Court of Appeal Supreme Court New South Wales

• Medium Neutral Citation: O'Brien v Bank of Western Australia Ltd [2013] NSWCA 71
• Hearing dates: 31 January 2013
• Decision date: 11 April 2013
• Before: Beazley P at [1]; Macfarlan JA at [2]; Ward JA at [26]

Decision

1. Leave to appeal is granted.

2. Appeal is allowed with costs.

3. Judgment and orders 1-5 made by the Court on 3 May 2012 be set aside and in lieu thereof order that the plaintiff's notice of motion filed 2 February 2012 be dismissed with costs.

4. Direct parties to approach the Registrar in Equity for a date for directions in this matter.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

• Catchwords: CONTRACT - contract of guarantee - construction of suspension/preservation of rights clauses and no waiver clauses -whether affirmative defences that, if proved, may lead to relief that would have the effect that there was no relevant failure to pay by the borrower as at the relevant date fall within the operation of the said clauses as properly construed; PRACTICE AND PROCEDURE - civil -summary judgment - whether there is an underlying defence that has a real or more than fanciful prospect of success
• Legislation Cited: Australian Securities and Investments Commission Act 2001 (Cth) s 12GM; Civil Procedure Act 2005 (NSW) ss 21, 22, 56-9; Federal Court of Australia Act 1976 (Cth) s 31A; Statute Law (Miscellaneous Provisions) Act (No 3) 1992; Supreme Court Act 1970 (NSW) s 62 and Rules; Trade Practices Act 1974 (Cth) ss 45 and 52
• Cases Cited: Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41; Bakota Holdings Pty Ltd v Bank of Western Australia Ltd [2011] NSWSC 1277; Batistatos v Roads and Traffic Authority (NSW) [2006] HCA 27; (2006) 226 CLR 256; Batiste v Lenin (2002) 11 BPR 20,403; [2002] NSWCA 316; Bitannia Pty Ltd v Parkline Constructions Pty Ltd (2006) 67 NSWLR 9; [2006] NSWCA 238; Buckeridge v Mercantile Credits Ltd (1981) 147 CLR 654; Capital Finance Australia Ltd v Airstar Aviation Pty Ltd [2003] QSC 151; [2004] 1 Qd R 122; Coca-Cola Financial Corporation v Finsat International Ltd [1998] QB 43; Commonwealth v Verwayen (1990) 170 CLR 394; Connaught Restaurants Ltd v Indoor Leisure Ltd [1994] 1 WLR 501; [1994] 4 All ER 834; Continental Illinois National Bank & Trust Company of Chicago v Papanicolaou ("The Fedora") [1986] 2 Lloyd's Rep 441; Daewoo Australia P/L v Porter Crane Imports P/L t/a Betta Machinery Sales [2000] QSC 050; Dey v Victorian Railways Commissioner (1949) 78 CLR 62; Esanda Finance Corporation Limited v Peat Marwick Hungerford (1997) 188 CLR 241;[1997] HCA 8; Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87; GE Capital Australia v Davis [2002] NSWSC 1146, (2002) 180 FLR 250; General Steel Industries Inc v Commissioner for Railways (New South Wales) (1964) 112 CLR 125; Grant v NZMC Ltd [1989] 1 NZLR 8; House v R (1936) 55 CLR 499; Hunt v Knabe (No 2) (1992) 8 WAR 96; Kammins Ballrooms Co Ltd v Zenith Investments (Torquay) Ltd [1971] AC 850; King Investment Solutions Pty Ltd v Hussain [2005] NSWSC 1076; Macatangay v State of New South Wales (No 2) [2009] NSWCA 272; McDonnell & East Limited v McGregor (1936) 56 CLR 50; Porter Crane Imports P/L v Daewoo Australia P/L [2000] QSC 051; Re Norman; Re Forest Enterprises Ltd (2011) 280 ALR 470; [2011] FCA 99; Saleh v Romanous (2010) 79 NSWLR 453; [2010] NSWCA 274; Spencer v Commonwealth of Australia [2010] HCA 28; (2010) 241 CLR 118; St George Bank Ltd v Field [2007] NSWSC 902; State Bank of Victoria v Parry (1989) 7 ACLR 226; Sunbird Plaza Pty Ltd v Moloney (1988) 166 CLR 245; Thomas v Stockman & Evans [2012] NSWCA 444; Town & Country Sport Resorts (Holdings) Pty Ltd & ors v Partnership Partnership Pacific Ltd (1988) 20 FCR 540; Trau v University of Sydney [1995] HCA Trans 409; Wang v State of New South Wales [2009] NSWCA 340; Webster v Lampard (1993) 177 CLR 598; Westpac Banking Corporation v Matich (unreported, 21/11/1997, 50183/1997); Westpac Banking Corporation v Prelea (1992) 28 NSWLR 481; White Industries Australia Ltd v Federal Commissioner of Taxation [2007] FCA 511; (2007) 160 FCR 298
• Texts Cited: Derham, The Law of Set-Off (3rd edn & 4th edn); Ritchies' Commentary on the Uniform Civil Procedure Act
• Category: Principal judgment
• Parties: Rory Francis O'Brien (First appellant); Bakota Holdings Pty Ltd (Second appellant); Bank of Western Australia Ltd (Respondent)
• Representation: Counsel: B W Walker SC with R A Yezerski (Appellants); J C Sheahan SC with P Dowdy, A K Flecknoe-Brown (Respondent); Solicitors: Russells (Appellants); Ashurst Australia (Respondent)
• File Number(s): CA 12/172170

Decision under appeal

• Citation: [2012] NSWSC 456
• Date of Decision: 2012-05-02 00:00:00
• Before: McDougall J
• File Number(s): 11/229400

Judgment

1 BEAZLEY P: I have had the advantage of reading in draft the reasons of Macfarlan JA and Ward JA and agree with the orders proposed by Ward JA. I agree with her Honour's reasons and the reasons of Macfarlan JA.

2 MACFARLAN JA: This is an application by two guarantors for leave to appeal in relation to the entry against them of summary judgment in the amount of $158,661,356, and in relation to further orders made at first instance. The background to the proceedings is set out in the judgment of Ward JA. For the reasons following, I agree with the orders proposed by her Honour.

Summary judgment principles

3 The High Court decision in Spencer v The Commonwealth [2010] HCA 28; 241 CLR 118 was concerned with s 31A(2) of the Federal Court Act 1976 (Cth) but the following principles stated in it are of general application:

(a) On a summary judgment application, the real issue is whether there is an underlying cause of action or defence, not simply whether one is pleaded (at [23]).

(b) The critical question can be expressed as whether there is more than a "fanciful" prospect of success (at [25]) per French CJ and Gummow J) or whether the outcome is so certain that it would be an abuse of the process of the Court to allow the action to go forward (at [54] in the judgment of the plurality). Demonstration of the outcome of the litigation is required, not an assessment of the prospect of its success (ibid).

(c) Powers to summarily terminate proceedings must be exercised with exceptional caution (ibid at [55]; see also French CJ and Gummow J at [24]).

The judgment at first instance

4 The primary judge concluded that there was "a simple answer" to the guarantors' contention that their allegations of misleading and deceptive conduct, and the like, constituted arguable defences to the Bank's claim on the guarantees and thereby precluded the Bank from obtaining summary judgment (at [39]). This answer was that although the guarantors' defences were "predicated on the exercise [by the Bank] of powers under Clause 11.1 of the facility agreement" with the principal debtor, none of the steps taken by the Bank depended for their validity upon Clause 11.1 (at [40] and [45]). Thus, his Honour concluded, the facility agreement came to an end, and the amount claimed by the Bank became due, not as a result of the Bank's action but automatically upon the contractually specified termination date of 15 January 2009 being reached ([49]). The guarantors' attacks on the steps taken by the Bank were therefore considered to be beside the point as the relevant amount became due by the principal debtor (and therefore by the guarantors) independently of those steps.

5 However this reasoning failed to take account of the fact that the guarantors' defences extended to contentions that, by reason of representations made to them, the principal debt did not become due on the termination date of 15 January 2009, or had at least ceased to be due by the time that the Bank purported to exercise powers in April 2009 (see [76] - [78A] of the guarantors' Further Amended Commercial List Response dated 4 April 2012 and the allegations incorporated into those paragraphs by reference).

6 The Bank argued in response to this criticism of the primary judge's reasoning that the guarantors did not allege that the Bank made any representation to them between the date of a facility variation of 23 December 2008 and the revised termination date of 15 January 2009 for which it provided. The relevance of this fact however depends upon the validity of the Bank's proposition that representations alleged to have been made by it prior to 23 December 2008 must have been superseded by the facility variation of that date. However the validity of the proposition is not self-evident and its correctness is sufficiently uncertain to preclude its determination on a summary judgment application. In any event, the guarantors alleged that representations were made soon thereafter (from 3 February 2009 - see [82] of their Further Amended Commercial List Statement to the Cross-Claim Summons) and that these had the effect of rendering the debt no longer due when the Bank commenced to exercise its powers in April 2009 (assuming that it had in fact become due earlier).

The arguments on appeal

7 To support the entry of summary judgment in its favour, the Bank focused on appeal upon answers to the guarantors' defences additional to that relied on by the primary judge. In particular, the Bank relied upon "preservation", "suspension" and indemnity clauses contained in the applicants' guarantees.

The preservation clauses

8 These clauses (Clause 5.2 in the first applicant's guarantee and Clause 4.2 in that of the second) appeared under the heading "Our rights are protected" and were relevantly in the following terms:

"Rights given to us [the Bank] under this guarantee and indemnity and your liabilities under it are not affected by any act or omission by us or by anything else that might otherwise affect them under law or otherwise, including:

...

(b) The fact that we release the debtor or give them a concession, such as more time to pay.

... "

9 Subclause (b) does not in my view assist the Bank. The guarantors did not allege that the Bank had given them a "release" and whilst what the guarantors alleged might fairly have been described as a "concession", the subclause did not entitle the Bank not to adhere to any such concession. Its effect was that the Bank's rights, as varied by the concession, were not affected by the giving of it.

10 Furthermore, the chapeau to the clause could not in my view reasonably be construed so as to confer protection on the Bank against the consequences of a promise that it might be found to have made to the principal debtor or guarantors.

11 In any event, the clauses could not in my view protect the Bank against the grant of statutory remedies for misleading and deceptive conduct raised, as here, as a defence to a contractual claim (see Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2006] NSWCA 238; 67 NSWLR 9). The same may be said of Clause 8.20 in the first applicant's guarantee and Clause 7.25 in that of the second applicant which precluded waiver of rights under the guarantees "except in writing signed by the party or parties to be bound". Whatever arguments there might be for these clauses' inapplicability as a matter of construction, they could not prevail over the statutory remedies.

12 The Bank submitted that whilst misleading and deceptive conduct remedies could be granted at a final hearing so as to override the contractual provisions relied upon by the Bank, until that occurred, those provisions were operative and required the guarantors to "pay first". In my view this argument fails because relief for misleading and deceptive conduct is not necessarily confined to in futuro operation. As, for example, s 12GM(7)(b) of the Australian Securities and Investments Commission Act 2001 (Cth) ("ASIC Act") indicates, orders may be made varying contracts from dates prior to the dates of the orders. It is therefore quite possible that the guarantors' defences, if established, may result in the contractual clauses relied upon by the Bank being inoperative at the present time and as at April 2009. Thus the presence of the clauses in the guarantees does not support the grant of summary judgment to the Bank.

The suspension clauses

13 These clauses (Clause 5.5 and 8.1 in the first applicant's guarantee and Clauses 4.5 and 7.3 in that of the second) appeared under the heading "Your rights are suspended". Clause 5.5 of the former guarantee was in the following terms:

"As long as any of the guaranteed money remains unpaid, you may not, without our consent:

(a) Reduce your liability under this guarantee and indemnity by claiming that you or the debtor or any other person has a right of set-off or counterclaim against us (except to the extent you have a right of set-off granted by law which we cannot exclude by agreement);

... "

The Clause 4.5 of the latter was in the same terms save that the words in parentheses were not included. Clauses 8.1 and 7.3 were to similar effect.

14 The clauses are not in my view applicable as the guarantors' defences are not confined to asserting set-offs or counterclaims which do not impeach the debt claimed by the Bank. As pointed out earlier, the guarantors assert in their defences that at relevant times that debt was not payable. Clauses such as the present do not protect a creditor against such a defence (see Capital Finance Australia Ltd v Air Star Aviation Pty Ltd [2004] 1 Qd R 122 at 127). They are concerned with reliance by a guarantor on claims of its own to meet a creditor's claim for an undisputed debt.

15 Another basis upon which the suspension clauses may be inapplicable is that they are expressed to operate only when the guaranteed money "remains unpaid". Arguably, this means "unpaid and due". If so, the guarantors' defences that the Bank's debt was, for a variety of reasons, not payable at relevant times would, if established, indicate that the clauses were inapplicable. The counter argument as to the meaning of "remains unpaid" is that a definition in the guarantees of "payable" as including "payable in the future" means that the suspension clauses operate when the debt exists, even if it is not then payable. The argubility of this point is sufficient to preclude summary judgment upon the basis of the clauses.

16 The possibility of relief conflicting with the suspension clauses being granted in respect of the misleading and deceptive conduct alleged by the guarantors (see [11] and [12] above) is a further reason why the clauses do not support the grant of summary judgment in favour of the Bank.

The indemnity clause

17 The second applicant's guarantee (but not that of the first) contained in Clause 2.3 an indemnity provision relevantly as follows:

"You unconditionally and irrevocably indemnify us against, and you must therefore pay us on demand for, liability, loss or costs we suffer or incur if:

(a) The debtor does not, is not obliged to, or is unable to, pay us the guaranteed money in accordance with any arrangement under which it is expressed to be owing;

... "

18 The communications alleged by the second applicant in its defence, if established, arguably amounted to "arrangements" as contemplated by this clause. On its case, there was no departure by the principal debtor or the guarantors from these "arrangements". Arguably therefore the second applicant's obligation to indemnify had not arisen at the relevant time.

19 In any event, the possibility of relief conflicting with the indemnity clause being granted in respect of the misleading and deceptive conduct alleged in the defence precludes the indemnity clause providing a sufficient basis for summary judgment (see [11] and [12] above).

Were the suspension clauses unenforceable in any event?

20 The applicants further argued that the suspension clauses were unenforceable in any event as they were inconsistent with the ASIC Act and cognate legislation, were contrary to public policy, were contrary to s 22 of the Civil Procedure Act 2005 and purported to fetter the exercise of federal jurisdiction. As these clauses did not, upon their proper construction, provide any foundation for the summary judgment, it is unnecessary to address these alternative arguments.

The cross-claim strike out order

21 In addition to granting summary judgment to the Bank, the primary judge struck out paragraphs 120 to 133A of the guarantors' cross-claim statement. These paragraphs alleged that in purporting to exercise its powers of enforcement the Bank acted in breach of implied terms of the security documents requiring it to act in good faith and not for collateral purposes. The loss alleged included damage to the guarantors' reputations.

22 The primary judge struck these paragraphs out "on the basis that they were predicated on the proposition that the Bank had acted pursuant to Clause 11.1" (Judgment [59]). For the same reasons given earlier in relation to the award of summary judgment (see [5] and [6] above), this reasoning cannot be supported. Whilst the paragraphs do focus on Clause 11.1, this is explicable by the Bank's own reliance upon that clause to justify its actions (see [79] - [82] of its Amended Commercial List Statement). Clearly the gravamen of the guarantors' contractual case is that the Bank's purported exercise of powers, pursuant to whichever provisions of the security documents the Bank alleges to be applicable, was in breach of the implied terms alleged. At most, the Bank had a pleading point (which, if well-founded, should have led to the guarantors being given leave to replead). However in any event the pleading point was not in my view well-founded whilst ever the Bank maintained its reliance on Clause 11.1 in its Amended Commercial List Statement.

23 In the alternative, the Bank sought to justify the strike out order upon the basis that, even if the guarantors established their implied term complaints, only nominal damages would be awarded. However, even if this were so, it would not justify the strike out order. The fact that a claimant might only seek nominal damages for a breach of a contract is not of itself a basis for striking out its claim. In any event, the guarantors alleged that they suffered substantial harm in that their reputations were damaged to a significant extent. There is therefore a prospect that substantial, and not merely nominal, damages may be awarded.

24 As the primary judge's order setting aside certain Notices to Produce and a subpoena was founded upon his strike-out of parts of the guarantors' cross-claim statement and, for reasons that I have given, that strike-out order should be set aside, his Honour's order setting aside the Notices to Produce and subpoena should also be set aside.

Orders

25 For the above reasons, I agree with the orders proposed by Ward JA. A grant of leave to appeal is appropriate in light of the strength of the applicants' cases and the size of the judgments entered against them.

26 WARD JA: This matter follows the entry of summary judgment (and other orders) against Mr O'Brien and Bakota Holdings Pty Ltd (a company of which Mr O'Brien is the sole shareholder) in favour of the respondent (Bank of Western Australia Ltd) for moneys claimed under separate guarantees given by Mr O'Brien and Bakota in respect of the obligations of an associated company (FOB-Airlie Beach Pty Ltd) under a facility agreement with the Bank. (I refer to Mr O'Brien and Bakota together as the Guarantors.) In substance, the dispute between the parties on the summary judgment application (and this appeal) was as to the operation (and validity) of what were referred to as "suspension" and "preservation" (or "pay now, litigate later") clauses in the respective guarantees.

Background

27 The background to the dispute may be briefly stated. In 2006, the Bank entered into a facility agreement with FOB-Airlie Beach for the purposes of refinancing the development of a property in Queensland. After various amendments, the relevant terms of the facility agreement were to be found in the Second Amendment and Restatement of Facility dated 4 December 2008, together with two letters of variation dated 19 December 2008 and 23 December 2008, respectively. The obligations of the borrower under the facility agreement were secured, among other things, by separate guarantee and indemnity agreements entered into by each of the Guarantors.

28 Under the terms of the facility agreement (clause 5.1), the amount borrowed (and any outstanding interest thereon) was to be repaid on the Termination Date. This date (as last amended) was 15 January 2009. There is no dispute that the debt was not repaid on that date.

29 On 6 April 2009, a letter of demand was issued to the borrower for the moneys then outstanding under the facility agreement. Relevantly (at least having regard to the way in which the summary judgment application was ultimately determined), the Bank in that letter of demand appeared to exercise the powers available to it under the default provisions of the facility agreement in order to terminate the facility (something the primary judge described as mere surplusage, since by then the Termination Date had already passed and the facility agreement had terminated by effluxion of time). The Bank subsequently appointed receivers and managers to the borrower under a fixed and floating charge that had been given over the borrower's assets and in due course the property the subject of the refinancing arrangements was sold.

30 On 28 January 2011, the Bank demanded payment from the Guarantors of the balance then outstanding (after the sale of the property) under the facility agreement. The Bank's demands did not in terms refer to the termination of the facility agreement, stating simply that the borrower had failed to pay the amount borrowed and demanding the balance then owing "pursuant to the terms of the guarantee". (The amount demanded included sums that were not on any view payable as at the Termination Date.) When the demands made on the Guarantors were not met, the Bank brought proceedings in the Commercial List against each of the Guarantors.

31 In May last year, on the application of the Bank, an order was made for summary judgment on the Bank's claim and, at the same time, part of the Guarantors' cross-claim was struck-out (that part being referable to an alleged breach of contract by the Bank in exercising its rights under the Guarantees not in good faith and for an alleged improper or collateral purpose). The primary judge also set aside three notices to produce addressed to the Bank and a subpoena to produce addressed to the Commonwealth Bank of Australia that had been issued by the Guarantors in connection with their breach of contract claim. The Guarantors have sought leave to appeal from that decision. The application by the Guarantors for leave to appeal was heard concurrently with the appeal itself (pursuant to direction by the Court in July last year).

Leave

32 Section 101(2)(l) of the Supreme Court Act 1970 provides that an appeal shall not lie to the Court of Appeal, except by leave of the Court of Appeal from a judgment or order of the Court in a Division on an application for summary judgment under the rules. Sub-paragraph (l) was inserted in the Act by the Statute Law (Miscellaneous Provisions) Act (No 3) 1992 without any relevant commentary in the Explanatory Memorandum.

33 Ritchies' Commentary on the Uniform Civil Procedure at [101.80] suggests that an appeal from summary judgment is an order from which leave is not necessary, citing King Investment Solutions Pty Ltd v Hussain [2005] NSWSC 1076 and Hunt v Knabe (No 2) (1992) 8 WAR 96. In King Investment, where Campbell J (as his Honour then was) considered the finality or otherwise of a decision granting summary judgment to a plaintiff mortgagee, the question was raised in the context of Part 60 Rule 17(k) of the Supreme Court Rules 1970 (which provided for there to be an appeal from an Associate Judge to the Court of Appeal where the decision was a final decision "other than" a decision on an application for a summary judgment).

34 In the present case, the position is governed by s 101(2)(l), which in its terms requires that leave to appeal be obtained, this being an appeal from a judgment of the Court in a division upon an application by the plaintiff for summary judgment (as recognised in Macatangay v State of New South Wales (No 2) [2009] NSWCA 272 at [13]; Thomas v Stockman & Evans [2012] NSWCA 444). (It is not necessary to enter into the debate as to whether that sub-paragraph also apples to an application by a defendant to dispose summarily of a matter, special leave in relation to which question was refused in Trau v University of Sydney [1995] HCA Trans 409.)

35 The respondent does not oppose the application for leave to appeal. This is clearly a case in which such leave should be granted, having regard to the consequences of the decision and the issues raised as to the operation of the suspension/preservation clauses.

Commercial List proceedings

36 At the time of the hearing of the Bank's summary judgment and strike-out application, the Guarantors had foreshadowed an application for leave to amend their Commercial List documents. Therefore, the Bank's application was conducted before the primary judge on the basis of the proposed further amended documents: a draft Further Amended Commercial List Response and a draft Further Amended Commercial List Statement to the Cross-Claim Summons. In the former, the Guarantors foreshadowed the inclusion, as part of their defence to the claim, of the following paragraph [78A]:

78A In further answer to all of paragraphs 76, 77 and 78 of the Amended Commercial List Statement, the defendants deny that there was a relevant failure to pay the aggregate of the Advances and the balance of the Debt owing on the due date, that there was any relevant Event of Default, or that the entitlement alleged in paragraph 78 of the Amended Commercial List Statement arose, by reason of the matters of estoppel, breach of contract and misleading and deceptive conduct pleaded more specifically in paragraphs 79-83 below.

37 In summary, paragraphs [76]-[78] of the Bank's Amended Commercial List Statement (to which [78A] of the proposed amended List Response was addressed), appearing under the heading Events of Default, alleged the failure of the borrower to pay the aggregate of the advances outstanding and the balance of the debt on 15 January 2009; that this was an Event of Default under the facility agreement; and that the occurrence of an Event of Default entitled the Bank to take certain steps (including cancellation of the facilities made available under the said agreement). Paragraph [79] alleged that, in exercise of the rights granted under clause 11.1(b) of the amended facility agreement, the Bank had terminated the borrower's facilities (by the notice issued by letter on 6 April 2009). Paragraphs [81] and [82] of the Bank's claim expressly averred that the respective demands for payment made on the Guarantors in January 2011 were "[i]n exercise of the rights granted" under clause 11.1(c) of the facility agreement and particular clauses of the respective guarantees (clauses 2.1 and 8.1 of the O'Brien Guarantee and clauses 2.1, 2.3 and 7.3 of the Bakota Guarantee).

38 The Guarantors contend that representations were made both to the borrower and to them (and both before and after 15 January 2009) that the Bank would roll-over the facility and would advance further funding to the borrower to allow the completion of the development. They contend that (to the Bank's knowledge) they (and the borrower) had relied to their detriment on those representations by not making arrangements to secure alternative funding. The Guarantors further allege unconscionable conduct on the part of the Bank, in taking the steps that it did in relation to the non-payment of moneys payable under the facility agreement, by reference to both equitable and statutory concepts of unconscionability (the further draft Commercial List Response and Cross-Claim Summons seeking relief, inter alia, under s 12GM of the Australian Securities and Investments Commission Act 2001 (Cth)).

39 In essence, what the Guarantors sought (and still seek) to maintain, both in defence of the claims made against them and by way of cross-claim, is not only the claim that (by reason of an estoppel or the consequences of breach of contract or misleading and deceptive/unconscionable conduct) there was no "event of default" as at 6 April 2009 when demand was made on the borrower (or that, if there was such an event, the Bank was precluded from relying thereon) but also (by reason of those same matters) that there was no "relevant failure" to pay the moneys that, under the facility agreement, were otherwise to be paid on the Termination Date. In this regard, the key point stressed by Senior Counsel for the Guarantors (Mr Walker SC) on appeal was the contention of the Guarantors that conduct had occurred which brought in its train consequences that would prevent from so being what would otherwise have been an event of default (or relevant failure by the borrower to pay the debt) on the Termination Date.

40 While the Bank's submission was that (either alone or in combination with the "no waiver" clauses) the suspension/preservation clauses of the Guarantees prevent the Guarantors, while the debt remains unpaid, from raising the case they seek to make against liability under the Guarantees, the Guarantors contend that, properly construed, the suspension/preservation clauses do not preclude the raising of affirmative defences that impeach the Bank's claim in debt. If that contention is incorrect, the Guarantors contend that the said clauses are void or cannot be given effect because they impermissibly oust statutory causes of action (under the now repealed Trade Practices Act 1974 (Cth) and the ASIC Act); are contrary to public policy; are contrary to or inconsistent with s 22 of the Civil Procedure Act 2005 (NSW); or impermissibly fetter the Court's exercise of federal jurisdiction.

Relevant Provisions of the Guarantees

41 The documents by which the payment of amounts under the Airlie Beach facility was guaranteed were in similar, but not identical, terms. One difference of substance was that Bakota (but not Mr O'Brien) also indemnified the Bank for liability or loss if the guaranteed money was not paid on time and in accordance with any arrangement under which it was expressed to be owing. Extracted below, are the relevant clauses. Terms in italics are as set out in the original documents, denoting that those terms have a defined meaning in the Guarantees.

Guarantee clauses

42 In the O'Brien Guarantee, the guarantee was contained in clause 2.1, in the following terms:

2.1 You guarantee the debtor's payment to us of the guaranteed money. Your guarantee continues until all guaranteed money has been paid in full ... If the debtor does not pay the guaranteed money on time and in accordance with any arrangement under which it is expressed to be owing, then you agree to pay the guaranteed money to us on demand from us (whether or not we have made demand on the debtor).

43 In the Bakota Guarantee, the corresponding clause 2.1 included the words "unconditionally and irrevocably" (though nothing turns on the use of this expression in the present case):

2.1 You unconditionally and irrevocably guarantee payment to us of the guaranteed money. Your guarantee continues until all guaranteed money has been paid in full ... If the debtor does not pay the guaranteed money on time and in accordance with any arrangement under which it is expressed to be owing, then you agree to pay the guaranteed money to us on demand from us (whether or not we have made demand on the debtor).

44 The term "guaranteed money" was defined in clause 9.1 of the O'Brien Guarantee to mean "all amounts payable under each guaranteed agreement ...". The term "guaranteed agreement" referred to the original facility agreement dated 20 July 2006 and under any other credit contract between the borrower and the Bank that the guarantor acknowledged in writing to be a credit contract to which the guarantee and indemnity extended. The word "payable" was defined as meaning "an amount which is currently payable or will or may be payable in the future".

45 Clause 8.1 of the Bakota Guarantee similarly defined "guaranteed money" to mean "at any time, all money which the debtor owes us or will or may owe us in the future, including under an arrangement with us".

46 Under both Guarantees, payment of the guaranteed amount was due on demand (as was the indemnity in clause 2.3 of the Bakota Guarantee) and was not contingent on the making of a demand on the borrower itself. However, in both cases, it can be seen that a prerequisite for liability to arise under the Guarantees was that the debtor did not pay the guaranteed money "on time" and in accordance with "any arrangement under which it is expressed to be owing". (While the words "expressed to be owing" might suggest a written arrangement, literally read they would extend to an oral arrangement.) It follows that if, by reason of an arrangement reached with the borrower, money was not due and payable by the borrower as at the Termination Date (or any other relevant date) there would not be a failure to pay that money in accordance with such arrangement and that prerequisite to the making of a demand under the Guarantees would not have been satisfied.

Indemnity clauses

47 Clause 2.3 of the O'Brien Guarantee contained an indemnity in favour of the Bank against loss it might suffer if any guaranteed agreement was unenforceable solely because of the debtor's death, insolvency or incapacity. There is no suggestion that any money was due by Mr O'Brien under this indemnity.

48 The indemnity provided in clause 2.3 of the Bakota Guarantee was in markedly different terms (and has no equivalence in the O'Brien Guarantee):

2.3 You unconditionally and irrevocably indemnify us against, and you must therefore pay us on demand for, liability, loss or costs we suffer or incur if:

(a) the debtor does not, is not obliged to, or is unable to pay us the guaranteed money in accordance with any arrangement under which it is expressed to be owing;

(b) you are not obliged to pay us an amount under clause 2; or ...

You as principal debtor agree to pay us on demand a sum equal to the amount of any such liability, loss or costs.

49 The indemnity in clause 2.3(a) of the Bakota Guarantee, unlike the guarantee in clause 2.1, does not include the words "on time".

"Preservation clauses"

50 Clause 5.2 of the O'Brien Guarantee, headed "[o]ur rights are protected" (in the same terms as those in the corresponding clause 4.2 of the Bakota Guarantee) provided that:

5.2 Rights given to us under this guarantee and indemnity and your liabilities under it are not affected by any act or omission by us or by anything else that might otherwise affect them under law or otherwise, including:

...

(b) the fact that we release the debtor or give them a concession, such as more time to pay...

51 Clauses 5.2/4.2 were referred to before the primary judge and in his judgment as the preservation clauses.

"Suspension clauses"

52 Clause 5.5 of the O'Brien Guarantee, headed "[y]our rights are suspended", provided (in similar terms as those in clause 4.5 of the Bakota Guarantee) that:

5.5 As long as any of the guaranteed money remains unpaid, you may not, without our consent:

(a) reduce your liability under this guarantee and indemnity by claiming that you or the debtor or any other person has a right of set-off or counterclaim against us (except to the extent you have a right of set-off granted by law which we cannot exclude by agreement) ...

53 The words in parentheses are not repeated in 4.5(a) of the Bakota Guarantee.

54 Clause 8.1 of the O'Brien Guarantee, headed "[p]ayment in full" provided:

8.1 Except to the extent you have a right of set-off granted by law which we cannot exclude by agreement (such as under a Code) you must pay us the guaranteed money in full without set-off, counterclaim or deduction.

55 The corresponding clause (7.3) in the Bakota Guarantee was in the same terms but omitted the words prior to "you must pay us".

56 Clauses 5.5/4.5 were referred to before the primary judge and in his Honour's judgment (together with clauses 8.1/7.3 of the respective guarantees) as the suspension clauses.

No waiver clauses

57 Clause 8.20 of the O'Brien Guarantee, and clause 7.25 of the Bakota Guarantee, provided that:

A provision of this guarantee and indemnity, or right created under it, may not be waived or varied except in writing signed by the party or parties to be bound.

The Bank's summary judgment application

58 By Notice of Motion filed on 2 February 2012, the Bank sought summary judgment in the amount of $158,661,356 (alternatively, an order striking out those paragraphs of the Commercial List Response and Cross-Claim Summons, in their then form, that related to the estoppel, breach of contract, and misleading and deceptive or unconscionable conduct claims) and setting aside notices and a subpoena that had been issued by the Guarantors for production of documents (relating to the breach of contract claim).

59 The primary judge noted the three broad areas of controversy between the parties as being: the proper construction of the preservation and suspension clauses; the alleged improper use of powers under the facility agreement; and the arguments based on estoppel, misleading or deceptive or unconscionable conduct.

60 His Honour considered (at [39]) that there was a simple answer to the case put for the Guarantors. His Honour accepted that the relevant steps taken by the Bank were steps authorised by clause 11.1, but said that it did not follow that those steps were taken in reliance upon that clause or depended for their validity and effect on that clause ([41]). The primary judge said that the Bank's act in purporting to terminate the facility agreement (in April 2009) was legally irrelevant "and in that sense legally ineffectual" ([50]), and its reliance on the clause 11.1(a) "mere surplusage" ([46]), since the facility agreement had come to an end by force of its own provisions on 15 January 2009 (the debt having become due on that date without the need for the Bank to do anything further [49]).

61 While that may provide an answer to that part of the case that focussed on the exercise (or alleged exercise) by the Bank of its powers under clause 11.1 of the facility agreement on the occurrence of an event of default, what that answer does not in my view address is the case sought to be advanced by the Guarantors and encapsulated in [78A] of the proposed Further Amended Commercial List Response. That case is that there was no "relevant failure" by the borrower to pay the debt irrespective of the validity or effect of the Bank's exercise of powers under clause 11.1 of the facility agreement. It is put on the basis that, by reason of the matters relied upon by the Guarantors, the Bank was estopped (or liable to be enjoined) from calling for repayment of the debt by the borrower (if not on 15 January 2009, then at least by the time the Bank made demand on the borrower on 6 April 2009) and hence there was no entitlement to call on the Guarantees in April 2011 based on the failure of the borrower to pay on the earlier date. (The Guarantors also contend that the Bank's conduct towards them precluded it from calling on the Guarantees.)

62 In view of those contentions, the determination as to whether the Guarantors have an arguable defence to the claim under the Guarantees cannot comprehensively be answered by reference to whether the Bank's claim was, or was required to be, based solely on the exercise of its powers under clause 11.1 of the facility agreement. It requires consideration as to whether there was an arguable defence that the guaranteed sum was either not due and payable by the borrower on 15 January 2009 or had become not due and payable by 6 April 2009, by reason of the matters sought to be pleaded by the Guarantors, so as to have the effect that there was no relevant failure by the borrower to pay on time and in accordance with any relevant arrangements with the Bank (that being necessary for there to be a liability under the guarantees given by both Guarantors and the indemnity given by Bakota).

63 Thus, the simple answer to a claim based on validity of exercise of the event of default provisions in the facility agreement would not of itself provide a basis for the entry of summary judgment in favour of the Guarantors. It was necessary (as the primary judge went on to do) to consider the operation of the suspension/preservation and no waiver clauses of the respective Guarantees on what I will refer to as the Guarantors broad "estoppel defence" (that defence encompassing, for present purposes, the claim for statutory relief permanently to enjoin the Bank from calling upon payment of the debt).

64 Senior Counsel for the Bank, Mr Sheahan SC, submits that the case sought to be advanced (to which I have referred broadly as the Guarantors' estoppel defence) is answered by (and was dealt with on its merits by the primary judge on the basis of) the operation of the suspension/preservation clauses in both the facility agreement and the Guarantees. Insofar as his Honour focussed on the ineffectual exercise or purported exercise of rights under clause 11.1, Mr Sheahan submits that such a focus was required by reference to the facts on which the Guarantors' estoppel case was based. In particular, he points to the fact that the Guarantors' cross-claim was based on the making of only one alleged representation prior to 15 January 2009 ([79]), followed (and, it is submitted by Mr Sheahan, overtaken) by two variations to the facility agreement (extending its term to 15 January 2009 and increasing the facility amount ([81] and [82])); and then representations from 3 February 2009 onwards ([82]-[90]).

Grounds of Appeal

65 There are three main grounds of appeal: first, as to the finding that there was not an arguable defence to the claim; second, as to the refusal to grant a stay of judgment pending the determination of the cross-claim; and, third, as to the striking out of paragraphs [120]-[133A] of the Amended Commercial List Statement to the Amended Cross-Claim Summons (on the basis that those paragraphs were predicated on an assumption that the impugned conduct of the Bank depended for its validity on clause 11.1 of the amended facility agreement). There is also an appeal from the setting aside of the respective Notices to Produce and the Subpoena to Produce, but it was accepted that the outcome of that appeal would turn on the outcome of the Guarantor's challenge to the striking out of the breach of contract claims from the Guarantors' cross-claim.

(i) Ground 1 - existence of an arguable defence to the claim

Relevant principles on summary judgment application

66 The primary judge set out the principles on which the Bank's summary judgment application was to be determined at ([23]), noting that the relevant question was whether the proposed defence showed no triable issue or no prospects of success at all (it not being sufficient to say that the prospects of success might be slight), and citing in support of that statement of the test: Dey v Victorian Railways Commissioner (1949) 78 CLR 62; General Steel Industries Inc v Commissioner for Railways (New South Wales) (1964) 112 CLR 125; Webster v Lampard (1993) 177 CLR 598; Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41; and Esanda Finance Corporation Limited v Peat Marwick Hungerford (1997) 188 CLR 241; [1997] HCA 8. It was recognised that the power summarily to dispose of a claim should be exercised with the utmost caution and only in very clear cases. On appeal, it was not suggested that there was any error in the articulation of the relevant principles by the primary judge.

67 The principles applicable on a summary judgment application were more recently considered by the High Court in Spencer v Commonwealth of Australia [2010] HCA 28; (2010) 241 CLR 118. Hayne, Crennan, Kiefel and Bell JJ there described the test identified by Dixon J in Dey as being a test requiring "certain demonstration of the outcome of the litigation, not an assessment of the prospect of its success", emphasising that unless it could be shown that it was "so certain" that the question to be determined must be answered in favour of the party seeking summary judgment (such that it would be an abuse of process of the court to allow the case to go forward) it would not be competent for the court to accede to such an application ([54]). French CJ and Gummow J (at [25]) commented that there seemed little distinction between the approaches set out in Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 at 99 and Batistatos v Roads and Traffic Authority (NSW) (2006) 226 CLR 256 at 275 (repeated in Agar v Hyde at 575-576) and the requirement of a "real" as distinct from "fanciful" prospect of success contemplated by s 31A of the Federal Court of Australia Act 1976 (Cth) as applicable in Spencer.

68 The issue, therefore, in the present case is whether (having regard to the potential outcome of the litigation) there is an underlying defence that has a real (or more than a fanciful) prospect of success. If so, then summary judgment should not have been given in favour of the Bank. The existence of such a defence on the one hand, and the pleading of such a defence on the other, are distinct concepts as noted by Lindgren J in White Industries Australia Ltd v Federal Commissioner of Taxation (2007) 160 FCR 298 at 309 (cited in Spencer with apparent approval at [23]).

69 This requires consideration of the potential outcome of the Guarantors' contention that the Bank's conduct gave rise to potential equitable relief or statutory remedies that would have the effect that no debt was due and payable (and hence there was no relevant failure to pay) at the time the demand was made on the borrower (6 April 2009), notwithstanding the provisions of clause 5.1 of the amended facility agreement.

70 It was not suggested by the Bank that the case sought to be maintained by the Guarantors in their cross-claim would not give rise to some form of arguable claim for relief against the Bank. Further, it was accepted by Mr Sheahan that, subject to the effect of the suspension/preservation clauses, the matter raised in [78A] demonstrated an arguable defence. (Though, for completeness, I note that Mr Sheahan contends that the breach of contract claim suffered from an additional flaw in that it was predicated on the exercise of powers under clause 11.)

71 Rather, what was contended by the Bank was that the operation of the suspension/preservation clauses, properly construed, was to put in place a "pay now, litigate later" regime, having the result that the Guarantors were precluded (while sums were outstanding under the facility agreement) from denying an immediate liability under the Guarantees to pay the balance of the amount owing under the facility agreement (and could only later pursue their claims against the Bank after payment of that amount).

Authorities dealing with construction of suspension/preservation clauses

72 Reliance was placed for the Bank on various authorities in which similar clauses have been considered. In Westpac Banking Corporation v Matich (unreported, 21 November 1997, No 50183 of 1997), Giles CJ Comm D, as his Honour then was, accepted the submission that a guarantee that provided in terms that "this instrument and the liability of the Guarantor hereunder shall not be affected or charged by" matters (including those set out below), defeated an estoppel defence sought to be raised by the defendant. The matters which were stipulated as not affecting the liability of the guarantor in that case included:

... the granting to the Debtor or to any other person of any time or other indulgence or consideration or by reason of any transaction or arrangement that may take place between the Bank and the Debtor or any other person ...or by any act neglect omission or default of the Bank whereby the whole or part of the liability of the Guarantor to the Bank would but for this provision have been affected suspended postponed rendered unenforceable or discharged or by the Bank failing or neglecting to recover by the realisation of any collateral or other security or otherwise any of the moneys hereby secured or by any other laches acts or omissions or mistakes on the part of the Bank ...

73 His Honour (referring to Buckeridge v Mercantile Credits Ltd (1981) 147 CLR 654 at 675-6 per Brennan J and to State Bank of Victoria v Parry (1989) 7 ACLR 226 at 229-30 and Westpac Banking Corporation v Prelea (1992) 28 NSWLR 481 at 485-6) said:

... It is well established that a guarantor may bargain away his rights to complain about conduct of the creditor. That usually arises when the complaint is that the creditor's conduct exacerbated or prevented the lessening of the guarantor's liability, but there is no reason why a provision of the guarantee in appropriate terms should not have the effect of precluding the guarantor from raising an estoppel by reason of the creditor's conduct.

74 The conduct on which the defendant there sought to rely (for the claim that the bank was estopped from suing on the guarantee) related to alleged breach of collateral agreements and an alleged failure by the bank to respond to communications said to have prevented a sale from which the indebtedness could be discharged (as well as other conduct in relation to the use or proposed use by the bank of the asset to which almost all of the indebtedness was referable).

75 Similarly, in St George Bank Ltd v Field [2007] NSWSC 902, an amended commercial list response was struck out and summary judgment given against a guarantor, by reference to clauses similar to those in the present case (namely, clauses that, first, provided for the guaranteed money to be paid in full without any deduction and contained a waiver of all rights of set-off, combination or counterclaim in relation to payment of the guaranteed money and, second, provided that the guarantor's liabilities and the rights of St George were not affected by, among other things, laches, acts omissions or mistakes, or anything else that might at law or in equity have the effect of breaching or discharging the guarantor's liability). McDougall J there held that the guarantor had bargained away the right to raise a defence based on conduct alleged to have the effect of discharging the guarantee, or of relieving the guarantor of liability under the guarantee or of making it unjust for St George to seek to enforce the guarantee. At [18], his Honour said:

There is an important distinction to be drawn between a defence that impeaches the guarantee itself, and a defence that impeaches the exercise of rights under the guarantee. Clauses of the kind to which I have referred may not prevent a defence being raised to liability under a guarantee where it is said (for example) that the taking of the guarantee was itself affected by some vitiating circumstance. But no such issue is raised in this case. There is no challenge to the validity of the guarantee. The allegations that I have summarised seek to attack the exercise of rights under it. In my view that is the kind of exercise prohibited by the terms of guarantee which terms, as I have said, are to be enforced according to their wording.

76 In the present case, McDougall J also referred to the earlier decision of Holmes J in Capital Finance Australia Ltd v Airstar Aviation Pty Ltd [2004] 1 Qd R 122 (to which his attention had not been drawn in the St George case). There her Honour had addressed the construction of clauses precluding counter-claims, referring to the decisions in Continental Illinois National Bank & Trust Company of Chicago v Papanicolaou ("The Fedora") [1986] 2 Lloyd's Rep 441, Coca-Cola Financial Corporation v Finsat International Ltd [1998] QB 43, Daewoo Australia P/L v Porter Crane Imports P/L t/a Betta Machinery Sales [2000] QSC 050; Porter Crane Imports P/L v Daewoo Australia P/L [2000] QSC 051 and GE Capital Australia v Davis [2002] NSWSC 1146, (2002) 180 FLR 250, to which I will refer in due course). Holmes J considered that the clause there under consideration had the effect of precluding the defendants from setting off any claim for damages against their liability for the monies guaranteed and required such claims to be dealt with independently of this proceeding. (The claim, there precluded from being raised, I interpose to note, was a set-off based on a damages claim.)

77 Relevantly, for the present case, her Honour (at 127) drew a distinction between matters properly raised by way of counter-claim and those more properly raised as matters of defence (the latter being described as the allegations of misrepresentation or misleading conduct, and breaches of conditions which might lead to vitiation of the guarantees or discharge of the guarantors' liability under them). Her Honour considered that insofar as the counter-claim constituted a true counter-claim it should be struck out (on the basis that the guarantors had contracted not to bring it) but that the matters properly the subject of a defence (going to invalidity or complete discharge of the guarantees) could properly be repleaded. This tends to support the conclusion for which the Guarantors contend, in that they argue that the suspension/preservation clauses do not preclude the raising of an affirmative defence based on allegations of conduct that, if successful, may lead to relief that would have the effect that no amount was payable by the borrower as at the relevant date.

78 Reference was also made to the decision of Barrett J, as his Honour then was, in Bakota Holdings Pty Ltd v Bank of Western Australia Ltd [2011] NSWSC 1277, setting aside a statutory demand that had been served by the Bank in relation to the very claim the subject of the summary judgment that is now sought to be overturned. His Honour was satisfied that Bakota had established the existence of a genuine offsetting claim for the purposes of s 459H(1)(b), that being a statutory claim for damages for misleading or deceptive conduct, even if it was one that could not be asserted or acted upon "in such a way as to bring about reduction or elimination of the payment required to be made" by reference to the suspension/no waiver provisions in the guarantees. (The Bank, as it did here, had argued that Bakota had bargained away its right to rely on any set-off, counterclaim or cross-demand.)

79 At [19], Barrett J (having referred to the decision of Bryson J (as his Honour then was) in GE Capital Australia v Davis (at [97] - [98])) observed (in obiter dicta), that the suspension/no waiver provisions in the present case:

... have the effect that the guarantor must pay the creditor immediately, even if some right of action is maintainable by the guarantor against the creditor and that there is to be no deduction from the guarantor's payment on account of the availability of such a right of action to the guarantor. The provisions of the contract do not purport to extinguish any right of action that the guarantor has against the creditor. They merely require that payment be made by the guarantor to the creditor in full and without the guarantor's right of action being used as a basis for deduction from the amount paid. The creditor is to be, as Bryson J put it, free from competition in the enforcement of its rights against the guarantor.

80 It is accepted by Mr Sheahan that the above observations by Barrett J do not represent a concluded (or binding) view of the relevant clauses. His Honour, for the purposes of the application to set aside the statutory demand, seems to me simply to have proceeded on the basis that clauses of this kind may operate to postpone claims that would operate so as to reduce the amount for which the guarantor might be liable under the guarantee; rather than holding that on their proper construction they have that effect.

Operation of suspension/preservation clauses in the present case

81 Turning then to the construction and operation of the relevant clauses in the present case, the Bank relies on a combination of the various provisions to support the contention that there is no arguable defence to its claim for payment of the moneys outstanding under the facility agreement.

82 Mr Sheahan notes that in Re Norman; Re Forest Enterprises Ltd (2011) 280 ALR 470; [2011] FCA 99, the Full Court of the Federal Court considering a clause similar to the suspension clauses in the present case approached the exercise on the basis that such clauses are to be interpreted consistently with business commonsense and in accordance with what a reasonable person would understand by the language expressed.

83 As to the preservation clauses, there is no suggestion in the present case that any release was given to the borrower. Nevertheless, reliance is placed by the Bank on the breadth of the reference, in sub-clause (b), to a complete release as informing the opening words of the clause (i.e. to indicate that there is no basis to read down the opening words of clause 5.2 (or 4.2) as excluding an estoppel arising from the giving of additional time to the debtor or guarantor). In other words, as I understand it, it was suggested that the fact that the preservation clauses contemplated a liability persisting on the part of the Guarantors even if the borrower had been released from its liability under the facility agreement made it unlikely that reliance on the representation or conduct in the present case (which contemplated an extension of the facility) would fall outside the operation of the clauses.

84 On one view, the representations alleged to have been made to the borrower (as to the extension and roll-over of the borrower's loan facilities and the provision of further funding), if proved, could be characterised as a "concession" for the purposes of sub-clause (b) insofar as they contemplated that the borrower would be given more time to pay the debt. On another view, they might be said to amount to a concession (similar to that alleged in Matich, namely, that the borrower would be able to procure funds with which to discharge that indebtedness.

85 However, treating the conduct in question as amounting to a concession to the borrower, what clause 5.2 (or clause 4.2) does is to provide that the Bank's rights under the Guarantees (and the Guarantors' liabilities thereunder) are not affected by the fact of the making of such a concession. If the Guarantors can establish an entitlement (having regard to the representations by which it is alleged the Bank indicated it would or might extend or roll-over the facility or provide further funding for its discharge) to statutory or other remedies, the consequence of which would be that there was deemed to be no failure by the borrower to make the payment in question as at the date of the demand, then no right to call upon the Guarantee (and no liability to pay the guaranteed money) would have arisen as at that date. This would not be the effect of any "concession" by the Bank to the borrower, so as to call into play the operation of the preservation clauses. It would be a result of the remedies granted to the Guarantors. In those circumstances the preservation clauses could not be relied upon to confer a right or impose a liability that on that hypothesis had not otherwise arisen under the Guarantees.

86 In other words, if this is not simply a case where a concession has been granted to the borrower of more time to pay an amount that was then due and payable, but (as contended by the Guarantors) is a case where, by reference to representations made to them and the borrower on which they have relied, relief is or may be granted that has the effect that, notwithstanding the provisions of clause 5.1 of the facility agreement, no amount was due and payable at the date the demand was made, then there would be no relevant right or liability to which the operation of the preservation clauses could attach.

87 Reliance on the preservation clauses does not therefore assist the Bank to establish the lack of an arguable defence of the kind that the Guarantors seek to raise.

88 As to the proper construction of the suspension clauses, the Guarantors contend (and I agree) that these clauses (and the no waiver clauses) operate only once a liability has arisen under the Guarantees (since the suspension clauses speak in terms of claims that would "reduce" the guarantor's liability under the guarantee and indemnity). The Guarantors argue that those clauses therefore do not operate to preclude a claim that the Bank is estopped, and liable to be enjoined, from asserting that a liability ever arose under the Guarantees.

89 In both St George and Airstar Aviation, it was accepted that a suspension clause of this kind does not preclude the raising of a claim that impeaches the validity of the guarantee or the discharge of liability thereunder. That distinction was accepted by the primary judge (at [29]). However, the Guarantors contend in effect that there is a further situation in which the clauses will not operate (i.e. where the defence goes to whether any liability has arisen under the guarantee because there has been no relevant failure to pay the sum demanded from the borrower). It is contended that the true distinction is between affirmative defences, the effect of which is to deny completely the plaintiff's entitlement to the relief sought (in respect of which it is said that suspension clauses do not by their terms operate) and claims of set-off or counterclaim which merely offset or reduce that liability (to which it is said the operation of suspension clauses is directed). Insofar as the defence sought to be maintained by the Guarantors is one that challenges the Bank's contention that the debt was payable on 6 April 2009, when demand was made of the borrower for payment of the debt, it would fall within the former category.

90 The suspension clauses, in their terms, operate while any of the guaranteed money remains "unpaid". While the definitions in clause 9.1 of "guaranteed money" and "payable" suggest otherwise, a reading of "unpaid" in clauses 5.5/4.5 as meaning money that is "due" and unpaid is consistent with the obligation of the Guarantor (under clause 2.1) being predicated on a failure of the borrower to pay money "on time and in accordance with any arrangement under which it is expressed to be owing", i.e. the payment of money when it is due and payable by the borrower.

91 In other words, as I read them the suspension clauses (and, for that matter, the no waiver clauses to which I shortly refer) in their terms do not operate if, as the Guarantors contend, no debt was due and payable at the relevant time. There would be then no failure by the borrower to make the repayment "on time and in accordance with" the arrangements between it and the Bank. If so, they do not operate contractually to preclude the Guarantors raising a defence based on the debt not being payable at the relevant time by reference to the matters raised in their proposed paragraph [78A].

92 Similarly, turning to the Bakota indemnity, clause 2.3 operates where the debtor does not pay an amount in accordance with "any arrangement" (a term that would cover an alleged oral agreement pursuant to which no sum was payable, particularly having regard to the breadth of the meaning for such a term in the context of s 45 of the Trade Practices Act). For the Bank it is noted that this is an indemnity in very wide terms and created a principal liability independent of that of the borrower (Sunbird Plaza Pty Ltd v Moloney (1988) 166 CLR 245 at 254). However, if the Guarantors' case is established, the indemnity has no operation because there has been no default under the arrangements reached between the Bank and the borrower (and, for the purposes of clause 2.3(b), no loss is incurred by the bank because Bakota is "not obliged to pay us an amount under clause 2" because on Bakota's case, there is no amount due under clause 2).

93 That conclusion means that it is not necessary to consider the historical distinction between "set-off" and "counterclaim". The Guarantors had relied in that regard upon McDonnell & East Limited v McGregor (1936) 56 CLR 50 at 58 per Dixon J; Derham, The Law of Set-Off (4th edn, 2010) at 1.01,1.03-1.04 for the proposition that use of the terms "set-off" and "counterclaim" limits the operation of the suspension clauses to monetary cross-demands and that affirmative defences that impeach the Bank's claim, such as estoppel, and claims for relief under s 12GM of the ASIC Act, are not counterclaims or claims by way of cross-demand and are not precluded by such a clause (as recognised in Airstar Aviation). In response, Mr Sheahan had noted the recognition that parties may, by contract, exclude an equitable set-off as well as cross-claims (Derham, The Law of Set-Off, 3rd edn, at [5.79]).

94 I accept that a reference to "set-off" may encompass claims for an equitable set-off. However, whether or not the reference to set-off or counterclaim in the suspension clauses extends beyond monetary cross-demands to claims based on estoppel/misleading and deceptive or unconscionable conduct, the suspension clauses are predicated on an amount being (due and) unpaid and if there is an arguable defence that (by reason of circumstances before or after the date on which, under the facility agreement, the sum was to be due) there was no sum due and payable at the date demand was made of the borrower, then there is no right/liability upon which the suspension clause can operate. For that reason, it does not seem to me that the authorities to which reference is made as to estoppel in the nature of set-off advance the Bank's position in the present case.

95 Under the facility agreements the borrower was obliged to pay all money payable by it "in cleared funds without set-off or counter-claim and free of all deductions". Various cases have considered what is meant by "without set-off, counterclaim or deduction" or words to that effect. Particularly when considering a party's primary obligations (such as under lease agreements) to pay amounts due without deduction, this has been construed to exclude deduction arising by reference to an estoppel claim or the like.

96 In The Fedora [1986] 2 Lloyd's Rep 441, Parker LJ rejected a submission that a "without set-off" clause of this kind did not apply to claims by way of set-off or counterclaim that were based on negligence, noting that (while exclusion clauses that purport to exclude liability altogether) without set-off clauses do not touch liability since "[t]he guarantors can still prosecute their claims to judgment. They are, if the clauses are effective, merely prevented from holding up payments admittedly due under the guarantees whilst disputed cross-claims are litigated" (my emphasis). Parker LJ accepted that the commercial purpose of the transaction was that, upon default by the borrower, the bank should be paid quickly.

97 In Coca-Cola Financial, Neill LJ considered a clause that provided that all payments were to be made "free and clear of any right of set-off or counterclaim or any withholding or deduction whatsoever". Finsat had argued that, on its true construction, this clause did not apply to the counterclaims made by it (and that even if, as a matter of construction, the clause could apply to those counterclaims, it was unenforceable as being contrary to public policy). Its construction argument was put on the basis that the relevant provision dealt only with the mechanics for making a payment under the agreement and did not define the extent of the obligation to make payments. (It was noted that a different article in the agreement had provided that the obligations of Finsat were enforceable "subject to laws affecting creditors' rights generally and the availability of equitable remedies".) Neill LJ rejected Finsat's contention and said:

... The language ... is clear. Article 5.7 provides that payments are to be made free and clear of "any right of set-off or counterclaim." In my judgment these words define the extent of the obligation to pay. The point is underlined by the following words "[free and clear of] any withholding or deduction whatsoever."

98 In GE Capital Australia v Davis, Bryson J similarly said:

The effect in substance of the provisions of the guarantee ... is that there is no limit on the right to resort to the courts if the guarantor first meets the obligation the protection of which is the primary purpose of the guarantee and indemnity and pays the amount of the debt. It is well established in this area of the law that the guarantor can have recourse to securities given by a principal debtor to indemnify himself, but that he cannot do so until he has paid the whole debt. The validity of modifications of what would under the general law be the rights of guarantors is well established. These contractual provisions extend the ways in which the guarantors' remedies are postponed, and extend the creditor's freedom from competition in enforcement of its rights. The condition which must be fulfilled is directly related to the purposes of the agreement.

99 In Daewoo, White J considered an application for summary judgment based in part on the contention that the defendant was precluded from raising a set-off against a claim for payments due under a dealership agreement. The relevant clause required payments to be made "free of any set-off or counterclaim and without deduction or withholding".

100 Her Honour referred to the decisions in Coca-Cola Financial and The Fedora, concluded that the clause in question prevented reliance by Porter Crane on any set-off which it might have "to delay Daewoo's claim for money owing under the Agreement" and gave summary judgment in Daewoo's favour.

101 In Norman, to which I have earlier referred, Jacobson, Nicholas and Yates JJ considered the operation of a clause providing for payment "without any deductions whatsoever". Their Honours considered that it was not necessary to decide the question of the meaning and effect of the words "without any deductions whatsoever" because of the view reached as to the unavailability of equitable set-off in that case but nevertheless dealt briefly with the issue of construction of this phrase from [181] - [202], concluding that an equitable set-off would have been excluded by those words.

102 Their Honours extracted the following four propositions from Connaught Restaurants Ltd v Indoor Leisure Ltd [1994] 1 WLR 501; [1994] 4 All ER 834 and Grant v NZMC Ltd [1989] 1 NZLR 8 (from [184] - [187]):

First, a tenant's right of equitable set off against rent may be excluded by the terms of the lease but clear words are needed to do so: see also Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689 at 717-18 and 723; [1973] 3 All ER 195 at 215-16 and 220.

Second, the word "deduction" is a flexible term, the meaning of which is heavily dependent upon its context.

Third, in the absence of contextual considerations to the contrary, the words "without deduction" are not sufficiently clear to exclude a tenant's equitable right of set off against rent.

Fourth, added words of exception or qualification are relevant to the construction of the phrase in question, but they are also subject to the general requirement of clarity.

103 At [192], their Honours said:

Perhaps the clearest statement of the line of authority in favour of the proposition that the words "without deduction" exclude set off is to be found in the observation of Bryson J in Batiste v Lenin (2002) 10 BPR 19,441; [2002] NSWSC 233 (Batiste). His Honour there said that in his opinion the literal meaning of those words make it clear that there is no room for reliance on any right of recoupment and the purpose of the words is to prevent the tenant from relying on rights or claims to be entitled to set off, recoup or otherwise withhold payment of rent. He also said at [105] that:

[105] ... if the use of the words "without deduction" did not achieve this result I cannot see what they would achieve as the ordinary obligation of a debtor is to pay the whole debt.

noting that on the dismissal of an appeal from that decision (Batiste v Lenin (2002) 11 BPR 20,403; [2002] NSWCA 316), Sheller JA (with whom Giles JA and Santow JA agreed) had said at [49] that he was not persuaded that Bryson J's view of the meaning of "without deduction" was correct, although did not go on to decide the question.

104 At [194], their Honours observed that the weight of appellate authority did not support the view that the phrase "without deduction" excluded equitable set-off but saw considerable force in the remarks of Bryson J. (In the case before their Honours, the words in question included "whatsoever" and, in accordance with the principles stated by Waite LJ in Connaught Restaurants, this was an added word of exception relevant to the construction of the phrase used in the leases.) At [199], their Honours said:

When considered in light of these principles, it is difficult to see how the words "without any deductions whatsoever" are consistent with an entitlement to maintain an equitable set off. A commonsense businesslike approach to the construction of what reasonable people would understand by this expression is that the parties intended that [the lessee] could not make any deduction of any kind from rent, including a deduction by way of equitable set off.

105 At [209], their Honours observed that, although the claim of estoppel was not developed during the course of the argument in the appeal, it was difficult to see how any representational conduct by the lessee could found an estoppel binding on the receivers, whose primary duty was to their appointor, exercising powers under independently agreed financial arrangements (an argument that Mr Walker submits was premised on an assumption that estoppel would otherwise be available).

106 Those cases proceeded in effect on the basis that there was an admitted or underlying liability such that the claim sought to be raised against it would operate (as a counterclaim or set-off) to reduce or extinguish the liability; not where the claim was one going to the existence per se of the liability (which is closer to the situation where the claim is one that would vitiate or discharge the guarantee itself).

107 The force of the words "without set-off or counter-claim and free of all deductions" in the facility agreement in the present case is that the borrower might, on Bryson J's reasoning, not be able to set up an estoppel or equitable set-off against a liability to pay the outstanding debt that had arisen on 15 January 2009 or that was persisting at 6 April 2009. However, I am not persuaded that the obligation to make payment of all money payable without deduction would preclude the borrower from raising an estoppel defence to argue that the amount was not then due and payable at all. Nor am I persuaded that the suspension/preservation clauses preclude the guarantors, whilst moneys remain outstanding under the facility agreement, from so doing.

108 As to the "no waiver" clauses, the Guarantors contend that even if these clauses, properly construed, operated to preclude an estoppel defence, they would be ineffective in equity to preclude an action to restrain the enforcement of the Bank's contractual rights (relying on Saleh v Romanous (2010) 79 NSWLR 453 at 459-460; [2010] NSWCA 274 [52]-[57]). Mr Sheahan contends to the contrary that the "no waiver" clauses can encompass waiver in the sense of estoppel (citing Commonwealth v Verwayen (1990) 170 CLR 394 at 407 and Kammins Ballrooms Co Ltd v Zenith Investments (Torquay) Ltd [1971] AC 850 at 883).

109 The no waiver clauses provide, relevantly, that no right created under the Guarantees can be waived or varied except in writing. In Commonwealth v Verwayen, Mason CJ (dissenting in the result) noted that one category of waiver was where a person was prevented from asserting, in response to a claim against that person, a particular defence or objection which would otherwise have been available; such a waiver arising where "the person agrees not to raise the particular defence or so conducts himself as to be estopped from raising it". (His Honour noted that past authorities dealing with waiver of statutory rights had spoken at times in the language of election, at times in that of estoppel and at other times in terms of unconscionability.)

110 In effect, the argument by the Bank is that, for it to be estopped from claiming sums owing under the Guarantee, it would be necessary for the conduct giving rise to such an estoppel to be in writing. Were it necessary to construe those clauses (and in light of the above conclusions it is not because, if the Guarantors' case is correct) I would have had difficulty construing the no waiver/variation clause as extending to the situation where an estoppel arises by operation of law or where relief of the kind sought by the Guarantors is available under legislation such as the ASIC Act.

111 In Town & Country Sport Resorts (Holdings) Pty Ltd & ors v Partnership Partnership Pacific Ltd (1988) 20 FCR 540, the Full Court of the Federal Court (Davies, Gummow and Lee JJ) noted that the court might, in an appropriate case, make orders to vary the terms of agreements or declare them void as a consequence of the contravention of the provisions of the statute by the mortgagee. Hence, such remedies may have retrospective effect so as to mean that there was no liability at a particular date.

112 In Bitannia Pty Ltd v Parkline Constructions Pty Ltd (2006) 67 NSWLR 9; [2006] NSWCA 238, Hodgson JA, at [8] noted that s 52 of the Trade Practices Act (Cth) disclosed a legislative intention that persons should have a remedy to protect them from (or to recover compensation for) damage from the misleading conduct of a corporation and it would not be in accordance with that intention to permit a corporation to obtain judgment on a cause of action one essential element of which had been created by the corporation's misleading conduct. (See also Basten JA at [88] and [96] and Tobias JA at [17]).

113 Mr Sheahan accepts that the question as to whether any prior representations were superseded by the amendment letter of 23 December 2008 (and were thus no longer operative by 15 January 2009), is not a matter appropriate for determination on a summary judgment application. Similarly, the question as to whether representations made after that date (namely, the 2009 representations alleged from [82] of the draft Further Amended Commercial List Statement to Cross-Claim Summons) would be sufficient to support the contention that the debt was not due in April 2009 would not appropriately be dealt with on a summary judgment application.

114 Accordingly, with respect to the primary judge, I am of the view that it cannot be said that there was no real or arguable defence to the Bank's claim under the Guarantees (or, in Bakota's case, on the indemnity). The suspension/preservation clauses do not preclude raising claims for the grant of relief for misleading and deceptive or unconscionable conduct that may operate retrospectively such that the foundation on which those clauses would operate would not have arisen or would have disappeared by the time demand was made under the Guarantees.

Challenge to enforceability of suspension/preservation clauses

115 In those circumstances, it is not necessary to consider the four alternative grounds (summarised in [40] above) on which the Guarantors submit that the primary judge erred in giving effect to the suspension/preservation clauses nor is it appropriate to do so given d the fact that at least some of these matters may fall for consideration in the substantive hearing.

(ii) Refusal to grant a stay

116 The Guarantors submit that, even if the primary judge was correct in granting summary judgment on the Bank's claim, the enforcement of that judgment should have been stayed: first, because their cross-claim arises out of the same subject matter as the Bank's claim, and its effect, if sustained, would be that the Bank is liable to them for any amount owed by them under the guarantees (citing State Bank of Victoria v Parry [1989] WAR 240 at 246, 250) and, second, because the failure to grant a stay would stultify the Guarantors' claim (given that the amount of the judgment far exceeds the financial resources of the ordinary citizen or private company).

117 It is submitted that the Guarantors do not have the means to satisfy the judgment (in the amount of $158,661,356) with the result that they will be forced to file for bankruptcy or to be wound up as insolvent and would be deprived of the opportunity to litigate their cross-claim (and hence be denied the opportunity of a hearing on their substantive defences to the Bank's claim).

118 Reference was made to the decision in Town & Country where the Court said (at 545) that, as a matter of discretion, the relaxation of the traditional requirement for a mortgagor selling relief in relation to the exercise of the mortgagor's rights first to provide adequate security for its indebtedness would usually be restricted to cases where the allegations which ground the application "are clearly arguable and not merely colourable" and to cases which show "an obvious nexus" between the allegations (there of misleading or deceptive conduct in contravention of s 52 of the Act) and the formation of the security documents sought to be varied or rendered unenforceable by the exercise of those powers. Mr Walker submits that this is not an exhaustive statement of the circumstances in which a stay may be granted.

119 The Bank contends that the Guarantors are not entitled to any stay on the summary judgment because such a stay would defeat the whole purpose of the Bank's requirement (as a term of the granting of the Facility Agreement) that it be paid "before resolution of any cross-claim disputes". It is submitted (by reference to The Fedora) that to grant a stay would defeat the whole commercial purpose of the transaction and be out of touch with business reality. It is submitted that the contractual intention of the suspension clauses was that the Bank should be paid in advance of what may be protracted litigation on counter-claims. (It is further submitted that there is no basis to contend that it would stultify the claim in circumstances where in a case of insolvency or bankruptcy there would be duties to consider (and press as appropriate) claims that might be in the interests of creditors to bring.

120 At 445, in The Fedora, addressing the question of a stay, Parker LJ said:

The purpose of [of the relevant clause] was to ensure immediate payment if the principal debtor did not pay. Indeed the present cases make it the more necessary that the Court should not interfere, for here the parties have specifically provided both in the loan agreement and the guarantees that payment should be made free of any set off or counterclaim. It would defeat the whole commercial purpose of the transaction, would be out of touch with business realities and would keep the bank waiting for a payment, which both the borrowers and the guarantors intended that it should have, whilst protracted proceedings on the alleged counterclaims were litigated. We do not doubt that the Court has a discretion to grant a stay but it should in our view be "rarely if ever" exercised, as Lord Dilhorne said in relation to claims on bills of exchange. Guarantees such as these are the equivalent of letters of credit and only in exceptional circumstances should the Court exercise its power to stay execution. The fact that a counterclaim which was likely to succeed existed would not by itself be enough, as Lord Justice Buckley pointed out. It might be that the existence of such a counterclaim coupled with cogent evidence that the bank would, if paid, be unable to meet a judgment on the counterclaim would suffice, but nothing of that nature arises here. This is a simple case where no ground for granting a stay can be shown.

121 In Daewoo, similarly, Holmes J refused an application for a stay of execution of that judgment, referring again to The Fedora and Coca-Cola decisions. A similar exercise of discretion was made in the present case by McDougall J. I am not satisfied that his Honour's decision has been shown to have proceeded on an erroneous basis or is otherwise open to challenge in accordance with the principles stated in House v R (1936) 55 CLR 499 at 504-5. Therefore, had I been satisfied that the suspension/preservation clauses had the operation for which the Bank contends, I would not have found an error of discretion in the refusal to grant a stay.

(iii) Strike-out of contractual claims

122 The breach of contract claim struck out by the primary judge was the claim that, in terminating the facility agreement in April 2009, and in taking subsequent steps to appoint receivers under the charge and to call upon the Guarantees, the Bank acted in breach of express or implied terms of the facility agreement precluding the Bank from exercising its powers contrary to good faith or for a collateral purpose. The allegation by the Guarantors is that the Bank took these steps at the direction of a third party (in order that there might be a reduction in the price to be paid for the acquisition of the Bank).

123 It is conceded by the Guarantors that, as expressed in the draft Further Amended Commercial List Statement to the Cross-Claim, that breach of contract claim was pleaded in relation to the steps taken by the Bank pursuant to or in purported reliance on clause 11.1 of the amended facility agreement. It is submitted that this reflected the terms of the Bank's own pleading and its April 2009 letter of demand to the borrower.

124 The primary judge (at [59]) accepted the Bank's contention that the breach of contract claim should be struck out because it was predicated on the proposition that the Bank had acted pursuant to clause 11.1 (his Honour having already determined that the Bank did not need to avail itself of the powers under clause 11.1 to take the steps that it did).

125 Mr Sheahan maintains that those paragraphs were correctly struck out of the cross-claim statement since they did not raise an arguable cause of action (on the basis that, irrespective of the giving of the demand to the borrower which referred to the exercise of powers under clause 11.1, money was due by force of the facility agreement at an earlier time). Mr Sheahan also submits that it was necessary, for the Guarantors' case, for the Guarantors to show that the exercise of power under clause 11.1 was not mere surplusage, because it was the very exercise of those powers that was said to have caused the prejudice. In other words, it is submitted that for the purposes of the estoppel defence it was necessary for the Guarantors to show a triable claim that the exercise of those powers caused prejudice, detriment or damage and that, if the exercise of the clause 11 powers was redundant (as his Honour found because the money was already owing), then there was no damage as a consequence thereof.

126 The Guarantors submit that the substance of their breach of contract claim is that the Bank acted in breach of contract by exercising its rights, contrary to good faith and for a collateral purpose, even if the debt had already fallen due on 15 January 2009 and hence the conclusion that the debt had fallen due under the terms of the facility agreement on 15 January 2009 did not preclude the possibility that a breach of contract as they alleged would be found.

127 Further, it is submitted for the Guarantors that, even if it were accepted that the strike-out of this part of the cross-claim was proper, the appropriate course was for the Guarantors to have been granted leave to replead since an arguable claim could be discerned from the existing pleading (Wang v State of New South Wales [2009] NSWCA 340 at [19]).

128 The Bank argued that it was a proper exercise of discretion to strike out these paragraphs on the basis that only nominal damages could flow therefrom. The Guarantors dispute this, pointing to the claim that reputational damage was suffered by Mr O'Brien and to the possibility of damage arising from a "fire sale". In any event, in the course of argument it appeared to be accepted by Mr Sheahan that the fact that only nominal damages might be available was not a basis on which a claim for breach of contract would be liable to be struck out.

129 The concern on the part of the Bank as to the agitation of the breach of contract claim (for which it was submitted there might be no more than a claim for nominal damages) was explained by reference to the serious allegations of improper purpose lying at the heart of the breach of contract allegations (the defence of which, it might be inferred, would add to the cost and time of the proceedings). It is further submitted that insofar as the submission that there should be leave to re-plead, that is a matter that should be dealt with by a formal application for leave to amend (with a pleading setting out the proposed amendments).

130 The fact that the breach of contract claim was pleaded by reference to the exercise of rights under clause 11 is explicable (at least in part) by the Bank's focus on those provisions in its own pleading. As I understand it, Guarantors contend that there has been a breach of contract in claiming moneys due thereunder whether that claim by the Bank be predicated on an exercise of its powers under clause 11 (as pleaded but not as the Bank now contends) or reliance on clause 5. The fact, if it be the case, that such a breach may sound only in nominal damages is not to the point (nor is the fact that the consequences of permitting such a claim to be pleaded may raise serious allegations of impropriety that would add to the time and cost of the proceedings).

131 I accept that the relevant paragraphs of the cross-claim that were struck out may well require some amendment to deal with the alternative way the breach of contract claim is sought to be put but so, too, in the circumstances does the Bank's claim (if the summary judgment is set aside), since that pleads an exercise of powers based on clause 11 that is now admitted to be nugatory. In those circumstances it may be that appropriate orders should be made for both parties to amend their existing court documents in order to reflect what is actually the contention of the Bank in relation to the basis of its claim and the response and cross-claim by the Guarantors in that regard. However, that is a matter that would more appropriately be dealt with at a directions hearing when the matter is back in the Commercial List.

Conclusion

132 For the above reasons, I have come to the conclusion that summary judgment should not have been granted in favour of the Bank and that the paragraphs relating to the Guarantors' breach of contract claim should not have been struck from the cross-claim (at least without the grant of leave to replead). Leave to appeal should be granted and the appeal should be allowed.

133 I propose the following orders:

1. Leave to appeal is granted.

2. Appeal is allowed with costs.

3. Judgment and orders 1-5 made by the Court on 3 May 2012 be set aside and in lieu thereof order that the plaintiff's notice of motion filed 2 February 2012 be dismissed with costs.

4. Direct parties to approach the Registrar in Equity for a date for directions in this matter.

**********

Decision last updated: 11 April 2013