Clarkson v State Bank of New South Wales [2006] NSWSC 903

The borrower alleged:

  1. the Bank represented an overdrawn cheque account in his name would be “frozen” for a sufficient period of time to allow him to complete a subdivision of his residential property;
  2. the Bank represented it would delay legal proceedings for the recovery of outstanding debt, and that it would advance to him, against the proceeds of sale, the sum of $18,750 to assist in the completion of the subdivision;
  3. the Bank caused a delay in the completion of the subdivision by changing the number of lots to be subdivide from three to two;
  4. that the Bank caused delays misplacing the title deeds to the property, thereby preventing registration of the linen plan.

On the basis of these allegations, the borrower submitted:

  • promissory estoppel arose which made it unconscionable for the Bank to enforce;
  • the bank engaged in unconscionable conduct by rescinding from representations;
  • the representations gave rise to binding contractual obligations which the Bank breached;
  • the bank acted negligently by failing to act with due care and diligence in causing periods of delay failing to obtain a fair market price for the property.

However the borrower’s claims all failed. Justice Barrett’s reasoning being that he could not be satisfied on the balance of probabilities that the representations made by the bank were as alleged, and therefore promissory estoppel could not succeed. With regard to the claim of unconscionable conduct, his Honour found that the bank was entitled to take appropriate steps to protect its security position and to continue to charge interest over the period of delay. As for the claim of negligence the bank owed no duty of care.

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