National Bank of Australia v Menere

CATCHWORDS : PROCEDURE - strike out - claim for possession - no reasonable defence alleged - form of pleading embarrassing - defence relies on estoppel - no clear evidence to support estoppel - defence alleges need to rely on acceleration clause in mortgage - whether s 57(2) notice required - defence struck out - third attempt at pleading defence - judgment entered.

LEGISLATION CITED : Real Property Act 1900 Uniform Civil Procedure Rules

General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 Long Leys Co Pty Ltd v Silkdale Pty Ltd (1991) 5 BPR 11, 512 CASES CITED : Northam v Favelle Favco Holdings Pty Ltd (unreported - Bryson J - 7 March 1995) Turnbull v National Mutual Royal Bank Ltd (1992) 26 NSWLR 361 Watson v Foxman (1995) 49 NSWLR 315

PARTIES : National Bank of Australia (Plaintiff) Paul Menere (Defendant)

COUNSEL : D Sulan (Plaintiff) P Mee Ling, Solicitor (Defendant)

SOLICITORS : DibbsBarker (Plaintiff) Mee Ling Solicitors (Defendant)

• 28 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION POSSESSION LIST

JUDGMENT 1 In these proceedings the National Australia Bank seeks an order for possession of property known as "Strathallen Cottages", Wollondilly Avenue, Goulburn arising out of alleged defaults under a mortgage. The mortgage secured monies loaned under 3 facilities as follows:

(a) An NAB Classic Account from about 15 December 2005;

(b) An NAB First Business Options Facility resulting in an advance of about $1,000,000 on or about 20 February 2008;

(c) An NAB Second Business Options Facility for a loan of a further $323,000 on or about 3 July 2008. 2 The Bank alleged default in relation to the NAB Classic Banking Account in about February 2009. It served a Notice of Demand, such Notice being said to be a notice in accordance with s 57(2)(b) Real Property Act 1900. 3 The Bank also alleged that by reason of the default under the NAB Classic Banking Account the Defendant defaulted under the other 2 facilities and Notices of Demand were served in relation to them also. 4 When the amounts demanded were not paid the Bank issued a Statement of Claim on 18 June 2009. After various interlocutory manoeuvrings, the detail of which I will refer to later, the Defendant filed an Amended Further Defence on 25 March 2010. The Plaintiff had sought that that Defence be struck out at the 9:30am Directions Hearing pursuant to the Practice Note. I declined to do so but gave leave to the Plaintiff to file and serve a Notice of Motion for that purpose. The Plaintiff filed a Notice of Motion on 9 April 2010 seeking that the Amended Further Defence be struck out pursuant to Rule 14.28 UCPR, in the alternative that certain specific paragraphs in the Defence be struck out pursuant to that Rule, and for judgment for possession for the land referred to. It was that Notice of Motion which came before me for hearing.

Procedural history 5 After the Statement of Claim was served a request for further and better particulars of the Statement of Claim was delivered on 24 July 2009. That was responded to by the Plaintiff on 19 August 2009. The Defendant filed his Defence on 21 September 2009. The Defence was difficult to understand but appeared to raise 2 defences. The first was that there was some sort of amended agreement with the Bank which involved the development of 24 units on the Strathallen site. The second defence appeared to be related to the same matter but suggested some form of an estoppel. In either case the result of the defences was said to be that the Plaintiff was not entitled to enforce the loan contract and the mortgage inconsistently with the arrangement pleaded. 6 The Plaintiff sought particulars of the Defence and, when they were not supplied, obtained a direction from me that they be answered by 26 November 2009. 7 The matter came before me on 3 December 2009 for Directions. The particulars had not been answered by the Defendant. The Defendant consented to the Defence being struck out but with liberty to replead by 18 December 2009. 8 A Further Defence was filed on 16 December 2009. It was also difficult to understand but appeared to plead similar defences in a slightly amended way. It also contained a defence suggesting that no valid s 57(2) Notice had been served. 9 The matter came before me for further Directions on 3 February 2010. Counsel for the Plaintiff indicated that the Plaintiff and its lawyers were having difficulty understanding the Defence. The Plaintiff indicated that it wished to seek particulars of the Defence and I directed that that be done. I directed in addition that the Defendant was to file and serve an affidavit setting out the substance of the conversations between him and the Bank officers that gave rise to what was said to be the estoppel defence. This was done in an attempt to obtain some clarity concerning the pleading. 10 When the matter came before me for further Directions on 10 March 2010 the Defendant had not complied with the Directions made. Mr Mee Ling, the solicitor for the Defendant, informed me that it would be necessary for the Defendant to amend his Defence further. He indicated also that the Defendant wished to cross-claim against the Bank. 11 The Amended Further Defence was, as I have said, filed on 25 March 2010. In the meantime, the Defendant had sworn 2 affidavits setting out the detail of the conversations he had with the officers of the Bank concerning the estoppel defence. No cross-claim has ever been filed.

The Amended Further Defence 12 Because of the issues that arose on the hearing of the Notice of Motion it is necessary to set out all those parts of the Amended Further Defence that relate to the estoppel/variation defence. This defence is said to provide a complete answer to the claim. In addition, the Defendant relies on what he says is an invalid notice under s 57(2)(b) Real Property Act with the result, he says, that there was no acceleration of the debt resulting in no default. The parts of the Defence pleading the variation/ estoppel defence are these:

6. (1) A The plaintiff by its officer Mr James O'Young and the defendant in person orally expressly agreed in January or February 2008 that the terms of the NAB Classic Account are subject to and only to be exercised pursuant to the following development finance agreement:- 1. The defendant proceed with the existing approved development of 24 units on the Strathallen site (being the subject of Approval of Development Application 345/0607/DA by Goulburn Council given on 17 July 2007, operative from 25 July 2007); 2. The plaintiff will lend the defendant 80% of the construction costs of the first block if contracts are exchanged for the sale of 6 of the units to be constructed in the first 8 unit block; 3. The defendant would put the units to be constructed in the first 8 unit block on the market; 4. By implication, the defendant may pay interest accruing by overdrawing the NAB Classic Banking Account. B. Pursuant to the said development finance agreement the defendant:- 1. Had a form of contract for the sale of the said units drawn up by his solicitors; 2. Engaged BBX Management Limited as real estate agents to market the said units; 3. Entered into 6 contracts for the sale of 6 of the units to be built at $320,000 each; Particulars Unit Purchaser Date 1 S R Gee & M Lamponi Unknown 2 R A Rolls Unknown 3 BBX Property Investment Fund 30-6-08 4 BBX Property Investment Fund 30-6-08

7 M E Thomas & L R Bamford 27-6-08 8 S & C Mac P/L 30-6-08 4. Refinanced the Strathallen purchase loan by entering into the 1st NAB Options Facility Loan (A/c 082-057 81-040-2300) on 3 March 2008. 5. Raised further monies to support the development by entering into the 2 nd NAB Options Facility Loan (A/c 082-057 82-106-8133). 6. Paid various amounts into the Classic Account:- Date Payment 25-2-08 $5,000.00 14-3-08 $20,000,00 31-3-08 $1,034.18 04-4-08 $10,000.00 16-4-08 $3,000.00 17-4-08 $600.00 22-4-08 $900.00 14-8-08 $12.000.00 24-9-08 $6,000.00 29-4-08 $3,000.00 30-4-08 $696.74 14-8-08 $12.000.00 24-9-08 $6.000.00 C. The plaintiff by its officer Mr James O'Young and the defendant in person orally expressly agreed in February 2009 that the terms of the NAB Classic Account are subject to and only to be exercised pursuant to the following development finance agreement in substitution for the existing development finance agreement pleaded in paragraphs 6(A) and (B) above:- 1. The existing approved development of 24 units on the Strathallen site (being the subject of Approval of Development Application 345/0607/DA by Goulburn Council given on 17 July 2007, operative from 25 July 2007) not proceed, 2. The plaintiff would continue to lend the funds advanced by the plaintiff under the accounts and facilities pleaded in the Statement of Claim then outstanding, 3. The interest accruing on the said funds would be capitalized until the lots to be created (see paragraph 5 below) were sold by overdrawing the Classic Account, 4. The term of this development finance agreement loan would be six months from the time of agreement; 5. The defendant would subdivide the Strathallen site into 12 lots as specified in the letter of 6 January 2009 from the defendant to the plaintiff: One for each of the 5 existing houses; One for the existing 2 bedroom unit; Six home sites from the existing vacant land; 6. The defendant would bear all development costs, some $10,000 having been incurred by that time and some $30,000 being projected for the entire development; 7. By implication, the defendant relying upon then (sic) rent from the existing cottages on the site the plaintiff would take no step to hinder or prevent the letting thereof. Particulars The cottages were all let but the tenants were in arrears. The total rent was about $1,250 per week. To the knowledge of the plaintiff the defendant was relying upon the said income to pay for the continuing development under the agreement. The plaintiff expressly refused to advance any money towards the development cost. D Pursuant to the said development finance agreement the defendant - 1. Proceeded to develop the Strathallen site at his own expense; 2. Negotiated the sale of lots to be created. (2) FURTHER AND IN THE ALTERNATIVE In January or February 2008 the plaintiff by its officer, Mr James O'Young, orally represented to the defendant in person that the plaintiff would fund 80% of the construction costs of the first block of 8 units in Development Approval 345/06/DA if the defendant exchanged contracts for the sale of 6 of the units for a price of $320,000 each. 1. In reliance upon the said representation the defendant had a draft contract drawn and exchanged contracts on 6 units to be constructed. Particulars Unit Purchaser Date 1 S R Gee & M Lamponi Unknown 2 RA Rolls Unknown 3 BBX Property Investment Fund 30-6-08 4 BBX Property Investment Fund 30-6-08 7 7 M E Thomas & L R Bamford 27-6-08 8 S & C Mac P/L 30-6-08

2. At all material times the plaintiff by its officer Mr O'Young was aware of the defendants reliance. Particulars The defendant made numerous telephone calls to Mr James O'Young and also met him a number of times during which the defendant informed the plaintiff by its said officer Mr James O'Young of the steps the defendant was taking. The defendant furnished the plaintiff by its said officer Mr O'Young with copies of the front pages of the exchanged contracts.

3. The plaintiff was accordingly estopped from enforcing its loan contracts and mortgages other than in conformity with the said representation.

4. Notwithstanding the said estoppel, in January 2009 the plaintiff by its officers in person, a credit officer (a lady whose identity is unknown to the defendant) and Mr James O'Young refused to conform with the said representation by telling the defendant in person that the plaintiff would not lend the construction finance.

5 In response to the plaintiff's said refusal, the defendant in person during January-February 2009 put a proposal to the plaintiff, by its credit officer (a lady whose identity is unknown to the defendant) and by its officer, Mr James O'Young, to develop the site on the terms and as pleaded in paragraphs (3) A 1 to 7 above;

6. The plaintiff by its officer, Mr. James O'Young acquiesced in his implementation thereof. Particulars The defendant made a number of telephone calls to Mr. James O'Young in which the defendant informed the plaintiff by its said officer Mr. James O'Young of the steps the defendant was taking as set out in paragraph 3 following. 7. In reliance thereon the defendant took steps to so develop the land, Particulars The defendant by his consultants submitted the pre-lodgement subdivision plan to the Council; The defendant by his consultants negotiated with the Council about settling the said plan; The defendant engaged consultants as to stormwater retention, fire safety, and kerbing and guttering in the proposed development; 8. The plaintiff is accordingly estopped from enforcing its loan contracts and mortgages other than in conformity with the said proposal.

The Defendant's evidence 13 The affidavits filed by the Defendant deposed to a meeting in late 2005 between the Defendant and a Kristina Christinakis of the Bank where the Defendant told Ms Christinakis that he wanted to buy the Strathallen cottages site in Goulburn. The price was $750,000 and he wanted to borrow $1,000,000 which would cover stamp duty, purchase expenses, 12 months interest and leave some money to renovate the five houses on the land. Ms Christinakis said that the Bank would fund the purchase for renovation if the land was valuable enough and it would lend up to 70% of the valuation. 14 Subsequently, Ms Christinakis said the Bank would lend $1,000,000. The Defendant exchanged contracts to purchase the cottages and the Bank advanced the $1,000,000 as promised. 15 On settlement of the sale the NAB Classic Account was opened by the Bank and surplus funds were placed into that account. The Account Authority Card executed by the Defendant and the Bank on 16 December 2005, contained an acknowledgement that: If you [the Bank] in your discretion allow an account to become overdrawn, we [the customer] shall be jointly and severally liable to you in respect of that account. 16 The Defendant renovated the houses and in March 2006 the NSW Police signed a 12 month lease of the five houses. He continued to negotiate with the Police, proposing to them that he would build 24 units on the land for police accommodation. He saw Mr James O'Young at the Bank, Mr O'Young having replaced Ms Christinakis. Although no date is given it may reasonably be inferred that it was 2006 or early 2007. He told Mr O'Young he wanted to build 24 units on the land and that he would put in a DA for that purpose. He asked if the Bank would lend him the money to build the units. Mr O'Young said: If the DA increases the value of the land enough, we will lend you money to get the development to a construction certificate stage. Then we will decide if we will offer more funding. 17 The Defendant obtained a DA, spending $65,000 in the process. In the meantime the existing lease of the five cottages expired and the Police did not exercise their option. They vacated the premises in July 2007. 18 The Defendant costed the development and obtained a quote for $1,280,000 for the cost of building the first of the 3 blocks. The Bank's valuation of the land on the basis of the DA was $1.8 million for land value. The Bank engaged a quantity surveyor to report on the costs of the proposed development and the quantity surveyor reached a figure of $1,602,912.63 for the cost of the building. 19 Then, in January or February 2008, the Defendant met with Mr O'Young. The Defendant said the conversation was to this effect: 15. He said: "The Bank will lend you construction funding if either the police sign a 3 year lease for the development or if contracts are exchanged for the sale of 6 units in the first block of units." I said: "I've been talking to the police for about 12 months. It does not look likely that they'll sign up. I'll put the units on the market."

16. After this meeting until I made a request to Mr. O'Young on numerous occasions in words to this effect; "I want the bank to put in writing what it has agreed to lend me for the construction costs" He would always say words to the effect: "We'll lend you 80% of the construction costs. We'll provide you with confirmation in writing." 20 Thereafter, on about 3 March 2008 the Defendant entered into the First Business Options Facility which he says was a re-finance of the original purchase loan. 21 The Defendant then engaged agents to sell units off the plan. By late June 2008 he had sold 6 of the units at $320,000 each. 22 On 4 July 2008 he entered into the Second Business Options Facility. He spent the money from this advance in payment of interest and other expenses of the site and on various expenses relating to an adjoining site in which he had an interest. 23 The Classic Account was being debited with interest from time to time and the Defendant was paying money into that account to meet the interest payments. 24 In January 2009 Mr O'Young contacted the Defendant and told him that the Bank would not proceed with the construction loan. He suggested the Defendant come in to discuss the matter with the Bank's senior credit personnel. Shortly afterwards the Defendant had a meeting at the Bank with Mr O'Young and a female credit officer where the following was said: She said: "How will the loan be repaid. We won't lend you the funds for construction "

I said: "If the bank won't finance the construction, the only alternative is to subdivide the land into 8 blocks and sell them "

She said: "Are you in a position to pay any interest? It is about $9,000 per month "

I said: "Settlement is pending on the adjoining Kenmore site in which I have an interest. When it is settled, my interest in the purchaser company will be transferred for $600,000 "

She said: "You can put a proposal to James O'Young, but we are not going to provide any additional funds."

I said: "I will fund the new D.A. The sale of 8 blocks of land plus the 5 houses should yield enough to pay the bank out " 25 On 6 January 2009 the Defendant wrote to the Bank. In his affidavit the Defendant does not make clear whether this letter was written before the meeting referred to above or after it. Although the first and last paragraphs suggest that it predated the meeting, the opening words of the second paragraph are at least consistent with what was recorded in the conversation with the female credit officer and Mr O'Young. The letter is important for the issues involved and it is necessary to set it out in full: 6 January 2009

National Australia Bank Level 18, 255 George Street SYDNEY 2000

As requested, I now set out the status of my NAB loan and proposal to repay same. As you are aware, there is an existing DA in place to build 24 x 4 bedroom units which the NAB have given preliminary funding approval. In the present climate it is not viable to build these and the NSW Police will not commit to a lease or purchase. My proposal is re-submit a new plan to strata the 5 x 5 bedroom homes, plus 1 x 2 bedroom unit, into six separate titles and sell them off individually. The 5 bedrooms should sell for approx $280,000 to $300,000 and the 2 bedroom for $150,000. This would net approx $1,450,000.

The balance of the vacant land would produce approximately 6 x 700 sq m. home sites. These could sell for between $90,000 to $110,000 each. Subdivision costs would be approximately $120,000.

Currently CPC Land Development Consultants Pry Ltd has lodged documents for the subdivision. Council came back on 9 December with certain queries which can be answered. The planners are hoping to have full approval by the end of March.

It is my request to the NAB that they refinance the loan for a further 6 months with interest capitalized so that the above can be achieved. The market has picked up in the low-cost area and with interest rates like they are, we will have no trouble achieving sales. Four of the current tenants wish to buy.

As you are aware, I have been involved in the Kenmore site which adjoins my site. The Kenmore site was put into receivership by the Westpac Bank with McGrath Nicol as receiver/managers. I formed a group with Aroura Property Group from Adelaide to negotiate the sale from McGrath Nicol. We put up a Deed of Company Arrangement which was accepted by Westpac and various other creditors (of which I am one) to purchase the site at $4.5 m. Aurora Property Group lodged a deposit of $450,000 (which I showed you). They had funding in place from Capital Finance to complete the purchase. A valuation was carried out by Preston Rowe Patterson at $9.5 m. They approved a $6 m facility. Out of this money I was to be paid $1.2 m for my shareholding and I would remain as project manager. Unfortunately, two weeks after exchanging, Capital Finance pulled the pin on all lending. We approached the Commonwealth Bank, who give preliminary approval, but delayed decisions for 2 months and have still not given full approval. NAB from Goulburn approached us and offered $5m and insisted that they could handle the loan from Goulburn. We are still waiting for an answer. In the meantime, McGrath Nicol has re-sold the site for $6.8 m. with settlement due at the end of January.

Grant McCarthy from Simmons McCarthy Lawyers is acting for us in this matter and will confirm when he returns from holidays on 12 January.

Upon settlement Westpac will be paid out, along with unsecured creditors. There will be a surplus of about $1.4 m for distribution. I will be claiming a major portion of this amount. Negotiations will be taking place before settlement. We are calling for a further creditors meeting with McGrath Nicol and their lawyers, Clayton Utz, to attempt to finalize this before settlement.

As you would understand, it is only the current lending market at present that prevented us from arranging funding to complete the purchase.

As a broker I am finding it virtually impossible to set any development loans in the current market.

I appreciate the NAB's support over the past 2 years on this project and hope it will continue.

26 The Defendant then deposes to a further meeting in mid-February 2009 with Mr O'Young where the following was said: I said: "As I wrote, I propose to subdivide the land into 5 strata title lots for the houses and to subdivide the rest of the land into another 5 sites. I can pay for the development costs myself from the rents of the houses. The bank does not have to give any further funding, just keep on accumulating the interest. The houses could be sold for about $275,000 and the vacant sites for about $90,000. There will be enough to pay the bank and make another $350,000. Give me 6 months."

He said: " We will not stop you , but we won't advance any more funds for the subdivision work." (emphasis added) 27 None of this evidence was challenged by the Bank who tendered no evidence about the events set out in those affidavits of the Defendant. The Bank's attitude to the evidence was that it was prepared to accept the evidence as putting the Defendant's position at its highest.

The Bank's application 28 The Bank applies under Rule 14.28 UCPR to strike out the Amended Further Defence on the basis that it discloses no reasonable defence to the Bank's claim and, alternatively, that it has the tendency to cause embarrassment in the proceedings. 29 It is accepted by the Bank that the test in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 is to be applied so that the defence should only be struck out in a plain and obvious case. Applying the principles expounded in that case I now turn to consider the defences raised by the Defendant.

The estoppel/variation defence 30 In reliance on the conversations set out in para 19 above [paras 15 and 16 of the Defendant's affidavit] the Defendant submits that as of January 2009 he was either entitled to compel the Bank to provide finance or he had actionable rights in either contract or equitable estoppel for the same. The Defendant says that he could have taken action against the Bank at that time but instead he sought to come to an alternative arrangement as identified in the letter of 6 January 2009. He relies on what Mr O'Young said at the mid-February 2009 meeting "we will not stop you". Those words are said to constitute the representation by the Bank and are said to amount to approval of the Defendant's statement to Mr Young that the Bank did not have to give any further funding but just to keep accumulating the interest. The Defendant submits that because Mr O'Young did not "refuse point blank" the Defendant went ahead and took the development steps including the rescission of the contracts for the sale of the 6 units. If the Bank had refused point blank he could have taken action against it. In that way, the Defendant submits, he altered his position to his detriment in reliance upon the Bank's representation. 31 These submissions seem to me to be fundamentally misconceived. At its highest the Defendant's evidence might support an action against the Bank for damages for breach of its promise to lend him 80% of the construction costs. There are considerable problems even with that to which I shall refer presently. 32 What the evidence does not do is disclose any representation by the Bank that the Bank would not call up the existing loans if there was a default under those loan agreements. Any representations made concerned only a promise of future funds and said nothing about altering any existing arrangements as disclosed in the various loan agreements that the Defendant had entered into and subsequently entered into on 3 March and 3 July 2008. In particular nothing was said about the NAB Classic Account and the Bank's position if it became overdrawn. 33 To the extent that the defence is characterised in terms of a variation of contract between the Defendant and the Bank there is no evidence of any consideration provided to the Bank for agreeing to the variation, nor is any such consideration alleged in the pleadings. The highest the evidence puts the matter is that a representation was made and that the Defendant acted on that representation to his detriment in obtaining the DA on the land and subsequently selling the 6 units off the plan. 34 Even if the promise of further construction costs, prima facie, gives rise to an action for damages, a few further things need to be mentioned. 35 First, there was an oral statement made about lending construction funding. Subsequently, when pressed for written confirmation, the Bank said that they would provide the same. As the letter of 6 January 2009 discloses, the Defendant knew that there had been only a preliminary approval, and elsewhere in the letter it can be seen that the Defendant perceived and understood the difference between a preliminary approval and a full approval because of comments he made about approaches to the Commonwealth Bank. 36 Secondly, and more significantly, at its highest the evidence discloses that the Bank promised 80% of construction costs to build the first of the 3 blocks of units on the land. As the letter of 6 January to the Bank makes clear the Defendant no longer intended to build those because: In the present climate it is not viable to build these and the NSW Police will not commit to a lease or purchase.

What the Defendant was doing in the letter of 6 January 2009 was asking for an entirely new arrangement for a different construction project that had no DA in place and in respect of which the Bank had made no promises. 37 In other words, the project did not go ahead, not because of any refusal of the Bank, but because the Defendant made a commercial decision not to pursue the intended project. This, of course, impacts upon whether the Defendant did act to his detriment in reliance on the representation from the Bank. The material in this letter indicates that ultimately he did not act to his detriment on the Bank's representation. 38 Even on the assumption that the Defendant has some sort of cross-claim against the Bank for damages for breach of the contractual promise to lend 80% of the construction costs any damages, as a matter of law, could not be set off against amounts owing to the Bank and could not, therefore, preclude the Bank obtaining an order for possession if it otherwise establishes the right to do so. The matter is put beyond doubt by the Terms and Conditions that applied to the NAB Classic Account. Clause 10 of those Terms and Conditions gives to the Bank the right to combine or set off the balance of 2 or more of any types of accounts or facilities but expressly provides: The account holder does not have a right of combination or set off unless the NAB has agreed. 39 Since the principal default relied upon by the Bank concerns the NAB Classic Account, and the default was that the facility was overdrawn without an approved overdraft limit, it is difficult to see how any of the conversations alleged provide any answer to the Bank's claim in respect of that default. The Defendant submits that his statement to Mr O'Young in February 2009 that the Bank could just go on accumulating the interest and Mr O'Young's statement "We will not stop you" was an agreement by him to accumulate the interest and, presumably, permit the Classic Account to be in overdraft without there being an overdraft limit approved, and that that position would remain for 6 months because the Defendant had said "Give me 6 months". 40 I do not agree with the submission that the words "We will not stop you" signify an agreement to everything that the Defendant said to Mr O'Young. The natural meaning of the words is that the Defendant was free to go ahead and sub-divide the land and pay the development costs himself from the rent of the houses but the Bank was not going to give him any further assistance. The words could not amount to a promise to permit the accumulation of interest with a resultant overdrawing of the account. 41 Further, there was no evidence, despite the Defendant's oral submissions to this effect, that the Bank had been accumulating the interest up to the time of the meeting in mid-February 2009 to give some meaning and context to the words "just keep on accumulating the interest". 42 In this regard I note what McClelland CJ in Eq said in Watson v Foxman (1995) 49 NSWLR 315 at 318-319: Where, in civil proceedings, a party alleges that the conduct of another was misleading or deceptive, or likely to mislead or deceive (which I will compendiously described as "misleading") within the meaning of s 52 of the Trade Practices Act 1974 (Cth) (or s 42 of the Fair Trading Act ), it is ordinarily necessary for that party to prove to the reasonable satisfaction of the court: (1) what the alleged conduct was; and (2) circumstances which rendered the conduct misleading. Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances . In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consider­ation of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.

Each element of the cause of action must be proved to the reasonable satisfaction of the court, which means that the court "must feel an actual persuasion of its occurrence or existence". Such satisfaction is "not … attained or established independently of the nature and consequence of the fact or facts to be proved" including the "seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding": Helton v Allen (1940) 63 CLR 691 at 712.

What I have said above as to the cause of action based on s 52 of the Trade Practices Act 1974 (Cth) (or s 42 of the Fair Trading Act ) is equally applicable, mutatis mutandis, to the causes of action based on contract and on equitable estoppel (with the added requirements, in the case of contract that any consensus reached was capable of forming a binding contract and was intended by the parties to be legally binding, and in the case of equitable estoppel that any representation alleged was clear and unequivocal and was relied on to the substantial detriment of the representee) . (emphasis added) 43 In my opinion, the Defendant does not establish any estoppel or variation of the facility agreements with regard to the Classic Account in particular. 44 Contrary to what appears in paragraph 6(1)C of the Amended Further Defence (page 5 above) on the Defendant's own evidence nothing was said by either Mr O'Young or the Defendant about the NAB Classic Account and, in particular, nothing was said to the effect that the terms of that account were subject to the agreement there set out. 45 No representation or promise was made by the Bank concerning the Defendant's right to overdraw that account and not to have to pay the indebtedness on it if demanded.

The s 57 notice defence 46 The Notice sent by the Bank on 23 February 2009 and addressed to the Defendant relevantly said this: YOUR CREDIT CONTRACT: NAB Classic Banking Credit Account ("Credit Contract") SECURITY: Registered Mortgage, number AC158281, dated 24 December 2005 provided by You, over the property comprised in Certificate of Title Folio Identifier 2/1078852, known as "Strathallen Cottages" Wollondilly Avenue, Goulburn NSW ("Mortgage")

1. You are in default under your Credit Contract and the Mortgage with National Australia Bank Limited ("NAB"). The default is that the Facility is overdrawn without an approved overdraft limit, and you failed to put the Facility in credit within 7 days of the Facility being overdrawn ("Default").

2. The action necessary to remedy the Default is for You to immediately repay the total amount as stated below:

Account No. 082-048 59-346-1311 Amount Balance of Credit Contract as at 23 February 2009 $61,790.38 Total Amount Owing $61 , 790.38

3. If the Default is not remedied within 31 days from the date this notice is taken to be given (which is the date on which it would have been delivered in the ordinary course of the post) then NAB may enforce its rights under the Mortgage and sell the property the subject of the Mortgage.

7. This is a notice pursuant to section 57(2)(b) of the Real Property Act 1900. 47 The relevant mortgage is dated 24 December 2005 and it incorporates the provisions of Memorandum Number 7652453 filed with the Department of Lands, Land and Property Information Division. Clauses 19 and 20 of the Memorandum relevantly provide: 19. You are in default if:

… (b) you do something you agree not to do, or you do not do something you agree to do, under this mortgage or an agreement covered by this mortgage ; or

20.1 If you are in default for more than one day and: (a) the Bank has given you a default notice allowing you a period of at least 31 days from the date of the notice to remedy the default, and (b) the Bank has given you ( and any other persons entitled) any other notice required by any provision of any law relating to the enforcement of this mortgage; and (c) the notice referred to in 20.1(a) and the notice referred to in 20 1 (b) (if any) are not complied with; then the whole of the amount owing becomes payable on demand and, if the Bank demands payment of the amount owing but it is not paid within 7 days, the Bank may enforce this mortgage by doing any one or more of the following in addition to anything else the law allows the Bank to do as mortgagee: … (e) take possession of the property, 48 Clause 31 defines the words amount owing as meaning (relevantly): all money which one or more of you owe the Bank , or will or may owe the Bank in the future, and which by law may be secured by this mortgage, including :

(a) under an agreement covered by this mortgage; 49 The Defendant accepts that there is no requirement for a s 57(2) Notice to be served and expire before an order for possession is able to be obtained but says it is otherwise if it is necessary to rely on an acceleration clause in the mortgage. In that regard s 57(5) Real Property Act provides: Without prejudice to any other manner in which it may be deprived of force or effect, a covenant, agreement or condition whereby upon a default referred to in subsection (2) (a): (a) the whole of the principal or other money of which the payment is secured by a mortgage or charge becomes payable, or (b) a part of that principal or other money (not being a part to which that default relates) becomes payable,

has no force or effect until the powers conferred by section 58 become exercisable by reason of that default. 50 To the extent that an acceleration clause needs to be relied upon the Defendant's submission is correct: Turnbull v National Mutual Royal Bank Ltd (1992) 26 NSWLR 361 at 367. Otherwise, s 57 is not engaged in relation to claims for possession: Long Leys Co Pty Ltd v Silkdale Pty Ltd (1991) 5 BPR 11, 512. 51 The Defendant submits that the acceleration clause (being cl 20.1 in the portion following sub-cl (c)), is engaged. Because in the first instance the Bank has to give a 31 day notice and thereafter there is a 7 day period before the Bank can enforce the mortgage, that is said to engage the words in s 57(3)(d) "or, where some other period exceeding one month is limited by the mortgage" so that a 38 day notice ought to have been served. 52 Section 57(3) provides that a notice referred to in sub-s (2) complies with sub-s (3) (as sub-s (2) requires) if: (d) it notifies the mortgagor, charger or covenant charger that, unless the requirements of the notice are complied with within one month after service of the notice ( or, where some other period exceeding one month is limited by the mortgage , charge or judgment for remedying the default referred to in the notice, within that other period after service of the notice), it is proposed to exercise a power of sale in respect of the land mortgaged or charged. (emphasis added) 53 The Defendant submits further that because the words amount owing are defined as meaning "all money" which the Defendant owes the Bank, and may be secured by the mortgage, it is necessary for the Bank to rely on an acceleration clause, being cl 20.1, before it can take possession of the property. 54 In my opinion, the Defendant's submissions should be rejected for the following reasons. 55 First, as cl 31 makes clear amount owing includes what is owed under an agreement covered by this mortgage. The NAB Classic Account was such an agreement and it contained the acknowledgement that the Defendant would be liable if the account became overdrawn. The Bank had no need to, and did not, rely on the acceleration clause in making the demand that the overdrawn funds be repaid. What was owing to the Bank was $61,790.38 being the overdrawn balance on the account. 56 Remedying the default under cl 20.1(a) required the payment of that amount of money. Nothing more under the NAB Classic Account was due, nor was there anything to accelerate. So much is evident from the subsequent demand in respect of that account forwarded on 31 March 2009. The total amount demanded under that notice was $62,784.30 which was the debit balance in the account of that day. Since nothing was being accelerated s 57(5) was not engaged with the result that s 57(3)(d) did not have to be complied with in relation to the demand forwarded by the Bank. 57 All that was required was the 31 day notice given under cl 20.1(a) and that clause was complied with by the terms of the notice given on 23 February 2009. 58 Secondly, I do not accept the construction of s 57(3)(d) for which the Defendant argues. What cl 20.1 requires is a 31 day notice. The notice served notified the Defendant that if the default was not remedied within 31 days it was proposed to exercise the power of sale in respect of the land. That is what the sub-section requires. 59 The fact that cl 20.1 provides for the service of a further notice to give the mortgagor another 7 days after a failure to comply with the first notice cannot mean that the 31 day notice accompanied by the required warning is not sufficient to comply with s 57(3) if that sub-section was otherwise engaged. 60 The 31 day notice was all that was necessary to comply with the words highlighted in s 57(3)(d) (para 52 above). Since a valid s 57 notice was served the amounts due under the other 2 facilities became due and payable. 61 The Bank in fact gave further notices on 31 March 2009 in respect of each facility requiring payment of the amount within 7 days. Those notices were not complied with. Accordingly, the Bank's right to take possession of the property, expressly provided for in cl 20.1(e) was enabled. 62 For these reasons, a notice under s 57(2) Real Property Act was not required to be given in respect of the NAB Classic Account. To the extent that such notices were required for the other facilities the notices given complied with s 57(2). There is no arguable defence based on the requirements of s 57.

The defence is embarrassing 63 The Bank submitted, in the alternative to its submission that the defence disclosed no reasonable defence, that by reason of the way the defences were pleaded the Amended Further Defence was embarrassing within the meaning of Rule 14.28(b). 64 In this regard, the Bank drew attention to the judgment of Bryson J in Northam v Favelle Favco Holdings Pty Ltd (unreported - Bryson J - 7 March 1995) where his Honour said (at pp 2-3): A pleading may be embarrassing even though it does contain allegations of material facts sufficient to constitute a cause of action, if the material facts alleged are couched in expressions which leave difficulties or doubts about recognising or piecing together what is referred to, or if imprecise or slang words are used with unduly broad ranges of possible meanings or without clear meanings. What is referred to must be clearly stated showing, as appropriate, when and where an event happened, who participated, what was said, what was the relevant effect of any document and so forth. It is not fair to require a defendant to flesh out general expressions or indirect allusions by piecing together information in other documents such as affidavits or experts' reports. He might get it wrong, and the greater the complexities are, the more probable it is that he will understand what is alleged in some different way to what the plaintiffs will rely on. Procedural justice can be upset just as much by opportunistic advocacy exploiting a choice among several possibilities as by an ambush from complete concealment. In the world of practicalities a defendant is unlikely to receive much protection when evidence is tendered which is an available meaning of a pleading if he has not attacked the pleading at an interlocutory stage. 65 When those remarks are taken in conjunction with what McClelland CJ in Eq said in Watson v Foxman (set out in para 42 above) it is entirely appropriate to characterise the Defendant's pleading in relation to the estoppel/variation defence as embarrassing. True it is that the analysis of the evidence that I have undertaken above indicates clearly enough that no reasonable defence is disclosed in relation to the estoppel/variation defence. So much is not at all clear from the terms of the Amended Further Defence themselves. 66 The Bank submitted that on its analysis of the Amended Further Defence there appeared to be 2 separate variation and estoppel defences raised. The first of these concerned the matters set out in paras 15 and 16 of the Defendant's affidavit together with the refusal in January 2009 to provide the finance for construction costs. The second variation and estoppel defence was thought to derive from the changed circumstances at the beginning of 2009 where the Defendant put forward a different proposal, acted on that proposal and then had the Bank refuse its agreement. 67 Some support for that dichotomy appears in the written submissions of the Defendant where the first complaint appears to be the refusal to provide the construction costs after a promise to do so, and subsequently a promise to capitalise interest for 6 months. 68 However, for the reasons that I have given earlier it seems impossible to characterise the refusal to pay 80% of the construction costs after the alleged representation to do so in terms of an estoppel with regard to existing facilities. Yet that is how the defence characterises the matter. 69 Further, in relation to what might be thought to be the second estoppel of a promise to capitalise interest for 6 months, when evidence was tendered by the Defendant to provide support for this defence (and such evidence is receivable under r 14.28(2)) the matter was confused further rather than clarified because the Defendant wanted to rely on the words "we will not stop you" as providing the basis for an estoppel involving (a) the capitalisation of interest, and (b) an agreement that the NAB Classic Account was to be operated on terms other than its written terms provided for. 70 Had I not reached the clear view on an analysis of the Defendant's own evidence that no reasonable defence was disclosed, I would have been satisfied that the Amended Further Defence was embarrassing within the meaning of the Rule. 71 Ordinarily, in those circumstances, a defence would be struck out with leave given to replead so that the matter could be pleaded in clear and non-embarrassing terms. In the present case, however, as Mr Sulan of counsel for the Bank pointed out, this defence was the third defence wherein the Defendant had attempted to plead the estoppel/variation defence with no gradation of increasing clarity through those 3 defences but rather, mounting confusion. 72 Coupled with the added complexity occasioned by the tendering of the Defendant's affidavit evidence, it would have been appropriate in the circumstances to strike out the Amended Further Defence and not to permit a repleading.

Conclusion 73 For the reasons I have given the Amended Further Defence discloses no reasonable defence to the Bank's claim for possession. The Amended Further Defence should be struck out. That order means that the Defendant is in default under r 16.2(1)(c). It is not suggested that the Defendant has any other defence to the Bank's claim. In the circumstances the Bank must be permitted to move for judgment. 74 The Bank has filed and relied upon a number of affidavits which show compliance with r 16.4 and service of notices to occupiers on the persons identified as occupying the 5 villas that comprise the land. 75 Accordingly, I make the following orders:

(1) The Amended Further Defence filed 25 March 2010 is struck out.

(2) Judgment for the Plaintiff against the Defendant for possession of the whole of the land referred to in Certificate of Title Folio Identifier 2/1078852 and known as "Strathallen Cottages", Wollondilly Avenue, Goulburn, NSW.

(3) Leave to the Plaintiff to issue a writ of possession to enforce the judgment.

(4) The Defendant is to pay the Plaintiff's costs of the proceedings.

13/05/2010 - Typographical error - Paragraph(s) para 75

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.