Savage v Bianchino [2011] NSWSC 140

This case concerned two applications under section 459G of the Corporations Act to set aside statutory demands. The two debts were allegedly owed under deeds with similar provisions, making the principal sum payable at any time after 15 months from the date of the deed and 30 days from receipt of written demand from the lender. Each deed gave the lender the right to request the borrower to grant a second mortgage in its favour over certain property. This was done. The lender requested further security on the basis that “the loan would not be called until refinancing was in place” and this was given. The lender then called for repayment of the two debts before refinancing was in place and served two statutory demands. The borrower  claimed that the oral agreement constituted a variation of the contract, estoppel and misleading or deceptive conduct.

The court found that a genuine dispute pursuant to section 459H is one which requires investigation (but does not require the court to determine the merits or which party is more likely to succeed) and raises the same sort of issues as the “serious question to be tried” criterion (for interlocutory injunctions and removal of a caveat). The court analyzed each of the borrower’s claims to determine whether there was a genuine dispute.

Claim in contract
The court found no genuine dispute in respect of the contractual argument on the grounds that:

  1. the oral agreement is a variation of the principal agreement and section 54A of the Conveyancing Act 1919 requires it to be in writing; and
  2. the variation was too uncertain to be a term of the agreement.

Estoppel

The court analyzed the purported promise of the lender to “wait until refinancing was in place” before calling for repayment and whether an equity arose in favour of the borrower. The court noted that before estoppel can arise:

  1. the borrower must have altered his position based on the promise;
  2. the lender can resile from his promise on giving reasonable notice; and
  3. the promise only becomes final and irrevocable if the borrower cannot resume his position.
  4. The promise is only enforced to the extent of avoiding detriment.

After considering these criteria the court found a genuine dispute.

The Trade Practices Act claim
The purported representation was as to a future act as to when demand would be made and the borrower claimed it contravened item 18 of schedule 1 of the Australian Consumer Law. The court found a genuine dispute in this regard.

Accordingly the court set aside the statutory demands.

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