New South Wales Court of Appeal CITATION: Equititrust Ltd & Anor v Franks [2009] NSWCA 128 HEARING DATE(S): 23 March 2009 JUDGMENT DATE: 24 July 2009 JUDGMENT OF: Ipp JA at 1; Macfarlan JA at 2; Handley AJA at 68 DECISION: See paragraphs [66] to [67] of the judgment CATCHWORDS: ESTOPPEL - promissory estoppel - representations by financier that would not charge interest at default rate - extent of detrimental reliance on representations by borrower - SET-OFF - set-off at law under s 21 Civil Procedure Act 2005 - no set-off where debt sought to be set-off was owed to joint but not joint and several creditor Civil Procedure Act 2005 Conveyancing Act 1919 LEGISLATION CITED: Corporations Act 2001 (Cth) Managed Investments Act 1998 (Cth) Property Law Act 1974 (Qld) Real Property Act 1900 CATEGORY: Principal judgment Bowyer v Pawson (1880-1) 6 QBD 540 Commonwealth v Verwayen [1990] HCA 39; (1990) 170 CLR 394 Coulton v Holcombe [1986] HCA 33; (1986) 162 CLR 1 CGU Insurance Limited v AMP Financial Planning Pty Ltd [2007] HCA 36; (2007) 235 CLR 1 Foran v Wright [1989] HCA 51; (1989) 168 CLR 385 Goodwin v Duggan (1996) 41 NSWLR 158 CASES CITED: Hircock v Windsor Homes (Development No 3) Pty Ltd [1979] 1 NSWLR 501 In Re Usines De Melle's Patent [1954] HCA 32; (1954) 91 CLR Legione v Hateley [1983] HCA 11; (1983) 152 CLR 406 Lord v Direct Acceptance Corporation (1993) 32 NSWLR 362 Roberts v Wayne Roberts Concrete Constructions Pty Ltd [2004] NSWSC 734; (2004) 208 ALR 532 Steeds v Steeds (1889) 22 QBD 537 Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418 Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387 TEXTS CITED: R P Meagher, J D Heydon, M S Leeming Meagher Gummow & Lehane's Equity: Doctrines & Remedies, 4th ed (2002) Butterworths Ritchie's Uniform Civil Procedure NSW (LexisNexis, Butterworths) Equititrust Ltd (formerly Equitiloan Ltd) (First Appellant) PARTIES: Equitiloan Pty Ltd (formerly Equitiloan Securities Pty Ltd) (Second Appellant) Phillip Maurice Franks (Respondent) FILE NUMBER(S): CA 40193/08 COUNSEL: D J Jackson QC/M G McHugh (Appellants) M S Willmott SC/M W Sneddon (Respondent) Marsdens Law Group (Appellants) SOLICITORS: Tucker & Cowen (Appellants) DTA Lawyers Lawyers (Respondent) LOWER COURT JURISDICTION: Supreme Court - Equity Division LOWER COURT FILE NUMBER(S): SC 4333/00 LOWER COURT JUDICIAL OFFICER: Brereton J LOWER COURT DATE OF DECISION: 1 February 2008 and 4 April 2008 LOWER COURT MEDIUM NEUTRAL CITATION: Franks v Equitiloan Securities Pty Ltd [2008] NSWSC 33; Franks v Equitiloan Securities Pty Ltd (No 2) [2008] NSWSC 456 IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40193/08 SC 4333/00 IPP JA MACFARLAN JA HANDLEY AJA 24 JULY 2009 EQUITITRUST LTD & ANOR v FRANKS Judgment 1 IPP JA: I agree with Macfarlan JA and, save for stating that I express no view as to what Handley AJA says in [71] to [73], agree with his Honour's additional comments. 2 MACFARLAN JA: This is an appeal from parts of two decisions of Brereton J: [2008] NSWSC 33 and [2008] NSWSC 456. Nature of Case and Conclusions 3 In this case a property developer alleged that its project financier represented that interest at a default rate would not be charged when the date for repayment of the project debt arrived. The primary judge held that the financier was precluded by principles of promissory estoppel from charging interest at the default rate until it gave notice indicating that it resiled from its representations. 4 I have concluded that the financier is so estopped, but for a lesser period than that found by the primary judge: the evidence in my view indicates that the developer did not rely to its detriment upon the representations for the whole of the relevant period. 5 The financier sought to set-off against its liability to repay interest at the default rate which had been paid by the developer under protest, the amount of a debt due by the developer to a related company of the financier. I have concluded, as did the primary judge, that the set-off is not available. Factual Circumstances 6 The respondent ("Mr Franks") was the effective owner and controller of Windy Dropdown Pty Ltd until the commencement of its administration in 2004. After administration, Mr Franks obtained an assignment from Windy Dropdown of various claims including one against Equitiloan Securities Pty Ltd ("Equitiloan Securities") which is the second appellant and is now known as Equitiloan Pty Ltd. 7 Mr Franks, Equitiloan Securities and a related company, Equitloan Ltd (now known as Equititrust Ltd) ("Equititrust"), were associated from July 1998 in relation to the development of property at Curl Curl, Sydney. Equitiloan Securities provided project finance to Windy Dropdown. Equititrust was involved in a management role. The three companies entered into a Profit Share Agreement on 10 May 1999. 8 Pursuant to the terms of a refinancing in March 1999, the then current loan amount of $6.25 million became repayable by Windy Dropdown to Equitiloan Securities in March 2000. The agreed interest rate was 10.25%. The primary judge held that on the proper construction of the arrangements of March 1999, monthly interest was to be capitalised, with the result that accumulated capitalised interest was to be paid, together with repayment of the principal, on 26 March 2000. He also held that interest at the rate of 16.25% was payable in the event of default and that this rate would be applicable from 26 March 2000 in the event that there was default at that time in the payment of capitalised interest or in repayment of principal. 9 26 March 2000 passed without payment of interest or repayment of capital. Three communications by Equitiloan Securities were however held by his Honour to give rise to a promissory estoppel which precluded Equitiloan Securities charging interest at the default interest rate from that date until 27 October 2000 when it served a Notice of Default. That finding is challenged by Equitiloan Securities. 10 The first communication comprised statements made by Mr Wayne McIvor on behalf of Equitiloan Securities in a telephone conversation with Mr Franks in about March 2000. His Honour preferred Mr McIvor's evidence of this telephone conversation to that of Mr Franks and gave the following description of Mr McIvor's evidence: "Mr Franks asked 'what is going to happen in March in relation to the expiry of the loan?,' And he replied 'Phil, at this point in time all we are concerned with is getting the houses finished' . In his affidavit, he denied having said that nothing would happen with the loan, but in cross-examination he conceded that he had said ('under conditions'): 'I can assure you nothing will happen if everything is proceeding properly. We're more than happy to continue with the project', adding 'we will continue to fund the project'" (at [25]). 11 The second communication was the forwarding to Mr Franks by Equitiloan Securities of a printout of a loan statement up to 31 May 2000. This showed the interest rate to that date as being 10.25%. The statement appears to have been sent at the request of Mr Franks. 12 The third communication comprised a statement made by Mr McIvor to Mr Franks on 5 May 2000 to the following effect: "Look, Phil, we are not going to break your balls if you get these houses finished and sold in a timely fashion" 13 The primary judge said about this evidence: "In the course of his oral evidence, Mr McIvor agreed that he knew that Mr Franks was concerned about the April expiry date [sic] of the loan, and that one way of 'breaking his balls' would be by charging him default interest; and though he added that his intent by that expression was to refer to the exercise of a power of sale and taking the project out of Mr Franks' hands, there is no reason why Mr Franks would necessarily have understood it in so limited a sense" (at [31]). 14 Mr Franks gave evidence, which was not challenged, that as a result of his communications with Equitiloan Securities he ceased in about March 2000 attempts he was making to refinance the project debt. He said in his affidavit of 24 July 2006 that he "did not vigorously attempt to pursue options for refinance again until approximately August 2000 and only did so then for the reasons set out below" (at [33]). Thereafter in the affidavit, Mr Franks refers to correspondence between the parties on 19 May 2000 and after May in which the parties took different stances about various matters. When Mr Franks said in his affidavit that he recommenced efforts from August 2000 to refinance "for the reasons set out below", it is clear that he was saying that the then state of relations between the parties (evident from this correspondence) caused him to want to seek alternative finance. 15 Subsequently, Equitiloan Securities claimed that interest at the default rate had been payable from 28 March 2000 and, in order to obtain the discharge of a mortgage over the subject property, Windy Dropdown had to pay $252,090 representing the difference between interest for the post 28 March 2000 period calculated at the rate of 10.25% per annum and interest at the default rate of 16.25% per annum. The payment was made under protest and is sought to be recovered in the present proceedings. The primary judge ordered that the amount be repaid by Equitiloan Securities, together with interest. Promissory Estoppel The Decision at First Instance 16 As mentioned above, the primary judge found that a promissory estoppel operated to preclude Equitiloan Securities from charging the default rate of interest from the time that the principal was repayable (and accumulated capitalised interest was payable) in March 2000 until it served a Notice of Default on 27 October 2000. 17 It is appropriate to proceed upon the basis that his Honour's summary of the relevant principles of law was correct as neither party joined issue with it. The summary was in these terms: "72 Thus in equitable promissory estoppel, it is necessary for a plaintiff to establish (1) that it has adopted an assumption as to the terms of a legal relationship with the defendant; (2) that the defendant has induced or acquiesced in the plaintiff's adoption of that assumption; (3) that the plaintiff has acted in reliance on its assumption; (4) that the defendant knew or intended that the plaintiff so act; and (5) that it will occasion detriment to the plaintiff if the assumption is not fulfilled [ Waltons v Maher , 428-9 (Brennan J)]. Promissory estoppel, a creature of equity, is, typically, focussed on the conscience of the defendant: it operates when the defendant has induced, or acquiesced in, the adoption by the plaintiff of an assumption that the defendant will not assert its strict legal rights, so as to prevent unconscientious insistence by the defendant on those rights. It is essential to an equitable estoppel that the defendant knows or intends that the party who adopts the assumption will act or abstain from acting in reliance on it [ Crabb v Arun District Council [1976] Ch 179, 188; Waltons v Maher , 423 (Brennan J)]." 18 Having considered the communications referred to in paragraphs [10-13] above, and the relevant principles of law, the primary judge concluded: "78 The elements of a promissory estoppel are, therefore, established. From March 2000, Equitiloan Securities was estopped from insisting on its strict legal right to take action adverse to Windy Dropdown in reliance upon expiry of the loan (including by charging interest at the higher rate), so long as the sale and realisation of Lots 14 and 15 proceeded satisfactorily." 19 His Honour found that whilst Equitiloan Securities was entitled to resile from its representations upon giving reasonable notice, it did not do so until the Notice of Default of 27 October 2000. 20 I now turn to the various bases upon which the primary judge's conclusions were challenged. Were there representations that default interest would not be charged? 21 Equitiloan Securities pointed out that there was no express reference to default interest, or even to interest, in the communications held to give rise to the promissory estoppel. It contended that what was said by Mr McIvor was a response to concerns expressed by Mr Franks about continued funding and could not fairly be understood as saying anything about the charging of default interest. 22 I do not agree. What was said by Mr McIvor in March (see [10] above) was a response to a general question about what was "going to happen in March in relation to the expiry of the loan". For the default interest rate to be applicable, it was necessary for the loan to be in default. There was in my view a clear implication involved in what Mr McIvor said that Windy Dropdown would not be treated as being in default when the loan repayment date arrived and the loan was not repaid. 23 Likewise the statement made by Mr McIvor in May (see [12-13] above) clearly embraced within its ambit such a significant change as a change from the normal interest rate of 10.25% per annum to the default rate of 16.25% per annum. This was recognised by Mr McIvor's concession in cross-examination that "one way of 'breaking his balls' would be by charging Mr Franks default interest" (see [13] above). The significance of the change in interest rate was recognised in Mr McIvor's evidence in cross-examination that the reason he did not tell Mr Franks that the loan would be in default and that he would be charged default interest was that it would have infuriated Mr Franks (Judgment [25]). 24 The other communication relied upon (the statement of account – see [11] above) contained express references to the interest rate of 10.25% being applicable in April and May 2000. These references were inconsistent with the default interest rate becoming operative at the end of March 2000. Did the period covered by the representations end with the settlement of the sales of lots 14 and 15? 25 Lots 14 and 15 were the portions of the subject land which were in the course of being sold in the first half of 2000. The sales were completed on 7 and 28 June 2000 respectively. 26 The primary judge's conclusion was that the estoppel was one which was to operate "so long as the sale and realisation of lots 14 and 15 proceeded satisfactorily" (see [18] above). 27 This reflected the qualifications embodied in the statements of Mr McIvor of March and May ("if everything is proceeding properly" and "if you get these houses finished and sold in a timely fashion": see [10,12] above). 28 The primary judge treated these qualifications as conditions to the representations rather than as imposing a temporal limit on the representations. That is, he did not regard the representations as only operative until the completion of the sale of the two lots which were in the course of being sold. Rather, his Honour treated the representations as operative until notice resiling from them was given (which he held occurred on 27 October 2000) (see [19] above). 29 I agree with the primary judge. The March assurance was in terms one of indefinite duration, subject to a condition. Similarly the May representation contained in its terms no suggestion that if the homes were finished and sold in a timely fashion the assurance could no longer be relied upon. I see no reason why any such end point should be implied. Rather, the position was, consistent with the primary judge's conclusion, that the representations were not limited in time but because they did not give rise to contractually binding promises were able to be withdrawn on reasonable notice. 30 The representation arising from the statement of account (see [11] above) in terms related only to the months of April and May but there was no logical reason founded in the terms of the communication or in the surrounding circumstances why the same position it stated regarding the interest rate as to those two months would not be applicable in subsequent months, in the absence of default occurring. Did the representations cease to have effect when events upon which they were conditioned allegedly did not occur? 31 As I have said, the representations as expressed in the March and May conversations were conditional (see [28-9] above). Equitiloan Securities contended on the appeal that the representations came to an end because the sales of lots 14 and 15 did not proceed satisfactorily to Equitiloan Securities and Windy Dropdown was not "co-operative". The effect of the submission was thus that everything was not "proceeding properly" in accordance with the March representation and that the houses were not "finished and sold in a timely fashion" in accordance with the May representation. 32 These matters were not however in issue before the primary judge and were therefore not dealt with by him. Windy Dropdown submitted that in these circumstances it was not open to Equitiloan Securities to raise them on appeal. I agree. 33 If Equitiloan Securities wished to contend that the representations relied upon by Windy Dropdown became inoperative at a relevant point of time because events upon which they were conditional did not occur, it needed to plead that that was the case, or at least conduct its case at first instance in such a way as to put Windy Dropdown on notice of the point and give it the opportunity to deal with it by evidence and submissions. 34 The point in question is not a question of law which could not have been met by additional evidence if raised at first instance (Suttor v Gundowda [1950] HCA 35; (1950) 81 CLR 418 at 438; Coulton v Holcombe [1986] HCA 33; (1986) 162 CLR 1 at 7; CGU Insurance Limited v AMP Financial Planning Pty Ltd [2007] HCA 36; (2007) 235 CLR 1 at [241]). Whilst there was some evidence before the Court which was relevant to the question of whether the events contemplated by the conditions had occurred, it can by no means be concluded that additional cross-examination might not have occurred, or evidence have been called, which may also have borne on the point. Further, the point required the determination by the primary judge of factual questions which, because they were not in issue, he did not resolve. In my view, it is not now open to Equitiloan Securities to raise the point. To what extent did Windy Dropdown change its position in reliance upon the representations? 35 As pointed out earlier (see [14] above) there was unchallenged evidence from Mr Franks that Windy Dropdown relied upon the representations by ceasing efforts to refinance. 36 It was contended by Equitiloan Securities on appeal that reliance upon the representations was not reasonable once a dispute emerged in early June as to the disbursement of the proceeds of sale of lots 14 and 15. The primary judge did not deal with the issue in precisely this way but he did address substantially the same issue by considering whether anything occurred prior to the end of October 2000 which should have indicated to Windy Dropdown that Equitiloan Securities was resiling from its representations. He found that there was nothing of this character. 37 There was not in my view any error in this conclusion. The fact that there was a disagreement about the application of the proceeds of sale of lots 14 and 15 did not indicate that Equitiloan Securities was resiling from its earlier representations about the default interest rate. Nor did its threat on 17 July 2000 to issue Default Notices, failing a satisfactory response to its facsimile, do this. Rather, as the primary judge indicated, the threat "signified adherence to the estopped position so long as the condition (a 'satisfactory response to our facsimile') was met" (Judgment [79]). A response was in fact provided. Apparently it was satisfactory to Equitiloan Securities as no Default Notices were issued until 27 October 2000. 38 A difficulty that Windy Dropdown does however face is that Mr Franks, who was the controlling mind of Windy Dropdown, gave evidence that the cessation of his attempts to refinance only lasted until "approximately August 2000" (see [14] above). This was the only evidence on this topic and it came from Windy Dropdown's own witness. The effect of it is in my view that the disadvantageous change of position on the part of Windy Dropdown must be regarded as having come to an end in August 2000. True it is that it took until sometime in November for the refinance to be obtained but there is no reason upon the basis of the evidence in the proceedings to think that vigorous efforts to refinance made in March would not have taken a similar period to come to fruition. 39 As a result of its reliance on the representations, Windy Dropdown was prejudiced by embarking on its refinancing efforts "in about August" rather than at the end of March. This in my view should be regarded as amounting to a period of four months (comprising April, May, June and July). The onus was on Windy Dropdown to prove the prejudice suffered by it and in the absence of proof as to a date in August which was relevant, the assumption should be made against Windy Dropdown that it re-commenced refinancing efforts at the beginning of August. 40 This point as to the commencement of refinance efforts in about August does not appear to have been focussed upon at first instance although Equitiloan Securities did make a general submission at first instance that there was no evidence of detrimental reliance by Windy Dropdown. In my view, the particular point falls within the ambit of that general submission and is available to be relied upon by Equitiloan Securities on appeal, particularly as the point arises out of Windy Dropdown's own unchallenged evidence. Conclusion as to Promissory Estoppel 41 For the reasons given above, my view is that the primary judge's findings as to the representations made by Equitiloan Securities are correct but the prejudice suffered by Windy Dropdown was limited to an amount equivalent to four months' interest calculated at a rate representing the difference between the normal rate of 10.25% and the default rate of 16.25%. Only that portion of the interest paid by Windy Dropdown to Equitiloan Securities under protest should be ordered to be repaid. The parties should bring in Short Minutes identifying the amount to be repaid. Set-Off 42 On a cross-claim filed by Equititrust, the primary judge held that Equititrust was entitled to recover from Windy Dropdown the amount of $722,880 in respect of profit share under the Profit Share Agreement, additional to the profit share which had already been paid to it. This finding was not challenged upon appeal. 43 Equitiloan Securities submitted that it was entitled to set-off against any liability it had to Mr Franks (as assignee of Windy Dropdown) to repay interest overpaid by Windy Dropdown, an amount equivalent to the debt which Equititrust was entitled to be paid by Windy Dropdown for additional profit share. It submitted that: "The obligation to give restitution to Windy Dropdown for overpaid interest on Equitiloan Securities and Equititrust's part was joint and several. Hence Equititrust would have been entitled to set-off the separate obligation owed by Windy Dropdown to it against the claim against it on its several liability in respect of the overpaid interest. Equitiloan Securities is entitled to the benefit of such set-off in respect of its obligation to make restitution". 44 Quite apart from the need for Equitiloan Securities to show that relevant principles of law entitled it to a set-off in these circumstances, Equitiloan Secuirites needed to establish for the purposes of this submission, first, that Equititrust, as well as Equitiloan Securities, had an obligation to repay interest overpaid by Windy Dropdown and, secondly, that the obligations of Equitiloan Securities and Equititrust in this respect were joint and several. 45 The primary judge found against Equitiloan Securites on the first point. He said the following: "84 Mr M G McHugh submits that as a result of the assignment of the mortgage and securities by Equitiloan Securities to itself and Equititrust, [and] any overpayment of interest can be set-off against any profit share that remains due to Equititrust. Although the claims for relief in the Further Amended Statement of Claim may not have been as felicitously expressed as possible, it was clear at least from the outset of the hearing that the claim for restitution of the overpaid interest was brought against Equitiloan Securities. The evidence of Mr Mark McIvor established that Equitiloan Securities lent funds on behalf of investors who deposited money with it and held the mortgages securing the advances, acting as a trustee, while Equititrust was a merchant bank and managed the mortgage lending scheme. The 23 March 2000 assignment was for regulatory compliance reasons, and was not intended to affect the beneficial interests: the consideration was expressed to be $1. I have referred, above, to the on-going treatment of Equitiloan Securities as the real lender despite the 23 March 2000 assignment. On the available evidence, I infer that Equitiloan Securities, not Equititrust, received the benefit of the payment on 17 November 2000 of principal and interest – including in particular the higher-rate interest. This is consistent with the manner in which Mr Mark McIvor explained that the proceeds of Lots 14 and 15 were applied. Accordingly, it is Equitiloan Securities, not Equititrust, that is obliged to give restitution. 85 On that basis, no question of set-off arises, as the debtor to Mr Franks (as assignee of Windy Dropdown) is Equitiloan Securities, a different legal entity from Windy Dropdown's creditor Equititrust. There are not mutual debts capable of being set-off." Set-Off at law 46 A right of set-off is provided by s 21 of the Civil Procedure Act 2005. Sub-section 1 of that section provides as follows: "(1) If there are mutual debts between a plaintiff and a defendant in any proceedings, the defendant may, by way of defence, set off against the plaintiff's claim any debt that is owed by the plaintiff to the defendant and that was due and payable at the time the defence of set-off was filed, whether or not the mutual debts are different in nature." 47 The section only applies in the case of "mutual debts". On the face of it, Equitiloan Securities is not seeking to set-off a mutual debt (the obligation of Windy Dropdown to pay additional profit share) because that debt is owed to another company, namely, Equititrust. Equitiloan Securities says however that if it and Equititrust are jointly and severally liable to repay to Windy Dropdown interest overpaid by that company, Equitiloan Securities can get the benefit of the fact that Equititrust would be able to set-off against its liability to Windy Dropdown the right it had to recover additional profit share from Windy Dropdown. The decision of this Court in Goodwin v Duggan (1996) 41 NSWLR 158 at 166-7 indicates that this proposition is correct (assuming the foundations for it can be established). 48 The joint and several liability in that case was a liability of the defendants in equity as co-trustees but the decision did not turn on the fact that the liability was equitable, as is demonstrated by the fact that the work by S R Derham, Set-Off (1987) Clarendon Press – Oxford (at 152-3), upon which the Court relied, was dealing at the relevant pages with the position both at law and in equity. The 3rd Edition (2003) of Derham's work states the law in similar terms to the statement in the 1st Edition. It is said: "If … joint and several debtors are sued together, judgment for a set-off in favour of one of the debtors to that extent would discharge the debt, and therefore the judgment against the other debtors should also be reduced accordingly" (at [12.21] citing Goodwin v Duggan ). 49 If the joint and several debtor who has a debt owed to him by the creditor is not a party to the action brought by the creditor, the debtor who is a party cannot plead the debt owed to the other joint and several debtor as a set-off in defence of the claim against him (Bowyer v Pawson (1880-1) 6 QBD 540 at 543-4; Lord v Direct Acceptance Corporation (1993) 32 NSWLR 362 at 371-2; Goodwin v Duggan at 166-7; Derham, Set-Off (3rd ed) [12.21]). This is so because if the joint and several debtor who is owed a debt by the creditor is not a party to the proceedings, allowance by the creditor of a set-off to the defendant who is a party will not discharge the creditor vis a vis the non-party joint and several debtor 50 As both companies are however here parties to the action, both companies will be bound by its outcome, and allowance of a set-off to one would constitute a discharge to Windy Dropdown of the profit share debt as against both companies. 51 If the liability for the debt in question is only joint, and not joint and several, these principles do not apply because there is no mutuality in the required sense: the debts are not between the same parties (Derham, 3rd ed, [11.01], [12.02]). Thus a person cannot set-off a debt owed to him or her personally against a debt for which the person is jointly liable with some other person. This means that in the present case if any liability of Equitiloan Securities and Equititrust to Windy Dropdown is joint only, Equititrust would not have been entitled to set-off the debt for additional profit share owed by it to Windy Dropdown and Equitiloan Securities accordingly cannot make any corresponding set-off. 52 It is then necessary to return to the question of whether Equititrust is liable, as well as Equitiloan Securities, to repay interest overpaid by Windy Dropdown and whether, if it is, their liability is joint and several. 53 Equitiloan Securities' argument in this respect relied upon the existence of a Deed of Assignment dated 23 March 2000 by which the project debt owed by Windy Dropdown to Equitiloan Securities was assigned by that company to itself and Equititrust. It was submitted that as the assignment was in writing, absolute and signed on behalf of Equitiloan Securities, with notice of the assignment having been given to Windy Dropdown on 9 November 2000, the assignment was effective in law under s 12 Conveyancing Act 1919 and that it gave Equitiloan Securities and Equititrust joint and several entitlements to the loans. It was submitted that the corollary was that the obligation to Windy Dropdown to repay interest overpaid in respect of the project debt after the date of the assignment was a joint and several one on the part of Equitiloan Securities and Equititrust. The Deed of Assignment was mirrored by a transfer of mortgage effected at the same time. As the primary judge said (Judgment [27]), there was no evidence before him that the transfer was registered. I add that the Deed of Assignment was expressed to be governed by Queensland law. Section 199 Property Law Act 1999 (Qld) is however in relevantly the same terms as s 12 of the New South Wales legislation. 54 Equitiloan Securities' submission cannot however be supported because the assignment of the project debt to that company and Equititrust was not on a joint and several basis. The documents which were executed did not contain any express statement that the benefit of the project loan was to be held jointly and severally. The transfer of mortgage did not contain a deletion of either of the alternatives of "joint tenants" and "tenants in common" provided for by the standard form. The effect of s 26 Conveyancing Act 1919 is that in respect of many types of transfers the transferees are deemed to be tenants in common (which has the effect of making their assumption of rights and obligations joint and several) rather than joint tenants. This provision is applicable to Real Property Act land notwithstanding a provision such as s 100(1) Real Property Act 1900 (Hircock v Windsor Homes (Development No 3) Pty Ltd [1979] 1 NSWLR 501). As the Deed of Assignment of Securities was expressed to be governed by Queensland law, I note that s 35 Property Law Act 1974 (Qld) is relevantly in the same terms as s 26 of the New South Wales legislation. 55 Section 26 (and its Queensland counterpart) however expressly states that it does not apply to mortgagees, thus rendering it inapplicable to the present case. As a result, the common law presumption of a joint tenancy, rather than of joint and several entitlements (Steeds v Steeds (1889) 22 QBD 537; Roberts v Wayne Roberts Concrete Constructions Pty Ltd (2004) 208 ALR 532 at [24]), is applicable. 56 Whilst the presumption is to the contrary in equity (Steeds; Roberts), this does not assist Equitiloan Securities because the set-off presently under consideration is one at law, namely, under s 21 of the Civil Procedure Act 2005. 57 If the entitlement of Equitiloan Securities and Equititrust to the mortgage debt is joint, and not joint and several, it follows in my view that any obligation they have to repay interest overpaid in respect of that debt is joint only and the principle referred to in [47-8] above is inapplicable. 58 It is thus not necessary to consider the correctness of the primary judge's conclusion that Equititrust did not have any obligation at all to repay overpaid interest. I simply note that if (as I have held to be the case) the entitlement of Equitiloan Securities and Equititrust to the project debt was joint an argument is available that although (as the primary judge held) the payment was actually made to only one of the joint debtors (Equitiloan Securities) in law the payment may be regarded as having been made to both joint creditors, with the arguable result that both joint creditors had the obligation to repay any overpayments. 59 I mention in conclusion in relation to s 21 that that section speaks of a defence of set-off being "filed". I do not regard this reference as precluding a defence of set off being raised where, although not contained in a filed form of defence, the defence, as here, is litigated at the hearing. 60 I note in passing that the Civil Procedure Act 2005 was not in force at the time of the events here in question and that there was no earlier statutory provision corresponding to s 21 then in force: Ritchie's Uniform Civil Procedure NSW (2005) LexisNexis, Butterworths at pages 2283-4. However, the Civil Procedure Act 2005, Schedule 6, clause 6 renders s 21 applicable to debts arising before the commencement of the section, unless the court otherwise orders. The Court was not asked to make such an order. Equitable Set-Off 61 I do not consider that an equitable set-off is available. Apart from any other reason, the obligation of Windy Dropdown to pay further profit share cannot be regarded as one which would "impeach" the title of Equitiloan Securities to pay to Windy Dropdown the debt in respect of overpaid interest. The debts are in my view separate and distinct. Impeachment in this way is a necessary element of an equitable set-off (Meagher Gummow & Lehane's Equity: Doctrines & Remedies, 4th ed (2002) Butterworths [37-045(h)]. Section 90(2) Civil Procedure Act 62 Finally, reliance was placed by Equitiloan Securities on s 90(2) Civil Procedure Act which enables the Court to give judgment for the balance only of sums of money awarded to a plaintiff and cross claimant against each other. This section is not applicable to the present case as, for the reasons expressed above, there are here no cross judgments of this nature: Equitiloan Securities is not entitled to any judgment against Windy Dropdown which it is entitled to juxtapose with the judgment for Windy Dropdown against it. The Costs Orders of 4 April 2008 63 Leave to appeal was sought against the refusal of the primary judge to order that Mr Franks personally pay costs ordered to be paid by Windy Dropdown on Equititrust's Cross Claim. 64 The primary judge's reasoning was as follows: "13 In this respect, it is important to recognize, first, that whereas at one stage it was possible that Mr Franks might have had a personal exposure on the cross-claim, he succeeded (at an earlier stage of the proceedings) on the argument that he was not so exposed as a result of the assignment to him of Windy Dropdown's cause of action against Equitiloan Securities. Next, although it may be that he had an indirect interest in the outcome of the cross-claim – in that he was a shareholder in and creditor of the company in administration – he defended the cross-claim for the benefit of the administration fund and not for his own separate benefit. All those having an interest in that administration fund would have benefited had he succeeded in the defence of the cross-claim. Thirdly, had he not done so, the administrators themselves would have defended the cross-claim, in all likelihood at greater cost to the fund than the costs incurred by Mr Franks, whose representation of Windy Dropdown made it possible to achieve efficiencies, since he was otherwise represented in the course of the proceedings. Fourthly, insofar as it might be suggested that a person who has some management of an action – such as a director of an insolvent company – who causes the company improperly to prosecute or defend proceedings (see HPM Pty Ltd v Fear [2002] WASCA 249 (S), [5]) in this case there is nothing to suggest that Mr Franks' defence of the proceedings on behalf of Windy Dropdown was improper. Indeed, the administrators had already rejected Windy Dropdown's proof of claim, and would themselves have defended the proceedings had Mr Franks' intervention not relieved them of that responsibility. 14 Accordingly, I am unpersuaded that a costs order should be made against Mr Franks personally in that respect. There will be an order that the cross-defendant Windy Dropdown Pty Ltd (in administration) pay Equititrust's costs of the cross-claim. 65 The applicants for leave, Equitiloan Securities and Equititrust, have not in my view shown that there is an arguable case that his Honour made an error in the exercise of his discretion and I would not grant leave to appeal. Orders 66 For the reasons above, I consider that the appeal should be allowed to the extent necessary to give effect to my conclusions that the entitlement of Windy Dropdown to recover overpaid interest is less than found by the primary judge. The decision below that Equitiloan Securities is not entitled to set-off the amount of the debt owed by Windy Dropdown to Equititrust in respect of additional profit share however stands. 67 As formulation of the orders to be made will involve matters of calculation, the parties should within seven days bring in Short Minutes of Order to reflect these conclusions as well as my conclusion that leave to appeal against the costs' orders of 4 April 2008 should be refused. The parties should within the same period lodge written submissions, not exceeding three pages in length, as to the appropriate costs orders which should be made in respect of the proceedings at first instance and on appeal. 68 HANDLEY AJA: In this appeal I have had the considerable advantage of reading the reasons for judgment of Macfarlan JA in draft. I agree with these reasons and conclusions on the promissory estoppel issues, but will add some reasons of my own on both issues. In the interests of clarity I will describe the appellant companies by their current names even when referring to events which occurred when they had different names. 69 Brereton J, having cited from the judgment of Brennan J in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, 428-9 said: (para [72]) that in equitable promissory estoppel the plaintiff must establish that it adopted an assumption about its legal relationship with the defendant and that the defendant must have "induced or acquiesced in the plaintiff's adoption of that assumption." This statement was not, and could not be challenged. 70 Promissory estoppel, as its name indicates, is based on a non-contractual promise or assurance which, in its orthodox form, becomes binding in equity, so as to restrain the promisor from enforcing his strict legal rights. 71 Although there are many references in the judgments in Legione v Hateley (1983) 152 CLR 406; Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; Foran v Wight (1989) 168 CLR 385; and Commonwealth v Verwayen (1990) 170 CLR 394 to "representations as to future conduct", "representations of (or about) future fact", "representations about the future", and "promissory representations", many are linked, as alternatives, with references to promises or assurances, or assumptions. 72 This loose use of the word representation may not matter a great deal, but its core meaning, derived from its Latin origins, is another presentation, generally in words, of something, and since that something is presented again it must already have occurred or exist. On the other hand a promise need not present anything again, but it puts forward (promittere) something that was not there before. 73 There is a real distinction between a representation (of an existing or past fact) which can be checked or, if not checked, qualified, and a voluntary promise about the speaker's future conduct. That distinction is reflected in the law of estoppel by conduct. It would therefore be helpful and an aid to clear analysis if representation was only used to refer to statements about an existing or past fact, and promise or assurance were used to describe the statements which can give rise to a promissory estoppel. 74 I do not wish to add anything further to the reasons of Macfarlan JA on the promissory estoppel issues. 75 Windy Dropdown's cause of action to recover the excess interest charged at the default rate did not accrue until the interest was paid under protest on 17 November 2000 to obtain a discharge of the mortgage. It accrued then although it was calculated for earlier months. The plaintiff is entitled, in accordance with the reasons of Macfarlan JA, to a refund of the amount paid in respect of the months April to July 2000 inclusive. 76 On 17 November 2000 the registered mortgagee was Equitiloan Pty Ltd which held the mortgage in trust for itself and Equititrust Ltd under a Deed of Assignment of 23 March 2000 and an unregistered transfer of the registered mortgage (Blue 106), executed the same day (Blue 110-117), which effected an equitable assignment of the mortgage and the mortgage debt to the two companies. Written notice of the assignment was given to Windy Dropdown, the debtor, 9 November 2000 causing the assignment to then take effect at law making the two companies creditors of Windy Dropdown. Accordingly on 17 November 2000 when Windy Dropdown's cause of action for the excess interest accrued, it accrued against both companies. 77 The cause of action of Equititrust to a further profit share under its Profit Sharing Agreement accrued much later as the relevant lots were sold. Ultimately there was no dispute as to its quantum, and as a result, the submissions of the parties and the Judge's findings, do not disclose the relevant dates, and the documentary evidence has not been included in the Appeal Book. It seems however that the sales occurred during 2003 and the profit share accrued progressively during that year. 78 Windy Dropdown therefore owed Equititrust $722,880 from some date in 2003 for its profit share and Equititrust and Equitiloan owed Windy Dropdown the excess interest from November 2000. 79 Windy Dropdown went into voluntary administration on 28 June 2004 and entered into a Deed of Company Arrangement on 26 August that year. The claims of creditors at the appointed date, 28 June 2004, became rights to prove in the administration. Clause 10.1 of the Deed provided, inter alia, that Subdivision A of Division 6 of the Corporations Act applied to claims under the Deed. That Subdivision included s 553C, the familiar mutual credits and set-off section. 80 The assets of Windy Dropdown administered under the Deed included its chose in action for the recovery of the excess interest. On 4 September 2005 the Administrators assigned this to Mr Franks. As an assignee Mr Franks took subject to any equities, including any rights of set-off, available to the debtors either under the general law or under s 553C of the Corporations Act. 81 The critical issue on this part of the case is whether the debt owed by Equititrust and Equitiloan for the excess interest can be set-off against the debt owed by Windy Dropdown to Equititrust for its profit share. As Macfarlan JA has demonstrated a right of set-off would be available at law if the debt was owed by the two companies jointly and severally, but not if it was owed by them jointly. 82 At common law a corporation could not hold real or personal property jointly with another: In re Usines de Melle's Patent (1954) 91 CLR 42, 47-8. This rule was abrogated by s 25 of the Conveyancing Act, and s 34 of the Property Law Act (Qld). Moreover a person can assure property to himself and others (Conveyancing Act s 24). 83 The nature of the debt for excess interest owed by the two companies must reflect the nature of their interest in the mortgage and the mortgage debt under the Deed of Assignment of 23 March 2000. 84 Under that Deed the assignor was Equitiloan and the assignee, as defined, was Equititrust and Equitiloan. The Deed did not define the nature of the interest taken by the two companies, and there were no words of severance. Their interests must therefore be determined as a matter of construction. Under s 26(1) of the Conveyancing Act, and its counterpart in s 35(1) of the Property Law Act (Qld), a disposition to two or more persons beneficially is presumed to create a tenancy in common but subs (2) provides, so far as relevant: "This section does not apply to persons who by the terms or by the tenor of the instrument are … mortgagees …" 85 Where s 26(2) and its Queensland equivalent apply, as they do here, the common law rule continues and a joint tenancy is presumed. The two companies therefore took as joint tenants, and their debt for the excess interest was owed by them jointly. 86 Equitiloan operated as a trustee company, and according to Mr McIvor (Blue 141) it was approved by the Queensland Law Society as a nominee company to hold all mortgages on behalf, as he said, of "contributors". The management of the mortgage scheme was undertaken by Equititrust. After September 1999 Equititrust became the "responsible entity and the holder of its own mortgages" following the advent of the Managed Investments Act and the phasing out of solicitors' mortgage lending schemes and nominee companies. Its management role was essentially unchanged. 87 Mr McIvor said that Equitiloan held the mortgage as trustee, and the Deed of Assignment of 23 March 2000 was required to comply with the Managed Investments Act (Blue 125U). 88 This appears to mean that Equitiloan held the mortgage as trustee until the Deed of Assignment and thereafter it and Equititrust held the mortgage on trust for the same beneficiaries. However there was no attempt either at the trial or on appeal, to establish the identity of the beneficiary or beneficiaries or to take the Court to the scheme of the legislation. 89 It is possible that the beneficial owner or owners of the chose in action for the profit share which accrued in 2003 were the person or persons entitled to the mortgage at the date of its discharge in November 2000. In that event there may have been a right of set-off in equity, because the beneficial interests were the same, although there was no such right at law. It is also possible that the investors as beneficiaries were only entitled to the net interest earned under the mortgage and Equititrust may have retained the profit share as part of its remuneration for managing the trust. It is also possible that the beneficiaries changed during that period. In the absence of evidence about these matters the position as to set-off is as stated by Macfarlan JA. 90 In these circumstances I agree with Macfarlan JA that the claim of the appellants to set-off their debt to Mr Franks for the excess interest against the debt owed by Windy Dropdown to Equititrust for its share of profits was not established. I agree with the orders proposed by Macfarlan JA ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.