Tunbridge and Tunbridge and Ors
[2018] FamCAFC 234
•28 November 2018
FAMILY COURT OF AUSTRALIA
| TUNBRIDGE & TUNBRIDGE AND ORS | [2018] FamCAFC 234 |
| FAMILY LAW – APPEAL – Whether a mortgage lender was estopped from seeking repayment of a debt owed to it under a loan agreement with the husband and wife – Where the debt should have been repaid at the time of settlement – Where the mortgage was discharged but the debt was not repaid due to a mistake by the mortgage lender – Where the mortgage lender accepted that the wife did not know about the mistake until at least four years later – Where the primary judge ordered that the wife repay the debt owed to the mortgage lender – Where the primary judge dismissed the wife’s estoppel argument – Estoppel by representation – Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, discussed – Where the wife’s case at trial lacked clarity – Whether conduct or silence by the mortgage lender amounted to a representation – Whether the mortgage lender had induced the wife to assume or expect that the loan had been repaid – Where there was no error – appeal dismissed. |
| Family Law Act 1975 (Cth) |
| Commonwealth Bank of Australia v Kojic (2016) 249 FCR 421; [2016] FCAFC 186 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; [1988] HCA 7 |
| APPELLANT: | Ms Tunbridge |
| FIRST RESPONDENT: | Mr Tunbridge |
| SECOND RESPONDENT: | Vernon Tunbridge |
| THIRD RESPONDENT: | Company A |
| FOURTH RESPONDENT: | Company B |
| FILE NUMBER: | PTW | 5653 | of | 2006 |
| APPEAL NUMBER: | WEA | 44 | of | 2017 |
| DATE DELIVERED: | 28 November 2018 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Perth (via telelink from Brisbane) |
| JUDGMENT OF: | Murphy, Kent & Carew JJ |
| HEARING DATE: | 9 July 2018 |
| LOWER COURT JURISDICTION: | Family Court of Western Australia |
| LOWER COURT JUDGMENT DATE: | 3 November 2017; Orders made on 8 November 2017 |
| LOWER COURT MNC: | [2017] FCWA 150 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Cobby |
| SOLICITOR FOR THE APPELLANT: | Paterson & Dowding |
| FOR THE FIRST RESPONDENT: | No appearance |
| FOR THE SECOND AND THIRD RESPONDENTS: | No appearance |
| COUNSEL FOR THE FOURTH RESPONDENT: | Mr Giles SC with Mr Kalmund |
| SOLICITOR FOR THE FOURTH RESPONDENT: | Hotchkin Hanly Lawyers |
Orders
The appeal be dismissed.
The appellant pay the fourth respondent’s costs in an amount as agreed in writing or, failing such agreement, as assessed.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Tunbridge & Tunbridge and Ors has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT PERTH |
Appeal Number: WEA 44 of 2017
File Number: PTW 5653 of 2006
| Ms Tunbridge |
Appellant
And
| Mr Tunbridge |
First Respondent
And
| Vernon Tunbridge |
Second Respondent
And
| Company A |
Third Respondent
And
| Company B |
Fourth Respondent
REASONS FOR JUDGMENT
On 8 November 2017, Walters J ordered the wife to pay the fourth respondent (“Company B”) an amount of $903,721.13 comprising a debt of $790,043.49 and interest of $113,677.64. In doing so, his Honour rejected the wife’s claim that Company B was estopped from claiming that she owed that, or any, sum due under a loan agreement between it and the husband and wife.
The wife appeals his Honour’s order. Her sole ground of appeal[1] asserts that the estoppel claim was wrongly rejected. For the reasons which follow, that contention should be rejected and the wife’s appeal dismissed.
[1] The wife’s Notice of Appeal contains three grounds of appeal. Only Ground 2 is pursued.
The circumstances giving rise to the wife’s claim
The husband and wife were married for 21 years prior to their separation in April 2004 and subsequent divorce in March 2007. There are four children of the marriage. All were adults at the time of the hearing.
The husband and his brother (“Vernon”) were directors and shareholders of the third respondent company (“Company A”). They conducted business together through Company A.
In 1983 the husband and wife purchased as joint tenants a piece of real property which became their matrimonial home (“Property A”).
In November 2003 (approximately six months prior to the husband and wife separating), loan agreements with Company B were entered into by the husband and wife and also by Vernon and his wife. A total of $644,000 was borrowed by the husband and wife. The loan was secured by registered mortgage over Property A. A total of $816,000 was borrowed by Vernon and his wife. That loan was secured similarly over their jointly-owned home (“Property B”).
In light of the arguments by the wife in support of the claimed estoppel both before his Honour and in this Court, it is significant that the binding agreement for loan signed by the husband and wife with Company B provided specifically:
6.07 Your liability continues
…
(b)We need not give a discharge of the Mortgage until we are satisfied there is no likelihood of any Debt being due by you to us on any account whatever. Even if the Mortgage is discharged, any of the Debt which is outstanding, or becomes outstanding after the discharge, must still be paid.
In February 2005, the husband and Vernon sought to refinance each of the Company B loans with Bank A through Company A. Bank A agreed to refinance both loans, offering Company A facilities totalling $1.65 million.
It is uncontroversial that it was intended by all parties that the Company B debts would be repaid by the refinance; that its two mortgages would be discharged contemporaneously; and that Bank A would take mortgages over each of the A and B properties.
Three important intended effects of the intended transactions (which occurred on 15 March 2005, some 12 months after the husband and wife separated) were that the wife would be discharged from liability to Company B in respect of the loan with it (as would the husband as a joint borrower); that the wife would not be party to the Bank A loan as a borrower (the borrower being Company A) and that the wife (in addition to the husband, his brother, his brother’s wife and three companies) would be a guarantor of the Company A loan.
The refinanced loan was with Company A, but securities were taken by Bank A in the form of registered mortgages over each of the A and B properties. Although the husband and wife had separated, they remained joint tenants of Property A. The wife’s guarantee (relevantly) provided additional security for the loan.
By reason of a mistake on the part of Company B’s settlement agents, the money provided by Bank A for the refinance was not paid to Company B as all parties to the transaction plainly assumed and expected. Rather, the money was paid to Company A. Notwithstanding that mistake, the Company B mortgage was discharged and Bank A became registered as mortgagee over both the A and B properties.[2]
[2] No error occurred in relation to the liability to Company B by Vernon and his wife. The mortgage over Property B was discharged and their debt was repaid (Reasons at [38]).
Company A through, as his Honour found, the agency of the husband, took advantage of the mistake just referred to. It disbursed the funds erroneously paid to it in a manner not accounted for before his Honour. The husband contended that Company A likely used it for “investments”. That explanation was not accepted by his Honour. More generally, the husband was found by his Honour to not be a truthful witness.
Despite the discharge of its mortgage, Company B continued to send loan statements addressed to the husband and wife at Property A.
Notwithstanding the unexplained disbursement of funds by Company A, the husband, through Company A, continued to meet the repayments to both Company B and Bank A as they fell due. Those repayments continued for approximately eight years until about mid-2013 when the first default occurred. Those repayments by Company A continued despite the husband and Vernon becoming bankrupt in about March 2010. The circumstances in which Company A, through its bankrupt directors, continued to meet repayments for about three and a half years after its directors became bankrupt, was not otherwise explained before us.
The default on the Bank A loan led to the bank selling Property A.
At the time of sale, the wife remained an owner of Property A as joint tenants with the husband. Despite the wife’s liability to Bank A as one of the guarantors of the defaulted loan and her co-owner the husband being a bankrupt, the wife received from the net sale proceeds of $1.25 million an amount of $623,638. The circumstances in which that sum was received do not emerge clearly. As best as can be gleaned, it seems the husband contended that he and the wife had agreed upon separation that she was to receive Property A unencumbered and that, as a result of a mediated settlement, the wife was discharged from liability to Bank A and received approximately half of the net proceeds of its mortgagee sale.
In the midst of these events, it appears Company B remained unaware of the mistake that had occurred at settlement. It continued to proceed on the basis that its debt remained owing until September 2013. Thus, Company B became aware of the mistake some eight years after it occurred. Relevant to a submission by senior counsel for Company B before this Court, no evidence was led before his Honour, nor any argument advanced as to the aggregation of knowledge of different employees of Company B and whether any such knowledge could be attributed to Company B.[3] His Honour’s finding as to when Company B became aware of the mistake is not challenged on this appeal.
[3] Fourth respondent’s Summary of Argument at paragraph 21, citing Commonwealth Bank of Australia v Kojic (2016) 249 FCR 421 at [65]–[67] (Allsop CJ); [73]–[83] (Besanko J); [89], [92]–[149] (Edelman J).
On 9 May 2014, Company B instituted proceedings against the spouse parties in the Supreme Court of Western Australia, to secure repayment of all moneys then owing under the loan agreement.
On 16 May 2014, the Supreme Court refused an application by Company B for either an interlocutory injunction restraining the wife from disposing of the proceeds she had received from the sale of Property A, or a freezing order to restrain the wife from diminishing her assets.
Shortly thereafter, the Supreme Court transferred the proceedings to the Family Court of Western Australia.
The husband, Vernon and Company A all participated in the proceedings before his Honour. Vernon and Company A neither filed material nor otherwise participated in the appeal. The husband filed a cross-appeal but, subsequent to its dismissal by consent prior to the hearing, did not participate further in the appeal.
The judge’s relevant findings and ultimate conclusions
Not only did Company B accept that the mistake at settlement was its alone, it also accepted that “the wife may not have known about the mistake until 2009 or thereabouts” (at [45]). By contrast, “[t]he husband’s state of knowledge was very different” (at [46]). His Honour found at [156] that the husband:
…knew that [Company A] was continuing to repay the monthly mortgage amounts … [and] received both regular statements and correspondence from [Company B] (including the Notice of Demand), and I reject his evidence that he did not remember receiving them.
Earlier, his Honour found, at [47], that “[f]rom July 2005, [Company B] continued to send loan statements on a regular basis to each of the spouses at [Property A], in relation to the amount still owing pursuant to the Facilities”.[4] That finding is not challenged.
[4] A similar finding is made at [82].
The wife and husband had jointly been parties to earlier refinances. The wife agreed in cross-examination that she “trusted [her] husband” to “arrange the collection of any further moneys that were being borrowed” and “trusted [her] husband” to “arrange the paying out of any previous lender”.[5] On each of those earlier refinances, and in the case of the instant refinance, the wife did not read any documents pertaining to the transaction and signed any documents she was asked to sign by the husband and relied upon him in and about the transactions (at [200]).[6] Again, his Honour’s finding to each such effect is not challenged.
[5] Transcript, 21 April 2015, p 57 ln 32–41.
[6] See also, Transcript, 21 April 2015, p 55 ln 37 to p 56 ln 40; p 56, ln 45 to p 58 ln 10.
Specific to issues at the heart of the asserted estoppel, the wife agreed specifically that she did not read or turn her mind to the Discharge Intention Form (“DIF”). The DIF plays a central role in the wife’s asserted representations both at trial and in this Court and will be referred to further later in these reasons.
The wife also did not read or otherwise have any regard to loan statements that Company B continued to send to Property A addressed to the wife and husband.[7] His Honour accepted the wife’s assertion that “she had no knowledge that any relevant payments were being made to [Company B] after the discharge of the … mortgage”.[8]
[7] Transcript, 21 April 2015, p 74 ln 46 to p 75 ln 19. See also, his Honour’s reasons at [191].
[8] Reasons at [143] – [146].
His Honour found that by the time the wife obtained legal advice in 2009:
151…she had become aware that there were moneys outstanding to [Company B] – because the husband had advised her of that fact. Notwithstanding her state of knowledge at that time, matters continued as she asserted they always had. In a very real sense, the wife simply put her head in the sand.
On 28 August 2008, both the husband and wife, as his Honour found, signed a letter to Company B requesting a change of date for the monthly repayments of the loan. Of course, that loan should have been discharged at the settlement three years earlier. That letter, too, his Honour found, was signed by the wife:
152…on the basis that she entrusted to the husband the conduct of her financial matters. It may well have been presented to her in a peremptory manner, but she allowed the husband to manage her financial affairs despite the fact that, after separation, she had no reason to continue to adopt this practice – and every reason not to do so. I am satisfied that she acquiesced in the course of action proposed by the husband in relation [to] the ongoing debt to [Company B].
His Honour went on to find:
160 The manner in which the Facilities were repaid after the discharge of the … mortgage comfortably replicates the manner in which they were repaid prior to that discharge. The spouses, through the husband and/or [Company A], continued to act on exactly the same basis.
The Primary Judge’s Ultimate Conclusions As To Promissory Estoppel
In the proceedings before his Honour, a number of different forms of estoppel were said by the wife to arise. Counsel for the wife on the appeal made it clear that the appeal asserted error solely in respect of what counsel called “estoppel by representation”.[9] That expression was referenced specifically to the principles applicable to equitable promissory estoppel enumerated by Brennan J in Waltons Stores (Interstate) Ltd v Maher.[10]
[9] Appeal transcript, 9 July 2018, p 4 ln 22–23.
[10] (1988) 164 CLR 387 at 428 – 429 (“Waltons Stores”).
His Honour’s ultimate findings in respect of the claimed equitable promissory estoppel are encapsulated in the following paragraphs of the reasons:
205 I would add that the DIF cannot fairly be interpreted as giving rise to representations on [Company B’s] part that it would obtain funds from [Bank A] to pay out the liabilities secured by the [Property A] mortgage – but even if it could be so interpreted, and once again, the wife paid no attention to it. Similarly, I do not accept [senior counsel for the wife’s] submission that the DIF should properly be interpreted as [Company B] accepting a mandate or a “job” to manage the refinancing settlement on behalf of the spouses, or otherwise in the manner suggested by [senior counsel for the wife].
206 In relation to the various criteria or considerations appearing in [the wife’s written submissions] at [45] and [46], [senior counsel for Company B] submitted, and I accept that –
(a) the wife did not consciously assume that the debtor/creditor relationship would be terminated;
(b) [Company B] did not induce such an assumption by the DIF or its conduct;
(c) any belief that the wife may have had and acted upon was not induced by [Company B];
(d) the evidence does not support a conclusion that [Company B] knew that the wife was making any form of assumption, and that it intended she should do so;
(e) the evidence does not support a conclusion that the wife suffered detriment in any real sense (and, certainly, the husband experienced "the opposite of detriment") because, among other things, her liability in relation to the [Bank A] refinancing funds has been removed;
(f) the onus was on the spouses to establish relevant detriment, and they have not done so;
(g) after the mistake, [Company B] continued its commercial relationship with the spouses on the basis that it was still owed the moneys formerly secured by the [Property A] mortgage;
(h) that the moneys formerly secured by the [Property A] mortgage had been repaid was not “the agreed or assumed state of facts” between the wife and [Company B] – indeed, the opposite is the case;
(i) [Company B] knew nothing of the wife's state of mind and whether she was relying or minded to rely on some form of assumption to the effect that the moneys formerly secured by the [Property A] mortgage would be repaid, although the fact that those moneys were not repaid was certainly the result of a mistake for which [Company B] was primarily or predominantly responsible; and
(j) any assumption to the effect that the moneys formerly secured by the [Property A] mortgage would be or had been repaid as a result of the refinancing settlement was neither intended to, nor did in fact, "govern the parties' legal relations", because [Company B] continued to treat the moneys as owing and unpaid.
207 In all the circumstances, I am satisfied that the evidence falls well short of demonstrating detriment (to the spouses or either of them) if [Company B] is permitted to depart from the purported assumption.
208 I am also satisfied that the evidence falls well short of demonstrating that there was any relevant representation on [Company B’s] part, much less a representation that was or could fairly have been relied upon by the spouses or either of them.
The ground of appeal
The wife’s sole ground of appeal is lengthy and discursive but should, we think, be quoted in full (numbering and formatting as per original):
2. Having found that –
a. in 2005 the wife and the husband had instructed the fourth respondent and the fourth respondent had accepted those instructions to attend at settlement and collect funds advanced by [Bank A] in discharge of the loan and the mortgage in favour of the fourth respondent over their home;
b. the wife, the husband and the fourth respondent therefore had a common understanding and intention that the loan would be repaid when the mortgage was discharged and that common understanding and intention was not altered before settlement;
c. when the fourth respondent attended at settlement in March 2005 and provided a discharge of the mortgage it failed to collect any funds to discharge the loan and that failure was a mistake made solely by the fourth respondent;
d. as a result of and simultaneously with the mistake, [Bank A] took a mortgage over the home to secure an increased facility of more than $1.65 million;
e. the husband knew immediately after the mistake that it had occurred and that [Bank A] had made the funds which should have been used to repay the fourth respondent available to [Company A], the company of which he was a director;
f. the fourth respondent knew from shortly after settlement that the loan had not been discharged;
g. the mistake could have been remedied at the time when the husband and his brother, as the directors of [Company A], learned of it; and
h. the wife did not know until some time in 2009 that -
a. the mistake had occurred;
b. the advance from [Bank A] for the purpose, inter alia, of repaying the loan to the fourth respondent had instead been paid to [Company A] and dissipated; and
c. she potentially remained liable to repay the loan to the fourth respondent,
the learned trial judge erred in fact and in law in finding that -
a. there was no representation by the fourth respondent to the wife, sufficient to found an estoppel. The representation arises out of the fourth respondent, having accepted the mandate to attend settlement and collect the funds in discharge of the loan, did not collect the funds and did not tell the wife that it had not collected the funds;
b. the wife's failure to read certain banking documents meant that there was no representation to her. The preponderance of the evidence, in the wife's trial affidavit and of the wife under cross-examination was that the wife intended that the mortgage was to be discharged and that she was signing documents to facilitate that discharge. That this is what all parties intended was common ground between the wife and the respondent;
c. the husband acted in every relevant sense the wife's agent in all dealings with the fourth respondent before settlement when before settlement, the husband did not have any authority to bind the wife, he sought her approval of the discharge of the loan and the mortgage and her signature to the documents necessary to effect that outcome;
d. the husband acted in every relevant sense the wife's agent in all dealings with the fourth respondent after the mistake or for the purpose of the attribution of knowledge to the wife, as -
i. after settlement, the husband was acting as a director of [Company A] in receipt of the funds which should have been used to discharge the loan and in fraud of her in dissipating those funds;
ii. by the actions of the husband between 2005 and 2009, including by not telling the wife that the loan had not been repaid and thereafter meeting the repayments on the loan, dishonestly concealed from the wife the fact that the loan had not been repaid; and
e. the wife had not suffered any detriment because she had subsequently negotiated to remove her consequential liability to [Bank A] when -
i. if the wife had been told that the loan had not been discharged promptly then she could have taken steps to ensure that the loan was repaid out of the funds advanced to [Company A] before those funds were dissipated;
ii. before being released from liability by [Bank A], the wife remained the subject of liabilities to both the fourth respondent and to [Bank A] between 2005 and 2014 and the wife endured legal proceedings by [Bank A] and costs in the defence of those proceedings before negotiating that outcome; and
iii. the wife remained liable for interest on the debt to the fourth respondent.
Relevant principles applied by the primary judge
As we have said, the asserted errors pertain solely to his Honour’s denial of the claimed equitable promissory estoppel and the wife’s case (and his Honour’s reasons) were referenced to the principles enunciated by Brennan J in Waltons Stores. The summary of those principles by Brennan J should be quoted (respectfully adding paragraphing for present clarity):[11]
[11] (1988) 164 CLR 387 at 428 – 429 (Brennan J).
In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that
(1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship;
(2) the defendant has induced the plaintiff to adopt that assumption or expectation;
(3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation;
(4) the defendant knew or intended him to do so;
(5) the plaintiff’s action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and
(6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise.
For the purposes of the second element, a defendant who has not actively induced the plaintiff to adopt an assumption or expectation will nevertheless be held to have done so if the assumption or expectation can be fulfilled only by a transfer of the defendant's property, a diminution of his rights or an increase in his obligations and he, knowing that the plaintiff's reliance on the assumption or expectation may cause detriment to the plaintiff if it is not fulfilled, fails to deny to the plaintiff the correctness of the assumption or expectation on which the plaintiff is conducting his affairs.
There is no challenge to the legal principles applied by his Honour.
What was the promissory representation and what assumption or expectation is said to have been induced?
Lack of precision and clarity
In order to examine whether, as the wife asserts, his Honour erred in finding that there was no relevant representation, it is first necessary to examine the promissory representation contended for before his Honour and how it was said that the specified representation induced the relevant assumption or expectation.
In order to found the relevant estoppel, the promissory statements or conduct relied upon by the wife needed to be identified by her with clarity or precision.[12]
[12] Crown Melbourne Limited v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1 at 16 [35].
Further, as Meaghar JA has said:[13]
Because there are separate doctrines which apply to common law and equitable estoppel and because of the different characteristics which give rise to the different species of equitable estoppel, it is necessary, as the judgments in Waltons Stores v Maher, Silovi v Barbaro and Austotel v Franklins demonstrate, to attend carefully to the identification of the assumption or expectation which the object of the estoppel is said to be estopped from denying or asserting…
[13] DHJPM Pty Ltd v Blackthorn Resources Ltd (formerly called AIM Resources Ltd) (2011) 83 NSWLR 728 at 739 [44] (Meagher JA; Macfarlan JA agreeing).
In written submissions before this Court, senior counsel for Company B asserted a “lack of clarity as to the foundation of [the wife’s] case”.[14] We respectfully agree.
[14] Written outline of opening submissions of Company B for trial of preliminary issues received by the Court on 29 June 2018 at paragraph 25. See also, Transcript, 21 April 2015, p 18 ln 28–35.
The Wife’s Case
His Honour refers to the wife’s submissions to that effect in the reasons as follows:
183The wife argues that the estoppel case is “clear”, in that –
… [Company B’s] conduct was such as to induce [the wife] to act (authorising the discharge of [the Company B mortgage] and re-mortgaging her home to [Bank A]) and to abstain from acting (taking steps to ensure that [Company B] used the necessary funds from [Bank A] to discharge [the Company B mortgage]). This provides the necessary reliance by [the wife] to enliven an estoppel…
184The wife’s argument is further developed in [her written submissions]:
33.[Company B’s] conduct caused [the wife] to form and continue to hold the assumption that the loan from [Company B] would be paid out on settlement with [Bank A] and, after such settlement, had been paid out contemporaneously with the discharge of [the mortgage] …
…
187 It is further submitted in [the wife’s written submissions]:
34.On the faith of [Company B’s] representation that the debt would be then had been, discharged at settlement it would be inequitable for [Company B] to now seek to resile and enforced (sic) the alleged debt… Induced by their conduct, [the wife] did not act to ensure that [Bank A] funds were used, as all parties intended, to pay off the loan and procure the discharge of [the mortgage]…
…
188In [the wife’s written submissions] at [44], it is submitted that [Company B] “effectively promised” to achieve the discharge of the loan at settlement and that, as a result, the appropriate relief that should be afforded in equity is such as would reflect the value of the promise.
(Emphasis added)
Within those submissions quoted by his Honour can be seen the wife’s contention that Company B’s promissory representation induced an assumption or expectation both that the loan would be paid out simultaneously with discharge of the mortgage and an assumption or expectation that it had been paid out.
At [189], his Honour records what was contended by the wife at paragraph 45 of the written submissions on her behalf below:
…it is submitted that the criteria for equitable or promissory estoppel have been met, in that –
(a) the wife “assumed that the relationship of creditor and debtor” that existed between her and [Company B] “would be terminated by the [Bank A] refinancing”;
(b) [Company B] “induced that assumption by its conduct” or, more particularly, “by its acceptance and apparent implementation of the instruction and authorisation” document [ie the DIF]…
(Emphasis added)
The role of the DIF (Discharge Intention Form) in the wife’s case
As those passages from his Honour’s reasons make clear, the wife’s assertion of promissory conduct by Company B, to the extent that it was particularised at all, accord to the DIF a pivotal role.
His Honour, referred at [193] to a submission on behalf of the wife that the DIF amounts to “a powerful representation” by Company B “to the spouses that [Company B] ‘will do that which the form mandates is to be done’”. In respect of that submission, his Honour found:
194I do not agree that the DIF amounts to a powerful representation by [Company B] that it “will do that which the form mandates is to be done”, or that it comprises a representation by [Company B] in any sense. [Senior counsel for the wife] later conceded that the form itself does not amount to a representation, but argued that the acceptance of the spouses’ request contained in the form (and [Company B’s] subsequent actions) amounted to representation by conduct. It “accepted the job” inherent within the form, as it were.
(As per original)
The DIF is a document signed by both the husband and wife on 2 March 2005. It:
·Specifies the relevant loan and indicates on its face a statement by the husband and wife that they “intend to FULLY DISCHARGE the above Loan/Mortgages” (as per original);
·Contains a request from the husband and wife to Company B to make available “the amount required to discharge the Mortgage(s), including your fees for an anticipated settlement date of AS SOON AS POSSIBLE” (underlining in original; handwritten capitals in original);
·Has the husband and wife saying that “[i]t would be appreciated if the discharge of Mortgage(s) could be prepared in readiness for settlement” and details of payout “faxed to my/our Solicitor(s)/Financier(s)”; and
·Authorises Company B to provide Bank A “with any information they may require in respect of my/our account with you and in particular the full amounts required by you to discharge the Mortgage indicated above”.
The DIF then provides:
In addition, you are further authorised and instructed to arrange the preparation of the discharge of my/our mortgage, to attend settlement and hand over the discharge of Mortgage and Certificate of Title as requested by [BANK A].
(As per original)
What assumptions or expectations are asserted?
Axiomatically, the consequence of the existing legal relationship between, relevantly, the wife and Company B, prior to settlement, would see the mortgage held by Company B discharged only if the debt owed to it by the parties was repaid to Company B. Here, there can be no doubt that all parties assumed that the debt would be repaid to Company B by the Bank A refinance and, consequently, that the mortgage to Company B would be simultaneously discharged at the refinancing settlement. The assumption common to all parties (howsoever respectively created) was that, at that settlement, Company B would be repaid its debt.
Referring only to the submission cited by his Honour at [189] of the reasons quoted above suggests that the wife’s case was that the only assumption or expectation alleged by her to have been induced by Company B was that the relationship between creditor and debtor would be terminated at the settlement.
However, other written submissions by the wife cited by his Honour which we have earlier quoted would appear to recognise that proof of that alone was insufficient to ground the asserted equitable estoppel. For the wife to succeed in her claim, it was necessary for her to prove that she was induced by Company B to assume or expect that her legal obligations under the loan agreement would and had come to an end, even though Company B had not been repaid the debt owed to it.
It would be surprising to say the least if the wife contended that Company B positively encouraged her to have that assumption or expectation. The evidence did not permit her to make that assertion and in truth she advanced no such case. Rather, her case was that Company B induced her to assume or expect that the debt would be paid to discharge the mortgage and to assume or expect that it had been paid. The submissions by the wife quoted by his Honour at [184] and [187] above assert exactly that.
That being so, the question then becomes what promissory statements or conduct by Company B to that effect were established before his Honour such that the wife can establish before this Court that his Honour erred in finding there were none?
What promissory statements or conduct by company b are asserted?
Save for the assertion of conduct particularised as the “acceptance and apparent implementation of the [DIF]”[15] we are unable to see where the asserted promissory conduct is otherwise specified or particularised in the proceedings before his Honour.
[15] Reasons at [189(b)].
Answering our enquiries in that respect, counsel for the wife appearing on the appeal was unable to take us to any evidence of the same or, indeed, to any submissions which did so.[16]
[16] See, eg, Appeal Transcript, 9 July 2018, p 5 ln 40–46; pp 4–8.
The DIF is not promissory. It contains no promise by Company B to do anything. It contains no “mandate” for Company B to do anything. His Honour so found and was, in our respectful view, entirely correct in doing so.
Further, as his Honour points out, senior counsel for the wife at trial conceded that, of itself, the DIF did not and could not amount to a promissory representation.
Even if the DIF was promissory, or contained promissory representations (which it is not and does not), the work it had to do concluded at the refinancing settlement; it could provide no representation that the debt had been paid simultaneously with the discharge of the mortgage at that settlement.
The wife’s case on appeal
With respect, the lack of clarity attending the wife’s case at trial in so far as her assertions of the relevant representation and the assumption or expectation it induced, are equally evident on appeal.
It is contended in written submissions on behalf of Company B before this Court that the wife now seeks to agitate an argument not raised before his Honour.[17] As will be seen, we agree and that is all the more so when reference is had to the central contention formulated orally before us to which we shall shortly refer.
[17] Metwally v University of Wollongong (1985) 60 ALR 68; Water Board v Moustakas (1988) 180 CLR 491; Whisprun Pty Ltd v Dixon (2003) 200 ALR 447.
Despite the central concession made on behalf of the wife referred to previously (at [44] and [55] of these reasons), the written submissions on behalf of the wife on appeal posit the DIF as containing, or forming an integral part of, the relevant representation. The wife’s written outline of argument before this Court commences, relevantly, (at paragraph 8) by asserting that his Honour erred in finding that:
…the [DIF] provided by [Company B] to the [wife] and the husband did not amount, in all the circumstances, to a representation that the debt due to [Company B] … would be discharged at the refinancing settlement between [Company B] and [Bank A].
The written outline continues, at paragraphs 9 to 12, to address arguments arising from that assertion — that is, arguments that tie the relevant representation solely to the DIF.
No argument is advanced by counsel for the wife as to how or why the wife should be released from the concession made on her behalf before his Honour. We repeat our view that the concession was properly made.
The argument advanced by the wife at paragraphs 8 to 12 of her written submissions on the appeal is not available to her.
As the wife’s written argument progresses the relevant representation and the error asserted by his Honour change. Like the written argument before his Honour, the written outline before this Court refers to “conduct” by Company B (at paragraph 14); asserts (at paragraph 15) that “[a] representation may be made impliedly, not only by the language used, but by conduct”;[18] and ultimately contends that a representation by Company B is to be implied from its conduct which includes (or, perhaps, is constituted by) its “lack of any communication” (at paragraph 16). The change in the wife’s argument can be seen summarised at paragraphs 16 to 17:
16.In the [wife’s] submission, the provision of the DIF by [Company B] to the [wife] and the husband, seeking the grant of authority to disclose to [Bank A] the amount required to discharge the debt due to [Company B] and authority to attend settlement on their behalf, [Company B’s] acceptance of the mandate to attend settlement upon the return of the completed DIF, and the lack of any communication by [Company B] to the [wife] of the failure to obtain payment in the amount of its debt, constituted a representation by [Company B] to the [wife] that her debt to [Company B] had been discharged at settlement of the loan by [Bank A], such that the learned judge erred at [198], Reasons in holding otherwise.
17.The fact that [Company B’s] failure to inform the [wife] of what had occurred at settlement was due to a mistake on its part does not, of itself, prevent a finding of an estoppel. A party’s impudence, where care is required of it, may give rise to an estoppel where its conduct is “a proximate cause of the other party’s adopting and acting upon the assumption”: Thompson v Palmer (1933) 49 CLR 507, at 547; Bell v Marsh, at 541.
(Emphasis added)
[18] Citing Bell v Marsh [1903] 1 Ch 528 at 541 and Thorner v Major [2009] 1 WLR 776 at [84].
As ultimately formulated orally before us,[19] the argument rests on an assertion that Company B created or encouraged in the wife an assumption by her that the debt would not be enforced against her by reason of the following matters taken together:
(a)the DIF signed by the parties, and authorising/instructing Company B to discharge the mortgage, attend settlement and hand over the discharge of Mortgage and Certificate of Title to Bank A;
(b)the failure of Company B to communicate any refusal to exercise the authority and instruction as contained in the DIF; and
(c)the failure of Company B to communicate to the husband and wife that, although the mortgage had been discharged, the loan had not.
[19] For the discussion antecedent to that submission see: Appeal Transcript, 9 July 2018, p 6 ln 6–15; p 14 ln 5–23. See also similar summaries of the wife’s argument at Appeal Transcript, 9 July 2018, p 8 ln 1–26 and p 10 ln 1–10.
The argument as ultimately formulated would appear to recognise that in order for the wife to have established the relevant estoppel before his Honour, it was necessary to prove either conduct or silence by Company B which induced the wife to assume or expect that the loan had been repaid simultaneously with the discharge of the mortgage when in fact it had not.
Conclusions as to the relevant representation and assumption
The wife did not, and on the evidence before his Honour could not, advance a case that Company B had positively encouraged her to the relevant assumption to which we have just referred:
·The evidence was, and his Honour accepted, that Company B did not know of the mistake at settlement until well after the refinancing settlement and, indeed, until after the wife herself knew;
·As and from the date of the refinancing settlement, all of Company B’s conduct was consistent with the debt not having been paid. In particular, it continued to send loan statements to Property A, as it had always done, showing the debt as owing;
·The wife accepted that all information in and about the transaction came not from Company B but from the husband; and
·The wife accepted that there had been earlier refinances and in respect of both those and the instant refinance, she did not read any documents and signed documents which the husband asked her to sign.
No specific conduct (explicit or implicit) was proved to have induced an assumption in the wife that her debt had been paid simultaneously with the discharge of the mortgage when in fact it had not been. His Honour correctly so found.
The submission ultimately advanced orally before this Court would appear, with respect, to recognise as much by seeking to advance a case based on a “lack of any communication” — in effect, that the relevant representation by Company B should be inferred from its post-settlement silence.
As we have said, we agree with senior counsel for Company B that the case as now articulated was not a case agitated before his Honour. We also agree that the case as now presented raises questions of fact about evidence which might have been called and calls into question arguments that might have been addressed below had the issue been raised. As we have earlier pointed out, senior counsel uses as an example, the question of “precisely when Company B learned the debt had not been repaid although settlement had occurred” which in turn “raises questions of aggregation of knowledge of different employees and whether any of that knowledge was to be attributed to the corporation”.[20] We agree Company B is prejudiced by it being raised for the first time on appeal.
[20] Fourth respondent’s Summary of Argument at paragraph 21, citing Commonwealth Bank of Australia v Kojic (2016) 249 FCR 421.
The wife’s argument as articulated before us should be rejected for that reason alone.
In any event, the wife’s (expanded) argument is in our view entirely without merit. What we have earlier said about the DIF pertains. As, too, does what we have said about Company B’s conduct: there was no evidence before his Honour by which it could or should have been found that the wife was induced to assume or expect that the debt to Company B had been paid simultaneously with the discharge of the mortgage even though it in fact had not been.
In Moratic Pty Ltd v Gordon,[21] Brereton J said at [34]:
…In the case of promissory estoppel where the defendant has not positively encouraged the plaintiff to adopt the relevant assumption, a plaintiff must show that the defendant at least failed to deny the assumption with knowledge that the plaintiff was relying on it to the plaintiff's potential detriment, and that the assumption could be fulfilled only by a diminution or suspension of the defendant's contractual rights [see generally Waltons v Maher, 428–429 (Brennan J); Meagher, Gummow & Leeming, [17–050]].
(Emphasis added)
[21] (2007) 13 BPR 24,713 (“Moratic”).
The wife did not and could not establish before his Honour that Company B failed to deny the wife’s asserted assumption. There was no evidence at all before his Honour that Company B was aware that the wife had assumed the debt was paid. Indeed, the evidence and his Honour’s unchallenged findings was that not only did it not know, but that it acted at all times consistent with the debt remaining owing.
The unchallenged factual findings made by his Honour are that all post‑settlement conduct by Company B was consistent with the debt not having been paid. His Honour correctly found that the DIF did not constitute any representation that the debt had been paid or would be paid if refinancing funds were not made available to it. That being so, there could be no obligation on Company B to notify the wife that it had not been paid. Company B did not, in any event, fail to communicate that the debt had not been paid. It continued to send statements as clear evidence that it had not in fact been paid.
Further, to the extent that the wife’s case is said to be founded on “lack of any communication” – that is, silence – it should be pointed out that principle dictates that silence will rarely evidence a clear and unequivocal statement of any representation[22] and has been described as a “particularly thin reed” upon which to base an estoppel.[23] In Moratic, Brereton J continued in the passage earlier quoted:
…It is essential to an equitable estoppel that the defendant knows or intends that the party who adopts the assumption will act or abstain from acting in reliance on it [see Crabb v Arun District Council [1976] Ch 179 at 188; Waltons v Maher, 423 (Brennan J)]. Such knowledge or intention may easily be inferred where the adoption of the assumption is induced by the making of a promise, but it may also be found where the defendant encourages a plaintiff to adhere to an assumption already formed, or acquiesces in an assumption when in conscience objection ought to be stated [Waltons v Maher, 423 (Brennan J)]. The cases emphasise that a party who seeks to set up an equitable estoppel of this type must show that the other has made, whether by words or conduct, an unequivocal representation that it did not intend to enforce its strict legal rights [Allied Marine Transport Ltd v Vale Do Rio Doce Navegacao SA (The Leonidas) [1985] 1 WLR 925 at 941 (Robert Goff LJ); Legione v Hateley, 435–7; Foran v Wright, 410–11, 435–6]…
(Emphasis added)
[22] See, Olga Investments Pty Ltd v Citipower Ltd [1998] 3 VR 485 at 499 (Charles JA).
[23]Summer Hill Business Estate Pty Ltd v Equititrust Ltd [2010] NSWSC 776 at [70] (Pembroke J).
In the usual course of events it is difficult to establish that the silent party knew that its silence was an “unequivocal representation that [Company B] did not intend to enforce its strict legal rights”[24] contained within the loan agreement, and all the more so in light of clause 6.07 of that agreement earlier quoted. Here, the contention to that specific effect fails for that reason; the wife offered no evidence by which his Honour could conclude that Company B knew of her assumption.
[24] See also, Brennan J in Waltons Stores at 428 citing Ramsden v Dyson (1866) L.R. 1 HL at 140 –141; Svenson v Payne (1945) 71 CLR 531 at 542 – 543; Willmott v Barber (1880) 15 Ch D 96 at 105 – 106.
His Honour found that to be the case at [206(d)] (quoted above). No specific challenge is mounted to that finding by the wife. The finding is, with respect, entirely correct.
The wife’s arguments as to agency and detriment
Agency
The wife contends that his Honour erred in finding that “the husband acted in every relevant sense [as] the wife’s agent in all dealings with [Company B]” both before the refinancing settlement and after it (Ground 2(c) and 2(d)(i)‑(ii)).
Relevantly, his Honour found:
146I am more than satisfied that the wife was quite content to allow the husband to act on her behalf in relation to the refinancing arrangements and the events associated with those arrangements (including the provision of security) in the period leading up to the mistake. Further, and in relation to the payment of instalments of principal or interest to both [Bank A] and [Company B], I find that the wife was content for the husband to act as her agent. Indeed, in her oral evidence, she accepted that the husband made payments on her behalf. The dynamic of the spouses' matrimonial relationship, its consequences and questions of control and the like may be issues for another day, but the objective evidence is clear: the wife allowed the husband to handle her affairs and generally, act in her stead.
The wife’s argument is met most expeditiously by saying that we agree with the submissions by senior counsel for Company B that his Honour’s central ultimate findings earlier quoted do not depend upon any attribution to the wife of the husband’s knowledge or conduct “[n]or did the impugned finding of agency influence the rejection of the [wife’s] argument in relation to any of the six integers identified by Brennan J in Waltons Stores.”[25]
[25] Fourth respondent’s Summary of Argument at paragraph 23.
We also agree, with respect, with the contention by senior counsel for Company B, expressed in effect in the alternative, that:[26]
…If there was error as alleged, it is not of any relevance and would not result in a successful challenge to any of the bases on which the [wife] failed to establish the alleged estoppel.
[26] Fourth respondent’s Summary of Argument at paragraph 23.
The wife’s arguments referrable to asserted findings as to agency should be rejected.
Detriment
Given our findings as to the correctness of his Honour’s finding that there was no relevant representation by Company B inducing any assumption or expectation upon which the wife relied, it is unnecessary to address in detail that component of the ground asserting error in the finding that the wife suffered no detriment.
We have, with respect, some difficulty in understanding the wife’s detriment case advanced below. She pleaded[27] in effect that she suffered detriment because she was liable under the Bank A loan (via her guarantee) rather than via her liability as a borrower under the Company B loan. Yet, she was released from her guarantee by Bank A and received approximately one half of the proceeds of the mortgagee sale. Had her asserted assumption borne fruit she would have been liable on the defaulted Bank A loan as one of the guarantors (others of whom are bankrupt).
[27] Formal pleadings had been ordered by his Honour.
In any event, we consider that, again, the case now sought to be agitated in respect of detriment is different from the case run at trial.
The wife’s written submissions contend that his Honour erred in concluding that the wife did not suffer detriment because:
48.Here the detriment was both financial and substantial in other ways:
48.1the [wife] lost the opportunity to take steps immediately after the refinancing settlement to ensure that the relevant funds were used to discharge the [Company B] loan;
48.2she remained liable to both [Company B] for the existing loan and to [Bank A] in respect of the refinancing loan, such that she was later required to defend proceedings instituted by [Bank A] for repayment of that loan; albeit she was ultimately able to settle those proceedings; and
48.3she remained exposed to [Company B’s] claim, including its claim for interest, which would not have arisen had its debt been discharged in 2005.
Company B contends, and we agree with the submission, that:
36.The detriment now asserted … was not the detriment alleged at trial, nor were those categories of detriment investigated at trial. For example, nothing is known about the conduct of the proceedings brought by [Bank A], how far those proceedings advanced and who paid the [wife’s] costs. There was no investigation of the benefits obtained by the [wife] which may have the consequence that, viewed in the broad, no detriment was in point of fact suffered…
We also agree with the subsequent submission that the detriment now alleged was not established by the evidence at trial.
The wife’s contentions of error in respect of detriment should be rejected.
Conclusion and costs of the appeal
The wife’s appeal fails.
Costs orders have already been made that the husband pay Company B’s costs pursuant to the consent orders made between those parties on 6 July 2018.
Counsel for the wife conceded that if the appeal failed, he could not resist an order being made for costs in favour of Company B. Company B had sought an order for indemnity costs but senior counsel for Company B, noting that the order as against the husband was agreed on a party and party basis, conceded that costs should be similarly assessed as against the wife.
We are persuaded that the circumstances justify an order for costs being made against the wife.
I certify that the preceding ninety-three (93) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Murphy, Kent and Carew JJ) delivered on 28 November 2018.
Associate:
Date: 28 November 2018
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