Fels v Rural Bank

[2020] WASCA 151

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT  :   THE COURT OF APPEAL (WA)

CITATION:   FELS -v- RURAL BANK  [2020] WASCA 151

CORAM:   QUINLAN CJ

MURPHY JA

MITCHELL JA

HEARD:   24 AUGUST 2020

DELIVERED          :   24 AUGUST 2020

PUBLISHED           :   8 SEPTEMBER 2020

FILE NO/S:   CACV 52 of 2019

BETWEEN:   ANTHONY JAMES FELS

Appellant

AND

RURAL BANK (A DIVISION OF BENDIGO AND ADELAIDE BANK LIMITED) (ACN 068 049 178)

Respondent

ON APPEAL FROM:

Jurisdiction              :   SUPREME COURT OF WESTERN AUSTRALIA

Coram:   MASTER SANDERSON

Citation: RURAL BANK LTD -v- FELS [2019] WASC 110

File Number            :   CIV 1836 of 2017

Catchwords:

Banking and finance - Claim for repayment of principal amount after the expiry of a 5 year interest only loan - Promissory or equitable estoppel - Summary judgment granted in favour of lender against the borrower - Where evidence that the borrower relied on representation indicating that the loan would be rolled over at the end of the loan term if the borrower elected to do so and was not in default - Where master mischaracterised the evidence as being to the effect that the lender represented that it would look favourably on rolling over the loan if the borrower was not in default - Whether it was arguable that the representation that the loan would be rolled over was sufficiently clear to provide the basis for the borrower's expectation that he could require the loan to be rolled over if he was not in default - Whether it was arguable that the lender had acted unconscionably when the lender had given reasonable notice that the loan would not automatically be rolled over, on the borrower's election, at the end of the loan term

Legislation:

Nil

Result:

Appeal allowed
Orders for summary judgment set aside
Unconditional leave to defend the primary proceedings granted

Category:    B

Representation:

Counsel:

Appellant	:	In person
Respondent	:	M D Howard SC

Solicitors:

Appellant	:	In person
Respondent	:	Corrs Chambers Westgarth

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

Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2016] HCA 26; (2016) 260 CLR 1

Federal Commissioner of Taxation v Energy Resources of Australia Ltd (1994) 54 FCR 25

Legione v Hateley (1983) 152 CLR 406

Low v Bouverie [1891] 3 Ch 82

Spencer v The Commonwealth [2010] HCA 28; (2010) 241 CLR 118

Stamoulis v Federal Commissioner of Taxation (1998) 41 ATR 302

The Commonwealth v Verwayen (1990) 170 CLR 394

Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387

Wilson v Arwon Finance Pty Ltd [2020] WASCA 137

REASONS OF THE COURT:

1. We made orders allowing this appeal at the conclusion of the hearing of the appeal.  We said that we would publish our reasons for making those orders at a later date.  These are our reasons for making those orders.

Introduction

1. This is an appeal against the master's decision of 4 April 2019 to allow the respondent's application for summary judgment.  The appellant was ordered to pay the respondent the sum of $425,927.18, mainly comprised of the principal sum lent to the appellant under a fixed term 5 year interest only loan agreement entered into on or about 28 October 2008.  A fixed interest rate applied for the first 12 months of the loan, with interest based on the respondent's variable rate thereafter.  The respondent claimed that the sum was payable by the expiry of the fixed term on 31 October 2013 (or alternatively on 27 February 2014).  Payment of that sum was secured by a mortgage over the appellant's farming property.  The master ordered the appellant to give vacant possession of the property within 56 days of 4 April 2019.  On 24 May 2019, this court stayed enforcement of the judgment until the determination of this appeal or other order.

2. The appellant opposed the summary judgment application at least principally on the basis of promissory or equitable estoppel.  This was essentially on the basis that, when the 5 year interest only loan was granted, agents of the respondent represented that, provided the loan was serviced properly and was not in default, it would be 'rolled over' at the end of the term for a further 5 years.  The appellant in effect said that he relied on that representation to his detriment in entering into the loan agreement, and that he serviced the loan over its term and was not in default.  In those circumstances, the appellant contended that the respondent was estopped from refusing to roll over the loan at the end of the 5 year term.

The appellant's evidence in opposition to summary judgment

1. Before the master, it was not in dispute that the principal sum of $400,000 was advanced under the 5 year loan facility and had not been repaid, and that the appellant had made all payments of interest due on that sum.

2. The appellant's affidavit evidence was that, in June 2006, he inspected a property known as 'Brookfield' which was being advertised for sale.  In July 2006 the appellant telephoned Mike Walter, who was the respondent's General Manager - Lending.  The respondent was then called Elders Rural Bank.  The appellant knew Mr Walter when they worked together in the office of Rabobank.[1]  It appears that Rabobank is a competitor of the respondent which also provides finance to rural enterprises.  While the appellant could not recall the words used during that phone call, he gave the following evidence as to his best recollection of what was said:[2]

   8.I explained to Mike that I needed a loan to assist fund the purchase of 'Brookfield' and the farming operations.

   9.Mike discussed with me how convenient and flexible the 5 year loan facility from Rabobank was for farmers, and that this was what the Elders Rural Bank model was based upon which he had been involved with creating.

   10.I asked Mike if the [respondent] made 5 year farming loans with interest fixed for up to 5 years at the borrowers choosing; and which would be rolled over at the end of the term provided the 1oan was not in default.  That had been the approach to lending that Rabobank had when I worked there with Mike where we had a very successful and popular loan product for farmers.  Mike said that the loan product of the [respondent] was essentially the same as that at Rabobank.  Mike told me he would contact Richard Gapper, who worked as the State Manager for Western Australia with the [respondent], to contact me. (emphasis added)

   [1] Affidavit of Anthony James Fels sworn 22 May 2018 (Appellant's Affidavit), pars 6 - 7.

   [2] Appellant's Affidavit, pars 8 - 10.

3. The appellant gave the following account of his subsequent telephone discussion with Mr Gapper:

   11. Richard Gapper called me shortly thereafter and we discussed my requirements for a long term interest only loan facility to assist with my proposed purchase of 'Brookfield'.  He confirmed that Elders Rural Bank was very competitive with Rabobank on interest rate, and the loan product was very similar in that it was initially for a 5 year term but would be rolled over into a new 5 year term at anytime, or to a principal and interest loan over 10 to 15 years if the borrower chose to do so. I told him that I was negotiating the purchase of 'Brookfield' in the Shire of Kojonup and that I would make an offer subject to finance from Elders Rural Bank.  We agreed that I would apply for the finance after I was successful in my offer to purchase 'Brookfield'. (emphasis added)

4. The appellant deposed to making an offer to purchase 'Brookfield' for $1.1 million on or about 1 August 2006, subject to finance approval from the respondent.[3] 

   [3] Appellant's Affidavit, par 12.

5. On 4 August 2006, the appellant obtained the interest rates being offered for a standard 5 year loan facility by Rabobank.  On or around 9 August 2006, the appellant spoke to Mr Gapper and was advised of the interest rates offered by the respondent for a 'low doc loan', which the appellant considered to be competitive with the rates offered by Rabobank.  Mr Gapper told the appellant that a 'low doc loan' was easily approved and to wait closer to the settlement date, when the appellant would know how much he required to borrow, before he approved it.[4]

   [4] Appellant's Affidavit, pars 13 - 14.

6. On or around 31 August 2006, the appellant advised the vendor's agent that finance had been approved.  A deposit of $50,000 was paid on or around 5 September 2006.  The proposed settlement date in the contract for the sale of 'Brookfield' was 26 February 2007.[5]

   [5] Appellant's Affidavit, pars 15 - 17.

7. The appellant gave the following evidence as to a discussion with Mike Walter and Richard Gapper when he took them to lunch on or around September 2006, at a point when he had not signed any loan documents with the respondent:[6]

   19.I recall raising with Mike and Richard that I wanted a loan product along the same lines as we used to do at Rabobank when we made loans to farmers for 5 year terms.  Mike said that as long as the loan was being serviced properly and was not in default it would be rolled over at the end of the term for a further 5 years.  It was important to me that that was the case, because I did not want to be placed in the position where the Bank called up repayment of the entire loan at the end of the 5 year period.  I recall Richard said words that were in support of what Mike had said. (emphasis added)

   [6] Appellant's Affidavit, par 19.

8. The sale of 'Brookfield' to the appellant settled on 26 March 2007.  The appellant signed documents for a loan facility of $300,000 with the respondent on around 23 March 2007.[7]

   [7] Appellant's Affidavit, pars 29 - 30.

9. The appellant deposed that he subsequently realised that he had been given a 'trading facility' rather than a 5 year fixed interest facility.  Ultimately, the 5 year interest only loan facility was established in October 2008 in the increased facility amount of $400,000.[8]  The appellant did not miss any loan repayments from 2008 to 2013.[9]

   [8] Appellant's Affidavit, pars 30, 44 - 52.

   [9] Appellant's Affidavit, par 53.

10. The appellant deposed as to the following events which took place in 2013:[10]

    54.In 2013, I was told that the [respondent] was undertaking a review of my loan facility which came as a surprise since I had not defaulted once and had made all my monthly interest repayments.  During that review period there were two or three short extensions of the loan facility (after the original 5 year term expired), but contrary to the representations that had been made to me by Mike and Richard, the [respondent] did not agree to extend my facility for a further 5 year term despite the fact that I had never defaulted on repayments and there had been no issues with serviceability of the loan.

    [10] Appellant's Affidavit, par 54.

11. The appellant deposed that he had continued to meet all monthly interest and penalty interest rates charged by the respondent (although he disagreed with the respondent's right to charge him penalty interest).[11]  He deposed:[12]

    58.I verily believe that there is a strong and arguable defence to the [respondent's] claim based on my reliance on the representations made by Mike and Richard.  If they had not made those representations, I would have taken out a longer term (20 to 30 year) principal and interest loan which were available at the time I took out the loan with the [respondent].

    [11] Appellant's Affidavit, par 57.

    [12] Appellant's Affidavit, par 58.

The master's decision

1. In granting summary judgment for the respondent, the master referred to the appellant's argument that the representations of the respondent's agents gave rise to a promissory estoppel.  The master held that:[13]

   The [appellant's] difficulty in running this argument is settling upon precisely what promise was made by the [respondent].  It cannot be that the [respondent] agreed to roll over the loan in perpetuity.  During the course of his argument the [appellant] mentioned that it was a possibility the [respondent] would decide that any roll over would be on slightly different terms – that is to say the [respondent] might have required repayment of principle and interest on any renewed loan.  Put at its highest, it would seem the [respondent] assured the [appellant] that if he was not in default of the loan when the term of the loan expired, the [respondent] would look favourably on providing another loan on similar terms.  It is difficult to see how the obligation undertaken by the [respondent] could extend any further – after all the loan was by its terms for a fixed period and all parties must have been aware that at the end of that period something more would need to be done if the borrowing was to continue. (emphasis added)

   [13] Rural Bank Ltd v Fels [2019] WASC 110 (Primary Decision) [8].

2. The master referred to evidence that the respondent had requested financial information from the appellant with a view to providing a new loan, and that the appellant had not provided that information or explained why he had not done so.[14]  The master held that it was clear that the appellant had no defence to the action.[15]

   [14] Primary Decision [9].

   [15] Primary Decision [10].

The appellant's appeal

1. The appellant appeals against the master's summary judgment decision on four grounds.

2. Ground 1 in effect contends that the master erred in finding that the appellant's case was, put at its highest, that the respondent's agent represented that, if the appellant was not in default, the respondent would look favourably on providing another loan on similar terms.  That finding is said to be contrary to the appellant's evidence that the respondent's agents represented that the loan would be rolled over if he was not in default.  Ground 2 contends that the master erred in allowing submissions from the bar table by an unrepresented litigant to influence his assessment of what the appellant's case was on the evidence.

3. The respondent in effect concedes that these grounds are established, and does not seek to support the master's approach.[16]  In our view, that concession is properly made.  The appellant's evidence was to the effect that Mr Walter and Mr Gapper represented that the loan would be rolled over for a further 5 year term at the appellant's election if the appellant was not in default.  The appellant's case should have been assessed by reference to that evidence.

   [16] Respondent's submissions, pars 1 - 3 (white appeal book, p 18).

4. Ground 3 contends that the master erred in failing to find that the appellant had raised a triable issue based on the doctrine of promissory estoppel (or equitable estoppel).  This is on the basis of the appellant's evidence that:[17]

   (a) prior to entering into the 5 year loan agreement with the Respondent, it was represented to the Appellant by the Respondent that provided the loan was being serviced properly and was not in default it would be rolled over at the end of the loan term for a further 5 years ('Representation');

   (b) the Appellant relied on the Representation to his detriment in that he did not enter into an available alternative loan facility under which the entire principal would not have been repayable at the expiry of a 5 year term;

   (c) the loan had continued to be serviced properly and the Appellant had not defaulted in respect of the monthly loan repayments during the loan term; and

   (d) the Respondent, contrary to the Representation, did not roll the loan facility over at the end of the term for a further 5 years but made demand for the repayment of the principal of the loan.

   [17] White appeal book, p 4 - 5.

5. It will convenient to consider this ground in the context of dealing with the respondent's notice of contention.

6. Ground 4 contends that the master erred in failing to find that the appellant had raised a triable issue as to whether, in all the circumstances of the case, the respondent had engaged in unconscionable conduct in contravention of s 21 of the Australian Consumer Law, alternatively s 51AC of the Trade Practices Act 1974 (Cth). The respondent makes the point that this was not an issue raised before the master, and challenges the capacity of the appellant to raise the new point on appeal. Given that grounds 1 - 3 are established, and the respondent's notice of contention is not established, it is unnecessary for this court to deal with the issue sought to be raised by ground 4.

The respondent's notice of contention

1. Accepting that the master erred in his factual finding, the respondent seeks to support the orders made by the master on several alternate bases.

2. First, the respondent contends that the representation was not, in the circumstances known to the appellant at all material times, sufficiently clear and certain to found an estoppel.  The respondent points to a lack of clarity and considerable uncertainty about:[18]

   21.1whether the roll-over could only occur at the expiry of the loan;

   21.2 whether only a roll-over was available to the Appellant, or was he also entitled to convert, at his option, the facility to a principal and interest loan of an uncertain period of between 10 - 15 years;

   21.3 how any such roll-over was to be achieved;

   21.4 would it happen automatically;

   21.5 would the Bank be obliged to offer an extension of the Loan Facility, or be obliged to offer a new facility;

   21.6 whether he was being told there would not be repayment required without sufficient notice; and

   21.7 whether he was being told that the Respondent might undertake a process before extending the term.

   [18] Respondent's submissions, par 21 (white appeal book, p 21 - 22).

3. Second, the respondent contends that the representation was not in the circumstances known to the appellant capable of misleading, nor conveying to, a reasonable person that the respondent would, without more, grant a new loan or extend the loan facility to the appellant on the same terms for a further five years.  The respondent says that the representation occurred in a commercial lending context where the agreement was reduced to writing.  The respondent submits that the representation relied upon appears to have the effect, at least, of converting their commercial arrangements to a 10 year loan at the appellant's option.  It would undercut or make inoperative, at the appellant's discretion, the written term of the loan in the circumstances where the parties were talking about a '5 year loan'.  It is submitted that no reasonable person would have understood that a bank was, without any opportunity to review its lending or the borrower's capacity, committing itself, in effect, to a 10 year loan for no additional consideration, particularly where it was a 5 year term which was being expressly discussed.[19]

   [19] Respondent's submissions, pars 23 - 26.

4. Third, the respondent contends that, even if the representation was capable of founding an estoppel, there was no unconscientious departure from any representation by the respondent.  The respondent says that it did not immediately call up the loan when it was repayable at the end of October 2013.  It was evident to the appellant no later than 6 August 2013 that the respondent intended to go through a review process before extending the loan facility for a further term.  The appellant knew that the respondent was departing from the representation from that time and was then given some 7 months before the respondent exercised its legal rights under the loan agreement.  There is no evidence of the appellant being unable to refinance the loan in the time following 6 August 2013.  Further, there was evidence that the respondent indicated that it was prepared to consider rolling over or extending the term of the loan facility on receipt of what might be thought to be routine information from the appellant.  In these circumstances, the respondent contends that it did not act unconscionably in demanding repayment of the principal sum.[20]  The respondent pointed to correspondence between the appellant and the respondent that supported these propositions.

   [20] Respondent's submissions, pars 29 - 38 (white appeal book, p 24 - 25).

1. The respondent's submissions must be assessed in the context of the established principle that summary judgment should be awarded only in the clearest of cases, where one party can demonstrate that the question will certainly be resolved in their favour.[21]  In our view, none of the matters raised by the respondent are appropriately resolved in this case on a summary judgment application.

   [21] Spencer v The Commonwealth [2010] HCA 28; (2010) 241 CLR 118 [54] ‑ [55].

2. As to the respondent's first and second points, the character of a representation which founds a promissory estoppel was described in the following terms by French CJ, Kiefel and Bell JJ in Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd:[22]

   It has long been recognised that for a representation to found an estoppel it must be clear.[23]  In Low v Bouverie, it was said[24] that the language used must be precise and unambiguous.  This does not mean that the words used may not be open to different constructions, but rather that they must be able to be understood in a particular sense by the person to whom the words are addressed.  The sense in which they may be understood provides the basis for the assumption or expectation upon which the person to whom they are addressed acts.  The words must be capable of misleading a reasonable person in the way that the person relying on the estoppel claims he or she has been misled.[25]

   In that case, a majority of the High Court held that a statement by a prospective lessor to a prospective lessee that the lessee would be 'looked after at renewal time' was not capable of conveying to a reasonable person that the lessees would be offered a further lease.

   [22] Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2016] HCA 26; (2016) 260 CLR 1 [35]. See also the discussion in the recent decision of this court in Wilson v Arwon Finance Pty Ltd [2020] WASCA 137 [135] - [166].

   [23] Legione v Hateley (1983) 152 CLR 406 at 435.

   [24] Low v Bouverie [1891] 3 Ch 82 at 106.

   [25] Low v Bouverie [1891] 3 Ch 82 at 113.

3. In the present case, the words which the appellant's evidence attributed to the respondent's agents were arguably capable of leading a reasonable person to believe that, provided the contemplated loan was being serviced properly and was not in default, it would be rolled over at the end of the loan term for a further 5 years.  The statements attributed to the respondent's representatives indicated that the loan 'would be rolled over' if the appellant was not in default.  It is arguable that the reference to a loan being 'rolled over' would be understood as the renewal, at the election of the appellant, of the loan at the time of maturity at the rate of interest prevailing at the time of renewal.[26] 

   [26] Federal Commissioner of Taxation v Energy Resources of Australia Ltd (1994) 54 FCR 25, 70 - 71; Stamoulis v Federal Commissioner of Taxation (1998) 41 ATR 302, 307 - 308.

4. The respondent refers to the observation of Keane J in Crown Melbourne, that estoppel in equity is not allowed to operate to 'underwrite unrealistic expectations or wishful thinking'.[27] However, on the appellant's evidence, there was an established commercial practice at Rabobank of providing loans on the terms said to be conveyed by the respondent's representations. The appellant's evidence as to that commercial practice at Rabobank is to be accepted for the purposes of dealing with the summary judgment application. Considered against the background of the practice attributed to Rabobank, it is arguable that the expectation said to be created by the representations was not unrealistic. That background is arguably capable of answering the respondent's points summarised at [26] above. It is arguable that the representations were, when considered against the established commercial practice at Rabobank, capable of inducing a reasonable person to believe that the loan would be rolled over if the appellant was not in default and chose to do so at the end of the loan term.

   [27] Crown Melbourne [153].

5. The respondent's third point also does not establish a case against the appellant's estoppel claim that is so clear as to be bound to succeed.  The appellant's evidence indicated that he relied on the representations by entering into the loan facility on the agreed terms, rather than on different terms which would not expose him to having to repay the principal sum after 5 years.  It is arguable that the appellant would suffer a detriment - namely being exposed to the obligation to repay the principal sum after 5 years rather than at some later time - if the respondent were free to depart from the assumption or expectation which its representations created and on which the appellant relied.  We do not accept the respondent's submission that the fact the principal sum was always owed and would ultimately need to be repaid means that there can be no relevant detriment.[28]  In our view, the appellant's exposure to a repayment obligation at an earlier time than would have been the case had he not relied on the respondent's representations arguably constitutes a detriment for these purposes.

   [28] Appeal ts 13 - 14.

6. As Brennan J noted in Walton Stores (Interstate) Ltd v Maher:[29]

   The unconscionable conduct which it is the object of equity to prevent is the failure of a party, who has induced the adoption of the assumption or expectation and who knew or intended that it would be relied on, to fulfil the assumption or expectation or otherwise to avoid the detriment which that failure would occasion.  The object of the equity is not to compel the party bound to fulfil the assumption or expectation; it is to avoid the detriment which, if the assumption or expectation goes unfulfilled, will be suffered by the party who has been induced to act or to abstain from acting thereon.

   [29] Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, 423.

7. The respondent will, arguably, act unconscionably, for presently relevant purposes, if it fails to fulfil the assumption or expectation, which it created by its representations and on which the appellant relied, that the loan would rolled over at the appellant's election if he was not in default at the expiry of the loan term.  It is arguable that the minimum relief required to avoid the detriment being suffered by the appellant as a result of his reliance on the representation[30] is to hold the respondent to its promise.

   [30] See Walton Stores 404 - 405, 407 - 408, 428 - 430; The Commonwealth v Verwayen (1990) 170 CLR 394, 411 - 412, 415 - 416, 428 - 429, 441 - 442.

8. The respondent relies on the emphasised part of the following passage of Nettle J's judgment in Crown Melbourne:[31]

   [W]hat is determinative in cases of promissory estoppel is whether the party sought to be estopped has played such a part in creating an assumption or expectation in the mind of a claimant, in reliance on which the claimant has acted to the claimant's detriment, that it would be unconscionable for the estopped party to depart from the assumption or expectation before allowing the claimant reasonable time in which to revert to the status quo ante or, in some cases, at all.[32] (emphasis added)

   [31] Crown Melbourne [211].

   [32] [Verwayen] at 411 per Mason CJ, 428 per Brennan J, 444 per Deane J.

9. Two points should be made about this passage.  First, Nettle J was at this point explaining why his Honour did not accept the submission that a representation of contractual certainty was required to found a promissory estoppel.  He was not addressing the issue of when reasonable notice of an intention to depart from an induced assumption may lead to the conclusion that departure from the assumption was not unconscionable.  Secondly, the passage recognises that there will be some cases in which allowing a claimant a reasonable time to revert to the previous position will not avoid a conclusion that departure from the assumption is unconscionable.  Whether that is so will depend on all the circumstances of the particular case.

10. The last point is illustrated by the judgments in Verwayen to which Nettle J refers.  In that case, Mason CJ observed:[33]

    Equity was concerned, not to make good the assumption, but to do what was necessary to prevent the suffering of detriment.  To do more would sit uncomfortably with a general principle whose underlying foundation was the concept of unconscionability.  So, in Waltons Stores, a majority of this Court concluded that equitable estoppel entitled a party only to that relief which was necessary to prevent unconscionable conduct and to do justice between the parties. … It follows that, as a matter of principle and authority, equitable estoppel will permit a court to do what is required in order to avoid detriment to the party who has relied on the assumption induced by the party estopped, but no more.  In appropriate cases, that will require that the party estopped be held to the assumption created, even if that means the effective enforcement of a voluntary promise.

    [33] Verwayen (411 - 412).

11. Brennan J observed:[34]

    The judgments of a majority of the Court in [Waltons Stores] held that equitable estoppel yields a remedy in order to prevent unconscionable conduct on the part of the party who, having made a promise to another who acts on it to his detriment, seeks to resile from the promise.  The remedy is to effect … 'the minimum equity to do justice'.  The remedy is not designed to enforce the promise although, in some situations … the minimum equity will not be satisfied by anything short of enforcing the promise. (citations omitted)

    [34] Verwayen (428 - 429).

12. Deane J observed:[35]

    There could be circumstances in which the potential damage to an allegedly estopped party was disproportionately greater than any detriment which would be sustained by the other party to an extent that good conscience could not reasonably be seen as precluding a departure from the assumed state of affairs if adequate compensation were made or offered by the allegedly estopped party for any detriment sustained by the other party.  … In such a case, the payment of, or a binding undertaking to pay, adequate compensation would preclude a finding of estoppel by conduct.  In other cases, particularly cases involving an assumption about a future state of affairs, the circumstances may be such that any significant detriment would be avoided altogether if the party affected were given reasonable notice of the intended departure.  In such a case, the estoppel may only preclude departure from the assumed state of affairs otherwise than after such reasonable notice has been given. (emphasis added)

    [35] Verwayen (441 - 442).

13. These passages illustrate that whether giving notice of a departure from an assumed state of affairs will avoid a conclusion of unconscionability depends on all the circumstances of the case. A critical factor will be whether the circumstances are such that any significant detriment would be avoided altogether if the party affected were given reasonable notice of the intended departure. The evidence in the present case does not reveal any certain answer to that question. However, the evidence does arguably establish that the appellant would sustain the detriment identified at [31] above if the respondent were free to depart from its promise. In those circumstances, the absence of evidence as to the appellant's capacity to refinance the loan in 2013 - 2014 arguably goes only to the extent (rather than the existence) of the significant detriment which the appellant would suffer if the respondent were free to depart from the assumption or expectation created by its representations. The absence of that evidence is not fatal to the appellant's defence at the summary judgment stage.

14. The validity of the points raised by the respondent's notice of contention is not properly determined in this case on a summary judgment application. In our view, it cannot be said at this stage that the appellant's estoppel case is necessarily doomed to fail. The evidence adduced by the appellant in the primary proceedings was, if accepted, reasonably capable of establishing the equitable estoppel particularised in the passage quoted at [20] above. The question of whether an equitable estoppel is actually established is properly answered in this case after both parties have had an opportunity to fully present their cases at trial.

15. We note that, as at the date of hearing this appeal, more than 10 years have passed since the grant of the loan facility in October 2008, so that the 5 year term of a 'rolled over' 5 year loan would also have expired by now.  That fact does not preclude the appellant from relying on the claimed estoppel as a defence to the claim for repayment of the principal sum advanced by the respondent in the primary proceedings.  The default relied on by the respondent in the primary proceedings was the appellant's failure to repay the loan on 31 October 2013, or alternatively 27 February 2014.[36]  While subsequent events have the potential to alter the parties' ongoing liabilities, it is at least arguable that nothing occurring after October 2018 (being the 10^th anniversary of the loan agreement) can affect the defence to the earlier default alleged in the primary proceedings.

    [36] Amended Statement of Claim, par 14 (blue appeal book, p 10).

Orders

1. For the above reasons, in our view, grounds 1 - 3 of the appellant's appeal were established and the respondent's notice of contention was not established.  We therefore made orders that the appeal be allowed and the orders made by the master on 4 April 2019 be set aside.  In substitution, we made orders giving the appellant unconditional leave to defend the respondent's claim and remitted the matter to the General Division of this court for trial.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

ZMM
Associate to the Honourable Justice Mitchell

8 SEPTEMBER 2020