that the defendant was liable for Apex’s indebtedness under the terms of the Guarantee and Mortgages, the defendant would nevertheless be estopped from resiling from the parties’ assumption that this was the position.
8.      None of the defendant’s positive ‘defences’ has been established.
9.      It has not been established that the defendant’s former wife has an equitable interest in the Property or was otherwise required to be joined as a party to the action.
10.    The 2016 Facility was not subject to the National Credit Code. Apex is the debtor under the 2016 Facility, and is not a natural person or strata corporation. The defendant is not a debtor under that facility.
11.    Nor was any of the Guarantee or Mortgages subject to the National Credit Code.
12.    In the alternative, it has not been established that there was any relevant non-compliance with the provisions of the National Credit Code.
13.    The Bank complied with the formalities necessary for the application of the Guarantee and Mortgages to a future credit contract.
14.    The Guarantee did not expire when the Apex Overdraft account temporarily went into credit in September 2010.
15.    The Bank did not provide unsolicited financial services to Apex; both the Apex Agreement and Apex Variation Agreement were the product of requests from the defendant for further financial assistance from the Bank.
16.    The Bank did not breach any condition of the Apex Variation Agreement (and thereby the Guarantee and Mortgages) by failing to make an advance to the defendant in November 2017. The Bank’s obligation to make requested advances was qualified, and it has not been established that it breached its qualified obligation in declining to pay for some of the work for which the defendant sought payment.
17.    In the alternative to the preceding paragraph, even if there was a breach of the Bank’s obligation to make requested advances, this did not give rise to a right to terminate on the part of the defendant. The defendant has not pursued or established any entitlement to damages for any such breach; and any such entitlement would not in any event be a basis for impugning the Bank’s right to possession.
18.    The defendant has not established any breach by the Bank of its prudential obligation under the Code of Banking Practice in respect of either the granting of the Apex Overdraft in 2010, entry into the 2016 Facility through the Apex Agreement, or the extension or variation of that facility through the Apex Variation Agreement.
19.    Even if breach of the prudential obligation had been established, there would have been several further obstacles to the defendant’s reliance upon this in resisting the Bank’s claim for possession or at all.
20.    The defendant has not established that the Bank used coercion in connection with the supply or possible supply of financial services.
21.    The Bank has thus established the matters necessary to entitle it to an order for possession of the Property, and none of the matters raised by the defendant in purported answer to the Bank’s claim provides a basis for resisting such an order.
Australian Securities and Investments Commission Act 2001 (Cth) ss 12BA, 12BAA(7)(k), 12BAB(1), 12DJ, 12DM, 12DMA; Australian Securities and Investments Commission Regulations 2001 (Cth) regs 2B(1), 2B(3); Code of Baking Practice 2004 cls 25, 25.1, 28.4, 28.5, 28.10; Code of Banking Practice 2013 cls 27, 28, 31.13, 41.3; Consumer Credit (Queensland) Act 1994 (Qld); Consumer Credit (South Australia) Act 1995 (SA) s 5; Consumer Credit Code ss 6, 50, 51; sch 2 s 11; Law of Property Act 1936 (SA) ss 55A, 55A(1), 55A(2a), 55A(5); National Consumer Credit Protection Act 2009 (Cth) sch 1; ss 191, 334(2)(c); National Consumer Credit Protection Regulations 2010 (Cth) reg 81; National Credit Code ss 3, 4, 5, 7, 8, 13, 41, 47, 54, 55, 56, 59, 88, 90, 204, 208(1); Real Property Act 1886 (SA) ss 132, 133; Supreme Court Civil Rules 2006 (SA) r 38(4), referred to.
Bank of Queensland Ltd v Edwards [2017] QSC 191; Devon v Thirteenth Kaysan Pty Ltd [2016] FCA 357; Doggett v Commonwealth Bank of Australia (2015) 47 VR 302; Haynes v Westpac Banking Corporation (2018) 130 SASR 551; Jams 2 Pty Ltd v Stubbings (No 3) [2019] VSC 150; Win Securities Ltd v Bower [2018] VSC 180, discussed.
Aalborg CSP A/S v Ottoway Engineering Pty Ltd (2017) 129 SASR 283; Amalgamated Investment & Property Co Ltd v Texas Commerce International Bank Ltd [1982] 1 QB 84; [1981] 3 All ER 577; Andar Transport Pty Ltd v Brambles Limited (2004) 217 CLR 424; Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549; Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; Appleyard v Westpac Banking Corporation Ltd [2017] QCA 316; Australia and New Zealand Banking Group Ltd v Smith [2009] VSC 556; Bahadori v Permanent Mortgages Pty Ltd (2008) 72 NSWLR 44; Bofinger v Kingsway Group Limited (2009) 239 CLR 269; Brighton v Australia and New Zealand Banking Group Ltd [2011] NSWCA 152; Circuit Finance Pty Ltd v Glenauchen Pty Ltd [2001] SASC 41; Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329; Commissioner of Taxation v The Trustee for the Michael Hayes Family Trust [2019] FCAFC 226; Commonwealth Bank of Australia v Starrs [2012] SASC 222; Commonwealth Bank of Australia v Wood [2016] VSC 264; CSR Ltd v Adecco (Australia) Pty Ltd [2017] NSWCA 121; Devon v Thirteenth Kaysan Pty Ltd [2016] FCA 1026; Doggett v Commonwealth Bank of Australia [2014] VSC 423; Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; Equititrust Ltd v SLJM Pty Ltd [2010] NSWSC 1059; Erect Safe Scaffolding (Australia) Pty Ltd v Sutton (2008) 72 NSWLR 1; Farrow Mortgage Services Pty Ltd v Hogg (1995) 64 SASR 450; Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; Fuge v Commonwealth Bank of Australia [2019] FCA 1621; George 218 Pty Ltd v Bank of Queensland Ltd (No 2) (2016) 313 FLR 287; Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161; Jones v Dunkel (1959) 101 CLR 298; Karthurmary Pty Ltd v Facac Pty Ltd [2013] SASC 90; Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115; LCY Pty Ltd v Ma [2017] VSCA 383; Manassen Holdings Pty Ltd v Commercial & General Corporation Pty Ltd [2019] SASC 171; McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579; Miller Heiman Pty Ltd v Sales Principles Pty Ltd (2017) 94 NSWLR 500; Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 6) (2015) 329 ALR 1; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; National Australia Bank Ltd v Hunter (No 3) [2013] NSWSC 1642; Outback Energy Hunter Pty Ltd v New Standard Energy PEL 570 Pty Ltd [2018] SASC 8; Palaniappan v Westpac Banking Corporation [2016] WASC 72; Perpetual Trustees Victoria Ltd v Yap [2010] NSWSC 761; PPG Development Pty Ltd v Capitanio (2016) 126 SASR 307; Rinehart v Hancock Prospecting Pty Ltd (2019) 93 ALJR 582; Russo v Buck [2006] SASC 380; Tipperary Developments Pty Ltd v Western Australia (2009) 38 WAR 488; Vantage Systems Pty Ltd v Priolo Corporation Pty Ltd (2015) 47 WAR 547; Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; Westpac Banking Corporation v Haynes [2017] SASC 23; Wiggins Island Coal Export Terminal Pty Ltd v New Hope Corporation Ltd [2019] NSWCA 316, considered.

BENDIGO AND ADELAIDE BANK LIMITED v BRACKENRIDGE
[2020] SASC 114
Civil
DOYLE J:
PART A: INTRODUCTION
PART B: BACKGROUND
The Property
Relevant people and entities
The trial
Procedural history
PART C: THE FACTS
Commencement of the defendant’s relationship with the Bank
The defendant’s purchase of the Property and entry into the Mortgage
The Kings Point Project
The Apex Overdraft and entry into the Guarantee and Second Mortgage
Deed of Cross Collateralisation
Apex Overdraft refinanced through the Construction Loan
Establishment of the Apex Term Facility
Extensions of the Apex Term Facility
Extensions during 2011 and 2012
Further extension in mid 2013
Further extensions in late 2013 and 2014

Valuation of the Property in November 2014
File transferred to Asset Management Unit in December 2014
Communications about completion of the Property
Communications in relation to refinancing
The Apex Agreement / 2016 Facility
Monies advanced pursuant to the 2016 Facility
Further Communications about the completion and sale of the Property
The Apex Variation Agreement
Monies advanced pursuant to the Apex Variation Agreement
Communications in late 2017
Notices of Demand
PART D: THE PLAINTIFF’S CASE
Apex’s indebtedness to the Bank
The Guarantee
Key provisions of the Guarantee
Principles governing construction of commercial documents
The reference to a Credit Contract dated 12 April 2010
Application of the Guarantee to the 2016 Facility
Application of the Guarantee to the Apex Variation Agreement
The defendant is liable to the Bank under the Guarantee

The Mortgages
Terms of the 2007 Mortgage
The Guarantee was an agreement covered by the 2007 Mortgage
Terms of the 2010 Mortgage
The Guarantee was an agreement covered by the 2010 Mortgage
Breaches of the Mortgages

The Deed of Cross Collateralisation
Events of default
Statutory notice
Notice provided for 2007 Mortgage
Dispensation for the 2010 Mortgage

Estoppel
Principles of estoppel
Application to the present case

PART E: THE DEFENDANT’S CASE
Proper parties
The National Credit Code
Relevant provisions of the National Credit Code
Non-applicability to Apex Agreement or Apex Variation Agreement
Non-applicability to Guarantee or Mortgages
Form of the Guarantee - s 55
Disclosure requirements for Guarantee - s 56

Formalities for application of Guarantee to future credit contracts
Formalities for the application of the Mortgages to future credit contracts
Expiration or extinguishment of the Guarantee
Unsolicited supply of financial services
Relevant provisions of the ASIC Act
Consideration of the defendant’s argument

Breach of the Guarantee and Mortgages by the Bank
The Bank’s obligation to make advances
The alleged breach
No termination or repudiation

Alleged breach of the prudential obligation
The nature and content of the prudential obligation
Compliance with the prudential obligation - Apex Overdraft
Compliance with the prudential obligation – 2016 Facility
The prudential obligation was not a condition precedent or essential condition
Other obstacles to reliance upon any breach of the prudential obligation

Coercion in connection with the supply of financial services
Other matters
PART F: CONCLUSION AND ORDERS
PART A: INTRODUCTION

The plaintiff in these proceedings is Bendigo and Adelaide Bank Limited (the Bank). It seeks possession of a property on Waterfall Gully Road in Beaumont (the Property) owned by the defendant. The luxury home on this property was constructed using funds advanced by the Bank.
The defendant, as the registered proprietor of the Property, granted two mortgages over the Property in favour of the Bank, in 2007 and 2010 respectively. The Bank contends that these mortgages secure the defendant’s obligations under a guarantee executed by the defendant on 20 April 2010 (the Guarantee). The Bank further contends that the Guarantee covers the indebtedness of Apex Property Solutions Pty Ltd (Apex), of which the defendant was the sole director and shareholder.
Liability under the Guarantee was initially limited to $80,000, but this was subsequently extended several times, the last such extension being to an amount of $3,121,000 plus costs and interest. More particularly, the limit of the defendant’s liability was extended to cover Apex’s indebtedness under a facility granted to it in February 2016 (the Apex Agreement or the 2016 Facility), and varied in 2017 (the Apex Variation Agreement).
The Apex Agreement was formed, and the 2016 Facility established, through Apex’s acceptance of the Bank’s letter of offer dated 19 February 2016. It involved the consolidation and refinancing of existing facilities which had been granted by the Bank to Apex, the defendant and V1 Systems Pty Ltd (V1 Systems) (a company of which the defendant was the sole director and majority shareholder). The Apex Variation Agreement was formed through acceptance of the Bank’s letter of variation dated 29 August 2017.
The 2016 Facility provided by the Bank expired in December 2017 and the full amount advanced fell immediately due and payable. Nothing was, or has since been, paid to the Bank. The debt now owing by Apex to the Bank is approximately $4 million (the Debt).
The Bank contends that Apex and the defendant have defaulted under the facilities granted to Apex, the Guarantee and the mortgages. In particular, the Bank contends that the defendant is liable for the Debt as guarantor of Apex’s obligations, that this liability is secured by the mortgages, and that the Bank is thus entitled to take possession of the Property.
The Bank’s primary claim is advanced pursuant to the contractual arrangements to which I have referred. However, the Bank has also pleaded an alternative claim in estoppel. The essence of the Bank’s case in this respect is that even if the Guarantee or mortgages were to be found to not extend to Apex’s liability under the 2016 Facility (as varied or at all), the defendant is nevertheless estopped from denying that to be the case. The estoppel is said to arise by convention or by representation.
In an earlier iteration of its claim the Bank sought monetary relief against the defendant. However, the Bank has abandoned that claim, and has confined its claim to one seeking an order for possession of the Property.[1]
[1] Subject to two relatively minor qualifications, namely claims (to the extent necessary) for rectification of a date mentioned in the Guarantee, and for dispensation under s 55A(2a) of the Law of Property Act 1936 (SA) in respect of the 2010 Mortgage.
In addition to challenging various aspects of the Bank’s case, the defendant has also raised a number of positive answers to the Bank’s claim, including contentions to the effect that:
·his former wife has an equitable interest in the Property and ought to have been a party to the action;
·the 2016 Facility was subject to the National Credit Code,[2] and that the Bank did not comply with various of its provisions;
·the Guarantee has expired, having come to an end when Apex’s overdraft account temporarily went into credit in late September 2010;
·the Bank supplied unsolicited financial services to Apex, such that, pursuant to s 12DMA of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act), Apex is not liable to make any repayments under the 2016 Facility;
·the Bank breached an essential term of the Apex Variation Agreement, and thereby the Guarantee and mortgages, by failing to make an advance to the defendant personally in November 2017, and that he then terminated the Guarantee and mortgages;
·the Bank breached its prudential obligation under clause 25 of the Code of Banking Practice 2004 (when granting Apex an $80,000 overdraft facility in 2010), and clause 27 of the Code of Banking Practice 2013 (when granting and varying the 2016 Facility in February 2016 and August 2017 respectively); and
·the Bank contravened s 12DJ of the ASIC Act by using coercion in connection with the supply or possible supply of financial services.
[2] As scheduled to the National Consumer Credit Protection Act 2009 (Cth).

In these reasons, I shall commence with some matters by way of background before then setting out, in essentially chronological order, the findings of fact I have made. I shall then address the various steps in the Bank’s case, and the defendant’s contentions in relation to the same. I will conclude by addressing each of the positive answers or ‘defences’ relied upon by the defendant.
PART B: BACKGROUND
The Property
The defendant is the registered proprietor of the whole of the land comprised in Certificate of Title Register Book Volume 5864 Folio 990 situated at 31 Waterfall Gully Road, Beaumont in the State of South Australia (defined earlier as the Property).
Two registered mortgages in favour of the Bank are noted on the Certificate of Title: mortgage number 1076 2379 (the Mortgage or the 2007 Mortgage) and mortgage number 1138 2696 (the Second Mortgage or the 2010 Mortgage).
As explained below, the defendant purchased the Property in April 2007. A significant dwelling was subsequently constructed on the Property, using funds obtained from the Bank. The building work was undertaken by the defendant, who in turn subcontracted others to perform various aspects of the work.
The defendant initially intended that the dwelling would serve as a display home for his design and construction services business. However, when he later began to focus his business efforts upon commercial property development through Apex, it became his intention that the dwelling would be his family residence.
Relevant people and entities
The defendant has a Bachelor of Business from the University of South Australia. He has worked in several sales and management positions for various large business organisations. More recently he has pursued his own business interests through V1 Systems and Apex. As demonstrated by his communications and dealings with the Bank the subject of these proceedings, and indeed his conduct of these proceedings, the defendant is an intelligent, capable and determined man.
V1 Systems was incorporated in 2002, and deregistered on 5 November 2017. The defendant was always the sole director, and was the majority shareholder from at least March 2010.
Apex was incorporated in March 2007, and deregistered on 28 July 2019. The defendant had been the sole director since March 2010, and was the only shareholder from August 2007.
As mentioned, the plaintiff in these proceedings, referred to as the Bank, is Bendigo and Adelaide Bank Limited. It is the successor in law to Adelaide Bank Limited.
The Bank was represented by various of its employees in its dealings with the defendant that are the subject of these proceedings. Initially the defendant dealt primarily with Lee Elphick (who was assigned the role as the defendant’s banking relationship manager) and Mark Robertson (who was a Regional Credit Manager, and described as the Manager of Business Banking). It was Mr Robertson who approved the initial facility granted to Apex in 2010, based upon a credit memorandum prepared by Mr Elphick. Subsequently, Mike Attiwill approved several extensions of Apex’s facilities, again based upon credit memoranda prepared by Mr Elphick.
From late 2014, when responsibility within the Bank for the facilities of Apex and the defendant was transferred to its Asset Management Unit, the defendant’s dealings were with Alec Dunn (Assistant Manager), Peter Steer (Manager) and Antonio Bellizia (Head of Asset Management). Later in time Stephen Pearce (Assistant Manager) also had some involvement.
It was Mr Bellizia who approved the Bank’s grant of the 2016 Facility, based upon a credit memorandum prepared by Mr Dunn. Arthur Eskitzis deputised for Mr Bellizia when he was on leave during August and September 2017, and it was Mr Eskitzis who gave the formal approval for the variation to the 2016 Facility through the Apex Variation Agreement.
The trial
The plaintiff issued these proceedings in June 2018. The trial took place, on a stop-start basis, over a two week period commencing Monday, 24 February 2020. The defendant represented himself, as he has done throughout these proceedings.
In support of its case, the Bank relied upon a large number of documents containing not only the formal documentation in relation to the various facilities and security arrangements involving the defendant, Apex and V1 Systems, but also a number of its communications with the defendant and its internal communications, diary notes and credit memoranda. While the documentary material relied upon by the Bank was voluminous (being in excess of nine lever-arch folders), it was not suggested that it was exhaustive. It did not include all of the communications between the parties, and indeed may not have included all the internal communications. However, there appeared to me to have been a genuine attempt by the Bank (through its legal advisors) to put before the Court all of the material that it considered to be relevant to the issues raised by both parties.
In addition to these documents, the Bank called evidence from four of its employees, being Mr Robertson, Mr Bellizia, Mr Eskitzis and Mr Pearce.
I have mentioned the decision-making roles of the first three of these men. They each gave evidence as to their dealings with the defendant and Apex, and their approaches to the approvals they gave. All three of these men were impressive witnesses. While the defendant challenged some aspects of their evidence, there was no reason for me to doubt the credibility or reliability of the evidence they gave. They were each careful to distinguish between matters that they were able to recall, and matters in respect of which they were reliant upon either their general practice, or reconstruction based upon the contemporaneous documents in the Bank’s files.
As for Mr Pearce, his evidence was essentially confined to verification of the amounts outstanding when the Bank served its notice of demand on 1 May 2018. His evidence was not challenged by the defendant.
While I have accepted the evidence of each of the Bank’s witnesses, as will become clear, the Bank’s case largely emerges from the documents in evidence. Most of the findings which I have made are based upon the contents of the contemporaneous documents, and inferences flowing from them.
The Bank did not call Mr Elphick, Mr Dunn or Mr Steer as witnesses. While they were witnesses who were available to the Bank, there was ultimately no occasion for me to attach any significance to the Bank’s decision not to call them to give evidence. The involvement of, and work by, these men is apparent from the documents. Even if it could be expected that their memories would enable them to add anything of significance to the written record, they were not the relevant decision makers. They did not approve any of the facilities granted by the Bank. While the defendant at times complained about the Bank’s decision not to call these men as witnesses, no particular issue was identified in respect of which it was appropriate to draw any assistance from the absence of these witnesses.
While the defendant pleaded a number of matters by way of positive defence, and cross-examined the Bank’s witnesses at some length, he did not ultimately give evidence in his own case. The only evidence he adduced was a modest number of documents he tendered during cross-examination of the Bank’s witnesses and (with my leave) in the course of his closing address.
Procedural history
Before addressing the substance of the matters in issue between the parties in these proceedings, it is convenient to commence with an overview of the procedural history of this matter. I do so in order to explain how it was that the matter proceeded without the defendant giving oral evidence, on the basis of a “draft” defence, and without the defendant having filed the counterclaim that he occasionally foreshadowed.
As mentioned, the Bank commenced these proceedings in June 2018, initially seeking orders for possession pursuant to the summary procedure available under Part XVII of the Real Property Act 1886 (SA). The defendant filed an address for service indicating that he would represent himself, and attended a directions hearing before a Master of this Court.
At the second directions hearing, on 15 August 2018, the Master made an order that the defendant file any affidavits in opposition to the claim for possession within 21 days, and the matter was adjourned to a hearing on 12 September 2018. The defendant did not file any affidavit evidence, but at the hearing on 12 September 2018 was given an extension until 25 September 2018 to file an affidavit deposing to the defences that he said he wished to rely upon. The matter was adjourned to a hearing on 26 September 2018.
The defendant did not file any affidavit within the prescribed time, and did not attend the hearing on 26 September 2018. In the face of these defaults, the Master made orders for possession in the Bank’s favour.
Some months later, and after the Bank had obtained and served a warrant for possession, the defendant filed an application to set aside the orders for possession. He relied upon both his being under stress and unwell at the time he was supposed to have filed his evidence and attend Court, and also an intention to defend the Bank’s claim. The grounds the defendant identified for defending the Bank’s claim were essentially those arising out of his contentions that Apex’s lending (and the security provided by the defendant) was governed by the National Credit Code; that the Bank’s lending was unsolicited; and that the Guarantee had expired back in 2010 upon Apex’s then overdraft facility moving into a credit balance.
On 14 March 2019, the Master allowed the defendant’s application, and set aside the orders for possession. His Honour did so on the basis that the last of these three potential bases for defending the Bank’s claim was arguable, and required further investigation.
The Bank was ordered to file a statement of claim, which it did on 27 March 2019. On 10 May 2019 the defendant filed a defence, and on 29 May 2019 the Bank filed a reply. The Bank made disclosure on 18 June 2019, and filed a second statement of claim on 24 June 2019 (to include an alternative claim in reliance upon the Second Mortgage).
On 27 June 2019, Lovell J ordered that the matter be listed for trial before Bampton J, commencing on 9 September 2019. His Honour also made various procedural directions, including that the defendant file any amended defence by 15 July 2019. The defendant did not file any amended defence. And on 23 August 2019, Lovell J made an order waiving compliance with the requirement to have the defendant sign the certificate of readiness for trial. The defendant was not present when this order was made, which he later said was because he did not have adequate notice of the hearing.
At around the same time, Bampton J became unavailable to hear the trial, and it was instead listed to commence before Kelly J on 16 September 2019.
On 16 September 2019, when the matter came on before Kelly J, it was not ready for trial. The defendant had a draft amended defence upon which he wished to rely, and he also had various disclosure and other procedural complaints that he wished to agitate. While the defendant sought to attribute blame to the Bank, and contended that the matter ought never to have been certified fit for trial, Kelly J adjourned the trial with an order that the defendant pay the Bank’s costs thrown away. Kelly J also made orders granting the defendant permission to file an amended defence, and assigning the matter to the special classification list before me.
The first hearing before me was on 4 October 2019. The orders I made on that occasion included an order that the defendant file his foreshadowed amended defence within 14 days. I subsequently extended this time frame by seven days. While the defendant circulated a draft second defence dated 22 October 2019, he did not file the document.
At a hearing on 24 October 2019, I gave the Bank permission to amend its statement of claim to remove its claim for any monetary relief (and required it to file a third statement of claim by 25 October 2019, which it did). The defendant said that the draft second defence he had circulated was not a final document and that he was also intending to bring a counterclaim. I made an order that he file his second defence and counterclaim by 1 November 2019. I also made various further procedural orders timetabling the matter towards a trial before me in early 2020.
By the time of the next hearing before me, on 20 November 2019, the defendant had still not filed his foreshadowed second defence and counterclaim. He proffered various excuses for his failure to do so, including the stress and health related difficulties he was struggling with and various complaints about the Bank’s conduct of the proceedings. While the defendant’s complaints were not adequately evidenced, let alone an adequate explanation for his delay, I ultimately granted him a further indulgence, ordering that the time for him to file a second defence and counterclaim be extended to 22 November 2019, but also ordering that in default of any such document being filed, the draft second defence circulated on 22 October 2019 was to stand as his defence in these proceedings.
The defendant did not file any second defence and counterclaim within this extended time frame. Indeed, despite subsequently making reference on several occasions to his intention to seek permission to file such a document, and me warning him about the need to do so promptly (and with appropriate supporting evidence) for his application to have any chance of success, the defendant has never made any such application. Nor indeed has he ever circulated, or otherwise sought to rely upon, any further version of his defence or any counterclaim.
In December 2019, I dealt with an application by the defendant challenging various aspects of the Bank’s pleading, which resulted in the Bank filing a fourth statement of claim to address those aspects of the defendant’s challenge that had merit. The defendant continued to raise various other procedural complaints at the hearings before me, which I dealt with as they arose.
On 20 December 2019, I made a number of orders timetabling the matter towards the trial that by then had been listed to commence before me on 24 February 2020. These included an order that all evidence in chief at the trial was to be given by way of witness statements. I ordered that the Bank file its evidence by 27 January 2020, and that the defendant do likewise by 10 February 2020.
The Bank filed its evidence by the end of January 2020, but the defendant did not file any evidence prior to the commencement of trial. He also failed to comply with several of the other pre-trial directions that I had made. This was despite me giving the defendant several warnings as to the importance of him complying with my orders, and the potential consequences for his case at trial if he did not do so.
At the commencement of the trial, I impressed upon the defendant the importance of him finalising his proposed witness statement as soon as possible. While indicating to him that he would need to make an application supported by evidence to explain his delay, I made it clear to him that he should promptly bring such application if he wished to give evidence. Unfortunately, despite several reminders and warnings by me during the early stages of the trial, and several intimations, if not assurances, from the defendant that he was intending to do so, the defendant never produced a final or complete witness statement, or otherwise applied to give evidence.
I have mentioned the stop-start nature of the trial. It commenced on Monday, 24 February 2020. After dealing with some further interlocutory matters raised by the defendant, the Bank opened its case and the defendant took the opportunity to give me an overview of his case. The Bank then called Mr Robertson, who was cross-examined at some length by the defendant. At the conclusion of Mr Robertson’s evidence, when rising for the day, I emphasised to the defendant the importance of him circulating at least a draft version of his witness statement as soon as possible, and preferably overnight.
The following morning the defendant had not circulated his foreshadowed statement. However, he indicated that he would do so by email over the lunch break.
After the defendant had spent the morning cross-examining the Bank’s second witness, Mr Bellizia, the trial was adjourned for a two-hour lunch break to give the defendant the time he said he needed to complete his witness statement.
When the trial resumed later that afternoon, the defendant was not present. I was informed that an incident had occurred in the precincts of the Court that had led to the defendant receiving both police and medical attention. I made an order adjourning the matter to a directions hearing on the Friday, with the intention that the defendant would by then be able to indicate whether he would be in a position to resume his cross-examination of Mr Bellizia, and the trial more generally, on the following Monday (that is, 2 March 2020).
On Friday, 28 February 2020 the defendant attended the hearing before me. The defendant, albeit without any formal evidence, explained the difficulties he had been experiencing in coping with the stress and strain of the litigation, and how this had triggered his episode earlier in the week. While expressing concern about his own health and well-being, he indicated that he was able to resume the trial on the following Monday, and that he understood the importance of producing his witness statement before the resumption of the trial.
As an aside, the Bank indicated on this occasion that in addition to Mr Dunn (whom the Bank had already indicated it did not intend to call to give evidence), it also no longer intended to call either Mr Elphick or Mr Steer to give evidence.
The trial resumed on the Monday without the defendant having produced a witness statement. The defendant completed his cross-examination of Mr Bellizia. He also cross-examined Mr Eskitzis, and then chose to ask no questions of the Bank’s final witness Mr Pearce. The Bank closed its case, subject to the tender of some documents it wished to gather together overnight.
The day concluded with an exchange between me and the defendant in which I reiterated the importance of the defendant being in a position to present his case the following day. I expressed my concern that he had not yet produced his foreshadowed witness statement, and the importance of him doing so as soon as possible. I also reminded him of the need to support any application to give evidence with an explanation for his non-compliance and delay. The defendant indicated an intention to circulate his statement to the Bank and the Court ahead of the resumption of the trial.
The following day, Tuesday 3 March 2020, the defendant did not attend Court. Shortly after the scheduled commencement time, the defendant emailed my chambers with an “unfinished draft” statement of his evidence. His covering email explained the difficulty he was having coping with the litigation and its demands, and concluded with “I am at his Honour’s mercy as to administering justice.”
My Associate’s telephone and email attempts to contact the defendant were unsuccessful, and the trial resumed later that morning. The Bank tendered the documents it had foreshadowed, and then applied for a direction that the defence case be treated as closed, and that the matter proceed to closing addresses on the Friday. Despite the force of the Bank’s detailed submissions in support of this approach, I decided to give the defendant a further opportunity to present his case at 2.15 pm that day.
My Associate sent the defendant an email notifying him of this outcome, and the requirement that he attend at 2.15 pm if he wished to avail himself of a final opportunity to apply to adduce evidence in the defence case. My Associate left a message on the defendant’s telephone informing him of the email.

The defendant did not attend at 2.15 pm, and so I made a ruling in the following terms:
As I said when last in court this morning, I accept and in effect adopt the matters outlined by Mr Thomas in his submissions this morning. Whilst I am cognisant of Mr Brackenridge’s position as an unrepresented litigant, there is a limit to the extent to which I can continue to grant him indulgences in the presentation of his case consistent with the requirements of fairness to both parties and the interests of justice. In my view, Mr Brackenridge has had more than appropriate opportunity to seek to present a defence case and hasn’t done so.
So, I consider it’s appropriate to proceed on the basis that the defence case is now closed. In forming that view, I’ve also had regard to the fact that the defendant’s position is, in my view, well-articulated in his defence and in my view, would, in any event, have stood or fallen to a significant extent on the documents, including the extensive file notes of … dealings and communications between the two parties. I think that is a relevant consideration in taking the step that I have. So, I intend to treat the defence case as closed.
Later that day (at 4.47 pm), the defendant emailed my Associate stating that he had not been aware of the emails earlier in the day, or of the adjournment to 2.15 pm, and apologising to the Court. Early the next morning (at 8.41 am) my Associate responded by email referring the defendant to the transcript with which he had been provided, and stating that in the absence of any proper explanation, or properly supported application, the matter was proceeding to closing addresses on Friday. The defendant was informed that his closing submissions were due by 4.00 pm the following day, but that they could be supplemented orally on the Friday.
In the absence of any communication or application from the defendant, the trial resumed for closing addresses on the Friday morning. This was the tenth and final day allocated for the hearing of the trial. I had other hearings scheduled for the following week.
The defendant attended Court, and whilst he reiterated some of the difficulties he had confronted in addressing the litigation, he did not make any application for permission to reopen his case or to otherwise adduce any evidence in support of his case. The defendant did, however, proceed to deliver an oral closing address in which he addressed in quite some detail a number of matters raised in his defence. Indeed, he did so in a very competent manner, demonstrating a quite sophisticated understanding of the matters in issue. During the course of his closing address, I accepted the defendant’s tender of several documents upon which he sought to rely.
It was in the above circumstances that the trial came to a conclusion without the defendant ever filing his foreshadowed amended defence and counterclaim, or giving any evidence in support of the defence case. Strictly speaking, he did not ever make an application to rely upon any such pleading or evidence, or indeed to adjourn the trial to enable him a further opportunity to do so. However, it was implicit in my approach to the trial, and decision to move to closing addresses, that I took the view that the defendant had been given ample opportunity to put forward any pleading or evidence upon which he wished to rely, and that it was not in the interests of justice that there be any further delay or disruption in the progress of the proceedings. While cognisant that the defendant did not have the benefit of legal representation or advice, and the need to ensure that I assisted him in understanding the Court’s process and afforded him some flexibility in his compliance with the same, he remained subject to the principles in Aon Risk Services Australia Ltd v Australian National University.[3] And in my view those principles justified, and indeed required, the approach that I took.
PART C: THE FACTS
[3] Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; as explained and applied in numerous subsequent decisions, including my decision in PPG Development Pty Ltd v Capitanio (2016) 126 SASR 307 at [30]-[40].
In this section of my reasons I have set out a chronology of factual findings that I have made. Most of these findings are based upon the documents in evidence, although they are consistent with, and in several respects supported by, the evidence given by the Bank’s employees who gave evidence.
Commencement of the defendant’s relationship with the Bank
The defendant commenced his relationship with the Bank (in its then capacity as Adelaide Bank Limited) in late 2004. His dealings at that point were with Norm Dicker and Greg Huddleston. Mr Dicker was an account manager reporting to Mr Huddleston, whose title was “Manager, Business Banking”.
Pursuant to a letter of offer dated 6 January 2005, the Bank lent V1 Systems the amount of $84,000. At around the same time, the defendant signed a guarantee. This January 2005 guarantee was limited to an amount of $84,000.
In June 2005, the Bank approved a $10,000 overdraft to the V1 Systems Business Cheque Account. Later that month, V1 Systems came into funds, which it used to repay the amounts then outstanding on both the V1 Systems loan and overdraft. By letter dated 28 June 2005, the Bank wrote to the defendant, acknowledging receipt of the repayment and informing him that he was released from the January 2005 guarantee.
Later in 2005, pursuant to a letter of offer dated 21 November 2005, the Bank approved a $30,000 overdraft to the V1 Systems Business Cheque Account. At around the same time, the defendant signed a further guarantee, this time with a limit of $30,000. The letter of offer was signed by the defendant as both the customer (that is, as director and secretary of V1 Systems) and guarantor.
The defendant’s purchase of the Property and entry into the Mortgage
In early 2007, the defendant wished to purchase the Property, which at that time was vacant residential land. The purchase price was $271,889.
In discussions with the Bank in April 2007, the defendant was given an intimation that the Bank would be able to assist him to purchase the Property, but was told to make the purchase contract subject to finance in case there were delays in establishing the loan. The defendant executed a conditional contract, with the date for settlement being 27 April 2007 (later extended to 30 April 2007).
At the time of settlement on 30 April 2007, the Bank had not yet established the anticipated loan facility. Instead, $256,889 was advanced against the V1 Systems Business Cheque Account. This resulted in the V1 Systems Business Cheque Account becoming overdrawn by a total of $290,364. The Property was conveyed into the plaintiff’s name as registered proprietor.
In around May 2007, Mr Robertson took over Mr Huddleston’s role, and assigned Mr Elphick to be the defendant’s banking relationship manager.
In July 2007, the Bank (through Mr Robertson and Mr Elphick) took steps to regularise the advance of funds that had occurred on 30 April 2007.
Pursuant to a letter of variation dated 16 July 2007, the Bank extended the overdraft on the V1 Systems Business Cheque Account from $30,000 to $230,000. The letter of variation referred to transaction documents that included the November 2005 guarantee (with the limit extended from $30,000 to $230,000) and a first registered mortgage over the Property. The letter of variation was signed by the defendant as both the customer (as the director and secretary of V1 Systems) and as guarantor.
A handwritten annotation to the letter of variation indicated that Mr Robertson and Mr Elphick had given an instruction that the mortgage “will not be registered as at this time”; that the Bank would hold it on deposit and David Webber (from residential banking) “will lodge a residential mortgage over this title in the near future.”
The Bank and the defendant subsequently executed a home loan for $208,000 (the Home Loan). The Home Loan was secured by a mortgage over the Property dated 30 July 2007 (defined earlier as the Mortgage or the 2007 Mortgage). The Mortgage was registered on 14 August 2007, and remains the first registered mortgage over the Property.
The Kings Point Project
At some point prior to 2010 the defendant and Apex became involved in a property development project (the Kings Point Project) on the land at the corner of Kings Road and Main North Road, Salisbury South (the Kings Point Land). That involvement was through a joint venture between Apex and Commercial & General Pty Ltd. The Kings Point Land was held by a company (Engel Holdings Pty Ltd) owned by the defendant’s father-in-law, Peter Engel. The joint venturers had established new corporate entities, in which they each held a 50 per cent shareholding, for the purpose of acquiring and developing the Kings Point Land.
As at early 2010, the defendant expected he would receive a 2 per cent commission of $800,000 from Mr Engel on the expected $40,000,000 sale price of the Kings Point Land. While the commission was payable upon settlement of the anticipated land sale contract, Mr Engel had offered to advance some of the commission to assist the defendant with his cash flow.
The Apex Overdraft and entry into the Guarantee and Second Mortgage
In February 2010, the defendant informed the Bank (through Mr Elphick) that he wished to consolidate his banking with the Bank, referring in that context to both V1 Systems and his “development company” Apex. He requested a $30,000 overdraft facility for Apex. After a series of emails between the defendant and Mr Elphick as to the terms and amount of the requested facility, approval was ultimately sought and obtained for an $80,000 Business Solutions Overdraft facility in favour of Apex.
The request for this overdraft facility was the subject of a credit memorandum dated 26 March 2010 that was prepared by Mr Elphick and approved by Mr Robertson. The credit memorandum described the purpose of the $80,000 as to assist with Apex’s working capital requirements in relation to the Kings Point Project.
The credit memorandum was predicated on the facility, at least initially, being serviced by income from V1 Systems. It gave the “first source of repayment” as cash flow generated by V1 Systems, and commission payments from Apex once the Kings Point Project “takes off” in three to four months time. It gave the second source of repayment as a second registered mortgage over the Property, and guarantees from the defendant and V1 Systems.
The security schedule attached to the credit memorandum made reference to both a first registered mortgage (said to be held in the retail section of the Bank) and a second registered mortgage (to be arranged). It also made reference to guarantees limited to $80,000 from the defendant and V1 Systems.
By letter of offer dated 20 April 2010, the plaintiff offered Apex an overdraft facility for $80,000 (the Apex Overdraft). The letter of offer required security in the form of a second registered mortgage over the Property, and guarantees from the defendant and V1 Systems. The defendant countersigned the letter of offer on 20 April 2010, both as the director and secretary of the borrower (Apex), and as the security provider. On the same date, the defendant also signed a guarantee in favour of the Bank (defined earlier as the Guarantee), and a “Form of acknowledgment – individual guarantor”. The relevant terms of the Guarantee are set out later in these reasons.
On 20 April 2010, the defendant also executed a second mortgage over the Property (defined earlier in these reasons as the Second Mortgage or the 2010 Mortgage). This mortgage was registered on 7 May 2010.
By letter of offer from the Bank to Apex dated 13 July 2010, the plaintiff offered to vary the limit of the Apex Overdraft from $80,000 to $160,000. The letter of offer referred to existing security in the form of the first and second mortgages over the Property and the guarantees from the defendant and V1 Systems, as well as “new security to be taken” in the form of a deed of cross collateralisation between Apex, V1 Systems and the defendant. On 16 July 2010, the defendant countersigned the letter of offer as borrower (as director and secretary of Apex) and as security provider (in his own capacity, and as director and secretary of Apex and V1 Systems).
Deed of Cross Collateralisation
On 16 July 2010, the defendant executed a deed of cross collateralisation (the Deed of Cross Collateralisation) between the Bank as lender, Apex as borrower, and the defendant and V1 Systems as security providers. The terms and relevance of this document are addressed later in these reasons.
Apex Overdraft refinanced through the Construction Loan
The evidence includes a credit memorandum dated 20 September 2010 prepared by Mr Elphick.[4] It identified the borrowers as Apex and the defendant. The purpose so far as Apex was concerned was said to be “[t]o reduce current OD limit from $160 to $20”, and so far as the defendant was concerned was said to be “[t]o provide a new TLN of $200 to assist with development on [the Property] and refinance OD under [Apex]”. The credit memorandum went on to provide a breakdown of the new loan of $200,000; namely, that it was as to $60,000 for construction, and as to $140,000 to refinance the overdraft.
[4] Although apparently not signed by him until 12 October 2010.
On 29 September 2010, in circumstances elaborated upon later in these reasons, the Bank paid the $200,000 into the Apex overdraft account, leaving it with a credit balance. As set out in the next few paragraphs, this advance of $200,000 was not formally documented until mid-October. By letter of offer from the Bank to Apex dated 14 October 2010, the Bank formally offered to replace the $160,000 limit on the Apex Overdraft with a reduced limit of $20,000. It listed as existing security each of the first and second registered mortgages, the guarantees from the defendant and V1 Systems, and the Deed of Cross Collateralisation.
By letter of offer dated 15 October 2010, the Bank offered the defendant a new loan of $200,000 (the Construction Loan) with the purpose said to be to assist with the development of the Property, and to refinance the Apex Overdraft. The letter of offer listed as transaction documents both an unregistered mortgage dated 16 July 2007 and guarantees to the limit of $200,000 from V1 Systems and Apex.
On 21 October 2010, the defendant countersigned both the 14 October 2010 and 15 October 2010 letters of offer in his various capacities.
By letter of offer dated 5 January 2011 from the Bank to the defendant, the Bank offered an increase in the limit on the Construction Loan from $200,000 to $215,000. There is no countersigned copy of this letter in evidence.
Establishment of the Apex Term Facility
By letter of offer dated 3 February 2011 from the Bank to Apex, the Bank offered Apex a Term Facility (interest only) with a limit of $100,000 (the Apex Term Facility). The letter of offer provided for a term of one year, and gave the purpose of the facility as being to assist with the construction of the Property, and to reimburse two facilities each of $20,000 held by V1 Systems and another related company (V1 Technologies Pty Ltd). The letter of offer identified the “overall security position” as involving existing security in the form of the first and second registered mortgages over the Property, existing limited guarantees from the defendant and V1 Systems for “$450,000 (being increased to $565,000)”, and the Deed of Cross Collateralisation. The letter of offer was countersigned by the defendant in his various capacities on 4 February 2011.
On 4 February 2011, the defendant also signed a document headed “Acknowledgment by Guarantor”, referring to the extension of the Guarantee to the Apex Term Facility, and to a revised limit of liability under the Guarantee.
Extensions of the Apex Term Facility
Over the period from the establishment of the Apex Term Facility in February 2011 through to the entry into the Apex Agreement in February 2016, the Bank granted a number of extensions to the Apex Term Facility to enable the construction of the Property. As will become apparent, there were significant cost overruns and delays in the completion of that construction work.
Extensions during 2011 and 2012
By letter of offer from the Bank to Apex dated 3 May 2011, the Bank offered to increase the limit of the Apex Term Facility from $100,000 to $200,000. The purpose of the increase was said to be to assist with construction of the Property. The “overall security position” was in the same terms as the 3 February 2011 letter of offer, except that the reference to existing guarantees from the defendant and V1 Systems included reference to those guarantees being for “$450,000 (being increased to $665,000)”. The letter of offer was countersigned by the defendant in his various capacities on 6 May 2011. On the same day, the defendant also signed a document headed “Acknowledgment by Guarantor”, in relevantly identical terms to the equivalent acknowledgment signed by the defendant on 4 February 2011.
By letter of offer from the Bank to Apex dated 1 September 2011, the Bank offered to increase the limit of the Apex Term Facility from $200,000 to $350,000. The purpose of the increase was said to be to assist with construction of the Property and to reimburse $60,000 to the Apex Overdraft. The “overall security position” was in the same terms as previously, except that the reference to existing guarantees from the defendant and V1 Systems included reference to those guarantees being for “$665,000 (being increased to $815,000)”. The letter of offer was countersigned by the defendant in his various capacities on 1 September 2011. And, once again, the defendant also signed a document headed “Acknowledgment by Guarantor”, in relevantly identical terms to the equivalent document already mentioned.
By letter of offer from the Bank to Apex dated 27 October 2011, the Bank offered to increase the limit of the Apex Term Facility from $350,000 to $1,043,000 (being an increase of $693,000). The purpose of the increase was said to be to assist with the construction of the Property. The initial one year term of the loan was extended to two years, ending on 8 February 2013. The “overall security position” was in the same terms as previously, except that the reference to existing guarantees from the defendant and V1 Systems included reference to those guarantees being for “$815,000 (being increased to $1,505,000)”. The letter of offer was countersigned by the defendant in his various capacities on 1 November 2011. And, once again, the defendant also signed a document headed “Acknowledgment by Guarantor” and in relevantly identical terms.
By letter of offer from the Bank to Apex dated 9 November 2011, the Bank offered to increase the limit of the Apex Term Facility from $1,043,000 to $1,093,000 (being an increase of $50,000). The purpose of the increase was said to be to assist with the construction of the Property. The “overall security position” was in the same terms as previously, except that the reference to existing guarantees from the defendant and V1 Systems included reference to those guarantees being for “$1,505,000 (being increased to $1,555,000)”. The letter of offer was countersigned by the defendant in his various capacities on 1 December 2011. And, once again, the defendant also signed a document headed “Acknowledgment by Guarantor” and in relevantly identical terms.
By letter of offer from the Bank to Apex dated 23 July 2012, the Bank offered to increase the limit of the Apex Term Facility from $1,093,000 to $1,343,000 (being an increase of $250,000). The purpose of the increase was said to be to assist with the construction of the Property and to reimburse $31,000 to the Apex Overdraft. The term of the loan was to be extended to 8 May 2013. The “overall security position” was in the same terms as previously, except that the reference to existing guarantees from the defendant and V1 Systems included reference to those guarantees being for “$1,555,000 (being increased to $1,794,000)”. The letter of offer was countersigned by the defendant in his various capacities on 25 July 2012. And, once again, the defendant also signed a document headed “Acknowledgment by Guarantor” and in relevantly identical terms.
Further extension in mid 2013

As mentioned above, in July 2012 the Apex Term Facility was extended in amount to $1,343,000 and in time to 8 May 2013.
On 1 May 2013, the defendant sent Mr Elphick an email attaching a budget of the cost to complete construction of the Property, and seeking funds for that purpose. The email included:
The budget shows $280,000 to complete so I think $300,000 is a good number.
The viewpoint would be to complete construction within 4 months and place on market immediately upon completion if other business deals have not eventuated by this time (ie cash flow to service loans).
Mr Elphick prepared a credit memorandum dated 9 May 2013 recommending an increase in the Apex Term Facility of $350,000 to complete construction of the Property. Of this, $281,000 was allocated to construction costs and $51,000 to refinance the Apex Overdraft. It was proposed that the term of the loan would be for four months beyond the existing expiry date of 8 May 2013. The credit memorandum included the following summary:
Customer has provided an updated budget which indicates exc of GST that $281 is left to complete. 10 months ago, Ian Brackenridge (customer) approached the Bank seeking $250 to complete his home at Beaumont. As per RCM’s approval conditions BBM inspected each progress draw and paid out accordingly. Costs now appear to have blown out or Ian did not provide an accurate cost to complete budget when funding was approved last time (17/07/12). Ian still has $281 to complete and has explained various reasons as to why this has happened, mainly disputes with suppliers, trades and unforeseen issues. This is Ian’s first major construction project and has not managed it well and neither has the Bank. This project should have had a quantity surveyor managing from the start but out of good faith to Ian we have allowed him to manage this himself. There were controls in place by the Bank over the last 2 and a half years but it appears it was not enough. Construction was put to a halt when Ian ran out of money in October last year. Ian advises (yet again) that majority of items to complete is already paid for and just needs to be installed, i.e. Tiles, Windows, doors, some exterior panelling and kitchen. This has always been a luxurious modern home and the latest technology, appliances and features have always been in Ian’s plans. It has always been the Bank’s intention to complete this property and previously we said we would fund it to a liveable level but Ian will need to forgo some of the luxury items until such time as he can afford to pay for this himself. It appears now we are being asked to fund these luxury items to be able to complete the home to not only to a high standard of living but to also put to market in the event it has to be sold after the requested 4 month timeframe. This will not only help the Bank achieve full debt reduction but may preserve some of Ian’s profits and he may be able to walk away from this with some money left over. The next 4 months will also provide Ian with extra time to try and get all these projects over the line that he has been working on for the last 6 to 12 months. If he can achieve this and provide the Bank with solid evidence he can service the end debt, we will not force him to put his home on the market.
The credit memorandum made reference to the inability of the client to demonstrate serviceability, and the absence of any updated financials. However, it was noted that the defendant’s father-in-law had offered $50,000, to be placed on a term deposit to service the loan and existing facilities for a period of four months. It was also noted that the defendant had no cash flow at present, or for the last two years, and thus it was not expected that the financials would show anything. It was noted that the defendant was working on several projects and that if any of them came to fruition then there may be a possibility he could demonstrate serviceability.
After an update on the Kings Point Project, and explanations for the delays in it coming to fruition, the credit memorandum concluded:
Ian Brackenridge has mostly done the right thing by the Bank, especially in 2007 when it was discovered the Bank was at risk because security had not been captured correctly. His inexperience with developments of this nature has shown throughout and the Bank has in good faith assisted him so far on the basis he would receive significant cashflow from the Woolworths project at Kings Rd. This and other projects which were expected to generate significant cashflow over the last 3 years have not eventuated, and the Bank is now left with a 80-90% complete home as security. The Bank has some room to move in equity available once development at Beaumont is complete and we have the ability to capitalise the interest during a selling period of 6 to 12 months.
On this basis and as detailed under [the] “purpose” section of the CM, it is recommended that we provide the customer with what is required to finish the development at 31 Waterfall Gully Rd, Beaumont as this is seen as the preferred option to enable full debt reduction of all loan facilities (if required) by sale of completed development.
The request was approved by Mike Attiwill on 23 May 2013. In approving the request, Mr Attiwill added a handwritten note:
Whilst position remains extremely frustrating that development has not been completed we are (and client) needing to have construction finished to a high standard to ensure property is attractive to high end market should property need to be sold either by bank or client.
We have not been as tight in control here due to original reasons behind initial approval however it is not critical to complete. As such I will approve as a final measure of assistance in terms of recommendation ...
Mr Attiwill’s approval was subject to several conditions, including obtaining a project manager acceptable to the Bank.
Mr Elphick prepared a further credit memorandum dated 25 June 2013 seeking a further increase of $50,000 in the Apex Term Facility to cover an increase in the projected costs of construction after taking advice from a project manager. This was approved the following day by Mr Attiwill.
By letter of offer from the Bank to Apex dated 25 June 2013, the Bank offered to increase the limit of the Apex Term Facility from $1,343,000 to $1,743,000 (being a total increase of $400,000). The purpose of the increase was said to be to assist with construction of the Property, and to reimburse the Apex Overdraft and some arrears on two other accounts. The term of the loan was extended to an expiry date of 8 November 2013. The “overall security position” was in the same terms as previously, except that the existing guarantees from the defendant and V1 Systems included reference to those guarantees being for “$1,794,000 (being increased to $2,156,000)”. The letter of offer was countersigned by the defendant in his various capacities on 26 June 2013. And the defendant again signed a document headed “Acknowledgment by Guarantor”, in relevantly identical terms to the earlier equivalent documents.
Further extensions in late 2013 and 2014
Mr Elphick prepared a credit memorandum dated 31 October 2013 seeking an extension of the Apex Term Facility for two months to address various issues, including to undertake a review and prepare a recommendation for a further extension of the facilities through to June 2014. In the commentary section, Mr Elphick made reference to various matters, including the following:
·The construction work on the Property was not yet complete and would not be completed until early the following year. The defendant’s forecast had been well off, apparently due to weather and other difficulties (including a dispute with a glazier, and the need to obtain council approval for a retaining wall before being able to undertake plumbing work on the pool).
·Only $59,000 had been drawn down on the previously approved increase of $400,000, with $244,000 still available to complete construction.
·The $50,000 advanced by the defendant’s father-in-law, Mr Engel, to assist with monthly commitments, was about to be exhausted.
·The defendant had advised the Bank that Mr Engel and Mr McClurg (of Commercial & General, the joint venture partner for the Kings Point Project) were willing to lend him further funds to service the interest on the Bank’s facilities through to June 2014. An agreement to that effect was being drawn up, and was expected to involve them paying the defendant $20,000 a month in return for a second registered mortgage over the Property. The expectation was that the defendant would repay them once he was paid his project management fee for the Kings Point Project.
·They were awaiting a re-zoning in relation to the Kings Point Project which was slow in its progress. It was expected this would be achieved in April next year.
·The defendant had advised that he had a tax debt of $167,000. Apex had been the subject of an ATO audit, and due to the project eventually becoming the prime residence of the defendant and his family, the ATO had rejected its GST claims in respect of construction costs. The defendant had entered into a payment plan with the ATO.
Mr Attiwill approved an extension of one month to allow a new finance structure to be put in place. He noted that the client should be advised that the Bank’s patience had been exhausted and that it required construction to be completed. He was only prepared to support the defendant while the Bank held monies to cover interest, or servicing could be adequately demonstrated.
On 26 November 2013, the Apex Term Facility was extended for a further month with the approval of Mr Attiwill.
In January 2014, the Bank sought and obtained an email assurance from Mr McClurg that he and Mr Engel would each continue to advance the defendant $10,000 per month to meet his obligations to complete the Property.
Mr Elphick prepared a credit memorandum dated 6 January 2014 seeking an extension of the Apex Term Facility for a further month to enable a review to occur. The commentary included reference to the following:
·    There was still currently $189,000 available to draw down on the approved funds.
·    The defendant had informed Mr Elphick that the Property was now 90 per cent complete; and that he and his wife and son had now moved in. There was painting, installation of kitchen and flooring still to be completed on the inside, which would be finished in eight weeks. There were only minor works to be completed on the outside. Mr Elphick and Mr Attiwill were to meet the defendant to discuss progress and timeframes on 9 January 2014.
·    The defendant was receiving $20,000 in total per month from Mr Engel and Mr McClurg, and expected to receive commission of $1 million (although he owed Mr Engels $424,000 in respect of advancements of this sum). He also owed Mr McClurg $200,000.
·    The defendant was anticipating that rezoning would soon occur in respect of the Kings Point Project, but that he would sell his house in June 2014 if the sale of the Kings Point Land did not occur by then. He said that Mr McClurg had indicated he would buy the Property if it went to a forced sale.
·    He was continuing to repay GST to the ATO as a result of the audit it had conducted of Apex.
·    It was proposed to refinance all group loans into one business flexi loan in the defendant’s name, in the form of an interest only loan for six months expiring 30 June 2014.
The credit memorandum concluded with a recommendation in the following terms:
Effectively you have a property worth $2.8M on completion, currently owing $2,142M to [the Bank], along with unsecured creditors $185k to ATO, $423k to father in law and $200k to Jamie McClurg. This leaves Ian $150k short in clearing all his debt with the sale of his residence – assuming a buyer purchases at valuation price. Ian still believes the house on completion will be worth $3.5M to $4M and insists there is still equity in the property.
Ian is reliant on the rezoning of Kings Rd to go through to achieve his $1M commission payment to clear a portion of his outstanding commitments and to continue to be able to meet [the Bank’s] interest commitments. The recommendation continues to be it is in the Bank’s best interest to finish the property to maximise our chances of clearing the debt.
It is recommended:
·Extension of commercial construction loan – 24585010/CT01 by 1 month to expire 08/02/2014, to enable time for BBM [Mr Elphick] & RCM [Mr Attiwill] to meet Ian to discuss progress and key timeframes for completion with a view to convert all group facilities to interest only.
·Group Annual review fell due on the 31/10/13, and without financial information we are unable to conduct a full review therefore we are recommending for a further extension by 1 month in line with above loan facility expiry.
·CRG to be downgraded to a 7.
The requested extension was approved by Mr Attiwill on 6 January 2014.
By letter of offer from the Bank to Apex dated 21 February 2014, the Bank offered to extend the term of the Apex Term Facility for five months through to 8 July 2014. The “overall security position” was in the same terms as previously, with the limit of the guarantees identified as $2,156,000. The letter was countersigned by the defendant in his various capacities on 25 February 2014.
Mr Elphick prepared a credit memorandum dated 8 July 2014 recommending a three month extension of various facilities including the Apex Term Facility. The commentary in the credit memorandum noted that there remained $40,000 to draw down on approved funds, but that despite earlier expectations the construction of the Property was still not complete. The commentary then set out a summary of the defendant’s progress on the construction works, and what remained to be done. It referred to the defendant having undertaken much of the work himself to reduce costs. According to the defendant, Mr McClurg and Mr Engel were prepared to continue providing him money due to recent progress on the Kings Point Project.
The extension request was approved by Mr Attiwill on 9 July 2014.
By letter of offer from the Bank to Apex dated 24 July 2014, the Bank offered to extend the term of the Apex Term Facility for three months through to 8 November 2014. The “overall security position” was in the same terms as previously, with the limit of the guarantees identified as $2,156,000. The letter was countersigned by the defendant in his various capacities on 24 July 2014.
Valuation of the Property in November 2014
In late 2014 the Bank was provided with a valuation report for the Property that had been prepared by CBRE Residential Valuations Pty Ltd and was dated 13 November 2014. The report described the Property as consisting of a three level architecturally designed dwelling comprising four bedrooms and three bathrooms, which was approximately 90 per cent complete. It valued the Property on an “as is” basis at $2,200,000. It also provided a hypothetical “as if complete” value of $2,700,000. It included an estimate of the costs to complete of approximately $265,000, but strongly recommended confirming those costs with a licenced quantity surveyor.
File transferred to Asset Management Unit in December 2014
In December 2014, the defendant’s file was transferred to the Asset Management Unit (AMU) within the Bank.
Mr Elphick prepared a credit reporting memorandum dated 2 December 2014 recommending that this occur. The commentary included reference to the following:
·    The information in the valuation report, as summarised above.
·    It being extremely disappointing that the costs to complete were $265,000 given that additional funds of $350,000 had been provided back in May 2013 to complete the construction.
·    Some of the group loans were starting to fall into arrears. Reference was made to arrears of $1,700 (two months interest) on the defendant’s home loan; $4,600 (two months interest, and one month principal and interest) on the defendant’s business flexi loan; and $215 (two months interest) on the V1 Systems Overdraft.
·    Mr Elphick had rung the defendant to advise him that he was no longer in control of the file and that it had been transferred to AMU, and that someone from AMU would be in contact with him.
·    The defendant had informed Mr Elphick that his wife had left him and they were working through a divorce. There was no movement on the Kings Point Project. Rezoning had been approved by council but they were awaiting state government approval of the rezoning. Mr McClurg and Mr Engel had not yet registered any second mortgage. The defendant was frustrated with the valuation, as he had been provided by another real estate agent with a much higher figure.
The recommendation was approved by Mr Attiwill on 3 December 2014, with a note indicating that it had been discussed with Mr Bellizia (Head of the AMU). Mr Bellizia’s evidence was that in approving the transfer of the file to AMU, his focus was upon the delays and cost overruns in completing the work on the Property.
Communications about completion of the Property
By email dated 5 December 2014 from Mr Dunn (Assistant Manager, AMU) to the defendant, Mr Dunn informed the defendant that he would now be managing his relationship with the Bank. The email included several questions in relation to the timing and cost of completion of the Property.
The defendant responded by email dated 11 December 2014 attaching information about the works necessary to complete the Project and the cost of those works. He said that construction could be completed within 2 to 3 months. He said that his intention was to live in the Property once it was complete. He referred to previous discussions with the Bank with a view to repackaging all existing loans into a single mortgage, and saving him interest costs. He said that he realised that the valuation report had triggered the review, but confirmed that he had arranged funding to continue to service the loan until the middle of the following year.
Mr Dunn responded by email on 15 December 2014 pressing for further detail in relation to the completion works and costs. He also mentioned the arrears of $14,956.58 (being the three amounts in the credit memorandum mentioned earlier (but slightly increased), as well as $8,003 that needed to be cleared on the Apex Overdraft), and that they required prompt clearance.
By email dated 28 January 2015 from Mr Dunn to Mr Bellizia, Mr Dunn referred to their recent discussions regarding the file, noting that the Apex Term Facility was due to expire on 8 February 2015, and requesting approval of an extension of the loan term by three months to avoid the facility defaulting. He referred to a likelihood that the defendant would receive significant funds from the sale of the Kings Point Land for $35 million. He referred to information from the defendant to the effect that he was meeting the following day to document his sales commission from the sale, and that he was waiting to hear whether he might be bought out by Mr McClurg.
Mr Bellizia approved the extension by return email dated 29 January 2015.
There followed a series of email communications between Mr Dunn and the defendant throughout February and March 2015 in which Mr Dunn continued to press the defendant for payment of arrears, and for further detail and certainty in relation to the commission that the defendant was expecting, and the progress of the Kings Point Project more generally.
By letter dated 20 April 2015, Mr Dunn wrote to the defendant on behalf of the Bank, noting the receipt of various documents that had been provided by the defendant (being a copy of a contract for the sale of the Kings Point Land, a letter confirming the defendant’s remuneration of $25,000 per month for his work in relation to the Kings Point Project, and a letter confirming that he would receive a commission of $600,000 within 30 days following settlement of the sale of the Kings Point Land on 30 June 2015). The letter explained that on the basis of these documents, and the settlement of the Kings Point Land sale on 30 June 2015, the Bank proposed various matters aimed at restoring the facilities of the defendant, Apex and V1 Systems within their contractual terms and ensuring the completion of “the Beaumont development” by the end of the year. The matters then set out included that the Beaumont development was to be completed by 30 November 2015, with an updated valuation to be obtained from CBRE by 15 December 2015 confirming completion.

The defendant made reference in his defence to the Bank’s failure to follow through on the request it made on 9 February 2010 for certain information (including a commercial banking application with a statement of position and associated declarations). However, I accept the Bank’s submission that these requests related to the proposal to offer a secured line of credit, which was not pursued. As such, this aspect of the defendant’s complaint falls away.
In summary, I am not satisfied that the defendant has established any breach of the Bank’s prudential obligation in respect of its April 2010 decision to grant the Apex Overdraft.
Compliance with the prudential obligation – 2016 Facility
The defendant also alleges that the Bank breached the prudential obligation under clause 27 of the Code of Banking Practice 2013 in both granting the 2016 Facility (through the Apex Agreement in February 2016) and in extending or varying it (through the Apex Variation Agreement in August 2017).
The essence of the defendant’s allegations in this respect is that the Bank failed to have adequate regard in granting and varying the 2016 Facility to (i) Apex’s inability to repay the facility from its own resources, (ii) the lack of up to date financial information from each of Apex, V1 Systems and the defendant, (iii) the lack of any income being generated by Apex, V1 Systems or the defendant and (iv) the lack of any up to date valuation of the Property.
In my view, the short answer to the defendant’s allegations in respect of the 2016 Facility is that they do not take account of the context and circumstances of the Bank’s decision-making in granting and then varying that facility. In particular, they do not take account of the fact that that facility was granted, and then varied, in circumstances where the Bank and the defendant agreed to work together in an attempt to give the defendant and Apex an opportunity to complete the construction of the Property, with a view to it then being sold so as to repay the 2016 Facility. It was not envisaged that there would be regular repayments in the interim. In those circumstances, I do not think that the matters complained of by the defendant establish any breach of the prudential obligation.
I have set out in quite some detail in the factual chronology earlier in these reasons the context in which the 2016 Facility was granted and varied, and the considerations taken into account in the Bank’s decision-making in this regard. It is not necessary for me to repeat that detail. It is sufficient to note some of the broader conclusions flowing from that detail.
Significantly, by the time the parties entered into the Apex Agreement and Apex Variation Agreement in February 2016 and August 2017 respectively, circumstances had changed significantly from those which existed at the time of entry into the Apex Overdraft and Apex Term Facility in 2010 and early 2011 respectfully. In particular, by February 2016: neither Apex nor the defendant had the ability to make monthly payments under the existing facilities, having lost access to the income previously available from the defendant’s work on the Kings Point Project; the construction of the Property was not yet completed; more than $2 million was outstanding on the existing facilities, and unless the defendant or Apex came into funding from other sources, the only way to clear the indebtedness was through the sale of the Property.
As to the possibility of the defendant or Apex coming into funding from other sources, the only possibility of this adverted to in the communications between the parties was the possibility of this occurring through the Kings Point Project. While the defendant appears to have maintained optimism in this respect, and the Bank was prepared to allow the defendant an opportunity for this optimism to come to fruition, it cannot be said that the decision-making of the Bank was premised upon this coming to fruition. It was at most a possible source of funds, rather than a source of funds that the parties’ communications and agreement was reliant upon.
In the circumstances I have described, the Bank was confronted with a decision in February 2016, and again in August 2017, whether to decline to assist the defendant and Apex, and take enforcement action; or to accede to the defendant’s requests for further financial assistance so as to give him an opportunity to complete construction of the Property and to repay the Bank through a sale of the completed Property (or through any funds that might in the interim have become available through the Kings Point Project).
As reflected in the terms of the 2016 Facility, and its variation, the Bank ultimately agreed with the defendant and Apex that the better course was for the Bank to provide further financial assistance to allow the completion and sale of the Property, with the advantage that the sale would occur through the defendant rather than as a forced sale by the Bank as mortgagee in possession. Consistently with this, the terms of the 2016 Facility provided for all interest to be capitalised, with the outstanding capital sum to be repaid at the end of the term.
As there was no expectation of monthly repayments of the 2016 Facility, I accept the Bank’s submission that there was no occasion or need for it to have had regard to the income of Apex or the defendant that would be available to service the loan. As explained in my earlier summary of the authorities in relation to the prudential obligation, the content of that obligation falls to be considered in the circumstances of the relevant lending decision. In particular, where the parties’ communications and agreement in relation to the lending are premised upon repayment through the realisation of an asset at the end of the term of the loan, then the obligation to act prudently in forming an opinion as to the borrower’s ability to repay the loan must be considered in that context. Here, it was discussed and agreed that repayment would occur through the sale of the Property by the defendant once the construction work was completed. The Property was offered and treated not merely as a form of security available to the Bank in the event of default, but rather as an asset of the defendant to which Apex (as the borrower) would have recourse in order to repay the 2016 Facility. As such, it is the prudence of the Bank’s opinion as to repayment through this means that is in issue.
In my view, this approach is consistent with (and indeed supported by) the reasoning of Kourakis CJ in Haynes v Westpac Building Corporation,[86] and in particular his Honour’s contemplation (in the passages extracted earlier in these reasons) that the prudential obligation may be discharged by having regard to capital assets that the borrower proposes to liquidate to repay the loan. His Honour gave the obvious example of bridging finance pending the sale of a residential property where this approach may be apposite. In my view there is no reason to limit it to this scenario. It is not difficult to envisage other scenarios in which it might be contemplated that repayment would be deferred until the end of the term and/or be dependent upon the liquidation of some capital asset. As long as such situations are carefully distinguished from situations in which an asset is only intended to be available as security in the event of default, I see no difficulty in extending the approach I have suggested to the prudential obligation to such cases.
[86] Haynes v Westpac Banking Corporation (2018) 130 SASR 551 at [70]-[72], [75].
Further, at least in circumstances where there is a clear link between the borrower and the party owning the relevant asset, I do not think it matters that the capital asset from which it was envisaged repayment would be made was owned by that other party. Here, where Apex was in essence the alter ego of the defendant and had been used to fund the construction work on the Property owned by the defendant, that link clearly existed. The additional finance was intended and expected to be used to complete the work so as to enable an enhanced value to be realised from the Property, to the benefit of each of the defendant, Apex and the Bank.
Of course, even accepting that it was appropriate for the Bank to focus upon repayment through the contemplated sale of the Property (rather than any income to be generated by Apex or the defendant), it remains to consider whether the defendant has established that the Bank nevertheless failed to exercise the care and skill of a diligent and prudent bank in selecting and applying its credit assessment methods and in forming its opinion about the borrower’s ability to repay.
In some cases, for example, involving fresh lending, the bank’s consideration of the value of the capital asset to be used to repay the loan will be critical. If the asset is unlikely to be sufficient to repay the requested loan, then prudence would ordinarily dictate that the request be declined. However, the position is more complicated in circumstances such as the present where the application is one, in effect, to refinance existing facilities. There was also the further complication in the present case that while the construction of the Property was well advanced, there was still significant work to be done to enable the Property to be sold in a condition apt to realise its true potential worth.
The Bank was confronted with a difficult choice between declining to provide any further financial assistance and moving to exercise its rights against Apex and the defendant (with the consequence that the Property would be sold in an incomplete state and through a forced sale), and providing further financial assistance with a view to achieving an orderly sale through the defendant once the construction work had been completed. Put another way, in deciding whether a bank has acted prudently in the context of a particular lending decision, it is in my view necessary to have regard to the alternatives reasonably open to the parties.
Here, once regard is had to the limited alternatives open to the parties, and the context more generally, I do not think it can be said that the Bank acted imprudently in the relevant sense.
In respect of the Bank’s decision to grant the 2016 Facility, it was Mr Bellizia who gave the relevant approval. I accept Mr Bellizia’s evidence as to his approach to this approval, and the matters he took into account. Significantly, and as he explained, the overarching policy of the AMU (as set out in the Bank’s Asset Management Policy) was to actively engage with customers experiencing financial difficulty with an intention of identifying an acceptable solution. While the policy contemplated a preparedness to act decisively when necessary to safeguard customer and shareholder interests, the policy did not focus on collections. Rather, the AMU’s priorities were to provide customers with every reasonable opportunity to preserve their loan and security. This policy, it may be observed, is consistent with the Bank’s obligations under clause 28 of the Code of Banking Practice 2013 to cooperate with customers to overcome their financial difficulties. In addition to this overarching policy, with its focus on solutions rather than enforcement, Mr Bellizia explained that as Head of AMU he had a delegated lending authority of $20 million. While he endeavoured to adhere to Bank policies and guidelines, and there is no basis for me to conclude that he did step outside any policy or guideline in approving the 2016 Facility, this delegated lending authority meant that he was entitled to exercise his discretion in lending outside of any policies and guidelines up to the amount of $20 million.
In describing his approach to the approval of the 2016 Facility, Mr Bellizia emphasised the matters of context to which I have referred. He also emphasised his reliance upon the matters of detail in the credit memorandum dated 9 February 2016. This credit memorandum was prepared by Mr Dunn, and I have quoted at length from it earlier in these reasons.
It will be recalled that the offer made by the Bank involved a facility with a limit of $2,684,000, including $55,000 of capitalised interest. This involved an increase of $476,000 upon the existing funding, in the context of an estimated cost of $337,000 to complete the construction and fit out of the Property.
In considering the adequacy of the Property as a means of repayment, the Bank had received a valuation report from CBRE which was dated 13 November 2014, described the construction work as 90 per cent complete, and gave an “as is” value for the Property of $2.2 million and an “as if complete” value of $2.7 million.
By the time of the extension of that facility through the Apex Variation Agreement in August 2017, it was contemplated that the limit of the facility would be increased to $3.121 million. While the ultimate approval for this increase was given by Mr Eskitzis, this occurred in a context where Mr Bellizia (who was on leave at the time) had earlier given an indication of his approval to increase the limit to $3 million.
I accept the evidence of Mr Eskitzis as to his approach to his approval of this variation. He had the benefit of a credit memorandum dated 23 August 2017, which reflected the terms of the earlier credit memorandum of 18 April 2017. Again, the terms of these memoranda have been summarised earlier in these reasons.
Importantly, by this time, the Bank had the benefit of not only the CBRE report to which I have referred, but also an indication from the defendant during 2017 that he had received advice from the real estate company Ouwens Casserly that the Property had an estimated worth of $3.8 million, and subsequently that it should sell for at least $3.5 million. The Bank had also been informed in late 2016 that Phil Harris of Harris Real Estate had said it might be worth up to $4 million, and referred to a realistic sale price of $3 million to $3.5 million.
While it may be accepted that the margin between the facility limit (as granted and then extended) was likely to be tight, there was no easy alternative. There was a real likelihood that a forced sale of the Property in an incomplete state would result in a significant deficit. In my view, given the difficult circumstances and limited alternatives, and bearing in mind that the prudential obligation allows for some risk that full repayment might not ultimately be achieved, I consider that there was scope in this case for Mr Bellizia and Mr Eskitzis to exercise their judgment in the manner they did.
The defendant did not adduce any expert evidence in support of his contention of imprudence by the Bank. Nor did he establish any breach by the Bank of its own policies or procedures. And in circumstances where experienced bank officers gave careful consideration to the circumstances I have mentioned, and contemplated that the advancement of funds under the 2016 Facility would be subject to strict conditions designed to ensure the timely and efficient completion of the construction of the Property, I do not think the defendant has established any breach by the Bank of its prudential obligation in respect of its decision to grant or extend the 2016 Facility.
The prudential obligation was not a condition precedent or essential condition
Even assuming, contrary to my reasoning above, that a breach of the Bank’s prudential obligation had been made out, issues would remain as to the consequence of any such breach. One such issue would be whether the breach of the prudential obligation would operate to discharge the defendant’s liability under the Guarantee, or whether the defendant would be confined to a claim for any loss and damage caused by the breach.[87] Presumably in support of the former, the defendant pleads that the prudential obligation was a condition precedent or essential condition of the relevant credit facilities and the Guarantee. The Bank, on the other hand, while acknowledging that clause 25.1 has contractual force, contends that it takes effect as a contractual warranty, with its breach sounding merely in a right to recover damages for any loss proved to have been caused by that breach.
[87] With the attendant issues of causation, contributory negligence, the operation of time limits, the ability to set off or otherwise impeach the Bank’s claim to possession, and the absence of any counterclaim.
While the proper characterisation of clause 25.1 will ultimately depend upon the facts of the particular case, including the express terms of the guarantee into which it is incorporated, it is nevertheless relevant to commence with some general observations as to the status of the provisions of the Code of Banking Practice.
It seems to me that the provisions of the Code of Banking Practice have generally been treated as a series of norms of conduct expected of banks. Consistently with this, in Commonwealth Bank of Australia v Starrs,[88] Peek J described the provisions of the Code as “largely a collection of ‘dos and don’ts’ of bankers’ conduct”. His Honour went on to describe the provisions as being in the nature of warnings and reminders to the bank of its obligations, and as intended to inform the expectations of the borrower or guarantor.
[88] Commonwealth Bank of Australia v Starrs [2012] SASC 222 at [116].
To the extent that there has been occasion to consider whether those provisions take effect as mere warranties breaches of which sound only in damages, or as conditions precedent or essential conditions potentially discharging the liability of the borrower or guarantor, the courts have favoured the former.
For example, in National Australia Bank Ltd v Hunter (No 3),[89] the issue was whether clauses 28.4 and 28.5 of the Code of Banking Practice 2004 (which dealt with certain formal requirements in relation to guarantees) were conditions precedent to the enforceability of a guarantee. In characterising the relevant obligations, Slattery J said:[90]
The Code does not prescribe any remedy for non-compliance. A few cases have considered the Code. In ING Bank (Aust) v Leagrove Pty Ltd [2011] QCA 131 with guarantees that were not compliant with the Code, Code compliance (including with clause 28.4) was found not to be a condition precedent to their operation, such that ING’s application for summary judgment against the guarantors was granted on appeal. And in Middleton Nominees v Westpac Banking Corporation [2008] FCA 371 an argument that the Code acts as a condition precedent to the acceptance and enforcement of a guarantee failed on the facts. The Code has been described as “an open offer to anyone that if that person becomes a customer of the defendant and the defendant will deal with that person in accordance with the Code of practice”: Flowers v National Australia Bank [2011] NSWSC 698. And in Commonwealth Bank of Australia v Starrs [2012] SASC 222 Peek J commented on the operation of the Code aptly describing it as a series of “do’s and don’ts” and pointed out the breaches of the Code would be likely to be of considerable relevance in unconscionability cases.
[89] National Australia Bank Ltd v Hunter (No 3) [2013] NSWSC 1642.
[90] National Australia Bank Ltd v Hunter (No 3) [2013] NSWSC 1642 at [98].
After mentioning the need to consider the issue in accordance with the principle in Ankar Pty Ltd v National Westminster Finance (Australia) Ltd[91] (see below), and after taking account of the some of the provisions of the relevant guarantee, Slattery J went on to hold that clauses 28.4 and 28.5 were not conditions precedent to enforcement of that guarantee.
[91] Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549 at 561.
Elliott J reached the same conclusion in relation to clauses 28.4 and 28.5 of the Code of Banking Practice in Commonwealth Bank of Australia v Wood.[92]
[92] Commonwealth Bank of Australia v Wood [2016] VSC 264 at [111].

Similarly, in Brighton v Australian and New Zealand Banking Group Ltd,[93] the confidentiality provisions of the Code of Banking Practice were held not to operate as conditions of a guarantee, when the guarantee was construed as a whole in accordance with ordinary principles.
[93] Brighton v Australia and New Zealand Banking Group Ltd [2011] NSWCA 152 at [90] and [102].
As recognised in the authorities to which I have referred, when considering the character of a term incorporated within a guarantee as a condition or mere warranty, it is appropriate to do so having regard to the principle in Ankar Pty Ltd v National Westminster Finance (Australia) Ltd;[94] namely, that a surety’s liability is to be strictly construed. As explained in the reasons of the plurality (Mason ACJ, Wilson, Brennan and Dawson JJ) in that case:[95]
At law, as in equity, the traditional view is that the liability of the surety is strictissimi juris and that ambiguous contractual provisions should be construed in favour of the surety. The doctrine of stictissimi juris provides a counterpoise to the law’s preference for a construction that reads a provision otherwise than as a condition. A doubt as to the status of a provision in a guarantee should therefore be resolved in favour of the surety and so the provision should be interpreted as a condition, or perhaps an innominate term, instead of a mere warranty. If the surety is to be discharged for breach of a promissory term in the suretyship contract, the justification for the discharge must be that the creditor has failed to comply with a provision that, as a matter of interpretation, requires strict performance as a condition precedent to the surety’s obligation or at least requires substantial performance of the promise such that the surety would not have entered into the contract if it had not been assured that there would not be a breach such as the breach which in fact occurred. If on its true interpretation the term is not intended so to operate, it is not easy to understand why the surety should be discharged by its breach. Of course, in construing the contact the court is entitled to look to the general setting in which the contract has come into existence …
[94] Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549 at 561.
[95] Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549 at 561.
The defendant submitted that Doggett v Commonwealth Bank of Australia[96] provided support for the application of the above principle leading to the conclusion that clause 25.1 was a condition precedent or essential condition. I do not agree. It is true that the Court of Appeal referred to an argument on behalf of the guarantors to the effect that the breach of clause 25.1 warranted a conclusion that the guarantees had been discharged or was otherwise unenforceable, and the potential relevance of this principle to that argument. However, the Court noted that this argument had not been advanced at trial, and indeed no relief in the nature of a discharge of the guarantees had been sought in the counterclaim. As the issue of the characterisation of clause 25.1 as essential or otherwise, and indeed the questions of termination, election and waiver, could have been the subject of evidence, the Court of Appeal expressly declined to determine the issue.[97]
[96] Doggett v Commonwealth Bank of Australia (2015) 47 VR 302.
[97] Doggett v Commonwealth Bank of Australia (2015) 47 VR 302 at [194]-[212].
In some cases, there have been other provisions in the guarantee which are inconsistent with the provisions of the Code of Banking Practice having the status of conditions, as opposed to warranties. In the context of the present case, while there is a provision in clause 9 of the Guarantee to the effect that the Bank’s rights under the Guarantee are not affected by any act or omission by the Bank, that clause is itself expressed to be subject to any limitation in a Code (which is defined to include the Code of Banking Practice). As such, I do not think it assists the Bank.
It is true that the wording of clause 25.1, and in particular the reference to the obligation being one to be performed “[b]efore we offer or give you a credit facility”, provides some literal support for the term being a condition precedent to the lending decision. However, properly understood, I consider this form of wording is merely a function of the timing of the work to which the obligation attaches, rather than an indicator of the contractual status or character of that obligation.
In the end, the issue is one that does not permit of much by way of analysis or explanation. It involves a conclusion as to the parties’ intention that must be drawn from a consideration of the nature of the obligation in the context of the relevant lending and guarantee arrangements.
In this respect, I agree with the Bank’s submission that it appears unlikely that the defendant would not have entered into the Guarantee but for an assurance that there would not be a breach of the prudential obligation concerning an assessment of the borrower’s ability to repay. The defendant, as the sole director of the borrower and the guarantor, can be taken to have known the financial position of the borrower and what resources it had or would have available to service and repay the loan. Yet he still entered into unconditional and irrevocable obligations (clauses 1 and 2 of the Guarantee), and excluded or suspended his rights of set-off (clauses 10 and 13). While the incorporation of the relevant provisions of the Code of Banking Practice through clause 26 of the Guarantee demonstrated an intention to achieve consistency with the Code, it seems unlikely that the parties intended that they be elevated to the status of conditions.
In my view, having considered the intended operation of clause 25.1 of the Code of Banking Practice in the context of the lending and guarantee arrangements in the present case, I do not think that clause was intended to operate as a condition precedent to, or essential condition of, the enforceability of either the lending or the Guarantee. In my view, while the parties can be taken to have expected their arrangements to be conducted in conformity with the norms of conduct prescribed under the Code of Banking Practice, including the prudential obligation under clause 25.1, I do not think they should be taken to have intended that strict conformity with those norms (particularly bearing in mind the inherent flexibility in their operation and application) was intended to be a condition of either the arrangements coming into effect or being capable of enforcement.
Of course, even if it were the case that clause 25.1 was a condition precedent to, or essential condition of, the Guarantee, there would remain the difficulty for the defendant of establishing that he did indeed terminate the Guarantee, or elect to treat it as discharged. On the evidence at trial, it is not clear to me that he did either.
While I have expressed my reasons by reference to clause 25.1 of the Code of Banking Practice 2004, the same reasoning would be applicable in respect of clause 27 of the Code of Banking Practice 2013.
For these reasons, it is my view that even if the defendant had made out a breach of clauses 25.1 or 27, this could only have sounded in a claim for damages. It would not have been a barrier to the Bank’s reliance upon the Guarantee in support of its right of possession.
Other obstacles to reliance upon any breach of the prudential obligation
Even if the defendant had made out a breach of the prudential obligation entitling him to bring a claim for damages, there would be further obstacles in the way of him obtaining any remedy or relief in respect of such a claim.
First, the defendant would need to establish some loss caused by reason of the breach of the Bank’s prudential obligation. As the reasons of the Court in Doggett v Commonwealth Bank of Australia[98] demonstrate, it does not automatically follow from the fact of a breach in respect of a particular lending decision that the lending could not or would not have proceeded in the absence of such breach. Whether that is so will depend upon the nature of the particular breach that is established, and the context in which it occurred. In circumstances where I am not satisfied that any particular breach has been established, I do not think it is necessary or helpful for me to hypothesise about the likely causative significance of any breach that might have been established.
[98] Doggett v Commonwealth Bank of Australia (2015) 47 VR 302.
For similar reasons, I do not think it is necessary or helpful for me to hypothesise about what, if any, loss the defendant might have established. That said, on the scant evidence before me on that topic, and in circumstances of pre-existing lending, it is difficult to see how any such loss could ever equate to the level of the indebtedness to the Bank.
Nor do I consider it necessary or helpful in the circumstances of the present case to express any view as to what, if any, reduction might be made to any damages payable by the Bank on account of contributory negligence by the defendant.
Further, even assuming a proven claim for loss caused by the alleged breaches by the Bank of its prudential obligation, the defendant would confront the additional obstacle that in circumstances where the Bank has confined its claim to one seeking an order for possession, it is difficult to see how a claim for damages could avail the defendant. Such a claim would not impeach the Bank’s right to an order for possession, particularly in circumstances where the defendant agreed to forgo any right of set off under the Guarantee or Mortgages.[99]
[99] Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161; Circuit Finance Pty Ltd v Glenauchen Pty Ltd [2001] SASC 41 at [17]; Palaniappan v Westpac Banking Corporation [2016] WASCA 72 at [86]-[95], [130]-[135].
It follows that in circumstances where the Bank has not advanced a claim for monetary relief, and the defendant has not ever brought his foreshadowed counterclaim, there would be no occasion for, or utility in, determining the quantum of any claim for damages in the defendant’s favour.
Finally, in respect of the allegation of breach in respect of the Bank’s April 2010 decision to grant the Apex Overdraft, the defendant would also need to confront the obstacle that the time limit within which such a claim was required to be brought appears to have expired.
Coercion in connection with the supply of financial services
The defendant pleaded an allegation that the Bank contravened s 12DJ of the ASIC Act by using coercion in connection with the supply or possible supply of financial services. The essence of the defendant’s allegation is that by reason of the Bank making various threats to resort to legal enforcement of its rights in late 2015 and early 2016, the defendant felt pressured and compelled to immediately complete the construction of the Property and to accept the Bank’s further supply of credit; and that the Bank sought to impose its preferred terms of credit, denying the defendant any choice in respect of the same.
To the extent this allegation is maintained, it has not been made out. The defendant adduced no evidence, and the evidence before me provides no basis for any finding, of coercion, as alleged or at all.
Other matters
The Bank’s reply and closing address seek orders relieving or exempting the Bank from complying with the requirements of ss 88 and 90 of the National Credit Code. The former sets out certain preconditions to enforcing a mortgage, and the latter makes a judgment against the borrower (Apex) a precondition to the enforcement of a guarantee. While I would be inclined, for the reasons advanced by the Bank, to grant the relief sought, given my conclusion that neither the Guarantee nor the Mortgages are subject to the National Credit Code, I see no reason to make the orders sought, or indeed to express a concluded view as to their appropriateness.
PART F: CONCLUSION AND ORDERS
For the reasons set out, the Bank has established the matters necessary to entitle it to an order for possession of the Property, and none of the matters raised by the defendant in purported answer to the Bank’s claim provides a basis for resisting such an order. Accordingly, I will make an order for possession of the Property in the Bank’s favour. I will hear the parties as to the terms of that order, and on the issue of costs.