The bank’s advance was secured by guarantees, charges and mortgages, including those given by the husband and wife directors.
Receivers were appointed by the bank but they were denied access to the security properties on the basis that the bank was estopped from calling in the loans and guarantees and appointing receivers.
The borrowers claimed the bank had made representations that it would provide long-term support under the facilities indefinitely or at least up to 10 years and pointed to instances where the bank had accommodated the borrower’s inability to make payment or when the borrower had exceeded the overdraft limit.
The court found the supposed promise highly unlikely:
The would in effect, require the bank to continue to provide financial accommodation and to accede to the customer’s demands for additional funds without any obvious limits. The bank was required to overlook the customers inability to make capital and other repayments and refrain from exercising its default powers. Their case claimed the bank was required to provide ‘long term’ banking indefinitely, or at least up to 10 years. Taken at face value, the defendants required the bank to ignore facility limits, conditions and events of default and do whatever the customer asked.
The judge rejected the estoppel case–concluding the husband and wife had no reasonable basis to assume that the facility would not be governed by its terms and conditions.
The judge ordered possession of the properties and business assets, an accounting of profits from ongoing use of the assets, and judgment against the husband and wife under their guarantees.