ANZ v Panuccio [2012] VSC 159

In this case a woman signed a guarantee which referred to a property she held a share of as security. The bank argued that this gave them an equitable mortgage over the security.

The clause in question read:

This guarantee is secured by each security that I agree in writing will be security for this guarantee. It includes each security referred to below…

The securities listed include a first registered mortgage over the property in question.

The bank argued this clause created an obligation for the woman to execute a mortgage. The judge thought not:

To read the clause as creating such an obligation goes beyond the natural meaning of its words. There is no record of Mrs Panuccio signing an agreement specifically that she would grant a mortgage of her share in the Commercial Street Property. In these circumstances, I am not persuaded that an equitable mortgage exists or that an order for specific performance of the mortgage should be granted.

The Bank submitted, in the alternative, that the woman be estopped from denying that her interest in the property was subject to its interest. The bank addressed the elements of estoppel as follows:

  1. The bank assumed that a particular legal relationship then existed between it and the guarantor or expected that a particular legal relationship would exist between them and, in the latter case, that the guarantor would not be free to withdraw from the expected legal relationship (it issued the guarantee, which, on its face, included that assumption, which she signed); 
  2. the guarantor has induced the bank to adopt that assumption or expectation (she signed the loan offers); 
  3. the bank acted in reliance on the assumption or expectation (it advanced the money);
  4. the guarantor knew or intended him to do so (which is why she signed the documents); 
  5. the plaintiff’s action or inaction will occasion detriment if the assumption or expectation is not fulfilled (it will hold less security);
  6. the guarantor has failed to act to avoid that detriment by fulfilling the assumption or otherwise (she has failed to sign the mortgage).

Accordingly, the Bank submitted that it would be unconscionable or inequitable for the woman to depart from the assumption and that she should be estopped from doing so.

The court agreed with these submissions and the conclusion that the woman was estopped. 

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