Australia and New Zealand Banking Group Ltd v Manasseh
[2015] WASC 34
•3 FEBRUARY 2015
AUSTRALIA AND NEW ZEALAND BANKING GROUP LTD -v- MANASSEH [2015] WASC 34
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2015] WASC 34 | |
| Case No: | CIV:1254/2012 | 19 & 20 NOVEMBER 2014 | |
| Coram: | McKECHNIE J | 3/02/15 | |
| 44 | Judgment Part: | 1 of 1 | |
| Result: | Plaintiffs claim dismissed | ||
| B | |||
| PDF Version |
| Parties: | AUSTRALIA AND NEW ZEALAND BANKING GROUP LTD JULIE MANASSEH |
Catchwords: | Banks Guarantee Whether 'Ankar' principle infringed Whether new agreement Whether misleading and deceptive conduct |
Legislation: | Nil |
Case References: | Ankar Pty Ltd v National Westminster Finance (Aust) Ltd (1987) 162 CLR 549 British Motor Trust Co Ltd v Hyams (1934) 50 TLR 230 Caffey v Leatt-Hayter [No 3] [2013] WASC 348 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 Commonwealth Bank of Australia v McArthur [2003] VSC 31 FCA Finance Pty Ltd v Cummings (Unreported, QSC, Library No 1012, 8 February 1988) Samuels Finance Group Plc v Beechmanor Ltd (1994) 67 P&CR 282 Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2014] WASCA 164 Triodos Bank NV v Dobbs [2005] EWCA Civ 630 Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; (2011) 282 ALR 604 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
- Plaintiff
AND
JULIE MANASSEH
Defendant
Catchwords:
Banks - Guarantee - Whether 'Ankar' principle infringed - Whether new agreement - Whether misleading and deceptive conduct
Legislation:
Nil
Result:
Plaintiffs claim dismissed
Category: B
Representation:
Counsel:
Plaintiff : Ms K F Banks-Smith SC
Defendant : Mr P G Clifford & Mr A P Rumsley
Solicitors:
Plaintiff : Ashurst Australia
Defendant : Alan Rumsley
Case(s) referred to in judgment(s):
Ankar Pty Ltd v National Westminster Finance (Aust) Ltd (1987) 162 CLR 549
British Motor Trust Co Ltd v Hyams (1934) 50 TLR 230
Caffey v Leatt-Hayter [No 3] [2013] WASC 348
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337
Commonwealth Bank of Australia v McArthur [2003] VSC 31
FCA Finance Pty Ltd v Cummings (Unreported, QSC, Library No 1012, 8 February 1988)
Samuels Finance Group Plc v Beechmanor Ltd (1994) 67 P&CR 282
Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2014] WASCA 164
Triodos Bank NV v Dobbs [2005] EWCA Civ 630
Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; (2011) 282 ALR 604
- McKECHNIE J:
Why this matter comes to trial
1 Dr Manasseh's husband, Mr Christou, wanted to borrow money on behalf of Vivaldi Investments Pty Ltd (Vivaldi) from the ANZ Bank (ANZ) to finance a property development on Vivaldi Drive near Mandurah.
2 ANZ required a guarantee for due performance of the credit contract and, after taking legal advice, Dr Manasseh provided one. The guarantee was secured by a mortgage. Her liability was limited to the unsecured value of the family home at 33 Aruma Way, City Beach, registered in her name. Only for the purposes of this trial the parties agree that the value of the property is between $1.5 million and $2.2 million.
3 The duration of that guarantee is what brings the parties to court. ANZ in summary contends that the guarantee continued for subsequent credit contracts offered or made to Vivaldi and particularly a credit contract executed on about 16 November 2009. It sues on this contract.
4 Dr Manasseh, in summary, contends that her liability came to an end on 28 February 2008 which was the termination date of an extension to the guarantee to which she had agreed. She did not agree to guarantee the November 2009 credit contract.
5 The parties have other contentions but these are the crucial ones.
The trial
6 Evidence was completed in less than one day. Only two witnesses were called, Ms Ellen Moore, Director of Lending Services with ANZ in Melbourne and Dr Manasseh. No issues of credit requiring resolution arose from their evidence. To the extent that such evidence has relevance it gives context and background to the guarantee.
7 The outcome depends upon contemporaneous documents and, crucially, the construction of relevant agreements. The oral evidence does not assist this task.
The issues and the answers
8 Ms Banks-Smith posited three questions for the court and a fourth arose during the trial. The answers to each question are:
(a) Do the obligations of the defendant as Guarantor under the Guarantee expire on the date expressed in the Facility as the date of termination of the Facility?
- Answer: No.
(b) Was the Bank obliged under the Guarantee to obtain the consent of the defendant to the Second Variation?
Answer: Yes.
(c) Was the Bank's conduct in providing for a termination date for the Facility in the Letter of Offer and First Variation misleading or deceptive?
Answer: No.
(d) Is the November 2009 letter a new agreement or variation?
Answer: A new agreement.
The lead up to the first guarantee 31 October 2006
9 The background is usefully contained in a letter directed to Mr Christou from ANZ on 25 May 2006 (exhibit 13).
10 Mr Clifford was keen to promote this as part of the genesis of the arrangements to give context to the credit contract (exhibit 14) dated 25 October 2006 and the individual guarantee and indemnity dated 31 October 2006.
11 Mr Clifford submitted that the letter gives the reasons behind the genesis of the transaction (ts 95) in order to understand two points. One is the construction of the terms of the instrument or instruments and the other is the relevant circumstances or background to the misleading conduct claims. Leaving for the moment the second aspect, I derive no assistance from the letter as to the first, apart from outlining at a most preliminary stage, the basics for a possible development and the financing of such a development.
12 As the letter says:
To date we have been provided with little in the way of a detailed project feasibility and cash flows and so the thoughts and concepts in this letter should be considered very preliminary in nature. Accordingly this letter is indicative and is provided for discussion purposes only. It does not represent a commitment of ANZ and any formal advices will require a credit approval.
13 The letter is helpful however in outlining the development:
The Mandurah Marina Development is a proposed 65 apartment low rise development with 3 levels of residential apartments over ground floor parking and commercial space. The group intends to submit a tender at approx. $11.0M (net of GST) to acquire the site. If successful settlement for the site purchase is expected to occur in September 2006, following settlement the group will seek development approval with construction expected to commence within 6 months of settlement.
The group has sought the transaction be structured on a non-recourse basis with preferred maximum equity contribution of $6.0M plus acquisition costs.
14 Obviously this was just the first in a series of discussions because the eventual credit contract was quite different.
15 An initial development feasibility was undertaken.
Letter of offer ANZ to Vivaldi 25 October 2006
16 Discussions obviously progressed to a stage where ANZ could make an offer of finance to Vivaldi.
17 The letter of offer was for a progress draw facility in the sum of $10,120,000.
18 The Facilities Schedule showed the progress draw facility as follows:
Facility limit: $10,120,000
The Facility limit is comprised of the following internal limit components:
$ 8,143,000 Land funding component
$ 502,000 Preliminary Costs
$ 52,000 Professional Fees
$ 111,000 Bank Fees and Charges
$ 612,000 Capital interest provision
$10,120,000
- Termination date: 30 July 2007
Purpose: To assist with acquisition of development site and preliminary costs (TB 251).
Milestones - The Borrower agrees that the events and dates listed below are the 'milestones'
1. Planning/Development Approval to be held 30 January 2006
2. Complete design drawings 28 February 2007
3. Lodge application for Building Licence with
local council 30 June 2007
4. Request building tenders 30 June 2007
5. Lodge application for approval of development
Finance 30 June 2007
6. Approval of Building Licence 30 September 2007
7. Award Building Tenders 30 September 2007
8. Selected builder to commence on site 30 September 2007
If the Borrower fails to achieve the Milestones such failure is a Review Event. The Borrower must on demand explain to the Bank the reasons for the failure and submit detailed strategies to demonstrate how it plans to ensure compliance with those obligations within a specified period of time. If:
• the Bank is not reasonably satisfied with any aspect of the Borrower's submission;
or
• the Borrower fails to comply with the submitted strategies,
then the Bank is entitled to treat the failure as an event of default and exercise any rights it has under clause 11 of the General Conditions (TB 255).
20 The General and Specific Conditions Schedule (TB 257) are incorporated by reference to General Conditions (Fourth Edition 2003). They are to be found in exhibit 1.
21 The offer was accepted by Vivaldi on 30 October 2006.
The guarantee of 30 October 2006
22 The offer contained a Security Schedule. Included in that schedule was a Corporate Guarantee limited to the value of the Kinkuna Way property by Julman Pty Ltd (a company of which Dr Manasseh is director) and an individual guarantee and indemnity limited to the value of the 33 Aruma Way property given by Dr Manasseh and secured by second registered mortgage (TB 253).
23 Dr Manasseh gave the requisite corporate surety acknowledgement on 30 October 2006.
The guarantor acknowledgement dated 30 October 2006
24 The guarantor acknowledgement was sent to Dr Manasseh by letter dated 27 October 2006. As is usual, it advised her to seek independent legal and financial advice and gave her other information.
25 The relevant terms included a definition:
In this letter Facility means the transaction or facility to be guaranteed (including any facility with us to be refinanced by the Facility) as described in the enclosed Letter of Offer (TB 264).
Independent solicitors' advice
26 Prior to trial ANZ foreshadowed an application to lead evidence from the independent solicitor, Mr Blair Doncon, in the event that Dr Manasseh gave evidence of the advice she had received. In those circumstances it was asserted that she would have waived legal professional privilege. However, Dr Manasseh did not waive privilege or give any evidence of the conversation or oral advice.
27 Both parties were content to proceed on the document entitled Independent Solicitors Advice signed by Mr Doncon on 30 October 2006 (exhibit 16). I have accepted the advice as evidence as to what it contains.
28 Mr Doncon certified that he had independently advised Dr Manasseh regarding the guarantees:
• Guarantee and Indemnity from Julie Manasseh in favour of Australia and New Zealand Banking Ground Limited ABN 11 005 357 522 (ANZ), for liability of Vivaldi Investments Pty ltd ACN 120 155 839 in its own capacity and as trustee for The Vivaldi Trust
• Letter of Offer from ANZ to the Borrower dated 25 October 2006
• Mortgage over property at 33 Aruma Way City Beach WA from Julie Manasseh in favour of ANZ for liability to ANZ under the above Guarantee and Indemnity (TB 273).
- He also gave general advice about guarantees which is not necessary to reproduce at this point but is part of the certificate.
Guarantor Acknowledgement dated 30 October 2006
29 Dr Manasseh executed the guarantee on 30 October 2006. That guarantee provided:
1. Each of the following guarantors acknowledges that the Guarantee will cover as Guaranteed Arrangements (as defined in the Guarantee) all facilities from ANZ to the Borrower as noted in the Letter of Offer and any securities given or to be given, secure all present and future obligations of the Borrower to ANZ with respect to the facilities as noted in the Letter of Offer.
2. ANZ's right to enforce the Guarantee or any security is subject to the conditions of the Guarantee and any security. The guarantor's liability under the Guarantee will be limited in accordance with the Guarantee by the amount or by reference to the value of the secured property as noted in the Guarantee, subject to any additional amounts in respect of costs and interest as noted in the Guarantee.
3. The guarantors may agree to vary or extend the Guarantee in the future.
4. This Acknowledgement is subject to the Bank providing the guarantors with any information they may be required to provide guarantors under the Code of Banking Practice.
5. By providing this guarantor Acknowledgement to the facility, each guarantor acknowledges that the provisions contained at Clause 22 'Privacy' of the General Conditions apply to them (my italics)
30 Mr Clifford stresses that in par 3 the guarantors 'may agree to vary or extend the Guarantee' not to change and replace it. This has significance when considering what I shall refer to as the November 2009 arrangement initiated by an offer from ANZ on 16 November 2009 which was subsequently accepted by Vivaldi. It is common cause that Dr Manasseh did not consent to the November 2009 arrangement. ANZ's position is that her guarantee extends to this arrangement in any event. Ms Banks-Smith noted par 1 and the terms 'and any securities given or to be given, secure all present and future obligations of the Borrower to ANZ with respect to the facilities as noted in the Letter of Offer'.
31 Parts of the Guarantee (exhibit 22) are crucial to the competing arguments on the proper construction of the guarantee. After reciting the guarantor and the customer, the Guarantee continues:
Under the GUARANTEED ARRANGEMENTS, being:
(a) each credit contract referred to below (if any); and
(b) any other credit contract that I agree in writing is to be covered by this Guarantee,
as changed or replaced [my italics].
Guaranteed Arrangement 1:
Being a credit contract* dated 25 October 2006 and accepted by the Customer (TB 282).
32 The asterisk referred to says:
For details of the specific loan or facility see the credit contract.
33 Under the heading 'Security' the Guarantee recites the second registered mortgage over the land at 33 Aruma Way, City Beach.
34 Clearly the words 'as changed or replaced' refer to both (a) and (b).
35 The guarantee therefore covers the credit contract of 25 (sic) October 2006 and any credit contract that either
• changes; or
• replaces,
the credit contract of 25 October 2006 with another credit contract. A change to the credit contract of 25 October 2006 or a replacement of it will only bind a guarantor who agrees in writing that the guarantee will extend to it.
36 Above the execution clause is a box entitled 'IMPORTANT' with notes (TB 284):
Note 1: As the information statement 'Things you should know about guarantees' referred to below only applies to guarantees regulated by Customer Credit Law, you will only receive that statement if this Guarantee secures a Regulated Arrangement.
Note 2: Despite the last section under 'Things you must know', in some circumstances your liability under this Guarantee may be increased even if you do not agree and without you being informed (see clause 8) but this is subject to any applicable limit in the Guarantee.
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BEFORE YOU SIGN | THINGS YOU MUST KNOW |
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* You should make your own Inquiries about the credit Worthiness, financial position and honesty of the debtor. |
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- The critical words are in the last box of the table.
Individual Guarantee and Indemnity
37 The Guarantee recites:
1.1 Guarantee
(a) By signing this Guarantee, I guarantee that the Customer will, on time:
(i) pay to ANZ all the Guaranteed Money; and
(ii) perform the Guaranteed Arrangements.
(b) I enter into this Guarantee in return for ANZ:
(i) giving or continuing to provide credit to the Customer; or
(ii) not taking immediate action against the Customer to enforce the Guaranteed Arrangements (TB 286).
2.1 The Guaranteed Moneymeans all money owing to ANZ for any reason under the Guaranteed Arrangements:
(a) by the Customer alone, or together with me or one or more others;
(b) now or in the future;
(c) actually or contingently (money is 'contingently' owed where the Customer has an obligation to pay ANZ if something happens or is discovered).
It includes amounts that would have been owed, and that would have been Guaranteed Money, but for some reason described in clause 3 (TB 286) [my italics].
40 Clause 2.2(b) notes that the ANZ Bank's recourse is limited to the secured property. Nothing turns on this.
41 Clause 4 entitled 'Unconditional nature of obligations' notes:
My obligations under this Guarantee are unconditional (TB 289).
42 Clause 5 entitled 'How I can stop my obligations' notes in cl 5.2(c):
In all other circumstances, even after I give the letter, I am still liable under this Guarantee in relation to a Guaranteed Arrangement for:
(i) liabilities relating to credit provided under the Guaranteed Arrangement before the letter is given to ANZ (for example, the principal amount lent and interest and any fees and charges relating to that principal); and (TB 289)
43 Clause 7 is entitled 'Continuing Guarantee':
My obligations under this Guarantee are continuing. They continue after my death or Administration and after ANZ learns of lit.
Even though ANZ receives payment from, or makes arrangements with, anyone, I am still liable for the Guaranteed Money and the Guaranteed Arrangements now and in the future (subject to the limit set out in clause 2.2, or any other agreed limit).
However, if I stop my obligations, clause 6 limits the Customer's debts for which I am still liable (TB 291).
Variation of Guaranteed Arrangements
44 This is the key term on which ANZ relies:
8. Variation of Guaranteed Arrangements
ANZ and the Customer can enter into new arrangements with one another or change or replace the existing Guaranteed Arrangements at any time. They may do whatever business they wish with each other. Except as stated below, they do not have to get my consent to do these things.
This Guarantee applies to any new or replacement arrangements that I agree are to be Guaranteed Arrangements and covered by this Guarantee.
This Guarantee also applies to any Guaranteed Arrangements that are changed. My consent to a change is only required if:
(a) ANZ changes the Guaranteed Arrangements in a way which increased my liability; and
(b) the law or any relevant code of conduct says I will not be liable for the increased liability unless I consent to the increase.
In all other cases, ANZ does not need to get my consent.
Where I give my consent, or where any of the Guaranteed Arrangements are changed but my consent is not required, then this Guarantee will automatically apply to those changed Guaranteed Arrangements.
If:
(a) my obligations are limited under clause 2.2(a);
(b) I agree that a new or replacement arrangement is to be a Guaranteed Arrangement, or to a change to any existing Guaranteed Arrangement that increases my liability; and
(c) I also agree a new dollar amount for the purpose of clause 2.2(a),
then this Guarantee (and in particular clause 2.2) will be read as if that new dollar amount were inserted on the Details Page (TS 292).
46 In essence this capsulates the dispute between the parties. Whether the further credit facility that was extended by the November 2009 arrangement was a change that did not require Dr Manasseh's consent and did not extend her liability or whether it was a change that required her consent. ANZ made a conscious choice to continue the November 2009 arrangement knowing Dr Manasseh would not consent.
An extension is agreed by Dr Manasseh
47 On 2 November 2007 the bank wrote to Vivaldi offering additional facilities and variations. The offer was accepted by Vivaldi on 18 December 2007. On the same date Dr Manasseh gave her consent to an extension of her guarantee.
48 ANZ's letter of 2 November 2007 provided:
ANNUAL REVIEW AND VARIATION LETTER VIVALDI INVESTMENTS PTY LTD ACN 120 155 839 IN ITS OWN CAPACITY AND AS TRUSTEE FOR THE VIVALDI TRUST
Following the annual review of your facilities, we are pleased to offer additional facilities and variations to the conditions on which the existing facilities are provided as follows:
Summary of facilities available:
A summary of facilities is as follows:
Facility Facility Limit
AUD
Progress Draw Facility (previously $10,120,000) __11,121,000
Total Facility Limits: 11,121,000
Details of varied/additional facilities:
Details of the varied facility is set out in the Facilities Schedule to this letter.
Security:
The existing security held by us is to remain in full force and will extend to cover the existing facilities and the additional or varied facilities in this letter being provided to you by us.
Variations to securities for the facilities are set out in the Security Schedule to this letter.
Financial requirements, other conditions and conditions precedent:
Details of varied financial reporting requirements, financial covenants, other conditions and conditions precedent are set out in the Financial Requirements and Other Conditions Schedule to this letter.
The existing financial requirements and other conditions continue to remain in full force (TB 308).
49 The facility limit had increased under the Facility Schedule (TB 311):
Facility limit: $11,121,000 (previously $10,120,000)
The Facility Limit is comprised of the following internal limit components:
$ 7,567,000 Land funding component
$ 232,000 Preliminary Costs
$ 1,500,000 Professional Fees
$ 64,000 Bank Fees and Charges
$ 590,000 Statutory
$ 1,168,000 Capitalised interest provision
$11,121,000
50 Importantly the termination date was noted:
Termination Date: 28 February 2008 (previously 30 July 2007)
51 The purpose remained the same, 'to assist with acquisition of development site and preliminary costs'.
52 Milestones were listed as 'other conditions to be met' (TB 314):
Milestones - The Borrower agrees that the events and dates listed below are the 'milestones'
1 Lodge Building Licence 30 October 2007
2 Receive Building Licence 30 December 2007
3 Request Building Tenders 30 October 2007
4 Award Building Tender 30 December 2007
5 Commence on Site 30 January 2008
53 Although the offer was available for acceptance until the close of business on 22 November 2007 that date was extended by ANZ.
54 In the Guarantor Acknowledgement dated 18 December 2007 Dr Manasseh acknowledged:
1. Each of the following guarantors acknowledges that the Guarantee will cover as Guaranteed Arrangements (as defined in the Guarantee) all facilities from ANZ to the Borrower as noted in the Letter of Offer and any securities given or to be given, secure all present and future obligations of the Borrower to ANZ with respect to the facilities as noted in the Letter of Offer.
…
3. The guarantors may agree to vary or extend the Guarantee in the future (TB 318).
55 This was the only acknowledgement of an extension to which Dr Manasseh agreed in writing. It was an extension of the facility on its face until 28 February 2008.
A number of offers are made
56 The correspondence reveals that ANZ treated the finance facility as ongoing. Over the next two years a number of offers to extend the facility were made to Vivaldi. Vivaldi does not appear to have formally accepted any of them until the November 2009 arrangement. No extension of the guarantee was obtained. Despite the termination date of 28 February 2008 having passed, it appears that ANZ and Vivaldi simply continued to deal with each other as if the facilities were ongoing.
57 There were a number of offers made during the period.
58 On 9 June 2008 (exhibit 28) ANZ wrote to Vivaldi:
Following the annual review of your facilities, we are pleased to offer variations to the conditions on which the existing facilities are provided as follows (TB 324).
59 The draw down facility was $11,487,000. The security was to remain in full force:
Annual review:
The facilities are subject to annual review. The next review date will be on 30 July 2008.
If the Annual review is not carried out on or before the next review date, we may carry out the Annual review at any time after the next review date (TB 325).
60 The offer was held open to 8 July 2008. The facility limit was comprised (TB 327):
Facility limit: $11,487,000 (previously $11,121,000)
The Facility Limit is comprised of the following internal limit components:
$ 7,567,000 Land funding component
$ 232,000 Preliminary Costs
$ 1,696,000 Professional Fees
$ 64,000 Bank Fees and Charges
$ 489,000 Statutory
$ 1,442,000 Capitalised interest provision
$11,490,000
61 The termination date was 30 July 2008 (previously 28 February 2008).
62 The facility extension was not accepted by Vivaldi.
63 ANZ wrote again to Vivaldi on 18 august 2008 (exhibit 29) with a further offer, also not accepted.
64 ANZ wrote again with an offer on 2 February 2009 (exhibit 30) but again Vivaldi did not accept the offer.
65 ANZ wrote to Vivaldi on 27 March 2009 (exhibit 31) commencing:
Further to recent discussions between ANZ and Mr Greg Poland of the Strzelecki Group of Companies, ANZ is prepared to consider the following for the provision of a financial facility to assist in the development of the Peninsula Waterfront Apartments ('the Project') by Vivaldi Investments Pty Ltd ('the Borrower').
66 The indicative project cost was $66.3 million and the indicative facility limit was $56.4 million. Essentially this was a letter discussing finance for the building project. It came to nothing.
67 ANZ again wrote to Vivaldi on 1 May 2009 (exhibit 33) offering to extend the facilities but that offer was not accepted.
68 ANZ made an offer to Vivaldi on 11 September 2009 (exhibit 34) which was not accepted.
69 ANZ made an offer to Vivaldi on 15 September 2009 (exhibit 35) which was not accepted.
70 To summarise, from 28 February 2008, although ANZ continued to deal with Vivaldi, the only written obligation to which Vivaldi was bound was that offer which had been accepted by Vivaldi on 18 December 2007, terminating on 28 October 2008.
The November 2009 arrangement
71 On 16 November 2009 ANZ wrote again offering facilities. The offer expired on 30 November 2009 (exhibit 37). It was accepted by Vivaldi in due course. This contract is what I have referred to as the November 2009 arrangement.
72 The letter commences:
We are pleased to enclose for you our offer, which details the arrangements we have recently discussed.
As there have been a number of variations to your arrangements with us since we last provided details of our terms and conditions in full, we take this opportunity to restate all existing arrangements in addition to the current changes. As a result of this letter, once accepted, wholly replaces previous Letters of Offer and Variation Letters that we have issued to you [my italics].
The attached documents include:
• The Letter of Offer - detailing the facilities offered, security and conditions.
• A copy of the Letter of Offer - this copy is for you to sign and return to accept the offer. The covering customer information sheet details the steps you need to take to accept this offer and satisfy those things required before facilities will be made available.
• General Conditions - specifies the general conditions of use for ANZ facilities.
• Specific Conditions - details additional conditions specific to facilities which are part of this offer and for which Specific conditions apply.
Please note the enclosed documentation details the terms of our banking arrangement and is the first in a series of letters that you will receive over time regarding your facilities. Additional shorter letters will be issued to you when there is a change to the current arrangements or facilities are extended for a further term.
For your information, clause 28 of the General Conditions clarifies the meaning of many of the words and legal expressions used in the documents. Should you have any questions, please don't hesitate to contact me on (03) 9273 6380. We suggest however that you contact your solicitor for any detailed legal queries.
To accept this offer please sign the copy of the Letter of Offer and return it to me. Please note that this offer expires on 30 November 2009 (TB 457).
73 The second paragraph of the letter is in the same form as the earlier offers which were not accepted. The Customer Information Sheet noted:
Guarantor Acknowledgement on page 15-17 of the letter must be signed (TB 458).
74 The document entitled Letter of Offer noted:
Conditions Continue
Until you accept our offer (and have complied with all conditions precedent), the current arrangements for the facilities that we are making available to you, including the conditions on which those facilities are being made available, continue [my italics].
…
Loan Approval Fee
A Loan Extension Fee of $30,000 will be debited to your account on receipt of your acceptance of this letter (TB 461).
75 The italicised words strongly imply that once accepted, there was a new agreement between the parties.
76 The Progress Draw Facility remained the same at $11,487,000.
77 The termination date is 30 August 2010. Significantly, the words which had appeared in earlier (unaccepted) offers 'previously' followed by a date are not included. This also suggests that the parties, or at least ANZ, intended that there would be a new credit facilities agreement created when Vivaldi accepted the offer. A new agreement, not a variation of an existing arrangement.
78 There was a change in the way in which interest would be paid to ANZ.
79 Interest was no longer to be capitalised but to be credited to the progress draw facility following each quarter during which the facility remained current. It was to be paid by Vivaldi from its own resources:
Repayment arrangement: Interest only with full repayment due by the termination date (TB 462).
80 In the 2006 agreement:
Interest only calculated daily on monies outstanding and payable monthly in arrears from the capitalised interest provision allowed for within the proposed advance (see Facility limit above). All interest obligations over and above this provision must be met from your own resources.
However, to the extent the facility allocation to cover interest payments allows, the following conditions apply:
Subject to all conditions for the facilities being met and no default occurring, interest will be debited to this facility monthly on the first business day of the month.
Your acceptance of this offer will also be your authorisation to effect payment of interest in this matter (TB 251 - 252).
81 By contrast, in the November 2009 arrangement:
Interest calculated daily on monies outstanding and payable monthly in arrears to be capitalised to the Progress Draw Facility. The equivalent of three months interest and line fees is to be credited to the Progress Draw Facility no later than five business days before the end of the quarter being:
• 23rd December 2009
• 24th March 2010
• 23rd June 2010
All interest obligations must be met from the Borrowers own resources.
Subject to all conditions for the facilities being met and no default occurring, interest will be debited to this facility monthly on the first business day of the month.
Your acceptance of this offer will also be your authorisation to effect payment of interest in this manner (TB 462 - 463).
82 The 2006 agreement provided the sum of $612,000 as capitalised interest provision within the total draw down facility of $10,120,000.
83 The Facilities Schedule to the November 2009 arrangement added a clause, 'Market Disruption' which did not appear in the Letter of Offer in 2006 or 2007. The Security Schedule in the November 2009 arrangement listed the second registered mortgage dated 31 October 2006 over 33 Aruma Way, City Beach and the individual guarantee dated the same date.
84 There are a number of other differences between the Facilities Schedule in the October 2006 and the November 2009 arrangement.
85 The facility limit in the first agreement in 2006 was $10,120,000.
86 In the 2007 variation it was extended to $11,121,00. Dr Manasseh agreed to this variation.
87 The limit was raised in the (unaccepted) offer of 9 June 2008 to $11,487,000. This facility limit, $11,487,000 was the amount agreed to in the November 2009 arrangement.
88 The General Conditions clause was amended to refer to the Fifth Edition 2009 to apply to the November 2009 arrangement.
Dr Manasseh refuses to consent
89 Dr Manasseh received a copy of the offer and guarantee. She emailed Vivaldi on 25 November 2009 (exhibit 93) setting out her view of the matter. She refused to consent.
90 A copy of that email was provided to ANZ who responded directly to Dr Manasseh on 10 December 2009. Neither the email (exhibit 93) nor the response (exhibit 46) assist in determining the proper construction of the contract. In the event ANZ provided the facilities to Vivaldi without insistence on a signed Acknowledgment of Guarantee from Dr Manasseh. ANZ's position was and is that they did not require such an acknowledgement. Dr Manasseh holds a contrary view.
ANZ's claim
91 It is not really in issue that Vivaldi has defaulted. Nor is it in issue that there was a second mortgage on Dr Manasseh's property to secure her obligations to ANZ. Nor is the amount of money now due by Vivaldi under the facility in issue.
92 The pleadings assert:
3. On or about 25 October 2006 and 16 November 2009, the Company and the plaintiff entered into a written agreement (Loan Agreement) under which the plaintiff agreed to provide the Company with a Progress Draw Facility (Facility).
Particulars
- (a) The Loan Agreement consists of the:
(i) Letter of Offer dated 25 October 2006 (First Letter of Offer);
(ii) Letter of Variation dated 2 November 2007 (Variation Letter);
(iii) Letter of Offer dated 16 November 2009 (Second Letter of Offer);
(iv) General Conditions (Fourth Edition (2003) and Fifth Edition (2009)) (General Conditions); and
(v) Specific Conditions Progress Draw Facility (First Edition (2004) and Second Edition (2009)) (Specific Conditions).
(b) The Facility was made available on account number 016-498 8376-02361 (Account).
4. On or about 31 October 2006, the defendant provided a Guarantee and Indemnity to the plaintiff in support of the Facility (Guarantee).
Particulars
- (a) The Guarantee given by the defendant to the plaintiff is in writing and dated 31 October 2006.
…
10. On or about 25 October 2006, the plaintiff provided the Company with a Facility limited to $10,120,000 pursuant to the Loan Agreement and Guarantee.
11. On or about 31 October 2006, the Company drew down the amount of $9,507,370.69 pursuant to the Loan Agreement and Guarantee.
12. On or about 2 November 2007, by the Variation Letter, the Plaintiff agreed to increase the limit of the Company's facility and the Company drew down to the amount of $11,121,000.
13. On or about 15 May 2008, the limit of the Facility was increased to $11,487,000.
14. On or about 16 November 2009, the Company signed the Second letter of Offer, regarding:
(a) The increase of the limit of the Company's Facility to $11,487,000; and
(b) The extension of the expiry date of the Facility to 30 August 2010.
15. By 30 November 2009, the Company had drawn down to the amount of $11,493,698.84.
16. Under the terms of the Loan Agreement, the Company agreed, among other things:
(a) To pay the loan extension fee of $30,000 due upon acceptance of the Second Letter of Offer in accordance with terms of the Second Letter of Offer;
(b) To provide adequate funds (a minimum of $210,000) for servicing of quarterly interest and line fees in accordance with the terms of the Financial Requirements and Other Conditions Schedule of the Second Letter of Offer;
(c) That a failure to pay on time any amount that is due and payable under a Transaction Document is an Event of Default in accordance with clause 14(1)(a) of the General Conditions (2009);
(d) That a failure to perform obligations under a Transaction Document is an Event of Default in accordance with clause 14(1)(n) of the General Conditions (2009); and
(e) That the consequences of default include the plaintiff becoming entitled to:
(i) terminate the Loan Agreement in accordance with clause 15(2)(a) of the General Conditions (2009); and
(ii) make all of the money owing due and payable in accordance with clause 15(2)(c) of the General Conditions (2009).
18. An event of default occurred on or about 23 December 2009 as a result of the Company's failure to provide adequate funds (a minimum of $210,000) for servicing of quarterly interest and line fees to be credited to the Facility.
19. On or about 10 March 2010, the plaintiff issued a Notice of Event of Default to the Company regarding the:
(a) Failure to provide adequate funds (a minimum of $210,000) for servicing of quarterly interest and line fees to be credited to the Facility by 23 December 2009; and
(b) Failure to provide the loan extension fee of $30,000 due upon acceptance of the Second Letter of Offer.
20. The Company failed to remedy the events of default set out in paragraphs 18 and 19(a) above within the time allowed in the notice or at all.
21. The event of default referred to in paragraphs 17 and 19(b) was not remedied within the time allowed.
Particulars
- (a) This event of default was remedied on 19 April 2010 when the plaintiff debited the loan extension fee from the Company's cheque account.
22. A further event of default occurred on or about 24 March 2010 when the Company failed to provide adequate funds (a minimum of $210,000) for servicing of quarterly interest and line fees.
23. On or about 16 April 2010, the plaintiff issued to the Company a Notice of Event of Default and Demand for Payment of $351,387.16.
Particulars
- (a) The amount demanded under this notice comprised:
(i) $111,387.16 owing prior to 1 April 2010; and
(ii) $210,000.00 owing for servicing of quarterly interest and fees due on 24 March 2010.
25. On or about 27 May 2010, the plaintiff issued a Notice of Termination and Demand for Payment of $11,922,213.97 owing under the Facility.
Particulars
- (a) The amount demanded comprised:
(i) $11,874,105.07 outstanding under the Facility which comprised principal of $11,487,000.00 and interest calculated as at 30 April 2010;
(ii) Line Fee of $100,511.25; and
(iii) Debit interest of $37,615.65.
27. The Facility expired on 30 August 2010. The Company also failed to repay the Facility at this time in accordance with the Loan Agreement.
28. The Company owes the plaintiff $11,487,000 plus interest and expenses.
93 The answers to question (a), 'do the obligations of the defendant as Guarantor under the Guarantee expire on the date expressed in the Facility as the date of termination of the Facility?' is straightforward. The obligations of a guarantor continue after the termination date in the facility. Obviously a breach of an obligation to repay may not arise until the termination date has passed. It would be absurd to relieve the guarantor of obligations as at that date.
94 The question however inadvertently masks the real issue which is 'what is the facility being guaranteed'?
95 The answers to question (b), 'was the Bank obliged under the Guarantee to obtain the consent of the defendant to the Second Variation?' and question (d), 'is the November 2009 letter a new agreement or variation?' are linked. ANZ has framed its case in the pleadings and in its argument on the basis that the November 2009 arrangement was a variation of the original agreement and guarantee. As such Dr Manasseh remains bound.
96 If ANZ entered into a new agreement with Vivaldi in November 2009 and it could not be characterised as a variation or if the November 2009 agreement adversely affected the guarantor's liability, then ANZ was obliged to obtain Dr Manasseh's consent.
Characterisation of the agreement of 16 November 2009 is the key
97 ANZ relies upon the agreement of 16 November 2009 which was not expressly acknowledged by Dr Manasseh.
98 The supplementary outline of submissions concedes:
5. Consent is required if the underlying contract is replaced. The Bank accepts that the defendant did not acknowledge the November 2009 arrangements.
99 In the course of the hearing there was the following interchange:
McKECHNIE J: What are you suing on? Are you suing on the agreement of 2009?
BANKS-SMITH, MS: We do but it's the one agreement so it's the 2007 – sorry, the 2006 agreement, as varied twice. And the fact that you might refer to it as the – using the later date, the date of the second variation, is simply – it's simply the manner in which – or you can describe a document – sorry, I need to find the general condition, your Honour. Because – well, I say nothing turns on the fact that that is the date used because under the guarantee we're talking about a credit contract as amended.
BANKS-SMITH, MS: So whatever it is called, if it's still the – in effect, the same agreement – which is, of course, a bigger point which we will come to – it doesn't have to be referred to as something dated the 26th or by the first date. You could say it's that date, as amended by, or because it has been amended - - -
McKECHNIE J: What if the agreement of 2009 was a different agreement?
BANKS-SMITH, MS: If it were a different agreement the bank would have to concede that consent was required for the guarantee to cover it. If it were truly a new agreement, a new – and - - -
McKECHNIE J: Well, that's really the issue, isn't it, whether it is a new agreement or whether it is a permitted variation.
BANKS-SMITH, MS: Yes, yes (ts 121).
The November 2009 arrangement is a new agreement not a variation
100 It is appropriate then to focus on the November 2009 agreement. If it is a continuation of the arrangements put in place in 2006 then other questions will have to be addressed.
101 But if, as I find, the November 2009 arrangement was a new agreement then Dr Manasseh's consent was required to make her liable under any guarantee. She did not of course give consent.
102 Each acceptance of an offer made by ANZ to Vivaldi created a contract.
103 There is no issue that this is a valid contract supported by consideration. In the November 2009 arrangement the consideration included a fee of $30,000 debited to Vivaldi's account.
104 That fee is ambiguously described within the offer as both 'Loan Approval Fee' and 'Loan Extension Fee'. In the context of the whole offer it is to be construed as a loan approval fee.
105 There is a significant change from the 2006 agreement and the 2007 variation. Interest was previously capitalised. Effectively it was now to be paid quarterly directly by Vivaldi. In fact it was Vivaldi's inability to pay that triggered its default.
106 In the November 2009 offer, the current facility arrangements were expressed to continue only until acceptance of that offer, a point I outlined earlier.
Clause 8
107 ANZ's practice, as appears from all the evidence, may well have been to extend the facility from time to time in a relatively informal way, perhaps relying on clause 8 of the Guaranteed Arrangement to protect itself.
108 If so, its confidence in the magical abilities of clause 8 was misplaced.
109 Again, as I outlined earlier, the Guaranteed Arrangement are defined in the 2006 contract as:
(a) each credit contract referred to below (if any); and
(b) any other credit contract that I agree in writing is to be covered by this Guarantee
as changed or replaced (TB 282).
110 The Guaranteed Arrangement 1:
Being a credit contract dated 25 October 2006 and accepted by the Customer (TB 282).
111 The drafter of clause 8 delineated between 'new or replacement arrangements' and 'Guarantee Arrangement that are changed'. Clearly as a matter of construction a 'replacement' is not a 'change' under the contract.
112 In an effort to overcome the apparently plain words of both the 2006 agreement as extended in 2007 and the November 2009 arrangement which states that it is a replacement, Ms Banks-Smith argued that a replacement might in fact be no more than a variation or amendment. It is, she says, question of substance over form. It is true enough that the November 2009 arrangement has to be construed in the light of what has gone before which may give context to the parties' intentions.
113 One authority she cites for her proposition is Triodos Bank NV v Dobbs [2005] EWCA Civ 630. An examination of the case and the paragraphs on which Ms Banks-Smith particularly relies does not support the submissions.
114 Longmore LJ said:
As a matter of principle there is no reason why the right of the Bank under clause 2.4.1 to agree amendments or variations to the loan agreement without reference to the guarantor should be confined to amendments or variations which are expressly contemplated by the agreement; the clause must mean that anything rightly termed a variation or an amendment is a matter which can be agreed without reference to the guarantor. The question is then whether what is said to be an amendment or variation is correctly so called. To my mind an agreement which truly 'replaces' the original loan agreement would not rightly be called an amendment or variation to the original agreement, since it will be a new agreement. This will be particularly true in the context of a guarantee which obliges the guarantor to pay sums falling due 'under or pursuant to' a particular loan agreement. Once that loan agreement has been replaced by a second and different agreement, sums due under that new and different agreement cannot be sums due 'under or pursuant to' an earlier agreement. For this purpose it does not matter whether the old agreement is discharged in the sense of the loan being fully repaid and a new agreement then made (in the technical sense of there being a novation) or whether there is a replacement agreement which is, for the future, treated as governing the parties' relationships. The new governing agreement is not the agreement 'under or pursuant to' which there falls due the money which the guarantor has guaranteed to pay [9].
115 This paragraph appears to directly contradict the submission.
116 It is correct that in the factual circumstances of the case Longmore LJ said:
It seems to me, therefore, (technical though this may be) that the first of the 1998 agreements, even though it is said to 'replace' its 1996 predecessor, is no more than an amendment to or variation of it, since the rescheduling was envisaged in it. The second 1998 agreement is, by contrast, considerably more than a mere amendment or variation to the corresponding 1996 agreement: not only does it 'replace' the earlier agreement but it triples the sum lent and provides that it is for the considerably extended building contract. That is not a contract which, in my view, Mr Dobbs agreed to guarantee [11].
117 Longmore LJ ultimately held that a new facility agreement was considerably more than an amendment or variation of the original or later loan agreement.
118 Ms Banks-Smith also sought support from authorities which examine individual arrangements to decide whether or not they are variations to an original contract still binding the guarantor or not. These cases are of limited assistance in construing the contractual arrangements in question here. The search for meaning commences (and ends) with the words of the particular contract in question. There is no deviation from general principle in the cases. Rather each reflects the circumstances of the particular contract under scrutiny.
119 In British Motor Trust Co Ltd v Hyams (1934) 50 TLR 230 Branson J said:
Normally speaking, any alteration in the contract between the creditor and the debtor was sufficient to release the surety, but that effect was expressly excluded in this case. To give a meaning to the word 'variation' one must look at the context in which it occurred, and here the provision was so wide that it was almost impossible to put any limit to the power to vary (231).
120 In another single judge decision, FCA Finance Pty Ltd v Cummings (Unreported, QSC, Library No 1012, 8 February 1988).
121 Ryan J said:
It is well settled that 'any material variation of the terms of the contract between the creditor and the principal debtor will discharge the surety who is relieved from liability by the creditor dealing with the principal debtor in a manner at variance with the contract the performance of which is guaranteed' [citation omitted]. The variation of the terms of the project supervisor deed effected by the supplementary deed was a material one and would in my opinion discharge the guarantors' obligations under the guarantee unless it was authorised by some provision of the guarantee. I consider that it was authorised by the provision of the guarantee under which the guarantors guaranteed due and punctual payment of moneys payable to the obligee pursuant to or as a result of the supervisor deed which included any written additions and amendments thereto. The deed of March, 1973 was one which made such additions to the supervisor deed. It may be that the words should be read as relating only to additions within the general purview of the original guarantee [citation omitted]; but the additions in this case were of this character (18 - 19).
122 The case also turns on the construction of the particular contract.
123 In Samuels Finance Group Plc v Beechmanor Ltd (1994) 67 P&CR 282 the particular contract provided the guarantors would be liable for payment of the moneys 'secured by this charge or any other variation of the provisions of this charge'. Lloyd LJ held there was nothing in the language or the context that would enable the court to construe 'any variation' to mean any 'any minor variation'. He continued:
One can perhaps imagine changes falling short of a novation which would yet be so fundamental that they could not properly be described as a variation at all. I will not attempt to say where the line is to be drawn.
124 The written submissions for ANZ make eight points to be considered in construing the documents:
First, whilst the covering letter to the November 2009 letter of offer does refer to 'replacing' previous letters of offer and variation letters, it also provides that:
(a) 'As there have been a number of variations to your arrangements since we last provided details of our terms and conditions in full, we take this opportunity to restate all existing arrangements in addition to the current changes.' (TB 457); and
(b) 'Except as indicated above, it is not proposed to vary any of the other conditions of your facilities' (TB 461).
125 As to the letter of 16 November 2009 the fact that the writer considered there had been a number of variations to the arrangement cannot diminish the contractual force of 'this letter once accepted wholly replaces previously letters of offer and variation letters that we have issued to you'.
126 The second quote from the submissions appears directly under the heading 'Conditions Continue':
Until you accept our offer (and have complied with all conditions precedent), the current arrangements for the facilities that we are making available to you, including the conditions on which those facilities are being made available, continue (TB 461).
127 Clearly, once the letter is accepted, the current conditions cease. They are subsumed by the new agreement.
128 The second point made in the submissions is that the facility was a drawn down facility:
Second, the facility provided by the Bank was a drawdown facility. The substantial drawdown for the acquisition of the land occurred on the day the facility and securities were formally agreed, being 31 October 2006 ($9,507,370). There was an increase in the limit of the drawdown facility from $11,121,000 (as provided in December 2007) (TB 24/p 311) to $11,487,000 (as offered in June 2008) (TB 324). That proposed limit of $11,487,000 did not change from that time on and was included in the November 2009 letter. The increase ($366,000) covered primarily capitalised interest over the period (some $274,000). [compare pp 311, p 341, and p 462]. There were no 'new monies' advanced. There was no repayment or provision of a new advance under the November 2009 letter.
129 This overlooks the fact that the only increase in the limit of the draw down facility to which Dr Manasseh consented was the limit of $11,121,000 as provided in 2007. What was offered in June 2008 was never formally accepted by Vivaldi. To say that the increase covered primarily capitalised income and that there was no new monies advanced does not, with respect, satisfactorily respond to the indubitable fact that the facility limit was increased.
130 The third point raised:
Third, the account number and details for the facility were always the same. The facility was described throughout (even in the November 2009 letter) as the 'Progress Draw Facility'.
131 So far as the bank was concerned the account number may well have been the same and the facility was always a progress draw facility. A difference was that in 2006 there were milestones to be achieved and a breakdown as to the amounts to be advanced for particular purposes.
132 The fourth submission:
Fourth, the purpose of the facility remained the same. From the first letter of offer, the purpose was described as being to assist with acquisition of the development site and preliminary costs (and words to that effect). That purpose is recited in each letter, including those which were not signed and including the November 2009 letter. The land by the time of the November 2009 letter had already been acquired and there is no suggestion any other piece of land was being acquired. It was being held for the purpose of the project, that is, the potential development of apartments, as always anticipated by the parties.
133 ANZ are somehow relying on the offers that were not accepted to construe both the 2006 agreement (the letters being written subsequently) and the November 2009 arrangement. I do not consider either is useful or admissible for that purpose but, in case I am wrong, reference should also be made to exhibit 46, a letter from Ms Moore to Dr Manasseh of 10 December 2009 following receipt of copy of her email to Vivaldi dated 25 November 2009. The reasons for the November 2009 arrangement were stated:
As you are aware, the directors of Vivaldi requested that the Bank agree to an extension to the term of the facilities to 30 August 2010. This request was made to avoid having to put the Mandurah development site up for sale in the current soft property market and to give the directors more time to seek an extension of the Landcorp Requirement, without which would adversely impact the sale price.
The Bank has agreed to this request, subject to a number of conditions, including a requirement that all future interest payments be met by Vivaldi, rather than be capitalised which would have led to an increase in the amount of the loan.
…
We encourage you to discuss these matters with the directors of Vivaldi. As we understand it, the directors of Vivaldi believe that if the development is allowed to continue to completion and the Mandurah apartment market improves over time, a sale of the Mandurah property should realise sufficient proceeds to repay the Bank's debt in full. If this occurs, then there will be no need for the Bank to call upon the Guarantee and Mortgage (TB 513).
134 It may be a quibble but, the purpose of the facility seems to have changed over time. Originally it was to purchase land and develop it for sale. By 2009 it was to hope that the market would improve and that Landcorp would extend its requirement. I say it is a quibble because it does not assist in construing the agreement and the correspondence is irrelevant for that purpose.
135 The fifth submission is:
Fifth, the loan term was simply extended. This is reflected in the accounts and the fact a Loan Extension Fee was payable under the November 2009 letter (as against the 'Loan Approval Fee' required in the 2006 Letter of Offer). It is artificial to view the term of the original facility letter in isolation. It was always anticipated the loan may be reviewed and so extended. For example, note:
(a) the milestones referred to in the 2006 Letter of Offer (TB 255) that extend beyond the termination date, and the ability of the Customer to make submissions as to a new period of time;
(b) the provision for annual review and the flexibility as to when the Bank may undertake that review (TB 248);
(c) the reference to valuations being provided every 24 months (TB 254);
(d) the right of the Bank to review the facilities, provide notice of the Bank's wish to change any conditions of the facilities and agree with the Customer to alter the period of facility (General Condition, 9, TB 222);
(e) the power of the Bank to make any changes to the conditions of the facilities including changing the time for payment after default (General Condition 11, TB 224);
(f) the Bank's willingness to enter into repayment plans where appropriate (General Condition 24(12), TB 231);
(g) that the Bank is not obliged to exercise any powers of default (General Conditions 11 and 16, TB 224, 226).
The fact that the intent of the November 2009 letter was to bring about a formal extension (and not a new agreement) is also reflected in the covering letter of 17 November 2009 (TB 506), the email of 8 April 2009 referred to in that letter (TB 373) and the letter to the directors dated 27 March 2009 (TB 371).
136 It may be accepted that it was always anticipated that the loan may be reviewed and extended. It does not follow that the loan would be reviewed and extended under the rubric of the original agreement. The intent of the November 2009 letter of offer has to be gleaned from the words used in it. Its words are clear. The November 2009 arrangement is intended to be a replacement.
137 The sixth reason advanced:
Sixth, the reason for the extension of the term is apparent and was at all times in the interests of the Customer and the defendant. The Customer intended to develop the site and required construction finance. Milestones were identified. Milestones for commencement on site were pushed back (milestones at TB 255 and 314, letter at TB 369). The course was aimed at enhancing the position of the Customer and so the guarantors. The option was to call up the loan and issue demands and default notices on the Customer and guarantors.
138 The premise may be accepted but not the conclusion. It is the form of the 'extension' which is in issue as well as the substance. The form was a replacement.
139 The seventh reason advanced:
Seventh, other changes incorporated in the November 2009 letter were also within the scope of the terms of the October 2006 letter:
(a) the Bank was permitted to change interest terms, including when it was paid (General Condition 12(4), TB 225); and
(b) the Bank was permitted to introduce fees [such as a loan approval fee or loan extension fee] (General Condition 12(5), TB 225).
140 The seventh reason focuses on similarities between the October 2006 agreement and the November 2009 arrangement. It is the differences which are determinative.
141 The eighth reason advanced:
Eighth, the risk to the defendant of being called upon to meet her limited liability was not increased because of the increase in the facility, when the amounts in question are considered. The difference in the circumstances between $11,121,000 and $11,487,000 was insubstantial.
142 It is a bold submission to say that the sum of $366,000 is insubstantial, especially in a context where interest on the amount drawn down had to be paid out of the resources of Vivaldi.
143 Despite the eloquence of Ms Banks-Smith, and acknowledging that the 2006 agreement was an 'all moneys' agreement, the November 2009 arrangement cannot by any stretch be construed as simply a 'change' to an existing facility.
144 It is manifestly a new agreement.
145 True it is, there are similarities by themselves which suggests a continuation of the existing facility. But these come about from ANZ's practices in relation to Vivaldi rather than through contractual force.
146 The original contract of 25 October 2006 provided for a termination date of 30 July 2007.
147 It did not provide for an annual review. Yet ANZ seems to have conducted periodic reviews and extended the facility from time to time even without another written contract. Such practice was not in accord with the first contract (even if commercially common) and might fall under the rubric of 'changed'.
148 But this practice is of no assistance in construing the November 2009 arrangement regardless as to extent to which surrounding circumstances can be taken into account: See Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; (2011) 282 ALR 604, Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2014] WASCA 164.
149 To decide the proper construction of the November 2009 arrangement relied upon by ANZ, mercifully I do not have to enter into or resolve the fascinating (for lawyers) but essentially arid (for everyone else) debate about the 'true rule'.
150 The November 2009 offer as accepted is clear and unambiguous.
151 It is a new contract and under the Guaranteed Arrangements ANZ required Dr Manasseh's consent. It did not get it. The answer to question (b) is therefore 'Yes' and the answer to question (d) is 'a new agreement'.
152 As ANZ sues Dr Manasseh under the November 2009 arrangement in the circumstances its action must fail because it was a new or replaced agreement.
Was Dr Manasseh's liability increased?
153 There is another reason why ANZ's claim must fail. The November 2009 arrangement increased Dr Manasseh's potential liability.
154 By way of defence Dr Manasseh pleads, among other things, as an alternative:
13.4 … any increase to the limit of the facility or extension of the termination date of the facility by the plaintiff was conduct which increased the risk of the defendant and thereby discharged the defendant from any liability under the guarantee.
155 This plea assumes a finding that the November 2009 arrangement was a variation, not as I find, a new agreement requiring consent.
156 ANZ's principle response is that the liability has remained fixed throughout the whole period as it is effectively capped at the net value of the property.
The Ankar principle
157 In Ankar Pty Ltd v National Westminster Finance (Aust) Ltd (1987) 162 CLR 549 the plurality examined the special principle said to apply to a suretyship contract:
[T]hat the surety is discharged from its obligations by the creditor's breach of that contract, so long at any rate as the breach materially prejudices the interests of the surety (557).
158 After discussing a number of cases from the United Kingdom the judgment continued:
The foundation of the rule is that the creditor, by varying the principal contract or extending time, has altered the surety's rights without consulting it though the surety has an interest in the principal contract, and that the creditor cannot be permitted to do so (560).
…
A doubt as to the status of a provision in a guarantee should therefore be resolved in favour of the surety and so the provision should be interpreted as a condition, or perhaps as an innominate term, instead of a mere warranty. If the surety is to be discharged for breach of a promissory term in the suretyship contract, the justification for the discharge must be that the creditor has failed to comply with a provision that, as a matter of interpretation, requires strict performance as a condition precedent to the surety's obligation or at least requires substantial performance of the promise such that the surety would not have entered into the contract if it had not been assured that there would not be a breach such as the breach which in fact occurred. If on its true interpretation the term is not intended so to operate, it is not easy to understand why the surety should be discharged by its breach. Of course, in construing the contract the court is entitled to look to the general setting in which the contract has come into existence: see, eg, the discussion in Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989 at 996-997; [1976] 3 All ER 570 at 574-575 (561).
159 The Ankar principle was analysed by Dodds-Streeton J in Commonwealth Bank of Australia v McArthur [2003] VSC 31:
The special principle has application in cases where a particular liability is guaranteed, but it is altered or varied without consent, or the surety has certain contractual rights which are disregarded.
Limitations upon, or reservations concerning, the special principle endorsed in Ankar Pty Ltd v National Westminster Finance Australia Ltdhave been applied. For example, in The Wardens and Commonality of the Mystery of the Mercers of the City of London v New Hampshire Insurance,Phillips J considered that the principle applies only in relation to obligations arising under a specific contract which are guaranteed and not to obligations arising from a future course of dealings. Accordingly, if there is a guarantee in respect of all loans without reference to any particular contract, the creditor and principal could conclude a new loan and proceed to vary its terms without that variation operating to discharge the guarantor.
A further exception to the variation principle is where the contract of guarantee or third party mortgage expressly permits variation. In the present case, the CBA mortgage by clause 9.12 expressly provided for the mortgagee’s right to vary advances and accommodation.
Similarly, the principle has no application to a subsequent independent agreement, as distinct from the variation of the terms of a particular original agreement. Whilst discharge will result from variation of the terms of a particular agreement unless it is unsubstantial and unprejudicial or the guarantor consents, the guarantor will remain liable in relation to entirely independent contracts, provided that they are within the scope of the guarantee.
Therefore, where there is a widely drafted 'all moneys' guarantee or mortgage clause, as in the present case, and as widely employed in modern commercial practice, a fresh advance or a subsequent loan would be within the scope of the guarantee. Moreover, a variation of a single agreement would also appear to be within the scope of such a guarantee.
Where an 'all moneys' guarantee or mortgage is executed, the guarantor has undertaken to guarantee an indefinite number of liabilities without limit. In such a context, it is artificial to distinguish between original and subsequent independent agreements, on the one hand, and variations of a single agreement, on the other hand. In the absence of misrepresentation as to the effect of the 'all moneys' guarantee or mortgage, or other vitiating factors, there appears to be no reason why equity should require the discharge of the guarantor’s obligation in either case [194] - [199].
160 The November 2009 arrangement has the following features which may adversely affect Dr Manasseh's liability:
• The amount of the facility is greater than the 2006 agreement.
• The date of termination is extended (to 30 August 2010). This is significant in a context where the termination date of the variation agreed to by Dr Manasseh was some 2½ years earlier than the date now proposed.
• There is a material change to the interest provisions which must now be met by Vivaldi immediately.
161 The limitation of the amount of money that may be called on from a guarantee in the event of a default does not entirely determine the question whether liability is increased.
162 ANZ has failed to discharge its onus to show that the November 2009 arrangement affected an insubstantial change without detrimentally affecting Dr Manasseh's liability under her guarantee. For these reasons also the answer to question (b) is 'Yes'.
Misleading and deceptive conduct
163 The defendant pleads:
40. Further and in the alternative by its letters of offer dated 25 October 2006 and 2 November 2007, the plaintiff represented to the defendant that any security provided by the defendant would be limited in time to expire 31 July 2007 and 28 February 2008, respectively.
41. In reliance on the conduct of the defendant pleaded in paragraph 40 above, the defendant entered into the Guarantee on or about 31 October 2006 and signed the guarantor acknowledgement on 2 November 2007.
42. The defendant would not have entered into the Guarantee and signed the guarantor acknowledgement if the plaintiff had not engaged in the conduct pleaded in paragraph 40 above.
43. Relevant circumstances to the conduct of the plaintiff pleaded in paragraph 40 were materially
43.1 the letter dated 25 October 2006 was the first request by the ANZ for the provision of any security other than the assets of the Company
43.2 by a letter dated 25 May 2006 the plaintiff provided a funding proposal in relation to the Company development project and
43.2.1 materially stated 'the group has sought the transaction be structured on a non-recourse basis with preferred maximum equity contribution of $6.0M plus acquisition costs'; and
43.2.2 identified the only security as the business assets and entitlements of the Company.
43.3 The letter of offer dated 25 October 2006 materially provided a termination date of 31 July 2007;
43.4 The letter of offer dated 2 November 2007 materially provided a termination date of 28 February 2008.
44. By engaging in the conduct pleaded in paragraph 40 above, issuing the Writ in these proceedings dated 14 February 2012 which relies on defaults of the Company, alleged to have occurred 30 November 2009, 23 December 2009, 24 March 2010, 25 May 2010 and the conduct pleaded in paragraphs 29 and 34 of the Statement of Claim, in the relevant circumstances pleaded in paragraph 43 above, the plaintiff has engaged in conduct in contravention of section 52 of the Trade Practices Act 1974 or alternatively section 18 of the Australian Consumer Law or alternatively section 12DA of the Australian Securities and Investments Commission Act 2001, or alternatively section 1041H of the Corporations Act 2001.
45. On the basis of the matters pleaded above the defendant is entitled to relief under section 87 of the Trade Practices Act 1974 or alternatively section 237 of the Australian Consumer Law or alternatively section 12GM of the Australian Securities and Investments Commission Act 2001, or alternatively section 1325 of the Corporations Act 2001, to confirm that the Guarantee expired 28 February 2008.
164 Despite the defendant's shotgun approach to which statutory provision Dr Manasseh relies upon, the only applicable legislation is the Australian Securities and Investments Commission Act 2001 (Cth) s 12DA.
165 In Caffey v Leatt-Hayter [No 3] [2013] WASC 348 Beech J helpfully restated the principles:
228 A claim of contravention of s 52 of the Trade Practices Act 1974 (Cth) need not be pleaded or argued by reference to the making of a representation. In this case, however, the plaintiffs pleaded their case based on representations.
229 Conduct is misleading or deceptive if, viewed as a whole, it has a tendency to lead a person into error.
230 Whether conduct is misleading or deceptive is a question of fact, to be determined objectively in light of all the surrounding facts and circumstances.
231 Often, as here, that will involve two steps: first, making findings of fact about what was said and whether any pleaded representation is established; secondly, determining whether the proven representations (or other conduct) are misleading or deceptive.
232 As French CJ has explained, the question whether conduct is misleading or deceptive is logically separate from, and anterior to, the question of whether a person has suffered loss or damage as a result. The conceptual distinction between characterisation of the conduct, and determination of the issue of causation, must be maintained. Nevertheless, in practical terms, there may be an overlap between the resolution of these logically distinct questions. The characterisation of conduct may involve assessment of its notional effects, judged by reference to its context. The same contextual factors may play a role in determining causation.
233 Where the relevant conduct is directed to an individual, in determining the character of conduct, in particular whether it is misleading or deceptive, account should be taken of the matters of fact each party knew about the other as a result of their dealings and the conversations between them.
234 Whether conduct is misleading or deceptive is determined objectively. A corporation may contravene s 52 even though it acts honestly and reasonably.
235 Conduct is likely to mislead or deceive if there is a real and not remote possibility that it will do so. It is not necessary that the degree of likelihood exceeds 50%.
236 A statement that is literally true may nevertheless be misleading and deceptive.
237 In the context of statements made to members of the public, it has been held that statements that are capable of more than one meaning may be misleading or deceptive if the meaning for which the applicant contends is one that would be reasonably open, and might be drawn by a significant number of those to whom the representation is made. Similarly, in my view, a statement made to a particular individual that is capable of more than one meaning will be likely to mislead or deceive if a meaning that is reasonably open is misleading or deceptive. If that is so, there will be a real and not remote possibility that the representation is misleading or deceptive. The meaning actually attributed to the statement by the recipient is relevant to reliance, but not to the objective characterisation task.
238 An expression of opinion that is identifiable as such conveys no more than that the opinion expressed is held and, perhaps, that there is a basis for the opinion. At least so long as those conditions are met, an expression of opinion is not misleading merely because it turns out to be incorrect.
239 Whether a particular formulation of words is taken to express merely an opinion or a statement of fact depends upon all the facts and circumstances of the case. That is to be assessed objectively, not by reference to the subjective purpose or motivation of the maker of the statement. The relative knowledge of the speaker and the audience may also be relevant to the question of characterisation of a statement as one of fact or opinion.
240 It may not be necessary or useful to attempt to classify a statement within a dichotomy of opinion and fact. Rather, the focus is on what the statement objectively conveyed to its intended audience.
166 I apply those principles.
167 Dr Manasseh says that the inclusion of the 'termination date' in circumstances where ANZ asserts that there was in fact no 'termination date', is conduct which, in the relevant circumstances was misleading or deceptive including being likely to mislead or deceive.
168 In response ANZ submits that included in the letter of offer was a termination date for provision of the facility. Unless extended, Vivaldi was obliged to repay the facility on that date. There is nothing unusual or surprising about the inclusion of a termination date for a facility. There is no representation in the letter of offer (or first variation) that obligations under the guarantee expire on termination of the facility. The terms of the guarantee are set out expressly in the guarantee and the defendant had the opportunity to and did seek legal advice as to the guarantee.
169 These submissions by Ms Banks-Smith must be accepted.
170 The 'audience' of the letter of offer and guarantee included a lawyer.
171 In its letter of 27 October 2006 to Dr Manasseh (TB 262) ANZ said:
Important Notice
As a prospective guarantor, it is important that you understand the following:
• Before you sign the Guarantee, you should seek independent legal and financial advice on the effect of the Guarantee
• You can refuse to enter into the Guarantee
• There are financial risks involved in acting as a guarantor
• You have a right to limit your liability in accordance with the Code of Banking Practice and as allowed by law
• You can request information about the transaction or Facility
172 The Independent Solicitors Advice form suggested by ANZ included:
• That if the Borrower defaults in payment or in other obligations to ANZ then the Guarantor would be liable to make good that default which could involve all amounts owed by the Borrower to ANZ together with interest and other charges (TB 273).
173 As part of the General Conditions the obligations of Vivaldi were set out:
3. Repayment of the facilities
For each facility, you agree to pay us on the termination date the outstanding money.
You also agree to pay us, on the last of the termination dates for the facilities, all other amounts outstanding but unpaid under any transaction document (TB 220).
9. Review of the facilities
Right of review
(1) We have a right to review the facilities (and the conditions of the facilities, including pricing and securities) in accordance with this clause (TB 222).
176 Clause 1.1 of the guarantee says:
1.1 Guarantee
(a) By signing this Guarantee, I guarantee that the Customer will, on time:
(i) pay to ANZ all the Guaranteed Money; and
(ii) perform the Guaranteed Arrangements.
(b) I enter into this Guarantee in return for ANZ:
(i) giving or continuing to provide credit to the Customer; or
(ii) not taking immediate action against the Customer to enforce the Guaranteed Arrangements.
If the Customer does not pay any amount of the Guaranteed Money on time, ANZ can demand that I pay that amount. I will then immediately pay that amount to ANZ.
ANZ can make a demand as often as the Customer does not pay ANZ, and a demand can be made:
(a) for all or part of the Guaranteed Money; and
(b) even if ANZ does not take action to recover the Guaranteed Money from the Customer or anyone else (TB 286).
178 Dr Manasseh's evidence was:
32. On the night that Nick [Christou] brought the ANZ documents home, our neighbour, Blair Doncan, came over to our house.
33. I read the Facilities Schedule attached to the letter of offer and saw that it was for a loan facility to Vivaldi Investments for $10,120,000 with a termination date of 30 July 2007.
…
38. I would not have signed the guarantee or the guarantor acknowledgement if the Facilities Schedule did not include the words 'Termination Date: 30 July 2007'.
179 In the written submissions Mr Clifford asserts:
49. The misleading or deceptive conduct here is the representation made in the 25 October 2006 facility schedule, that there was a termination date, of 30 July 2007, subsequently made in the 2 November 2007 facility schedule, that there was a termination date of 28 February 2008. Where the ANZ position is that there was no 'termination date'.
180 That is not the ANZ position. The ANZ position, supported by the wording of contracts is that there was a defined termination date and on that date Vivaldi's obligation to repay crystallised. The contract also provided that the termination date might be extended.
181 I think it likely that Dr Manasseh misunderstood her obligations under the guarantee and believed that they finished at the termination date. But any misunderstanding cannot objectively be sheeted home to ANZ. Its conduct was neither misleading or deceptive. The contractual documents, being the letter of offer, General Conditions and guarantee were clear. Dr Manasseh's obligation could only come to an end when Vivaldi had performed all of its obligations to ANZ and discharged its liability in full. All that the termination date specified was the date for repayment (unless Vivaldi agreed to a change on that date). It is unreasonable to read the contractual document as terminating the guarantor's responsibility on that date and ANZ did not engage in misleading and deceptive conduct.
Summary and conclusion
182 ANZ did not engage in misleading and deceptive conduct and that aspect of the defence fails.
183 ANZ however sues on the third variation, the November 2009 arrangement. These constituted a material change to the 2006 agreement and first variation. It was not in substance a variation but a replacement agreement. It also had the effect of adversely affecting Dr Manasseh's liability under the guarantee. For both of these reasons she would only become liable if she consented or entered into a new guarantee. She did neither and so ANZ's claims under the guarantee and mortgage are dismissed.
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