Papas v Westpac [2014] FCA 290

The bank bankrupted the borrower notwithstanding that the borrower had claimed he had a defence to the mortgage.

The borrower appealed and argued the court ordering the bankruptcy failed to appreciate that he had raised a genuine dispute in respect of the debt. The borrower claimed that the lender engaged in misleading conduct in not rolling over its facility, as promised after large amounts of money were paid off the facility.

The Appeal Court found that the lower court did appreciate that the borrower’s allegations raised a case of misleading and deceptive conduct and a defence of estoppel but that the lower court dismissed it because it found no evidence had been advanced of damage because the borrower did not repay even after the allegedly promised the roll-over date. Nevertheless the Appeal Court found that the lower court made the following errors:

  1. The court was wrong to treat the borrower as having made an application for an adjournment, when, in truth, he was objecting to the summary hearing of the amended creditor’s petition;
  2. The court did not take into account that the borrower had only one month, not four, to obtain legal representation in respect of the substituted creditor’s petition and was now able to obtain legal representation;
  3. The court seems to have reached a conclusion that it would be pointless to “adjourn” the matter to allow the borrower to obtain legal advice because his case was futile. That conclusion was not open. The borrowers’ material raised the kernel of a defence to the lender’s claim and the court could not reasonably exclude the possibility that the borrower, with the assistance of a lawyer, might have been able to bring together a case for relief that could demonstrate a genuine dispute about the debt.

However, the Appeal Court noted that the borrower now had legal representation but had not placed before the Appeal Court any further material upon which he could have relied.

The Appeal Court found that in the absence of further evidence capable of demonstrating that there was a genuine dispute about the debt, it was not satisfied that the borrower had shown that the lower court’s errors affected the outcome of the final judgment. Therefore, the appeal was dismissed and no retrial was ordered.

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