Brackenridge v Bendigo and Adelaide Bank Limited
[2021] SASCA 129
•4 November 2021
SUPREME COURT OF SOUTH AUSTRALIA
(Court of Appeal: Civil)
BRACKENRIDGE v BENDIGO AND ADELAIDE BANK LIMITED
[2021] SASCA 129
Judgment of the Court of Appeal
(The Honourable Justice Lovell, the Honourable Justice Livesey and the Honourable Justice Bleby)
4 November 2021
APPEAL AND NEW TRIAL
MORTGAGES - ESTATE, RIGHTS AND LIABILITIES OF MORTGAGOR AND MORTGAGEE - POSSESSION
MORTGAGES - MORTGAGEE'S REMEDIES - POSSESSION - PROCEEDINGS TO OBTAIN
GUARANTEE AND INDEMNITY - ENFORCEMENT OF GUARANTEE AND RELATED MATTERS
The appellant is the registered proprietor of a property on which a “luxury home” was constructed with funds advanced by the bank (the Property). The appellant granted two mortgages (the 2007 Mortgage and the 2010 Mortgage) over the Property which secured his guarantee (the guarantee) covering the indebtedness of Apex Property Solutions Pty Ltd (Apex), of which the appellant was the sole director and shareholder. The guarantee was in the respondent’s favour.
The purpose of the loan facility was to enable the appellant to construct a “luxury home” on the Property. However, even after numerous advances and extensions to the loan facility, the home remained incomplete. The facility expired in December 2017 and the full amount fell immediately due and payable. Nothing repayment was made, and approximately $4 million remained outstanding. In June 2018, the respondent commenced proceedings seeking possession of the property. The appellant opposed the respondent’s action, claiming that neither he nor Apex were liable or otherwise indebted to the respondent, with the effect that the respondent’s mortgages effectively secured nothing.
The trial Judge found against the appellant and the respondent obtained a warrant of possession. The bank subsequently sought possession on 27 October 2020 and the applicant again applied to prevent the bank taking possession. The applicant obtained an interim stay on the basis that he would file a notice of appeal that day. By 4 November 2020, the notice of appeal had not been filed, so the Master set aside the stay. The bank again sought to take possession of the property and the applicant filed his notice of appeal on 30 November 2020, well over four months out of time. On 2 December 2020, the appellant obtained a partial stay of the warrant of possession to enable him to prosecute his appeal.
Held (by the Court), dismissing the appeal and discharging the partial stay of the warrant of execution:
1.The respondent did not impermissibly depart from the case that it was entitled to possession based on the contentions that the appellant was liable under the guarantee for the indebtedness of Apex and that this was secured by both the 2007 and 2010 mortgages. That was the case as opened, prosecuted and closed during the course of the trial.
2.To the extent that the appellant propounded a new case on appeal which was not put before the trial Judge, whether in relation to his case that the mortgage needed to be read down having regard to the circumstances surrounding entry into the 2007 mortgage, or on any other appeal grounds, that case must be rejected because it could have been addressed by the respondent.
3.The ordinary commercial operation of an overdraft facility is that the facility will, of necessity, move in and out of credit from time to time as the debtor’s trading circumstances demand. The appellant’s contention that the facility was extinguished by the payment of $200,000 is contrary to the commercial purpose of the facility and must be rejected.
4.Whatever the effect of the $200,000 payment, it cannot be said to have extinguished the facility given the surrounding circumstances and where the appellant continued to sign acknowledgments in his various capacities acknowledging Apex’s ongoing liabilities.
5.The appellant was provided with all of the requisite documents at every stage. Those documents were provided in whatever capacity the appellant acted, whether as director and shareholder of the debtor, or as director and shareholder of a corporate guarantor or in his own right as guarantor.
6.No financial services or financial products were supplied until the appellant, in his various capacities, accepted the offers and signed the requisite documents. When that occurred, the appellant solicited the funding or credit that followed.
7.The appellant’s appeal grounds are without merit and there is no utility in granting an extension of time to file his notice of appeal.
Australian Securities and Investments Commission Act 2001 (Cth) ss 12AB, 12BA(1), 12DJ, 12DMA, 12BAB, 12BAA; Real Property Act 1886 (SA) s 55A, referred to.
Bendigo and Adelaide Bank Ltd v Brackenridge [2020] SASC 114, 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] QB 84; Andar Transport Pty Ltd v Brambles Limited (2004) 217 CLR 424; Appleyard v Westpac Banking Corporation Ltd [2017] QCA 316; Bank of Queensland Ltd v Banjanin [2017] QSC 209; Banque Commerciale SA (En Liquidation) v Akhil Holdings Ltd (1990) 169 CLR 279; Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130; Bofinger v Kingsway Group Limited (2009) 239 CLR 269; Brackenridge v Bendigo and Adelaide Bank Ltd [2020] SASC 235; Commercial & General Corporation Pty Ltd v Manassen Holdings Pty Ltd [2021] SASCFC 40; CSR Limited v Adecco (Australia) Pty Ltd (2017) NSWCA 121; Deguisa v Lynn (2020) 268 CLR 638; Devon v Thirteenth Kaysan Pty Ltd [2016] FCA 1026; Devon v Thirteenth Kaysan Pty Ltd [2016] FCA 357; Director of Consumer Affairs Victoria v Domain Register Pty Ltd [2017] FCA 1603; Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; 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; George 218 Pty Ltd v Bank of Queensland Ltd (No 2) (2016) 313 FLR 287; Gregory v MAB Pty Ltd (1989) 1 WAR 1; Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653; Jams 2 Pty Ltd v Stubbings (No 3) [2019] VSC 150; Karthurmary Pty Ltd v FACAC Pty Ltd [2013] SASC 90; Macks v Viscariello (2017) 130 SASR 1; Manassen Holdings Pty Ltd v Commercial & General Corporation Pty Ltd [2019] SASC 171; McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579; Mercantile Credits Ltd v Shell (1976) 136 CLR 326; 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; Mintech Resources Pty Ltd v Russell-Taylor (2012) 113 SASR 80; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; Outback Energy Hunter Pty Ltd v New Standard Energy PEL 570 Pty Ltd [2018] SASC 8; Perpetual Trustee Victoria v Yap [2010] NSWSC 761; Placer Development Ltd v Commonwealth (1969) 121 CLR 353; Rinehart v Hancock Prospecting Pty Ltd (2019) 267 CLR 514; Tessari v Bais Pty Ltd (1993) 60 SASR 59; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; UBS AG v Tyne (2018) 265 CLR 77; University of Wollongong v Metwally (No 2) (1985) 59 ALJR 481; Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; Wigan v Edwards (1973) 1 ALR 497; Wiggins Island Coal Export Terminal Pty Ltd v New Hope Corporation Ltd [2019] NSWCA 316; Williams v Telecommunications Commission (1988) 52 SASR 215, considered.
BRACKENRIDGE v BENDIGO AND ADELAIDE BANK LIMITED
[2021] SASCA 129Court of Appeal – Civil: Lovell, Livesey and Bleby JJA
THE COURT:
Introduction
The appellant appeals against a judgment granting possession in favour of the respondent bank, concerning a property at Waterfall Gully Road, Beaumont on 24 June 2020.[1] The bank, Bendigo and Adelaide Bank Limited, is the successor in law to Adelaide Bank Limited.
[1] Bendigo and Adelaide Bank Ltd v Brackenridge [2020] SASC 114, [597] (Doyle J) (the Beaumont property).
Relying upon 14 separate grounds of appeal, each with extensive particulars, the appellant seeks to set aside the judgment and orders made on 26 June 2020. Alternatively, the appellant applies to re-open the case so as to “enable a resolution of all the real issues between the parties”.[2]
[2] Notice of Appeal dated 30 November 2020, Part 3, Orders sought.
Because the appellant issued his notice of appeal out of time, he requires an extension of time in which to press his appeal. He presently has the benefit of a “partial stay”.[3] For the reasons that follow, the appellant has not demonstrated any utility in an extension of time and the appeal should be dismissed.
[3] Brackenridge v Bendigo and Adelaide Bank Ltd [2020] SASC 235 (Livesey J).
Relevant background
The appellant is the registered proprietor of the Beaumont property on which a “luxury home” has been constructed with funds advanced by the bank.
The case for the bank at trial was that the appellant granted two mortgages over the property (the 2007 mortgage and the 2010 mortgage) which secure a guarantee executed by him in favour of the bank on 20 April 2010. The bank contended that the guarantee covered the indebtedness of Apex Property Solutions Pty Ltd (Apex), of which the appellant was the sole director and shareholder. In finding for the bank, the trial Judge rejected the various defences advanced by the appellant.
The appellant contends that neither he nor Apex is liable or otherwise indebted to the bank, with the result that the bank’s mortgages effectively secure nothing. At trial, the appellant did not challenge the bank’s evidence that, if Apex was indebted to the bank, the amount owed approximated $4 million.[4]
[4] Bendigo and Adelaide Bank Ltd v Brackenridge [2020] SASC 114, [5], [26], [237] (Doyle J).
The appellant represented himself at trial and on appeal. He was described by the trial Judge as “intelligent, capable and determined”.[5] The trial Judge emphasised that, during closing address, he demonstrated a “quite sophisticated understanding” of the matters in issue between the parties.[6]
[5] Bendigo and Adelaide Bank Ltd v Brackenridge [2020] SASC 114, [15].
[6] Bendigo and Adelaide Bank Ltd v Brackenridge [2020] SASC 114, [62].
Before outlining the appellant’s appeal grounds, it is necessary to emphasise that the bank contends that, in a number of respects, the appellant seeks to agitate matters which were neither pleaded nor litigated at trial, in circumstances where the appellant ultimately declined to give evidence at the trial. The bank asserts that this demonstrates the appellant’s propensity to conduct his defence “in a staged and tactical way for the purpose of frustrating” the bank’s claims, contrary to the High Court’s decision in UBS AG v Tyne.[7]
[7] Respondent’s Written Submissions, [6], citing UBS AG v Tyne (2018) 265 CLR 77.
These assertions must be assessed in light of the history of the appellant’s delays. It is not presently necessary to describe these in detail as was done by the trial Judge.[8] For the purposes of this appeal, it is sufficient to provide the following outline.
[8] Bendigo and Adelaide Bank Ltd v Brackenridge [2020] SASC 114, [30], [63].
The bank commenced proceedings in June 2018, initially relying upon the summary procedure available under Part XVII of the Real Property Act 1886 (SA). The bank obtained an order for possession on 26 September 2018, after the appellant failed to file evidence in opposition and did not attend the hearing at which the order was made.
Only after the bank obtained and served a warrant for possession did the appellant file an application to set aside the order for possession. That application was not filed until 23 January 2019, the date fixed for execution of the warrant. On 14 March 2019, a Master of this Court set aside the order for possession on the basis that one of the potential defences raised by the appellant was arguable. The appellant’s delays continued. The appellant opposed the bank taking possession a second time on 27 October 2020, again on the day a second warrant for possession was to be executed. The appellant made a third application the day before possession was scheduled to be taken on 1 December 2020.
When the matter came before the Master on 27 October 2020, an interim stay was granted because the appellant told the Court that he would file a notice of appeal later that day. When the matter was called back on the following day, the Master was told by the appellant that he wished to amend his notice. The Master did not know that the notice of appeal had not then been filed.
On 4 November 2020, the appellant told the Master that his notice of appeal had not been filed because he had discovered that he could not do so without either paying a filing fee (which he could not afford) or obtaining a waiver (which he had not obtained). The Master had by then obtained from the Chief Justice a provisional listing of the appeal for 11 December 2020. Without any notice of appeal, there was no longer any basis upon which to stay execution of the order for possession made by Doyle J, and so the stay was dismissed, and the December appeal date lost.
When the matter came before Livesey J, the appellant had only just filed his notice of appeal on 30 November 2020, well over four months out of time. The appellant did not explain his delay between the time judgment was delivered on 24 June 2020 and the filing of the notice of appeal on 30 November 2020. After hearings on 1 and 2 December 2020 a “partial stay” was granted in the following terms:
Applicant undertaking to diligently and expeditiously prosecute his appeal to a hearing before [the Court of Appeal] on Tuesday, 2 February 2021 at 10.15 am; and
On the bank’s undertaking that, subsequent to taking possession of the property at Beaumont, in the State of South Australia as a mortgagee … you will not sell the property as mortgagee unless or until the applicant’s application for an extension of time within which to bring the appeal is dismissed, or the appeal is otherwise determined; it is ordered that:
1.The application by the applicant for a stay of the warrant of possession is dismissed.
2.The bank is to prepare the appeal books.
3.The matter is listed for a hearing before [the Court of Appeal] on Tuesday, 2 February 2021 at 10.15 am.
4.The parties have liberty to apply.
5.The bank is to have the costs of and incidental to this application.
The appellant did not file a summary of argument before the hearing of the appeal. His very detailed grounds of appeal served to outline his contentions, to which he spoke at the hearing on 2 February 2021. At the conclusion to his oral reply submissions, the appellant was given permission to file a supplementary written outline by 19 February 2021. No outline was filed.
The grounds of appeal
In broad outline, the appellant’s grounds of appeal are as follows:
1.The bank’s case was not founded on its pleadings (appeal ground 1).
2.The guarantee was not an agreement “covered by the mortgage” (appeal ground 2).
3.The guarantee was extinguished in 2010 (appeal ground 3).
4.The guarantee was in any event unenforceable in relation to the Apex 2016 Agreement (appeal ground 4).
5.The 2016 facility was an unsolicited financial service pursuant to s 12BA(1) of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act) (appeal ground 5).
6.The appellant was not liable under the National Credit Code (appeal grounds 6, 7 and 8).
7.The Apex 2016 Agreement was not a valid contract (appeal grounds 9 and 10).
8.The bank’s alternate cases in estoppel were not enlivened (appeal ground 11).
9.In any event the estoppel case was excluded by the “entire agreement clause” (appeal ground 12).
10.The estoppel by convention was not established (appeal ground 13).
11.Promissory estoppel was not established (appeal ground 14).
As will be seen, the appellant did not press all of these grounds in the course of his submissions before the Court of Appeal. It will be necessary to review the findings made by the trial Judge before addressing these grounds in greater detail by reference to the evidence and the submissions made by the parties on the hearing of the appeal.
The findings made at trial
In overview, the trial Judge accepted that the appellant was liable under a guarantee which, though initially limited to $80,000, was extended on a number of occasions, with the last extension being to an amount of $3,121,000 in addition to interest and costs. In particular, the appellant’s liability as guarantor was extended to cover the indebtedness of Apex under the Apex 2016 Agreement which was established through the acceptance by Apex of the bank’s letter of offer dated 19 February 2016. That involved consolidating and refinancing a number of existing facilities which had been granted to Apex, the appellant and another company, V1 Systems Pty Ltd (V1 Systems), of which the appellant was the sole director and majority shareholder.
The appellant’s liability as guarantor was also extended to cover Apex’s indebtedness under what was described as the Apex 2017 Variation Agreement, which was established through Apex’s acceptance of the bank’s letter of variation dated 29 August 2017.
The Apex 2016 Agreement, as varied by the Apex 2017 Variation Agreement, expired in December 2017 and the full amount advanced immediately fell due and payable. Notices of Demand were issued, demanding that the appellant repay the borrowed amounts.
The appellant did not remedy the Notices of Demand. Accordingly, the bank contended, and the trial Judge found, that there were defaults under the facilities granted to Apex as well as the guarantee and the 2007 and 2010 mortgages. The trial Judge also found that, as the appellant was liable for Apex’s obligations as guarantor, and as this liability is secured by the mortgages, the bank was entitled to take possession of the Beaumont property.
The trial Judge also accepted the bank’s alternative claims in estoppel. That is, even if the guarantee and mortgages did not actually extend to cover Apex’s liability under the Apex 2016 Agreement and the Apex 2017 Variation Agreement, the appellant was precluded by estoppel by convention and by estoppel by representation, from departing from the mutual assumption that they did extend to cover Apex’s liability under the Apex 2016 Agreement and the Apex 2017 Variation Agreement.
Though the bank initially sought monetary relief, that was abandoned and the case at trial and on appeal was confined to contesting the order for possession of the Beaumont property.
Defences abandoned
A number of the appellant’s defences agitated at trial were no longer pressed on appeal. These include the contentions that the appellant’s former wife had an equitable interest in the Beaumont property and ought to have been joined as a party, that the bank breached an essential term of the Apex 2017 Variation Agreement, and thereby the guarantee and mortgages, by failing to make further advances to the appellant personally in November 2017, and that the appellant then terminated the guarantee and mortgages. The appellant also abandoned his claim that 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, as well as under clause 27 of the Code of Banking Practice 2013 when granting and varying the Apex 2016 Agreement in February 2016 and the Apex 2017 Variation Agreement in August 2017. Likewise, the appellant abandoned his claim that the bank contravened s 12DJ of the ASIC Act by using coercion in connection with the supply or possible supply of financial services.
Findings regarding the appellant and the bank
The appellant obtained a Bachelor of Business from the University of South Australia, working in sales and management for various large businesses before pursuing his own business interests through V1 Systems and Apex. V1 Systems was incorporated in 2002 and deregistered on 5 November 2017. Apex was incorporated in March 2007 and deregistered on 28 July 2019.
The trial Judge found that the appellant purchased the Beaumont property in April 2007 and that the “luxury home” was intended to serve as a display for his design and construction services business. Later, however, after the appellant focused on commercial property development through Apex, he intended to live in the property with his family.
Whilst most of the trial was conducted on the basis of a large volume of documents, the bank called evidence from four employee officers regarding the bank’s dealings and decision-making concerning the appellant, V1 Systems and Apex. The trial Judge accepted the evidence of the bank’s witnesses but, largely, made his findings based on the contents of the contemporaneous documents.
The trial Judge observed and found, based on the appellant’s communications and dealings with the bank, as well as his conduct of the trial, that he was an intelligent, capable and determined man. Indeed, that emerged during the hearing of this appeal. The appellant was articulate and clear in his presentation of his appeal during the course of a day before the Court of Appeal.
Nonetheless, the appellant did not give evidence at the trial and his detailed, draft witness statement was not admitted into evidence. On the hearing of the appeal, the appellant contended that, nonetheless, the trial Judge had made findings based on the draft witness statement. At one stage, the appellant suggested that this Court should receive that document as evidence. Ultimately, no application was formally made to admit the appellant’s draft witness statement into evidence. In any event, this submission must be rejected: there is no ground of appeal concerning this issue and, more importantly, it has not been demonstrated that his Honour’s findings were not made on the basis of the evidence that he said he used, that is to say, primarily the documents, as well the evidence of the bank’s witnesses which the trial Judge accepted.
The appellant commenced dealings with the bank in 2004 and, the following year, V1 Systems was lent $84,000, guaranteed by the appellant. Later that year, the bank approved an overdraft with a cheque account. There were further dealings between the appellant and the bank until the acquisition of the Beaumont property in early 2007 for a purchase price of $271,889. By the time of settlement on 30 April 2007, the bank had not yet established an anticipated loan facility and so an amount was advanced against the V1 Systems overdraft, resulting in the business cheque account being overdrawn. Arrangements were formalised during the balance of 2007, resulting in a home loan being awarded for $208,000 secured by the 2007 mortgage which was registered over the property on 14 August 2007.
Later, during 2010, the appellant and Apex became involved in what was described at trial as the “Kings Point Project” on land on Main North Road, Salisbury South. Apex and Commercial & General Pty Ltd embarked on a joint venture concerning land held by Engel Holdings Pty Ltd owned by the appellant’s father‑in-law, Mr Peter Engel. During 2010, the appellant anticipated receiving a 2 per cent commission of $800,000 from Mr Engel on an expected $40,000,000 sale price, payable at settlement. Mr Engel offered to advance some of that commission early so as to assist the appellant with cashflow.
Also during 2010, the appellant sought to consolidate his banking as regards his personal interests and the interests of V1 Systems and his “development company”, Apex. An overdraft facility for Apex was sought and obtained in an amount of $80,000. At that stage, it was anticipated that the appellant would generate income from V1 Systems, as well as commission from Apex through the Kings Point Project, in a few months’ time. By letter of offer dated 20 April 2010, the appellant received from the bank, on behalf of Apex, an offer of an overdraft facility secured by a second registered mortgage over the property, together with guarantees from the appellant and V1 Systems. The letter of offer was countersigned by the appellant on 20 April 2010, as director and secretary of Apex, as well as the security provider. At the same time, the appellant signed a guarantee in favour of the bank together with a “Form of Acknowledgment – Individual Guarantor”. This led to execution of the 2010 mortgage. This second mortgage was registered on 7 May 2010.
Later that year, the Apex overdraft was doubled to $160,000, supported by existing security as well as a new security by way of a Deed of Cross‑Collateralisation between Apex, V1 Systems and the appellant. This letter of offer was signed by the appellant on 16 July 2010 in his capacities as borrower or director and secretary of Apex, and as security provider (in his own capacity and as director and secretary of Apex and V1 Systems). On the same date, the Deed of Cross-Collateralisation was executed with the appellant signing in his various capacities.
By September 2010, the appellant was seeking a new loan of $200,000, of which $60,000 was required for construction and $140,000 for refinancing the Apex overdraft. On 29 September 2010, the bank paid that sum into the Apex overdraft account leaving it with a credit balance. Formal documentation was not entered into until the following month. By letter of offer dated 14 October 2010, Apex was offered a reduced limit on the Apex overdraft (down from $160,000 to $20,000) supported by existing security. By another letter of offer dated 15 October 2010, the bank offered the appellant a new construction loan of $200,000 so as to assist development of the Beaumont property and to refinance the Apex overdraft. These letters of offer were countersigned by the appellant in his various capacities on 21 October 2010.
During 2011, the construction loan limit was increased to $215,000. By letter of offer dated 3 February 2011, the bank offered Apex a term facility (interest only) with a limit of $100,000 for one year to assist with construction. In so far as is relevant, the security position was described as comprising the first and second registered mortgages (that is to say, the 2007 mortgage and the 2010 mortgage), existing limited guarantees from the appellant and V1 Systems (increased to $565,000) and the Deed of Cross-Collateralisation. This letter of offer was countersigned by the appellant in his various capacities on 4 February 2011.
On the same date, the appellant signed an “Acknowledgment by Guarantor”, extending his guarantee to the Apex term facility and revising the limit of liability under the guarantee.
Between February 2011 and February 2016, various extensions were granted to the Apex term facility to facilitate construction at the Beaumont property. There were significant delays and increasing costs associated with completion of the construction work.
For present purposes, it is unnecessary to notice each variation or extension, save that the trial Judge made clear findings to the effect that, at each stage, the appellant signed an “Acknowledgment by Guarantor” in terms identical to that signed on 4 February 2011. By 2013, the appellant’s father-in-law had offered to place $50,000 on term deposit to service the appellant’s loan and facilities for four months, given that he had been without cash flow for two years, but it was hoped that one of several projects would soon come to fruition and enable the appellant to demonstrate “serviceability”. The Kings Point Project had not yet finalised.
During 2014, the bank was assured by Mr McClurg of Commercial & General and Mr Engel that they would each continue to advance the appellant $10,000 each month to assist him in meeting his obligations to complete the Beaumont property.
Quite apart from the difficulties in bringing the construction of the Beaumont property to a completion, by June 2015, Commercial & General decided not to proceed with the Kings Point Project. Nonetheless, the appellant remained optimistic and explained to the bank that there were ongoing discussions with other large organisations interested in the Kings Point Project. He estimated completion of the Beaumont property would take no more than six months.
Unsurprisingly, the bank was by then taking a close interest in developments and seeking budget estimates and assurances. A building consultant, Integral Concept Pty Ltd, executed a contract to assist with building supervision during January 2016. By this stage, the bank was insisting on the involvement of a building supervisor before advancing further funds. However, on the same day, 13 January 2016, Mr Garrod of Integral Concept emailed the appellant, notifying that he was no longer available to undertake the contemplated building work. He said that he was too busy with other projects. Nonetheless, Mr Garrod was prepared to oversee the process, whether personally or with a supervisor. The appellant did not tell the bank for a few days. The trial Judge noted that, by this stage, there were some difficulties with communications between the appellant and one of the bank’s officers. There was, during this period, the first signs of difficulties in the relationship.
Nonetheless, there was a meeting at the Beaumont property on 2 February 2016 and one of the bank’s officers and witnesses, Mr Bellizia, gave evidence which was accepted by the trial Judge, even though it was not supported by any contemporaneous written record. That evidence was to the effect that the appellant could not complete construction work without further funding from the bank and that the appellant requested financial assistance from the bank. Mr Bellizia said that he told the appellant at the meeting, in effect, that if the bank was going to advance further funding, it required access to the property to ensure that construction work was being completed in a reasonable timeframe. Mr Bellizia also gave evidence that he said words to the effect that, regardless of the fate of the Kings Point Project, the construction work was to be completed and the Beaumont property placed on the market. The appellant did not disagree.
As mentioned, the trial Judge accepted this evidence.
The documents demonstrate that, during February 2016, there was some debate between the appellant and the bank about refinancing all of the debt and increasing funding to complete the Beaumont property. Although the appellant responded in an email that he preferred that funding be provided in his personal name, and not in the name of Apex, he eventually agreed to funding in the name of Apex on the basis that the bank had said in an email “… depending what happens [the funding] could be refinanced into your own name”.[9]
[9] Bendigo and Adelaide Bank Limited v Brackenridge [2020] SASC 114, [151]-[155].
It ought be emphasised that, at this stage, the appellant still expected that completion of the construction at the Beaumont property would occur in a matter of months, most likely within four months.
Eventually, the bank, by letter of offer to Apex dated 19 February 2016, offered what came to be described as the “Apex 2016 Agreement” with a facility limit of $2.684 million and a term of four months. The offer noted that the facility was not regulated by the National Credit Code and the schedule set out the security comprising the existing first registered all monies mortgage (the 2007 mortgage), an existing guarantee and indemnity from the appellant and V1 systems for $2.684 million (increased from $2.156 million) and the existing Deed of Cross‑Collateralisation between Apex, the appellant and V1 Systems. Again, accompanying the letter of offer was an “Acknowledgment by Guarantor”.
On 23 February 2016, the appellant signed the letter of offer on behalf of Apex, permitting entry into the Apex 2016 Agreement. He signed the “Acknowledgment by the Security Provider” on behalf of Apex and V1 Systems, as well as on his own behalf. He also signed the “Acknowledgment by Guarantor” on his own behalf, as well as on behalf of V1 Systems.
During March 2016, the bank advanced $2,225,267.11 for refinancing the existing facilities in the names of Apex, V1 Systems and the appellant, and this was followed by numerous advances. On each occasion, the advance was made pursuant to a drawdown request signed by the appellant on behalf of Apex. Between March and December 2016, there were 26 advances totalling $337,663.59. By 15 September 2017, when the appellant signed the Apex 2017 Variation Agreement, there had been a further 19 advances and the cumulative balance totalled $509,933.41.
The trial Judge found that, between March 2016 and September 2017, the bank continued to monitor the appellant’s progress through email correspondence and occasional site visits. In October 2016, the appellant advised the bank that a real estate agent had undertaken an appraisal and expressed the view that the Beaumont property was worth up to $4 million if further work was undertaken. The property was worth less in its unfinished state. Indeed, the real estate agent would not consider marketing the property until the further work was done.
Significantly, although the appellant was seeking further funding and an increase in the facility limit to $3 million, the bank was aware that the appellant’s relationship with Mr Engel had “soured significantly”. Mr Engel was described as the “former father-in-law”. The bank continued to review the appellant’s request internally and this was done with the benefit of a “completion cost summary” provided by the appellant on 7 August 2017. A reconciliation of progress payments was also provided.
Eventually, by letter of variation from the bank to Apex dated 29 August 2017, the bank offered to vary the terms of the Apex 2016 Agreement as outlined in the 19 February 2016 letter of offer. In overview, the trial Judge found that the facility limit was to be increased to $3.121 million with an expiry date extended to 3 December 2017 with funding sufficient to assist with the estimated cost to complete as well as estimated capitalised interest, marketing and sales costs and a contingency allowance. As the trial Judge found:[10]
… the loan was not to exceed $3.121 million and was “to be cleared in full from sale of the security property by no later than 3 December 2017 when the facility expires”.
The schedule also referred to the Bank’s security in the form of the existing first registered all monies mortgage over the Property in the name of the [appellant], the existing guarantee and indemnity from the [appellant] and V1 Systems to secure the facilities to Apex in favour of the Bank, and the existing Deed of Cross Collateralisation between the [appellant], V1 Systems and Apex to secure the facilities to Apex in favour of the Bank.
[10] Bendigo and Adelaide Bank Limited v Brackenridge [2020] SASC 114, [196]-[197].
The letter of variation was signed by the appellant on 15 September 2017. That day, the appellant also signed an acknowledgment from “the Security Provider” on his own behalf, as well as on behalf of Apex and V1 Systems. He also signed an “Acknowledgement by Guarantor” on his own behalf and on behalf of V1 Systems.
As might be expected, by the last half of 2017, the appellant was under considerable pressure. Nonetheless, in his email correspondence to the bank dated 8 September 2017 he acknowledged frustration but “made it plain that he did not hold the bank responsible for his predicament”.[11] Nonetheless, he queried why the facility was in the name of Apex, as well as other aspects of the fees and conditions. The bank considered the appellant’s questions. Internally, the bank acknowledged that it was in “workout/forbearance mode” and not in a position to justify “a new clean loan” in the name of the appellant. The bank’s officers did not believe that they could “restructure” the existing facility.
[11] Bendigo and Adelaide Bank Limited v Brackenridge [2020] SASC 114, [200].
The appellant signed the letter of variation concerning the Apex 2017 Variation Agreement on 15 September 2017. Between 15 September and 29 November 2017, there were a further nine advances taking the total advancement under the Apex 2017 Agreement and the Apex 2017 Variation Agreement to $556,276.21.
In the last part of 2017, yet further difficulties and delays were encountered with the construction work necessary to complete the Beaumont property. It became clear that the appellant was unable to resolve all issues by the date the Apex 2016 Agreement, as varied by the Apex 2017 Variation Agreement, was due to expire on 3 December 2017. On 3 November 2017, the bank’s file records a conversation with the appellant following a site visit the day before which suggested that there had been little or no progress since the previous week’s visit. The bank decided not to approve a further drawdown request for $3,640.
It was during a conversation that the appellant became angry and abusive. He expressed frustration and anger at working long hours under stress without the bank appreciating his effort. He said that he questioned the point of continuing and was contemplating “throwing himself off his balcony”. The bank was concerned about the appellant’s state of mind as well as the suggestion that he might not complete the construction work.
In later conversations, the appellant apologised for his comments and adopted a more conciliatory tone. The bank made a further advance of $7,000 on 8 November 2017. On 10 November, there was a further site visit. The bank’s officers were concerned that there was no further work completed and a conversation with the appellant, whilst “largely reasonable, … [became] very heated”.[12] The bank expressed concern that, due to accumulating interest which was being capitalised, there needed to be a prompt completion of the Beaumont property otherwise the sale price would not clear bank debt. The appellant acknowledged that he was likely to “get very little out of the house sale” and so he was trying to get the best finish so as to maximise the sale price. Nonetheless, the conversation deteriorated when the appellant sought an assurance that he would be paid a reasonable amount for his own labour. When he did not receive that assurance, he threatened to stop work and prevent others coming onto site. Nonetheless, continuing requests and advances were made for drawdowns during the balance of November 2017.
[12] Bendigo and Adelaide Bank Limited v Brackenridge [2020] SASC 114, [216].
By 22 November 2017, the appellant was accusing the bank of applying undue pressure and taking advantage of his special disadvantage by reason of his financial vulnerability; he accused the bank of acting in an unjust and unconscionable manner. The bank responded with a letter dated 20 November 2017 which was, in all the circumstances, a measured and conciliatory rejection of the appellant’s allegations.
On 12 December 2017, the bank wrote to the appellant advising of the expiry of the facility. The appellant responded by email dated 20 December 2017 seeking “further time to understand and consider his options”.[13]
[13] Bendigo and Adelaide Bank Limited v Brackenridge [2020] SASC 114, [223].
On 15 February 2018, the solicitor for the bank, Mr Michael Barrett of Thomson Geer, wrote to Apex enclosing a Notice of Demand dated 15 February 2018, requiring repayment in the amount of $3,139,809.71 by 5pm on Monday, 19 February 2018. The Notice of Demand foreshadowed the exercise by the bank of its rights under the guarantee dated 20 April 2010 and the first registered mortgage, including by taking possession of and selling the Beaumont property pursuant to the mortgage, s 55A of the Law of Property Act 1936 (SA) and s 133 of the Real Property Act 1886 (SA). Another Notice of Demand dated 24 April 2018 was sent demanding payment of $3,185,652.20 by 4pm on 27 April 2018. Finally, a third Notice of Demand dated 1 May 2018 was sent by the bank to the appellant referring to Apex’s default under the bank’s facilities as well as the appellant’s failure to comply with the guarantee and the consequential default under the mortgage, requiring remedy within 31 days.
Neither Apex nor the appellant complied with these Notices of Demand.
The trial Judge observed that the bank acknowledged three essential pre‑requisites to an order for possession, namely:[14]
1.a valid mortgage;
2.money secured by the mortgage; and
3.an event of default under the mortgage giving rise to a right of possession upon the giving of the requisite notice under s 55A of the Law of Property Act 1936 (SA) specifying the defaults which had not been remedied.
[14] Bendigo and Adelaide Bank Limited v Brackenridge [2020] SASC 114, [228]-[231], citing Russo v Buck [2006] SASC 380, [174] (Doyle CJ).
There was and is no dispute that the 2007 mortgage and the 2010 mortgage were validly executed by the appellant. Indeed, there appeared to be no real dispute that there had been an event of default giving rise to a right of possession. Certainly, that was not agitated on the appeal. What remained in issue was the extent to which money was secured by the mortgages. As to that, the trial Judge recorded the bank’s case, which he accepted, as follows:
1.Apex was indebted to the bank;
2.the appellant gave a guarantee and indemnity with respect to Apex’s liability to the bank;
3.the appellant’s obligations under the guarantee were secured by the mortgages, each of which contained a covenant requiring payment of amounts owing.
Ultimately, the trial Judge found that the bank established the matters necessary to entitle it to an order for possession and that none of the positive defences raised by the appellant conferred any basis to resist that order. [15]
[15] Bendigo and Adelaide Bank Limited v Brackenridge [2020] SASC 114, [597].
It is appropriate to now consider the extent to which the appellant maintained opposition to the making of the order for possession.
The appellant’s approach on the hearing of the appeal
As will be seen, the appellant’s extensive grounds of appeal are expressed in what might perhaps be described as an unusual fashion. At various points, the appellant articulates questions or propositions, rather than asserted error.
On the hearing of the appeal, the appellant explained that he did this because of research that he had undertaken which included the High Court’s Practice Directions. He said that he had considered the work of Bryan A Garner from the United States which suggested that his critique should be articulated as “premise, premise, response or question” and to frame the grounds in a manner which informed the Court as to the “general principle” in issue rather than just asserting that the trial Judge erred. He argued that to do otherwise did not really tell the Court “anything as to what the issue is”.
Whilst the appellant did not commence with appeal ground 1 – he devoted most of his attack to appeal ground 3 – it is convenient to address the appeal grounds in the order in which they appear in the Notice of Appeal. Nonetheless, the appellant commenced his case by posing the following question:[16]
… how a consumer, with no income since 2013, a small business that had no income since 2010, was able to build a luxury home in the wake of the financial crisis of 2009, the introduction of the National Consumer Credit Protection Act and financial reforms. As to the lending practices that occurred …
… it does point to a bigger issue with Courts and the objects of the Courts to decide and determine the rights of citizens, in relation to property and liberty, that the chains of financial bondage are no different to what was outlawed by right-minded people many years ago, and certainly what the government has sought to outlaw in this country for some time.
The dispute did not arise out of any desire or intention on my behalf to simply have a house constructed and walk away mortgage free. The dispute didn’t arise out of anything to do with the security-side of things. It arose before the financial accommodation ended out of the conduct of the respondent [bank].
[16] Appeal Transcript, p 7.
Appeal ground 1: The bank’s case was not founded on its pleadings
The appellant’s first appeal ground is set out as follows:
RESPONDENT’S CASE NOT FOUNDED ON ITS PLEADINGS
1.Unless the Court grant’s permission a party is bound, at the trial of an action, by its pleadings. The respondent pleaded Apex’s obligations and liabilities under the Apex Agreement were secured by the Mortgage (or in the alternative, the Second Mortgage); the Guarantee, and the Deed of Cross Collateralisation. At trial the respondent pursued a case on the contention that the Guarantee secured Apex's obligations under the Apex Agreement and that both of the Mortgage and the Second Mortgage secured the appellant’s obligations under the Guarantee. In finding the respondent made out its case pursued at trial, was the Court correct not to hold the respondent bound by its pleadings?
Issues in relation to ground of appeal
a. The Apex Agreement contained an acknowledgment signed by the “Security Providers”, expressing “its guarantee, security or other document given by it to the Lender continues in full force and effect and extends to the Borrower’s obligations and liabilities under the Facility Agreement”. The respondent pleaded the appellant, by signing the Apex Agreement as a Security Provider, accepted the Mortgage extended to Apex's obligations and liabilities under the Apex Agreement. Was the Court correct to conclude the appellant, by signing the Apex Agreement as Security Provider, gave a written acknowledgment not only that the 2016 Facility was to be secured by the Guarantee, but also that the appellant’s obligations under the Guarantee were to be secured by the Mortgage?
b. The Apex Overdraft Agreement in April 2010 contained an acknowledgment signed by the “Security Providers” in the same terms as the Apex Agreement. Contemporaneous records evince the Mortgage did not extend to secure Apex’s obligations under the Apex Overdraft Agreement, nor did the Mortgage extend to secure the appellant’s obligations under the Guarantee. Did the evidence support the Court’s finding that the appellant, by signing the Apex Agreement as Security Provider, gave a written acknowledgment not only that the 2016 Facility was to be secured by the Guarantee, but also that the appellant’s obligations under the Guarantee were to be secured by the Mortgage?
c. The High Court has repeatedly affirmed contractual construction is governed by the intention which the parties expressed, not the subjective intentions which they may have had, but did not express. The Apex Agreement unambiguously expressed the 2016 Facility was to be secured by the Mortgage, the Guarantee and the Deed of Cross Collateralisation. The Court held that the general scheme of the security arrangements under the Apex Agreement was clear, namely that Apex’s liability was to be secured by the Guarantee and the Mortgage. The Court further held the terms of the Apex Agreement did not express the Mortgage was securing the Guarantee, or that the Guarantee was an agreement covered by the Mortgage. Was the Court correct to conclude the sense and meaning conveyed by the Apex Agreement was that the Mortgage was securing the Guarantee and not Apex’s liability?
a. An originating process must bear any endorsement required by statute, including any statutory provisions relied on. The respondent’s originating process as amended, bore no endorsement of the Law of Property Act 1936 or the Real Property Act 1886, and the respondent’s statement of claim failed to plead any statutory provisions conferring a right to possession. At trial the respondent sought to rely on a right to possession pursuant to the Law of Property Act 1936 and the Real Property Act 1886. Was the order for possession obtained irregularly and did the respondent’s originating process provide the requisite notice of the case to be met at trial?
d. A pleading must not contain inconsistent allegations of fact; or alternatives that are confusingly intermixed; or be susceptible to various meanings, so as to embarrass the opposite party who does not know what is alleged against him. Did the respondent plead matters of both fact and law with sufficient clarity and specificity so as to provide the appellant adequate notice of the case to be met at trial, and so as not to take the appellant by surprise?
e. A pleading may contain alternative allegations of fact, which may be internally inconsistent, however the courts have held alternative allegations must still be available as a true alternative fact. The respondent pleaded an alternative case that if, on the proper construction of the Apex Agreement, the reference to the “Existing 1st Registered All Monies Mortgage" was not a reference to the Mortgage it was a reference to the Second Mortgage. The Apex Agreement references a solitary mortgage, which the Court held was clearly a reference to the Mortgage. Was the respondent’s alternate case available as a true alternative fact?
f. Further, was the Court correct to hold it was the respondent’s case that both the Mortgage and the Second Mortgage secured the appellant’s liability under the Guarantee?
In his oral address, the appellant explained that the action commenced in a form which originally would have been an action in ejectment but was an action for possession of property under the Real Property Act 1886 (SA) (Real Property Act). He pointed out that the action was amended to be a common law action based on breach of contract. He said that endorsements concerning the Real Property Act were struck out and that he had questioned the trial Judge about whether there was an irregularity because the summons did not clearly reflect the bank’s case as a possession action. It was at this stage that the appellant’s submissions became a little difficult to follow. The trial Judge recorded that the claim for monetary relief had been abandoned and the bank had confined its claim to possession. Indeed, in his reasons for decision, the trial Judge clearly understood that the bank’s case was confined to possession and that the appellant was meeting that case at trial.
For its part, the bank met the apparent absence of any pleading or endorsement referring to the Law of Property Act 1936 (SA) or the Real Property Act by emphasising that these concerned the notice provision under s 55A and the summary procedure under Part XVII, whereas the case prosecuted at trial was concerned with questions such as the contractual effect of instruments such as the 2007 mortgage, the 2010 mortgage, the guarantee and the Deed of Cross‑Collateralisation. The bank maintained that there had been no failure to provide procedural fairness.[17] Indeed, the bank emphasised that, to the extent that there had been any departure from the pleaded issues, that was a matter for the discretion of the trial Judge and there was no criticism made of his approach.[18] At no stage did the appellant suggest that he was not properly apprised of the real issues in contest at trial or that the way in which the trial was conducted, assuming for the moment that there had been any departure from the pleadings, caused him any prejudice. No complaint of prejudice was ever made.
[17] Banque Commerciale SA (En Liquidation) v Akhil Holdings Ltd (1990) 169 CLR 279, 286-287 (Mason CJ and Gaudron J); Williams v Telecommunications Commission (1988) 52 SASR 215, 216 (King CJ); Mintech Resources Pty Ltd v Russell-Taylor (2012) 113 SASR 80, [39]-[42], [47]-[49] (White J, with whom Peek and Stanley JJ agreed).
[18] Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653, [424]-[428] (Ipp JA); Macks v Viscariello (2017) 130 SASR 1, [111] (Lovell J, Corboy and Slattery AJJ).
The bank did not impermissibly depart from the case that it was entitled to possession based on the contentions that the appellant was liable under the guarantee for the indebtedness of Apex and that this was secured by both the 2007 mortgage and the 2010 mortgage. That, indeed, was the case as opened, prosecuted and closed during the course of the trial.
Appeal ground 1 must be dismissed.
Appeal ground 2: The guarantee was not covered by the mortgage
The appellant’s second appeal ground is articulated in the following way:
GUARANTEE NOT COVERED BY THE MORTGAGE
2. The Nov2005 Guarantee and the Guarantee were each an agreement under which the appellant incurred or owed obligations to the respondent. Documentary evidence establishes that neither the Nov2005 Guarantee nor the Guarantee was an agreement covered by the Mortgage. Did the evidence support the Court’s finding that the Guarantee was an agreement covered by the Mortgage?
Issues in relation to ground of appeal
a. In response to the appellant’s request for an overdraft facility for Apex in February 2010 the respondent stated it required security because the $30,000 V1 Systems Overdraft was unsecured. The representation was made in the knowledge of the fact and terms of the Nov2005 Guarantee and the Mortgage, and it induced the appellant to enter the Guarantee and Second Mortgage. If the respondent’s representation was true, it evinces the Mortgage, on its terms, did not secure guarantees (or alternatively, that the respondent would not rely upon such a construction). If the respondent’s representation was false, the appellant was induced by a misrepresentation of fact material to entering the Guarantee and Second Mortgage, and thereby is not bound by his contract. In the premises where the respondent’s case fails irrespective of whether its representation was true or false, was the Court correct in making no finding of fact as to the truth of the respondent’s representation?
b. The state of mind of a company is discerned by reference to the state of mind of its representatives. Witnesses for the respondent deposed they had no recollection of circumstances surrounding the entering of security documents or credit contracts prior to the Apex Agreement. The only witness who could give evidence directly relevant to agreements entered between 2010 and 2014 was Lee Elphick, whom the respondent failed to call to give evidence. Was the Court correct not to draw a Jones Dunkel inference from the respondent’s failure to call evidence from Lee Elphick
c. The Memorandum of Common Provisions is a standard form document dated 23 September 1996 containing generic boilerplate terms and definitions, such as the “amount owing” and “agreement covered by this mortgage”, each of which express the context of the noun “agreement” by using the determiner “an”, which is a singular indefinite article that cannot be used with plural nouns. The context is further clarified by the absence of a quantifier determiner such as “any”; “each”; or “every”. Having regard to the text, was the Court correct to construe the meaning of “agreement covered by this mortgage” as being any; each; or every agreement under which the appellant owed obligations to the respondent?
d. The Memorandum of Common Provisions is titled, “Home Loan Mortgage” and was procured by the respondent’s residential lending division for the specific purpose of securing the appellant’s obligations under the Home Loan Agreement, which expressly stipulated the Mortgage was given to secure repayment of the “total amount owing”, being defined as “the balance owing on your loan account, plus all ...other amounts which you must pay under this contract...” Contemporaneous documents evince the Mortgage, on its terms, did not secure the appellant’s obligations under either the Nov2005 Guarantee or the Guarantee, or the appellant’s obligations under the Construction Loan Agreement when executed in September 2010. In constructing the terms of the Mortgage, did the Court correctly identify, and duly consider, the genesis, background and context of the Mortgage transaction?
e. A conveyance of land is subject to good consideration. The Memorandum of Mortgage expressly stipulated the Mortgage was granted for the valuable consideration of (i) “The Mortgagee having provided or agreeing to provide loans and other banking accommodation to or at the request of the Mortgagor”; and (ii) “The Mortgagee forbearing at the request of the Mortgagor to press for immediate payment of the amount owing”. The Guarantee was not a loan or other banking accommodation provided to or at the request of the appellant, nor was it a deferred debt obligation. Was the Court correct to find a contract of guarantee was within the ambit of the Mortgage?
f. Pursuant to s 153 of the Real Property Act 1886 a registered mortgage may be renewed or extended by registration of an instrument with the Lands Titles Registration Office. The respondent did not register any instruments or dealings extending the Mortgage, either as security for the appellant’s obligations under the Guarantee or as security for Apex’s obligations under any credit contract. Was the Court correct to find the Mortgage was extended as security for the appellant’s obligations under the Guarantee?
On the hearing of the appeal, the appellant confined his attack to the rhetorical question: Why was there a second 2010 mortgage if the 2007 mortgage was an “all monies mortgage” which already covered the appellant’s liabilities? The appellant answered that proposition by contending that the 2007 mortgage only covered his personal borrowings, such as the initial home loan, and it did not extend to guaranteed borrowings taken, for example, by Apex. The appellant relied upon the following passage from the reasons of the trial Judge:[19]
Under clause 1.1 of the 2007 Mortgage the defendant secured to the Bank the payment of the “amount owing” by mortgaging to the Bank all his estate and interest in the Property, together with each fixture, structure or improvement on it or fixed to it. The defendant agreed under clause 2.1 that if he did not comply with his obligations under the mortgage, the Bank may take possession of the Property, sell it and sue the defendant for any remaining money he owes the Bank.
[19] Bendigo and Adelaide Bank Limited v Brackenridge [2020] SASC 114, [275].
It is, with respect to the appellant, a little difficult to know where this appeal ground ultimately goes. Even if there was thought to be some difficulty with the 2007 mortgage, the bank, obviously enough, could and did rely upon the 2010 mortgage.
Perhaps anticipating this, the appellant’s appeal grounds articulated a new case, not previously agitated, that he had been induced to enter into the guarantee and 2010 mortgage by reason of unparticularised misrepresentations. In addition, in so far as the appellant raised issues about the corporate state of mind of the bank, it is, with respect to the appellant, difficult to see how this was relevant to any question about the proper construction of the relevant documents for the purposes of determining, for example, whether the guarantee was an agreement covered by the mortgage.[20] In short, the subjective intention of any officer of the bank appears to be irrelevant to any question of contractual construction.
[20] Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, [38]-[40] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ).
The appellant contended that the phrase “amount owing” in the 2007 mortgage was confined to amounts owing under a single agreement and could not extend to amounts owing under more than one agreement. Again, this contention is new. It is, in any event, undermined by the definition within the mortgage (clause 9.1) of “agreement covered by this mortgage” which extends to any agreement, contract or arrangement acknowledged by the mortgagee to be an agreement covered by the mortgage.
The appellant’s appeal grounds include a question as to whether the guarantee came within the mortgage given the way in which the question of consideration was identified in the Memorandum of Mortgage. This new argument, with respect to the appellant, appears to go nowhere. The same may be said of the suggestion that the 2007 mortgage was void for want of consideration: the only relevant question is whether, in terms, the mortgage secured the amounts owed under the appellant’s guarantee. The appellant put no argument which disclosed any error in the conclusion of the trial Judge that the mortgages did cover the guarantee given by the appellant for the liability of Apex.
Similarly, to the extent that the appellant raised an argument based on s 153 of the Real Property Act, it must be rejected. This new argument is directed to extensions of mortgages, encumbrances or leases. Just exactly how it applied to the circumstances of this case was never clearly articulated by the appellant. In the case of a lease, it has been held that this provision is directed to extensions made otherwise than through a right of renewal or extension contained in the registered lease.[21] The purpose of the legislation was to provide a system whereby a person dealing with a registered proprietor need look no further than the registered title and the interest notified on that title so as to ensure that any dealing “does not miscarry”.[22] This provision does not apply to any question about the application of the mortgages to the guarantee given by the appellant. The mortgages and their relevantly applicable terms and conditions identify, relevantly, that they were “all monies mortgages”. Both were registered and their existence and terms were apparent from a search of the register.
[21] Mercantile Credits Ltd v Shell (1976) 136 CLR 326, 336-337 (Barwick CJ); Tessari v Bais Pty Ltd (1993) 60 SASR 59, 82-83 (Olsson J) (a case where a director’s guarantee of a company’s obligations under a lease extended to the company’s obligations under an extended albeit unregistered lease).
[22] Deguisa v Lynn (2020) 268 CLR 638, [2] (Kiefel CJ, Gageler, Keane, Gordon and Edelman JJ).
Ultimately, on the hearing of the appeal, the appellant seemed to be contending that, though the mortgage in its terms was capable of applying to the liabilities arising under the Apex 2016 Agreement and Apex 2017 Variation Agreement and the guarantee, it needed to be read down having regard to the circumstances surrounding entry into the 2007 mortgage.
To the extent that the appellant propounded a new case on appeal which was not put before the trial Judge, whether under this or any other appeal grounds, that case must be rejected because it could have been addressed at trial.[23] For example, to the extent that the appellant propounded a case based on asserted misrepresentations, that case necessarily failed because the appellant did not ultimately give evidence and, to the extent that aspects of that case were propounded in cross examination, the trial Judge rejected the appellant’s case and accepted the evidence given by the bank’s witnesses in favour of the bank’s position. To the extent that there was an attempt on the hearing of this appeal to read down the express terms of the 2007 mortgage, that contention must be rejected. As the trial Judge found, the 2007 mortgage operated according to its strict terms. That is not to say that there was no uncertainty about why the 2010 mortgage was entered into. As senior counsel for the bank, Mr Hoffmann QC, frankly conceded on the hearing of the appeal, it remained unclear why the bank required the 2010 mortgage. Nonetheless, the primary Judge’s reasons were clear and, ultimately, not subjected to any attack by the appellant.[24]
[23] University of Wollongong v Metwally (No 2) (1985) 59 ALJR 481.
[24] Bendigo and Adelaide Bank Limited v Brackenridge [2020] SASC 114, [280]-[286] (Doyle J).
Appeal ground 2 must be dismissed.
Appeal ground 3: The guarantee was extinguished
The appellant articulated this appeal ground in the following way:
GUARANTEE EXTINGUISHED IN 2010
3.The Code of Banking Practice confers on a guarantor a right to extinguish his liability under a Guarantee “at any time” by paying the then outstanding liability of the debtor or any lesser amount to which the guarantor’s liability is limited by the terms of the Guarantee. The Court found that as at 29 September 2010 Apex’s current liability under the $160,000 Apex Overdraft was $155,576.64 and the appellant’s liability under the Guarantee was limited to $160,000. The Court further found that on 29 September 2010 the respondent transferred $200,000 of the appellant’s funds to the Apex Overdraft facility in a refinancing transaction. Was the Court correct to find the Guarantee did not end on 29 September 2010?
Issues in relation to ground of appeal
a. Was the Court correct to conclude the payment of $200,000 on 29 September 2010 merely had the effect of moving the Apex Overdraft account temporarily into credit and did not discharge Apex’s outstanding liability (including any future or contingent liability) under the Apex Overdraft Agreement, and hence did not discharge the appellant’s exposure under the Guarantee?
b. The language of clause 28.10 of the Code of Banking Practice 2004 is unambiguous that a guarantor may exercise his right to extinguish his liability under a Guarantee “at any time”. The Court held that for so long as the Apex Overdraft facility remained in place, and able to be drawn upon by Apex, the Guarantee continued to secure amounts that were outstanding and not paid by Apex. Did the Court give the correct legal effect to clause 28.10 of the Code of Banking Practice 2004?
c. The Credit Memorandum dated 20 September 2010 was an internal bank document, not a communication between the parties. Email communications between the parties on 26 September 2010 evince the appellant was given a choice of retaining the $160,000 Apex Overdraft while obtaining a new $200,000 Construction Loan or refinancing the $160,000 Apex Overdraft into the $200,000 Construction Loan, leaving the appellant only $40,000 to advance the Construction. The emails further evince the appellant elected the latter option. Did the evidence support the Court’s finding that the communications between the parties made it plain that only $140,000 of the $200,000 was intended to be by way of refinancing the Apex Overdraft and the remaining $60,000 was intended as an advance to the appellant for the Construction?
d. The respondent failed to disclose any email communications between the parties during the period from August 2010 through September 2010 and on the final day of the trial sought to adduce the solitary email from Lee Elphick to the appellant dated 29 September 2010. The appellant objected to the respondent adducing undisclosed evidence and proceeded to tender all relevant emails for the period from August 2010 through September 2010. Was the Court correct to refer to, and draw an inference from, the solitary email tendered by the respondent while failing to refer to, and take into account, all of the relevant email communications between the parties?
e. Did the evidence support the Court’s finding that there was no express or implicit agreement between the parties to the effect that the payment on 29 September 2010 was intended to end Apex’s liability under the Apex Overdraft or the appellant’s liability under the Guarantee?
f. Clauses 1(c) and 2(c) of the Guarantee were to the effect that the Guarantee continued only until the Guaranteed Amount had been paid in full or the Guarantee was ended. The definition of the Guaranteed Amount included the qualification that it was “limited only by this deed and the relevant provisions of each Code that are applicable to this guarantee and indemnity”. The Court found that as at 29 September 2010 the appellant’s liability (to pay the Guaranteed Amount) was limited to $160,000. Did the evidence support the Court’s conclusion that the payment of $200,000 on 29 September 2020 was not payment in full of the Guaranteed Amount, or that the Guarantee did not otherwise came to an end, for the purposes of clauses 1(c) and 2(c) of the Guarantee?
On the hearing of the appeal, the appellant put his case on this ground in the following way:
The ultimate issue on appeal …. is, was the appellant’s liability under the guarantee, extinguished on 29 September 2010, when $200,000 of the appellant’s personal funds [were] paid to the Apex overdraft account in a refinancing transaction.
So at the core of the issue on appeal, under the notice of appeal, is whether the guarantee was extinguished in accordance [with] clause 28(10) of the Code of Banking Practice 2004.
As mentioned, this seemed to be the primary argument pressed on appeal. Before going to the detail of the documents upon which the appellant relied, it is first helpful to recall that, by 29 September 2010, the Apex overdraft was overdrawn and in debit in an amount of $155,576.64. As a result of the transfer of $200,000 on 29 September 2010, there was a credit balance of $44,423.36. However, after several withdrawals, by 12 October 2010, the account was again overdrawn.
The starting point is the terms of the guarantee. These were set out in some detail by the trial Judge.[25] The trial Judge paid careful regard to the authorities relevant to the principles governing the construction of commercial documents.[26] The trial Judge relied on the principle that, to the extent of any ambiguity or doubt as to the construction of a provision of a guarantee, that was to be resolved in favour of the surety, in this case, the appellant.[27] On the question of the contra proferentem approach, the trial Judge explained as follows:[28]
However, in pointing out that this principle was a manifestation of the contra proferentem approach to the interpretation of contractual documents, [McColl JA] emphasised that it only operates to resolve ambiguity between reasonably available alternative meanings. Other authorities have similarly emphasised that the contra proferentem rule is only designed to resolve ambiguities, and not to create them.[29] Indeed, it has been said that it should be seen as a principle or rule of last resort.[30]
[25] Bendigo and Adelaide Bank Limited v Brackenridge [2020] SASC 114, [241]-[242].
[26] Bendigo and Adelaide Bank Limited v Brackenridge [2020] SASC 114, [243]-[246], citing Rinehart v Hancock Prospecting Pty Ltd (2019) 267 CLR 514, [44]; Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640, [35]; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, [46]-[51].
[27] Wiggins Island Coal Export Terminal Pty Ltd v New Hope Corporation Ltd [2019] NSWCA 316, [85]‑[87], [118]; Bofinger v Kingsway Group Limited (2009) 239 CLR 269, [53]; Andar Transport Pty Ltd v Brambles Limited (2004) 217 CLR 424, [17]; CSR Limited v Adecco (Australia) Pty Ltd (2017) NSWCA 121, [153]-[164] (McColl JA, with whom Macfarlan and Simpson JJA agreed).
[28] Bendigo and Adelaide Bank Limited v Brackenridge [2020] SASC 114, [246].
[29] Erect Safe Scaffolding (Australia) Pty Ltd v Sutton (2008) 72 NSWLR 1, [82].
[30] McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579, 602.
With these principles in mind, the trial Judge noted that the guarantee included terms that the appellant “unconditionally and irrevocably” guaranteed payment of “the Guaranteed Amount” (clause 1(a)) and, that if Apex did not pay all or any part of the Guaranteed Amount, then the appellant agreed to pay on demand even if no demand had been made on Apex (clause 1(b)). In addition, the guarantee was a “continuing obligation and extends to all of the Guaranteed Amount” until it was paid in full or the guarantee ended (clause 1(c)). The guarantee included an indemnity whereby the appellant “unconditionally and irrevocably” indemnified the bank against any loss, liability or costs suffered or incurred if Apex did not pay all or any of the Guaranteed Amount when due (clause 2(a)). This indemnity was a “continuing obligation in the same way as the guarantee” (clause 2(c)). Importantly, the appellant’s liability extended to any “further amount accepted by [the appellant] in writing” (clause 3(a)).
Clause 29 contained definitions which included definitions of the “Guaranteed Amount”, of a “Credit Contract” and the “Code” as follows:
·Guaranteed Amount means “any money which the Debtor [Apex] (whether alone or with others) is now or in the future may become actually or contingently liable to pay to or for the account of the Lender [the Bank] (whether alone or with others) under the Credit Contract, limited only by this deed and the relevant provisions of each Code that are applicable to this guarantee and indemnity.”
·Credit Contract means “the credit contract to which this guarantee and indemnity initially applies, brief details of which are contained in the Details. The Credit Contract can be a letter of offer, a loan schedule, a housing loan contract and a variation agreement. It also includes any variance to the credit contract and future credit contract between the Debtor [Apex] and us [the Bank] and, if a Code applies, if you have acknowledged in writing that it is to be a credit contract to which this guarantee and indemnity extends.”
·Code means “either the Code of Banking Practice14 or the Consumer Credit Code15 and, where the context requires, means both of them.”
As the trial Judge found, with respect, correctly:[31]
In summary, the Guarantee was an all monies guarantee, which would extend to Apex’s actual or contingent liabilities under future agreements with the Bank, if the defendant acknowledged in writing that the Guarantee would extend to those agreements. Further, the defendant could also increase the limit of his liability under the Guarantee above the initial limit of $80,000 (plus costs and expenses) by agreeing in writing to an increase.
[31] Bendigo and Adelaide Bank Limited v Brackenridge [2020] SASC 114, [242].
It was common ground between the parties that the Code of Banking Practice 2004 was incorporated into the guarantee. The appellant placed emphasis upon the fact that the trial Judge did not recite clause 1(d) of the guarantee. The suggestion was that the trial Judge had overlooked this provision. That clause provided:
Except to the extent you have a right conferred by a Code, you cannot otherwise withdraw from, and or limit this guarantee.
In circumstances where the bank accepted the applicability of the Code, the criticism made by the appellant goes nowhere.
Clause 28.10 of the Code of Banking Practice 2004 provided:
You may, at any time, extinguish your liability to us under a Guarantee by paying us the then outstanding liability of the debtor (including any future or contingent liability) or any lesser amount to which your liability is limited by the terms of the Guarantee or by making other arrangements satisfactory to us for the release of the Guarantee.
(original emphasis omitted).
On appeal, the appellant emphasised that the Code gave three avenues to a surety to extinguish a surety’s liability:
1.Paying the outstanding liability of the debtor.
2.Paying any lesser amount to which liability was limited by the terms of the guarantee.
3.By making other arrangements satisfactory to the bank for the release of the guarantee.
The appellant’s case was that the payment of $200,000 represented the payment of a lesser amount to which his liability was limited by the terms of the guarantee.[32] The trial Judge rejected this contention in the following passage:[33]
As the Bank submitted, the known context for, and purpose of, the Guarantee was that it was a guarantee of indebtedness under an overdraft facility. It is inherent in the nature of an overdraft account that it may oscillate between a debit and credit balance, depending upon the use made by the account holder. To construe a guarantee as coming to an end the first time the account moves into credit would tend to undermine the effectiveness, if not the very purpose, of the guarantee. The Bank would then be without security when, as the parties have implicitly anticipated by reason of the overdraft limit remaining in place, the account moves back into a debit balance. A reasonable businessperson would not, in the absence of clear words, construe a guarantee as having this limitation upon its scope.
[32] Appeal Transcript, p 13.
[33] Bendigo and Adelaide Bank Limited v Brackenridge [2020] SASC 114, [456]. It should be noted that, on any view, these contentions did not meet the estoppel cases propounded by the bank.
The bank supported the analysis of the trial Judge, emphasising that neither party had expressed any contemporaneous intention that the payment made by the bank would bring the appellant’s exposure as surety to an end. On the contrary, the contemporaneous records show that the parties recognised that the bank would continue to rely upon the security earlier provided. The ordinary commercial context for the operation of these instruments was that an overdraft would, of necessity, move in and out of credit from time to time as the debtor’s trading circumstances demanded.[34]
[34] Bendigo and Adelaide Bank Limited v Brackenridge [2020] SASC 114, [459]-[463].
Perhaps more importantly, whatever the contended effect of the payment of $200,000, the appellant’s argument does not survive the acknowledgments that continued to be provided by him, for example, on and after 15 October 2010, which were signed by the appellant in his various capacities, including as guarantor in his personal capacity in respect of the ongoing liabilities of Apex.
Appeal ground 3 must be dismissed.
Appeal ground 4: The guarantee was in any event unenforceable
The appellant articulated appeal ground 4 in the following way:
GUARANTEE UNENFORCEABLE IN RELATION TO THE APEX AGREEMENT
4. The Guarantee, if not extinguished in September 2009, is unenforceable in relation to a future credit contract unless the guarantors were given a copy of the relevant contract documents and subsequently provided written acceptance of the extension of the Guarantee. Where a corporate body has a legal personality distinctly separate from and independent of its members and officers, was the Court correct to find that by giving a copy of the Apex Agreement to the debtor Apex the respondent discharged its obligation to give a copy of the future credit contract to the appellant as guarantor?
On the hearing of the appeal, the appellant emphasised the bank’s obligation to provide guarantors with a copy of the relevant contract documents, as well as written acceptance of the extension of the guarantee, failing which the guarantee was unenforceable. Whether under the Consumer Credit Code or the Code of Banking Practice, the appellant maintained that, because he was not given another copy of the loan agreement in his capacity as guarantor, the guarantee was unenforceable as against him in his personal capacity in respect of any future credit contract. The trial Judge addressed these contentions in the following passages of his reasons:[35]
Under each of the terms of the Guarantee, clause 31.13 of the Code of Banking Practice 2013 and s 59 of the National Credit Code, the application or enforceability of the Guarantee to future credit contracts was conditioned upon (i) the provision of a copy of the future credit contract to the guarantor and (ii) the obtaining of a written acceptance of the extension of the Guarantee. The defendant pleads that the Bank failed to comply with these formality requirements in respect of the Bank’s application or extension of the Guarantee to the Apex Agreement and Apex Variation Agreement.
The mischief against which these provisions is intended to protect is obvious. If a person has signed an all monies guarantee, based on one underlying credit contract, they ought not be exposed to a guarantee of liabilities under other later contracts without their knowledge and acceptance of that extended exposure. For reasons which will be explained, there is no sense in which that mischief occurred in the present case. The defendant was well aware of the extension of the Guarantee to Apex’s liabilities under the Apex Agreement and the Apex Variation Agreement.
[35] Bendigo and Adelaide Bank Limited v Brackenridge [2020] SASC 114, [429]-[430].
The trial Judge accepted that the appellant was given the Apex 2016 Agreement because he countersigned the letter of offer with a schedule of terms on 23 February 2016. The trial Judge made a similar finding with respect to the Apex 2017 Variation Agreement. When addressing this aspect of the appellant’s case, the trial Judge made the following findings:[36]
The defendant acknowledges that he received the letter of variation and applicable Standard Terms, and indeed that he did so as guarantor. However, the defendant complains that the Bank “failed to provide the defendant, as guarantor, a copy of the Schedule of Terms dated 19 February 2016”. The Bank accepts that it did not – in the immediate lead up to the execution of the Apex Variation Agreement in August or September 2017 – provide the defendant with a (further) copy of the Schedule of Terms dated 19 February 2016. However, the Bank contends that there was no requirement that it do so; that the earlier provision of this document to the defendant back in February 2016 was sufficient to meet the requirements of the Guarantee, clause 31.13 of the Code of Banking Practice 2013 and s 59 of the National Credit Code. I agree with the Bank’s contention.
The defendant also pleads that the Bank did not procure a written acceptance in the form of an Acknowledgment by Guarantor for the extension of the Guarantee to the Apex Variation Agreement. Again, the Bank accepts the factual premise of this plea, namely that it did not obtain a separate Acknowledgment by Guarantor of the type that was signed in relation to the Apex Agreement back in February 2016. However, as the Bank contends, I do not think that a separate document in this form was necessary. The letter of variation dated 29 August 2017 attached an acknowledgment from the Security Provider (in the terms described earlier in these reasons) which was sufficient to meet the requirement of written acceptance of the extension of the Guarantee to the Apex Variation Agreement under each of the terms of the Guarantee, clause 31.13 of the Code of Banking Practice 2013 and s 59 of the National Credit Code.
[36] Bendigo and Adelaide Bank Limited v Brackenridge [2020] SASC 114, [436]-[437].
The appellant did not address these grounds on the hearing of the appeal. Although the appellant was given an opportunity to supplement his submissions in writing, he did not take up that opportunity.
Nonetheless, out of an abundance of caution, it is appropriate to address them. They are without merit. The appellant appears to be contending that the trial Judge was wrong to find that the Apex 2016 Agreement and the Apex 2017 Variation Agreement were not subject to the National Credit Code because the relevant debtor was Apex, a corporation.[50]
[50] Bendigo and Adelaide Bank Limited v Brackenridge [2020] SASC 114, [368]-[389].
There is no need to review the evidence in any detail. The debtor was Apex. The appellant was guarantor. The Code provides expressly that a guarantor is not a debtor.[51] The appellant appeared to be contending that he was a “prospective debtor” or, at least, as he was ultimately jointly liable with the primary debtor, he thereby became a “debtor” for the purposes of the Code. This argument was, with respect to the trial Judge, rightly rejected.[52]
[51] See the definition of “debtor” in s 404 of the National Credit Code.
[52] Bendigo and Adelaide Bank Limited v Brackenridge [2020] SASC 114, [368]-[384].
The legal liability to repay the loan monies lay with Apex.[53] There is no basis to view the various documents in any manner other than as they appear: Apex was the borrower and debtor and, relevantly for the question of possession, the appellant was guarantor. It is of no moment that the appellant in his capacity as a guarantor might make his assets (particularly the Beaumont property) available for the purposes of discharging the liability of Apex.
[53] See Devon v Thirteenth Kaysan Pty Ltd [2016] FCA 357, [24]-[27] (Davies J); Devon v Thirteenth Kaysan Pty Ltd [2016] FCA 1026, [12] (Middleton J).
In Jams 2 Pty Ltd v Stubbings, the individual guarantor was in substance the borrower, but not strictly the debtor, under the relevant agreement or for the purposes of the Code.[54] In that case, a loan was made to a company and a mortgage was given solely as security for a guarantee provided by the director. There was no suggestion that the loan was a sham or was in fact made to the director in his personal capacity. Robson J relied on Devon v Thirteenth Kaysan where Davies J summarily dismissed the proceeding and the application for leave to appeal was dismissed with costs by Middleton J.[55]
[54] Jams 2 Pty Ltd v Stubbings (No 3) [2019] VSC 150 (Robson J).
[55] Devon v Thirteenth Kaysan Pty Ltd [2016] FCA 357 (Davies J); Devon v Thirteenth Kaysan Pty Ltd [2016] FCA 1026 (Middleton J).
Again, in those cases, loans were advanced to a company of which the applicant was sole director. The loans were secured by personal guarantee from the applicant as well as a mortgage over property held by the applicant in his personal capacity. Whilst Davies J was prepared to find that the applicant may have been able to rebut the presumption arising under s 13, that the Code did not apply because the loan and mortgage documents acknowledged that the loan and the mortgage were not provided for a Code purpose,[56] no real issue of fact arose regarding s 5(1)(a) of the Code because the loans were not made to a natural person or to a strata corporation. The applicant in that case did not allege that the mortgage constituted a separate credit contract but, even if it did, s 7 of the Code operated to exclude that possibility and the loan agreement demonstrated that the mortgage was only given as security.[57]
[56] Devon v Thirteenth Kaysan Pty Ltd [2016] FCA 357, [21].
[57] Devon v Thirteenth Kaysan Pty Ltd [2016] FCA 357, [23].
On the application for leave to appeal, Middleton J agreed with the analysis of Davies J and with the conclusion that the Code did not apply to the mortgage document:[58]
… the mortgage agreement itself was not a ‘credit contract’ (either in its terms or operation), and the mortgage was clearly given as security. The actual loan or credit contract (if not a sham) was clearly not made to a natural person.
[58] Devon v Thirteenth Kaysan Pty Ltd [2016] FCA 1026, [12] (Middleton J).
In so far as the appellant complains that the trial Judge did not address s 5(2) of the Code, the substance of his argument was, nonetheless, addressed.[59] That is to say, the appellant maintained that the Apex 2016 Agreement involved the refinancing of regulated loans, and so the refinancing accordingly involved transactions under regulated agreements and the Code therefore applied to the Apex 2016 Agreement. This argument was also rightly rejected by the trial Judge. The earlier agreements and the Apex 2016 Agreement were plainly separate contracts for the purposes of the Code. That funds advanced under the Apex 2016 Agreement might have discharged a regulated loan did not mean that the Apex 2016 Agreement was itself a regulated loan.[60]
[59] Bendigo and Adelaide Bank Limited v Brackenridge [2020] SASC 114, [358]-[390].
[60] See Perpetual Trustee v Yap [2010] NSWSC 761, [146]-[155] and Appleyard v Westpac Banking Corporation Ltd [2017] QCA 316.
Importantly, the trial Judge also found that, even if the Code applied, there was compliance with it.[61] This conclusion was not challenged by the appellant.
[61] Bendigo and Adelaide Bank Limited v Brackenridge [2020] SASC 114, [400]-[444].
Appeal grounds 6, 7 and 8 must be dismissed.
Appeal grounds 9 and 10: The Apex 2016 Agreement was not a valid contract
The appellant articulated these grounds of appeal in his notice of appeal as follows:
APEX AGREEMENT DID NOT CONSTITUTE A VALID CONTRACT
9. Formation of a binding contract requires a moving of valuable consideration from the promisor to the promisee. The consideration, by way of promise of performance, offered by Apex under the Apex Agreement, as varied, was for the facility “to be cleared in full from sale of the security property by no later than 3 December 2017 when the facility expires”. The respondent contends the ‘security property’ is the Property, which was not an asset of Apex, who had no rights to deal with the Property. On the respondent’s own case no consideration moved from Apex to the respondent; the consideration was illusory. Was the Court correct to hold the Apex Agreement constituted a binding enforceable contract?
a. The Schedule of Terms made clear that Apex was not obligated to make any payment during the term of the Apex Agreement, or as varied. The Standard Terms stipulated, “You must make all payments required under the Facility Agreement in the manner stated in the Facility Details”. The Facility Details stipulated the manner of repayment was for the Facility “to be cleared in full from sale of the security property by no later than 3 December 2017 when the facility expires”. The respondent contends the “security property” is the Property, which is not an asset of Apex, but rather, is the appellant’s asset, and Apex had no right to deal with the Property. Was the Court correct to hold that Apex defaulted by not having paid amounts under the 2016 Facility?
10. The appellant pleaded the respondent sought to avoid the effect of the National Consumer Credit Protection Act 2009 (NCCP Act), including the National Credit Code (NCC), by contracting the supply of credit in the name of Apex rather than the appellant, who was the intended recipient. The appellant further pleaded that, iirrespective [sic] of whether or not the respondent succeeded in avoiding the effect of the NCCP Act or the NCC, s 334(1) of the NCCP Act and s 191(1) of the NCC are contravened where a person seeks, by provision of a contract or other instrument, to avoid or modify the effect of the legislation. The nominated “borrower” in a credit contract is a provision of such a contract. In making no finding of fact or statement of law on the pleaded issue, did the Court resolve all of the issues raised by the pleadings?
a. The Defendant further pleaded the purpose and objectives of the NCCP Act, including the NCC, are not achieved, and it thereby goes against the public interest, if a financial service provider is able to avoid the effect of the legislation by supplying credit in the name of a corporate body in the premises where the financial service provider knows the credit is to be supplied wholly, or predominantly, for “Code purpose” and the intended recipient of credit is a consumer. In making no finding of fact or statement of law on the pleaded issue, did the Court resolve all of the issues raised by the pleadings
The appellant did not address these grounds in his oral submissions and instead relied on the grounds as articulated in the Notice of Appeal. Regardless, these grounds are without merit.
The appellant’s case represents a new argument, not previously agitated at trial, that the Apex 2016 Agreement was void for lack of consideration because Apex was not liable to repay the loan advanced to it. The appellant contends, it would seem, that because the loan was ultimately to be cleared in full from the sale of the Beaumont property, which was an asset of the appellant rather than Apex, there was an absence of consideration.
Quite apart from the fact that this new argument ought not be entertained for the first time on appeal,[62] the evidence already reviewed demonstrates that Apex promised to make repayment of the loaned monies as consideration for the advances made. This is not a case where consideration can be regarded as illusory because the promisor has a discretion not to perform, rendering the promise unenforceable,[63] or where the promise was only concerned with the performance of an existing contractual duty,[64] or where there is no standard by which the Court can determine whether the promise has been broken,[65] or where the promise was accompanied by an exclusion of any liability for non-performance.[66]
[62] University of Wollongong v Metwally (No 2) (1985) 59 ALJR 481.
[63] Placer Development Ltd v Commonwealth (1969) 121 CLR 353, 357 (Kitto J), 361 (Taylor and Owen JJ).
[64] Wigan v Edwards (1973) 1 ALR 497, 512.
[65] Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130, 156 (McHugh JA).
[66] Gregory v MAB Pty Ltd (1989) 1 WAR 1, 14 (Malcolm CJ).
Contrary to the appellant’s contentions, the relevant contracts were not illusory. An illusory contract for these purposes has been described as “a bilateral transaction having some semblance to a contract, but which is not in truth a contract because [it is] not capable of creating legally enforceable rights and obligations”.[67]
[67] Placer Development Ltd v Commonwealth (1969) 121 CLR 353, 369 (Windeyer J).
In this case, the terms of the relevant agreements were clear and the promises made by Apex on each occasion were clear and binding.
Appeal grounds 9 and 10 must be dismissed.
Appeal grounds 11, 12, 13 and 14: Estoppel by convention and promissory estoppel
The appellant’s appeal grounds on these issues are articulated in the following way:
ALTERNATE CASES IN ESTOPPEL NOT ENLIVENED
11. The respondent pleaded its alternate cases in estoppel were enlivened on satisfaction of two conditions, the threshold test being, “If... Apex's liabilities to the [respondent] under the Apex Agreement and Apex Variation Agreement are not, on the proper construction of those agreements, secured by the Guarantee and Mortgage (or the Second Mortgage)”. At trial of the action the respondent pursued a case that, on the proper construction of the Apex Agreement, as varied, Apex's liabilities were secured by the Guarantee and that both of the Mortgage and the Second Mortgage secured the appellant’s obligations under the Guarantee. On the respondent’s own case pursued at trial, the threshold condition enlivening its alternate cases in estoppel was not satisfied. Was the Court correct to enliven the respondent’s alternate cases in estoppel?
Issues in relation to ground of appeal
a. The proper construction of the Apex Agreement and the Apex Variation Agreement does not give rise to the reason why the Guarantee, the Mortgage, and the Second Mortgage do not secure Apex’s liabilities under 2016 Facility. When enlivening the respondent’s alternate cases in estoppel, did the Court correctly identify, and duly apply, the relevant test as pleaded by the respondent?
b. The respondent pleaded the second condition to enliven its alternate cases in estoppel was, “if... the Plaintiff has no right to possession of the Property under the Mortgage (or, alternatively, the Second Mortgage).” The case pursued by the respondent at the trial of the action was that it had a right to possession of the Property under both the Mortgage and the Second Mortgage. When enlivening the respondent’s alternate cases in estoppel, did the Court correctly identify, and duly apply, the relevant test as pleaded by the respondent?
c. Was the Court correct to reframe the legal test enlivening the respondent’s alternate cases in estoppel as being (i) if the Court were to find the Guarantee or Mortgages did not extend to Apex’s liability under the 2016 Facility (as varied or at all); or (ii) if the respondent failed in its primary case that the appellant was liable for Apex’s indebtedness under the terms of the Guarantee and Mortgages?
ESTOPPEL PROHIBITED BY THE ENTIRE AGREEMENT CLAUSE
12. In addition to the Schedule of Terms, the Apex Agreement, as varied, was governed by the respondent’s Standard Terms, which included an “entire agreement clause”. The Court held that the test as to whether an entire agreement clause is an obstacle to the existence of an estoppel, at least an equitable estoppel, depends on the terms of the clause and the extent to which the parties had regard to the clause. In finding the entire agreement clause is not of any material significance in the present case, did the Court correctly identify, and duly apply, the relevant legal test?
Issues in relation to ground of appeal
a. The respondent pleaded the proper construction of the Apex Agreement and the Apex Variation Agreement was the subject of its contended estoppels. The Court held the entire agreement clause was not of any material significance in the present case because it was “a term of the 2016 Facility, rather than the security arrangements the subject of the contended estoppels”. Did the Court correctly identify, and duly apply, the relevant legal test?
b. Clause 1 of the Standard Terms stipulated, “The Standard Terms will also apply to each person who provides (by way of signing a Security) a Security to the Lender as security for the performance of the Borrower's obligations under the Facility Agreement”. The Court found the Guarantee, the Mortgage and the Second Mortgage secured the performance of Apex under the Apex Agreement, as varied. Was the Court correct not to find the entire agreement clause was incorporated by reference into the security agreements”?
c. The respondent pleaded the adoption of the Assumption, and the making of the Representation, were each to be inferred from the conduct and dealings of the parties since April 2010. The Court held, “the force of the Bank’s case in estoppel lies in the fact that this was the consistent effect of the entirety of the dealings between the parties from the establishment of the Apex Overdraft in April 2010 through to the final advance under the 2016 Facility (as varied) in November 2017”. The Court further held the entire agreement clause was not of any material significance in the present case on the grounds “the focus of the entire agreement clause is upon conduct prior to entry into the facility being superseded by the terms of that facility, whereas the focus of the estoppels is upon the parties’ understanding of their arrangements by reason of their conduct on and after entry into the facility”. Did the Court correctly identify, and duly apply, the relevant legal test?
CONVENTIONAL ESTOPPEL NOT ESTABLISHED
13. The respondent pleaded the parties each adopted the common assumption that, “Apex's liabilities under the Apex Agreement and Apex Variation Agreement were secured by the Mortgage (or alternatively the Second Mortgage) and the Guarantee. At trial of the action the respondent contended the parties each adopted the common assumption that Apex's liabilities under the Apex Agreement, as varied, were secured by the Guarantee and that the appellant’s obligations under the Guarantee were secured by both the Mortgage and the Second Mortgage. Was the Court correct to find the respondent made out its case in estoppel by convention?
Issues in relation to ground of appeal
a. The respondent pleaded the Assumption allegedly adopted by each of the parties in clear, precise and unambiguous terms. The Court framed the Assumption allegedly adopted by each of the parties as being, “the Bank contends that throughout that time the parties conducted themselves on the basis of an assumption... that the defendant had guaranteed Apex’s obligations to the Bank, and that the Bank had security over the Property for the money advanced to Apex. Was the Court correct to reframe the alleged Assumption in such broad and ambiguous terms?
b. The Apex Agreement and Apex Variation Agreement each referenced a solitary mortgage, namely the “Existing 1st Registered All Monies Mortgage", which the Court held was clearly a reference to the Mortgage. Did the evidence support the Court’s finding that the parties each adopted a common assumption that if Apex's liabilities under the 2016 Facility were not secured by the Mortgage they were secured by the Second Mortgage?
c. Did the evidence support the Court finding the appellant, as Security Provider, adopted the pleaded Assumption?
d. Was it reasonably open on the evidence for the Court to find the appellant, as Security Provider, knew or intended the respondent would adopt the pleaded Assumption?
e. The Court made no finding as to reasonable reliance, inducement, unconscionableness, or detriment. In finding the respondent made out its contended estoppel by convention, did the Court correctly identify, and duly apply, the relevant legal test?
PROMISSORY ESTOPPEL NOT ESTABLISHED
14. Unless the Court grant’s permission a party is bound, at the trial of an action, by its pleadings. The respondent pleaded “the Representation” was made by the respondent to the appellant, and that by reason of the Representation the respondent was induced to adopt the Assumption, which is to say, the respondent induced itself to adopt the Assumption. At trial the respondent pursued a case on the contention the appellant made the Representation to the respondent. In finding the respondent made out its case in promissory estoppel, was the Court correct not to hold the respondent bound by its pleadings?
a. The respondent pleaded the alleged Representation in clear, precise and unambiguous terms. The Court framed the alleged Representation as being, “the Bank contends that [from 2010 through to at least 29 November 2017]... the defendant represented that the defendant had guaranteed Apex’s obligations to the Bank, and that the Bank had security over the Property for the money advanced to Apex.” Was the Court correct to reframe the alleged Representation in such broad and ambiguous terms?
b. To found a promissory estoppel the evidence must establish a clear, precise and unambiguous representation capable of misleading a reasonable person in the way the claimant alleges to have been misled. In the course of establishing the 2016 Facility the respondent expressly represented the reason it preferred to establish the facility in the name of Apex was because of the existing security structure. The appellant expressly queried the accuracy of the respondent’s representation by stating, “As the house is in my personal name and not Apex Property Solutions I would have thought security wise it would be better in my name”. Did the evidence establish the appellant made the Representation in the way the respondent alleged to have been misled?
c. The respondent pleaded a promissory estoppel (equitable estoppel) on the basis of a representation as to a future state of affairs or legal relations, as distinct from an estoppel by representation (common law estoppel), which is founded on a representation as to an existing fact or state of affairs. Was the Court correct to hold the respondent contended, and established, an estoppel by representation?
d. The Apex Agreement and Apex Variation Agreement each contained an acknowledgment by the ‘Security Providers’ that, “its guarantee, security or other document given by it to the Lender continues in full force and effect and extends to the Borrower’s obligations and liabilities under the Facility Agreement”. In signing those agreements any representation by the Security Providers was to an existing fact or state of affairs. Estoppel by representation is to the effect of preventing the representor from denying its belief in the truth of the representation as to an existing fact or state of affairs, but is not to the effect of preventing the representor from denying he was mistaken as to that fact or state of affairs. In finding the respondent made out a case in estoppel by representation, did the Court correctly identify, and duly apply, the relevant legal test?
e. The Court made no finding as to reasonable reliance, inducement, unconscionableness, or detriment. In finding the respondent made out a case in estoppel by representation, did the Court correctly identify, and duly apply, the relevant legal test?
Despite the extraordinary breadth of the contentions raised by the appellant’s appeal grounds, the appellant did not address them in his oral submissions. The appellant contented himself with the proposition that there was no evidence at all to demonstrate that there was a mutual assumption, or that the parties had adopted the same assumption for the purposes of any estoppel. As the appellant put it at the appeal hearing:[68]
… the bank’s assumption was that the guarantee was secured by the mortgage. If there was any assumption to be attributed to me it was that the mortgage and the guarantees secured Apex’s obligations under the credit contract. Two entirely different assumptions.
[68] Appeal Transcript, p 91.
It will be recalled that the estoppel findings were strictly unnecessary because the trial Judge concluded that the guarantee did extend to cover the liability of Apex under the Apex 2016 Agreement and the Apex 2017 Variation Agreement.[69]
[69] Bendigo and Adelaide Bank Limited v Brackenridge [2020] SASC 114, [322] (Doyle J).
An estoppel by convention may be established where:[70]
1.one party adopts an assumption as to the terms of its legal relationship with another party;
2.the other party adopts the same assumption;
3.both parties conduct their relationship on the basis of the mutual assumption made by them;
4.each party knows or intends that the other will act on that basis;
5.one party’s departure from the assumption will cause detriment to the other party.
[70] Miller Heiman Pty Ltd v Sales Principles Pty Ltd (2017) 94 NSWLR 500, [42]-[44] (Macfarlan JA, with whom McColl JA and Sackville AJA agreed); Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 6) (2015) 329 ALR 1, [760] (Edelman J). See also the slightly differing formulation in Outback Energy Hunter Pty Ltd v New Standard Energy PEL 570 Pty Ltd [2018] SASC 8, [269]-[271] (Blue J), applied in Manassen Holdings Pty Ltd v Commercial & General Corporation Pty Ltd [2019] SASC 171, [259] (Doyle J). See also, Commercial & General Corporation Pty Ltd v Manassen Holdings Pty Ltd [2021] SASCFC 40.
So far as estoppel by representation, or promissory estoppel, is concerned, the elements are as follows:[71]
1.one party makes a representation or engages in conduct which is capable of giving rise to an assumption in the other party;
2.the other party, based on the first party’s representation or conduct forms an assumption about the manner in which rights will be exercised or enforced;
4.the other party acts or abstains from acting in reliance upon the assumption resulting from the first party’s representation or conduct;
5.the other party would suffer detriment if the first party were permitted to depart from the assumption.
[71] Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, 428-429 (Brennan J); Aalborg CSP A/S v Ottoway Engineering Pty Ltd (2017) 129 SASR 283, [70] (Kourakis CJ, Blue and Bampton JJ); Manassen Holdings Pty Ltd v Commercial & General Corporation Pty Ltd [2019] SASC 171, [196]‑[200] (Doyle J); Commercial & General Corporation Pty Ltd v Manassen Holdings Pty Ltd [2021] SASCFC 40.
In many cases, the same factual basis will give rise to both estoppel by convention and promissory estoppel given the common and overlapping features of both forms of estoppel.[72] There is extensive authority demonstrating that these kinds of estoppel may apply to guarantees.[73] In this State, the Full Court in Farrow Mortgage Services Pty Ltd v Hogg upheld an estoppel that a guarantee operated even though the guarantee was in fact invalid and of no effect.[74] As the Full Court found:[75]
The respondent also relied upon the doctrine of estoppel by convention in answer to the assertions of the appellants: see Coghlan v S H Lock (Australia) Ltd (1985) 4 NSWLR 158 at 165, 167 and Amalgamated Investment & Property Co Ltd (In liq) v Texas Commerce International Bank Ltd [1982] 1 QB 84. The factual basis of such a contention was pleaded by the respondent in par 8 of its reply. All that need be said concerning this is that, in my opinion, standing alone, this is, in any event, a complete answer to the appellants’ assertions. One need do no more, by way of example, than refer to the express reference in the two Guarantors’ Acknowledgments to “the Guarantee given by us to Farrow Mortgage Services Pty Ltd” to perceive the express representations made by the appellants to the respondent as to their continuing status of guarantors, on the basis of which the rollovers were agreed to. They simply cannot now be heard to resile from that stance.
[72] Karthurmary Pty Ltd v FACAC Pty Ltd [2013] SASC 90, [85]-[86] (Nicholson J).
[73] Amalgamated Investment & Property Co Ltd v Texas Commerce International Bank Ltd [1982] QB 84; George 218 Pty Ltd v Bank of Queensland Ltd (No 2) (2016) 313 FLR 287, [117]-[130] (Martin CJ, Newnes and Murphy JJA); Farrow Mortgage Services Pty Ltd v Hogg (1995) 64 SASR 450 (Olsson J, with whom Mohr and Bollen JJ agreed).
[74] Farrow Mortgage Services Pty Ltd v Hogg (1995) 64 SASR 450, 459-460.
[75] Farrow Mortgage Services Pty Ltd v Hogg (1995) 64 SASR 450, 459-460.
After reviewing extensively his own findings regarding the conduct of the parties between 2010 and 2017, the trial Judge accepted that, at each critical stage, the bank intended to obtain security in the form of a guarantee and, in the case of the appellant, backed by mortgage.
The appellant’s contention on appeal that he did not make the same assumption must be rejected. Contrary to his assertion, there was ample evidence to support the finding made that the appellant conducted himself on the basis that he knew that the bank was operating on the basis that there was mortgage security backing the guarantee that he gave. By way of example, in the appellant’s email dated 11 September 2017 he said, “I am also listed personally as a guarantor and in reality the security is in the property itself”.[76]
[76] Bendigo and Adelaide Bank Limited v Brackenridge [2020] SASC 114, [340].
The appellant has advanced no basis upon which to undermine the trial Judge’s findings.[77] With respect, they are correct.
[77] Bendigo and Adelaide Bank Limited v Brackenridge [2020] SASC 114, [331]-[349].
The suggestion that the estoppels were excluded by an entire agreement clause must also be rejected. As the trial Judge found, there was no entire agreement clause in any of the security arrangements the subject of the estoppels which were found to arise. As the trial Judge concluded:[78]
The existence of an entire agreement clause is not a conceptual obstacle to the existence of an estoppel; at least, not an equitable estoppel.[79] While it may, depending on its terms and the extent to which the parties had regard to it, be relevant to whether an estoppel has been made out on the facts, I do not think this clause is of any material significance in the present case. The clause is a term of the 2016 Facility, rather than the security arrangements the subject of the contended estoppels. Further, the focus of the clause is upon conduct prior to entry into the facility being superseded by the terms of that facility, whereas the focus of the estoppels is upon the parties’ understanding of their arrangements by reason of their conduct on and after entry into the facility. In short, I do not think the “entire agreement” clause provides a basis for resisting the estoppels contended for by the Bank.
For the reasons set out, I am satisfied that the Bank has made out its alternative case in estoppel. It has established the matters necessary to make out both an estoppel by convention and an estoppel by representation. 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.
[78] Bendigo and Adelaide Bank Limited v Brackenridge [2020] SASC 114, [348]-[349].
[79] Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603, [32]-[33], [42], [554].
The appellant’s attack on the estoppel findings must be rejected. It ought not be overlooked that the appellant did not ultimately give any evidence at trial. Nonetheless, the estoppel findings were based upon the terms and effect of the voluminous correspondence and documents exchanged between these parties over a number of years.
Appeal grounds 11, 12, 13 and 14 must be dismissed.
Extension of time
It follows from the foregoing that the appellant’s appeal grounds are without merit. There is no utility in granting the appellant an extension of time to file his notice of appeal. In any event, the appellant has failed to satisfactorily explain his delay. An extension of time is refused.
Conclusion
In these circumstances, the order for possession was rightly made.
It is appropriate to make the following orders:
1.The appeal is dismissed.
2.The order made by way of “partial stay” on 2 December 2020 is discharged.
The parties will be heard on the question of costs and any other orders required. The effect of the orders made will be to permit the bank, having taken possession of the property, to deal with it, including by way of sale.
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