PRELEA AND ANOR v WESTPAC BANKING CORPORATION LTD AND ANOR SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MAHONEY, CLARKE and SHELLER JJA 25 May 1992, 29 May 1992 [1992] NSWCA 188 SUMMONS FOR LEAVE TO APPEAL — GUARANTEE — PRACTICE IN COMMERCIAL DIVISION — STRIKING OUT OF PLEADINGS. Mahoney JA The claimants, Paulette Prelea and Prelea Investments Pty Ltd, ("Investments") seek by summons leave to appeal from a decision of Cole J sitting in the Commercial Division given on 6 April 1992 striking out certain paragraphs of the further amended defence of George Prelea and the first claimant and certain paragraphs of the second further amended cross claim in which the claimants together with George Prelea were the cross claimants. The Court refuses leave to appeal and would not normally give reasons for doing so. There is, however, one aspect of the argument as presented on behalf of the claimants to the Court which, in order to prevent future misunderstanding, calls for comment. The first opponent, Westpac Banking Corporation Ltd, sued George Prelea and the first claimant as guarantors of the indebtedness of Investments. The proceedings in accordance with the practice in the Commercial Division (Practice Note No 39 para(3)) were commenced by summons. According to the evidence before us, on 18 October 1991 Deputy Registrar Sourdin made the following order: (i) The defendants to file and serve any Defence and/or Cross Claim against any third party and Affidavits in support on or before 1 November 1991. On 29 November 1991 Cole J made an order to the effect that amended defences and cross claims be filed by 4 pm on 29 November 1991 and the affidavit be served and filed on 2 December 1991. There was tendered before us and admitted in evidence an affidavit by George Prelea made on 3 December 1991 and apparently filed pursuant to this order. Subsequently, George Prelea and the first claimant and George Prelea and the claimants filed the further amended defence and second further amended cross claim said on their face to have been amended or filed pursuant to orders made by Cole J on 13 March 1992. So far as appears no order was made for the filing of any further affidavit in support. In the further amended defence George Prelea and the first claimant pleaded that Westpac was estopped from making the claim against Investments as principal debtor and from asserting the claim against the guarantor defendants. This estoppel was founded upon the knowledge of Westpac, the assumption of George Prelea and a representation by Westpac that Investments' borrowings from Westpac were on the footing that they would be repaid from and limited to the proceeds of the factoring by the second cross defendant and second opponent, Australian Guarantee Corporation Ltd, of Investments' invoices and thereafter, if necessary, from the proceeds of certain securities. The particulars of this representation were: "The representation was made to George on behalf of 2 UNREPORTED JUDGMENTS Investments orally and by conduct by Twine, Clarke and Witheridge of Westpac. The assumption was held by George on behalf of Investments." This estoppel defence was contained in paral to para5 inclusive of the further amended defence. His Honour ordered, on the first opponent's application, pursuant to Ptl5 R26 of the Supreme Court Rules, that these paragraphs, inter alia, of the further amended defence be struck out. In the course of his judgment his Honour said: "Such a defence must always be difficult to establish because it renders purposeless a solemn document, namely the guarantee. It is because of the raising of defences such as these that in the Commercial Division there is a practice requiring guarantors seeking to set aside or render nugatory a guarantee to file an affidavit supporting the allegations in the defence. Both Mr and Mrs Prelea swore such an affidavit. Mrs Prelea's affidavit relates only to the Contracts Review Act defence. The particulars in para2 of the defence assert that the representation alleged was made to Mr Prelea 'on behalf of Investments (the company) orally and conduct by Twine, Clarke and Witheridge of Westpac'. Thus it is not alleged that the representation was made to a guarantor as guarantor, but to Mr Prelea on behalf of the company. Mr Prelea's lengthy affidavit of 3 December 1991 makes no mention at all of any oral representation by Mr Twine, Mr Clarke or Mr Witheridge to Mr Prelea that borrowings would be repaid only from the proceeds of AGC factoring and by recourse to the security being the mortgages over the house and the charge over the assets of the company but excluding any personal obligation under the guarantee. On several occasions in the affidavit Mr Prelea refers to letters from Westpac which make it entirely clear that the financing arrangements being offered and accepted were on the basis of personal guarantees of Mr and Mrs Prelea (see for instance letters of 4 November 1985, 24 February 1986, 16 December 1986, 27 June 1989, and the guarantees themselves). Mr Prelea swore he had no recollection of the receipt of some of those documents, or of the signing of the guarantee. In addition he stated in the affidavit (para24 and para35) that he held a belief that there would be no recourse to him or Mrs Prelea personally but no basis for that belief was stated. Nor is there any evidence in the affidavit filed by Mr Prelea of any conduct of Messrs Twine, Clarke or Witheridge which could sustain any assertion that by conduct, they represented to Mr Prelea that there would be no recourse to the guarantors. It is not without significance that in para3 of the statement of defence, the reliance is pleaded as follows: 'In reliance upon the said assumption and/or representation, George (Prelea) acting on behalf of the company, incurred the obligations now sued upon by Westpac.' It may be true, for it is at present untested, that Mr Prelea made an assumption that no recourse would be had to the guarantors, notwithstanding many letters and the guarantee itself which make clear that such guarantees were required. But there is no evidence at all to suggest any basis for any such assumption by Mr Prelea. Nor is there any evidence of the communication of that assumption, if it were held, to the bank or its officers, nor is there any evidence of any oral representation as alleged, and nor is there any evidence of conduct which would give rise to such a representation. In those circumstances the claim that Westpac is estopped from asserting its entitlement under the guarantee to have recourse to the guarantors, as distinct from factoring moneys from AGC and the securities, must fail. Accordingly UWRRELEA AND ANOR v WESTPAC BANKING CORPORATION LTD AND ANOR (Mahone? JA) paral to paraS inclusive of the statement of defence should be struck out as should reference to them in paral8 of the cross claim." Part of the evidence before us included a transcript of the argument before Cole J on 27 March 1992. In the course of that, counsel for Westpac referred to para2 of the further amended defence and submitted that the affidavit which had been filed made no reference to the representation pleaded. The transcript reveals no attempt by counsel for the claimants to submit that this affidavit was not addressing the facts relied upon to support the estoppel. In the course of his submissions Mr Spender QC who appeared for the claimants, argued, inter alia, that his Honour should not have struck out this part of the defence filed in March 1992 on the basis of an affidavit filed in early December 1991 which, it was said, did not address the issue of estoppel. Ultimately in his argument in reply Mr Spender sought an adjournment so that he would have an opportunity to lead evidence in support of this defence. The Court does not regard it as appropriate on this application for leave to appeal to allow this course to be taken. Amongst other things it is impossible for us to discern with any confidence that there was, as is now asserted, some misapprehension as to the way in which the first opponent put its case for the striking out of this part of the defence. It there was such a misapprehension or if for this or any other reason the claimants wish now to put forward further evidence that seems to us a matter which should be done by application to Cole J. What we have said is not intended to encourage such an application or to express any view as to its outcome if it is made. It is merely to point out that if there has been a misapprehension or there is further evidence that the claimants wish to rely upon the appropriate course is to bring this to the attention to Cole J. Leave to appeal is refused. The claimants must pay the opponents' costs of the application. Counsel for the claimant: J Spender QC/DJ Hammerschlag Solicitors for the claimant: Milne Berry and Berger Counsel for the first opponent: AJL Bannon Solicitors for the first opponent: Minter Ellison Counsel for the second opponent: BR McClintock Solicitors for the second opponent: Clayton Utz