Bond University Ltd v Limgold P/L and Nista P/L

[1997] QSC 227

IN THE SUPREME COURT

OF QUEENSLAND
  No. 1824 of 1995
[Bond University Ltd v. Limgold P/L and Nista P/L & Anor]

BETWEEN:
  BOND UNIVERSITY LIMITED
  Plaintiff
AND:
  LIMGOLD PTY LTD and NISTA PTY LTD
  First Defendants
AND:
  THE LONG-TERM CREDIT BANK OF JAPAN LIMITED
  Second Defendant

REASONS FOR JUDGMENT  -  DERRINGTON J

Judgment delivered 11 December 1997

INTRODUCTION...................................................................................................................... 1

THE NATURE OF THE CLAIMS.............................................................................................. 1

BRIEF HISTORICAL REVIEW................................................................................................. 3

DETAILED HISTORY AND DISCUSSION............................................................................. 9

OTHER SUBMISSIONS OF THE PARTIES......................................................................... 147

THE CLAIM AGAINST THE BANK.................................................................................... 163

SUBSEQUENT HISTORY AND LACHES........................................................................... 171

THE EVIDENCE.................................................................................................................... 189

FURTHER DEFENCES.......................................................................................................... 193

RELIANCE AND DETRIMENT............................................................................................ 196

THE REQUIREMENT OF CLARITY.................................................................................... 208

FURTHER EQUITABLE CONSIDERATIONS IN THE GRANT OF A REMEDY.............. 220

PROPORTIONALITY........................................................................................................... 221

THE TRADE PRACTICES ACT CLAIM............................................................................... 223

FIDUCIARY DUTY  AND  CONSTRUCTIVE TRUST...................................................... 224

RESTITUTION....................................................................................................................... 225

NOTICE TO QUIT AND RENT............................................................................................ 227

SUMMARY............................................................................................................................ 231

ALTERNATIVE ORDERS ON DIFFERENT FINDINGS..................................................... 233

THE COUNTERCLAIM........................................................................................................ 236

ALTERNATIVE RESULT AS TO REPAYMENT................................................................. 248

RECTIFICATION.................................................................................................................. 250

CONCLUSION OF COUNTER-CLAIM.............................................................................. 253

COSTS................................................................................................................................... 253

ORDERS................................................................................................................................ 254

INTRODUCTION

The present transaction is somewhat removed from the commonplace.  It was also very complex, covering a changing situation over a long period of time, and there was little negotiation by parties at arm's length.  Because it is necessary to trace a lengthy and complex history in some detail through its changes, it is desirable to lay out in advance some broad explanations of its framework so that a continuous thread may be more easily traced and the place and relevance of the detail can more easily be understood.

THE NATURE OF THE CLAIMS

The plaintiff ("BUL") was incorporated to conduct a private university on land owned by the first defendants and subsequently mortgaged to the second defendant ("the Bank") which represents a group of Japanese banks that were creditors of EIE International Corporation ("EIE"), a Japanese land development company with international activities.  BUL’s incorporation was the result of a joint venture entered into between Bond Brewing Investments Pty Ltd and Bond Corporation Holdings Ltd (together compendiously referred to as "Bond") on the one hand and EIE on the other for the development of a large area of land, on part of which the university was then established.  It still occupies the site.  The first defendants were respectively owned by the joint venturers and together were used, among other things, as the land-holding vehicle for this purpose and the conduit for funding loans made to BUL.

Because of Bond’s incapacity to contribute to mounting costs of the venture due to its own financial stress, its interest was bought out by EIE in 1992 with funds supplied by the Bank on security over the first defendants and their assets, including the subject land.  As the result of EIE's default in meeting its obligations under the securities held by the Bank, the latter appointed receivers to the first defendants, and they have arranged to sell the land to the University of Queensland.  This will threaten BUL with ejectment unless it can make other arrangements with that party.

In order to forestall this situation, it claims against the first defendants to be entitled to a ninety-nine year lease, or its equivalent in occupation rights, and seeks to enforce this by equitable remedies, principally based on proprietary estoppel or constructive trust.  Alternatively, it claims damages under the Trade Practices Act or, in effect, restitution based on unjust enrichment of the defendants because of the sums outlaid by it in the formation and conduct of the university, the benefit of which, it says, will accrue to them if BUL is forced to vacate this land.

It is also claimed that as the result of the Bank's assumption of EIE's fiduciary duties, it inherited the obligations of the first defendants towards the plaintiff and/or that by its own conduct it directly became bound by similar obligations; and that its title as registered mortgagee of the land is subject to an equitable interest arising from those duties and obligations to the plaintiff.

The defendants deny that the conduct of any such party, in its proper context and limited to the true facts, can amount to the necessary promise or representation that would support the equitable and other claims made, that there was any relevant reliance by BUL on the alleged promise or representation, or that it suffered detriment.  Alternatively, they argue that if a remedy be granted, it should be limited to monetary compensation, preferably set off against BUL's admitted debt to them of $94,297,221.11.  Further in the alternative, they raise the principle of proportionality, that is, that the relief sought by the plaintiff is out of all proportion to the detriment alleged to have been suffered as the result of the alleged conduct.  They also deny that any equitable lease or its equivalent could have come into existence, having regard to the uncertainty of its major terms.  Further, or in the alternative, they point to BUL's significant delay in its action, during which it has obstructed their attempts to sell the land and then has stood by while the Bank's receiver conducted the sale, in which BUL itself was an unsuccessful bidder.

Limgold, or alternatively the Bank as its assignee counterclaims for the repayment of the  debt which BUL admits it owes but which it claims is not yet due and payable because of the effect of a deed of subordination which also suspended BUL's obligation to repay the debt, or alternatively because of the original terms of the loans.  The Bank claims that under the terms of the deed, the subordination and suspension have terminated and that under the terms of the original loans the debt has become payable immediately.  In the alternative, if the deed permits the loans to become payable at once, BUL seeks rectification of it on the ground that it conflicts with the terms that had been agreed.

BRIEF HISTORICAL REVIEW

The evidence  is heavy with complex detail but the general stream of relevant facts is fairly well defined.  It is desirable to commence with a brief outline of the history of events and of the parties' relationship so that in the next section the detail with accompanying observations may be properly understood in the total context, which is essential in this case.

Prior to 1987, Bond and EIE together acquired a large area of vacant land at the Gold Coast in the name of the first defendants with the intention of fostering the establishment of a university on part of it and then selling the remainder as a residential subdivision at a premium generated by the university's presence.  They were to be further reimbursed for their outlay on the campus land and buildings by selling it to a public investment trust after granting a lease to BUL.  The return on the trust's investment was to be the income from rent paid at a commercial rate from the commencement of the lease.  The substantial costs of the buildings were to be met from the funds generated by the sale, so that they were not to fall on the joint venturers' own resources.

To this end some independent persons were recruited to the venture to assist in the establishment of the university and BUL was incorporated on 12 February, 1987.  In the course of this stage of development, statements were made to those recruits about the intended permanence of the university's existence and its presence on the site under the venture scheme.  Its funds for its rent and its operational costs were to come from its earnings and donations from other sponsors, but plainly in the formative years that would be insufficient.  In the first two or three years of its establishment it was to receive loans from the proceeds of the sale of the land to the trust.  This scheme failed, so the plan was changed and the funds for its outgoings, including rent, were to come from its own independent borrowings.  This plan also failed, and it had to look to the joint venturers indefinitely for operating funds.  Nor could it pay any rent when after occupying the site during a period of establishment it opened on 15 May, 1989 with an enrolment well below the figure projected in its planning stages.

The failure of these plans not only threw these burdens on the joint venturers, but it also meant that they had to find from their own resources the cost of the expensive buildings on the campus amounting to about $200m., which had not been part of their anticipated outlays.  They planned to recover these and the cost of the campus land by selling it to an investor, subject to a lease to BUL, but it could not enter into a commercial rent arrangement that would justify a purchaser's investment.  Soon after, Bond began to suffer from a cash shortage that turned rapidly into financial disaster and it was unable to contribute its share of any of these costs.  From 1990, because of its financial inadequacies EIE too was placed by the Bank under some management supervision that later became much more intrusive and intense because of its poor performance.

By late 1990 Bond, still unable to subscribe any funds to the venture, was threatened with receivership that would have terminated the whole venture, including the university.  After protracted negotiations EIE was obliged to buy out its interest in order to save the  project, but this was not completed until January 1992.  Its own difficulties impeded its raising long-term finance for this purpose and to enable it to proceed with the purchase, so in order to sustain vital funding for the university, the Bank finally provided it with the necessary support  This led to its granting the Bank various securities, including a mortgage over the subject lands and a debenture over its holdings in the first defendants.  In the meantime BUL had lodged a caveat against the land to protect its interests.  The Bank and EIE denied that it had any interest but after EIE and the Bank had made it clear that it would get its lease, the mortgage was registered on 27 October, 1992, but expressly subject to any prior interest of BUL, and the caveat was allowed to lapse.  A second mortgage in favour of the Bank was subsequently registered.  In the meantime, with the Bank's support EIE continued to fund BUL's operational expenses.

There had been assurances to BUL by the joint venturers of their willingness to grant it a long-term lease and to allow concessions because of its inability to pay rent, but it well understood that this was subject to an implicit proviso that the benefits would be limited to what the joint venturers could reasonably afford to provide.  It knew of their respective financial situations and of the further stress of its own calls on their resources, and it knew that the assurances were given in the context of various schemes that the joint venturers were continually devising to try to achieve a successful outcome for all.  This included the scheme under which the lease would be granted with suitable concessions but so limited that the property could be sold at a commercial price that would bring them some financial relief.

Significantly, it also unequivocally acknowledges that to the end of the transaction the joint venturers genuinely attempted to fulfil their assurances.  This is borne out by the evidence.  Apart from some delays because of the intervening uncertainties produced by the financial crises of the various parties, from 1989 they, and later EIE with the concurrence of the Bank, tried conscientiously but unsuccessfully to formulate a suitable lease which would have been granted.  The obstacle was the deep uncertainty of the extent of rent concessions that BUL would need, and whether EIE could reasonaly afford them.  Unfortunately, tax problems associated with its plan to provide concessions also interfered with this.  The concession that had to be provided was not merely the cost of the rent foregone at the time.  The grant of a lease with indefinite concessions would have severely reduced the value of the asset that it needed to sell at a reasonable price to help to meet its debts.

These were good reasons why the matter remained temporarily in abeyance but EIE, with the Bank's approval, continued to investigate ways to provide the lease.  In the meantime BUL was permitted to continue to occupy the site and no rent has ever been paid, even to this day.

In 1993 after some change in the personnel controlling BUL, a new attempt was made to grant a lease on such terms and with such concessions as would be commercially acceptable to a purchaser but  affordable to BUL and then to sell the land.  After studying its financial state EIE, with the Bank's approval, proffered to it a thirty-year lease of a reduced area at an affordable rent payable in arrears and after a two year rent holiday which was to begin after it had occupied the premises rent-free for over four years.  BUL rejected offer and its demands excluding compromise led to an impasse.

Soon after, EIE's poor performance of its obligation to the Bank led to the latter’s withdrawal of support, and it lost its power to grant any lease either with or without the concessions that BUL would have needed.  The Bank acted on its securities, leading to the sale of the land to the University of Queensland, but not until lengthy negotiations with BUL had proved fruitless.  In those negotiations, BUL raised the brief suggestion of a claim of right to a long-term lease on grounds that had no foundation, but did not accept an invitation to substantiate it and, except for vague allusions to that claim, conducted its negotiations along other lines.  It refused to provide its financial papers to allow the Bank to see whether negotiations were worthwhile and it temporised on the payment of rent for its occupation of the land.  It was also very obstructive of the Bank's receiver.  When he put the land up for sale, it became a bidder.  When the completion of the sale to the University of Queensland was imminent, it then commenced this action.

It should be stressed, though it will not be constantly repeated, that from the beginning, it was plain from the nature of the enterprise, the establishment of a university, that all the participating parties intended that it should occupy the proposed site for a long time and that long tenure would be granted.  Whenever the subject was adverted to, particularly in isolation from other considerations and more especially at times of mutual encouragement, this aspiration was clearly expressed in such terms, or at least implied.  Consequently, whenever the proposed lease was mentioned in similar circumstances, it was spoken of in terms that assumed lengthy tenure.  On some occasions, that result was taken for granted because it was the genuine intention of all parties, and they never resiled from it.  EIE with the Bank's approval was still trying to do that at the end.

However, and this must be equally stressed, this goal was understood to be subject to conditions which, though implicit, were realistic and well understood.  These changed with the changing schemes to provide the lease that were pursued as each was defeated by circumstances.  The primary condition was that the joint venturers were to recoup their outlays on the university land and buildings, and for this result the lease had to provide for a commercial rent.  When it became obvious that extensive concessions would be necessary, the joint venturers indicated that they would provide them but again it was clearly understood that they would provide only what they could reasonably afford.  That level would change as their fortunes faded and Bond departed the scene, but in the end EIE, with the Bank's concurrence, offered a lease with the best terms that it reasonably could.

The university now has no registered lease nor even an agreement for lease.  It is because the land is to be sold free of any interest except its acknowledged tenancy at will that it has brought these proceedings for the enforcement of its present claim to the substantial interests described above.  In effect, the claim is that although with genuine goodwill the joint venturers tried to provide it with a lease and actually proffered one, this was not sufficient, and the expectations on which it relied in setting up its university entitled it to a long-term lease, even if that should be unreasonably financially detrimental to EIE and its creditors.  Its difficulty lies in its emphasis on the intended result, which is not in issue, rather than on the conditions attached to it, which, associated with its rejection of the lease that was offered, were the reasons for its frustration. 

It should be emphasised that the issue is not whether there was a promise of lengthy tenure or an assurance of substantial concessions, for both were offered to BUL and refused.  It is whether the promise extended to an immutable ninety-nine year lease with all the rent concessions that BUL might be found to need, irrespective of their cost to the joint venturers and of any harm that the grant of such concessions might do to them; or whether these were subject to an implied condition of reasonable affordability, and if so whether the lease that was offered was sufficient because of this or in any case.  Alternatively, BUL claims that EIE could have afforded the concessions it required, particularly as it had the support of the Bank.

In respect of BUL's indebtedness of $94m., because of its concerns over its large indebtedness and doubts as to the terms of repayment that had never been formulated, in August, 1989, it demanded and obtained from Limgold as the nominal provider of the loans a deed which suspended BUL's obligation to repay, and subordinated the debt to all other debts of the company until the deed's termination was triggered by one of three events.  The trigger that became relevant was BUL's achievement of a surplus as defined in the deed.  There is contention as to whether that has occurred, and if so, when, and as to its consequences.

DETAILED HISTORY AND DISCUSSION

Unless it is more fitting at the time to refer to a particular person who will then be identified, it will be convenient to refer compendiously to the representatives of BUL, Bond, EIE and the Bank simply by their respective principal's name when their knowledge or conduct is such as to bind or affect it.  Similarly, except where the context demands reference to the first defendants expressly, they will be spoken of as though they were the joint venturers or EIE, depending on which had control of them at the time.  The reason is that the representatives of the principals spoke of relevant matters as though they were themselves the owners of the land or the supplier of funds and without reference to the first defendants as the instruments for their actions and promises.

Because of an approach adopted in the plaintiff's case, it is desirable to give a prefatory word of warning.  In this analysis, any tendency to consider the welfare of the university alone as though it were the only or even the prime purpose of the venture should be avoided.  As all those involved knew from the beginning, and as BUL itself stresses in part of its argument when it suits it, the university project was only part, albeit an integral part, of a total venture.  Its importance to the success of the financial purpose of the venture was a factor that the representatives of BUL could validly, and did, have in mind when assessing their position.  Significantly, it also means that it shared the risks of the venture, for it had much to gain from it and was not above and removed from its vagaries, although its attitude as betrayed in its argument would suggest otherwise. 

The most obvious of these risks included changing economic forces and, if they proved adverse, the financial decline and fall of the joint venturers that would deprive them of their capacity to provide indeterminate gratuitous benefits to the university as a preference over their own creditors.  Just as the entrepreneurial prominence of the joint venturers would naturally lead to an expectation that their philanthropy would have some magnitude in good times, so it would be wrong to treat these risks as irrelevant to issues affecting BUL's legitimate expectations.

Equally, when the details of the project were first revealed, it was understood that the recoupment by the joint venturers of their very substantial outlays on the university through a commercial sale of the campus lands and buildings was to be a significant contribution to the success of the venture, and this required that a commercial rent be paid under the lease.  Consequently, this factor, as well as their philanthropic attitude towards the university, must be included in the circumstantial background when construing their statements.

As a matter of balance it should also be remarked that in addition to the anticipated profits, the purpose behind the venture included the public relations benefit to the joint venturers from setting up a substantial educational institution, the prestige associated with it, and probably some satisfaction in creating it.  Conversely, its failure would reflect badly upon them.  This factor was influential in a number of the dealings which occurred later, particularly when BUL made demands on the joint venturers for benefits that, due to their deteriorating financial condition, they were unwilling to provide.  In essence, their profits and financial well-being were not the only factors in the background context in which their assurances were given, but they also had an important role.  It is convenient now to turn to the details of relevant events. 

In 1986, the companies controlled by Mr Alan Bond were apparently prospering, and for various reasons he wished to be associated with a work of some prestige as part of his entrepreneurial activity.  At the same time EIE had very substantial dealings in land holdings in Australia, and as a foreign entity it was concerned about the local response to this and wished to make some gesture of goodwill to deflect it.  In a multi-purpose plan the two groups entered into a joint venture for the subdivisional development of a large area of residential land at the Gold Coast.  It is agreed on all sides that the various features of the plan were mutually interdependent.

It proposed that part of the land be used for the establishment of the Bond University, the first private university in Australia, with ancillary facilities.  In addition to making the land available, the joint venturers were to arrange for the erection of the necessary buildings on it, provide a lease to BUL, and then sell it.  Another part of the land was to be dedicated as a commercial scientific research park, which was to be separate from the university but intended to work in co-operation with it to their mutual advantage.  The third element of the plan was the subdivisional development of the remaining residential land, which was to be sold at a premium because of the ambience created by the university.

For the realisation of the university aspect of this plan, an Advisory Council headed by Professor Watts was recruited.  It was the predecessor of what became the University Council and the BUL board after the company was incorporated in February, 1987.  Its first meeting was held on 30 September, 1986, though Professor Watts had become involved before then.  Although it makes no difference to the result, no action taken by any person associated with it as the result of an expectation generated in this period could have been the foundation of any present claim of BUL, for it was non-existent at that time.  However, implied promises and assurances made to them acquired a certain indirect force because the same persons became the first members of the University Council and the company board after incorporation, and BUL can rely on an implied ratification of what had earlier been said to them.

As it turned out, further assurances confirmed what had gone before, but equally they were not unconditional.  That they were accompanied by the genuine goodwill and support of the joint venturers was what gave them their greatest strength in their effective encouragement of BUL.  What was presented in evidence as a series of assurances of a lease and of necessary concessions given without express reference to any implied limitations were in fact always made in the general context of the scheme that was being undertaken at the time towards that result, and they were always given and understood to depend on the success of the scheme and on their reasonable affordability to the joint venturers.  The oral evidence, the contemporaneous written material and the parties' conduct all point to this contextual reservation even though it was not expressly mentioned.  That is why the incidents of the lease that was proposed from time to time would vary in accordance with the scheme that was currently under consideration in the joint venturers' attempt to find a suitable answer. 

As well as responding to the assurances given by the joint venturers there may well also have been a commitment by BUL to complete what had been begun by the Advisory Council, a commitment that was not dependent on them but operating collaterally.  The alternative to its continuing with the process would have been the abandonment of the work that had already been done by the Advisory Council and Professor Watts.  But these components all combined to encourage BUL to proceed.

It would be wrong to treat the assurances artificially as distinct from the scheme of which they were part, and indeed BUL acknowledges that this is so and that its expectations varied according to the exigencies of the situation at the time.  However, it claims that there were some fundamental features that remained constant and were not to depend on the fortunes of the occasion, though it never explains why they should be different from other features.  The  length of the term of the proposed lease was one of these.

During this early period when the 'vision' of the joint venturers was explained to those recruited to help in the establishment of the university, much was said in broad and non-specific terms as to the intention that it be an enduring institution located on that site, clearly implying that it was intended that it have long tenure.  However, this did not exclude the further implications referred to above, that the project was part of a larger enterprise that could well involve risk, or that the long-enduring stability of the university was a goal that was aspired to rather than a result that was promised, or that the proposal for long tenure would be conditional upon the university's capacity to accept its terms, subject to such concessions as the joint venturers could reasonably afford.  Consequently, when the details became specific and the question of BUL's capacity to afford the high rent that was set for the lease caused concern, the matter of concessions was spoken of in terms of discretionary philanthropy by the joint venturers and not as of right for BUL. 

This series of brave statements of extravagant aspirations of greatness and of the intention to pursue them was the first basis of the claim of reliance by those who undertook the establishment of the university, including Professor Watts, who was to become the founding Vice-Chancellor.  He was of a somewhat entrepreneurial disposition himself and naturally had a personal as well as an altruistic interest in the university's welfare and quickly knew the developing details very well.  There have been suggestions that the university Councillors relied on such vague statements to give them an assurance of permanence of occupation of the site, but they were not naive people, and they appreciated the substance of what was proposed. 

More particularly, they did not believe simplistically that because the joint venturers were of very substantial status in the business world, their benefaction would be unlimited and entirely altruistic.  While they were entitled to rely on the honesty of the joint venturers in making them, they knew very well that these implied assurances were not absolute and unqualified and that there were limitations on what their benefactors would and could afford to provide for the project.  They understood that apart from their encouragement and goodwill, the principal contribution by the joint venturers to the university project did not involve expense so much as their facilitation of it by organisational experience and their backing of it as parties of wealth and power whose support would attract to it the further support it might need.  It is quite possible and even likely that they did not anticipate fully how serious the limitations would become as circumstances changed.  The case suggesting that they were gullible people who accepted these statements in their highest possible optimistic sense and without any sensible qualifications does not do them justice and is contrary to their performance as witnesses. 

A number of BUL's arguments refer for support to the benefit to the joint venturers in the sale of the surrounding residential land from the premium that would be attracted by the presence of a prestigious university nearby.  This, they say, was so fundamental to the scheme that the survival of the university was correspondingly fundamental, and this implied in turn the necessity of the grant of long tenure that was seen as essential to its long-term future.  It is true that this was an essential part of the project under the only plan that was pursued, while it lasted;  but it is wrong to say, as BUL sometimes implies, that this was the only plan that could have been pursued, that this benefit from the university's presence was the only source of such planned benefits, or that the joint venturers had no expectation of recovering anything directly from their heavy investment in the campus.  As it has been explained, the recoupment of their outlays on it was also to come from the proceeds of the sale of the university land and buildings. 

Other recoupment was to come from profits and incidental benefits to related companies from ancillary activities relating to the university, such as management companies controlling student accommodation, and the profits from the research park.  These tend to favour the above argument as to the university's place in the scheme, but there is also the point that the financial benefits from the project were of equally major importance so that the welfare of the university was certainly not the only nor even the main consideration.

Consistently with this, the heavy cost of the buildings and some temporary financial support of BUL by way of loans for rent obligations and operational costs were not to be provided from the joint venturers' own resources but were to be lent from the proceeds of the sale of the land which was to be paid from the sale of the units in the public trust.  The result of all this was that although they would themselves invest in the public trust that was to acquire the campus lands, the joint venturers were to have little net cost or depletion of their own resources from their material support of the university and if anything hoped to profit by it.  Although there was to be some philanthropy and considerable genuine goodwill, it was not a case of grand endowment with an altruism that put the university before the interests of the joint venturers themselves.  That is why the advances that were to be made would be by way of loan rather than gift, and residual questions such as interest were left open.  This is the context in which the assurances of a lease and of rent concessions and funding were given and received.

The public trust was to attract subscriptions as an investment.  Its income was to be the rent payable by BUL on a long-term lease from its commencement at a rate sufficient to provide a commercial return to the investors.  It was recognised that it would not immediately have the financial capacity to pay this rent or other operating costs, but, as it has been mentioned, it was planned that for the first two or three years, loans would be made to it by the joint venturers from the proceeds of the sale to the trust. While they would be fully compensated for their outlays, and would profit from the other features of the venture, the cost to them aside from direct donations made at their discretion would be the deferral of the repayment of moneys lent.

At first the scheme was non-specific as to the terms on which BUL would occupy the campus except that it was strongly implied from the circumstances and expressed in general discussion between the joint venturers and members of the University Advisory Council and its successor, the University Council, that long tenure was intended.  There was abundant evidence of this understanding, which, so far as it goes, was never challenged in the defence case.  It was limited to a denial that any absolute assurances of a lease were given and alternatively the uncertainty of the terms of the proposed lease.  At first its structure, particularly on financial details,  was vague and always understood to be on terms that were to be devised.  The volume of evidence concerning assurances given as to its duration does not detract from its provisional nature, which depended on the settling of its other terms. 

One basic criterion was that, subject to some philanthropic consideration by the joint venturers, it was to be within the financial bounds of the scheme of the joint venture.  Despite the confidence that was felt, and expressed, that it would come about, the proposed lease was certainly not a simple, unconditional and totally discrete arrangement divorced from the benefits, risks and constraints of the scheme.  The general optimism could not have disguised the risk behind the venture that was to have for BUL the prize of a fully functional prestigious university, if it succeeded;  and the joint venturers never undertook to provide that result unconditionally at their own expense.

It does not advance the resolution of the real issue that, as BUL says, "the joint venturers were involved in telling third parties that BUL would be entitled to long term tenure".  In this proposition its unjustified elevation of an intended result into an entitlement may be overlooked because it makes no difference in substance to the result.  It was known to its representatives that a number of matters were being represented to various authorities as an established position when it was only the intended course of action if and when other interdependent parts of the total plan were successfully achieved. 

Indeed, in some cases the BUL representatives were themselves parties to the statements, which they knew were not entirely accurate but were a true representation of the part of the intended plan that was relevant to the discussion in which they were made.  Implicit in this was excuse that the intended result that was represented as an accomplished fact was so stated on the assumption that all would proceed according to plan.  That was Ms Nosworthy's excuse for this and it is quite understandable, but it is also the answer to BUL's argument that the joint venturers acted in the same  reasonable way.    

If by this evidence BUL intended to show that the provision of long tenure was part of the parties' genuine intention, it is correct and not an issue.  If it is intended to suggest that it was a discrete and unconditional intention that was to remain unmarked by any disappointments as to other features central the overall plan, that is not what was said and it is unacceptable.  It would fail to recognise or to accord sufficient weight to the inherent conditions and contingencies that it knows clearly attached to and were an integral part of the intention. These were not relevant to the discussions with the third parties referred to, and consequently their omission was meaningless.  The limited statements of intention as such were true so far as they went, but the parties knew that they were also provisional only and  this has a decisive effect on the implications that can be drawn from them in isolation.

In this context they could not have been interpreted by BUL representatives as implied promises that were independent of the scheme or the inherent conditions to that part of it.  Indeed, the contrary was clearly the case, and any evidence to the effect that the joint venturers intended an unqualified promise or the recognition of absolute entitlement is at best rationalisation by witnesses who wish to advance BUL's cause.

While accepting in argument that the statements referred to part of a scheme that failed, BUL  argues that together with later statements and actions of the joint venturers they promoted "the idea that BUL was entitled to long term tenure and was not of a temporary nature".  This artificially converts a continuing good intention into an ‘entitlement'.  Aside again from this unjustified reference to entitlement, it is undoubtedly true that by their statements they made abundantly clear their continuing intention that BUL's long-term future would be secured by the grant of a suitable lease so that it would not be merely a transitory being.  But this was always within the context of discussions as to plans and intentions relating to them, and was understood, if not fully appreciated as to its significance, to be subject to the financial limits of the scheme.  This included the capacity of the joint venturers to afford any benefits that were necessary to that result.  Unfortunately, this condition of affordability naturally continued throughout the transaction to qualify that intention, and had the effect of limiting the concessions that could be offered.

The difficult task of trying to frame a lease in terms as appropriate as possible to the original aspirations of the parties but with adjustments suitable to the reduced circumstances had begun in March 1988 with the drafting of proposed terms.  The draft (Ex 19) spoke of a lease by the public trust of the academic buildings, but possibly not of the retail and commercial parts of the campus buildings, for ninety-nine years with an option for a further similar period.  The rental was to be 10% (in later proposals this was to be reduced by donations in the early years to 6.5%) of the capital cost from the commencement of the lease.  Although 10% was not set as a final figure, for that would have amounted to more than $20m. per annum, as events turned out the lowest figure discussed was always far outside the capacity of BUL to pay it, and that remains the position even now.

It was followed by a draft lease prepared by BUL's solicitors which was presented to it on 18 May.  It still had the proposed trustee of the public trust as the lessor, but it contained no details as to the area demised, the terms of the rent or the length of tenure.  This reflects the difficulty in finding a solution to the problem thrown up by BUL's incapacity to pay any reasonable rent in the definable future, if at all, and the joint venturers' known unwillingness to provide open-ended benefits.

When the draft was discussed in a Council meeting on 10 June, questions were raised by Professor Watts as to BUL's capacity to pay a rent that would reflect the very large capital cost of the extravagant buildings that were being built, and although the minutes of the meeting do not record it, he says that the Bond representatives gave an assurance that whatever was paid as rent would never put BUL's operation at risk (T95/23).  No doubt something along these lines was mentioned, but whether it was in terms of an assurance or merely of an encouraging prediction or a hopeful intention is difficult to decide. There is difficulty in distinguishing these close but significantly distinct messages in respect of unrecorded casual remarks that are not confirmed later with the principals as might be expected, and because of a tendency to rationalisation in the evidence of many of these matters. 

However, it is convenient to assume that it took the form of an assurance.  Again BUL presents this as absolute, but in its context it was clearly implied to be qualified by its affordability.  This is also established by the absence of any formal confirmation or even any written record or advertence to it, and by the complete absence of any implementation of it in the formal drafting that followed.  It was not even raised later in discussions as to the amount of rent that BUL might afford to pay, but this is consistent with its remaining as a tacit understanding similar to the understanding as to affordability.

Proposed Heads of Agreement along the lines proposed, but significantly without any mention of concessions, were assented to by the university Council on 16 June, 1988, and the relevant committee was authorised to develop a lease in accordance with them, but again because of the difficulty in knowing what BUL could pay by way of rental, nothing came of this until September.  Because of later mention of these Heads, it should be understood that it set a ninety-nine year term but although the rental was reduced, it was far beyond the level that BUL could afford, so various proposals were considered that ultimately led to a decision that BUL would seek very substantial independent finance. 

Bond's representative gave an assurance of support in respect of possible concessions.  This was a precursor of the more specific discussion that came much later when the prospect of BUL's obtaining independent finance became more remote, and it has limited value here.  It was made by Bond only, and was confined to a context as to very high rental rates as distinct from the subject of payment of any rent at all.  More importantly, Professor Watts understood this to be subject to the condition as to affordability, as he acknowledged.  The true position is probably that although he knew this, he did not properly evaluate the risk of Bond's failure and was content to rely on the manifestly genuine goodwill behind the gesture.

With this knowledge, however, it is unlikely that he understood the assurance as excluding any risk to BUL or as absolutely assuring continuing philanthropy without any limitation of duration or cost.  If he intended to convey that he had such an understanding, his recollection in this respect would seem to be unique.  Further, if the joint venturers had intended that, it could have been easily done by linking the rate of rent to the amount of a defined surplus in BUL accounts.  This was not done, and the simple explanation is that the assurances were manifestations of goodwill that were sufficient to act upon;  but they were also subject to the realistic qualification that Bond would do only what it reasonably could to aid the university.

His cognate claim of detriment from reliance on this assurance is also suspect.  He claims that in its absence he would have been able to call on 'corporate Australia' for sponsorship if BUL's financial position demanded it, but the success of such a call is very doubtful.  It is noteworthy that soon after at a time when BUL was in a serious funding crisis and his garnering of outside support would have provided it and the joint venturers with welcome relief, he did not do so.  Had he been able to obtain funds from any source, he would have pressed for them.  It is likely that despite any encouraging signs he had from other potential sponsors, BUL's close association with Bond would have been unattractive to them at that time, and that he knows it.

Because of the joint venturers' continuing delay in producing a set of terms, further draft agreement to lease and lease documents were prepared by BUL's solicitors in the following September, but again they did not show the duration of the term, the rent to be paid or the land to be demised.  Again, this merely shows the uncertainty inherent in the whole question at the time.

Because of the variety and inconclusive character of changing plans that were considered under proposals made by a financial adviser, it is difficult and unnecessary to trace precise details of the suggested arrangements as to the lease and rental accurately, but the following summary is close enough for present purposes.  It was during these developments that the parties first began to realise that the original plan  would have to be modified because the scheme for the sale of the campus to the public trust had proved patently unworkable and the joint venturers abandoned it in about October, 1988.  However, the process under the original scheme was not quite exhausted because the plan for BUL to obtain long-term independent finance that would accommodate its operational shortfall in its formative years and allow it to pay a suitable rent was mutually adopted.  It began searching for it early in 1989.  Though this was pursued for some time, it gradually became clear that it would not succeed, even with the assistance of EIE's good offices in the Japanese finance market.  Even then EIE continued to try to obtain it.

When BUL commenced its search in January, 1989, both it and the joint venturers were active parties in representing to various sources of finance, including government ministers and state instrumentalities, that a long-term lease was proposed which would require it to pay from its commencement the rent calculated on the capital costs of the land and buildings as described above.  Broadly speaking, that was the proposed plan.  Some went so far as to say that a lease had been granted, which of course was not true.  But the basis of the lease referred to was the payment of a rent of at least 6.5% of the capital value from the commencement of the lease, which was far beyond BUL's dreams unless it obtained the finance.

It is now suggested by BUL that it was really intended that even if long-term finance was found it was still to have the concessions and that the misrepresentation as to the rent payable would be corrected in the course of negotiations with any financier who might show interest. This explanation is unacceptable.  The assurance as to concessions had not gone that far.  If funding were obtained, the need for them would be overcome, and there would have been no reason why BUL should not have been required to pay  rent, for the recoupment of their outlays was certainly a serious part of the joint venturers' thinking at that time. Moreover, if the rent were immediately payable in the event of adequate funding, there would have been no misrepresentation to the people who were told that it would be payable. Apart from the issue of misrepresentation, if the rent payable was to be limited, there would have been a danger in overstating BUL's liability for it in such a presentation, for it might have thrown BUL's capacity to meet its obligations into serious doubt and deflected a potential lender before there was an opportunity to correct the representation. 

While BUL's case  promotes the importance of these representations that indicated that the parties intended that it should have a long-term lease, it finds it necessary to deprecate the importance of the rent tie to the lease that history has shown it could not pay.  In this way it suggests a distinction between its hope and expectation of being granted such a lease and the joint venturers' hope and expectation of receiving a commercial return on their outlays through rent or sale. 

The suggestion is egocentric and should be rejected, particularly as it is not supported by documentary corroboration or evidence of any conversations identifying such a distinction.  Indeed, the tenor of the written material is to the contrary.  The evidence supporting the suggestion is largely a present assessment of the past state of mind of the parties.  It may have been an egocentric view at the time, or it may simply be a retrospective misjudgment due to the joint venturers' supportive willingness in offering this limited relief.  It should be found that under this new proposal it was the general expectation that BUL would pay the stipulated rent from the commencement of the lease from this independent finance, subject perhaps to some limited temporary assistance from the joint venturers.

Although there is little evidence on the point, it seems likely from later events as well as the general circumstances that under the new plan the joint venturers contemplated following the thrust of the earlier one but with the difference that the land would be sold privately.  It was intended that a long-term lease to the university should be in place so that the rental would be a reasonably attractive return for the purchaser's investment.  However, the price for which it could be sold would plainly be affected by the amount of the rent and BUL's capacity to be a viable lessee, and so any concessions as to rent in the lease or uncertainty as to BUL's capacity to pay it would have reduced the expectation of a reasonable capital return from this source. 

At this time the conversion of this capital into cash would probably have been much more important in their financial crises than any comparatively small return by way of rental. So although there was no great urgency they probably felt the deprivation of a reasonable sale more acutely than the mere non-receipt of the rent for that period.  It will be more convenient to speak of their loss compendiously as the loss from any concessions that would need to be made, but the added and more onerous disadvantage was experienced also.

They did not immediately negotiate any sale to another investor, which would have been premature in the absence of a settled lease, but in an attempt to grant the lease they continued the line of investigation under which a commercial rent would still be payable but with affordable concessions.  Affordability became a more pertinent factor because of their own deteriorating financial position.  This was a very good reason why specific agreement as to a suitable formula that defined the concessions with some certainty was to be necessary.

Because EIE was working sympathetically if unsuccessfully to devise and present such a formula and probably expected that if it met the criteria it would be reasonably accepted by BUL, the specific extent of the assurance as to concessions never came up for discussion.  This was the practical consequence of the criteria controlling them, for EIE would need to know the amount of the concessions with sufficient particularity before it could assess whether it could afford them.

Uncertainty as to these impeded the progress of the negotiations as to the terms of the lease but they proceeded on the assumption that they would succeed.  The whole financial structure of the proposal had changed.  The joint venturers were deprived of the funds from the sale and they were faced with paying for the erection of buildings costing nearly $200m. and the funding BUL's operational expenses from their own resources.  This and other factors such as the university's own financial underperformance defeated any attempt to adhere to the original plan; but they investigated other means of carrying out their intention to provide a lease by other arrangements.

This is a reasonable example of the tie between the success of the project's schemes and the benefits that BUL was to receive to allow it to accept the lease.  The failure of the scheme supporting the benefits could not have left the arrangement to provide them untouched.  BUL acknowledges the reasonableness of this proposition but argues that there were some features, such as the actual grant of a lease and the length of its tenure, that were constant throughout the various schemes and not subject to abatement or alteration by the failure of the respective conditions or at all.

It is a feature of BUL's case throughout that while it correctly notes the beneficial changes of plans, such as those relating to rent that were made to meet its failure to attract independent funding or an adequate enrolment, it still relies on the unaltered continuation of the factors in the former scheme that favoured it, that is, the intended existence and length of the lease, as though they were to be absolutely unaffected by the change.  Consequently, it is prepared to change its definition of the goal so that it becomes the grant of the long-term lease with the necessary rental concessions, but it is not prepared to recognise or give sufficient weight to the unfavourable factors that went with it in the change, such as the affordability of the concessions. This enables it to disregard their adverse consequences to the joint venturers.

Though some features remained superficially constant because they were important to all of the changing schemes as the goal to which they were directed, it is difficult to understand how they should have had an ultimate inviolability against disaster, or why, though keeping their quality as the result to be achieved if reasonably possible, they should not have been modified by way of reasonable compromise to meet other equally important considerations. The grant of the lease was not the only item of critical importance to the whole scheme, and the proposition that it should remain untouched while the others should bear the whole of the unexpected burdens and carry the whole of the risks is not entirely balanced. 

The alternative is that some compromises, devised with goodwill and with a proper recognition of the importance of these matters to the respective parties, be made in suitable terms so as to reach a fair and reasonable result, but this is rejected by BUL.  It wants primacy of its interest over the competing interests of the joint venturers and their creditors and total or near-total immunity from compromise for its claim to a ninety-nine year lease and says that the financial harm to EIE of providing the rent concessions is immaterial.  This is inconsistent with the whole tenor of the relationship.  It was one of philanthropic support and not one of obligation, even to the extent of the benefactors' own financial harm.

Taken with the provision and subordination of the large loans that were made, such an entitlement would have provided BUL with the virtual certainty of a massive benefit while insulating it from any risks of the venture.  Conversely, if as it happened there was an economic turn for the worse and the joint venturers were put in financial jeopardy, it could have caused the joint venturers grave harm at a time of their financial vulnerability.  This would have been contrary to any underlying understanding that BUL must have derived from the nature of the enterprise or what was said, yet it was the recurring assumption of many of its arguments.  The implication that BUL was to share in the risk of the venture was much of the same order as that which it relies on relating to the long tenure expected for a university.  It was only that in the beginning the risk appeared negligible.

It is true that the goal of a long-term lease had some special enduring quality so that the parties continued to work towards it, but with the changes in the means of achieving it came a subtle difference.  Unless some other means could be devised, the need to provide unassessable but obviously substantial concessions and the ability of the joint venturers to afford them made the prospect of long tenure, or of any lease at all, less secure, but the assurance of the genuine endeavours of the joint venturers to try to achieve it remained.

It was generally understood, though not specifically expressed, that this necessary radical departure from the original plan was designed to overcome the consequences of BUL's financial failure.  This was largely not its fault nor was it the fault of the joint venturers who were doing all they could to help it.  It was also understood that this heavy burden cast on them had not been part of the assurances upon which BUL had undertaken the venture. The joint venturers would not have been in breach of any commitment if they had simply declined to provide funding or any rental concessions of the magnitude required or to erect the campus buildings from their own resources, and the force of external factors would have terminated the whole arrangement.  Their adoption of a new scheme did not mean that all former assurances were totally abandoned, but equally it did not follow that their pursuit of the same goal as before meant that the conditions were to remain the same.

BUL's alternative argument for total freedom from any conditions as the result of the special quality of the constant goal is that the paramount purpose of all this activity was to provide it with a lease, and that the concessions that were finally found to be necessary were merely a means of adjusting the feature of rent, which was insignificant to entrepreneurs of the stature of the joint venturers.  Again this misstates the emphasis of the relative values applying.  The grant of a lease was certainly the point of the exercise but, as it has been explained, the joint venturers' own commercial wellbeing was of the same order of importance, the more so because of the very large cost to them of what they had already given.

As it turned out, because EIE sought to fulfil this philanthropic goal as far as it could, a substantial lease with concessions was later offered, but it was rejected on the basis that it was not enough. The difficulty with BUL's justification of this lies in this attempt to make the grant of a long-term lease at any cost to the grantor an unqualifiable imperative of the arrangements between the parties, totally independent of the financial state of the scheme of which it was a part and of the capacity of the grantor to afford it.  That was not the way in which it was understood at the time. This concept of affordability will be discussed when its significance becomes clearer.

The joint venturers turned their attention to devising the terms of the lease that would provide BUL with the concessions necessary for it to be able to accept it.  EIE was having difficulty in obtaining an assurance of tax relief in respect of the transaction that would have made the concessions more affordable, and it seems to have taken the view that before they could be finally embodied in a binding lease, their extent had to be reasonably foreseen and definable in order to enable it to assess whether it could afford them.

Though it had always been an implicit element of the provision of financial assistance or concessions, it was at this later time that the factor of affordability became more germane in a practical way and of most importance in the history of this period.  A lease with large and particularly indeterminate concessions would have had a seriously adverse effect on the sale value of the reversion. As this represented a saleable asset as a means of recoupment of large outlays and satisfying its creditors, any serious depreciation in its value in this way had to be evaluated and treated cautiously.

With the frustration of the original plan, while the joint venturer's persisted with their  intention to provide the university with a ninety-nine year lease, the most relevant part was the conditional nature of that intention.  Their continuing genuine desire to find a way to provide a lease is acknowledged, and they tried to do so. There was however no talk of BUL's entitlement to a lease.  That would have introduced an alien element into the atmosphere of co-operation. The grant of the lease was part of the prevailing line of positive discussion so that, given the goodwill of the joint venturers, things were said and actions were taken in the optimistic expectation that the necessary conditions would be fulfilled and it would eventually be forthcoming, but they did not imply any absolute element.

BUL's unquestioning co-operation in the various attempts to find a way to give it a lease was in accordance with what would only be expected in the circumstances.  It entered into arrangements that were not strictly orthodox because, given the genuineness of the joint venturers, it was assumed that it had a lease when that was only their intention. So when a lease of part of the commercial area of the campus had to be provided to Westpac, in anticipation of the result it was decided to have BUL enter into the transaction as sub-lessor under an agreement for lease.  This was a convenient way of doing business in a period when matters were unresolved so that the formalities could be not be strictly observed but goodwill led to reasonable optimism of the result that was assumed.  It was based on the common confident expectation of a successful outcome.  There was a reasonable implication that if in the end a suitable lease could not be arranged, these premature anticipatory actions, such as the grant of sub-leases by BUL, could be reversed or re-adjusted.  For example, if BUL had accepted the lease later offered by EIE, then everything would have fallen into place, but since it did not there has been no suggestion that these affairs are not adjustable.

This was not an unequivocal expression of any certainty of the outcome.  If such an interpretation were genuinely held by BUL, it would have completely misinterpreted the joint venturers' actions that merely reflected their good intentions.  These were the equivalent in principle of their allowing BUL into rent-free occupation despite the absence of a lease.

In any case, in the factual context in which they were made the implications to be drawn from these statements and actions were at their best equivocal as to essential issues, particularly the condition of affordability, and were probably well understood to have been provisional only, though supported by genuine goodwill.

Conversely, the Bank's argument that the joint venturers' willingness to grant a lease was understood to be dependent on agreement as to the terms of rental and other details is not quite a correct version of the position because it too is incomplete.  They undertook to grant the lease and to that end to provide the concessions that would enable BUL to accept it, providing they could reasonably do so.  The difficulty was not a matter of agreement because the parties were generally agreed as to what was intended.  It was a matter of finding the result that met all the competing conditions.

As it will be seen, in 1993 when BUL's income improved and BUL's capacity to pay rent in the future could be reasonably anticipated, Mr Ogawa, an EIE employee who was highly motivated was able to produce a set of terms  that reasonably did so.  The failure to finalise the lease stemmed in part from BUL's disregard of EIE's reasonable protection of its own interests in the critical state of affairs of the time, but this does not mean that it was not in accordance with the full understanding that had been engendered. The Bank's further argument that the terms of any such understanding were too vague to found a right in BUL will be discussed later. 

BUL's answer to this is that the formulation of and agreement as to the rent was not a precondition to the grant has validity to a point. There was no difficulty in agreeing as to the appropriate measure for determining  the rate of rent, which was to be such as to enable BUL to survive.  That was in accord with simple commonsense as well as the joint venturers' goodwill, but there was the other dimension.  The joint venturers had to be able to afford the concessions that would allow that rate, and the first answer did not mean that they would be unlimited or more than could reasonably be afforded.  There was no uncertainty as to the way in which the rent should be fixed but whether the uncertain amount of the concessions could be afforded.

In further support of its claim that agreement was irrelevant to EIE's obligation, BUL refers to the undoubted special relationship between these parties and from this draws the reasonable inference that their arrangement was different from the usual case where agreement is necessary to a binding obligation.  This special relationship of support and co-operative philanthropy certainly had an effect that distinguished this from the usual case where the parties negotiate at arm's length and where more formal manifestations of conditions and qualifications, of the acceptance of specific obligations or the grant of rights, and of the fact of agreement would be necessary.  However, the proposition conflicts with BUL's other proposition that because limitations on the assurances of the joint venturers were not specifically expressed or mentioned they did not exist or had no force.  This will be discussed later.  It is certainly true that there was a special relationship.  In addition, estoppel does not depend on any agreement.

Whatever the basis of a cause of action of this kind, the obligation of the person responsible for the promise or representation does not exceed its proper content  Any conditions or limitations implied through that same special relationship are as essential to that content as the promise or representation itself.  Here, it was known by implication and accepted, though it was not expressly stated and agreed to, that the undertaking was to make only such concessions as could be afforded.  Because of the good faith of that approach, BUL is correct in its proposition that express agreement in specific terms was not seen as an issue.  But since the mutually satisfactory level of concessions had to be resolved before a lease could be viable, and they could be determined only in terms of a rental and other terms that the parties accepted as conforming with the total arrangement, it is not to the point and not entirely correct to argue, as BUL does, that because no witness said that the formulation of the rent was a precondition of the lease, it was not so.  In the special relationship that existed, it would not have been necessary to say it, and it probably would not have been said.  However, this point is an irrelevant distraction.  This is different from the case where a transaction fails because the parties could not agree on the criteria controlling the result.  If BUL had reciprocated EIE's goodwill when a suitable lease was offered, their failure to agree on the implementation of the criteria would have merely established its impossibility at that time.  The rejection of this argument of the Bank is of little import.

When these changing events cast uncertainty on the prospects of the concessions, the joint venturers, and particularly EIE, were slow to produce an alternative formulation that could resolve the conflicting interests.  One further problem that must have faced EIE was Bond's default in its contributions to the venture and especially to the large and unexpected burdens of providing indefinite funding for BUL and of paying for the construction of the university buildings.  In EIE's own state of financial difficulty it must have been uncertain as to what concessions on top of these it alone could afford to undertake.

Although BUL's financial uncertainty was a serious contributor to the uncertainty and it had no solution except its request for concessions, it pressed to have the lease granted.  As practical and intelligent people, its representatives' awareness of the rumoured problems of the joint venturers made them anxious to have this security.  It is likely that they recognised that the original scheme had failed, but they must have been encouraged by the continuing goodwill of the joint venturers in pursuing alternative means of providing it through new  strategies and by the assurances of support that they received, but they still knew of the risks.

There could also have been a further reason for delay, though it was only of minor and temporary importance.  Because of its failure to meet planned targets and because its continuing demand for operational funding could not be sustained indefinitely, there must have been some doubt as to BUL's prospects of survival.  In the risky business of setting up the first private university in Australia, until that became more reasonably assured it must have made the joint venturers cautious as to how much further they should go in providing further substantial benefits lest they be wasted.  BUL's winding up would have meant that a lease, granted to BUL on the favourable terms, would accrue to the benefit of another party whom they had no reason to benefit.  Moreover, the new lessee might not be as suitable to the advancement of the rest of the project as they might wish.

This prospect of failure was rarely if ever expressly adverted to, probably because an emphasis on success was deliberately adopted.  Nevertheless, until it was seen that the university would become viable with continued support, the pace of action could have been influenced by this factor. The only relevant result of this was to contribute temporarily in delaying the joint venturers' confidence to grant rental concessions in the lease, and it had no other effect on the final result.  In any case it never came to the point where this alone delayed the drafting of the lease.  Although it was a contributing factor, it was substantially if not entirely subsumed in the delay caused by the difficulty in trying to devise a mutually affordable rental formula that was caused by the same uncertainties. 

In an attempt to disparage the idea that the intention to grant the lease was conditional upon some reasonable prospect of its survival, BUL suggests that if that were so, then at that time it would have been left without any expectation upon which it could rely until its survival was established.  That is not so.  It had a conditional expectation upon which it could rely and which would have served it appropriately if the result had turned on that point.  This was fortified by the further justifiable expectation that the joint venturers would continue to provide their philanthropic support to the extent indicated above.  These were far from fanciful or light grounds, but they did not exclude some risks as BUL's case would suggest.

As an alternative course it would have been possible to make the university's survival a condition subsequent in a suitable lease, but that would have been a very embarrassing term to insert in a registered lease that would publish the uncertainty as to the university's prospects to all who would see it, and a difficult and unusual one to formulate.

Unfortunately, towards mid-1989 when the university was due to open, it had failed to find any independent finance and seemed unlikely to do so.  The enrolment of the first intake of students was far below the projected figures and although the numbers increased, this deficit continued for the whole of the relevant period.  For example, its planned enrolment by the end of the first stage in 1991 was 2500, but in the seven years to the time of trial its highest enrolment had been about 1650.  It is said with some justification that this was not its fault because the public's perception of the insecurity of the university's future raised by Bond's growing problems turned off the interest of many potential students.  However, it was probably compounded by BUL's own poor financial management that damaged its credit with suppliers as well as inducing the joint venturers to impose severe constraints on its funding.  However, the relevant problem was not a question of its fault.  It was simply the result of its participation in a venture associated with Bond for all the advantages that it would bring, and the accompanying disadvantages had to be accepted as part of the risk, even though they may not have been adequately considered at the time.

This manifest disappointment as to enrolment and financial viability during the whole of the relevant period must have had a destructive effect on the financial planning of the scheme  that included the provision of a lease with only modest concessions.  It would be 1993 before BUL would have even a small surplus in its accounts, and then only because it was not called upon to pay rent or to contribute to maintenance and repair costs.  This state of affairs did not admit of any reasonable assessment of the concessions that would have to be written into a lease.  Nor had it been the basis of the assurances that were made under a scheme whereby the need for concessions was to be considerably less.

Nor did it assist towards their affordability by the joint venturers.  Contrary to all the plans on which the assurances had been given, it meant that the joint venturers and particularly EIE had to supply from their own resources very substantial funds for the university's operating costs until it could support itself.  The most disturbing feature must have been that the extent and duration of both the funding and the concessions could not then be evaluated, which with Bond's financial misbehaviour and its own financial stresses must have caused EIE some indecision.  This is the only reasonable explanation for its failure to act, for it was certainly not due to any lack of good intention.  This serious uncertainty again changed the whole picture relating to the lease and justified its postponement until BUL's chances of survival and the joint venturers' capacity to provide the necessary concessions could be assessed.  In the meantime, consistently with their genuine goodwill, they continued to provide encouragement and other support of a more practical nature.

It is further claimed that these manifestations of continued commitment amounted to a confirmation that BUL could expect to be there for ninety-nine years or at least a long time.  In support it is argued that the alternative would have been for the joint venturers to say to BUL in effect: "Well, things are very tough.  You should have known that you had nothing from day one and never did.", and that this was contrary to the commitment that was shown.  This is similar to an earlier argument and is plainly wrong on both counts. 

The commitment was that BUL would have the continuing support so far as it was affordable, and this applied to the goal of long tenure. This did not imply that BUL had nothing.  It had a justified but contingent expectation of a lease;  and it had a justified expectation of the genuine goodwill of the joint venturers.  Together, these gave a very valuable, if contingent prospect even before the benefits had been provided, and those that were actually provided and offered were very substantial, even if in the misadventures that followed the benefits were not all that were hoped for.  This line probably reflects BUL's persistent refusal in argument to acknowledge the existence or at least the effect of the condition that was acknowledged by its witnesses.

As further support of its attempt to devalue the condition, it advances the argument  that because the plan of the joint venture, while it lasted, always intended that this university be the one to fulfil its purpose, and because the buildings that were erected were of a style and quality that matched that intention, there was no other use within the plan to which the land could be put than occupation by this university.  This, it is said, implied the certainty of the grant of a long-term lease to BUL and contributed to the justification of that expectation.

This proposition was raised often in BUL's argument and in the explanation of some witnesses as to how, despite what the joint venturers clearly implied as to a limit to their philanthropy, they came to an expectation of entitlement to a lease as a matter of inevitability.  The facts are broadly correct but the conclusion is defective.  Undoubtedly the establishment of this university was the strong intent of all the parties to the venture, so far as it went, and while it lasted they did not pursue or even consider any alternative result.  The lease that EIE would later offer was in conformity with this intent.  However, until negotiations failed irretrievably they never reached the point where an alternative course required consideration, but if the exigencies of the situation demanded it, occupation of the campus by another university was plainly an alternative option to be taken up if this university had palpably failed.  The factors mentioned in BUL's submissions were certainly consistent with an intended grant of a lease to BUL, but that was not inevitable as claimed and they did not detract from the condition of affordability.  Particular care must be taken to observe this distinction.

The manifestations of limits to the support that would be provided are in direct conflict with the picture of unlimited support to any necessary extent that BUL tries to paint.  While they never failed to produce continuing funding, the joint venturers showed express reluctance to undertake this burden for very long, much less indefinitely. In plain terms which were never contradicted, they said that  their support of the university had not been part of the original plan and was not part of their responsibility.  For example, they said this on 26 May when they undertook to continue funding but limited their promise to the next eight weeks.  They also strictly limited their guarantees of future funding until forced to extend them by threats by BUL to wind itself up. 

This is another example of the understanding accepted by all parties at the time that any assurances had to be read in the context of the scheme under which they were made, that they were not absolute and unconditional, and that they were vulnerable to the vicissitudes of the scheme.  Most relevantly, the joint venturers' reluctance to provide funds impliedly emphasised the constraints imposed on their assurances by their capacity to afford them.  Conversely, the fact that they continued to provide them and their other expressions of support also implied their  continuing goodwill and that they would try to find a way to provide the necessary help, but no more than that.  BUL's arguments relating to these gestures ignore the former and draw too much from the latter.

It has been suggested in evidence that while the written material certainly exhibits some reluctance by the joint venturers to give an assurance of indeterminate funding, their representatives gave personal spoken assurances, never recorded nor noted in writing, that despite this, "underneath it all there was goodwill towards BUL and that the joint venture parties would not let BUL fail, and in the event they did not" (T. 239).  So far as it goes, this is acceptable if it is understood as showing that the joint venturers' warnings as to the limits of their philanthropy were softened by genuine assurances of goodwill and support in averting failure, so far as they could reasonably afford to do so.  It is not an acceptable interpretation if, contrary to the prevailing circumstances, read in the total context of the matter, and contrary to the mood and implications of the written restrictions, it is suggested that they were unconditional assurances of unlimited support for an unlimited time, if that were necessary, unaffected by the financial condition of the parties.

If the rent were to have become payable it would ex hypothesi have been '. . . other expenditure as agreed between Limgold and BUL. .' within the meaning of clause 1(b) of  the Deed, so that it would then have been brought into account in this formula relating to a surplus, as might be expected having regard to the Deed's general purpose.  The matter has not been fully argued and in any case is overtaken by the above findings and need not be determined here, but provisionally it seems that rent was not to be taken into account at the time when the concession was being provided, but would be included when it became payable.  This, it might be thought, is an eminently reasonable result in keeping with the likely intention of the parties.

In answer to Mr Murdoch's results, Limgold refers to his inclusion in his calculations of the costs in each year of capital equipment which, omitted, would lead to a surplus since 1993 on those calculations.  This should be omitted, it says, because according to the formula prescribed in clause 1(b) which reads, ". . . and if after paying or providing for additional capital equipment and other expenditure as agreed between Limgold and BUL . .", it is a component only if the expenditure has been agreed between Limgold and BUL, and this did not happen.  BUL responds that the formula does not require any agreement as to capital expenses and that the requirement of consent is limited to 'other expenditure'.

Limgold's argument prevails in this respect because the requirement of agreement  in the formulation is not limited as BUL suggests.  The two are linked textually in the second group formed by the repetition of the definitive words, 'if after paying or providing for', which seems to have the purpose of establishing two separate classes of expenditure, and the only apparent reason for this division is to make Limgold's agreement necessary to that coming within the second class but not the first.  Within the relevant group the items are not separated,  such as by the insertion of the word  'for' before the words 'other expenditure' as might be expected if a distinction between its elements were intended.  If the qualification were not intended to apply to the cost of additional capital equipment, it should naturally have been inserted in the first group where the limitation does not appear.

This construction is supported by a realistic understanding of what the parties would probably have intended.  The party bestowing such a substantial benefit would have wished to have some restraint on the beneficiary's unilateral discretion to extend it at will by purchasing additional capital equipment to forestall any imminent surplus.  This was achieved by the simple expedient of giving the grantor some control through a requirement of its consent.  This is much more consonant with the relationship between the parties on these matters at that time.  The joint venturers were generously providing substantial funds but demanding reasonable powers of supervision over the university's spending, which had been ill-disciplined.  Consequently, only that capital expenditure approved by Limgold comes into the equation.  (It will be shown below that this extends to expenditure which it should have approved.)  It is not necessary that the amount be spent because BUL is correct in showing that the Deed’s formula refers only to “providing for” additional capital equipment agreed to by Limgold.

There was no evidence of any  agreement, express or implied, as to the items within this category after Limgold was taken from EIE’s control. However,  while EIE had control of it, the circumstances, and particularly EIE's representative presence on the university Council, strongly imply EIE's, and consequently Limgold's, approval of expenditure of this kind during that period through its de facto agents.  That is a realistic appraisal of what was probably intended and there is no evidence to counter the inference.  As there is no evidence of what part of the relevant expenditure occurred prior to the appointment of the receiver to Limgold in 1993, this factor cannot be excluded from the computation of any surplus in that year. 

As for the following years the  relationship of the parties also supports  an implication that Limgold would not have withheld its consent to any reasonable expenditure of this kind.  This issue was not raised or argued and there is no direct evidence on which it could be found whether any of the provisions for expenditure came within this description. However, it is clearly established that in general BUL’s financial plight was such that it is very unlikely that it would have been spending unreasonably in this area so that the necessary approval should have been given to all the items that have been included in the accounts.  Limgold has not proved the contrary of this prima facie position.

For the future the same considerations will not apply and if BUL does not obtain Limgold’s reasonable approval to any proposed purchase, it will have to show on the merits that it should have approved and its mere commitment to the purchase will have no prima facie force.

Limgold advanced other arguments  which, because of the result, need not be canvassed.  It is still desirable to mention that its claim that the exercise should be performed on a cash surplus basis, as in the financial accounts of the company, has no foundation.  The deed itself prescribes what it means by 'surplus', and though, as all would agree, it clearly assumes the income to be the starting point, it stipulates the items that are to be deducted. 

Both sides tried to use technical accounting methods and expressions as an overlay on the simple and practical formula prescribed by the deed, but that should be discouraged.  Both parties knew BUL’s accounting system and no doubt intended that it should be the basis of the formula, and indeed they said so.  There is no place for such substitute concepts as the liability of the university to provide the services for which fees had been received.  The students concerned were not “creditors . . . reflected and recorded in the accounts of BUL” within the meaning of the deed and the concept behind the formulation, and the parties cannot reasonably be believed to have intended to enter into an arrangement with such mischievous potential rather than by reference to the ordinary meaning of the terms that were used.

On the correct application of the formula prescribed in the Deed, the first surplus was achieved in 1994 in the sum of $2.907m.  In 1995 it was $3.711m. making a total of $6.618m.  This results from the adjustment of the respective surpluses of $4.505m. and $6.796m. in the company’s accounts by deduction of current lease liabilities, non-current lease liabilities and purchase of non-current assets and totalling respectively $1.598m. and $3.085m. as described by Mr Murdoch in his exercise.

It being established that the suspension of repayment by the deed has been interrupted by the appearance of a surplus, the second issue is whether that terminates the operation of the deed so that the whole debt becomes repayable or, as BUL argues, the subordination and obligation to repay is lifted only to the extent of the amount of the surplus in each year.  The Deed said that "the Loans are subordinated . . . and will not be repayable unless . . . there is a surplus in any financial year from which the Loans or any portion of them may be repaid." 

This is ambiguous.  On one side it is said that in its ordinary meaning the description of  the relevant event, which contained no express limitation on the result of that event, carried no such inherent limitation as BUL suggests, since the words used were no more than were necessary to define the event.  In other words, the reference to a surplus and when it would occur was necessary to the prescription of the triggering event in a clause that was used simply for that purpose.  The description is no more than was necessary for the precision of the definition of which it was part.  That is enough to explain its purpose fully and so its mention does not justify any inference that it has a further inherent purpose, particularly when the extraneous factors that would support such an inference are at best equivocal.

BUL's construction calls in aid the reference to "a surplus in any financial year" and says that it is consistent with the expression appropriate to a year to year arrangement, and that in turn is consistent with payment of the debt over a period of time.  This, it says, would be consistent only with the limitation of the amount of the repayment to that of a surplus less than the total debt.   It is also consistent with the description that would be adopted where it is intended to link the trigger to a surplus that is to be assessed by reference to any financial year's results  where there is uncertainty as to whether and when such a result might occur.  For example, it would be suitable drafting to say, "If there is a surplus in any financial year from which any part of the debts may be repaid, then the whole of it shall be repaid".  As this usage is suitable for the purpose of describing the triggering event for the total repayment, there is less reason to confine the meaning of the expression to an alternative interpretation, but of the two that advanced by BUL is the more comfortable.

The other textual basis it relies on turns on the Deed's reference to the words, "...From which the Loans or any portion thereof may be paid", and it says that this anticipates that the loan may be repayable in parts under this system. However, it is equally consistent with the intention of triggering the  repayment of the whole debt  if the surplus is enough to pay the whole or even a part of it.  Both the whole and a portion could well have been referred to out of caution to cover all the possibilities and to avoid doubt.  Again, this simple explanation, consistent with the primary purpose of the text, is enough to share acceptability with the alternative explanation that could have been, but was not, expressed by the simple addition of the words, "..and then only to the extent of such surplus" at the end of the sub-clause.  This omission gains some significance by comparison with clause 1(c), where that was done in just such a form, but the ambiguity itself suggests that care should be exercised before relying on such drafting refinements.

Although each may be demonstrated to be equivocal, together, these two textual usages have the flavour of BUL’s version, and Ms Nosworthy and Mr Robertson apparently read them as such, but the factual context makes it much more assured.  The subordination and the suspension of repayment of the debt are inextricably linked in the Deed as completely related to each other for its purpose, and all its terms refer to them in common.  It would have been most impractical for the subordination to be terminated totally on the appearance of a surplus that might have left most of the debt beyond any capacity for repayment so that debts to others that may have had priority when they were contracted might lose it and the company might be found to be profoundly insolvent. 

Limgold tacitly acknowledges the force of this point by seeking to distinguish between the Deed's provisions for subordination of the debt and those for the suspension of the obligation for repayment.  It argued that its reference to the occurrence of a surplus is limited to the latter because it appears in the text immediately after the reference to it; and that it has no reference to the former as well even though the two are conjunctively joined in that text.  Consequently, it argues, the subordination is permanent while the suspension can be terminated more readily without serious effect to BUL's financial status.

While such a construction might have some such effect, its influence in making the debt immediately repayable would be almost as dramatic as the subordination feature.  Moreover, the notions of subordination and suspension of repayment are conceptually related in this context so that if the debt is subordinated to the debtor’s other debts, in practical terms that virtually amounts to limiting its repayability to the surplus as defined.  Consequently, this distinction is unconvincing. 

There is also no basis for it in the text.  As might be expected from a practical point of view, textually the two features are generally treated together throughout the deed and on the same basis except where a difference is intended, and then the intended feature is expressly treated as such.  Specifically, the qualifications in paragraph 1. are expressed to apply to both features.  Stripped to its essentials, it reads: 'The loans are subordinated and their repayment will be suspended unless the prescribed events occur.'  The result is obvious.  If the conditions were not intended to apply to both, there would have been a clearer separation by textual or other means.  This argument should be rejected.

All of this and more would have been contrary to the parties’ purpose and intention in making the Deed but it would not have been so if the subordination had been lifted only to the extent of the surplus which could then be used to redeem the debt to that extent.  This points strongly to the latter intention in respect of subordination, and since the suspension of repayment is treated in common with it, the same would apply to it.  This result has the attraction of being the more reasonable in the circumstances, and although it may have deprived the grantors of the opportunity of reviewing the repayability of the debt at a convenient time, with their goodwill they could hardly have intended to require more of BUL than the Deed provided for, and their power over funding and the lease probably gave them sufficient control for that purpose if they  had wished to vary the arrangement.

Further, as it has been explained, when the deed ceased  to impose a non-repayment provision, it did not follow that the debt was immediately repayable.  If the trigger provided for total termination of the suspension, then the parties would have been forced to renegotiate a further suitable arrangement.  This structure set up by the deed was therefore eminently suited to avoid this by setting those terms then in what seems to be a practical and complete but still sympathetic way.  Since the terms of repayment had never been stipulated and would be very difficult to infer in this complex arrangement, it was desirable that they should be finally stated in this way rather than deferred.  It might be added that the terms struck are probably very close to the implied terms of repayment that would have needed determination if the operation of the Deed had been found to have been totally terminated, so that the result is the same.

Ms Nosworthy says that she expected that on the attaining of a surplus by the university the parties would enter into fresh negotiations for the repayment of the debt, and that is consistent with what she said on 14 June, 1991, in a letter to the university's solicitor (Exx 66, 78) where she linked it with the termination of a proposed short-term lease that was expected to occur at about the time when the university could pay rent.  This would be consistent with the retention of some flexibility in the position between these parties, but with the settling of the terms of repayment at least until another arrangement would replace it if that became necessary.  This anticipation of further co-operative negotiations therefore does not necessarily support the complete termination of the suspension of repayments. 

Ms Nosworthy's other evidence indicated that in the negotiations for the deed there were verbal arrangements to the effect that only the amount of the surplus was to be payable on such an occasion.  While this is most pertinent to the issue of rectification, if that were necessary, it also shows that at least the chosen version is open to be accepted as a practical one for those circumstances. 

In summary, both the text and the weight of the circumstances support the construction that on the appearance of a surplus the suspension of payment of the debt was lifted to that extent, and with it the subordination of that much of the debt.  On this basis, the present liability is $6.618m. as found above being the total of the surpluses to date. Interest should be allowed on the amounts which should have been paid from the time when the obligation to repay each was respectively incurred.  An average rate of 7% should be struck. This amounts to $1.130m. and the total of the capital sum and interest is $7.748m.  It is noteworthy that the Deed left open the question of interest on the debt even prior to its repayment, but it would be inappropriate to allow for that and it is not sought.

It should be added that since the operation of the Deed continues in this respect, the obligations that it places on BUL, such as to use its best endeavours to obtain finance to repay the loans, remain.  This means, for example, that it could be obliged to contribute reasonable interest if the Bank itself were to proffer finance on reasonable terms within the description of Clause 1 (a).  BUL would be obliged to accept this.

ALTERNATIVE RESULT AS TO REPAYMENT

If the above construction is incorrect and the suspension of the obligation for repayment

terminated totally on the advent of the first surplus, unsurprisingly the result is little different. Absent any negotiated rearrangement, it would then be necessary to refer back to the parties'  intention when the loans were being made.  This was never expressed or even verbally implied since they were waiting to see what the future would reveal, and so, as with the rent concessions, they were never able to formulate the terms of repayment.  Plainly it was hoped that if BUL were unable to afford to repay it, the joint venturers would be able to defer it and would do so.  It is unlikely that the parties turned their minds to the facts that actually came to pass.  However, the circumstances of the transactions and their purpose provide strong inferences of what would have been intended.

Most of the relevant considerations are identical with those discussed in relation to the lease, but there are some significant variations in emphasis.  The main difference is that the advances were actually made so that BUL's liability to repay at some time was already incurred.  It was not as though the loan was to be made when the terms of repayment affordable to both parties could be formulated.

Moreover, the fact that the liability had been incurred meant that the university's inability to repay it according to its terms would have been far more dangerous to its survival than the non-acquisition of a lease.  If the terms had been considered at the time when the loans were made, this fact of liability would have been a serious distinguishing force.  The joint venturers' philanthropic intention, as understood by BUL, to provide for the university against such disastrous consequences must have had a very influential. By providing the funding under those circumstances, the joint venturers evinced an intention to avoid them  so far as they reasonably could.

This did not mean that their own interests were not to be afforded some protection.  Their reluctance to provide the funding and insistence at all stages that the loans were to remain a debt with possible interest and not become a gift implied some self-protective intention.  This was acceded to by BUL.  Cautionary consideration to the possibility of  financial stress of the joint venturers would have been taken into account. 

It is a useful guide to consider what the parties would probably have commonly accepted if at the time when they agreed on the terms of the deed they were asked what terms they then intended should be fixed as to repayability in the anticipated further negotiations.  Their understanding of all the influential circumstances surrounding the making of the loans should have guided their mutual responses.

If the parties had been asked of their understanding of the likely final result, no doubt the response would be that it would depend on the whole circumstances of the time of the postponed negotiations, but if forced to answer they would probably have agreed that the repayment should begin with and if possible be limited to the amount of the surplus.  Otherwise, the preservation of the university and the protection of the joint venturers' interests would have remained the predominant factors.

If the latter were not significant at the time, the limitation of repayments to the amount of any surplus would have been virtually automatic and continued indefinitely.  As a balance to relieve the joint venturers of their burden, BUL would have been expected to try to repay the debt as soon as reasonably possible consistently with its own financial safety, and this would require it to achieve the most fruitful surpluses and also to seek independent funding as required by clause 1(a).  In this way the provisions of the deed give a strong indication of what the parties mutually felt was fair and appropriate in analogous circumstances, and so it is fair to assume that they would have felt the same on this subject.

The excessive consequences of an obligation of early repayment and the philanthropic intentions of the joint venturers together defeat Limgold's claim to equal or greater strength of its interests, and the common intention was probably balanced for mutual benefit in the way described above.  In itself, that programme provides some relief for Limgold and its creditors, for the debt remains payable and the annual determination of BUL's surplus is kept fair by the application of terms similar to those of Clause 1(b).  Moreover, it is likely that it was part of the implied intention of the parties that BUL should still pursue suitable finance.

In summary, as best as may be found, it was the intention of the parties that if the Deed ceased to have effect because BUL had achieved a surplus, failing agreement the imputed terms of the original agreement would continue to apply.  Translated into specific terms appropriate to the present circumstances, these required that BUL would repay the debt by instalments in the respective amounts of any surpluses, defined in  the same manner as in Clause 1(b) of the deed; that it would pursue finance in the same manner as that required by Clause 1(a) of the deed and, if successful, pay off the debt; and that if it went into liquidation it would pay as set out in the terms of Clause 1(c) of the Deed. In respect of the first two contingencies, it should act assiduously so as to make all the repayments as soon as reasonably possible.

RECTIFICATION

This is the claim by BUL in the alternative to its primary submission on the construction of the deed.  In view of the result it is otiose but it should be considered on the assumption that that the construction of the Deed meant that the whole debt became payable at once.  It depends on the evidence of Ms Nosworthy referred to above that in discussion with Mr Robertson, the solicitor for Limgold engaged to draft the deed, she insisted that its terms should provide for payment only of the amount of any surplus from time to time, and that he agreed (T243-244).  For the reasons that have been given in the earlier discussion of this matter, her evidence should be accepted.

However, there should be some caution as to its full meaning and effect because other than in the terms themselves there is no objective manifestation of this common contractual intention between the parties, and because ex hypothesi the rectified version would differ from the Deed that was reduced to writing. It was subjected to the scrutiny of BUL's solicitor and of Ms Nosworthy, who was herself a highly competent solicitor.  These are substantial obstacles to the serious business of rectifying a written deed that was carefully negotiated, drafted and considered: cf. Hooker Town Developments Pty Ltd v Director of War Service Homes (1973) 47 ALJR 320 at 323-324; Joscelyne v Nissen (1970) 2 QB 86 at 98.

However, her evidence on this point is of such a quality that, subject to a point of incompleteness that will be discussed,  it should have prevailed.  It has the necessary degree of clarity as to the substance of the agreement and the expression of it, and it is understandable that the parties should have agreed to it because of its inherent reasonableness.  It is also easy to see how  the drafted document may have departed from the agreement, and how, because of the difficulty in construction that led to controversy in this action, that departure may have been overlooked, particularly in the atmosphere of mutual co-operation that existed in this special relationship.  Further, the fact of the oral agreement has been proved without contradiction, though Mr Robertson's position as EIE's solicitor would certainly have made it difficult for Limgold to have had his full co-operation with proofs of his evidence.

From what Ms Nosworthy says, the discussion was confined to the effects of any provision of the Deed relating to the lifting of the suspension of repayment upon BUL's generation of a surplus.  It is not suggested that it affected the alternative triggers contained in Clauses 1 (a) and 1(c), nor would that seem likely or reasonable.  Consistently with the form of the Deed that merely terminated the suspension on a triggering event and did not regulate the repayment, the understanding was not intended to exclude other prescribed requirements of the deed for repayment consistent with the basis on which the loans were made. 

The effect of her evidence is that the Deed would conform with the agreement if Clause 1(b) had the words,"and then it will become repayable from time to time whenever there is such a surplus but only in the amount of  such surplus until the whole of the loans will have been repaid", added to it at its end.

With this restriction the agreed clarification was useful in establishing that upon the occurrence of that trigger, it did not follow that the amount that would be payable for that reason would be the whole debt.  However, it could not reasonably have also meant that that was the only source of repayment.  For example, in the event of BUL's liquidation the rights equivalent to those in Clause 1(c) of the deed should have been expected to  be available to the joint venturers despite that it would never have another surplus.  Equally, they would have expected it to seek to obtain finance in the same way that it was obliged to act under Clause 1(a) of the Deed. 

These are not only the most reasonable implications in the circumstances:  they are also what might be expected as the reasonable response to this issue by both sides at the time.  The joint venturers' generosity would surely have been qualified by at least an expectation that BUL would try to ameliorate their position by trying to repay the debt as reasonably soon as may be, and for its part BUL should have been willing to co-operate to that extent, if only to retain their goodwill.  These attitudes are amply demonstrated by the presence of terms of that nature in the deed itself. 

Consequently, when Ms Nosworthy extracted this  understanding from Mr Robertson, it should be construed as being limited to the single feature she has claimed.  This view allowing for repayment otherwise than by means of surpluses helps to explain how it was anticipated that there would be negotiations at that time, which would have been meaningless if the terms of repayment had been fixed to the amount of surpluses.  It also reduces the otherwise unreasonable burden on the joint venturers.  Hopefully, Ms Nosworthy did not intend to suggest otherwise. 

This contractual intention of the parties would have been given effect to by rectification in the form of a suitable addition to Clause 1(b) of the Deed: Pukallas v Cameron (1982) 56 ALJR 907.

CONCLUSION OF COUNTER-CLAIM

The result then is that BUL is currently indebted to Limgold in the sum of $7.748m., being the accumulation of the surpluses to the date of trial and interest.  The remainder of the indebtedness is not yet repayable, but will become so in accordance with its future surpluses or its earlier fulfilment of its obligations as described above.

COSTS

The only feature of costs requiring discussion relates to the construction of the Deed and the result of the true construction in relation to the Counterclaim.  BUL denied any liability and Limgold claimed too much.  Limgold should have its costs because it recovered something but because its excessive claim based on an incorrect construction of the Deed had to be resisted, the costs in respect of the Counterclaim should be limited to one half of its costs.

ORDERS

IT IS ORDERED THAT the Plaintiff's claims for declarations that it is entitled to or has any equitable interest in the relevant lands, that the First Defendants hold the said lands on a constructive trust for the Plaintiff in any interest, that the Second Defendant holds the said lands on any constructive trust for the Plaintiff , or that the interest of the Second Defendant in the said lands is subject to any interest of the Plaintiff , or, as against all of the Defendants, for restitution, an injunction, damages, relief pursuant to section 87 of the Trade Practices Act 1974, interest and an account of profits are all dismissed;
AND IT IS FURTHER ORDERED AND DECLARED THAT the plaintiff is a tenant at will of the lands presently occupied by it such tenancy being determinable only on three years' notice subject to the payment of rent, if demanded, of THREE MILLION FIVE HUNDRED THOUSAND DOLLARS ($3,500,000.) per annum payable quarterly in advance and of all repairs and maintenance costs relating to the tenanted property; but otherwise on one month's notice;
AND IT IS FURTHER DECLARED THAT subject to the other implied obligations of the plaintiff to pursue means for earlier repayment, if and whenever in the meantime a surplus as defined in Clause 1(b) of the Deed between the plaintiff and the defendant Limgold Pty Ltd dated 14 May, 1990, occurs, then and in each such case the amount that shall be repayable in respect of the loans made by the said defendant to the plaintiff shall be an amount equal to the amount of such respective surplus until the whole of the said loans shall have been repaid in full; and
IT IS FURTHER ORDERED THAT there be judgment for the First Defendant Limgold Pty Ltd against the Plaintiff in the sum of SIX MILLION, SIX HUNDRED AND EIGHTEEN THOUSAND DOLLARS ($6,618,000) with interest of ONE MILLION, ONE HUNDRED AND THIRTY THOUSAND DOLLARS ($1,130,000) making a total of SEVEN MILLION, SEVEN HUNDRED AND FORTY-EIGHT THOUSAND DOLLARS ($7,748,000).
Costs reserved.