Cairns Festival Faire P/L v AEFC Ltd

[1993] FCA 620

CAIRNS FESTIVAL FAIRE PTY LTD (Receivers and Managers Appointed) and
LANDMARQUE HOLDINGS PTY LTD v. AEFC LIMITED; RONALD DAVID BEHAN and ERNEST
GEORGE HARRIS
No. NG3183 of 1993
FED No. 620
Number of pages - 19
Contract - Estoppel - Trade Practices

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
HEEREY J

CATCHWORDS

Contract - construction of shopping centre - alleged oral agreement to rollover existing financial facility for two year period - improbability of agreement having been entered into - inconsistent contemporaneous documentation - absence of logical motivation for financier to extend facility - alleged payments made pursuant to agreement - lateness of assertion as to existence of agreement.

Estoppel - absence of evidence of financier either inducing an assumption of a two year extension to existing facility or adoption of such assumption - no detriment established - any alleged detriment suffered by third parties.

Trade Practices - misleading and deceptive conduct - statement as to current intention truthful - reasonable grounds for making statements as to future matters.

Trade Practices Act 1974 (Cth) ss 51A, 52.

Hoyt's Pty Ltd v Spencer (1919) 27 CLR 133.

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387.

HEARING

BRISBANE, 16, 17, 18, 19 and 20 August 1993

#DATE 3:9:1993, MELBOURNE

Counsel for the applicants: Mr A J Clout

Solicitor for the applicants: Colbran and Associates

Counsel for the first respondent: Mr J Muir QC with Mrs D A Mullins

Solicitor for the first respondent: David J Frank

Counsel for the second and
third respondents: Mr P McMurdo QC with Mr A Ryan

Solicitor for the second and
third respondents: Middletons Moore and Bevins

ORDER

The Court orders that:

1. As to paragraphs 1, 2, 4, 5, 6 and 7 of the prayer for relief in the amended statement of claim there be judgment for the respondents.

2. The applicants pay the respondents' costs, including reserved costs.

3. The proceeding be otherwise adjourned to a directions hearing on a date to be fixed by the Queensland District Registrar.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules

JUDGE1

HEEREY J In Cairns there is a shopping centre called Cairns Festival Faire (the Centre). It is owned by the first applicant Cairns Festival Faire Pty Ltd (CFF). CFF is a wholly owned subsidiary of the second applicant Landmarque Pty Ltd (Landmarque). The Chairman and Chief Executive of Landmarque is Mr Ian Meredith. Some, but not all, of the shareholders of Landmarque are residents of Hong Kong who have been advised by an American lawyer, Mr Anderson Bartlett. Mr Bartlett's clients have been referred to in this case as "the foreign investors" and I shall use that term.

1. By the first half of 1991 the Centre was in serious trouble. Construction had not been completed and the builder, Coastal Constructions Pty Ltd ("CC"), was facing collapse. The Centre was not trading profitably, due amongst other things to an inappropriate tenant mix. Lenders held the following securities over the Centre:
   

AEFC Ltd (first mortgage) $11,700,000 Bill Acceptance Corporation

Ltd (second mortgage) $21,000,000 Interpacific Group

Limited (third mortgage) $2,500,000

1. AEFC Ltd, the first respondent, is a wholly owned subsidiary of the Commonwealth Bank of Australia ("CBA"). Bill Acceptance Corporation Ltd is a wholly owned subsidiary of Westpac. In the dealings that followed no practical distinction was drawn between those banks and their subsidiaries, so I shall use the expressions "CBA" and "Westpac" to encompass AEFC and BAC respectively.

2. The second mortgage secured moneys advanced by Westpac to another subsidiary of Landmarque for a project in the Hunter Valley which was also in financial strife.

3. The advance by CBA was in the form of a credit facility ("the facility") dated 28 June 1989 granted to Landmarque and guaranteed by CFF and others. The term of the facility expired on 31 May 1992 but there had been default in an interest payment due on 31 March 1991. By 17 June the amount due had been paid but it was clear that a further interest payment of $488,374.19 due on 30 June was not going to be met. The valuations of the Centre held by CBA had declined from $27 million in August 1988 (estimated value on completion fully leased) to a figure of $12.5 million as at 18 June 1991.

4. Ultimately CBA appointed the second and third respondents as receivers of the rents of CFF on 27 July 1992. The applicants claim that appointment was in breach of an agreement (referred to in the amended statement of claim as "the rollover agreement") reached in July 1991 whereby CBA agreed to extend the term of the facility for two years from the termination date (31 May 1992) or alternatively for two years from the date of the rollover agreement itself.

5. The applicants also raise a claim for damages and make other complaints including allegations concerning the management of the Centre by the receivers. However the hearing before me has been held consequent upon an order of Beaumont J made on 17 July 1993. His Honour's order directed that there be a trial confined to the relief claimed in paragraphs 1, 2, 4, 5, 6 and 7 of the prayer for relief in the amended statement of claim. In substance those paragraphs seek declarations as to the effectiveness of the rollover agreement, declarations that the appointment of the receivers was invalid and consequential injunctive relief.

The Applicants' Case
8. The applicants say that by April 1991 an estimated $805,000 was needed to complete the Centre. CBA declined to provide additional funds. Mr Bartlett on behalf of the foreign investors was saying that they would not contribute any further funds if the CBA were to move on its security and sell the Centre prematurely. Landmarque's attitude was that it would only contribute further funding if CBA continued the facility for 24 months, by which time the Centre would be self-servicing from rental income.

1. It is said that in early June Landmarque, the foreign investors and Westpac reached what the amended statement of claim calls "the joint agreement". Those parties agreed to advance the $805,000 to CFF subject to CBA rolling over the facility for a further 24 months. On 11 June CBA was told of the substance of the joint agreement. On 20 June there was a meeting at CBA offices in Sydney at which the CBA representative Mr Gregory Palmer agreed, subject to confirmation by his superior, that CBA would rollover the facility for 24 months if the foreign investors and BAC put in the additional funding.

2. In early July, in a telephone conversation between Mr Bartlett and Mr Palmer, the latter confirmed that the CBA would rollover the facility.

3. In performance of the rollover agreement it is said that Westpac and Landmarque each contributed $402,500 to CFF for the completion of the Centre, the contribution by Landmarque being obtained from the foreign investors.

4. On 8 August 1991 the parties entered into a supplementary credit facility agreement which provided for CBA to lend an additional $233,000 to Landmarque, these funds to be applied by CFF to complete the Centre. The repayment date was to be the same as that for the facility, viz 31 May 1992, but extended by the rollover agreement.

5. In late May 1992 CBA gave notice of its intention to terminate the facility. The applicants say that they protested that this would be a breach of the rollover agreement. Nevertheless, CBA appointed the second and third respondents as receivers of the rents of CFF on 27 July 1992.

The Alleged Joint Agreement
14. From January to July 1991 Mr Bartlett was present in Australia on behalf of the foreign investors endeavouring to resolve problems that had arisen with Landmarque's projects. He attended a number of meetings with Mr Palmer and the latter's superior at CBA, Mr Trevor McDonald. At one such meeting, on 8 March, at which Mr Meredith was also present, reference was made to the interest payment which would fall due at the end of the month. This would be the first payment requiring actual cash; previous interest payments had been capitalised. Mr McDonald said that CBA was expecting the interest to be paid. He also pointed out that the facility expired on 31 May 1992 and that CBA would not consider a rescheduling of those arrangements, which were to be adhered to.

1. The interest was not paid on 31 March. On 17 April a further meeting took place. Mr Bartlett told Mr Palmer that he was going to Hong Kong at the end of April to discuss with his clients the possibility of injecting further funds into Landmarque. That visit took place in the period 25 to 28 April. On 29 April Mr Bartlett telephoned Mr Palmer and told him that the foreign investors would definitely not be putting any more money into their Australian investments.

2. On 8 May a meeting was convened by CBA at its Sydney office. Present were Mr Meredith, Mr Bartlett, Mr Paul Pridham on behalf of Vortex Management Services Pty Ltd (the Centre's Project Manager) and Mr Rowland Hutchinson, the Manager of the Centre. Mr Palmer and two other officers attended on behalf of CBA. An agenda prepared by Mr Palmer noted that CBA representatives would be visiting the Centre on 13, 14 and 15 May and requested written comment on a number of items. Those items included
   

"18. Likelihood of capital injection.

19. Ability to condition debt.

20. Written authority to have dialogue with Andrew (sic) Bartlett.

21. Position with second and third mortgagees".

1. Notwithstanding Mr Meredith's evidence to the contrary, it seems clear that no representatives of Westpac were present. In his evidence Mr Bartlett agreed that Mr Palmer at the meeting asked if the foreign investors would put in further money and Mr Bartlett said they would not. The foreign investors were, as Mr Bartlett said in his evidence, "still maintaining a very hard line at that stage".

2. Prior to the critical meeting of 20 June there is no document which suggests the existence of any agreement as between Landmarque, CFF the foreign investors and Westpac or any of them. Nor is there any evidence to indicate that the expressed attitude of the foreign investors changed between 8 May and 20 June. Throughout May CBA was engaged in collecting information for the purpose of deciding what to do about the Centre. The meeting of 8 May and the subsequent visit to Cairns were part of that process. CBA was faced with an express refusal from the foreign investors to put in further money. Nor was there any positive indication from Westpac that money would come from that source. I find that no joint agreement was made.

3. The amended statement of claim also alleges that on or about 11 June Mr Bartlett on behalf of the foreign investors and Mr Gregory Marshall on behalf of Westpac informed Mr Palmer of the terms of the joint agreement. There is no evidence of such communication at all. Mr Bartlett did not give any evidence of it. The proposition was not put to Mr Palmer in cross-examination. Mr Marshall was not called by either side. The Westpac files were produced under subpoena but the applicants did not seek to produce any documents from them. I am satisfied that no such communication took place.

4. Thus the 20 June meeting did not take place in a setting which included any agreement between Landmarque or the foreign investors on the one hand and Westpac on the other as to the injection of further funds. Still less had there been any communication to CBA suggesting the existence of any such joint agreement.

The Meeting of 20 June 1991
21. Although this meeting was also held at the CBA office in Sydney, much of the initiative for it came from the management of the Centre and in particular Mr Hutchinson. He prepared an agenda for the meeting which described the purpose of the meeting as

"- to review current operations

- to receive retail planning report and management proposals."

1. Mr Hutchinson arranged for those attending the meeting to receive a detailed planning report and management submission prepared by a planning consultant, Total Resource Management Pty Ltd, the principal of which was Mr Martin White. That report indicated that the Centre was unsaleable at a price which would liquidate borrowings given its incompleteness including the prevalence of vacant tenancies and low income producing tenancies, a situation that was likely to continue within the current leasing strategy. The report recommended an Action Plan, a central feature of which was seeking tenancies for retail warehouses from national retailing groups and new management by Property Economic Planning Pty Ltd ("PEP"), another company associated with Mr White. The report also noted estimated costs of completion totalling $805,794. Of this amount $465,130 related to the builder and the balance was made up of items such as management services, legal costs and leasing commissions and incentives.

2. Those present at the meeting were Mr Meredith and Mr Hutchinson on behalf of Landmarque, Mr Bartlett on behalf of the foreign investors, Mr Palmer and another bank officer on behalf of CBA, Mr Marshall and another bank officer on behalf of Westpac and Mr Pridham on behalf of the project manager.

3. On 3 July Mr Palmer completed a detailed memorandum for his superiors concerning the meeting. That memorandum was prepared at a time when no dispute had arisen between the parties and no motive existed for giving otherwise than a fair representation of what had occurred. There was no significant criticism of its accuracy at the trial. I find it is a fair and accurate record of what took place at the meeting. Insofar as it contains recommendations from Mr Palmer to his superiors I find those recommendations to be consistent with what was said at the meeting.

4. The memorandum notes amongst other things that Westpac had refused to refinance CBA and would prefer to hold the Centre for "up to two years and immediately lend a further $1 million to complete the building, clear creditors, relocate some tenants in order to improve the tenancy level, beyond 65 per cent (currently), improve the cap rate and therefore enhance saleability". The memorandum notes:
   

"Westpac will not advance further monies in the event that AEFC decides to sell the property in the short term. Should AEFC hold, Westpac will require a letter confirming AEFC's commitment to remain and not force a sale for up to two years. We will need to carefully consider this aspect as we must ensure that AEFC retains its right to take the initiative under its documentation rather than agree to some form of open ended arrangement.

...

A situation whereby AEFC is locked in beyond reasonable levels as Westpac hold and wait, seeking to absolutely maximise the property values and minimise losses, needs to be avoided.

...

Messrs Greg Marshall and Jaycen Fletcher of Westpac, Group Loans Management, have attended several CFFSC meetings at this office and are currently awaiting our decision."

1. The memorandum refers to Mr White's retail planning report and management submission which was described as "an excellent analysis of the overall position". The memorandum speaks very favourably of Mr Hutchinson's efforts and of the proposal to engage PEP, which the representatives of both banks indicated that they would support. The memorandum notes Mr Hutchinson's view that CBA would need to hold the Centre "for up to two years in order to gain full advantage of the PEP endeavours and the improving market".

2. As to the builder, the memorandum notes that the builder had issued proceedings against CFF claiming $189,807. The report noted that "a decision by the banks to hold CFFSC would see CC paid in full (by Westpac)". The memorandum concludes with a recommendation as follows:
   

"Recommendation is for approval to hold CFFSC for up to two years subject to:-

- AEFC to receive all rental income beyond the operating expenses required to be met to keep the Centre viable - AEFC will not advance any further funds - Westpac to meet all other costs as detailed in attachment F (which detailed costs totalling $805,784) including early payment of CC's claim

- Documentation to the satisfaction of AEFC - Management by PEP. Note - at this stage we do not have, nor wish to pretend to possess, the power to insist on the employment of PEP; however, Mr Meredith is aware that we do support his decision in this regard." (Emphasis in original)

1. The memorandum is quite inconsistent with the existence of any concluded agreement between CBA and Westpac for the contribution of funds; nor is there any mention of funds from the foreign investors. Mr Palmer said at the meeting CBA would not advance any further funds. As will appear, that position was to change, although not in a way consistent with the case now put by the applicants. At the meeting all seem to have accepted that if any money was to be forthcoming to finish the Centre it would have to come from Westpac.

2. That no concluded agreement affecting CBA's facility was reached at the meeting of 20 June is confirmed by the terms of a letter which Mr Meredith sent to Mr Palmer the following day. After discussing various matters which needed attention, the letter stated:
   

"Upon Trevor McDonald's return, I confirm you will be discussing approval by the Commonwealth Bank to extend the finance facility for Cairns for the next 24 month period and giving acknowledgment to Westpac that the bank will not move on a sale of the Centre without agreement with all parties within this period. Obviously a prerequisite to the above is your satisfaction that the reports and projections currently being prepared illustrate that the first mortgage to AEFC will be serviced."

1. An extract from a Westpac diary note relating to the meeting was in evidence. It records Mr Palmer saying that his senior manager would be unavailable until Monday 1 July and no decision could be taken at least until that time.

2. It is true that Mr Hutchinson and Mr Pridham in evidence spoke of agreement having been reached at the 20 June meeting. But I think the explanation is that they were primarily concerned with the management issue as to which agreement could be, and I think was, reached without the necessity of approval by CBA. In any event the applicants' case, as pleaded and as maintained to the end, accepted that no agreement was reached on 20 June. The applicants' case is that it was the telephone conversation between Mr Bartlett and Mr Palmer which nailed down the rollover agreement. The Bartlett-Palmer Telephone Conversation
   

3. The evidence of Mr Bartlett included the following passage in evidence-in-chief:
   

"Q Now, Mr Bartlett, I take you to approximately the second week of July, or early July 1991. Do you recall a telephone conversation with Greg Palmer? A Yes, I do.

Q Now, could you state to the Court what Greg Palmer said to you, and then what you said to Greg Palmer, please?

A Well, I was read a final confirmation that everything was in order. The Commonwealth was happy with the deal we had struck. They would hold it for two years and we'd go ahead and fund our part of it. And Westpac was, in turn, going to fund their part of it. Q Yes, Mr Bartlett, are you able to recall the words which were said by Mr Palmer, and your replies to Mr Palmer?

A Only the general - the general agreement. As far as I was concerned, we had a two year commitment and we'd put up our share.

Q And your share was the subsequent $US250,000? A Correct."

1. Mr Palmer denied that any such conversation took place.

2. The circumstances point towards a conclusion that the applicants' case on this central issue of fact should not be accepted.

3. There is no logical reason why CBA should have chosen a telephone conversation with Mr Bartlett as the sole means of communicating its acceptance of the rollover proposal. Mr Bartlett's limited role was known to all concerned. He was not acting for Landmarque or CFF; those bodies had been represented at all meetings by Mr Meredith. The applicants' evidence does not suggest any prior arrangement with CBA and Mr Bartlett that he should be used as the means of communicating to Landmarque an acceptance by CBA of the rollover proposal. Nor is there any reason why such an indirect route should have been suggested, since all communications that did take place before and after early July 1991 took the direct and obvious course of meetings, telephone conversations or correspondence between Mr Palmer and Mr Meredith.

4. Mr Bartlett's version of the conversation does not include any suggestion by Mr Palmer that he (Mr Bartlett) pass the good news onto Mr Meredith. Nor did that in fact happen. Mr Bartlett does not say that he told Mr Meredith about the conversation at the time. Nor does Mr Meredith say that Mr Bartlett told him. Mr Meredith swore an affidavit in these proceedings on 11 July 1993 in which he deposed:
   

"23. I am informed by Andy Bartlett and verily believe that in about the second week of July 1991 Andy Bartlett had a telephone conversation with Greg Palmer in which Greg Palmer said: 'AEFC will roll the facility over for another 24 months'."

1. The ordinary meaning of that paragraph is that Mr Meredith received that information about the alleged telephone conversation from Mr Bartlett about the time the affidavit was sworn.

2. The contents of the alleged conversation do not fit the course events took. The expression "I was read a final confirmation that everything was in order" suggests reference in the telephone conversation to a document which had that effect. Yet no such document was produced in evidence. Such documents as there were in July and August 1991 emanating from CBA were, as will be pointed out, inconsistent with the applicants' case.

3. The alleged telephone conversation treats as a fundamental part of the deal a commitment by the foreign investors, Mr Bartlett's clients, to fund the cost equally with Westpac. Yet the firm position taken by the foreign investors up to and including the meeting 20 June was that they were not going to contribute any further funds. The evidence does not disclose any indication to CBA between 20 June and the date of the alleged Bartlett/Palmer conversation of a reversal of that attitude.

4. Finally, Mr Bartlett's evidence suffers from the defect that, in contradistinction to Mr Meredith, he contends that a commitment was made at the meeting of 20 June. He said:
   

"Well my best recollection - and certainly the way I left that meeting - was that we had a commitment, barring any, you know, major unforeseen circumstances, that we would put up the $805,000 between us and Westpac and that the project would be held for a minimum of two years".

CBA - Westpac Agreement
41. After the meeting of 20 June negotiations took place between CBA and Westpac. However CBA needed to decide internally what course it would take.

1. Mr Palmer's memorandum of 3 July was passed onto his immediate superior Mr McDonald who supported the recommendation subject to the following comments, which he endorsed on the memorandum:
   

"1. The agreement between Westpac and ourselves should include provision for the CBA to take action under its securities if for some unforeseen circumstances the property value declined from a current valuation of $12.5 million by more than say $1 million or there was a breakdown in Centre management which could cause loss of rentals.

2. If Westpac are in agreement the arrangement should be witnessed in as simple form as possible or even a verbal arrangement may be suggested. Our letter should be 'intention' rather than an agreement.

3. The side arrangement should be referred to our legal people."

1. That recommendation was in turn passed onto Mr John Lawrence who was the CBA officer with authority to make the final decision. He noted amongst other things "I agree that our intention to hold the position should be very carefully conveyed to Westpac with all necessary qualifications". (Emphasis in original)

2. On 12 July Mr Lawrence wrote to Mr Marshall of Westpac in the following terms:
   

"I refer to our recent discussions regarding our respective banks' exposure to Landmarque Holdings Pty Ltd. As discussed our thinking at the present time is to maintain the position as is, i.e. we have no current intention of exercising our power of sale over the AEFC Limited security property, Cairns Festival Faire Shopping Centre. Assuming management of the Centre and rentals continue at or around the current level, we would see no reason for our position to change. You will appreciate, of course, that we do need to reserve our rights should circumstances such as any breaches under the facility occur, the management of the Centre and/or rental cash flows alter.

We would appreciate you letting us know in due course your decision regarding conditioning of the amount due to the builder."

1. Discussions then ensued between CBA and Westpac officers in which CBA agreed to advance $233,000 (i.e. the half the $465,130 cost of completion by the builder) on the basis that Westpac would give additional priority.

2. The response to Mr Lawrence's letter from Westpac came in a letter dated 30 July from Mr Marshall which said:
   

"We refer to your letter of 12 July and subsequent phone discussions, Lawrence/Maiden and McDonald/Marshall regarding the above company.

Based on your advices that you have no current intention of taking any action under AEFC Security over the Cairns Festival Faire Shopping Centre, assuming management and rentals continue at current levels, we confirm that we intend to provide additional funding to the group, including 50 per cent of the $456,000 due to Coastal Constructions Pty Ltd, to complete the Centre.

We note that you are prepared to provide the remaining 50 per cent, $232,000 to the builder, Coastal Constructions Pty Ltd, subject to corresponding increase in priority under your mortgage.

Your co-operation and assistance in this matter is appreciated."

1. On 31 July Westpac wrote to Mr Meredith advising of a further advance of $745,000 made up as to $235,000, described as "50 per cent amount due to Coastal Constructions Pty Ltd re Cairns Festival Faire Pty Ltd (remaining 50 per cent to be provided by first mortgage (sic), AEFC)" and the balance consisting of refurbishment of a market building at the Centre, leasing incentives and some items relating to other projects. Mr Meredith signed and returned a copy of the letter to Westpac. As between CBA and Westpac it is clear that two things happened following the meeting of 20 June. Contrary to its earlier stand, CBA moved to a position where it was prepared to contribute some further funds to ensure completion of the Centre. But it declined to go beyond an assurance that it had no current intention of taking action under its security. Although a request had been clearly made at the 20 June meeting for CBA to hold the position for two years, CBA was not prepared to give such a commitment to Westpac, and still less to Landmarque.

2. In practical commercial terms CBA's position is understandable. As at July 1991 it held a first mortgage security over the Centre which on current valuation would recover almost all the principal, if not accrued interest. CBA was therefore in a much better position than Westpac and those standing behind Westpac. If the Centre were permitted to trade on, the new management arrangements and perhaps a change for the better in the economic climate might improve matters, but if that did not happen CBA would incur further loss of interest, and perhaps capital as well. The risks involved in trading on were less attractive for CBA than they were for Westpac, which had little to lose. In that context there is no logical reason why CBA should have bound itself not to enforce its security for a further period of two years. In my view the applicants' case suffers from inherent improbability, quite apart from inconsistency with contemporaneous documents.

3. At this point I should mention that the allegation of a rollover agreement for two years from the time of the negotiations in mid 1991 appears in the amended statement of claim as an alternative to the applicants' primary claim which is based on an alleged agreement for a rollover for two years from the termination of the facility, i.e. two years from 31 May 1992. However the applicants' evidence contains no foundation for such a term and it was not seriously pressed at the trial.

Further Advance from CBA to Landmarque
50. CBA sent a formal letter of approval to Mr Meredith on 2 August confirming the further advance of $233,000. The letter included the following:

"Dear Mr Meredith,

LANDMARQUE HOLDINGS PTY LTD

TERM LOAN FACILITY

As discussed, AEFC Limited (AEFC) has approved an increase in the above facility of $233,000 from $11,700,000 to $11,933,000 to assist in the completion of Cairns Festival Faire Shopping Centre (CFFSC).

All of the existing terms and conditions, relative to the current term loan facility, shall apply to the increased amount. The full terms and conditions will be incorporated in the loan and security documentation with the main points as follows:

BORROWER: Landmarque Holdings Pty Ltd. PURPOSE: To assist in the completion of CFFSC at a total cost of $468,000 approximately. Bill of Acceptance Corporation Ltd (BAC) shall provide an additional amount of $235,000.

AEFC's funds will be provided on the basis that all outstanding amounts for work completed, currently due to the builder, Coastal Constructions Pty Ltd, and being subject to litigation, have been paid. AEFC's increased loan of $233,000 is to be utilised only for the purpose of completion of the CFFSC project. REDUCTION

ARRANGEMENTS: Repayment in full by 31 May 1992. SECURITY: The existing security together with a Supplementary Credit Facility Agreement shall support total facilities. Kindly execute under company seal the attached letter of request and return to our office.

In addition, a Priority Deed will be prepared for execution by AEFC, BAC and Interpacific Group Ltd. We understand that you have brought this requirement to the attention of the other parties who are in agreement with the situation. ...

OTHER: All other terms and conditions outlined in AEFC's letter of offer dated 17 May 1989 still apply."

1. The letter requested formal acceptance by signing and returning the duplicate of the letter, which Mr Meredith accordingly did on 8 August.

2. Mr Meredith said in evidence that this was "an agreement bringing in line $233,000 added to that mortgage that was their total advance when the facility was to be rolled over for a two year period and be repaid out of the funds from leases on the Shopping Centre". Mr Palmer said that he had a conversation with Mr Meredith concerning the approval letter of 2 August, went through the letter with him and discussed all aspects of it including the reduction arrangements for repayment by 31 May 1992. He said that he told Mr Meredith the facility repayment would have to be addressed close to that time.

3. Mr Meredith disputed that such a conversation took place and said that it was "contrary to all the other negotiations to have the rollover". However in my view, the opposite is the case. CBA had made it clear earlier in the year that the facility would have to be refinanced on the due date of 31 May 1992. Within that broad strategy CBA were prepared to grant some indulgence and not enforce the rights that had arisen consequent upon default on interest payments in March and June 1991. Nevertheless that indulgence did not extend beyond an assurance that there was no current intention of exercising rights. For the reasons already mentioned, there was no reason why it would be in CBA's interest to extend this troublesome facility beyond the term initially granted.

4. The formal documentation of the further advance was contained in a supplementary credit facility agreement dated 8 August 1991 which was executed by Landmarque and guaranteed by CFF and Mr Meredith. This agreement confirmed the terms of the original loan, which included of course a termination date of 31 May 1992.

5. Counsel for the applicants argued that the supplementary credit facility agreement was "not relevant to the existence or terms of the agreement made in July 1991 to extend the loan facility". I do not agree. If there was in truth agreement in July/August 1991 to vary the facility by (i) increasing the amount of the advance and (ii) extending the time for repayment - both major adjustments of the parties' rights and obligations - the natural commercial consequence would be some written confirmation of both changes. Counsel for the respondents relied on the rule against enforcement of oral collateral agreements which are inconsistent with a written instrument: Hoyt's Pty Ltd v Spencer (1919) 27 CLR 133. However I think it is more a case that the written documents, that is to say the letter of 2 August and the supplementary facility agreement of 8 August, point to the unlikelihood of the alleged oral agreement having been in fact made.

Alleged Payments by Foreign Investors
56. It will be convenient at this stage of the narrative to look at just what the evidence disclosed as to the alleged contributions by the foreign investors. On the applicants' case this was the essential quid pro quo provided for the commitment by CBA to the rollover agreement.

1. In his affidavit Mr Meredith deposed to an agreement between Westpac and the foreign investors to each contribute a sum of $402,500 and asserts that those sums were so contributed. As I have mentioned, there is no documentation whatsoever as between Westpac on the one hand and the foreign investors or Landmarque or CFF on the other to substantiate such an agreement or the performance of it.

2. In his evidence Mr Meredith said that, after the end of June 1991, the foreign investors "put in $463,000 to Landmarque from which Landmarque paid $180,000 to the builder". At another stage he said that the foreign investors made contributions of $180,000 and $90,000 or thereabouts in "May or June or perhaps July" and put a total sum of approximately $463,000 into the group, the balance being in respect of other ventures. All of these funds were lent to Landmarque and then on lent to the subsidiaries. The amounts of $180,000 and $90,000 "were paid during the period of discussions to keep Coastal Constructions from going into liquidation. They were having problems themselves because of the period of time to reach agreement with the builder". The payments would have been "more closer to May and June, it might even have gone over into July. They were around the same period of time of the negotiations, in fact I can't tell you the exact dates, but it would be more closer, probably to June/July." There were four foreign investors and the money came down in one parcel direct to Landmarque.

3. At a later stage in his evidence, indeed when the applicants' case was reopened towards the end of the trial, Mr Meredith said that he thought "the moneys were lent to CFF not to Landmarque" and that the four different investors "would have probably paid their money individually and not collectively". Landmarque ceased to trade in about May 1991.

4. Mr Meredith accepted in cross-examination that funds from CBA and Westpac made up the $805,000 required to finish the Centre. Mr Meredith then said that the advances from the foreign investors, namely the $180,000, the $90,000 and other amounts totalling in all about $306,000 were separate from the $805,000, the amount which, according to the applicants' case as originally presented, was contributed in equal shares by Westpac and the foreign investors.

5. If payments were made by the foreign investors in performance of the rollover agreement, Mr Meredith would have been aware of them. He might have been expected to confirm promptly to CBA, and with some satisfaction, that his side's bargain had been kept, but it is not suggested that any such communication took place.

6. The direct evidence of Mr Meredith on this issue I found to be confused and contradictory. It also has to be assessed against the fact that at the end of July 1991 he knew the amount necessary for the builder to complete the works was being contributed equally by CBA and Westpac. There was no need for payments thereafter by the foreign investors, who were the last people to put money into the Centre if they didn't have to.

7. The bank statements of the account of CFF for the relevant period were in evidence, but the applicants did not point to any entries in them which might have related to contributions by the foreign investors, either directly or via Landmarque.

8. From late May 1991 Mr Palmer was monitoring the CFF account to compare actual to budgeted cashflows and receiving duplicate statements. He did not observe any sums which might have represented payments from the foreign investors and none were pointed out to him.

9. Mr Bartlett's evidence was that his clients ended up putting in approximately US$250,000 "but the exact dates - there were two disbursements as I remember. The exact dates I can't tell you." Mr Bartlett was asked in cross-examination
   

"Q Now you have spoken about the monies which were put in which you say were put in by the foreign investors and you have said you cannot say the exact dates, but by the meeting on 20 June, do you recall that the foreign investors had actually put in all the money that they were going to put in?

A No, I can't be sure about that but that should appear in Landmarque's books."

1. It would be a relatively simple exercise to provide the dates and amounts of any payments made by the foreign investors. There is no apparent reason why the foreign investors would not be prepared to co-operate with the applicants in making this evidence available. Yet no such evidence was proffered.

2. The applicants' case must be not just that payments were made by the foreign investors, but that payments were made pursuant to the rollover agreement. In that event, such payments would have to have been made after the meeting of 20 June and, consistently with the way the case was presented, after the critical Bartlett - Palmer telephone conversation in early July because it was not until then that the rollover agreement was concluded. On the evidence I find that no such payments were in fact made, although there may have been other payments made earlier in relation to the Centre.

Subsequent Dealings Landmarque - CBA
68. Following on the formal documentation in August there was contact from time to time between Mr Meredith and CBA extending up to the time of the appointment of the receivers on 27 July 1992. The respondents place significance on the fact that allegation of the existence of the rollover agreement was only made belatedly.

1. However this phase of the story commences with a document which, of all the evidence in the case, came closest to supporting the applicants' case. On 15 August Mr Meredith wrote to Mr Palmer. The subject matter of the letter was mainly concerned with the mechanics of making progress payments to the builder. The letter commences:
   

"In your absence last week I attended to the signing of the necessary documentation in regard to the further advance from AEFC to ensure completion and retention of the Cairns Centre for the next 24 month period."

1. In the margin against that paragraph Mr Palmer noted:
   

"AEFC Limited/CBA facility expires 31.5.92."

1. Mr Palmer did not respond to the letter.

2. But on reflection it seems to me that this letter and Mr Palmer's note do not warrant the conclusion that Mr Palmer knew or believed that Mr Meredith was labouring under a misapprehension that there was a binding agreement that CBA would not exercise any rights under the facility for the next 24 months. The paragraph in the letter is equally consistent with belief on Mr Meredith's part that the further advance from CBA would enable the Centre to be completed and retained by its present ownership for a two year period so as to maximise the potential of a satisfactory sale. It does not necessarily follow that the facility from CBA would be extended so that it was available throughout that period. If things went according to plan it would be open to Landmarque to refinance the CBA facility when it expired perhaps, for example, with Westpac. But whatever happened CBA was to stick to the initial term of the facility - as CBA had stressed in March and as the recently completed documentation had confirmed.

3. Mr Palmer could only believe Mr Meredith assumed there was a rollover agreement if, to Mr Palmer's knowledge, CBA had communicated its acceptance of the proposal put at the 20 June meeting. Here again one returns to a basic flaw in the applicants' case: the absence of any approval by CBA.

4. Mr Meredith's evidence accepts that no approval was given at the 20 June meeting itself. The only evidence put forward as constituting any approval was the Palmer/Bartlett telephone conversation in early July. Once that is rejected, there is no basis for concluding that the rollover agreement came into existence or that Mr Meredith believed that it did or that Mr Palmer, or anyone else at CBA, thought that Mr Meredith had such a belief.

5. In January 1992 Mr Meredith had a discussion with Mr Palmer about a proposed sale of the Centre to a buyer who was offering $16 million cash and a property swap of an island called Wallace Island. Mr Palmer asked whether the proposal had been discussed with the second and third mortgagees, to which Mr Meredith said that he was going to do that, but if they did not agree then he wanted CBA to consider selling the property as mortgagee in possession. Mr Palmer replied that CBA had that right but that they would not exercise it as a matter of course; they would investigate other avenues and discuss matters with the subsequent mortgagees. Mr Meredith did not assert the existence of the rollover agreement.

6. CBA sent letters noting accrued interest for the September and December quarters, but took no steps to exercise remedies under the facility. Nor did it threaten to do so.

7. On 14 April 1992 Mr Lawrence of CBA wrote to Mr Meredith in the following terms:
   

"Landmarque Holdings Pty limited

AEFC Limited

Term Loan Facility Maturing 31 May 1992

Balance as at 13 April 1992 - DR$13,185,619.83 The terms and conditions of the above facility encompass a maturity date of 31 May and, as previously advised, the Bank will not consider any extension or renewal of the facility. It would appear most unlikely that your endeavours to sell Cairns Festival Faire Shopping Centre (CFFSC) will be settled prior to loan maturity. With this in mind, the Bank would appreciate your fresh proposals for clearance of the debt.

As the CFFSC cash flow has fallen well short of projections, with net quarterly income still unable to meet quarterly interest costs, it will be necessary for you to make alternative financing arrangements for effect on or about 31 May 1992.

Please let us have your comments in writing as soon as possible."

1. Mr Meredith said he received that letter about eight to ten days after its date. He did not respond to the letter which of course was totally inconsistent with the existence of the alleged rollover agreement. His explanation was:
   

"Given I've already sent prior letters I would then be quite familiar with the bank with what my belief, the transaction is. They administer the meeting and they've had prior letters."

He also said he had other things on his mind at the time.

1. On 27 May 1992 Mr Meredith wrote to Mr McDonald of CBA. Included in that letter was reference to the possible sale of the Centre. The letter included the following statement:
   

"I do not expect any opposition to the trade (of Wallace Island as part payment) by BAC as they are aware that AEFC wish us to refinance Cairns. I assume AEFC will stay in on Cairns until settlement which will be three weeks approx from BAC's approval (middle of June)."

1. I see that passage as confirming Mr Meredith's understanding of the basic attitude which CBA had always taken, namely that the facility was not to be extended past its original due date of 31 May 1992.

2. On 2 June 1992 CBA served notices of demand for the following amounts:
   

Principal $11,885,789.26 Interest $1,238,893.26 Financial Institutions Duty $1,200.00 $13,125,882.52

1. There was no response to the notices of demand and no reliance on the rollover agreement. On 5 and 11 June Mr Meredith telephoned Mr Dennis of CBA. There was discussion about the proposed sale of the Centre and the appointment of a receiver. Mr Meredith did not allege in those conversations the existence of the rollover agreement.

2. The first assertion of the existence of a rollover agreement came on 28 July in the course of another telephone conversation with Mr Dennis. The first written assertion came in a letter from Mr Meredith dated 27 October 1992, by which time the CBA had commenced bankruptcy proceedings against Mr Meredith and his wife. In the letter it was stated:
   

"It is our intention to contest that the original loan made by AEFC is in fact still current and will be so until May 1993 and we contest therefore the validity of AEFC and Commonwealth Bank having a claim against my wife and I under the guarantees.

1. The respondents' point as to the lateness of assertion as to the existence of the rollover agreement has validity.

Conclusion as to Rollover Agreement
85. It will be apparent from the foregoing that I do not accept the applicants' case that the CBA entered into the rollover agreement and restricted its right to enforce its security under the facility for a period of two years from July or August 1991.

1. At most, the CBA in July 1991 gave an assurance that it then had no current intention of exercising the power of sale to which it was entitled. That was in fact CBA's intention at the time. CBA never gave any contractual or other commitment that it would extent the facility beyond the original due date of 31 May 1992. It did not in fact exercise any security rights until two months after that date. This is so notwithstanding that from 31 March 1991 onwards the CBA had grounds on which it could have exercised such rights.

Estoppel
87. For essentially the same reasons I do not think any case of estoppel is made out. As to the requisite elements, see Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 428-429 per Brennan J. I am not satisfied that the applicants assumed that the facility would be extended for two years from July or August 1991, still less that CBA induced the applicants to adopt such an assumption or expectation. Further, the only detriment suggested by the applicants is the making of the payments by the foreign investors. Any such payments of course would have been made by an entity separate from the applicants. Insofar as the applicants or either of them used funds received from the foreign investors to pay amounts owing to the builder, it can hardly be a detriment to the applicants to pay debts which were legally due. More importantly, for the reasons I have mentioned, there is no satisfactory evidence that payments as alleged were made by foreign investors to the applicants or by the applicants to the builder at all, or that such payments were made in reliance on any assumption to which CBA contributed.

Trade Practices Act ss.51A, 52
88. There was no misrepresentation by CBA. Its statement as to its current intention was truthfully made and, insofar as it concerned a "future matter" it has reasonable grounds for making such statement.

Orders
89. There will be an order that as to the prayers for relief in paragraphs 1, 2, 4, 5, 6 and 7 of the amended statement of claim there will be judgment for the respondents with costs including reserved costs. Counsel for the applicants argued that any order for the costs of the second and third respondents should only extend to a watching brief. However the appropriate level of costs is a matter for the taxing officer.

1. The proceeding is otherwise adjourned to a directions hearing on a date to be fixed by the District Registrar.