TM Erbacher v GN & CE O'Leary [1999] QDC 26 (5 March 1999)

Last Updated: 3 September 1999

IN THE DISTRICT COURT

HELD AT TOOWOOMBA

QUEENSLAND

[TM Erbacher v GN & CE O'Leary]

[Before Forde DCJ]

Plaint No 5434 of 1998

BETWEEN:

TERESA MARY ERBACHER

Of MS 212, Brookvale Park Road, Oakey in the State of Queensland

Plaintiff

AND:

GERARD NOEL O'LEARY AND CLARE ELIZABETH O'LEARY

of MS 422, Clifton in the State of Queensland

Defendants

JUDGMENT

Judgment delivered: 5 March 1999

Catchwords: Wills - Application for summary judgment - r.153 District Court Rules - a deed of loan. Promissory Estoppel - waiver - Waltons Stores Ltd v Maher (1988) 164 CLR 387.

Counsel: Mr G Koppenol for the Plaintiff/Applicant

Mr M Conrick for the Defendants/Respondents

Solicitors: Bernays & Bernays (Twmba) for the Plaintiff

Masons (Twmba) for the Defendant

Hearing dates: 16 December 1998 (Toowoomba) and 2 March 1999 (Brisbane).

IN THE DISTRICT COURT

HELD AT TOOWOOMBA

QUEENSLAND

Plaint No 5434 of 1998

BETWEEN:

TERESA MARY ERBACHER

Of MS 212, Brookvale Park Road, Oakey in the State of Queensland

Plaintiff

AND:

GERARD NOEL O'LEARY AND CLARE ELIZABETH O'LEARY

of MS 422, Clifton in the State of Queensland

Defendants

REASONS FOR JUDGMENT - FORDE D.C.J.

Delivered the 5th day of March 1999

The plaintiff, Teresa Mary Erbacher, applies for summary judgment pursuant to r. 153 of the District Court Rules. She sues as the Administratrix of the Estate of the late Gerard Edmund O'Leary (the deceased). The respondents to the application are Gerard Noel O'Leary and Clare Elizabeth O'Leary. The judgment sought relates to a loan evidenced by a loan agreement dated 21.18.89, which is Exhibit "DC2" (C) to the affidavit of David Macdonald Cormack filed 10.11.98.

BACKGROUND TO ACTION

The respondents purchased a property from the deceased by contract dated 20th December 1988. The purchase price was $146,718.25. The deceased, as vendor, financed the transaction to the extent of $60,000.00. The terms of the contract provided:

"Special conditions

The Vendor agrees to finance the purchaser to the extent of $60,000.00 at 10% interest pa payable monthly and the principal to be paid in full in five (5) years. In event of death of either party loan to continue under above conditions."

The Deed of Loan provided as follows:

"1. The Borrowers will pay the principal sum on or before 20^th December, 1993.

2. The Borrowers will pay to the Lender interest on the principal sum outstanding from time to time at the rate of 10 per centum per annum calculated half year commencing from 20^th December 1988 and payable on the 20^th June and the 20^th December in each and every year. The first interest payment to be made on the 20^th June 1989.

3. If the principal sum is not paid on the 20^th December, 1993 then it shall bear additional interest at the rate of 18 per centum per annum calculated as and from the 21^st December, 1993. On the 21^st of each and every month the interest if unpaid shall become principal monies and shall thenceforth bear interest as principal monies."

The amount due and owing using the above formula is $177,676.07 to 2^nd March, 1999, with interest accruing.

Under the terms of the will of the deceased, dated 20th November 1996, the following is provided for:

"6. SUBJECT TO my nephew GERARD NOEL O'LEARY repaying the loan the subject of the Loan Agreement dated August 21, 1989 prior to my death, I GIVE AND DEVISE AND BEQUEATH the rest and residue of my estate both real and personal of whatsoever nature wheresoever situate of which I may die seized possessed or entitled UNTO AND TO THE USE OF my Trustees UPON TRUST for my said daughter TERESA MARY ERBACHER, my niece CELIA KENNETT and my said nephews MICHAEL JAMES O'LEARY and GERARD NOEL O'LEARY as shall survive me for a period of thirty days in equal shares and if only one of them shall so survive then for such one absolutely.

7. IN THE EVENT of the said GERARD NOEL O'LEARY failing to repay the load referred to in clause number 6 prior to my death THEN clause number 8 shall apply in lieu of clause number 6 hereof.

8. I GIVE DEVISE AND BEQUEATH the rest and residue of my Estate both Real and Personal of whatsoever nature and wheresoever situate of which I may die seized possessed or entitled UNTO AND TO THE USE OF my Trustees UPON TRUST for the said TERESA MARY ERBACHER, the said CELIA KENNETT and the said MICHAEL JAMES O'LEARY as shall survive me for a period of thirty days in equal shares and if only one of them shall so survive then for such one absolutely."

The loan was not repaid prior to the death of the deceased. The respondents in their Entry of Appearance and Defence plead that the loan agreement was varied and initially that the loan would not be repayable until 20^th December, 1993. Further, it is alleged that the deceased reduced the interest rate to 5%. There is a document to support the latter. Exhibit A to the affidavit of Bruce Leslie Scott is a note from the deceased that records the following:

"G.N. & C.E. 5/7/95

Date Amount Paid

2/7/90 3000

7/1/91 3000

2/1/92 6150

2/3/93 6149 @ 10%

4/7/94 3000 @ 5 %

3/7/95 3000 " 15 Santa x Steers?

Regards Gerard"

This document supports the sworn statement by the male respondent that the deceased varied the interest rate. It also supports his statement that certain payments were made pursuant to the loan agreement as varied. Mr. Scott deposed to the fact that the male respondent told him that the deceased gave him the document shortly after 5^th July, 1995. It is not contested that the document is that of the deceased. Also, the defence do not contest the fact that the will is clear in what it says. Therefore, the application proceeds on the basis that the deceased disinherited the male respondent in the event that he failed to repay the loan. The applicant contends that the loan is still repayable.

VARIATIONS TO LOAN AGREEMENT

Paragraph 6(b) alleges that the male respondent offered in or about July, 1993 to tender the principal sum, but that the deceased refused the offer. The rate of 5% interest was confirmed. Further, it is alleged that the deceased said that he "would let the loan run". The respondents made payments pursuant to this arrangement during 1994 and 1995.

Further variations are relied upon in paragraphs 8 and 9 of the defence. In effect, these were that:

November, 1996.

a. no interest was payable on the principal after July 1995.

b. that if the principal was not repaid during the deceased's

lifetime, the deceased would forgive the debt by his will.

July, 1993

a. that the deceased would not enforce the provisions of the

agreement relating to the repayment of the loan.

b. the loan was repayable on demand

In the affidavit of the male respondent the following is deposed to:

July, 1993

A. The deceased said that "we are in the middle of a

drought and things are tough and I will let it go on."

B. The interest rate will be reduced to 5 %.

14th November, 1996

A. The male respondent told the deceased that he was not

in a position to repay the loan

B. The deceased said "don't worry - I'll fix it up(sic) in my will."

The respondents say that they relied on the deceased's representation, and arranged their affairs accordingly. The will was executed on 20th November, 1996.

The male respondent deposes that he was in a position to finance repayment of the loan through Elders Finance in 1993. Because he was not required to pay out the loan, he used the money for other property expenses. He substantially confirms the truth of the allegations referred to in the defence. He further alleges that the deceased said that he would "fix it up in the will". He added that the deceased forgave him the interest debt for 1996. Relying on this statement, the male respondent did not make repayment. The deceased died on 30^th November, 1996. It is suggested in paragraph 17 of the defence that the forgiveness of the principal became unconditional upon the deceased's death.

DEFENCE SUBMISSIONS

It is submitted that the power to order summary judgment should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried: Fancourt v. Mercantile Credit Ltd. (1983) HCA 25; (1993) 154 CLR 87,99. It was further submitted that the respondents need only show that there is a triable issue, and leave to defend should be given unless there is clearly no defence in law, and no possibility of a real defence on the factual questions: Commonwealth Dairy Produce Equalisation Committee Ltd. V. Hansen (1944) St. R. Qd. 95,98. It is further submitted that any defence which was available against the deceased is available against the Administratrix. One can proceed on the premise that those propositions of law are apposite.

VARIATION OF LOAN AGREEMENT

The note from the deceased (Exhibit A) confirms that the interest rate was varied to 5%. If sustainable, the claim for interest at 18% must fail. Although the applicant submits that any variation is inconsistent with other documents, the note speaks for itself. The will points to the fact that the loan was repayable, but testators are notorious for telling different parties different things. Whatever the deceased told the applicant about the loan agreement being enforceable, it does not destroy the effect of the allegations of the defence supported as they are by Exhibit A: Meaney v. Triming and Anor. (Supreme Court of Queensland 18.10.89 Thomas J. unreported 13.5.93); Queensland Art Gallery Board of Trustees v. Henderson Trout, (Supreme Court of Queensland 1750/92 10.11.98 Chesterman J. unreported para 105-6). His Honour referred to the passage in McDonald v McDonald 41 NE 336 (1895) at 345:

"Such statements of the testator should be received as evidence with great caution, for the reason that they are sometimes made by him for the express purpose of misleading or satisfying curious friends or expectant relatives".

Such a proposition may be relevant in the present case. The deceased may have told the male respondent one thing and the applicant another. The will made the position clear in so far as any inheritance was concerned. What is not clear is what flows from the proposition that if the male respondent has raised facts giving rise to a contrary position, is the applicant prevented from enforcing the loan agreement?

One might infer that the male respondent was not aware of the consequences of the contents of. or effect of the will. William Gregory Nunan has sworn an affidavit filed on 25^th February 1999. He states that his clear instructions were in accord with the will viz. that if the male respondent failed to repay the loan as at the time of his death, then the deceased would not provide for him in the will. At no time did the deceased indicate that the loan was to be or had been forgiven. Mr Nunan advised the deceased to inform the male respondent of this as it would significantly penalise him. He is unable to say if the deceased did so. There was no attempt by the deceased to make formal demand through his solicitors for repayment of the loan.

CONSIDERATION

Counsel for the respondents conceded that there was no consideration given by the male respondent in respect of paragraph 17. The consideration referred to in respect of the earlier variations was that the deceased was assured of ongoing income albeit at the reduced rate of interest. Counsel for the applicant pointed out that the Deed of Loan provided for a rate of 18 per centum in the event of the failure to repay the loan. Therefore, it follows that there was no benefit accruing to the deceased as a result of a lower rate of interest. In the circumstances, I find that there is no consideration to support any variation:

"The general rule is that a promise to perform an existing duty is no consideration, at least when the promise is made by a party to a pre-existing contract, when it is made to the promisee under that contract, and it is to do no more than the promisor is bound to do under the contract.": Wigan v. Edwards and Anor. (1973) ALJR 586, 594.

Consideration cannot be established "where a variation is exclusively for the benefit of one party": Contract Law in Australia Third Ed. Carter and Harland para.389.

ESTOPPEL/WAIVER

If one accepts for the purpose of this application that the respondents relied on the representation of the deceased and did not repay the loan and used the monies elsewhere relying upon the representation statement of intention of the deceased, then it arguably would satisfy the requirements to establish estoppel: Waltons Stores (Interstate) Ltd. v. Maher (1988) 164 CLR 387, 406, 415, 419; Legione v . Hately [1983] HCA 11; (1982-3) 152 CLR 406, 432-5; Birstar Pty Ltd v The Proprietors "Ocean Breeze" BUP No 4745 [1997] 1 Qd.R.17, 127-128 C.A.; Foran v Wight [1989] HCA 51; (1989) 168 CLR 385, 43405; The News Corporation Ltd v Lenfest BC9604395 (Giles J. Supreme Court of New South Wales 20.8.96 p.16). Also, on the applicant's case, it would leave the respondents liable to a higher interest rate of 18% if not paid within the time provided for in the loan agreement. The male respondent suffered the additional detriment of being excluded from the proceeds of the will. The deceased was not pressing the original agreement but was going to punish the male respondent for failure to pay. On the version of the male respondent and as pleaded in the defence, this was, I find, unconscionable. It is also consistent with Mr. Nunan's view that he told the deceased he ought to tell the male respondent of the true position, as the terms of the will would amount to a penalty. The deceased at that stage could have instructed Mr. Nunan to do so. It is not inconsistent with the male respondent's assertion that he was unaware of the terms of the will, and that the deceased had told him he would "fix it in the will". The deceased was not, on the defence version, forthcoming as to how he had "fixed it". His conduct amounted to encouragement to the male respondent not to repay the loan. Whether the deceased told him or not, the applicant's submission was that it had no legal effect anyway. On that basis, I see no need for the male respondent to swear to the issue.

It was argued by Counsel for the applicant that the detriment, if any, must be known to the deceased. This submission ignored what the deceased well knew was in the will as up to his death. The solicitor, Mr. Nunan, appreciated the consequences for the male respondent. It was clear to the deceased, I find, that by telling the male respondent that he would "fix it in the will", led the male respondent to have an expectation viz. that the debt would be taken care of in the will and not to worry about repaying it prior to that. One has to assume for the purposes of this application that what the male respondent deposes to is prima facie correct in the absence of clear evidence to the contrary. The only relevant document (Exhibit A) supports his position at least in relation to the lower interest rate.

Counsel for the applicant argued that estoppel is not available where a voluntary promise is made and detriment occurs without more. He referred to Walton Stores at p.406:

"As failure to fulfil a promise does not of itself amount to unconscionable conduct, mere reliance on an executory promise to do something, resulting in the promisee changing his position or suffering detriment, does not bring promissory estoppel into play".

The joint judgment approved of the principle that if in "the creation or encouragement by the party estopped in the other party of an assumption that a contract will come into existence or a promise will be performed and that the other party relied on that assumption to his detriment to the knowledge of the first party", this may well amount to that "something more" required to found an estoppel. In my view, the conduct of the deceased did amount to such encouragement to cause the male respondent not to repay the loan and to have some expectation that the will would forgive the debt. Alternatively, the respondents made two payments, one on 21st December, 1994 and the other on 21st December, 1995. The amounts were consistent with a 5% interest rate. The respondents would have arranged their affairs accordingly. Certainly, after December, 1995 no further payments were made. None was due until December, 1996. The alleged forgiveness of the debt occurred in November, 1996.

OTHER ARGUMENTS BY APPLICANT

(a) Waiver not in writing. The facts of a waiver can often give rise to promissory estoppel. Both defences, assuming there is no consideration given, require that one party should have changed his position in reliance on the election: Contract Law in Australia, Lindgren Carter & Harland 1986 Ed.para.387. The learned authors refer to the decision of Hartley v Hymans [1920] 3 KB 475 for the proposition that a buyer was estopped from terminating the performance of a contract because delivery did not take place by a certain date. An estoppel does not vary the contract but disentitles a party from relying on his strict legal rights. It can, therefore, be made orally notwithstanding the contract may require a waiver to be in writing.

(b) Limitation of Actions Act 1974. The applicant's counsel referred to the fact that the Deed of Loan was under seal and that a twelve (12) year limitation period applied: s.10(1C). I accept that submission.

(c) Uncertainty

It has been argued that any alleged agreement is uncertain and therefore unenforceable: Upper Hunter County District Council v. Australian Chilling and Freezing Co. Ltd. [1968] HCA 8; (1967-1968) 118 CLR 429, 437:

"So long as the language employed by the parties...is not "so obscure and so incapable of any definite or precise meaning that the Court is unable to attribute to the parties any particular contractual intention", the contract cannot be held to be void or uncertain or meaningless".

It is clear to me that if one accepts the accuracy of the version of the male respondent, then the deceased led him to believe or to have an expectation that the will would resolve the question of the loan agreement, and that he was not required to repay same pursuant to the loan agreement as varied. In any event there need not be a binding contract for estoppel to arise: Walton Stores ibid.403.

APPEAL COSTS FUND CERTIFICATE

Counsel for the male respondent seeks a certificate pursuant to section 22(1)(c) of the Appeal Costs Fund Act 1973. When this matter was listed for hearing, the summons asked for 9.30 a.m. on 14^th December 1998. The matter could not be heard until later in the week. This was a circuit court sittings. The judge on circuit could not hear the summons due to commitments in the Criminal Sittings. A specific day was set aside for Chamber matters and this matter was part heard by me in Toowoomba. Counsel on both sides were not prepared to argue all points which arose in the course of argument, and the matter was adjourned to Brisbane to allow written submissions to be delivered. Section 22(1)(c) speaks of "abortive proceedings and new trials after proceedings discontinued". This matter was never discontinued nor was a new trial ordered. A suitable date had to be determined. It is not unusual for chamber matters to be dealt with on a day suitable to the court and to the profession. An astute solicitor will make enquiry of the Registrar or Associate and determine a suitable time, notwithstanding that the summons may provide for the first day of the sittings. The Appeal Costs legislation was not intended to cover the present position. For example, trials may be set down for a particular day but not get on due to the lack of judicial resources. It is part of the management of the court. The application for a certificate is refused.

CONCLUSIONS

I am satisfied that the deceased's last will does neither release nor forgive the debt owing by the respondents. In the absence of any representation by the deceased, the debt was repayable. I am satisfied that the amount otherwise owing under the loan agreement is $171,676.07. In my view, a question has been raised for trial. The affidavit of the male respondent satisfies me that it would be unconscionable for the applicant to succeed on the present application. It will be a question for the trial judge to be satisfied of the reliability of such evidence. I am not satisfied that the defence is so weak or "shadowy" to require that the respondents be put on terms to allow them to defend the action.

ORDERS

1. The application for summary judgment is refused.

2. The costs of and incidental to the application are costs in the cause.