Wilson v Arwon Finance Pty Ltd
[2020] WASCA 137
•31 AUGUST 2020
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: WILSON -v- ARWON FINANCE PTY LTD [2020] WASCA 137
CORAM: QUINLAN CJ
PRITCHARD JA
VAUGHAN JA
HEARD: 9 JUNE 2020
DELIVERED : 31 AUGUST 2020
FILE NO/S: CACV 84 of 2019
BETWEEN: FRANK CULLITY WILSON
Appellant
AND
ARWON FINANCE PTY LTD
Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram: KENNETH MARTIN J
File Number : CIV 2225 of 2017
Catchwords:
Equity - Promissory estoppel - Alleged error of law - Loan agreement - Purported assumption by appellant that respondent would have recourse to security interest before seeking to recover from appellant personally - Whether primary judge misapprehended and misapplied Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd in finding that recoverability assumption was not reasonable - Whether primary judge ought to have instead considered whether assumption was reasonably open to the appellant.
Appeals - Whether primary judge erred in failing to give adequate reasons for factual finding that appellant did not hold purported recoverability assumption - Turns on own facts.
Equity - Promissory estoppel - Alleged errors of fact - Whether primary judge erred in finding appellant did not hold recoverability assumption - Whether primary judge erred in finding there was no reliance by appellant on recoverability assumption - Whether primary judge erred in finding that departure from assumption by respondent would not cause detriment to appellant - Turns on own facts.
Legislation:
Nil
Result:
Appeal dismissed
Category: B
Representation:
Counsel:
| Appellant | : | G R Donaldson SC & T C Russell |
| Respondent | : | S K Dharmananda SC & V Ghosh |
Solicitors:
| Appellant | : | McInnes Wilson Lawyers |
| Respondent | : | Allens |
Case(s) referred to in decision(s):
Arwon Finance Pty Ltd v Wilson [2019] WASC 244
Attard v James Legal Pty Ltd [2010] NSWCA 311; (2010) 80 ACSR 585
Australian Crime Commission v Gray [2003] NSWCA 318
Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd [2014] HCA 14; (2014) 253 CLR 560
Australian Goldfields NL (in liq) v North Australian Diamonds NL [2009] WASCA 98; (2009) 40 WAR 191
Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485
Bell Group Ltd (in liq) v Westpac Banking Corporation [No 9] [2008] WASC 239; (2008) 39 WAR 1
Birla Nifty Pty Ltd v International Mining Industry Underwriters Ltd [2014] WASCA 180; (2014) 47 WAR 522
Browne v Browne [2019] WASC 1
Browne v Dunn (1893) 6 R 67
Chappel v Hart [1998] HCA 55; (1998) 195 CLR 232
Commonwealth v Verwayen [1990] HCA 39; (1990) 170 CLR 394
Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2016] HCA 26; (2016) 260 CLR 1
Falkingham v Hoffmans (a firm) ) [2014] WASCA 140; (2014) 46 WAR 510
Fox v Percy [2003] HCA 22; (2003) 214 CLR 118
Galaxidis v Galaxidis [2004] NSWCA 111
Giumelli v Giumelli [1999] HCA 10; (1999) 196 CLR 101
Grundt v Great Boulder Pty Gold Mines Ltd [1937] HCA 58; (1937) 59 CLR 641
Joyce v Anderson [2020] WASCA 48; (2020) 91 MVR 334
Legione v Hateley [1983] HCA 11; (1983) 152 CLR 406
Merilla Pty Ltd v Commonwealth of Australia [2015] WASCA 309
Minister for Immigration, Local Government and Ethnic Affairs v Hamsher (1992) 35 FCR 359
Murphy v Overton Investments Pty Ltd [2001] FCA 500; (2001) 112 FCR 182
Rosenberg v Percival [2001] HCA 18; (2001) 205 CLR 434
Sidhu v Van Dyke [2014] HCA 19; (2014) 251 CLR 505
Smart v Power [2019] WASCA 106
Sullivan v Sullivan [2006] NSWCA 312; (2006) 13 BPR 24,755
Summer Hill Business Estate v Equititrust Ltd [2010] NSWSC 776
Thompson v Palmer [1933] HCA 61; (1933) 49 CLR 507
Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387
Western Australian Insurance Co Ltd v Dayton [1924] HCA 58; (1924) 35 CLR 355
Windsor v National Mutual Life Association of Australia Ltd (1992) FCR 580
Zerjavic v Chevron Australia Pty Ltd [2020] WASCA 40
QUINLAN CJ & VAUGHAN JA:
Overview
The appellant, Mr Wilson, was at all material times an experienced solicitor specialising in taxation, property and commercial law. He was also, for most of the relevant period, the chief executive officer (CEO) of the respondent, Arwon Finance Pty Ltd (Arwon), and the CEO and managing director of Arwon's listed ultimate parent company, Quintis (Australia) Ltd (Quintis). Arwon, as a wholly owned subsidiary within the Quintis group, essentially operated as a financier and lender to persons who applied to borrow money for the purpose of investing in tax effective investments that the Quintis group promoted. Those investments involved the establishment of sandalwood tree plantations.
On 30 June 2014 Mr Wilson entered into a loan agreement with Arwon. Funds in the amount of $13,267,650 were advanced to and received by Mr Wilson. Mr Wilson used the funds to invest in a sandalwood planation product promoted by the Quintis group. That investment secured an immediate tax deduction of $12.9 million for Mr Wilson. That deduction was applied to reduce Mr Wilson's assessable income in the tax year ending 30 June 2014 to a relatively small taxable income.
Mr Wilson resigned as a director from all board positions within the Quintis group, including both Arwon and Quintis, on 27 March 2017. By January 2018, Quintis was in receivership and administrators had been appointed. After Mr Wilson ceased to be a director he fell into arrears under the loan agreement. In July 2017 proceedings were commenced to recover some $11.109 million, interest and costs. By the time of trial - late April 2019 - the debt including interest was $13,651,096.96.
At trial Mr Wilson sought to defend the claim on a single basis. He asserted a promissory estoppel defence. In substance Mr Wilson asserted that on entry into the loan agreement he was led to believe that, if he ever defaulted, Arwon had promised to limit its loan recovery options against him by first foreclosing on security that Arwon held over Mr Wilson's sandalwood plantation investment and only recovering personally against him if there was a quantified monetary shortfall on his loan (such shortfall to be ascertained after Arwon had credited Mr Wilson with the value of the realised security in relation to Mr Wilson's sandalwood plantation assets according to a formula). As, on Mr Wilson's case, there was no shortfall - the value of the security provided over Mr Wilson's sandalwood plantation investment exceeding the amount of the debt - there could be no personal pursuit of Mr Wilson as a debtor: there was no residual indebtedness to pursue.
Adopting phraseology employed by Mr Wilson, the learned primary judge referred to Mr Wilson's asserted recovery assumption as the 'trees first' recovery policy:[1] there must first be recourse against the security - the woodlots comprised in Mr Wilson's sandalwood plantation investment - before proceeding against Mr Wilson personally to recover the debt under the loan agreement.
[1] Arwon Finance Pty Ltd v Wilson [2019] WASC 244 (primary reasons) [28].
The learned primary judge rejected Mr Wilson's defence and consequently entered judgment against Mr Wilson for the amount owing under the loan agreement (an amount of $13,991,596.57 as at the date judgment was entered). There were three reasons why the promissory estoppel defence failed:
1.Having concluded that Mr Wilson was not running an estoppel by representation case[2] - a conclusion that is unchallenged on appeal - the learned primary judge found that Mr Wilson had failed to establish on the facts that he held the alleged 'trees first' recovery assumption;[3] and that, even if held, such an assumption was unreasonable and unreasonably reached.[4]
2.The learned primary judge found that Mr Wilson had not proved reliance on the putative assumption in all the circumstances.[5]
3.The learned primary judge concluded that Mr Wilson had not sufficiently established a 'detrimental position' as regards the debt recovery action.[6]
[2] Primary reasons [217(a)].
[3] Primary reasons [217(b)]. See also Primary reasons [183], [187], [213], [217(d)].
[4] Primary reasons [217(b)].
[5] Primary reasons [217(c)]. See also Primary reasons [187], [189], [191], [213].
[6] Primary reasons [216], [218].
On appeal Mr Wilson alleged that the learned primary judge erred in law in his approach to the promissory estoppel defence (grounds 1 and 9). Mr Wilson alleged that his Honour failed to give adequate reasons for the factual finding that he did not hold the 'trees first' recovery assumption (ground 4). In the alternative Mr Wilson challenged the learned primary judge's factual finding in this respect going as far as to contend that a finding that the assumption was held was required by the evidence (grounds 5 and 6). Mr Wilson also challenged the learned primary judge's factual findings as to the absence of reliance (ground 7) and the absence of detriment (ground 8). Mr Wilson sought that the orders of the learned primary judge be set aside and the action be remitted to be determined according to law.[7]
[7] Orders wanted pars 2, 3 WAB 26.
For the reasons that follow the appeal should be dismissed.
Background facts
Mr Wilson challenged the learned primary judge's factual findings on various key integers of the promissory estoppel defence: whether Mr Wilson in fact held the contended for 'trees first' recovery assumption; whether Mr Wilson relied on the alleged assumption; and whether resiling from the alleged assumption would cause a detriment to Mr Wilson. Otherwise there is no challenge to the factual findings made by the learned primary judge.
The nature of the relationship between the parties, the relevant transaction and the ensuing claim have been broadly described at [239] to [3] above. In amplification of those matters:
1.Mr Wilson was the founding partner and, for over 15 years, the managing partner, of a Perth based law firm. He was also the founder of the Quintis group. Over many years, since about 1996, Mr Wilson was the executive chairperson or managing director of the Quintis group of companies. Quintis itself became a listed public company in 2006.
2.In addition to being the founder of the Quintis group, Mr Wilson was an enthusiastic supporter and investor in its tax effective products.
3.Arwon was a subsidiary of Quintis. Since 2000 it acted as a financier and lent money to borrowers who would commit to using the funds in the acquisition of sandalwood investments promoted by the Quintis group of companies. As at 30 June 2014, Quintis and Arwon had a common board. That board consisted of Mr Wilson and another four directors. As mentioned, Mr Wilson was CEO of both companies. He thus occupied the senior management position within the two companies.
4.The loan the subject of the proceedings was used by Mr Wilson to invest in woodlots extending over some 215 hectares of a sandalwood plantation. In that respect Mr Wilson entered into an Investment Management Agreement (IMA). The terms of the IMA were in evidence.[8] However, little attention was given to the express terms of the IMA at trial[9] and there was no mention of them at the appeal hearing. Accordingly, it is not necessary to consider the detail of the IMA's provisions.
5.Mr Wilson and Arwon entered into a written loan agreement on 30 June 2014. The terms of the loan agreement were varied by a deed of variation dated 20 February 2016. The variations - as distinct from the fact of the variation - are immaterial to the issues on appeal. As part of the loan arrangements, Arwon held a registered security over Mr Wilson's leasehold interest in the sandalwood tree plantation woodlots acquired using the money advanced by Arwon pursuant to the loan (see [15] below).
6.The express terms of the loan agreement provided for repayment over seven years. However, in the event of default the repayment obligations could be accelerated. Arwon could require immediate repayment of the whole of the debt. That is what occurred. On 7 June 2017 Arwon issued a notice of default. On 18 July 2017 Arwon informed Mr Wilson that the total amount owing under the loan had been accelerated to become due and payable. Demand was made for the outstanding balance.
7.Mr Wilson did not pay the debt under the loan agreement and the proceedings were commenced.
8.Arwon took steps to recover the loan the subject of the proceedings after Mr Wilson resigned his board positions. Mr Wilson accepted that Quintis was in financial trouble by the time that Arwon took the relevant steps.
[8] GAB 417 - 463.
[9] See Primary reasons [159] - [160].
The learned primary judge described the nature of Mr Wilson's sandalwood plantation investment by reference to his application to the Australian Taxation Office (ATO) for a private taxation ruling. That document contained a description of the sandalwood tree project in which Mr Wilson invested together with the nature of the related services to be provided to Mr Wilson by various Quintis related entities. The project itself - to be established within 18 months - was a forest managed investment scheme with an expected length of about 15 years. Mr Wilson was to lease 215 hectares from a Quintis related entity on which sandalwood trees would be planted for the afforestation business. The plantation was to be established at a cost of $66,000 per hectare (inclusive of GST). Mr Wilson was to be provided with establishment services, investment services, property management services and selling and marketing services. As a grower Mr Wilson was entitled to receive the net proceeds of sale from the growing and harvesting of the sandalwood trees on his leased woodlots.
It will be necessary to return to the application for a private taxation ruling when considering Mr Wilson's challenges to the learned primary judge's factual findings. Accordingly, it is best to mention some of its features now. Relevantly, the application dealt with finance aspects of the project. Among other things it stated:
Finance for the Project is being provided to [Mr Wilson] by Arwon …
Arwon … is entitled to a security interest … over the assets of [Mr Wilson] as security for the repayment of the advanced funds.
The Project does not involve any form of non-recourse or limited recourse financing pursuant to which a Grower can leverage its tax deductions but not be at risk with respect to any of its financial obligations.
A Grower may elect to enter into a loan agreement during the Relevant Period and repay the loan to Arwon … This Private Ruling will not apply if a finance arrangement entered into by the Grower includes or has the following features:
…
2.there are indemnity arrangements or other collateral agreements in relation to the loan designed to limit the Grower's risk;
…
7.lenders do not have the capacity under the loan agreement, or a genuine intention, to take legal action against the Grower …[10] (emphasis added)
[10] GAB 482; see Primary reasons [109].
Mr Wilson's application for a private taxation ruling went on to assert:
As a result of entering the Project, the Grower will be financially at risk even after allowing for the taxation benefits associated with the Project … Due to the fact that there is no non or limited recourse funding available to the Grower for the Project, the Grower's financial expenditure over the period of the Project far exceeds the taxation benefits which are available to the Grower from the Project. The Grower is at financial risk unless the Project derives sufficient business income for the Grower to recoup the financial outlays on the Project.[11] (emphasis added)
[11] GAB 482; see Primary reasons [109].
The ATO was provided with the written loan agreement between Arwon and Mr Wilson in support of the application for a private taxation ruling.
The terms of the loan agreement were in evidence[12] and were substantially reproduced in the primary reasons.[13] There were standard terms as to the advance (cl 2) and repayment (cl 3). Clause 4 provided for the grant of a security interest over the 'Collateral' (essentially Mr Wilson's right, title and interest in relation to the sandalwood plantation woodlots and all proceeds therefrom) as security for the performance of Mr Wilson's obligations. Mr Wilson undertook various borrower's covenants including an obligation to insure the collateral (cl 5). A list of 'Events of Default' were prescribed (cl 7). Among other things, an event of default permitted Arwon to accelerate repayment.
[12] GAB 395 - 416 (loan agreement); GAB 657 - 666 (deed of variation).
[13] Primary reasons [130].
Clause 8 of the loan agreement provided for the exercise of rights where, after an event of default, the secured money was not immediately repaid. In addition to exercising 'any other rights provided by law' - consistent only with Arwon having an unconstrained right to exercise any of its legal rights on an event of default including that of seeking recovery in a court of competent jurisdiction - Arwon was entitled to exercise all or any of the following rights:
1.Immediately enforce its security interest under the loan agreement (cl 8(a)).
2.Declare all or any part of the secured money to be immediately due and payable (cl 8(b)).
3.Exercise any rights and powers set out in the Property Law Act 1969 (WA) including the powers of a mortgagee on default and the power to appoint a receiver or a receiver and manager (cl 8(c)).
It may immediately be seen that cl 8 of the loan agreement is inconsistent with Mr Wilson's contended for 'trees first' recovery assumption. In his evidence in cross‑examination Mr Wilson said that he did not recall reading the loan agreement but had an understanding of what it contained. Mr Wilson said that he realised it was a full recourse loan and was aware that if he defaulted Arwon would have broad rights of recovery. It was, however, Mr Wilson's evidence that Arwon had a policy and practice that effectively trumped cl 8 of the loan agreement by giving priority to what is found in cl 8(c).[14]
[14] ts 104. See also ts 108 - 109.
Other relevant terms of the written loan agreement were cl 11 (dealing with representations and warranties), cl 15.3 (requiring variations to be in writing if to be effective) and cl 15.5 (an entire agreement provision). By those covenants Mr Wilson was to have disclosed all relevant matters for disclosure (cl 11(a)) and agreed that any representation not contained or referred to in the agreement was of no force or effect (cl 15.5). The loan agreement also confirmed at cl 15.12 that:
The rights, powers and remedies provided in this Agreement are cumulative with and not exclusive of the rights, powers and remedies provided by law independently of this Agreement.[15]
[15] GAB 410; see Primary reasons [130].
Clause 11(a), cl 15.5 and cl 15.12, like cl 8, were inconsistent with Mr Wilson's 'trees first' recovery assumption. Clause 15.3 was relevant so far as certain variations to the terms of the written loan agreement were reflected in a formal deed of variation entered into in February 2016. In this respect, inconsistently with Mr Wilson's contention by way of defence in the proceedings, the parties did observe the strict legal formalities prescribed by the loan agreement.
The final area of factual context that ought to be discussed at the outset is Arwon's loan recovery practice and policy. Mr Wilson's contended for 'trees first' recovery assumption relied heavily on this matter.
Mr Wilson gave evidence by witness statement, which was accepted by the learned primary judge, that Arwon had a historical practice from 2000 - which was still in existence in mid-2014 - which was applied to all borrowers regardless of their financial status or investor status. That practice was consistent with and became formalised by a 2013 document entitled 'Policy and Procedures' as referred to at [23] - [28] below.[16] As will be seen, this provided for Arwon to first realise its security, foreclosing on the borrower grower's sandalwood plantation woodlot, in preference to debt recovery action as a first step. While not referred to by the learned primary judge, Mr Wilson gave other oral evidence to similar effect.[17]
[16] Primary reasons [155] - [156]. See also Primary reasons [162] - [172].
[17] See eg ts 105 - 106 ('Arwon always … no exception, applied to foreclose the loan'). See also ts 110, 114, 121 - 122, 152.
Mr Wilson also referred to an external report - the 'Moelis report' - which resulted in a strategic shift in Quintis' business model to increase its ownership of sandalwood plantation assets. Foreclosure on Arwon loans, and the resultant transfer of borrower grower's sandalwood plantation woodlots to Quintis group entities, was suggested to be consistent with that shift in business strategy.[18]
[18] Primary reasons [144] - [153]. The pursuit of a business strategy involving an increase in Quintis' ownership of sandalwood plantation holdings was common ground: Primary reasons [77]. See also Primary reasons [163] - [164].
The more significant matter was the document entitled 'Policy and Procedures' which addressed Arwon's lending policy and loan arrears collections and enforcements.[19] The learned primary judge referred to this document as being relied on by Mr Wilson as establishing (or embodying in the sense of codifying) Arwon's inflexible recovery approach in only ever applying the 'trees first' security realisation policy against defaulting debtors.[20] The document is undated. The learned primary judge appears to have accepted that it was created in 2013.[21]
[19] GAB 464 - 474. See Primary reasons [123].
[20] Primary reasons [103(c)], [120] - [121].
[21] Primary reasons [121].
One issue at trial was whether Arwon, by its board, ratified the Policy and Procedures document. The learned primary judge concluded that Arwon's board merely noted the document on the board's regular action item list.[22]
[22] Primary reasons [122].
The Policy and Procedures document commences with a heading 'Lending Policy - General Terms & Conditions'. There is reference to a preferred maximum amount of $1 million (par 1.1.1). Mr Wilson's loan, being for an amount of in excess of $13 million, was for a large multiple of the preferred maximum amount. The document says that loans for larger amounts will be considered in 'special circumstances'. Presumably, the loan to Mr Wilson was a special circumstance. What implications, if any, this had for the application of the policy and procedures referred to more generally in the Policy and Procedures document was not raised with Mr Wilson in cross-examination.
Part 7 of the Policy and Procedures document is headed 'Loans Arrears - Collections and Enforcement'. It then provides for an 'arrears management timeline'. Where a default is at 210 days or greater the document states as to relevant action:
Arrange transfer of woodlot/s ownership to Arwon
Determine valuation of woodlot/s (as per adopted method) and seek approval from CEO / CFO in respect to:
(a)Shortfall in assessed woodlot/s value to Arwon Loan - Write off net Arwon Loan or take further legal action for recovery from borrower/s and/or guarantor/s.
(b)Surplus in assessed woodlots / value to Arwon Loan - Return of surplus funds to borrower/s.
Arrange transfer of woodlots to [Quintis][23]
[23] GAB 470.
Notes referred to various assumptions including that any proceedings were not defended and that the loan was not the subject of an agreement to accept the secured property in full and final payment for the outstanding loan amount. Elsewhere the Policy and Procedures document made reference to enforcement (par 7.3), bankruptcy (par 7.5) and insolvency (par 7.6). As to enforcement, the Policy and Procedures document stated:
If the debt has not been cleared, including principal, interest, fees and collection/recovery costs, then further action against the Borrower(s)(s) [sic] and/or Guarantor(s) should be evaluated from the perspectives of viability of recover [sic] and cost effectiveness.
At trial Mr Wilson asserted that the action items in the arrears management timeline were consistent with his suggested inflexible 'trees first' recovery policy. Mr Wilson contended that there was no discretion for the CEO or the Chief Financial Officer to not follow the policy.[24] However, the learned primary judge found that the Policy and Procedures document was no more than an internal procedure document.[25] It was no more than what it presented to be on its face, namely, a policy.[26] His Honour rejected, as illogical and commercially untenable, that the policy and procedures provided for in the document were set in stone and incapable of being departed from across the lifetime of any loan.[27] The learned primary judge found, in terms that are unchallenged on appeal, that the Policy and Procedures document was not a manifestation of an inflexible and universally applied 'trees first' recovery policy on the part of Arwon.[28]
[24] Primary reasons [124] - [125].
[25] Primary reasons [126], [128].
[26] Primary reasons [156].
[27] Primary reasons [126], [127]. See also Primary reasons [156].
[28] Primary reasons [128]. See also Primary reasons [156], [172].
There were, however, public statements of Arwon's loan recovery policy. As the learned primary judge noted,[29] Quintis' annual report for the year ended 30 June 2013 stated:
On default on payment of a debtor the Group's policy is to extinguish the receivable and to reclaim the underlying security being the sandalwood plantation. This plantation's fair value is recognised on the same valuation principles outlined in note 12 (Biological Assets) of these financial statements. Any difference between the fair value and extinguished receivable is recognised as a gain on settlement of trade debtor in the statement of profit or loss.[30] (emphasis added)
[29] Primary reasons [165].
[30] GAB 327. There is a similar statement in Quintis' annual report for the year ended 30 June 2014: GAB 576. However, that post-dates the date of the contended for 'trees first' recovery assumption.
Later in the same report, in a note to the financial statements addressing financial risk management, Quintis stated:
In event of any default by an investor in a plantation investment, [Quintis] will seek to recover the outstanding amount by undertaking normal debt recovery procedures, but if necessary take possession of part or all, of the underlying plantation and either retain ownership or seek to on-sell.
Credit risk in trade receivables is managed in the following ways:
- a risk assessment process is completed before granting loans to customers
- timber lots are not allocated to an investor until the minimum initial payment is received;
- payment terms are 30 days, unless 12 month payments terms are granted, in which case a signed payment plan commitment is obtained from the customer, and
- if any defaults are recognised the company can claim on its security by reclaiming the underlying sandalwood lot.[31] (emphasis added)
[31] GAB 358. See also GAB 247. There is a similar statement in Quintis' annual report for the year ended 30 June 2014: GAB 609. However, that post-dates the date of the contended for 'trees first' recovery assumption.
There is some inconsistency between the two statements reproduced at [29] and [30] above. The latter, but not the first, refers to undertaking normal debt recovery proceedings. The learned primary judge did not refer to the latter statement and did not seek to reconcile the inconsistency between the two statements. Nor does it appear that the latter statement was brought to Mr Wilson's attention in the course of cross-examination. The earlier statement, and part but not the whole of the latter, were referred to by Mr Wilson in the witness statement that stood as Mr Wilson's evidence-in-chief.[32] Mr Wilson omitted any reference to Arwon seeking to recover by undertaking normal debt recovery proceedings.
[32] Exhibit 1 pars 99 - 100 GAB 135.
The learned primary judge appears to have accepted that, as a matter of routine practice, the Quintis group preferred to first realise its security rather than embarking on a personal recovery action against a defaulting grower.[33] However, his Honour also found that:
1.The Quintis' group preference was not some act of generalised waiver limiting Arwon's recovery options for the future against all its borrowers generally.[34]
2.Arwon had never suggested to borrowers generally 'some truncation' in the loan recovery remedies available to it in the event of future default.[35]
3.The loan recovery approach favoured by Arwon while Mr Wilson was on its board had not been established, inflexibly, as the only and invariable debt recovery strategy to be applied forever with no room for discretionary application of a different approach (as available under the relevant loan agreement) should Arwon see fit as regards a particular defaulting borrower.[36]
[33] Primary reasons [157]. But compare Primary reasons [158] where the primary judge puts this in terms of assumption rather than a finding as to the Quintis group practice.
[34] Primary reasons [157].
[35] Primary reasons [157].
[36] Primary reasons [158]. See also Primary reasons [156], [172].
Those findings were not challenged on the appeal.
Mr Wilson's pleaded defence
The learned primary judge identified, in broad terms, the nature of Mr Wilson's recoverability assumption and the promissory estoppel defence advanced at trial.[37] His Honour then developed at some length Mr Wilson's pleaded defence and Arwon's reply to the defence.[38] None of his Honour's consideration of the pleaded case is challenged in the appeal. What follows is only that as is necessary to put in context the issues raised in the appeal.
[37] Primary reasons [25] - [30], [48] - [55].
[38] Primary reasons [56] - [82].
The substance of the defence was as follows:
1.Mr Wilson asserted that Arwon had a policy, invariably applied, in relation to recovery of defaulting borrowers' loans: the so-called 'trees first' recovery policy.[39] Mr Wilson relied on three matters in asserting that he understood that there was such a policy and that it would apply to him in relation to the loan agreement:[40]
[39] Primary reasons [25], [50].
[40] Appeal ts 5 - 6, 11- 12, 21.
(a)Arwon's past practice in relation to defaulting borrowers (in particular since 2007);[41]
[41] See Appellant's consolidated third amended defence dated 29 April 2019 pars 2(a)(i), 2(b)(i) BAB 93 - 95.
(b)the 2013 document entitled 'Policy and Procedures' (as referred to at [23] - [28] above) - which was said to manifest Arwon's inflexible and universally applied 'trees first' recovery policy;[42]
(c)discussions between Mr Wilson and officers of Arwon immediately prior to execution of the loan agreement.[43]
2.Mr Wilson claimed that, because of Arwon's prior conduct in this regard, he was led to assume that Arwon would always follow the 'trees first' recovery policy on default - without exception - as it was an inflexible and rigidly applied strategy. In entering into the loan agreement Mr Wilson assumed that the 'trees first' recovery policy would apply to him and that it would trump the terms of the written loan agreement.[44]
3.The consequences of the assumption were twofold. Mr Wilson claimed to have been led by Arwon's conduct to believe that notwithstanding the written terms of the loan agreement:[45]
(a)he could only be pursued personally as a debtor for a residual shortfall amount after first being credited with the value of Arwon's security in respect of his woodlots; and
(b)if there was no shortfall after such realisation of the security there could be no personal pursuit of Mr Wilson as a debtor (there being be no residual indebtedness to pursue).
4.Mr Wilson asserted that, as the proceedings constituted a departure from the 'trees first' recovery policy, there had been unconscionable conduct on the part of Arwon. It was alleged to be detrimental to Mr Wilson to pursue him personally for the debt under the loan agreement without first foreclosing against and crediting Mr Wilson with the ascertained value of his sandalwood trees.[46]
[42] Primary reasons [128].
[43] See Appellant's consolidated third amended defence dated 29 April 2019 par 2(b)(iii)(C) BAB 96.
[44] Primary reasons [25] - [26], [32], [51] - [52], [103(b)].
[45] Primary reasons [27].
[46] Primary reasons [29], [53].
According to Mr Wilson, the ascertained value of Arwon's security over the sandalwood trees was to be determined in accordance with a fixed valuation formula for 'Self-Generating and Regenerating Assets' known as the SGARA.[47]
[47] Primary reasons [27], [30], [53]. See Primary reasons [150] for an explanation of the SGARA.
On Mr Wilson's case, applying the SGARA formula, the value of Mr Wilson's interest in the sandalwood plantation trees the subject of his woodlots exceeded $18 million. Thus the value of the security was more than the outstanding debt pursuant to the loan agreement. There would be no residual shortfall if Arwon foreclosed on its security and credited Mr Wilson with that value in reduction of the debt under the loan agreement. On that basis the alleged promissory estoppel was said to provide a complete defence to Arwon's claim.[48]
[48] Primary reasons [30].
Turning, then, to the precise terms of Mr Wilson's pleading, the defence referred to the 'Plaintiff's Loan Policy' as a defined term in this way:
[T]he plaintiff did not seek to recover [debts under loan agreements such as Mr Wilson's loan agreement with Arwon] except by recourse only to the Security Interest [ie the security interest granted under the various loan agreements] … in the Collateral [ie the relevant investor's right, title and interest in relation to his or her woodlots including the sandalwood trees and the product produced therefrom] … granted by that investor in circumstances where the value of the Collateral exceeded the debt … [49]
[49] Appellant's consolidated third amended defence dated 29 April 2019 par 2(a)(i) BAB 93 - 94. See Primary reasons [60].
The promissory estoppel defence as pleaded then proceeded as follows at par 2(a) of the defence:
(ii)the defendant assumed that the plaintiff would apply the Plaintiff's Loan Policy to the legal relationship between the defendant and the plaintiff such that if there was an event of default with respect to the Loan Agreement the plaintiff would seek to recover the Secured Monies (as defined in the Loan Agreement) (Secured Monies) by having first recourse to the Security Interest in the defendant's collateral and would only seek to recover personally from the defendant to the extent that the value of the defendant's Collateral was less than the Secured Monies (the Recoverability Assumption);
(iii)the defendant entered into the Loan Agreement in reliance on the Recoverability Assumption and would not have entered the Loan Agreement but for the Recoverability Assumption (the Defendant's Reliance on the Recoverability Assumption); and
(iv)the value of the defendant’s Collateral exceeds the value of the Secured Monies;[50]
[50] Appellant's consolidated third amended defence dated 29 April 2019 par 2(a)(ii) - (iv) BAB 93 - 94. See Primary reasons [69].
Paragraph 2(a)(ii) pleads the contended for assumption said to found the defence; par 2(a)(iii) pleads Mr Wilson's asserted reliance on the assumption. Paragraph 2(a)(iv) alleges as fact the relevant circumstance which would, if Arwon was estopped from resiling from the contended for assumption, prevent Arwon from ever pursuing Mr Wilson for the debt under the loan agreement.
On appeal Mr Wilson summarised the contended for assumption as follows. If Arwon sought to recover money advanced under the loan agreement, it would do so by first transferring the secured woodlots to Quintis. In the event that, having regard to the SGARA valuation, the value of the transferred woodlots was less than the secured money, the balance owing would be payable by Mr Wilson.[51] In other words, by reason of Arwon's conduct in respect of its loan recovery policy and practice, in the event of a future default by Mr Wilson, Arwon's first recourse would be to its security interest; Arwon would only proceed against Mr Wilson personally if and to the extent that the value of the security was less than the debt.
[51] Appellant's submissions par 25 WAB 14.
Mr Wilson pleaded that Arwon induced or acquiesced in the assumption and his reliance on the assumption.[52] Mr Wilson alleged that:
1.Arwon applied the loan policy since 2007.[53]
2.Arwon knew that Mr Wilson held the assumption and relied on the assumption.[54]
3.Despite such knowledge, Arwon remained silent and did not correct the assumption or Mr Wilson's reliance on the assumption before entry into the loan agreement.[55]
[52] Appellant's consolidated third amended defence dated 29 April 2019 par 2(b) BAB 94. See Primary reasons [74].
[53] Appellant's consolidated third amended defence dated 29 April 2019 par 2(b)(i) BAB 95. See Primary reasons [74].
[54] Appellant's consolidated third amended defence dated 29 April 2019 par 2(b)(ii) - (iii) BAB 95 - 97. See Primary reasons [74].
[55] Appellant's consolidated third amended defence dated 29 April 2019 par 2(b)(iv) BAB 97. See Primary reasons [74].
The pleaded case as to detriment was relatively sparse. Mr Wilson:
[said] further that if the plaintiff is permitted to depart from the Recoverability Assumption, the defendant will suffer detriment to the extent that the plaintiff is permitted to seek to recover any outstanding debt from him instead of seeking recourse only to the Security Interests in the Collateral;[56]
[56] Appellant's consolidated third amended defence dated 29 April 2019 par 2(c) BAB 97. See Primary reasons [78].
However, at trial then senior counsel for Mr Wilson accepted that the reference to 'only' went too far. The estoppel applied absolutely if the security value was greater than the debt but not otherwise. The case advanced at trial was that Arwon was only allowed to pursue Mr Wilson personally after it was ascertained whether the debt was greater than the security value; and, then, only if and to the extent that the debt was greater than the security value.[57]
[57] Primary reasons [79], [81].
Particulars were sought and provided as to the alleged detriment. As so particularised:
The detriment [Mr Wilson] will suffer, to the extent that [Arwon] is permitted to seek to recover any outstanding debt from him instead of seeking recourse only to the Security Interests in the Collateral, is:
(a)financial loss by reason that the financial value of the Security Interest in the Collateral is likely to be in excess of the money allegedly owed by [Mr Wilson] to [Arwon] under the Loan Arrangement;
(b)his legal and other costs of defending these proceedings; and
(c)further particulars will be provided following discovery and expert evidence.[58]
[58] Appellant's answers to the respondent's request for further and better particulars dated 15 November 2018 answer 1 BAB 100. See Primary reasons [80].
No additional particulars were provided.[59] At trial, although more relevant to the question of reliance, a submission was made on detriment that Mr Wilson would not have entered into the loan agreement but-for the 'trees first' recovery assumption.[60] If, however, Arwon was now permitted to depart from that assumption, it was contended for Mr Wilson that he would be forced to repay the entire amount of the loan without Arwon first having recourse to the security.[61] The detriment was said to be that Mr Wilson would have to pay the whole of the debt from his own funds and - were Mr Wilson to sell the woodlots to do so rather than Arwon having recourse to its security and simply crediting Mr Wilson with the value of the security - he would have to undertake the inconvenience and expense of finding a purchaser (all the while continuing to accrue interest and, presumably, other costs in maintaining the investment).[62]
[59] Primary reasons [80].
[60] ts 185.
[61] ts 186.
[62] ts 188.
The reasoning of the learned primary judge
One of Mr Wilson's grounds of appeal asserts that the learned primary judge's reasons were inadequate. Accordingly, it is necessary to outline his Honour's reasoning process in more detail than might otherwise be the case. It is convenient to do so under two headings. The first addresses the learned primary judge's reasons as a whole. The second is confined to the findings that his Honour made in relation to Mr Wilson as a witness. The latter are particularly significant so far as ground 5 - 7 challenge the factual findings of the learned primary judge.
The structure and essential components of the learned primary judge's reasons
The learned primary judge provided some uncontroversial background to the proceedings[63] and then identified the essential nature of Mr Wilson's promissory estoppel defence.[64] Before turning to the pleadings[65] (already discussed at [34] - [46] above), his Honour addressed Mr Wilson's antecedents and his various roles within the Quintis group and Arwon.[66] His Honour observed, in colloquial terms, that Mr Wilson was on 'both sides' of the loan transaction[67] and that Mr Wilson's 'trees first' recovery assumption was founded on knowledge obtained as an officer of Arwon and the Quintis group of companies.[68]
[63] Primary reasons [1] - [23].
[64] Primary reasons [24] - [32], [48] - [55].
[65] Primary reasons [56] - [82].
[66] Primary reasons [34] - [45].
[67] Primary reasons [44].
[68] Primary reasons [48] - [55]. See also at [62] - [63], [68], [74], [167], [172], [174], [190].
The learned primary judge identified that Mr Wilson's assumption as pleaded relied on conduct as to Arwon's recovery dealings with other investors as leading to the alleged assumption. There was no representation, either express or implied, by Arwon to Mr Wilson - Mr Wilson instead argued that he was led, by Arwon's conduct, to assume that a 'trees first' recovery policy would always be followed in all circumstances of default and without any possibility of exception. However, his Honour also found that a promissory estoppel could arise in the absence of a representation.[69] The learned primary judge was correct to do so. For the purpose of the doctrine of promissory estoppel a relevant assumption or expectation may arise outside of a promise or representation.[70]
[69] Primary reasons [64], [91] - [92], [168].
[70] See eg Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387, 427 - 428.
Following his review of the pleaded case, the learned primary judge addressed the principles applying to the equitable doctrine of promissory estoppel.[71] It will be necessary to return to aspects of this in addressing ground 1. His Honour then identified and discussed three key areas of factual context: the transaction as a whole and the application for a private taxation ruling in particular;[72] the terms of the written loan agreement;[73] and Arwon's loan recovery policy and procedure.[74] These matters, and the relevant conclusions of the learned primary judge in respect of them, have been considered previously.
[71] Primary reasons [84] - [101].
[72] Primary reasons [103(a)], [104] - [119].
[73] Primary reasons [103(b)], [130] - [135].
[74] Primary reasons [103(c)], [120] - [129]. See also Primary reasons [154] - [158].
In the course of exploring those factual matters the learned primary judge made several findings as to Mr Wilson's evidence. These will be returned to in the next section of these reasons. His Honour then embarked on a careful and detailed consideration of Mr Wilson's evidence. That consideration was primarily by reference to the witness statement that stood as Mr Wilson's evidence-in-chief. However, as necessary, his Honour considered additional matters arising in cross-examination and on the documentary evidence.[75]
[75] Primary reasons [136] - [207].
Along the way, the learned primary judge rejected a number of critical aspects of Mr Wilson's evidence. Relevantly:
1.In terms that have already been discussed (see [28] and [32] above), his Honour rejected Mr Wilson's suggestion that Arwon's loan recovery practice and procedure was an inflexible and invariable strategy to be applied forever without room for discretionary application of a different approach should Arwon see fit.[76]
2.The learned primary judge expressly rejected Mr Wilson's evidence to the effect that:
(a)it was his (Mr Wilson's) understanding in entering into the loan agreement that in the event of default Arwon would first foreclose on Mr Wilson's sandalwood plantation woodlots;[77]
(b)that understanding was 'the' (or 'a') 'major influencer' in his decision to borrow from Arwon;[78]
(c)had he (Mr Wilson) been told that Arwon would sue him personally in the event of default, rather than having first recourse to its security, Mr Wilson would not have proceeded with the investment.[79]
[76] Primary reasons [158]. See also Primary reasons [172].
[77] Primary reasons [183], [187]. See Exhibit 1 par 144 GAB 141 (referred to at Primary reasons [186]).
[78] Primary reasons [187], [189]. See Exhibit 1 par 145 GAB 141 (referred to at Primary reasons [186]).
[79] Primary reasons [191]. See Exhibit 1 pars 146 GAB 141 (referred to at Primary reasons [186]).
The learned primary judge rejected the evidence of Mr Wilson's 'understanding' (in substance his evidence that he held the 'trees first' recoverability assumption) on the basis that it was implausible.[80] His Honour considered it more probable that Mr Wilson did not direct his mind at all to what might happen on default, it being the furthest thing from his mind given his senior management position and Mr Wilson's status as an enthusiastic supporter and investor in Quintis' tax effective products.[81] The reliance evidence (that the alleged understanding was a major influencer) was 'unreliable, implausible, self-serving and inconsistent with' Mr Wilson's true motivation: to obtain an immediate income tax deduction by making an investment on the last day of the 2014 income year.[82] The rejection of Mr Wilson's hypothetical evidence as to what he would have done had he been told that Arwon would sue him personally, rather than resort to the security and credit Mr Wilson with the value of the sandalwood investment, was rejected for the same reasons.[83]
[80] Primary reasons [187].
[81] Primary reasons [183], [187].
[82] Primary reasons [189].
[83] Primary reasons [191].
The learned primary judge also referred to portions of Mr Wilson's witness statements where he recounted conversations between himself and two officers of Quintis that occurred before entry into the loan agreement. On Mr Wilson's evidence, he (Mr Wilson) asked the officers whether he was getting the 'same deal' as all the other borrowers. Mr Wilson was told that he was not getting any less favourable terms.[84] The learned primary judge found that the evidence was vague[85] and not directed to the 'trees first' recovery assumption as pleaded.[86] While his Honour did not reject the evidence as to the conversations having occurred, his Honour found Mr Wilson's professed focus on borrowing terms (ie interest rate, term of loan and mixture of principal and interest repayments) to be insightful. Having regard to that, and the cross-examination as a whole, the learned primary judge found - in a finding that is unchallenged on appeal - that at the relevant time Mr Wilson was 'not at all' focussed on his potential exposure as a borrower on default. This, on his Honour's unchallenged finding, would have been the furthest thing from Mr Wilson's mind. The learned primary judge rejected Mr Wilson's evidence to the extent he suggested otherwise.[87]
[84] Primary reasons [177]. See Exhibit 1 pars 138 - 142 GAB 140 - 141.
[85] Primary reasons [181], [184].
[86] Primary reasons [182], [185].
[87] Primary reasons [183]. See also Primary reasons [187].
Separately, the learned primary judge concluded that if, in fact (ie contrary to his Honour's rejection of Mr Wilson's evidence), such an 'understanding' was an 'influencer', then the understanding was an uncommercial and unreasonable one for Mr Wilson to have then held.[88] His Honour held that Mr Wilson, as a lawyer, knew or ought to be taken to know what had been agreed by the terms of the loan agreement.[89]
[88] Primary reasons [190]. See also Primary reasons [191].
[89] Primary reasons [192]. See also Primary reasons [190].
As to the value of his woodlots, Mr Wilson relied on a document provided to him by Quintis. However, this was issued only for insurance purposes. The learned primary judge found that it could not be relied on for other purposes.[90] Accordingly, Mr Wilson could not make out that part of his defence as pleaded at par 2(a)(iv) (ie that the value of the collateral exceeded the amount of the debt).[91]
[90] Primary reasons [200] - [201].
[91] See [39] above.
Based on the foregoing, the learned primary judge stated that he would assess Mr Wilson's promissory estoppel defence as failing on the basis of his evidence-in-chief alone.[92] At the appeal hearing senior counsel for Arwon relied on this statement as a finding that Mr Wilson's case failed even if Mr Wilson's evidence-in-chief was accepted.[93] That is not what the learned primary judge intended to convey. Had Mr Wilson's evidence-in chief been accepted at face value there would have been findings that the contended for 'trees first' recovery assumption, and reliance thereon, were proven. In context his Honour was observing that, having regard to the findings he had already made in relation to - and in part rejecting - Mr Wilson's evidence-in-chief, the promissory estoppel defence could not succeed.
[92] Primary reasons [208]. See also Primary reasons [215].
[93] Appeal ts 71 - 72.
The learned primary judge went on, however, to make further findings about the reliability of Mr Wilson's evidence at trial.[94] Those findings are considered in the next section of these reasons.
[94] Primary reasons [209] - [214].
The learned primary judge made a series of findings by way of conclusion. In substance his Honour concluded:
1.The 'trees first' recovery assumption was not proved.[95] His Honour considered that it only emerged in the circumstances of Mr Wilson's default having then ceased to hold office as a director of Quintis and Arwon.[96]
2.If, however, the contended for assumption was held, it was unreasonably reached and was an unreasonable assumption for Mr Wilson to hold in all the circumstances.[97]
3.In all the circumstances Mr Wilson had not proven that he had relied on the contended for 'trees first' recovery assumption.[98]
4.By its prior recovery conduct, Arwon made no relevant contribution towards encouraging, acquiescing in, ratifying or providing to Mr Wilson any reasonable basis for him to hold the contended for 'trees first' recovery assumption.[99] (No specific ground of appeal was directed to this finding. At the appeal hearing senior counsel for Mr Wilson suggested that this finding, at [217(d)] of the primary reasons, stood or fell with the findings challenged at [217(b)] of the primary reasons and invited the court to read grounds 4, 5 and 6 as also challenging the finding at [217(d)].)[100]
5.Mr Wilson had not established that Arwon's debt recovery action amounted to relevant detriment.[101] The learned primary judge stated that Mr Wilson had not provided a persuasive basis to suggest how he was disadvantaged by the debt recovery action insofar as, on his case, the value of the sandalwood plantation woodlots substantially exceeded the amount of the debt.[102] His Honour considered that Mr Wilson looked to be more disadvantaged under a foreclosure scenario.[103]
[95] Primary reasons [217(b)]. See also Primary reasons [217(d)].
[96] Primary reasons [217(b)].
[97] Primary reasons [217(b)].
[98] Primary reasons [217(c)].
[99] Primary reasons [217(d)]. In context the finding is directed to the inducement and acquiescence plea referred to at [42] above.
[100] Appeal ts 3 - 4.
[101] Primary reasons [218].
[102] Primary reasons [216].
[103] Primary reasons [216].
It is not clear whether the learned primary judge made any relevant findings as to whether, assuming (contrary to the findings referred to at [59.1] and [59.3] above) the contended for assumption was held and relied on, Arwon knew of those matters. It is possible that an adverse finding in this respect is subsumed in the finding referred to at [59.4] above. However, on appeal Arwon did not contend this to be the case. Nor was it suggested that the finding referred to at [59.4] above stood in the way of the appeal being allowed if Mr Wilson was successful on his various grounds. In the circumstances we would not rely on the finding referred to at [59.4] above as answering Mr Wilson's plea as to Arwon's knowledge (see [42.2] above).
The learned primary judge's consideration of Mr Wilson's evidence
The learned primary judge made a number of adverse findings in relation to Mr Wilson's evidence. In these respects it is plain that the learned primary judge considered Mr Wilson to be an unsatisfactory witness.
As to whether Mr Wilson had signed a declaration as contemplated by the application for a private taxation ruling, his Honour found Mr Wilson's answers 'vague and unsatisfactory' and concluded that Mr Wilson was 'seeking to obfuscate'.[104] The learned primary judge recorded his impression that Mr Wilson 'strained unconvincingly' to distance himself from - or to diminish personal responsibility for - the content of the application as lodged on his behalf.[105] The evidence was said to be 'less than impressive' and indicative of a 'strong effort' to avoid direct personal responsibility for obligations where that end served Mr Wilson's purpose.[106]
[104] Primary reasons [112].
[105] Primary reasons [113].
[106] Primary reasons [114].
Having regard to Mr Wilson's evidence as to Arwon's loan recovery policy - in substance that Arwon's inflexible first recovery action was recourse to its security by way of foreclosure against the secured sandalwood plantation assets before any personal recourse - the learned primary judge was critical of the lack of disclosure made by Mr Wilson to the ATO.[107] His Honour considered that it was 'less than a fulsome disclosure'[108] and that the position as advanced in support of Mr Wilson's defence was 'well out of alignment with the presentation of Mr Wilson's borrowing arrangements with Arwon to the ATO'[109] (as to which see [12] - [13] above).
[107] Primary reasons [116] - [118].
[108] Primary reasons [116].
[109] Primary reasons [116].
In this respect there is, in our view, considerable force in the learned primary judge's observation - unchallenged by any ground of appeal - that:
such a significant and inflexible Arwon loan recovery policy (which Mr Wilson described in his evidence as a policy of Arwon that 'effectively trumped what is contained in clause 8 [of the loan agreement] or gave priority to ... what is in clause 8(c)' (ts 104)) ought to have been fully explained and disclosed to the ATO.[110]
[110] Primary reasons [118].
While not expressly mentioned by the learned primary judge, the inadequate disclosure in this respect had two forensic implications. First, it told on Mr Wilson's credit in a general sense. Second, it impacted on the reliability of Mr Wilson's evidence as to the holding of the contended for 'trees first' recovery assumption and his reliance thereon. It is, to say the least, unusual that an experienced taxation solicitor would make a statement or cause a statement to be made on his behalf to a taxation officer that is potentially misleading in a material particular by reason of omission. The absence of any reference to the alleged recovery policy was potentially so misleading in circumstances where: (1) the ATO was provided with the terms of the written loan agreement; (2) the application for a private taxation ruling was in terms that there was a full recourse loan (ie no 'non-recourse or limited recourse financing') where Mr Wilson was 'at risk' as to his financial obligations, there were no arrangements limiting risk and Arwon, as lender, had the capacity under the loan agreement and a genuine intention to take legal action; and (3) there was no qualification or clarification that informed the ATO that Arwon's ability to recover the debt under the loan agreement against Mr Wilson was subject to Arwon first realising its security and crediting Mr Wilson with the assessed value of the woodlots.
Indeed, in cross-examination Mr Wilson seemingly accepted that cl 8(c) was inaccurate and incomplete given the nature of the defence he was propounding in the proceedings. Mr Wilson suggested that, on reflection, the loan agreement should have made it clearer that cl 8(c) effectively trumped the other parts of cl 8 and that cl 8 was not how Arwon operated.[111]
[111] ts 108 - 109.
The alternate forensic possibility - and the one favoured by the learned primary judge given the findings that his Honour made in rejecting Mr Wilson's evidence (see [52] - [54], [59.1] above) - was that Mr Wilson did not hold the asserted 'trees first' recovery assumption and it was something that only emerged in answer to the debt recovery proceedings commenced by Arwon. This, in our view, is what underpins the observations of the learned primary judge as reproduced at [63] and [64] above. The absence of any relevant disclosure, given what was stated in the application for a private taxation ruling and Mr Wilson's background, was inconsistent with Mr Wilson holding the contended for 'trees first' recovery assumption on entry into the loan agreement: had the assumption been held the expectation is that it would have been fully disclosed and explained to the ATO. The lack of disclosure supported his Honour's eventual rejection of Mr Wilson's evidence as to his professed 'understanding'.
In addition to the learned primary judge expressly rejecting key parts of Mr Wilson's evidence in support of the promissory estoppel defence, his Honour found fault with Mr Wilson's evidence in that:
1.There were inaccuracies in Mr Wilson's witness statement that were exposed in cross-examination.[112]
2.In cross-examination Mr Wilson responded with 'bravado' when questioned as to Arwon's historical loan recovery practices.[113]
3.His Honour assessed Mr Wilson as seeking to elevate the status of the 2013 document entitled 'Policy and Procedures' to advance his cause.[114]
[112] Primary reasons [141], [152].
[113] Primary reasons [119].
[114] Primary reasons [126]. See also Primary reasons [128].
More generally, reflecting on Mr Wilson's evidence after considering his cross-examination, the learned primary judge expressed doubts as to the reliability of Mr Wilson's evidence: his Honour concluded that he viewed all of Mr Wilson's evidence cautiously.[115] Specifically, so far as Mr Wilson gave self-serving evidence, his Honour was cautious about assessing that evidence unless corroborated from a reliable documentary source.[116] Among other things the learned primary judge had a significant concern that Mr Wilson lacked capacity to draw an appropriate line between his personal interests (as investor and borrower) and his obligations as a former board member and officer of Quintis and Arwon.[117]
[115] Primary reasons [209].
[116] Primary reasons [210].
[117] Primary reasons [211].
The learned primary judge plainly formed an impression of the quality and reliability of Mr Wilson's evidence having seen and heard him give evidence at trial. His Honour stated:
Mr Wilson had presented as a witness at trial as a highly self-assured man. He appeared as thoroughly convinced of the righteousness of his position and of, in effect, of what he saw as the discriminatory conduct taken against him by his being exposed to a personal recovery suit pursued against him for his debt. At times, Mr Wilson gave evidence in sweeping fashion, lapsing into broad statements of generality. But some generalisations came to be exposed by cross-examination as lacking in supporting factual detail. Mr Wilson struggled when pressed for the detail and when exposed would seek to obfuscate.[118]
[118] Primary reasons [212]. (As to the finding of obfuscation, the primary judge referred to ts 113 - 114.)
By way of conclusion as to his impressions of Mr Wilson's evidence, the learned primary judge criticised Mr Wilson's evidence in two particular respects. First, his Honour essentially repeated his earlier observations as to Mr Wilson's evidence concerning the application for a private taxation ruling - evidence the learned primary judge described as being 'highly unconvincing'.[119] Second, and most importantly, in what his Honour described as being the 'key areas' of Mr Wilson's evidence as regards the promissory estoppel defence, the learned primary judge did not assess Mr Wilson's evidence as being reliable.[120] While his Honour did not further describe those key areas, it is clear, reading the primary reasons as a whole, that his Honour intended this to include Mr Wilson's evidence as to holding the contended for 'trees first' recovery assumption (ie Mr Wilson's alleged 'understanding') and his reliance on the alleged assumption in entering into the loan agreement (ie Mr Wilson's alleged 'major influencer'). That is evident in as much as his Honour expressly rejected those parts of Mr Wilson's evidence-in-chief.
[119] Primary reasons [214].
[120] Primary reasons [213].
The grounds of appeal
There are seven grounds of appeal. (Originally there were nine; two were abandoned at the appeal hearing.)[121] They fall into three categories: (1) alleged errors of law in his Honour's approach to the promissory estoppel defence; (2) an alleged error of law in failing to give adequate reasons for finding that Mr Wilson did not hold the recoverability assumption; and (3) alleged errors of fact in the learned primary judge's determinations as to the various integers of the promissory estoppel defence.
[121] Appeal ts 55.
As to the alleged errors of law in assessing the promissory estoppel defence, the grounds advanced at the hearing were as follows:
1.The learned primary judge erred in law in concluding that a promissory estoppel can only arise where an assumption as to the future, contended by the person asserting an estoppel, was reasonable or reasonably based; Judgment [94] - [101], [164], [174], [175], [190], [217(b)].
9.The learned primary judge erred in law in concluding that a promissory estoppel cannot arise where the person asserting an estoppel is a director of a public company and makes an assumption as to the future based on 'inside' knowledge, being knowledge acquired by that person as a result of being a director of such publicly listed company; Judgment [167], [172], [190].
As will appear, only ground 1 had merit. Ground 9 attributes a finding to the learned primary judge that is not open on a fair reading of his Honour's reasons as a whole.
Ground 4 attacks the adequacy of his Honour's reasons:
The learned primary judge erred in law in failing to give adequate reasons for the finding that the assumption contended for by the Appellant (what his Honour referred to as the 'trees first recovery assumption') was not an assumption made and held by the Appellant as at 30 June 2014; Judgment [217(b)].
Then there are the grounds of appeal dealing with the learned primary judge's factual findings for rejecting the promissory estoppel defence:
5.In the alternative to ground 4, the learned primary judge erred in fact in finding that the Appellant had not made the 'trees first recovery assumption' as at 30 June 2014; Judgment [217(b)]. Such finding was against the weight of the evidence.
6.In the alternative to ground 5, the learned primary judge erred in fact in finding that the Appellant had not proved that he made the 'trees first recovery assumption' as at 30 June 2014; Judgment [217(b)]. Such finding was required by the evidence.
7.The learned primary judge erred in fact in finding that the Appellant did not rely on the 'trees first recovery assumption' in entering into the loan agreement on 30 June 2014; Judgment [217(c)]. Such finding was against the weight of the evidence.
8.The learned primary judge erred in fact in finding that had the Appellant made and relied on the 'trees first recovery assumption' in entering into the Loan Agreement with the Respondent on 30 June 2014, the resiling from such assumption by the Respondent would not cause a detriment to the Appellant; Judgment [218]. Such finding was against the weight of the evidence.
Grounds 5 and 6 may be considered together. Ground 5 alleges error in finding, positively, that Mr Wilson did not hold the contended for 'trees first' recovery assumption; ground 6 alleges error in not coming to the contrary conclusion - it is said that the learned primary judge was required to find that Mr Wilson held the 'trees first' recovery assumption. Grounds 7 and 8 deal with the finding made as to reliance and detriment but do not seek contrary findings.
Putting aside ground 4 (which would, if successful, result in the appeal being allowed), for the appeal to be upheld Mr Wilson must succeed on one or both of grounds 5 and 6 and each of ground 7 and ground 8.[122] That is so even if Mr Wilson succeeds on ground 1. Senior counsel for Mr Wilson suggested, however, that there were difficulties in untangling the learned primary judge's reasoning and the outcome on some grounds would necessarily impact on others, going so far as to submit that if Mr Wilson succeeded on ground 1 alone there would have to be a re-trial as the error represented by ground 1 infected the findings challenged by grounds 5 - 8.[123] We accept that success on ground 1 may inform grounds 5 and 6; and, similarly, the outcome on grounds 1, 5 and 6 may inform consideration of grounds 7 and 8. However, we reject any suggestion that ground 1 is automatically dispositive of any of grounds 5 - 8 or the appeal generally. When regard is had to the doctrine of promissory estoppel - and its various accepted integers - it is necessary for Mr Wilson to succeed on either ground 5 or 6, and to succeed on each of grounds 7 and 8, if he is to succeed on the appeal.
[122] A point accepted on behalf of Mr Wilson: Appeal ts 10.
[123] Appeal ts 10 - 11.
All of the grounds require an understanding of the law applying to equitable estoppel. Accordingly, it is convenient at the outset to mention the relevant principles as relied on by the parties.
The doctrine of promissory estoppel
In presenting Mr Wilson's appellant's case, senior counsel for Mr Wilson was at pains to distinguish between various forms of estoppel: common law estoppel as against estoppel in equity; estoppel by representation against estoppel by conduct; and promissory estoppel against proprietary estoppel. We did not understand senior counsel for Mr Wilson to suggest that this exhausted the taxonomic possibilities. For the purpose of this appeal senior counsel for Mr Wilson sought to emphasise equity's concern with conscience and what, on Mr Wilson's reading of the learned primary judge's reasoning process, was a lack of consideration of 'unconscientiousness'[124] on the part of Arwon.
[124] See eg Appeal ts 5, 7 - 8.
There is, as yet, no acceptance of a unifying overarching doctrine of estoppel in Australian law.[125] Moreover, distinctions are recognised even within the prescript of equitable estoppel.[126] However, this appeal does not require consideration of the doctrine of estoppel in all of its possible manifestations. Before the learned primary judge, and indeed on appeal, Mr Wilson's case was put in terms of an estoppel in equity relying on the doctrine of equitable promissory estoppel. It is unnecessary to consider any principles associated with some other species of estoppel.
[125] Giumelli v Giumelli [1999] HCA 10; (1999) 196 CLR 101 [7]; Sidhu v Van Dyke [2014] HCA 19; (2014) 251 CLR 505 [1] (fn 26); Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2016] HCA 26; (2016) 260 CLR 1 [37], [139], [217]. Compare Commonwealth v Verwayen [1990] HCA 39; (1990) 170 CLR 394, 410 - 411, 413, 432, 440, 445; but compare 454, 499 - 501.
[126] For example, in Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [141] Keane J accepted that the separate categories of promissory and proprietary estoppel allowed for different approaches to the determination of whether a defendant was responsible for creating an assumption or expectation in different contexts (see also [145] - [146], [148] - [149]). See also Nettle J at [215].
The doctrine of equitable promissory estoppel operates to prevent a party (who we will refer to as the 'charged party') unconscientiously departing from an assumption or expectation which it has induced another party (who we will refer to as the 'claimant') to adopt and to act in reliance on to its detriment. This court has previously approved the following summary of the principle:
[F]or there to be an equitable estoppel there must be the creation or encouragement of an assumption that a contract will come into existence or a promise be performed, and reliance upon that promise in circumstances where departure from the assumption by the [charged party] would be unconscionable.[127]
[127] Bell Group Ltd (in liq) v Westpac Banking Corporation [No 9] [2008] WASC 239; (2008) 39 WAR 1 [3543(e)]. The quotation is part of a substantially longer passage all of which has been referred to with approval in this court. See Australian Goldfields NL (in liq) v North Australian Diamonds NL [2009] WASCA 98; (2009) 40 WAR 191 [194]; Birla Nifty Pty Ltd v International Mining Industry Underwriters Ltd [2014] WASCA 180; (2014) 47 WAR 522 [110]. To similar effect see Commonwealth v Verwayen (444 par 2), (455 - 456).
Equitable estoppels (promissory and proprietary) are distinguished from common law estoppels by the circumstance that equitable estoppel is concerned with conscience - in particular with the prevention of unconscionable insistence on strict legal rights.[128] Thus it is said that the equitable doctrines result in new rights between the parties when it is unconscionable for a party to rely on his or her strict legal rights.[129] Nettle J has explained that the 'foundational principle on which equitable estoppel in all its forms is grounded is that equity will not permit an unjust or unconscionable departure from an assumption or expectation of fact or law, present or future, which that party has caused another party to adopt for the purpose of their legal relations'.[130]
[128] P Brereton Equitable Estoppel in Australia: The Court of Conscience in the Antipodes page 5. See also at pages 7, 11 - 12.
[129] Commonwealth v Verwayen (500). See also (436 - 437), (440 - 441).
[130] Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [213]. See also [211].
Equitable estoppel has its basis in unconscionable or unconscientious conduct - and preventing the suffering of detriment occasioned thereby - rather than making good assumptions or expectations or bringing about the enforcement of promises.[131] It is grounded in the body of equitable doctrine that prevents unconscientious assertion of claimed legal rights.[132] The fundamental object of equitable estoppel is to protect a claimant against unjust detriment which would flow from the charged party's change of position if the charged party were permitted to depart from an assumption or expectation held by the claimant as induced by the charged party's representation or conduct.[133] It is the action or inaction of the claimant as induced by the charged party which is the foundation for equitable intervention as '[i]t is not the breach of promise, but the promisor's responsibility for the detrimental reliance by the promisee, which makes it unconscionable for the promisor to resile from his or her promise'.[134] So understood, detriment is relevant both in establishing the basis for the estoppel and in determining the appropriate relief. It also demonstrates that, while distinct concepts, there is a relationship between detriment and unconscionability.
[131] Waltons Stores (Interstate) Ltd v Maher (405); Commonwealth v Verwayen (411), (429), (501).
[132] Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd [2014] HCA 14; (2014) 253 CLR 560 [86]. See also Commonwealth v Verwayen (428 - 429) where Brennan J summarises the effect of the judgments of the majority in Waltons Stores (Interstate) Ltd v Maher.
[133] Waltons Stores (Interstate) Ltd v Maher (404), (416), (418 - 419), (421), (423), (426 - 427), (453), (458); Commonwealth v Verwayen (409 - 411), (423), (453), (501); Sidhu v Van Dyke [1], [77], [82]; Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd [84] - [86]; Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [39], [139] - [141], [217] - [218]. See also Grundt v Great Boulder Pty Gold Mines Ltd [1937] HCA 58; (1937) 59 CLR 641, 674 - 675 (Dixon J's passage there being the source for many of the later statements as to the purpose of an estoppel).
[134] Sidhu v Van Dyke [58]. See also Giumelli v Giumelli [35].
More is required than simply a representation or conduct on the part of the charged party that induces the claimant to hold an assumption or expectation. A mere broken promise will not suffice.[135] In Waltons Stores (Interstate) Ltd v Maher Mason CJ and Wilson J stated:
[T]he doctrine of promissory estoppel … extends to the enforcement of voluntary promises on the footing that a departure from the basic assumptions underlying the transaction between the parties must be unconscionable. As failure to fulfil a promise does not of itself amount to unconscionable conduct, mere reliance on an executory promise to do something, resulting in the promisee [ie the claimant] changing his position or suffering detriment, does not bring promissory estoppel into play. Something more would be required … this may be found … in the creation or encouragement by the party estopped [ie the charged party] in the other party of an assumption that a contract will come into existence or a promise will be performed and that the other party relied on that assumption to his detriment to the knowledge of the first party.[136]
[135] Commonwealth v Verwayen (416).
[136] Waltons Stores (Interstate) Ltd v Maher (406).
In Waltons Stores (Interstate) Ltd v Maher four members of the High Court accepted that the elements of reliance and detriment may attract equitable intervention if it is unconscionable for a charged party to depart from an assumption or expectation he or she induced in the claimant.[137] More recently, Keane J has explained that, as the charged party is responsible for creating the assumption or expectation on which the claimant acted, an estoppel arises to prevent the claimant suffering a detriment.[138] So too Nettle J has emphasised the criticality of whether the charged party has played such a part in creating the assumption or expectation, in reliance on which the claimant has acted to his or her detriment, that it would be unconscionable for the charged party to depart from the assumption or expectation.[139]
[137] Waltons Stores (Interstate) Ltd v Maher (401), (404 - 405), (407 - 408) (Mason CJ and Wilson J); (419) Brennan J; (453) Deane J. Gaudron J relied on common law estoppel rather than equitable estoppel.
[138] Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [141].
[139] Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [211], [217], [221].
The determination of whether it is unconscionable for the charged party to depart from an assumption or expectation created in the mind of the claimant depends on the facts and circumstances of the case.[140]
[140] Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [217]. See also Commonwealth v Verwayen (444 par 4).
In Western Australia it has been fashionable to identify the requirements for the doctrine of promissory estoppel by reference to a re-formulated paraphrasing of the criteria enunciated by Brennan J in Waltons Stores (Interstate) Ltd v Maher.[141] They are:
1.The plaintiff [ie the claimant] has assumed that a particular legal relationship then existed between the plaintiff and the defendant [ie the charged party] or has expected that a particular 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 has acted or abstained 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.
6.The defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise.[142]
[141] Waltons Stores (Interstate) Ltd v Maher (428 - 429).
[142] Bell Group Ltd (in liq) v Westpac Banking Corporation [No 9] [3539] (again part of the passage referred to with approval in Australian Goldfields NL (in liq) v North Australian Diamonds NL and Birla Nifty Pty Ltd v International Mining Industry Underwriters Ltd.)
Mr Wilson's defence was pleaded so as to pick up the six criteria set out in this passage.
Brennan J elaborated on the second element. A charged party who has not actively induced a claimant to adopt an assumption or expectation will nevertheless be held to have done so in certain circumstances. This occurs where the assumption or expectation can be fulfilled only by transfer of the charged party's property, a diminution in his or her rights, or an increase in his or her obligations and the charged party, knowing that the claimant's reliance on the assumption or expectation may cause detriment to the claimant if it is not fulfilled, fails to deny to the claimant the correctness of the assumption or expectation on which the claimant is conducting his or her affairs.[143]
[143] Waltons Stores (Interstate) Ltd v Maher (429).
The general application of Brennan J's six criteria retains wide judicial support.[144] It may, however, be accepted that where a case involves different circumstances to those considered in Waltons Stores (Interstate) Ltd v Maher Brennan J's general formulation of principles must necessarily be subject to qualification and refinement. In its application to particular circumstances the general formulation must be applied so as reflect and give effect to the broad equitable principles which underlie its application.[145]
[144] See eg Elvidge Pty Ltd v BGC Construction Pty Ltd [2006] WASCA 264 [40]; Caringbah Investments Pty Ltd v Caringbah Business and Sports Club Ltd (in liq) [2016] NSWCA 165 [72]; Risi Pty Ltd v Pin Oak Holdings Pty Ltd [2017] VSCA 317 [62] (fn 43).
[145] Doueihi v Construction Technologies Australia Pty Ltd [2016] NSWCA 105; (2016) 92 NSWLR 247 [162] - [163].
The six criteria enunciated by Brennan J do not expressly mention the term 'unconscionable conduct'. However, before stating his often cited passage from Waltons Stores (Interstate) Ltd v Maher Brennan J asked himself the question: '[w]hat, then, is unconscionable conduct?'[146] After noting, first, that an exhaustive definition was both impossible and unnecessary,[147] Brennan J went on to consider the question he had posed by reference to authority and principle, identifying - both by example and principle - conduct that would or would not be unconscionable.[148] The six criteria, as amplified, summarise that discussion. As McLure JA has observed, unconscionability derives from the establishment of the six criteria; it is not a separate requirement.[149]
[146] Waltons Stores (Interstate) Ltd v Maher (419).
[147] Waltons Stores (Interstate) Ltd v Maher (419 - 420). Similarly, Deane J has stated that 'the notion of unconscionability is better described than defined': Commonwealth v Verwayen (440).
[148] Waltons Stores (Interstate) Ltd v Maher (420 - 428).
[149] Elvidge Pty Ltd v BGC Construction Pty Ltd [41].
Read together the six criteria describe, in a non-exhaustive way, conduct that is unconscionable for the purposes of equitable estoppel. In the circumstances of the other criteria, the conduct attributable to the charged party warranting equity's intervention is found in the second, fourth and sixth criteria (the sixth constituting the charged party's insistence on his or her strict legal rights). However, the importance of the second criterion ought not be overlooked. Since Thompson v Palmer[150] and Grundt v Great Boulder Pty Gold Mines Ltd it has been well understood that the justice of an estoppel depends not only on the fact that a state of affairs has been assumed as the basis for action or inaction and departure therefrom would occasion detriment. The justice of an estoppel depends also on the manner in which the assumption has been occasioned or induced: the charged party must have played such a part in the adoption of the assumption that it would be 'unfair or unjust' (ie unconscionable) if he or she were left free to ignore it (although the concepts of fairness and justice are not at large).[151] Whether a departure by the charged party from the assumption or expectation should be considered unconscientious (or unjust) depends on the part taken by the charged party in its adoption by the claimant.[152] The charged party must have played such a part in the adoption of, or persistence in, the assumption or expectation that he or she would be guilty of 'unjust or oppressive' conduct if he or she were to depart from it.[153]
[150] Thompson v Palmer [1933] HCA 61; (1933) 49 CLR 507.
[151] Grundt v Great Boulder Pty Gold Mines Ltd (675).
[152] Thompson v Palmer (547).
[153] Commonwealth v Verwayen (444 par 4).
In referring to three possible aspects of the learned primary judge's reasoning which were suggested to ground the finding the subject of grounds 5 and 6, Mr Wilson omitted the major reason that his Honour found the contended for 'trees first' recovery assumption to be not proven: the learned primary judge rejected Mr Wilson's evidence to the effect that he held such an understanding in entering into the loan agreement. There is, in our opinion, nothing that bespeaks error in that conclusion or the reasons given by the learned primary judge for that conclusion. It was open to his Honour to conclude that the evidence was implausible as it was more probable than not that Mr Wilson did not direct his mind at all to the matter of default in circumstances where: (1) he was the CEO of Quintis and Arwon and the managing director of the Quintis group; and (2) he was an enthusiastic supporter and investor in Quintis tax effective products.
Also contributing to the learned primary judge's factual finding were these additional matters (see [186] - [190] above):
1.Mr Wilson's own evidence-in-chief as to conversations with fellow Quintis officers before entry into the loan agreement (see [54] above).
2.His Honour's assessment that the asserted understanding was an uncommercial and unreasonable one for Mr Wilson to have held - making it unlikely for a person with Mr Wilson's background to have held such an assumption (see [55] above).
3.The related finding rejecting Mr Wilson's reliance evidence (see [52.2], [53] above).
4.The more general credibility and reliability findings that led the learned primary judge to state that he did not assess the key areas of Mr Wilson's evidence concerning the promissory estoppel defence to be reliable (see [70] - [71] above).
Of course, it is important to recognise that factual findings - even those grounded in whole or in part on credibility and reliability findings - are not immune from appellate intervention. And indeed, in the present case, it was Mr Wilson's contention that the learned primary judge's credibility and reliability findings were fundamentally flawed.[349] Nevertheless, we do not accept that contention. For reasons already given those findings were well open to the learned primary judge and no error is revealed as to his Honour's credibility and reliability findings. Once that position is reached there are obvious difficulties for Mr Wilson's contention, by grounds 5 and 6, that the learned primary judge was wrong to conclude that Mr Wilson did not hold the contended for 'trees first' recovery assumption in entering into the loan agreement.
[349] Appeal ts 64.
Having conducted a review of the materials adduced at trial and the learned primary judge's reasons we are unable to accept Mr Wilson's contention that his Honour erred in concluding that the alleged assumption was not established. In reaching that conclusion we rely on the following four matters as well as the matters previously referred to.
First, insofar as the question of assumption was directed to a subjective state of mind - that being whether Mr Wilson held the pleaded recoverability assumption - Mr Wilson's professed understanding was one aspect of the material evidence. However, Mr Wilson's evidence in this respect was no more than bare assertion. As his Honour found, it was not supported by Mr Wilson's evidence as to his contemporaneous conversations with other officers of Quintis. In any case, the evidence was rejected by the learned primary judge having had the benefit of seeing and hearing Mr Wilson give evidence. In part his Honour did so because he did not assess Mr Wilson's evidence to be reliable. In addition, for reasons that are cogent and which we accept, his Honour rejected the evidence as being implausible.
Second, none of the evidence referred to in Mr Wilson's PD 7.4 schedule was overlooked by his Honour. The 2013 'Policy and Procedures' document was dealt with extensively. So too the learned primary judge referred to the portions of Mr Wilson's witness statement that were relied on in support of grounds 5 and 6. The identified passages from Mr Wilson's cross-examination were not all expressly referred to, but were taken into account insofar as they were repetitive of the evidence by way of examination-in-chief. Moreover, the learned primary judge referred to Mr Wilson arguing that the recovery policy applied inflexibly without possibility of exception.[350]
[350] Primary reasons [51], [52], [103(c)], [116], [120], [124], [128], [156], [158].
Third, for reasons given above, we do not accept that the finding is infected by invalid reasoning on the part of the learned primary judge in the manner advanced on behalf of Mr Wilson in his written submissions. There are unchallenged findings rejecting Mr Wilson's suggestion that Arwon's loan recovery practice was, inflexibly and without exception, to be applied forever with no discretion to take a different approach as permitted under the relevant loan agreement. So too, in our opinion, the apparent incompatibility between the contended for assumption and the application for a private taxation ruling strongly supported the learned primary judge's conclusion. Moreover, the finding was supported by the other matters and reasoning we have referred to which was not challenged by Mr Wilson in advancing grounds 5 and 6. In the latter respect, to the extent that the reliance finding was challenged by ground 7, we would, for the reasons provided in relation to ground 7, dismiss the challenge to the reliance finding.
Fourth, while not mentioned by the learned primary judge, it was the case that the recovery assumption as originally formulated in Mr Wilson's initial pleaded defence (then referred to as the 'non-recourse assumption') was in different terms - terms which were accepted by Mr Wilson in cross-examination to be not accurate.[351] This was not a case in which the contended for assumption was advanced in a consistent manner throughout the course of the litigation.
[351] ts 157.
Having regard to the settled principles of appellate review in relation to factual findings, there is no basis for setting aside the learned primary judge's finding that Mr Wilson's contended for 'trees first' recovery assumption was not established. The impugned finding relied, at least in part, on the assessment that his Honour formed as to the reliability of Mr Wilson's evidence. The learned primary judge saw and heard Mr Wilson give evidence. His Honour had an advantage over this court in that respect. There is no basis to suggest - indeed it was never suggested - that the learned primary judge misused or failed to use his advantage as trial judge. The factual finding has not been demonstrated to be wrong by reference to incontrovertible facts or uncontested testimony. No such materials were adverted to in written or oral submissions. Nor is the finding glaringly improbable or contrary to compelling inferences. A person in the position of Mr Wilson may or may not have had the assumption for which he contended. The competing possibility that found favour with the learned primary judge was open. That was all the more so given the circumstances in which Mr Wilson entered into the loan agreement - on the last day of the income year thereby obtaining a taxation deduction of $12.9 million such that Mr Wilson's taxable income was reduced from an amount in excess of $12.9 million to a minimal amount.
Grounds 5 and 6 should be dismissed. Necessarily it follows that the appeal must be dismissed.
The reliance finding (Ground 7)
Ground 7 challenged the learned primary judge's reliance finding, ie the finding that reliance on the contended assumption was not proved. On one level this can be dealt with briefly so far as the appeal fails on dismissal of grounds 5 and 6. Logically, the impugned lack of reliance finding must stand with the dismissal of grounds 5 and 6: Mr Wilson could not have relied on the contended for 'trees first' recovery assumption if he did not in fact hold that assumption at the time of entering into the loan agreement. Ground 7 must fail on this basis in any event.
The materials referred to in Mr Wilson's PD 7.4 schedule in support of ground 7 were a sub-set of those relied on in respect of grounds 5 and 6: parts of Mr Wilson's witness statement (despite being expressly rejected by the learned primary judge) and portions of Mr Wilson's cross-examination to similar effect.[352] At the appeal hearing senior counsel for Mr Wilson also relied on evidence Mr Wilson gave in cross-examination to the effect that he was not motivated solely by obtaining a tax deduction.[353]
[352] Appellant's PD 7.4 schedule of findings and evidence row 3 WAB 29.
[353] Appeal ts 27, 29, 55, 65 (referring to ts 101).
Reliance can be established by direct evidence or inference. Mr Wilson bore the legal burden of proving that he had been induced to rely on Arwon's conduct.[354] It was not necessary, however, that Mr Wilson establish that the asserted assumption was the sole or predominant cause of his entry into the loan agreement. What was required was that Mr Wilson establish that the assumption was a contributing cause, ie that having the belief engendered by the assumption and taking that belief into account made a difference to him in that Mr Wilson would not have entered into the loan agreement if he did not hold that belief.[355] Nevertheless:
Reliance is a fact to be found; it is not to be imputed on the basis of evidence which falls short of proof of the fact. It is actual reliance by the promisee, and the state of affairs so created, which answers the concern that equitable estoppel not be allowed to outflank Jorden v Money by dispensing with the need for consideration if a promise is to be enforceable as a contract.[356] (citations omitted)
[354] Sidhu v Van Dyke [61]. Sidhu v Van Dyke was a proprietary estoppel case. However, so far as it is referred to here and in following references we consider the principles it establishes to be equally applicable to the doctrine of promissory estoppel.
[355] Sidhu v Van Dyke [90] - [91]. See also [66], [71] - [73].
[356] Sidhu v Van Dyke [58].
Thus the relevant question is whether, despite any other contributing causes, the party seeking to establish the estoppel would have acted differently (either by action or inaction) had the assumption or expectation not been induced.[357]
[357] Sidhu v Van Dyke [93].
Senior counsel for Mr Wilson submitted that reliance was obvious. The contention was that, had Mr Wilson had the understanding Mr Wilson said he had, it would be astonishing if Mr Wilson did not rely on it in entering into the loan agreement.[358] The proposition that the assumption played no part in Mr Wilson entering into the transaction was said to be 'simply absurd'[359] as only a fool would not have regard to such an assumption if actually held.[360] According to Mr Wilson's argument, it would have been irrational to ignore the assumption.[361]
[358] Appeal ts 67.
[359] Appeal ts 67. See also Appeal ts 27.
[360] Appellant's submissions par 47 WAB 19.
[361] Appellant's submissions par 49 WAB 20.
Accordingly, the submissions in support of ground 7 depended on establishing that the contended for assumption was held at the time of entry into the loan agreement. The failure of grounds 5 and 6 stand as an insurmountable hurdle to that type of argument. These submissions in support of ground 7 must be rejected.
Senior counsel for Mr Wilson also submitted that the learned primary judge ought to have dealt with, and rejected, Mr Wilson's evidence that he would not have invested in any Quintis investment product for tax reasons alone to come to the conclusion that in all of the circumstances Mr Wilson had not proved his case on reliance.[362] In that connection senior counsel emphasised that it was not put to Mr Wilson, squarely or at all, that the motivating factor on which he relied in entering into the transaction was the tax deduction.[363] We have already dealt with that argument so far as it concerns the suggested omission in Mr Wilson's cross-examination. Otherwise these submissions overlook the circumstance that the learned primary judge expressly rejected Mr Wilson's reliance evidence[364] and did so in terms whereby his Honour found that the 'true driver' for Mr Wilson's sandalwood plantation investment - and thus his entry into the loan agreement - was to obtain the immediate taxation deduction that could be obtained through the investment.[365] Necessarily the learned primary judge implicitly rejected Mr Wilson's evidence at these points. Such evidence was assessed as being unreliable in any event as part of his Honour's general credibility and reliability findings in relation to the key areas of Mr Wilson's evidence.[366]
[362] Appeal ts 65.
[363] Appeal ts 55.
[364] Primary reasons [189] - [191].
[365] Primary reasons [189].
[366] Primary reasons [213].
Often a reliance finding will be established by inference from the objective facts. On occasions - as occurred in the present case - a witness will give direct evidence to the effect that he or she took particular steps (or refrained from taking particular steps) on the faith of or induced by an understanding or belief brought about by a representation or other conduct on the part of another. Any such evidence is inherently self-serving. It will usually be treated with caution and scrutinised carefully by a trial judge in much the same way, and for much the same reasons, as a trial judge will carefully consider the veracity and reliability of hypothetical evidence (where such evidence may be lead).[367] Such hypothetical evidence is normally assessed in light of the surrounding objective facts and circumstances.[368] Unless objective evidence confirms its reliability such evidence often has little probative value.[369] Demeanour can play little part in accepting the evidence; it may, however, be ground for rejecting the evidence.[370] The last observation demonstrates that rejection of a party witness' direct evidence of reliance may result in him or her failing to establish reliance.
[367] See eg Falkingham v Hoffmans (a firm) ) [2014] WASCA 140; (2014) 46 WAR 510 [247] (referring to Chappel v Hart [1998] HCA 55; (1998) 195 CLR 232 [32] (fn 64)); Rosenberg v Percival [2001] HCA 18; (2001) 205 CLR 434 [15] - [17], [44] - [45], [87] - [91], [157] - [158], [221].
[368] Falkingham v Hoffmans (a firm) [41].
[369] Attard v James Legal Pty Ltd [2010] NSWCA 311; (2010) 80 ACSR 585 [120], [126].
[370] Chappel v Hart [32] (fn 64).
The present case provides a good example of why direct evidence of reliance will often attract the same type of approach as hypothetical evidence. Among other things, Mr Wilson's evidence was to the effect that had he been told something different about the terms of the loan agreement - specifically had he been told that Arwon would sue him, personally rather than first having recourse to its security - he would not have proceeded with the investment.[371] That evidence is hypothetical in nature.
[371] Exhibit 1 par 146 GAB 141. See Primary reasons [186].
Factual conclusions are best reached, as far as possible, on the basis of contemporary materials, objectively established facts and the apparent logic of events. [372] That admonition has its usual force when considering a question of reliance in light of a party witness' direct evidence that he or she relied in a particular way. The real question is the appropriate inference to be drawn from the whole of the evidence.[373] Accordingly, if, on the whole of the evidence, the court is not satisfied on the balance of probabilities that the asserted assumption or expectation contributed to the claimant's actions (or inactions), he or she will fail to make out the required connection between the charged party's representation or other conduct - leading to the claimant's relevant assumption or expectation - and the asserted detriment.
[372] Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 [31].
[373] Sidhu v Van Dyke [64].
The learned primary judge rejected Mr Wilson's reliance evidence as being unreliable, implausible, self-serving and inconsistent with what his Honour considered to be Mr Wilson's 'true driver': to obtain the immediate $12.9 million taxation deduction.[374] The reference to the 'true driver' demonstrates that in coming to his reliance finding the learned primary judge had regard to - and was influenced by - the objective facts and circumstances as established by the evidence. More generally, having regard to Mr Wilson's evidence as a whole, the reliance evidence was one key area of Mr Wilson's evidence as regards the promissory estoppel defence which was assessed as not being reliable.[375]
[374] Primary reasons [189] - [190].
[375] Primary reasons [213].
The finding of lack of reliance was grounded in part on the learned primary judge's assessment of Mr Wilson's credibility and reliability. In that respect Mr Wilson has not established a proper basis for appellate intervention having regard to the principles enunciated at [193] above. What has been said in this regard as to ground 5 and 6 applies equally here. To the extent, however, that the learned primary judge had regard to objective factors, the restrictions on appellate review have less force in their application. In our view, however, the objective established facts and apparent logic of events provided a compelling basis for the learned primary judge's conclusion that the relevant 'true driver' for Mr Wilson in entering into the transaction was to obtain an immediate tax deduction - thus leading to his Honour's rejection of Mr Wilson's self-serving evidence that his contended for understanding was 'the' or 'a' major influencer in his decision to borrow from Arwon. No error can be identified in this respect.
The objective established facts included the following:
1.On Mr Wilson's own evidence, he was 'more focussed' on borrowing terms, ie interest rate, term of loan and the mixture and principal and interest repayment.[376]
2.Mr Wilson did not approach any alternative lender with respect to the investment.[377]
3.The transaction occurred on 30 June 2014 (a Monday). The IMA is dated 30 June 2014.[378] So too is the loan agreement.[379] 30 June 2014 was the last day of the 2014 income year. That is a fact that would have been well known to Mr Wilson given his background as both a taxation solicitor and executive of a company whose main business was promoting tax effective investments. The investment saw Mr Wilson able to claim an immediate taxation deduction of $12.9 million in the 2014 income year.[380]
4.Mr Wilson applied for the private taxation ruling on 16 July 2014.[381] The shortness of time between the investment and the application supports the inference - already arising from the timing of the investment - that the investment was tax driven.
5.Mr Wilson's oral evidence did not deny that one of his motivations was to obtain a taxation deduction. Mr Wilson said only that: 'I wouldn't have invested in any Quintis products for tax reasons alone' going on to express a belief in the products being a profitable long-term investment and investing in Quintis' plantations predominantly for that reason.[382] Nevertheless, consistent with the learned primary judge's finding that the investment was tax driven, in context the answer by Mr Wilson accepted that one of his reasons for the investments was the obtaining of the tax deductions derived thereby.
6.Mr Wilson had assessable income in the 2014 income year in an amount that exceeded $12.95 million.[383] Excluding salary the bulk of that income was derived from trust distributions.[384] Trust income must be distributed by resolution within the income year; if no beneficiary is presently entitled the trustee is taxed. It follows that the relevant instruments of distribution must have been effected before or at the time of the transaction. In any case the taxation deduction obtained by Mr Wilson through the investment was such that it reduced his taxable income to $33,323[385] - the taxation deduction broadly approximating Mr Wilson's assessable income - and resulted in Mr Wilson having an expected tax refund of $993,650.79.[386]
[376] Exhibit 1 par 141 GAB 141. See [177].
[377] ts 131 - 132.
[378] GAB 417.
[379] GAB 395.
[380] Primary reasons [44].
[381] GAB 475.
[382] ts 101.
[383] GAB 380.
[384] GAB 386.
[385] GAB 380, 391.
[386] GAB 391.
Those objective facts provided a sound basis for the learned primary judge's conclusion, by inference, that the true driver for Mr Wilson's investment and borrowing decision on 30 June 2014 was to obtain a taxation deduction. There was no error in so concluding. There are difficulties in establishing error in such circumstances. It is well established that an appellate court is unlikely to be satisfied of error if all that is shown is that the trial judge made a choice between competing inferences - being a choice the appellate court may not have been inclined to make but not a choice the trial judge should not have made.[387] In the present case, however, we would not rest on the requirement to exercise appellate restraint by giving respect and weight to the conclusion of the learned primary judge. Rather, we are satisfied that the objective facts and apparent logic of events lead to the conclusion that his Honour was correct to find that Mr Wilson's true driver was to obtain an immediate taxation deduction. Once that finding was made there was a proper platform for his Honour to reject - as unreliable and self-serving - Mr Wilson's direct reliance evidence. The rejection of Mr Wilson's evidence provided the basis for the conclusion that Mr Wilson had not proved his case as to reliance.
[387] Minister for Immigration, Local Government and Ethnic Affairs v Hamsher (1992) 35 FCR 359, 369.
Mr Wilson's challenge to the learned primary judge's lack of reliance finding has not been sustained. Ground 7 should be dismissed.
The detriment finding (Ground 8)
On its face there is possible merit to Mr Wilson's challenge by ground 8 to the learned primary judge's detriment finding. His Honour did not address Mr Wilson's pleaded case as expounded in closing submissions. Rather, his Honour considered the question of detriment by reference to evidence elicited from Mr Wilson in cross-examination which distracted from the burden of his contention as to detriment. Accordingly, the learned primary judge did not consider whether there was detriment in that, contrary to the contended for assumption, Mr Wilson was being required to pay the whole of the debt under the loan agreement rather than being credited with the assessed value of his sandalwood plantation woodlots following recourse to the security.
It is, however, unnecessary to finally determine whether - contrary to the learned primary judge's finding - there was relevant detriment in this respect. Mr Wilson's appeal would fail even if ground 8 succeeded. Moreover, the question of detriment is very much tied to the relevant assumption. Identification of the relevant assumption is a necessary first step in determining whether the elements of an estoppel are established. Having not accepted Mr Wilson's contended for 'trees first' recovery assumption we would decline, as a matter of judicial economy, to offer an unnecessary and incorrectly premised conclusion on ground 8.
Conclusion and orders
We accept that Mr Wilson has established error in terms of ground 1. However, that error was not material insofar as the learned primary judge made other factual findings which resulted in the failure of Mr Wilson's promissory estoppel defence. The challenge to those factual findings fails. We would uphold the learned primary judge's rejection of the promissory estoppel defence on two bases. First, that Mr Wilson did not hold the contended for 'trees first' recovery assumption on entry into the loan agreement: Mr Wilson did not establish that he held the assumption on which the estoppel defence was based. Second, Mr Wilson did not establish that he relied on the contended for assumption in entering into the loan agreement.
Accordingly, Mr Wilson's appeal should be dismissed. There should be an order to this effect. Otherwise we would hear from the parties as to costs.
PRITCHARD JA:
I respectfully agree with the reasoning and conclusions reached in the joint judgment in respect of grounds 4 - 7 and ground 9 of the Grounds of Appeal. I also agree with their Honours, for the reasons set out at [235] - [236] of the joint judgment, that it is not necessary to finally determine ground 8, because the appeal would fail even if Mr Wilson succeeded on that ground.
For the reasons explained in the joint judgment, Mr Wilson's failure to succeed in respect of ground 4, or on one of grounds 5 ‑ 6 and grounds 7 ‑ 8, means that the appeal must be dismissed, irrespective of the outcome of ground 1.
That being the case, in my respectful view it is neither necessary nor is it the preferable course, having regard to all of the circumstances, to determine ground 1, and for that purpose to express a concluded view on the application of the principles concerning promissory estoppel in the factual context of this case.
The appeal must be dismissed.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
OE
Research Orderly to the Honourable Justice Vaughan
31 AUGUST 2020
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