New South Wales Supreme Court CITATION : Summer Hill Business Estate v Equititrust [2010] NSWSC 776 This decision has been amended. Please see the end of the judgment for a list of the amendments. 28 April 2010 HEARING DATE(S) : 28 May 2010 25 June 2010 JUDGMENT DATE : 30 July 2010 JURISDICTION : Equity JUDGMENT OF : Pembroke J DECISION : See judgment CATCHWORDS : PROMISSORY ESTOPPEL - commercial parties - formal contract - inherent probabilities - commercial reality - caution required - PROMISSORY ESTOPPEL - no assumption found - alternatively assumption unreasonable - PROMISSORY ESTOPPEL - relevance of terms of contractual relationship - PROMISSORY ESTOPPEL - necessity for clear and unambiguous conduct - reliance unreasonable - EVIDENCE - conversations - reconstruction - unreliable - no corroboration - principles in Watson v Foxman (1995) 49 NSWLR 315 at 319 - CONTRACT - loan agreement - default interest - ELECTION - no inconsistent rights CATEGORY : Principal judgment Aneve Pty Limited & Ors v Bank of Western Australia Limited [2005] NSWCA 441 Austotel Pty Ltd v Franklins Self Serve Pty Ltd (1989) 16 NSWLR 582 Barnes v Addy (1874) LR 9 Ch at App 244 Central London Property Trust v High Trees House Ltd [1947] KB 130 Equuscorp Pty Ltd v Glengallen Investments Pty Ltd (2004) 218 CLR 471 Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR at 89 For the Good Times Pty Ltd v Coltern Pty Ltd [2007] NSWSC 807 Franks v Equitiloan Securities Pty Ltdl [2008] NSWSC 33 Giumelli v Giumelli (1999) 196 CLR 101 CASES CITED : John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19 Legione v Hately (1983) 152 CLR 406 McMurtrie v Commonwealth of Australia [2006] NSWCA 148 NZI Securities v Avery (unreported) Supreme Court of Victoria, 24 May 1994 Sargent v ASL Developments Ltd (1974) 131 CLR 634 State Rail Authority (NSW) v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170 Tanwar Enterprises Pty Limited v Cauchi (2003) 217 CLR 315 Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387 Watson v Foxman (1995) 49 NSWLR 315 Westpac Banking Corporation v Kurobe Pty Ltd [2010] NSWSC 537 PARTIES : Summer Hill Business Estate Pty Limited Equititrust Limited FILE NUMBER(S) : SC 2010/67275 COUNSEL : M Ashhurst SC with M Dawson - for the Plaintiffs R Derrington SC with J Hogan-Doran - for the Defendant SOLICITORS : Blackstone Waterhouse - for the Plaintiffs Tucker & Cowen - for the Defendant IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION PEMBROKE J FRIDAY 30 JULY 2010 67275/2010 SUMMER HILL BUSINESS ESTATE PTY LIMITED v EQUITITRUST LIMITED JUDGMENT INDEX Topic Paragraph Introduction 1-8 The Facilities 9-10 The Contractual Terms 11-26 The Factual Summary 27-30 Estoppel and Commercial Parties 31-40 Promissory Estoppel 41-44 The Assumption – Findings 45-54 Contemporaneous Communications 55-58 Mr Demian – Findings 59-66 Clear and Unambiguous conduct – Findings 67-68 Inaction and Silence 69-75 Conduct on Other Loans 76-80 Higher Rate and Default Interest 81-88 Event of Default 89-91 Election 92-94 Extension of Term 95-96 Another Estoppel 97 Orders and Costs 98-99 REASONS Introduction 1 The plaintiffs are companies owned and controlled by Mr Demian. Mr Demian is an experienced businessman. His companies carry on the business of commercial property development and construction. They have borrowed many tens of millions of dollars. A number of those loans have been obtained from the defendant. The defendant is not in the first rank of commercial lenders. Its principal place of business is Chevron Island on the Gold Coast in Queensland. 2 This case concerns three loans. Except for two conversations, the primary facts are either not contentious or are contained in written documents. Each loan was for a short term. One loan was for six months but was later increased and extended to 12 months. The other two loans were for 12 months. The loan terms are favourable to the defendant and reflect the quality of the business which was offered to it by Mr Demian. The interest rates were high. And any failure to pay on time resulted in an obligation to pay a higher rate of interest that was 6% above the prevailing rate. 3 By the terms of the credit facility agreements, the defendant's numerous rights on default were expressly preserved notwithstanding any indulgence, neglect, omission or waiver by it. The payment of an expiry fee when the borrower failed to repay the loan on the due date, was not to be taken as the grant of an extension of the term of the loan. Nor would it prevent the defendant charging default interest or having any other rights upon default. 4 The plaintiffs defaulted. Each failed to repay its loan at the expiry date. The Defendant claims the higher rate of interest from the expiry date. In each case following default, the defendant charged a substantial expiry fee, as it was entitled to do, and continued to issue periodic loan statements to the plaintiffs. They showed the charge for the expiry fee. They also recorded interest accruing on the loan at the lower rate rather than the default rate. However, there was a warning at the bottom of each page of every loan statement that stated that it was a statement of transactions only and did not include any default interest calculation. 5 There had been two previous loans where the defendant had not acted uniformly in relation to the exercise of its right to collect the higher rate of interest when default occurred. The plaintiffs relied on the defendant's conduct in those transactions as justifying an assumption by Mr Demian on their behalf that default interest was not payable on the loans in question. They also relied on two conversations which Mr Demian had with Mr McIvor, the defendant's manager. Mr Demian said that in those conversations Mr McIvor effectively promised him that the defendant would not insist on its strict right to charge default interest and that it had a policy of not charging default interest except in extreme cases. For reasons that I will later explain, I do not accept Mr Demian's evidence in relation to these two conversations. 6 The plaintiffs contend that they should not be obliged to pay the higher rate of interest from the expiry date of each loan. This was initially put on two bases. The premise of the first was a contention concerning the proper construction and legal effect of the letters of offer. As the letters of offer preceded, and were subsumed by, the credit facility agreements, their legal significance is minimal. Further, the point of construction of the letters of offer is wrong. 7 The second contention depended on the doctrine of promissory estoppel. That issue occupied most of the time of the hearing. Additionally, during final addresses, the plaintiffs advanced a third series of contentions, which depended on a number of submissions arising out of the construction of the credit facility agreements. These submissions primarily revolved around a suggested difference between interest at the Higher Rate (a defined term) and default interest (an undefined term). 8 I will first deal with the promissory estoppel issue including the contention concerning the construction and effect of the letters of offer. I will then turn to the questions of construction of the credit facility agreements raised during final addresses. Before doing so, I will first describe the facilities in issue, the contractual terms and the factual summary. I then make some preliminary observations regarding the promissory estoppel claim in the commercial context in which it arises. The Facilities 9 I mentioned that there are three facilities in issue. The controlling mind of the plaintiffs was at all times Mr Demian. He was the only witness for the plaintiffs. The material facts concerning each facility are as follows: Shimden (a) The Shimden Credit Facility Agreement was dated 18 January 2007. It was preceded by a letter of offer dated 16 June 2006. The facility provided for a loan of $2,270,000. The term of the loan was 12 months. The loan was drawn down on 18 January 2007 and the term expired on 18 January 2008. Summer Hill (b) The Summer Hill Credit Facility Agreement was dated 11 June 2007. The letter of offer was dated 8 June 2007. The loan amount was $865,000. The term of the loan was six months. The loan was drawn down on 12 June. On 1 August 2007 the parties entered into a deed of variation providing for an increase in the limit and extending the term to 12 months. The defendant advanced a further $8,200,000. The extended term expired on 12 June 2008. Demian Constructions (c) On 31 July 2007 the parties entered into the Demian Constructions Credit Facility Agreement. It was preceded by a letter of offer dated 13 July 2007. The amount of the advance was $1,870,000. On 23 September 2007 a deed of variation was entered into and a further advance of $1,760,000 was made. The date for repayment was 1 February 2008. 10 I have mentioned that there were two previous loans on which the plaintiffs rely. They are not directly in dispute although they are relevant to the estoppel claim. The Guildford facility commenced in approximately April 2006. The loan amount was $2,315,000 and was due for repayment on 13 April 2007. The CTP facility commenced in approximately August 2006. The loan amount was $4,375,000 and was due for repayment on 15 August 2007. The Contractual Terms 11 The material terms of the three credit facility agreements in issue are substantially the same. Each credit facility agreement was preceded by a letter of offer which was accepted by the borrower. Mr Demian in his evidence, and the plaintiffs in the initial presentation of their case, placed reliance upon the letters of offer. However the reliance was misplaced. Each letter of offer contained an acknowledgement that the lower interest rate assumed strict observance of the loan terms and that, in the event of default, the default rate applied. There was also a separate provision stating that, if the loan were not fully repaid by the expiry date, a loan expiry/extension fee would be charged. There was no dichotomy. Both provisions applied. 12 Further, the letters of offer were superseded by the credit facility agreements. Clauses 1.4 and 27.2 of each credit facility agreement ensured that, in any contest with the letter of offer, the credit facility agreement was paramount. Those clauses provide as follows: 1.4 Conflict If there is a conflict between the terms of this Credit Facility Deed and the terms of another document between the Lender and the Borrower and/or any Security Provider, the interpretation most favourable to the Lender prevails. 27 General 27.2 This Credit Facility Deed and the Security embody the entire agreement between the parties in relation to the advance under this Credit Facility Deed and supersedes `all prior negotiations, agreements, arrangements and understandings with respect to such advance. 13 The Schedule to each credit facility agreement defines the expressions "Lower Rate" and "Higher Rate". In the Summer Hill facility, the Lower Rate was described as "initially 20% per annum and then as specified in the letter of offer for the current term". The Higher Rate was described as "the prevailing rate of interest plus 6%". 14 Item 5 of the Schedule to each credit facility agreement specifies the date for repayment of the loan. Clause 3.1 of each credit facility agreement deals with repayment. It is in two parts and provides: 3. Repayments 3.1 The Borrower will pay to the Lender the total amount outstanding of the Money Secured on the date stipulated in Item 5 or such other day as agreed in writing by and between the parties hereto. In the event of loan expiry the Lender shall be at liberty to extend the loan term by written notice to the Borrower at which time Item 5 shall be deemed to be varied by mutual consent. 15 Clauses 3.2 and 3.4 provide, in a relatively common form, that interest is payable at the Higher Rate but that the defendant will accept payment of interest at the Lower Rate if the plaintiffs make their payments on time and have duly observed and performed all of the terms, covenants and conditions in the agreement. 16 Clause 3.2 provides: 3.2 Interest under this Credit Facility Deed shall be calculated … at the Higher Rate in accordance with the provisions of this clause 3.2. Such interest will be: (1) computed from the day on which the Lender makes the first advance on account of the Money Secured (that being the date on which the Lender allocates funds at the request of the Borrower); (2) calculated and charged on the daily outstanding balances to the Borrower's account with the first such payment of interest being payable on the date and in the manner set out in Item 8 on account of the Money Secured with subsequent payments being due and payable on the days and in the manner referred to in Item 8 whilst the Money Secured or part thereof remains outstanding; and (3) if an Event of Default occurs, such interest shall be added to the Money Secured and thereafter such capitalised interest shall bear interest at the Higher Rate determined in accordance with this clause 3.2. 17 Clause 3.4 provides as follows: 3.4 If the Borrower: (1) on every day which interest is payable under this Credit Facility Deed or any Security, pays to the Lender interest on the Money Secured or so much thereof as shall from time to time remain unpaid under this Credit Facility Deed at the Lower Rate; and (2) duly observes and performs all the terms, covenants and conditions contained in and implied by this Credit Facility Deed, then the Lender shall accept payment of the interest calculated and charged at the Lower Rate for every such instalment of interest payable under this Credit Facility Deed. 18 Clause 8 provides that the borrower shall, at the option of the Lender, be immediately in default, without the necessity for any notice or demand, upon the occurrence of any of the specified events of default. There are twenty (20) specified events of default. 19 Clause 8, including the first two specified events of default, provides relevantly as follows: 8. Events of Default The Borrower and each Security Provider who is a party to this Credit Facility Deed shall at the option of the Lender be immediately in default without the necessity for any notice or demand upon the occurrence of any of the following events of default: (1) the Borrower and/or the Security Provider fails or neglects to pay on the due date for payment any part of the Money Secured, or any interest or other moneys payable at the time and in the manner provided by this Credit Facility Deed or under any Security; or (2) the Borrower and/or the Security Provider fails or neglects to observe or perform any of the covenants, conditions or agreement contained in this Credit Facility Deed or any Security … (emphasis added) 20 At any time after the occurrence of an Event of Default, two rights became exercisable by the lender. The first was a right, at the discretion of the lender, to make the Money Secured become immediately payable: Clause 9.1. 21 The second was a right "in the manner and at the times the Lender in its absolute discretion deems appropriate, but without any obligation to do so", to exercise the particular rights specified in sub-paragraphs (1)-(8) of clause 9.2. They included the rights, among others, to appoint a manager or receiver, to perform any of the borrower's obligations or to carry on any business of the borrower. 22 Clause 9.2 provides relevantly as follows: 9. Rights Upon Default 9.2 At any time after the occurrence of an Event of Default the Lender may in the manner and at the times the Lender in its absolute discretion deems appropriate but without any obligation to do so : (1) appoint a manager to manage the default on behalf of the Lender who may its absolute discretion take such action it deems appropriate; (2) appoint a Receiver of the Mortgaged Property or the Borrower or any Security Provider; (3) exercise any powers rights or privileges conferred by law, this Credit Facility Deed , the Security and/or any other collateral document or securities. (4) perform any one or more of the Borrower's obligations under this Credit Facility Deed or the Security Provider's obligations under the Security; (5) apply any moneys received by the Lender in exercising its rights under this Credit Facility Deed or for any other reason in and towards full or partial payment of any outstanding Money Secured; (6) carry on any Business of the Borrower or any Security Provider; (7) do any act or sign any documents necessary to enforce any powers under this Credit Facility Deed or any Security; and/or (8) to do anything in respect of the Mortgaged Property which the Lender could lawfully do as if it was the owner of the Mortgage Property absolutely. (emphasis added) 23 Clause 9.2 contains the following rider: The Lender may exercise its rights under this clause notwithstanding any omission neglect delay or waiver of the right to exercise such option and without liability for loss. (emphasis added) 24 In addition to the rider in the concluding words of clause 9.2, there is an express no waiver clause. Clause 12 provides as follows: 12. No Waiver Notwithstanding any provision contained in this Credit Facility Deed or any rule of law of equity to the contrary, the granting of any time or any other indulgence by the Lender to the Security Provider or Guarantor in relation to any existing or future default under any Security or this Credit Facility Deed shall not be deemed a sanction or waiver of any continuing or recurring breach nor shall the Lender's right to exercise its rights under the Security or this Credit Facility Deed at any subsequent time he effected (sic) or diminished by the grant of time or any other indulgence . (emphasis added) 25 Significantly for this dispute, clause 31 incorporates the special covenants and conditions contained in Item 14 of the Schedule. There are two parts to Item 14. They provide as follows: Special Covenants At the expiration of the term, if the Borrower has not repaid on the due date, a fee of 1.5% per annum of the outstanding balance pro-rated and charged monthly is due and payable by the Borrower, and if not paid on demand then the net amount shall be a debt due and owing under the Mortgage. This clause shall not be deemed to be consent by the mortgagee for a further extension of the term and shall not prejudice the rights of the mortgagee in any respect including the charging of default interest . (emphasis added) 26 I should say at the outset, and contrary to the plaintiffs' submissions, that I do not think that the reference to "default interest" in Item 14 of the Schedule was intended to apply only to interest capitalised and compounded pursuant to clause 3.2(3), but not to interest at the Higher Rate calculated and charged pursuant to clause 3.2(2). That would not be a sensible purposive construction having regard to the overall terms of the agreement and its apparent object. In any event, I regard the supposed distinction between interest calculated under clause 3.2(2) and interest calculated under clause 3.2(3) as illusory. I will return to this question of construction later. The Factual Summary 27 When each of the Shimden, Summer Hill and Demian Constructions facilities expired and each loan was not repaid, the loan statements issued by the defendant to each borrower included a charge for a loan expiry fee. The statements continued to record charges for interest calculated at the Lower Rate and did not set out any charges for Higher Rate or default interest. However, each loan statement contained the following warning at the bottom of every page: This is a statement of transactions only and does not show a payout figure or default interest calculation . (emphasis added) 28 In addition to the clear scheme in clause 3.2 and 3.4 of the credit facility agreements, imposing a primary obligation to pay the Higher Rate, each letter of offer had made clear to the plaintiffs that the applicable interest rate (the Lower Rate) applied only in the case of prompt payment. The letters of offer included the following acknowledgement under the heading "Interest Rate": The Borrower acknowledges that the interest rate of [ ]% assumes strict observance of the loan terms. In the event of default, the default rate in the Credit Facility Deed shall apply. 29 The plaintiffs contend that Mr Demian was entitled reasonably to make an assumption that they would not be required to pay default interest if they failed to repay their loans on expiry. They relied, among other things, on the conversations between Mr McIvor on behalf of the defendant and Mr Demian on behalf of the plaintiffs to which I have briefly referred and to which I will return. They also relied on the following facts, namely that: (a) on 13 April 2007, the Guildford facility expired and the loan was not repaid. The borrower (another company controlled by Mr Demian) continued to pay interest at the Lower Rate and the defendant did not explicitly demand interest at the Higher Rate until 27 March 2009; (b) on 15 August 2007, the CTP facility expired and the loan was not repaid. The borrower (another company controlled by Mr Demian) continued to pay interest at the Lower Rate until the loan was paid out on 4 April 2008. When the loan was paid out, excess funds from the sale of the secured property were paid on account of interest in advance on the Shimden and Summer Hill facilities; (c) when each of the Shimden, Summer Hill and Demian Constructions facility agreements were entered into, deeds of collateralisation were also executed with the effect that any subsisting default under the Guildford and CTP facilities also amounted to default under the Shimden, Summer Hill and Demian Constructions facilities. Notwithstanding that default, the borrowers under those facilities paid interest at the Lower Rate during the term of each loan; (d) on 5 November 2008, Mr Gwynne (who was subordinate to Mr McIvor) sent an email to the plaintiffs setting out the upcoming interest payments for the Summer Hill and Shimden facilities for the period November 2008 to January 2009. The figures were for Lower Rate interest. 30 Overlying the plaintiffs' case was a contention that the charging of an expiry fee when each loan expired and was not repaid, constituted both a an election between alternatives, as well as conduct from which Mr Demian could reasonably infer that the plaintiffs would not be required to pay default interest. This was central to the plaintiffs' case. As a matter of contract, this was an unsustainable contention. It origin appeared to be in an erroneous reading of the terms of the letters of offer and an apparent ignorance of certain terms of the credit facility agreements, in particular Item 14 in the Schedule. This was an unstable footing for the development of the promissory estoppel claim. Estoppel and Commercial Parties 31 I should say, as a preliminary observation, that I do not think that the plaintiffs' estoppel claim reflected the commercial reality, particularly having regard to the terms of the credit facility agreements. The commercial reality and the inherent probabilities must necessarily be shaped by the terms of the parties' contractual relationship. The terms of the credit facility agreements allocated risk between the parties and gave to the defendant specified rights, entitlements and privileges upon default. Those matters are relevant to the probability of the assumption which Mr Demian is alleged to have made. 32 I have already mentioned that Mr Demian is an experienced businessman. He has negotiated and procured many substantial commercial loans. He must have understood the risks involved in his business as well as the correlative risks to which the defendant was exposed in extending credit to the plaintiffs. He would have known that an evaluation of those risks was reflected in the terms and conditions of each facility agreement. And he would have known that each loan was priced to reflect the risk and uncertainty relating to it as well as the return on investment which the defendant required – both when the loan terms were adhered to and when they were not. 33 It is obvious from the terms of the credit facility agreements, that an essential feature of the bargain was that, in the case of default by the borrower, the defendant would be entitled to a higher ongoing return in the form of greater interest – reflecting the heightened risk to which it would then be exposed. It is also obvious that there was another essential feature of the bargain, namely that the defendant had maximum flexibility in relation to its rights on default. It was not bound to exercise any right. It could delay doing so. No neglect, omission, waiver or indulgence by it would prevent it from the later exercise of any right to which it was entitled. 34 As Hayne J said in NZI Securities v Avery (unreported) Supreme Court of Victoria, 24 May 1994, speaking of a commercial loan agreement: It would, in my experience, be unusual to find that a party in the position of the [lender] bound itself to act in a particular way upon the occurrence of a default on the part of the opposite party. 35 Each case will depend on its own facts. But speaking generally, the imposition of an estoppel to suspend or abrogate the valuable legal rights of one party is not something that is lightly found. This is particularly so in a formal legal relationship, between arms length commercial parties, where their rights and obligations are carefully and extensively set out and formally documented. The quality of the evidence, the commercial reality, the inherent probabilities and the detriment to the plaintiff, must indicate that there is good reason why the defendant should be prevented from having the full benefit of the bargain to which it originally agreed. In such a case, an essential unfairness will be evident, demonstrating the appropriateness of finding an estoppel. But whether an estoppel should be granted depends on well developed principles, not merely on notions of unfairness or unconscionability: Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 at 324-5. 36 In this case, the plaintiffs and the defendant were both arms length commercial parties with access to legal advice and resources. They were able to look after themselves. The credit facility agreements were drafted to preserve and protect the defendant's rights on default at multiple levels. In these circumstances, the cautionary statement by Kirby P in Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582 at 585 is apposite: The Court has before it two groupings of substantial commercial enterprises, well resourced and advised, dealing in a commercial transaction having a great value. … This is not, of itself, a reason for denying them the beneficial application of the principles developed by equity. But it is a reason for scrutinising carefully the circumstances which are said to give rise to the conclusion that an insistence by the appellants on their legal rights would be so unconscionable that the Court will provide relief from it. At least in circumstances such as the present, courts should be careful to conserve relief so that they do not, in commercial matters, substitute lawyerly conscience for the hard headed decisions of business people. 37 That statement is, I think, a valuable touchstone in this area. In the choice between lawyerly conscience and the hard headed decisions of businessmen, I prefer the latter. The plaintiffs' promissory estoppel claim appeared to be driven by a lawyerly conscience that was too tender. It was certainly not hard headed. It paid little regard to the terms of the contractual relationship and the inherent probabilities. To Kirby P's caveat can be added other well known warnings. 38 In Barnes v Addy (1874) LR9 Ch at App 244 at 251, Lord Selborne said: There would be no better mode of undermining the sound doctrines of equity than to make unreasonable and inequitable applications of them. (approved in Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at [179]) 39 In John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19 at [101], the High Court warned that a strained application of equitable ideas does not promote justice, citing Judge Learned Hand in James Baird Co v Gimbel Bros Inc 64F 2d 344 at 346: in commercial transactions it does not in the end promote justice to seek strained interpretations in aid of those who do not protect themselves. 40 These sentiments are not, of course, a reason of itself to deny the beneficial application of the principles of equity in an appropriate case. But they indicate the need for caution and careful scrutiny before doing so in circumstances such as these. Promissory Estoppel 41 Although there is an infinite variety of facts and circumstances that may give rise to a promissory estoppel, this is a paradigm case. The defendant is alleged to have made a representation to the plaintiffs, by words and conduct, justifying an assumption by the plaintiffs that the defendant would not exercise or insist upon its existing legal rights: Central London Property Trust v High Trees House Ltd [1947] KB 130 is an exemplar of such a case. The well developed principles governing this type of estoppel are set out in Legione v Hately (1983) 152 CLR 406; Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; Giumelli v Giumelli (1999) 196 CLR 101. 42 On the facts of this case, these well developed principles require consideration of three primary requirements. First, the words or conduct of the defendant must be clear and unambiguous: Legione v Hately 152 CLR 406 at 435-437. Second, the conduct of the plaintiff in relying to its detriment on those words or that conduct must be reasonable: State Rail Authority (NSW) v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170; Legione v Hately (1983) 152 CLR 406. Third, the defendant must know or intend that the plaintiff will act or abstain from acting in reliance on those words or that conduct: Franks v Equitiloan Securities Pty Ltd [2008] NSWSC 33 at [72] per Brereton J. 43 The third requirement amounts to knowledge of reasonable reliance. It is necessary that the defendant have a reasonable expectation that its words or conduct will induce some detrimental reliance by the plaintiff: Walton Stores v Maher (supra) at 403. Reliance by the plaintiff which is unforeseen and unexpected, or simply foolish, will usually indicate that it is not reasonable. In particular, the anticipated reliance will not be reasonable if the plaintiff knew or should have known that the defendant's representation could not have been intended to bind it unless it formed part of a formal variation to their existing contract. Frequently the defendant will have intended, informally but effectively, to alter the legal position to which it was strictly entitled. But the defendant's subjective intention to alter the existing legal position is not a pre-requisite of a promissory estoppel. 44 For the reasons that follow, I have concluded that all of the necessary features of an equitable promissory estoppel are absent in this case. The defendant's conduct was not clear and unambiguous; the plaintiffs' reliance was not reasonable; the defendant had no reasonable expectation that its words or conduct would induce some detrimental reliance by the plaintiffs; and the commercial reality and inherent probabilities are against the plaintiffs. Even more fundamentally, I am not satisfied that Mr Demian held and maintained the assumption that is the foundation of the plaintiffs' case. I will deal first with that assumption. The Assumption - Findings 45 The assumption that underpinned the plaintiffs' case was neither certain nor clear. It was described in different terms at different times during the hearing. It was articulated by Mr Demian in his evidence in a manner that was so lacking in specificity and conviction that, for that reason alone, it was implausible. There are, in addition, other factors weighing against its likelihood – to which I will come. 46 In opening, the plaintiffs contended that there was a dichotomy which existed when a loan expired. They said that no statement was made in the letters of offer that, if the loans were not repaid at the expiry date, interest would be charged at the Higher Rate. It was said that an expiry fee was payable but that default interest was not payable. As I have said, this proposition was unsustainable on the construction of both the credit facility agreements and the letters of offer. 47 From this false premise, the assumption underpinning the promissory estoppel was described in opening as follows: We say the conduct of the defendant from the very commencement of the letters of offer that were sent, right the way through the entirety of the existence of these loans, is that when a loan expired an expiry fee was payable on these loans between 1.5% and 2% per annum charged per month but that default interest was not payable on those loans . (emphasis added) 48 As I have indicated, this description was neither justified by the terms of the letters of offer nor by Item 14 in the Schedule to the credit facility agreements. In final submissions, the assumption was eventually described in more qualified terms as follows: That the defendant would accept payment of interest calculated at the Lower Rate notwithstanding the expiry of the initial term of a loan facility, provided such interest was paid in a timely manner and the plaintiffs paid a loan expiry/extension fee . (emphasis added) 49 In his evidence Mr Demian did not support either of those assumptions – certainly not in a manner that was tolerably clear or reasonably persuasive. His contention that he would never have agreed to pay both an expiry or extension fee and default interest, was put to him rhetorically. His response was "Well, it depends on events". When asked about the conversation that allegedly took place in November 2007, he said that Mr McIvor stated that the defendant hardly ever charges penalty rates – only in extreme cases and that there was an understanding that [sic] should never apply and I believe that was the case. The words "hardly ever" and "only in extreme cases" simply beg the question. 50 Further, Mr Demian acknowledged that in forming his belief, he did not have regard to the terms of the credit facility agreements. He said that he did not read them at the time. He thought the letters of offer took precedence. This was surprising - but the letters of offer did not support his case anyway. 51 Further, and in any event, in November 2007, I do not think that any conversation happened in the terms alleged by Mr Demian. In November 2007 the relationship between Mr Demian and Mr McIvor was bitter. It is simply implausible that Mr McIvor would have granted any indulgence to Mr Demian at that time. Shortly before the alleged conversation, Mr McIvor made plain to Mr Demian that he no longer wished to do business with him and that he thought Mr Demian was dishonest in his dealings. Mr McIvor denied Mr Demian's version of this conversation and I believe him. 52 The probabilities and the contemporaneous events support Mr McIvor. He had no reason to grant an indulgence to Mr Demian or to abandon a valuable right belonging to the plaintiffs. Further, Mr Demian gave differing accounts of what Mr McIvor allegedly said. The absence of consistency in his evidence on this issue further diminished the credibility of what was already an implausible version. It is telling that, even if one accepted the broad thrust of what Mr Demian attributed to Mr McIvor, there was no discussion of the length of the period, or the conditions on which, the defendant would forego its right to default interest. 53 Mr Demian also relied on a conversation in June 2009. I do not think that the June 2009 conversation happened in the terms alleged by Mr Demian. Had the agreement, arrangement or understanding alleged by Mr Demian actually been reached in June 2009, it is implausible that Mr Demian would not have recorded it in writing or referred to it on some subsequent occasion. The circumstances are akin to those in Watson v Foxman (1995) 49 NSWLR 315 where McLelland CJ in Eq at 319 noted the difficulties of proof for a party relying on spoken words as the foundation of a cause of action in the absence of some reliable contemporaneous record or other satisfactory corroboration. 54 Mr McIvor denied Mr Demian's version of this conversation and I believe him. Mr Demian's several accounts of this conversation lacked consistency. And there was missing any logical rationale explaining why Mr McIvor might have chosen to act differently in early June 2009 when clear statements concerning the plaintiffs' liability for default interest had already been made in the emails sent to Mr Demian on 27 March and 20 May 2009. Once again, the probabilities and the contemporaneous events support Mr McIvor. I refer to those contemporaneous communications below. Contemporaneous Communications 55 A singular feature of the evidence is the absence of any corroboration supporting Mr Demian's account of his assumption or the representations supposedly made to him. The sequence of the contemporaneous communications between the plaintiffs and the defendant is remarkable for the non-existence of any protest by Mr Demian, or any assertion by him, that he had any understanding or arrangement that the plaintiffs would not be required to pay default interest if they failed to repay their loans on expiry. 56 In February 2010, the plaintiffs first asserted that there was an agreement or understanding to the effect that they would not have to pay default interest if they failed to repay their loans at the expiry date. In contrast, from late October 2008, there had been a number of communications between the plaintiffs and the defendant about, among other things, the fact that interest was accruing at what was variously described as the "default rate" or the "Higher Rate". 57 The sequence of those communications is as follows: (a) On 20 October 2008, Mr Gwynne, on behalf of the defendant, sent an email to Mr Demian requiring full repayment of current facilities as soon as possible; (b) On 5 November 2008, Mr Gwynne informed Mr Demian by email that there was currently a "zero tolerance" on unpaid/late interest across the book. He said that if interest was not received by the due date default notices would be issued within 7 days; (c) On 18 February 2009 Mr Gwynne sent an email to Mr Demian stating that he had not received an interest payment from the plaintiffs since before Christmas and that the facilities were now 60-90 days in arrears; (d) On 5 March 2009 Mr Gwynne sent another email to Mr Demian requesting information from him urgently to prevent action being taken against him; (e) On 27 March 2009 Mr McIvor sent an email to Mr Demian which was copied to Mr Gwynne stating: "You are presently accruing interest at default rate on all your loans as all loan terms have expired and interest is in arrears. … Please consider and advise."; (f) On 20 May 2009 Mr Gwynne sent an email to Mr Demian stating: "I remind you that all of your facilities are in default and accumulating interest at the higher rate and I encourage you to work towards a speedy exit strategy."; (g) On 25 May 2009 Mr Demian responded, merely stating: "I also ask that you reconsider the default interest at this stage."; (h) On 26 May 2009 Mr Gwynne sent an email to Mr Demian stating: "I have advised you on a number of occasions that your loans are in default and are accruing default interest, so default interest being charged to the Guildford facility should come as no surprise." 58 Mr Demian's meek response on 25 May 2009 seeking "reconsideration" is not the language of someone who believed that he had been assured in November 2007 that he would not be charged default interest. Nor is it the response of someone who had made a fundamental assumption in the conduct of his business affairs in reliance on that assurance. Nor is it the response of someone who had acted to his detriment by refraining from obtaining re-finance, in reliance thereon. Similarly, although Mr Demian responded to the 26 May email, he made no assertion that he had an understanding or belief that the plaintiffs would not be charged default interest. The projects being funded by the defendant were substantial. The amounts of money involved were large. There is a significant credibility gap between Mr Demian's contemporaneous conduct and communications on the one hand, and the case put forward on behalf of the plaintiffs on the other. Mr Demian - Findings 59 Mr Demian's evidence at the hearing was unconvincing and inherently implausible – both as to its content and the manner in which it was given. I formed the view that, except where, if at all, it was corroborated by contemporaneous written documents, or the evidence of Mr McIvor and Mr Gwynne, his evidence was unreliable. 60 It is not necessary for me to conclude that Mr Demian's evidence was dishonest. But it was not sufficiently cogent or plausible for me to act on the basis of it. I thought that, at best, he had convinced himself – contrary to the reality. The following observations by McLelland CJ in Eq are apposite to Mr Demian's evidence: Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience. See Watson v Foxman (1995) 49 NSWLR 315 at 319; see also` Aneve Pty Limited & Ors v Bank of Western Australia Limited [2005] NSWCA 441 per Hodgson JA at [49]; McMurtrie v Commonwealth of Australia [2006] NSWCA 148 per Hodgson JA at [5]; For the Good Times Pty Ltd v Coltern Pty Ltd [2007] NSWSC 807 per Young CJ in Eq at [184]. 61 In paragraph [27] above, I referred to the loan statements which the defendant issued to the plaintiffs at regular intervals. I noted that, after expiry, these statements included a charge for a loan expiry fee when it became applicable as well as interest calculated at the Lower Rate rather than the Higher Rate. I also noted that each statement also contained an overriding and unambiguous sentence, clearly set out at the bottom of each page, warning the borrower that it does not show a default interest calculation. 62 In connection with this warning, Mr Demian gave evidence that was foolhardy. He said that "You hardly pay attention to it. It's been there from the beginning". When I questioned that answer, he responded by saying: "I personally would not have paid much attention to it as it has been there from day one." Although Mr Demian ignored those written words, a reasonable person would not have done so. 63 Additionally, Mr Demian professed ignorance of the terms of the credit facility agreements. He seemed to think that the letters of offer were more important. In fact, as I have explained, there was nothing about the terms of the letters of offer that justified Mr Demian in thinking that default interest would not be charged if the loans were not re-paid at the expiry dates. And if he had been familiar with the terms of the credit facility agreements (which he signed) he would have had even less reason for making the assumption on which his case depended. His ignorance of the terms of those agreements was almost cavalier. 64 As I have said, I do not accept that Mr Demian actually held the assumption on which the plaintiffs' estoppel depends. The estoppel case lacked an essential credibility. No court can be satisfied that a promissory estoppel has been established unless the evidence proves the assumption on which it depends. Nor is it sufficient if the assumption appears to be overly optimistic, commercially naïve or possibly disingenuous. It must be reasonable. And it must be remembered that self interest will usually explain the conduct of commercial entities: Austotel Pty Ltd v Franklins Self Serve Pty Ltd (1989) 16 NSWLR 582 at 586. 65 There is, in my view, force in the defendant's submissions that the assumption for which the plaintiffs contends in this case is, in the events that occurred, "commercially absurd, never recorded in writing and contradicted by all contemporaneous documents". The most that could be said is that Mr Demian may have had a glimmer of hope that he could avoid the imposition of default interest or the Higher Rate of interest on the three loans in issue. But he was incautious if he thought it was any thing more than a hope. He was certainly not justified in having a reasonable expectation. Nor was he justified in forming any fundamental assumption as to the basis of the contractual relationship between the plaintiffs and the defendant. 66 I have therefore concluded that Mr Demian, in truth, did not make the assumption on which his case depends. Quite what, if any, assumption he did make is opaque. Further, if he made any assumption broadly to the effect that the plaintiffs were not liable to pay default interest or interest at the Higher Rate upon expiry of the loans in issue, his assumption was not reasonable. Clear and Unambiguous Conduct - Findings 67 I propose to dismiss the plaintiffs' estoppel claim because I am not satisfied that Mr Demian made the assumption for which the plaintiffs contend, and if he did, it was not reasonable to do so. However, I have also concluded that the defendant's conduct on which the plaintiffs relied to justify Mr Demian's assumption, amounted at best, to imprecise representations and ambiguous conduct. To borrow a phrase of Sir Owen Dixon, the plaintiffs' case on this issue consisted of no more than inexact proofs, indefinite testimony and indirect inferences. A party should not be estopped on an ambiguity: Legione v Hately (1983) 152 CLR 4-6 at 435-7. 68 The conduct relied on was in three parts. The first comprised the conversations with Mr McIvor in November 2007 and June 2009 to which I have referred. The second was said to be constituted by inaction and silence by the defendant. The third was said to be constituted by the defendant's conduct on other loan transactions. I have already dealt with the conversations. I will now deal with the inaction and silence followed by the conduct arising from other loan transactions. Inaction and Silence 69 The three loans expired in 2008 but the defendant did not state explicitly that the plaintiffs were liable to pay default interest until 27 March 2009. However, its loan statements constantly warned the plaintiffs that they did not include a default interest calculation. 70 In this case, silence by the defendant is a particularly thin reed on which to base an estoppel. Among other things, the credit facility agreements provided (1) that there was no obligation to give notice of default or make a demand; (2) that the defendant was entitled to exercise any powers, rights or privileges on default at any time in its absolute discretion but without any obligation to do so; (3) that the defendant may exercise its rights on default notwithstanding any omission, neglect, delay or waiver; and (4) that the defendant's rights under the credit facility deed were not effected (sic) or diminished by the grant of time or any other indulgence. 71 In this respect, the observations in Equuscorp Pty Ltd v Glengallen Investments Pty Ltd (2004) 218 CLR 471 at [33]-[35] as to the importance of the terms of the executed agreement, are singularly apposite. The reasonableness of the plaintiffs' conduct, and Mr Demian's asserted assumption, must be assessed by reference to the contractual terms which governed the legal relationship between the plaintiffs and the defendant. This was the commercial reality. 72 The clear message to Mr Demian from the credit facility agreements was that the plaintiffs should look after their own interests. Mr Demian may not have read the terms of those agreements, but his solicitors presumably did. He may not have paid attention to the warning at the foot of each page of the loan statements, but a reasonable person would have done so. The defendant's inaction or silence, including the non-assertion or non-exercise of a right, without more, could not detract from its ability to exercise and enforce the rights given to it by the credit facility agreements. In the circumstances, it was not reasonable for Mr Demian to act as if the defendant's silence (by non-assertion and non-exercise) were equivalent to a representation that the plaintiffs were freed of their obligation to pay default interest. 73 Silence may sometimes, but not necessarily always, constitute conduct by a defendant giving rise to an assumption on which a plaintiff is entitled to rely. My decision in Westpac Banking Corporation v Kurobe Pty Ltd [2010] NSWSC 537 at [36]-[46] is an example of an estoppel founded on calculated and deliberate silence intended to deceive. This is not such a case. 74 Where, as in this case, a lender has provided a warning to the borrower, effectively reserving its legal entitlement to collect default interest, and where its right to do is contractually entrenched, it could hardly be under an obligation, without more, to disabuse the borrower of any unduly optimistic expectation the borrower might have. In those circumstances, the lender's silence could not be construed reasonably as if it were equivalent to a promise that default interest will not be charged. There is nothing inequitable in those facts and circumstances. 75 As Brennan J said in Waltons: Silence will support an equitable estoppel only if it would be inequitable thereafter to assert a legal relationship different from the one which, to the knowledge of the silent party, the other party assumed or expected: see Ramsden v Dyson (1866) L.R. 1 H.L., at 140-141; Svenson v Payne (1945) 71 CLR 531 at 542-543; Willmott v Barber (1880) 15 Ch. D. 96 at 105-106. Conduct on Other Loans 76 In paragraph [29(b)] above, I explained how the CTP facility was allowed to be paid out in April 2008 at the Lower Rate of interest even though it was due to be repaid in August 2007. I do not regard that as a determinative factor. The commercial circumstances, the negotiations, the secured property and the dynamics in relation to each loan were not the same. Nor was the timing or the economic climate at the expiry date of each loan. Absent proof of a course of dealing, no inference could be drawn reasonably that an approach taken on one loan would apply on other loans. Mr McIvor explained that after repaying the CTP loan (at the Lower Rate) and using excess proceeds to pay monies due on other loans, the proceeds were insufficient to justify claiming the Higher Rate of interest. There was, in my view, a sound commercial reason for adopting this approach. 77 In paragraph [29(a)] above, I explained how the Guildford facility expired on 13 April 2007 but that default interest was not explicitly demanded until March 2009. I do not think that the plaintiffs were entitled to attribute any legal significance to this fact. There was no regular course of dealing and no clear and unambiguous inference of applicability to other loans. The defendant's rights were entrenched and reserved in the credit facility agreements – including as to the timing of exercise. I accept Mr McIvor's explanation of the accounting and taxation reasons why the defendant might make a commercial choice not to claim, or record a charge for, default interest on a particular loan if there were doubt about its collectability. 78 In paragraph [29(c)], I referred to the deeds of collateralisation. It is correct that the plaintiffs were probably technically in default of the three loans in question by reason only of the effect of the deeds of collateralisation. However, in the circumstances, and having regard to clauses 9.2 and 12 of the credit facility agreements, the defendant's failure to rely on these breaches could not be regarded reasonably as a representation that the plaintiffs would not be obliged to pay default interest if they did not repay the loans at the expiry date. 79 In paragraph [29(d)], I mentioned that on 5 November 2008, Mr Gwynne sent an email setting out upcoming interest payment calculations at the Lower Rate. When considered against the defendant's contractual rights set out in the credit facility agreements and the warning that appeared on each loan statement, no reasonable inference could arise from that email to support the plaintiffs' case. 80 For those reasons, I have concluded that there was no clear and unambiguous conduct by the defendant justifying the assumption for which the plaintiffs contend. Nor was there any expectation of reasonable reliance by the defendant. Understandably, it did not occur to Mr McIvor that the plaintiffs might arrange their affairs on the basis that they would not be legally obliged to pay default interest if they did not repay the loans after expiry. In any event, I have found that Mr Demian did not make the assumption. The doctrine of promissory estoppel does not therefore prevent the defendant from requiring the plaintiffs to pay the higher interest that became due from the expiry date of each of the Summer Hill, Shimden and Demian Constructions loans. Higher Rate and Default Interest 81 This leads me to the contractual and construction issues which the plaintiffs raised only during final addresses. On the basis of these issues, the plaintiffs said that they succeeded, even if their promissory estoppel claim failed. 82 The plaintiffs submitted that there was a difference between interest at the Higher Rate (a defined term) and default interest (an undefined term). An unattractive aspect of these contentions is that the suggested difference is inconsistent with the approach taken by the parties at the time and during the hearing prior to final submissions. 83 In their contemporaneous communications and documents, the parties tended to use the expressions "default rate", "default interest" and "Higher Rate" as if they were synonyms. In his evidence, Mr Demian made clear that he considered that interest at the "default rate" and interest at the "Higher Rate" were the same thing. Further, the letters of offer were expressed as if the "default rate" were equivalent to "Higher Rate". Overall, the parties dealt with each other on the basis of an assumption that, "default interest" where appearing in Item 14 of the Schedule and elsewhere, and interest at the Higher Rate, were the same thing. 84 In any event, the practical effect of the supposed difference is, I think, illusory. That is because pursuant to clause 3.2(2), Higher Rate interest must be "calculated and charged on the daily outstanding balances to the Borrower's account". This will have the effect of capitalising and compounding the interest payable at the Higher Rate following default – at least so long as the borrower continues to fail to pay the accrued unpaid amounts. Each daily balance will reflect the capitalisation of unpaid Higher Rate interest up to and including that daily balance. Higher Rate interest will then be calculated and charged on each progressive daily balance. Absent payment by the borrower, the effect of clause 3.2(2) therefore leads to inexorable capitalisation and compounding. 85 Clause 3.2(3) uses difference language but it produces the same economic result. Where an Event of Default occurs, it provides for capitalisation by adding the Higher Rate interest to the Money Secured. It then provides that such capitalised interest shall bear interest at the Higher Rate. This is no different to what happens pursuant to clause 3.2(2) when the Higher Rate interest is progressively calculated and charged on daily outstanding balances that include accrued unpaid Higher Rate interest. 86 On the basis of this false distinction, the plaintiffs submitted that there was no automatic right to default interest; that default interest was only payable pursuant to clause 3.2(3) when and if an Event of Default occurred; that an Event of Default could only occur when the defendant had exercised its option pursuant to clause 8; and that there was no evidence of the defendant exercising its option for an Event of Default to occur before February 2010. For the reasons that follow, I do not think that the submission is based on a correct legal or factual analysis. 87 More fundamentally however, the submission raises a false issue. Even if it is correct that the defendant has not satisfied the requirements entitling it to charge interest pursuant to clause 3.2(3), it has a right to the Higher Rate interest calculated and charged pursuant to clause 3.2(2) from the expiry date of each loan. The right to such interest arises automatically as a necessary consequence of the structure of the credit facility agreements. The borrower's primary obligation is to pay the Higher Rate interest calculated and charged in accordance with clause 3.2(2). Only if the borrower duly observes the terms of the agreement, is the defendant obliged to accept interest calculated and charged, in the same manner, at the Lower Rate. 88 Whether there was an Event of Default and whether clause 3.2(3) was triggered, are therefore side issues that do not need to be determined. The plaintiffs' submissions on this issue take them nowhere. However, if it is necessary to resolve those questions, I have concluded that there was an Event of Default and that clause 3.2(3) was triggered. My reasons are as follows. Event of Default 89 Clause 8 is headed "Events of Default". It specifies that "at the option of the Lender", the borrower shall be immediately in default without the necessity for any notice or demand upon the occurrence of any of a number of specified events of default. The first and most obvious of the events of default stipulated in Clause 8 is the failure to pay the Money Secured on the expiry date. Whether an event of default has occurred does not depend on whether the option referred to in clause 8 has been exercised by the lender. The fact of there being an event of default is conceptually different from the lender's option contemplated by the first two lines of clause 8. It may be that the "event of default" becomes an "Event of Default" when the option under clause 8 has been exercised by the lender. If that is correct then, in my view, the option was exercised from the expiry date of the loans. 90 That is because the expiry fee became due and payable under the first part of Item 14 of the Schedule when the borrower failed to repay the loan on the expiry date. The occasion for the charging of the expiry fee, and the inclusion of it on the loan statements issued to the borrower, was the default constituted by the borrower's failure to repay the loan on the due date. The inclusion of the expiry fee on the loan statements was a clear signal to the borrower that it was immediately in default; that the lender was proceeding to exercise its rights "without the necessity for any notice or demand"; that an event of default had occurred; and that the lender had exercised its option within the meaning of clause 8. 91 The words "at the option of the Lender" connote an exercise of choice. It is evident that, at a practical level, as a matter of loan administration, a choice was made. That choice - which was manifested in the lender's conduct in charging the expiry fee and including it on the loan statements then issued to the borrower - satisfied the requirement of the language of the opening words of clause 8. Both lender and borrower were conscious that the borrower was in default and that the lender had chosen to enforce its rights upon default pursuant to Item 14 of the Schedule. It did so, in part, by including an expiry fee on the loan statements that were then issued to the borrower. This was sufficient to indicate that clause 8 applied and was invoked. There was therefore an "Event of Default" for the purposes of cl 3.2(3) – if it matters. Election 92 The plaintiffs also contend that the defendant made an election between inconsistent rights. This was also a new submission that had not been advanced prior to addresses on the final day. The plaintiff submitted that it was not open to the defendant to "affirm the facility and charge and collect interest at the Lower Rate but nevertheless reserve a right to claim interest at the Higher Rate to be exercised at some later time". This is a perplexing submission given the extensive rights and liberties granted to the defendant pursuant to the credit facility agreements: Equuscorp Pty Ltd v Glengallen Investments Pty Ltd (supra) at [31]-[35]. 93 In my view, the circumstances of this case do not give rise to an election. The conduct relied upon was not unequivocal in the sense of being consistent only with the exercise of one of two sets of rights and inconsistent with the exercise of the other: Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 646. 94 The contractual terms expressly contemplated, and absolved the defendant from the consequences of, any indulgence, omission, neglect, delay, waiver or failure to exercise a right. The defendant was not making a choice to charge the Lower Rate of interest and to abandon its entitlement to the Higher Rate. Further, it made its position pellucid in the loan statements which it issued to the Borrower, and which I have described and explained in paragraph [27] above. In my view, Mr Demian well understood this, despite his protestations that he did not read the reservation of the defendant's right to charge default interest that appeared on the statements. I have referred to Mr Demian's evidence on this topic in paragraph [62] above. Extension of Term 95 The plaintiffs also submit that at the end of the term of each of the three loans in question, the defendant exercised its contractual right to extend the term. I have set out in paragraph [14] above the terms of clause 3.1. It permitted the Lender to extend the term of the loan by written notice to the Borrower. The plaintiffs advanced two reasons why the requirement for writing was satisfied. The first was that the loan statements issued by the defendant were said to evidence an agreement for an extension of the loan for the period of the statement. This was said to be because the statements included a charge for a loan expiry fee as well as interest calculated at the Lower Rate. It was said that the defendant agreed to a regime for the payment of interest beyond the initial term of the facilities and that this agreement necessarily involved an equivalent extension of the term of those facilities. 96 There are several reasons why I do not accept the submission that the defendant agreed to extend the term of the loans: (a) first, clause 3.1 contemplates a deliberate act by the lender, constituted by a written notice to the borrower. This is apparent from the language. The words "at liberty to extend the loan term" and "by written notice to the Borrower" indicate that the parties contemplated a conscious decision by the lender – no doubt usually preceded by a request from the borrower and followed by a written notice from the lender to the borrower; (b) second, the decision to extend requires the selection of a new date for repayment. Clause 3.1 specifies that, at the time of extension by written notice to the borrower ", Item 5 shall be deemed to be varied by mutual consent". Item 5 specifies a particular date. The contemplated process of extension requires the selection of a replacement date. Because these were short term loans, the critical importance of the expiry date was emphasised in the letters of offer. There could not be, in my opinion, an extension within the meaning of clause 3.1 without a conscious decision to do so by the lender, and without the selection of a replacement expiry date. No date was selected. The contractual language does not contemplate the possibility of an informal extension, occurring by default, with an open-ended expiry date; (c) third, clause 14 in the Schedule reinforces two things. It demonstrates the inappropriateness of seeking to infer the grant of an extension of the term of the loan simply because of the charging of an expiry fee. And it serves to explicitly remind the borrower that the charging of an expiry fee will not derogate from the lender's entitlement, among others, to charge "default interest"; (d) fourth, the evidence of Mr McIvor and Mr Gwynne was inconsistent with any extension, or with any decision actually taken by the defendant to extend the term of the loans or to select a replacement expiry date. Another Estoppel 97 Alternatively, the plaintiffs contended for another estoppel, preventing the defendant from denying that there had been an extension of the term of the loans. This estoppel can rise no higher than the estoppel I have already addressed. For the reasons that I have endeavoured to explain, the circumstances of this case do not give rise to any estoppel. Orders and Costs 98 The parties should bring in agreed short minutes to reflect these reasons. The amended summons should be dismissed. Appropriate declarations and orders should be made pursuant to the cross claim. The defendant is entitled to the higher interest from the expiry date of each loan. Both clauses 3.2(2) and 3.2(3) apply. If, which I doubt, there is any arithmetical difference between the amount calculated pursuant to each of those clauses, it should be made clear in the orders. Costs, including, at least prima facie those of the interlocutory hearing, should follow the event. The defendant however seeks indemnity costs. I will entertain an application by the defendant for a special order as to costs, if it is so advised. Among other things, there were unsatisfactory features about the conduct of the plaintiffs' case which have contributed to increased cost and undue length of hearing. 99 If the plaintiffs wish to have a separate costs order in relation to the interlocutory hearing, I will entertain their application. Any application by the defendant together with an outline of submissions and an affidavit, if necessary, should be delivered to my associate by 12 August 2010. Any application by the plaintiffs including responsive submissions should be delivered to my associate by 23 August 2010. 04/08/2010 - Amendment to catchwords - Paragraph(s) Cover sheet 24/08/2010 - Amendment to cover sheet - Paragraph(s) Catchwords 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.