Nibar v Wallace [2012] NSWSC 1301

The guarantor raised the following defences:

National Credit Code

The guarantor claimed the code applied and that a notice under section 80 of the code ought to have been served before commencing enforcement proceedings.

The judge was sceptical of the claim that the code applied because although the security was the guarantor’s home and the money was used to renovate his home, the borrower was a company that operated from the premises.

In any event, he did not decide one way or another as to whether or  not the code applied, but contented himself with saying that a failure to issue a section 80 notice (if one was required) did not make the proceedings or the mortgage void. At worst, it was an irregularity.

Promissory Estoppel

The next claim was that the lender promised to advance additional funds, but did not end up doing so and that this left the guarantor in the lurch.

The court noted that if you are going to raise a broken promise defence (promissory estoppel defence) you have to establish that not only were you induced to change your position by the promise, you have to show you suffered some detriment as a result of changing your position in reliance on the promise that was broken.

In this case, the borrower claimed the detriment was that:

It took longer to complete the renovations and because he had to undertake work himself, rather than using professionals, so that in the result, the property had not realised its full potential.

The court found that this argument was not “so obviously untenable that they cannot possibly succeed” and granted the guarantor leave to amend his pleadings.

Click here to read the full judgment.

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