Whitehouse v BHP Steel Ltd

LOWER COURT District Court JURISDICTION : LOWER COURT DC 7860/02 FILE NUMBER(S) : LOWER COURT Rolfe DCJ JUDICIAL OFFICER :

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 41203/03

GILES JA TOBIAS JA McCOLL JA

Monday 6 December 2004 MARK GEOFFREY WHITEHOUSE v BHP STEEL LIMITED Judgment 1 GILES JA: I agree with Tobias JA. 2 TOBIAS JA: By its Second Amended Statement of Liquidated Claim filed in the District Court on 18 July 2003, the respondent sued the appellant as guarantor with respect to certain roofing materials (materials) sold and supplied by the respondent to MGW Roofing Pty Limited (Roofing) of which the appellant was the sole director. 3 The appellant's primary defence to the respondent's claim was that as he had only given a guarantee with respect to materials supplied by the respondent to MGW Construction Pty Limited (Construction) (of which the appellant was the sole director and shareholder), he was not liable under that guarantee with respect to materials supplied by the respondent to Roofing. 4 By way of reply, the respondent asserted that the appellant was estopped from denying that he was liable to it under the guarantee in respect of materials supplied to Roofing as the relationship between them had proceeded on the conventional basis of an agreed or assumed state of affairs which both were estopped from denying. That assumed state of affairs was that Construction would be liable for any debt incurred by Roofing in respect of materials ordered on, and supplied pursuant to, the credit account of Construction with the respondent and that the appellant would be liable under his guarantee for that debt. 5 The proceedings were heard by his Honour Judge R A Rolfe who on 24 November 2003, upheld the respondent's contention that there was a conventional estoppel operating as between itself and the appellant as a consequence whereof judgment was entered for the respondent in the sum of $203,142.34 and other consequential orders made. It is against that judgment and those orders that the appellant appeals to this Court.

The background facts 6 At all materials times the respondent was, inter alia, a supplier of building products including roofing materials. Between 1996 and 1999 Construction, which was registered on 26 September 1995, conducted a roofing business and the appellant, as its director, wished the respondent to supply materials to it on credit. 7 Accordingly, on 19 March 1996 the appellant, as a director of Construction, signed an application to the respondent to open a credit account in the name of Construction. At the same time the appellant signed a form of guarantee and indemnity (the Construction guarantee) addressed to the respondent which, relevantly, was in the following terms: "In consideration of your, at my/our request, supplying goods from time to time to MGW Construction Pty Limited I/we: Mark Geoffrey Whitehouse … (hereinafter called the Guarantor/Guarantor(s)) hereby agree to guarantee the due payment by the customer of any amount whatsoever or at any time hereafter becoming owing in respect of the sales and/or delivery of goods supplied from you to the customer … … In this agreement 'customer' means any of the customers named in the schedule hereto …" 8 Although at one point the respondent suggested that the Construction guarantee was in terms wide enough to include materials supplied by the respondent to Roofing, clearly the guarantee could not be so construed. Although there is no schedule to the document or other definition of "customer", it was common ground between the parties that the guarantee was confined to the supply of materials from the respondent to Construction. 9 On or about 2 May 1996 the respondent accepted Construction's credit application whereupon, as the primary judge found, a binding agreement (the Construction credit arrangement) came into existence between the respondent and Construction for the supply of building products on the terms and conditions annexed to the credit application which included the following: a) that delivery dockets would be prima facie evidence of delivery to Construction; b) that statements of account would be prima facie evidence of the amount owed to the respondent; and c) that any outstanding balances were to be paid by the last working day of the month following the month of invoicing. 10 In furtherance of the foregoing terms of the Construction credit arrangement the respondent wrote to the appellant care of Construction on 24 May 1996 relevantly in the following terms: "We are pleased to confirm that customer code N-MGW has now been established which enables you to purchase directly our range of products. You will, of course, want to know our trading terms. Payment is to be received by the 28th day of the month following the month of invoicing with a 2% settlement discount if these terms are met. … You are required to notify BHP Building Products of any change which may occur to the name and/or ownership of your account. … Please find enclosed a direct deposit book, which will enable you to use our Direct Deposit Facility by banking at any ANZ Bank into our account. Would you kindly fax us immediately you make such a deposit with the details of your payment so that we can adjust your account accordingly." 11 Thereafter, the respondent supplied materials to Construction upon the terms and conditions of the Construction credit arrangement. This continued until 30 June 1999 when Construction ceased trading. All payments for materials supplied were made via the direct deposit facility referred to in the respondent's letter of 24 May 1996. 12 Further it would appear that until 30 June 1999, the order forms for the supply of materials utilised by Construction was headed "MGW" in large letters on both the left and right-hand side at the head of the form with the name of the company between the two logos. Delivery dockets and invoices for the materials supplied were issued by the respondent in the name of Construction. In particular, the invoices bore the customer code N-MGW referred to in the respondent's letter to the appellant of 24 May 1996. Finally, the following identification of the customer appeared prominently at the centre of the invoices: CUSTOMER M G W CONSTRUCTION PTY LTD Orders MGW Letterhead ONLY PO BOX 245 NELSON BAY NSW 2315

13 Roofing was incorporated on 29 June 1999. It proceeded to place orders with the respondent in respect of materials similar to those previously ordered by Construction. The only difference in the trading procedure which occurred as a consequence of Construction ceasing to trade (without that fact being conveyed by the appellant to the respondent) and the ordering of materials by Roofing, was that the order forms provided by the appellant to the respondent had the name "MGW Roofing Pty Limited" inserted between the two MGW logos at the head of the order form and provided for the account to be addressed to "MGW Roofing Pty Limited". Notwithstanding this the respondent, to the knowledge of the appellant, continued to issue delivery dockets and invoices in the name of Construction. Furthermore, payments for materials supplied to Roofing were made by the appellant with the deposit book which had been issued to Construction. The cheques used for payment were those of Roofing but it was not suggested that the respondent had knowledge of that fact. 14 A number of butts from the deposit book used by the appellant to pay for materials ordered by Roofing were in evidence. They identified the date and the amount deposited as being "for the credit of 012003/77596518". In cross-examination relating to these butts, the following exchange with the appellant took place: "Q. You understood at all times that the credit account, which is identified in deposit book Ex. 16 was the credit account for MGW Construction Pty Limited? A. That's correct."

The primary judge referred to this exchange as a concession by the appellant that the deposit book related to the N-MGW credit account of Construction. 15 The respondent submitted to this Court that the appellant's affirmative answer to the question was an acknowledgment by him that 012003/77596518 was the identification number of Construction's credit account. It was further submitted that if this was so, it constituted a representation by the appellant that the amounts deposited in respect of materials supplied to Roofing were being deposited on behalf of Construction. However, I do not think that the identification number referred to was related to Construction's credit account with the respondent. Rather, it represented the respondent's BSB and account number with its bank. Nevertheless, the respondent would have become aware of the deposit when it received its bank statements. Further, it can be inferred that it accepted the deposit as a payment to be credited against Construction's account in the respondent's books. I shall return to this point later in these reasons. 16 At no time did Roofing have in place any arrangements with the respondent for the supply of materials on credit. Nevertheless, the primary judge found that the appellant was aware that the respondent would not supply materials on credit without a credit facility being in place and that it would be essential for him to provide his personal guarantee as a director of the relevant customer as part of any such facility. 17 Notwithstanding the fact that the appellant was well aware that the Construction guarantee related only to the indebtedness of Construction, he did not notify the respondent as he was required to do by the letter of 24 May 1996 that there had been any change to the name and/or ownership of the credit account in respect of which the customer code N-MGW had been established. Furthermore, the appellant never informed the respondent that Roofing was a different company to Construction. 18 In addition the appellant was aware from the invoices issued by the respondent in respect of materials ordered by Roofing that, firstly, they were being supplied under Construction's customer code N-MGW; secondly, they were being issued in the name of Construction as the customer, and thirdly, as is made clear by the box appearing on the invoices for the insertion of the customer's name (see [12] above) and as was found by the primary judge, the respondent was only prepared to accept orders and thus sell and supply materials if the orders were provided on "MGW letterhead". Roofing's order forms so provided. 19 Mr Dale Coutts was the sales manager of the respondent between July 2000 and December 2002. He recalled meeting the appellant soon after he commenced work with the respondent. His evidence, which was accepted by the primary judge, established that it was his practice in his conversations with the appellant to refer to the "N-MGW account". He acknowledged that he saw documents referring to Roofing, but said that it did not occur to him that there were two separate companies and that the appellant did not say anything to suggest otherwise. Furthermore, he assumed that the respondent's normal credit procedure had been followed in setting up a credit account on behalf of "the MGW company" and that the appellant had signed a personal guarantee on behalf of the MGW company with which the respondent was dealing. He said: "It was my understanding and belief that it was on the basis of this credit application and guarantee that BHP did business with MGW." 20 On or about 1 April 2001, Mr Coutts arranged for the respondent to enter into a supply agreement with Roofing in respect of the period 1 April 2001 to 31 December 2002. That agreement provided for various matters but, relevantly, provided the following with respect to payment for materials supplied: "Where N-MGW Roofing has established an approved credit account with BHP Building Products, N-MGW Roofing shall ensure that payment for Product is made to BHP Building Products on before the 30th calendar day following the month of invoice and at least one hour before the time at which trading banks close for business to enable banking on that day. Direct depositing will be our preferred option." 21 On 8 May 2001, a further agreement was entered into between the respondent and Roofing entitled "Lysaght Approved Contractor Agreement". It generally related to the provision by the respondent of warranties to Roofing's customers. 22 According to the evidence of Mr Coutts accepted by the primary judge, although he was aware that the supply agreement was with Roofing, as far as he was concerned he was dealing with MGW. In [20] of his affidavit of 8 September 2003, he deposed as follows: "I did not know there were two N-MGW companies and had no reason to believe that the Supply Agreement was with a company other than that with which BHP already had a credit agreement and in respect of which there was a personal guarantee". 23 It was not until a conversation with the appellant's accountant on 8 March 2002, when the account for materials supplied was well in default, that Mr Coutts was informed that the company with which the respondent had been dealing since 1999 had been Roofing and not Construction. This was the first time that Mr Coutts appreciated that there were two companies using the MGW logo. 24 It would appear that for a period of time there was no problem with the account and the credit arrangements that were in place were met. The respondent's claim in the proceedings was in respect of materials supplied during the period 5 October 2001 to 5 March 2002 but not paid for. Roofing was placed into Voluntary Administration on 4 June 2002.

The primary judge's decision 25 Having accepted Mr Coutts as an "honest, reliable and truthful witness", the primary judge was satisfied that he did not make the connection in his mind, nor did he differentiate, between purchase orders in the name of Roofing and the sales resulting from such orders being added to the credit account of Construction. As far as Mr Coutts was concerned, what was important was that the account was "MGW" which he identified from computer records and the documents in his office. So long as an order had the letters "MGW" on it, it could be booked to the N-MGW account. 26 His Honour also found that at all times during discussions with Mr Coutts when orders were being placed in the name of Roofing, the appellant only ever referred to "MGW" and that Mr Coutts always referred to the "MGW Account". His Honour further found that "even after Roofing commenced to place orders with BHP for the supply of product, Whitehouse received confirmation of those orders from BHP which identified the purchaser as Construction. Whitehouse did nothing to inform anyone at BHP that the confirmation should have been addressed to Roofing. Similarly, Whitehouse was aware that when products were supplied, the delivery dockets were issued to Construction not Roofing. Again he did nothing to correct the position, thus fostering BHP's understanding that the debtor was Construction. Likewise when the Plaintiff sought payment for orders, the invoices were issued to Construction. Whitehouse was aware of that fact, and thus he was fostering an assumption by BHP that Construction was liable for the debts that were being run up. Whitehouse did nothing to disabuse BHP about this assumption." 27 The primary judge also found that the appellant assumed that whatever credit arrangements he had made for Construction would also apply to Roofing. In particular, his Honour found that the appellant assumed that the Construction guarantee would continue to operate in respect of all transactions including those entered into by Roofing. This was the reason the appellant took no steps to establish new credit arrangements for Roofing. Critically, the following exchange bears this out: "Q. You just assumed, did you, that whatever the arrangements were that you'd made for MGW Constructions Pty Ltd would apply to the new entity, MGW Roofing Pty Ltd. Is that right? A. It would appear so, yes. Q. That's what you assumed. A. Yes. Q. You assumed, did you, that your guarantee that you'd given for the credit facility would operate in respect of the transactions? A. Yes. Q. Including those which were entered into by MGW Roofing Pty Ltd. A. Yes. Q. Is that the reason why you tell his Honour you took no active steps to speak to BHP about this change in the entity carrying on the business? A. Yes." 28 The last question and answer would appear to be the reason why the appellant took no steps to notify the respondent of any change that had occurred to the name and/or ownership of the N-MGW account as required by the respondent in its letter to him of 24 May 1996.

29 A little later in the appellant's cross-examination, the following exchange took place which was relied upon by the primary judge as establishing the necessary common assumption to give rise to a conventional estoppel: "Q. Can I put it to you again that what you assumed to be the case from late June, early July 1999, was that BHP were incorrectly understanding the MGW Roofing orders to be made by and on behalf of MGW Construction Pty Ltd. A. It would appear that way. Q. That's what you understood? A. Yes. Q. Although you thought that to be a curious position, as I understand your evidence, not once did you ever speak to BHP about it. You were content for BHP to continue to make that assumption. Is that right? A. Yes." 30 As I have already noted, the primary judge accepted Mr Coutts' evidence that he had no reason to believe that the Supply Agreement entered into on or about 1 April 2001 was with a company other than that with which the respondent already had a credit arrangement in respect of which the appellant's personal guarantee was in place. 31 His Honour then expressed the following finding: "The truth of the matter is, and I so find as a fact, that Whitehouse knew that BHP were treating and dealing with him and his companies up to and including February 2002 on the basis that BHP assumed that Construction was liable for the debts incurred on the N-MGW account. Whitehouse also knew that BHP regarded him as liable for those debts under the Construction Guarantee." 32 In other exchanges in the course of the appellant's cross-examination, and referred to by the primary judge, the appellant accepted that the Construction guarantee was considered by him to also cover Roofing's indebtedness in respect of materials supplied to it by the respondent. The appellant accepted that as far as he was concerned, it was unnecessary for Roofing to enter into a separate credit arrangement and for him to give a new guarantee in respect of its debt as the Construction guarantee related, so far as he was concerned, to any debt owed by Roofing. He was aware that Roofing owed some $200,000, which he regarded as secured by the Construction guarantee. This was finally confirmed by the following exchange: "Q. I'm asking that your obligation, you are prepared to admit, are you, that you owe the money claimed in these proceedings under Construction's guarantee. That's right? A. Yes, it appears so." 33 Based on the foregoing evidence, the primary judge concluded in the following terms: "Accordingly, I am therefore comfortably satisfied that BHP and Whitehouse (and through him his two Companies) adopted the common assumption that, for the period in question, in relation to the products which were supplied, that Construction was the debtor and that Whitehouse was liable for the debt of Construction under the Construction Guarantee. In coming to this conclusion I am satisfied, by reason of the matters referred to in this Judgment and the findings that I have made, that Whitehouse caused and contributed to BHP making such assumption. In the circumstances, it would be unjust to allow Whitehouse to depart from this assumption. I am therefore satisfied that BHP has made out its case on conventional estoppel. Whitehouse is therefore estopped from denying that Construction is indebted to BHP in the sum of $203,142.34 and from denying that he is liable to BHP on that debt under the Construction Guarantee."

The relevant principles 34 For present purposes it is sufficient to commence a short consideration of the authorities by reference to the following passage from the judgment of Brandon LJ in Amalgamated Investment & Property Co Ltd (in Liq) v Texas Commerce International Bank Ltd [1982] QB 84 at 130, where his Lordship said: "This form of estoppel is founded, not on a representation of fact made by a representor and believed by a representee, but on an agreed statement of facts the truth of which has been assumed, by the convention of the parties, as the basis of a transaction into which they are about to enter. When the parties have acted in their transaction upon the agreed assumption that a given state of facts is to be accepted between them as true, then as regards that transaction each will be estopped as against the other from questioning the truth of the statement of facts so assumed." 35 The facts in Amalgamated are not unlike those in the present case. The respondent bank lent money to Amalgamated secured by mortgages on English properties. Later the bank agreed to make a loan to ANPP, a subsidiary of Amalgamated registered in the Bahamas, to be secured by a mortgage over property that ANPP owned together with a guarantee from Amalgamated. Amalgamated executed a guarantee in respect of ANPP's indebtedness to the bank. However, as a consequence of exchange control requirements the bank arranged for the loan to ANPP to be channelled through a subsidiary company of the bank which it had acquired in the Bahamas. ANPP then executed a mortgage over its property in favour of that company which was shown in its and bank's books as the direct lender to ANPP. However, the contemporary and subsequent negotiations and transactions between the parties in respect of the loan were upon the basis that the guarantee made Amalgamated liable to the bank in respect of the Bahamas' loan. The issue before the Court of Appeal was whether Amalgamated was entitled to a declaration that it was not liable to the bank under the guarantee in respect of the loan to ANPP. The basis of this claim was that the guarantee related to ANPP's indebtedness to the bank but, in fact, ANPP was indebted to the bank's subsidiary company, which in turn was indebted to the bank. Accordingly, so it was alleged, ANPP was not a principal debtor to the bank in respect of which the guarantee operated. 36 Robert Goff J dismissed Amalgamated's claim holding that although the bank could not rely directly on the guarantee, Amalgamated was estopped from contending that it did not cover ANPP's liability for the Bahamas' loan. His Lordship's findings were, firstly, that the bank's officers mistakenly believed that the guarantee covered the Bahamas' loan and that the source of their error lay in the bank itself and not in anything said or done by or on behalf of Amalgamated. Secondly, the officers of Amalgamated laboured under the same mistake, again independently originated. Thirdly, Amalgamated by their whole course of conduct represented and encouraged the bank to believe that the guarantee covered the Bahamas' loan. Fourthly, that conduct influenced the bank in that it operated to confirm its officers' mistaken belief. 37 Although it was submitted that no estoppel could arise because the bank came to hold this mistaken belief in the first place as a result its own error this argument was rejected by both the trial judge and the Court of Appeal. Thus, Brandon LJ (at [131]) said: "Applying that description of estoppel by convention to the present case, the situation as I see it is this. First, the relevant transactions entered into by [Amalgamated] and the bank were the making of new arrangements with regard to the overall security held by the bank in relation to both the [English and Bahamas'] loans. Secondly, for the purposes of those transactions, both the bank and [Amalgamated] assumed the truth of a certain state of affairs, namely that the guarantee given in relation to the [Bahamas] loan effectively bound [Amalgamated] to discharge any indebtedness of ANPP to [the bank's subsidiary]. The transactions took place on the basis of that assumption and their course was influenced by it in the sense that, if the assumption had not been made, the course of the transactions would without doubt have been different." 38 For reasons that will become apparent, in my opinion the facts of the present case bear a close resemblance to those in Amalgamated. 39 Amalgamated was followed by a majority of this Court in Coghlan v S H Lock (Australia) Limited (1985) 4 NSWLR 158. Samuels JA, with whom Hope JA agreed, noted (at 166F) that estoppel by convention does not depend upon a representation of existing fact. His Honour observed that it was implicit in the judgments of the Court of Appeal in Amalgamated that the fact that nothing said or done by Amalgamated originated the bank's mistake did not bar the estoppel. 40 His Honour then referred to K Lokumal & Sons (London) Ltd v Lotte Shipping Co Ltd [1985] 2 Lloyd's Rep 28 where, at 34-35, the Court of Appeal, in a judgment delivered by Kerr LJ, said: "All estoppels must involve some statement or conduct by the party alleged to be estopped on which the alleged representee was entitled to rely and did rely. In this sense all estoppels may be regarded as requiring some manifest representation which crosses the line between representor and representee, either by statement or conduct. It may an express statement or it may be implied from conduct e.g. a failure by the alleged representor to react to something said or done by the alleged representee so as to imply a manifestation of assent which leads to an estoppel by silence or acquiescence. Similarly, in cases of so-called estoppels by convention, there must be some mutually manifest conduct by the parties which is based on a common but mistaken assumption. The alleged representor's participation in this conduct can then be relied upon by the representee as a basis for this form of estoppel." 41 Samuels JA then referred (at 167F) to Grundt v Great Boulder Proprietary Gold Mines Ltd (1937) 59 CLR 641 at 675 where Dixon J said: "Before anyone can be estopped, he must have played such a part in the adoption of the assumption that it would be unfair and unjust if we were left free to ignore it."

His Honour did not think, in the context of Grundt , that the reference to " the adoption " of the assumption excludes estoppel if, as in Amalgamated , the assumption was originated by the party asserting the estoppel and fostered by the opponent. Again for reasons that will become apparent, the relevant assumption in the present case originated with the respondent as the party asserting the estoppel and was fostered by the appellant. 42 The relevant principle was also stated in the joint judgment of Gibbs CJ, Mason, Wilson, Brennan and Dawson JJ in Con-Stan Industries of Australia Pty Limited v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226 at 244 in the following terms: "Estoppel by convention is a form of estoppel founded not on a representation of fact made by a representor and acted on by a representee to his detriment, but on the conduct of relations between the parties on the basis of an agreed or assumed state of facts which both will be estopped from denying." 43 In that case, the Court held that there was no estoppel because all estoppels, including estoppel by convention, required the assumed state of affairs to be an assumed state of fact whereas the relevant assumed state of affairs relied on by the party advancing the estoppel was as to the legal effect of the relevant conduct. However, that aspect of Con-Stan was distinguished by this Court in Eslea Holdings Ltd v Butts (1986) 6 NSWLR 175 where Samuels JA, with whom Kirby P agreed, held (at 188) that a conventional estoppel might rest upon a foundation of assumed law as well as of assumed fact. It is unnecessary to take this aspect of the matter further for the decision of the High Court in Commonwealth v Verwayen (1990) 170 CLR 394 established that the relevant assumption, even in the case of a conventional estoppel, may be one as to a legal, as well as a factual, state of affairs: see at 413 per Mason CJ and at 445 per Deane J. 44 Verwayen was not a case of conventional estoppel but the general principles articulated by Deane J at 444-445 are clearly applicable to that form of estoppel. Two of those principles are relevant here. They are in the following terms: "2. The central principle of the doctrine is that the law will not permit an unconscionable - or more accurately, unconscientious - departure by one party from the subject matter of an assumption which has been adopted by the other party as the basis of some relationship, course of conduct, act or omission which would operate to that party's detriment if the assumption be not adhered to for the purposes of the litigation. …. 4. The question whether such departure would be unconscionable relates to the conduct of the allegedly estopped party in all the circumstances. The party must have played such a part in the adoption of, or persistence in, the assumption that he would be guilty of unjust and oppressive conduct if he were now to depart from it. The case indicated four main, but not exhaustive, categories in which an affirmative answer to that question may be justified, namely, where that party: (a) has induced the assumption by express or implied representation; (b) has entered into contractual or other material relations with the other party on the conventional basis of the assumption; (c) has exercised against the party rights which would exist only if the assumption were correct; (d) knew that the other party laboured under the assumption and refrained from correcting him when it was his duty in conscience to do so."

It is clear on the facts of the present case that categories (b) and (d) are relevant to, and clearly encompass, the appellant's conduct as found by the primary judge.

The appellant's submissions 45 The appellant's submissions may be summarised thus:

(a) For estoppel by convention to be established, there must be found to exist an " agreed state of facts ", the truth of which has been assumed as the basis of a transaction into which the parties have entered.

(b) That would require a finding that Mr Coutts on behalf of the respondent and the appellant each knew of or assumed that Construction had agreed to accept liability for the materials to be supplied to Roofing. Mr Coutts was not aware of the existence of Construction as distinct from Roofing or any other entity. He was aware of "MGW". As he was not aware of the existence of Construction, he could not have proceeded on the assumption that Construction had agreed to accept liability for goods so supplied.

(c) The assumption made by Mr Coutts was that the N-MGW account was a credit account in respect of which Roofing was entitled to purchase goods on credit. At no time did Mr Coutts proceed on the assumption found by the primary judge that that account was one in respect of which Construction had agreed to accept liability for materials supplied to Roofing.

(d) The mistaken assumption upon which Mr Coutts proceeded was that the N-MGW account was one in respect of which the respondent had approved sales on credit to Roofing. That was not an assumption that was induced by any conduct or representation by Construction, Roofing or the appellant.

(e) Accordingly, there was no common assumption and, in any event, no assumption induced by any conduct on the part of the appellant, Roofing or Construction, to the effect of that found by the primary judge, namely, that Construction was the debtor in respect of goods supplied by the respondent to Roofing.

(f) In any event, the terms of the Construction guarantee were such that it only applied with respect to materials supplied to Construction and had no application with respect to goods supplied to Roofing.

Should the appellant's submissions be accepted? 46 It is apparent from the submissions of the appellant summarised in (a), (b) and (c) of the preceding paragraph that the thrust of the appellant's argument is that whereas the primary judge has found that the parties adopted the common assumption that Construction would be liable to pay for materials supplied to Roofing, the finding of such an assumption was not open to the primary judge given that Mr Coutts was not at any relevant time aware that Construction existed. Accordingly, he could not have proceeded on the assumption that Construction had agreed to accept liability for materials supplied to Roofing. 47 In my opinion, this submission overlooks the fact that although Mr Coutts was the respondent's representative in relation to the sale of materials to Roofing, he was not the only person who was involved with the N-MGW account. Thus the appellant's argument fails to have regard to the critical facts that the respondent (or its relevant officers) issued written confirmations in the name of Construction of the orders placed by the appellant on behalf of Roofing, issued delivery dockets in the name of Construction and, critically, issued invoices for payment in the name of Construction. 48 In my opinion it is clear from these facts that it was well open to the primary judge to hold that the respondent, as a corporate entity, had adopted the assumption that materials the subject of purchase orders lodged by the appellant on behalf of Roofing were to be supplied on credit in accordance with the N-MGW account, being the Construction credit arrangement in respect of which Construction would be liable as the principal debtor and the appellant would be liable as guarantor. After all, that credit account was in Construction's name and, certainly, the appellant understood and intended that any materials purchased by Roofing would be supplied in accordance with the Construction credit arrangement and were therefore subject to the terms of that facility which included, to his knowledge, Construction's liability to pay the invoiced amounts which were guaranteed by the appellant. 49 Accordingly, when the position is looked at from the point of view of the respondent (as distinct from Mr Coutts personally), the assumption attributed to the respondent by the primary judge was clearly established. 50 A more controversial issue is whether Construction, as distinct from the appellant, played a relevant part in the adoption by the respondent of that assumption in terms of categories (b) or (d) referred to by Deane J in Verwayen to which I have referred in [44] above. Or, to put the matter in terms of that referred to by Samuels JA in Coghlan, was that assumption in any way fostered by Construction? 51 In my opinion the answer to the question so posed should be in the affirmative. Although Construction had stopped trading as at 30 June 1999, it continued in existence as evidenced by the fact that its annual returns were filed up to and including 2001. Further, the appellant was its sole director and shareholder and, therefore, its directing mind and will. Through the appellant, Construction was aware that the respondent was issuing confirmations of orders, delivery dockets and invoices for payment in its name. It thereby knew that the respondent was acting under the assumption that Construction was liable for the payment of the materials ordered by Roofing. 52 Furthermore, the deposit book which related to Construction's credit account and therefore belonged to Construction was, through the appellant, utilised for the purpose of enabling Roofing to pay those invoices. In these circumstances it is inevitable that, at the very least, Construction knew that not only was the respondent labouring under the assumption that the materials were being supplied pursuant to, and in accordance with, the Construction credit arrangement, but also that the respondent was assuming that in accordance with the terms of those arrangements, Construction would be liable to pay the invoices issued in respect of the materials so supplied. As Construction through the appellant did nothing to disabuse the respondent of those assumptions, it follows that it played a sufficient part in their adoption by the respondent that it would be unjust if it were now permitted to depart from them. 53 During the course of argument before this Court, it was suggested that the primary judge's finding that the common assumption extended to Construction being the debtor was unnecessary to enable the respondent to succeed against the appellant on the Construction guarantee. This is because on the findings made by the primary judge, there was clearly a common assumption adopted by the appellant and respondent that the supply of materials pursuant to the Construction credit arrangement, the payment of which was guaranteed by the appellant, extended to the materials the subject of Roofing's purchase orders. In other words the assumption common to both parties was that any materials supplied by the respondent pursuant to Roofing's purchase orders were covered by the Construction credit arrangement entered into in 1996 in respect of which the appellant guaranteed payment for the materials supplied. As both the respondent and the appellant were under the same assumption and as materials were ordered and supplied on the basis of that assumption, it follows that a conventional estoppel was established with the consequence that any departure from that assumption by the appellant would be unconscionable. 54 When this form of common assumption was put to the appellant's counsel, it was virtually conceded that he had no answer to it. 55 Nevertheless, it was contended by the appellant that whether the correct assumption was that found by the primary judge or that referred to above in argument, the debt was in truth that of Roofing to which the appellant's Construction guarantee did not, in terms, extend. The difficulty with this submission is that it overlooks the fact that the common assumption of the parties, about which they were both mistaken and on the basis of which materials were ordered and supplied on credit, was that the payment of the purchase price of those materials was guaranteed by the appellant. The concessions of the appellant in cross-examination referred to in [27] above make it abundantly clear that the appellant assumed that his Construction guarantee extended to materials the subject of purchase orders by Roofing. Although they were not the true terms of the guarantee, the effect of the common assumption adopted by the parties is that the appellant was estopped from denying that the guarantee so extended. 56 The appellant also submitted that it was not open to the respondent to rely on conventional estoppel as the mistake it made regarding the identity of the true debtor was self-induced in that Mr Coutts failed to make his usual enquiries to check, when the supply agreement was entered into by Roofing, that credit arrangements were in place with respect to that company. He made the erroneous assumption that the Construction credit arrangement applied. 57 In my opinion there is no substance in this submission. It was made in reliance upon the statement of McHugh JA in Coghlan (at 176D]) that: "[e]stoppel is not concerned, however, with a self-induced mistake even if both parties have made the same mistake." 58 In my opinion, this statement of McHugh JA has no application to the present case. It was made in the context of his Honour's assertion that the party to be estopped must have conducted himself in such a way as to cause, induce or occasion another person to accept some fact or event as the basis of their dealings. As I have already indicated, that requirement was relevantly satisfied in the present case. In my opinion, his Honour was speaking of a mistake which was not induced by the conduct of the party to be estopped, but which was due only to the mistake of the party seeking the estoppel. It has no application where, to quote the sentence from his Honour's judgment appearing immediately after that cited above, "[t]he person alleged to be estopped must have contributed to or occasioned the other party's mistake." 59 It follows from the foregoing that the appellant's challenges to the primary judge's finding, that he was estopped from denying that he is liable to the respondent under the Construction guarantee, should be rejected.

The appellant seeks leave to advance a further argument 60 In its written submissions, the appellant sought to advance a further challenge encapsulated in Grounds 6 and 7 of the Amended Notice of Appeal. It was submitted that the appellant could not be liable on the Construction guarantee as there was no enforceable obligation on the part of the principal debtor Construction as, having lodged a Proof of Debt in the Administration of Roofing, the respondent had elected to pursue its rights against Roofing instead of Construction. 61 The respondent objected to the appellant raising the issue of election which was neither pleaded nor advanced in the court below. Although counsel for the appellant referred us to material which was admitted into evidence (over objection) and which might have laid the groundwork for an argument based upon election, he was (with some reluctance) forced to concede that he did not seek to support the admission of that evidence upon the basis that it was relevant to the issue of election: nor did he address the primary judge upon that basis. 62 The respondent objected to leave being granted to the appellant to raise this new issue upon the basis that firstly, it had never been pleaded nor argued in the court below and secondly, that it would be prejudiced as it would have wished to adduce further evidence from a Ms Basford, who was called to give evidence on another issue, and from a Ms Colleen McKenna, the respondent's National Credit Manager whom Ms Basford supervised and to whom she reported. It was submitted that there were paragraphs of Ms Basford's affidavit which were not read before the primary judge but which would have been if the issue of election had been advanced and, further, that affidavits of Ms McKenna had been prepared but, again, not read given the matters that were in issue in the court below. 63 Further, it was asserted that there were other witnesses who may have been able to give relevant evidence going to the issue of election and, in particular, to the respondent's knowledge of the relevant facts giving rise to alternative and inconsistent rights. 64 At the conclusion of submissions on this issue, the Court refused the appellant leave to argue Grounds of Appeal 6 and 7. My reasons follow. 65 The principles applicable to an attempt to take a point on appeal not taken in the court below are well established. The classic statement is that of Latham CJ, Williams and Fullagar JJ in Suttor v Gundowda Pty Limited (1950) 81 CLR 418 at 438 where their Honours said:

"Where a point is not taken in the court below and evidence could have been given there which by any possibility could have prevented the point from succeeding, it cannot be taken afterwards." 66 Again, in University of Wollongong v Metwally (No. 2) (1985) 59 ALJR 481 at 483 the High Court said:

"It is elementary that a party is bound by the conduct of his case. Except in the most exceptional circumstances, it would be contrary to all principle to allow a party, after a case had been decided against him, to raise a new argument which, whether deliberately or by inadvertence, he failed to put during the hearing when he had an opportunity to do so." See also Coulton v Holcombe (1986) 162 CLR 1 at 7-9; Water Board v Moustakas (1988) 180 CLR 491 at 497; Chilcotin Pty Ltd v Cenelage Pty Ltd [1999] NSWCA 11 at [14], [15]. 67 More recently, in Multicon Engineering Pty Limited v Federal Airports Corporations (2000) 47 NSWLR 631 at 645, Mason P, with whom Gleeson CJ and Priestley JA agreed, stated the principle in the following terms:

"A party seeking to advance for the first time on appeal a new ground not taken at trial will be precluded from doing so if the new ground could possibly have been met by calling evidence at the hearing or if, had the ground been raised below, the respondent might have conducted the case differently at trial." 68 Finally, in Whisprun Pty Ltd v Dixon (2003) 77 ALJR 1598 at 1608 [51] Gleeson CJ, McHugh and Bummow JJ observed (omitting citations): "…It would be inimical to the due administration of justice if, on appeal, a party could raise a point that was not taken at the trial unless it could not possibly have been met by further evidence at the trial. Nothing is more likely to give rise to a sense of injustice in a litigant than to have a verdict taken away on a point that was not taken at the trial and could or might possibly have been met by rebutting evidence or cross-examination. Even when no question of further evidence is admissible, it may not be in the interests of justice to allow a new point to be raised on appeal, particularly if it will require a further trial of the action. Not only is the successful party put to expense that may not be recoverable on a party and party taxation but a new trial inevitably inflicts on the parties worry, inconvenience and an interference with their personal and business affairs." 69 As I have noted, the respondent submits that its case would have been conducted differently before the primary judge had the point now in issue been taken. The weight to be attached to such a submission was referred to by Sheppard and Neaves JJ of the Federal Court in Cummings v Lewis (1993) 41 FCR 559 at 567 in these terms:

"If the case now made had been the one made at trial, [counsel] may have cross-examined quite differently, other witnesses may have been called or witnesses who were called may have been asked questions about this aspect of the matter. Naturally counsel could not identify precisely the extent of the prejudice which each claimed was involved. This is understandable. It is very difficult for counsel, having conducted a case on one basis, to say precisely how the case would have been conducted if it had been put in a different way. Courts do not accept as of course statements made by counsel as to possible prejudice to their clients in circumstances such as this. Courts, however, recognise that counsel are placed in a substantial difficulty when asked to specify a claim of prejudice with any precision. If prejudice is claimed, a court is likely to give effect to that claim unless the circumstances clearly point to there being in fact no prejudice." 70 In my opinion, application of the foregoing principles to the respondent's submissions referred to above justified the Court accepting that permitting the appellant to rely on Grounds 6 and 7 of the Amended Notice of Appeal would clearly cause prejudice to the respondent in the manner for which it contended and which it should not be required, as a matter of fairness, to endure. It is for these reasons that I joined in the Court refusing the appellant leave to advance these grounds.

Conclusion 71 In my opinion the various challenges to the primary judge's decision should be rejected. I would therefore propose that the appeal be dismissed with costs. 72 McCOLL JA: I agree with Tobias JA. **********

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