Commonwealth Bank of Australia v Carotino (Australia) Pty Ltd
[2011] SASC 42
•1 April 2011
Supreme Court of South Australia
(Civil: Civil)
COMMONWEALTH BANK OF AUSTRALIA v CAROTINO (AUSTRALIA) PTY LTD
[2011] SASC 42
Judgment of The Honourable Justice Kelly
1 April 2011
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - FORMATION OF CONTRACTUAL RELATIONS - AGREEMENTS CONTEMPLATING EXECUTION OF FORMAL DOCUMENT - WHETHER CONCLUDED CONTRACT
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - FORMATION OF CONTRACTUAL RELATIONS - MATTERS NOT GIVING RISE TO BINDING CONTRACT - VAGUENESS AND UNCERTAINTY - AGREEMENT SUBJECT TO FURTHER AGREEMENT OR ARRANGEMENT
Contract - where two fuel companies held banking facilities with the plaintiff bank - where companies required the plaintiff's consent to the defendant becoming the ultimate owner of the companies - where the parties executed a letter whereby the plaintiff gave its consent and the defendant gave an undertaking to execute a "Shareholders Guarantee, in a standard form to be provided by the bank within 7 days of receipt" in favour of the plaintiff - where companies now in voluntary administration - whether parties intended to be bound by an immediately binding contract of guarantee - whether terms of alleged contract sufficiently certain to constitute a binding guarantee.
Held: Claim dismissed - letter amounts to an unenforceable arrangement whereby the defendant undertook execute a guarantee to be provided by the plaintiff in the future - the terms of the letter and surrounding circumstances do not indicate an intention by the parties to be immediately bound to a contract of guarantee - the terms of the letter are insufficiently certain to constitute a binding contract - further negotiation was contemplated regarding the terms of a guarantee - plaintiff had no standard form of shareholder's guarantee at the relevant time.
ESTOPPEL - ESTOPPEL IN PAIS - EQUITABLE ESTOPPEL - PROMISSORY ESTOPPEL
ESTOPPEL - ESTOPPEL IN PAIS - THE REPRESENTATION - IN GENERAL
Estoppel - whether defendant estopped from denying letter constitutes an immediately binding guarantee - where no guarantee document provided by the plaintiff to the defendant for execution until after companies in voluntary administration and after the commencement of litigation - whether defendant estopped from now refusing to execute a guarantee.
Held: Claim dismissed - no reasonable person in the position of the parties would have assumed that the letter in itself constitutes an immediately binding contract - the plaintiff did not make that assumption based on the letter rather it was misled by its own lax internal procedures - no inducement by defendant - no evidence that assumption of the plaintiff caused additional loss or damage - defendant not estopped from refusing to now execute a guarantee - refusal not unconscionable - late provision of guarantee document commercially unreasonable.
State Bank of New South Wales v Brown (2001) 38 ACSR 715; Howell v Macquarie University [2008] NSWCA 26, applied.
Caltex Oil (Aust) Pty Limited v Alderton (1964) 81 WN (Pt 1) (NSW); Walsh v Westpac Banking Corporation (1991) 104 ACTR 30; Re Haddard; ex parte RW Jordan Pty Ltd (Unreported, Federal Court of Australia, Sackville J, 20 August 1997); Relwood Pty Ltd v Manning Homes Pty Ltd [1990] 1 Qd R 481; GE Commercial Corporation (Australia) Pty Ltd v L & B Enterprises Pty Ltd [2009] NSWSC 770, distinguished.
Jones v Dunkel (1959) 101 CLR 298; R v Burdett (1820) 4 B & Ald 95; 106 ER 873; Masters v Cameron (1954) 91 CLR 353; Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540; Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647; Abadeen Group Pty Ltd & Anor v Bluestone Property Services Pty Ltd & Ors [2009] NSWCA 386; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd & Ors (2004) 219 CLR 165; Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; Commonwealth v Verwayen (1990) 170 CLR 394; Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466; Grundt v Great Boulder Proprietary Gold Mines Limited (1938) 59 CLR 641; Low v Bouverie [1891] 3 Ch 82; Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226; Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; Channel 7 Adelaide Pty Ltd v Manock [2010] SASCFC 59, discussed.
Allcars Pty Ltd v Tweedle [1937] VLR 35; Tonelli v Komirra Pty Ltd [1972] VR 737; Thompson v Palmer (1933) 49 CLR 507; Standard Chartered Bank Aust Ltd v Bank of China (1991) 23 NSWLR 164; Citizens' Bank of Louisiana v First National Bank of New Orleans (1873) LR 6 HL 352; Sydney Bolsom Investment Trust Ltd v E Karmios & Co (London) Ltd [1956] 1 QB 529, considered.
WORDS AND PHRASES CONSIDERED/DEFINED
"shareholder's guarantee", "standard form", "undertaking to execute", "negative pledge"
COMMONWEALTH BANK OF AUSTRALIA v CAROTINO (AUSTRALIA) PTY LTD
[2011] SASC 42CIVIL
KELLY J.
Introduction
The plaintiff, Commonwealth Bank of Australia (CBA), in these proceedings seeks to enforce a contract of guarantee allegedly entered into by the defendant, Carotino (Australia) Pty Ltd (Carotino), on 4 May 2007 and evidenced by a letter bearing that date.
CBA claims to be entitled to the sum of $4,770,982.60, being the amount outstanding under banking facilities provided to AF Fuels Pty Ltd (AFF) and South Australian Farmers Fuel Pty Ltd (SAFF) (together the SAFF Companies) as at 22 May 2009. Those companies are now in voluntary administration. The proceedings arise from events in 2007, when Carotino acquired a majority interest in Australian Farmers Fuel Pty Ltd (Australian Farmers Fuel), which was the holding company of the SAFF Companies. Before making the acquisition, at the insistence of CBA, Carotino signed a letter dated 4 May 2007 undertaking to execute a “Shareholders Guarantee, in a standard form” to be provided by the bank within 7 days of receipt. CBA now says that this letter, in itself, constitutes an immediately binding guarantee.
The relationship between Carotino and the SAFF Companies began in early 2007, when Mr Andrew Fischer, who held all of the shares in Australian Farmers Fuel and was the group’s directing mind, sought a new equity partner for the group. Carotino was considered a suitable equity partner because it was involved in the production of crude palm oil, which is an additive to bio-diesel, whilst the SAFF Companies were involved in the sale and distribution of bio-diesel.
It was determined that Australian Farmers Fuel would sell 51 per cent of its shares to Carotino, which would effect a change in the ultimate ownership of the SAFF Companies. Such a change in ownership required the consent of CBA, which determined that its consent would be conditional on Carotino agreeing to guarantee the debts of the SAFF Companies. On 4 May 2007, a letter was prepared by CBA and signed by the directors of Carotino, confirming the bank’s consent and Carotino’s undertaking to sign a guarantee.
CBA now seeks to enforce the letter as a contract of guarantee. In the alternative, CBA claims that Carotino is prevented, by operation of the doctrine of estoppel, from denying that the letter of 4 May 2007 constitutes an immediately effective guarantee or at the very least that it is now bound to execute a guarantee.
Carotino denies liability for the whole of the claim. On 8 April 2010 a Master of this Court made an order that the issue of the liability, if any, of Carotino for the claim should be determined separate from and prior to all other issues which arise in the proceedings.
The Factual Background
The Australian Farmers Fuel group was based in Adelaide. The person in control of the group was Mr Andrew Fischer, who was a director of both SAFF Companies and Australian Farmers Fuel. As noted, Australian Farmers Fuel was the holding company of the SAFF Companies. Other subsidiaries of Australian Farmers Fuel included Silver City Petroleum Pty Ltd and Austek Engineering Pty Ltd. The group also had a research and development arm, namely Australian Farmers Bio-Fuel Pty Ltd, as well as an arm dealing with electronic cards and rewards points systems, namely Electronic Fuel Solutions Holdings Pty Ltd and its subsidiaries. Mr Fischer was also the sole trustee of BAT Trust and as such, prior to March 2007, he was the ultimate owner of 100 per cent of the shares in Australian Farmers Fuel, Australian Farmers Bio-Fuel Pty Ltd and Electronic Fuel Solutions Holdings Pty Ltd. The principal business of the group was in the distribution and wholesaling of bio-fuels and lubricants.
In early February 2006, the SAFF Companies obtained receivables finance facilities from CBA with a limit of $8,500,000.00. These were facilities whereby the companies borrowed money against their accounts receivable, also known as “factoring”. Those facilities were secured by unlimited guarantees given by Australian Farmers Fuel and Silver City Petroleum Pty Ltd as well as a limited guarantee given by Mr Fischer personally. The SAFF Companies also entered into Deeds of Subordination with CBA. The Receivables Finance Agreement, the guarantees and the Deeds of Subordination were all entered into on 3 February 2006.
On 22 February 2006, equitable mortgages were signed by the SAFF Companies in favour of CBA, for all moneys owed to CBA by the respective companies. A clause in both mortgage deeds provided that in the event of a change in ultimate ownership of the SAFF Companies without the consent of CBA, the secured monies at the option of CBA would become payable without demand or notice.
Later in 2006, by two letters of offer to the SAFF Companies dated 6 September 2006, CBA increased the receivables facilities’ limits to $9,500,000.00. By two further letters of offer dated 14 March 2007, CBA confirmed the permanency of those increases.
The Relationship Manager at CBA in charge of the dealings between CBA and the SAFF Companies was at that time Mr Giovanni (Gio) Migheli, who worked in Sydney. It was Mr Migheli who sent out the various letters of offer and had general correspondence with the SAFF Companies.
In about early 2007, Mr Fischer had discussions with Mr Rex Wallace, who was a General Manager of the Australian Farmers Fuel group, regarding obtaining a new equity partner for Australian Farmers Fuel. This led to negotiations in March 2007 with Carotino as a potential suitor.
Carotino’s two parent companies were PharmaCare Laboratories Pty Ltd (PharmaCare) (49.2 per cent) and Carotino SDN BHD (Carotino Malaysia) (50.8 per cent). Carotino Malaysia’s business background was in the cultivation and manufacture of palm oil. Mr Michael Halter, who was Group Operations Manager of PharmaCare and a director of Carotino Australia, gave evidence that crude palm oil is an additive to diesel in the production of bio-diesel. It was this connection with the production of bio-diesel that led to the negotiations to take over the Australian Farmers Fuel group, which as mentioned, was involved in the sale and distribution of bio-diesel.
Mr Wallace said that he and Mr Fischer met with Mr Les Galbraith, who presented himself as the Manager of Carotino. Mr Galbraith was based in Sydney and was the person with whom Mr Wallace had day-to-day contact regarding the transaction. Mr Halter gave evidence that Mr Galbraith was appointed as the conduit between Carotino Australia and the Australian Farmers Fuel group. Mr Galbraith was Carotino’s representative in the environmentally friendly fuels (ENFFUE) division. He reported to Carotino Australia, even though he was not formally employed by Carotino Australia.
As a result of the negotiations between the Australian Farmers Fuel group and Carotino, a memorandum of understanding dated 30 March 2007 was entered into, setting out the terms of the purchase by Carotino of 51 per cent of the shares in Australian Farmers Fuel.
In the period from about late April 2007 to 4 May 2007, Mr Fischer approached CBA regarding consent to a change in the ultimate ownership of AF Fuels, whereby Carotino would become the ultimate parent. In about April 2007, Mr Wallace also approached Mr Migheli of CBA regarding consent to a change in ultimate ownership of the SAFF Companies.
Mr Migheli said that he had frequent discussions with Mr Wallace and Mr Fischer and that he said to them “from the outset” that if someone was going to purchase 51 per cent of Australian Farmers Fuel then CBA would require a guarantee from that person over debts held by the SAFF Companies. It is not contested by either party that as a condition of consent to a change in identity of the majority shareholder of Australian Farmers Fuel, CBA would require a guarantee from the incoming majority shareholder.
Mr Wallace was then involved in further communications with Carotino regarding Carotino’s willingness to give a guarantee. Mr Wallace remembered that he discussed this issue at some stage with Mr Galbraith. No witness called at the hearing purported to recall precise conversations or even details of conversations, however a number of emails were tendered. In one email dated 30 April 2007 sent by Mr Wallace to a solicitor at Kelly & Co, then solicitors for Australian Farmers Fuel, Mr Wallace advised that he had had a discussion with Mr Halter who indicated that Carotino would “execute a company guarantee for CBA for the debt facility in order to allow the deal to complete”. Although Mr Wallace said at the hearing that he could not specifically remember having such a conversation with Mr Halter, he said that he would not have sent such an email to the company solicitors unless he had such a conversation.
On the same date as that email, 30 April 2007, Mr Wallace sent a further email to CBA to Mr Migheli stating “Carotino (Australia) has agreed in principle to a company guarantee if absolutely necessary to enable the transaction to proceed”. Mr Wallace gave evidence that the source of that information would most likely have been Mr Galbraith.
On the morning of 4 May 2007 at about 6:00 am there was an exchange of emails between Mr Migheli and Mr Fischer. In the first email from Mr Fischer to Mr Migheli, Mr Fischer made it clear that he required Mr Migheli’s “URGENT attention” with regard to the issue of CBA’s consent to the forthcoming agreement with Carotino. Mr Fischer explained that everything else had been in place for the merger since 1 May and that he did not want his new partners getting nervous. Mr Migheli sent two emails in response, the first giving reassurance that he was working to obtain consent and the second indicating that CBA had all of the information required to complete the request. Mr Migheli explained that the request for consent had occurred quite quickly adding that ideally “some prior notice would have been great”, but that he did understand that Mr Fischer was tied up in negotiations with the other company. At the hearing when asked why he was working at the bank at 6:00 am Mr Migheli said:
There was quite a lot happening with this connection and there was a lot of pressure to get all the information out so they [the Australian Famers Fuel group] wouldn’t lose this opportunity.
Both parties accept that at some stage on 4 May 2007 CBA received a copy of the share sale and subscription agreement which Mr Fischer, Carotino and Australian Farmers Fuel proposed to sign subject to receiving the consent of CBA.
Meanwhile, over 3 and 4 May 2007, Mr Migheli prepared an internal CBA document for his superiors in connection with the proposed transaction entitled “Application Report”. In the Application Report, on 3 May 2007, Mr Migheli wrote:
A change in security is sought by way of adding a Guarantee from Carotino Australia Pty Ltd. At first they did not want to supply but have agreed after we insisted.
Later in a further section of the application Mr Migheli wrote under a heading “CONDITIONS PRIOR TO FUNDING”:
A letter of undertaking is to be signed acknowledging that clients will execute the banks security documentation including a new Unlimited Guarantee from Carotino Australia Pty Ltd.
In that document which went to Mr Migheli’s superior, Mr Migheli included a “Security Summary” being a computer maintained document which records the status of all security held by CBA in relation to various facilities. In relation to the SAFF Companies’ receivables finance facilities, the document records one of the security items:
Description
Status
G/U by Carotino Australia Pty Ltd
New
Mr Migheli agreed in evidence that he inserted this entry even though he had had no direct contact with any person from Carotino about the guarantee. He said that that entry was made in expectation of the guarantee being given in the future. That entry had some important consequences in the context of the issues which arise for the determination in this case and it will be necessary to return to it later.
The acronym “G/U” was the subject of evidence at the hearing. There was some confusion between different CBA employees about the meaning of that acronym. Mr Migheli suggested it means “guarantee unlimited” while Mr Andrew Perkins, a Relationship Manager in the corporate financial services at CBA, said that the acronym means “guarantee unsupported” meaning that there is no further security such as a property linked with the guarantee. Mr Steven Dumican, a risk executive at CBA, said that in the context of the Security Summary, it means “guarantee unsupported” while Mr Peter Russell, a CBA Manager in Business Lending Support based in Sydney at the relevant time, said that the expression means “a guarantee unlimited and unsupported” in that it is unlimited in dollar amount and there is no additional security offered other than the guarantee.
The Letter of 4 May 2007
In any event on 4 May 2007 the bank’s consent was given in a letter sent to a firm of Adelaide solicitors. As the terms of that letter are critical to the outcome of this case, the letter is reproduced in full below:
Both parties agree there was some urgency in the creation and sending of the letter of 4 May 2007 by facsimile. From the point of view of Mr Fischer it was obviously urgent to ensure that the share sale went ahead as planned. Mr Migheli agreed that it was due to this sense of urgency that the letter of undertaking was forwarded rather than the execution of formal guarantees. As at 4 May 2007 in fact no formal guarantee had been prepared by CBA for execution by Carotino.
There was some evidence that the formal letter of approval went to the parties before Mr Brett Moloney, Mr Migheli’s superior, had approved the application at about 5.19 pm on 4 May. However, nothing turns on this as neither party sought to deny that by the letter CBA did consent to the change of ownership.
Thereafter on Monday 7 May 2007 Carotino acquired 51 per cent of the issued shares in Australian Farmers Fuel.
Evidence About Events After 4 May 2007
At the hearing there was no dispute between the parties concerning the events which led to the signing of the letter of 4 May 2007. However, events which occurred after that date were the subject of some dispute. CBA maintained that after the return of the signed letter dated 4 May 2007 to the bank, formal documentation which included a guarantee was prepared in the bank and sent to Carotino for execution. At this point it is sufficient to note that the terms of the guarantee allegedly sent to Carotino were never explained by CBA. CBA further alleged that despite a number of requests for the return of the executed guarantee, Carotino never returned the executed guarantee to the bank. On the other hand Carotino denied that at any stage after execution of the letter dated 4 May 2007 it ever received a formal guarantee for execution by its directors.
It has been necessary therefore to trace the actions of the relevant officers within CBA and other relevant officers within Carotino and the SAFF group of companies in order to try and resolve the conflict between the parties about what happened.
A number of officers from CBA gave evidence about the usual practice adopted by the bank throughout the relevant period when the bank either issued a new facility or made changes to an existing facility. Mr Migheli described the steps taken after the bank receives an approach from a customer. Initially details are taken from the customer as to the precise request. That might entail a number of matters including the provision of financial information and supporting documentation. The relevant bank officer (in this case it was Mr Migheli) and the associated team within CBA, referred to by the bank as “the pod”, then receive the information and analyse the customer’s application.
At some stage the relevant bank officer together with the other members of the pod makes a recommendation to a person within the bank who has authority to approve such applications. In this case that person was Mr Moloney. The recommendation is considered by that person with approval authority and then, if the application is approved, a letter of offer is generated and sent out to the customer.
Mr Migheli and other bank officers gave evidence about the purpose of sending a letter of offer and the usual circumstances in which the bank sends out a letter of offer to the client. It suffices to say that the bank regards the letter of offer as an important document to be executed by the client prior to the execution of any formal security documentation. In the normal course of events, the bank acts only upon the acceptance of the client evidenced by the return of the executed letter of offer.
The letter of offer sets out what it is the bank is prepared to do and the information the customer needs to read and understand, which includes items such as group limits, names, interest rates, fees, the advance rate, securities and other like matters. It is, as Mr Migheli pointed out, the bank’s way of defining with precision its relationship with the customer for the purpose of that transaction and it ensures that the bank has a record of the agreement it made with the borrower and the terms of its agreement as lender to the borrower. Mr Migheli accepted that the letter of offer is an essential document in the process of the borrowing and lending relationship within the bank.
As soon as the customer has signed the letter of offer and returned it to the bank, the bank then prepares the documentation which is necessary to record what it is the bank requires in return for the provision of the finance facility. What the bank requires is usually recorded under the heading “Security” in the letter of offer. All the witnesses called on behalf of CBA agreed that the bank’s usual process is to wait until it receives a signed letter of offer indicating the customer’s and any guarantor’s acceptance of terms and conditions, before sending out the security documentation for execution. This is the case even though a Relationship Manager, such as Mr Migheli, might previously have requested the preparation of the formal documentation from the bank’s own loan processing centre (LPC) which at that time was based in Sydney.
In this case there is no dispute that two unexecuted letters of offer dated 23 May 2007 (exhibits P4 and P5) were located in the files of the administrator for both of the SAFF Companies. There is, however, no evidence either from the bank records or from anyone else that the two letters of offer allegedly sent to the SAFF Companies on about 18 June 2007 were ever executed or returned to CBA by the SAFF Companies
Evidence about what occurred in CBA after the return of the signed letter of 4 May 2007 came principally from Mr Migheli. On Tuesday 8 May 2007 Mr Migheli sent an email to Mr Wal Placek, a risk executive manger at CBA. The email relevantly states:
Hi Wal,
Please refer to the attached approval from Risk (Brett Moloney) to allow for a change in ultimate ownership of the group. We will request a fresh guarantee from LPC once we have a copy of the new Letters of Offer.
Could you please arrange to issue a new Letter of Offer with the change in security noted as well as the conditions set by Brett.
About two weeks later on 21 May 2007 Mr Migheli sent a further email to Ms Leah Oorloff of CBA following up on the whereabouts of the documentation requested in the following terms:
Hi Leah,
Could you please advise when we will be able to obtain a copy of the BFD [business facility documents] as per my request below.
This is quite urgent as I can not order a new Guarantee until I have a copy of the Letter of offer.
The two letters P4 and P5 evidence the fact that after Mr Migheli’s email of 8 May 2007, new letters of offer were prepared. Both of the letters P4 and P5 are replicated in the computer records of CBA, the only difference in the bank records being the date which records the letters as 22 May 2007 and not 23 May 2007 as appears in the letters found in the administrator’s files. There is no dispute that the letters were actually received by the SAFF Companies although Mr Migheli was unable to say exactly when they were sent.
Mr Migheli did send a letter of 18 June 2007 to Mr Rex Wallace, the General Manager for South Australian Farmers Fuel, in which he stated that he was enclosing “a New Letter of Offer”. This letter, which a number of witnesses were asked about, relevantly states:
Mr Rex Wallace
South Australian Farmers Fuel Pty Ltd
PO Box 1
Pooraka SA 509518 June 2007
Dear Rex,
Change in Ownership
Thanks for copying the Share Sale agreement and forwarding it to us with the letter of undertaking.
Please find enclosed a New Letter of Offer that shows the new security item of a Guarantee for Carotino (Australia) Pty Ltd and the security documents required to complete this transaction.
Could you please arrange for all parties to sign where indicated and return to this office marked to mine or Gareth Harvey’s attention, preferable by the end of June 2007.
Please note that I will be on Leave at the end of this month and will be back on 7 August 2007. In my absence Gareth Harvey will be able to deal with any enquiries you may have. Gareth has recently taken over from Kon Zikou as my Relationship Banker.
Please do not hesitate to contact me on … 5050 if we can be of any assistance.
Yours sincerely
Gio Migheli
Relationship ManagerMr Migheli was asked in evidence about the enclosures referred to in the letter itself. Initially he explained that the security documents to which he was referring in that letter were the guarantee for Carotino and other documents. When he was asked about what other documents he might have been referring to, Mr Migheli referred back to one of the two letters of offer of 23 May 2007 (P4 and P5), which contain a list of security items on page 2. Those items refer to existing securities already held by the bank as well as a guarantee unlimited by Carotino.
Later, he said that the only document that he enclosed with the two letters of offer was the formal guarantee for Carotino to execute. Mr Migheli did not give any evidence regarding the terms of such a guarantee. Still later, he conceded that he has no recollection of what enclosures were sent with the letter of 18 June 2007 to Mr Wallace. Ultimately Mr Migheli conceded that he may not have included the guarantee document in the enclosures with that letter of 18 June 2007 because, had he done so, that would have represented a departure from the bank’s usual practice.
On the other hand there is what appears to be a contemporaneous note made in the bank computer records on 18 June 2007 by Mr Migheli to the following effect:
Full copy of share sale and subscription agreement sent to immaging for copying together with the original letter of undertaking. Have today posted new Guarantee and BFD to client for signing and return to this office. Sent by express post. Gio.
CBA’s “client” in this context was the SAFF Companies, which held the receivables finance facilities.
The recipient of letter of 18 June 2007, Mr Wallace, recalled the letter from Mr Migheli and that it came with a manila envelope containing a bundle of documents. He said he forwarded them on immediately to Carotino possibly via Kelly & Co. Mr Wallace was an important witness for CBA on the issue of whether a guarantee was included in that letter of 18 June 2007, however, I found some of his evidence on this topic confusing. Initially, at least, Mr Wallace said that he was “fairly certain” that a guarantee document was included in the bundle of documents, but he did not give any evidence as to the terms of such a guarantee.
On 20 June 2007 Mr Wallace sent an email to Mr Migheli in which he stated:
G’Day Gio,
I have just received your letter of offer, will send on to the various parties to sign.
He said he was aware that Carotino received the guarantee for execution because he subsequently had a conversation with Mr Les Galbraith about it. Mr Galbraith was the conduit appointed by the directors of Carotino to be the day to day contact between Mr Wallace for the SAFF group of companies and Carotino. Mr Wallace claimed to recall a telephone call he had with Mr Galbraith specifically about the guarantee. He said:[1]
I recall telephoning Les and asking him to chase up the documents and chase up the execution of those documents, and for two reasons: one because they needed to be executed fairly urgently, and two to make sure that they had actually arrived and they weren’t sitting in somebody’s out-tray waiting to be sent, still. And I recall Les going – moving round throughout the building – he had a mobile phone I was talking to him on – and he checked and he told me that the documents were on Michael Halter’s desk.
[1] Transcript 163.
Mr Wallace’s evidence was that after the acquisition by Carotino of the majority shareholder interest in the SAFF Companies he had many dealings with Mr Galbraith over a period of months on the topic of bank guarantees generally as well as other matters. This was because there was a requirement for Carotino to lodge various bank guarantees with the SAFF group’s supplier oil companies, whereby Carotino arranged for guarantees to be provided by certain banks in favour of the suppliers.
When it was suggested to Mr Wallace that he had no clear memory of what was contained in the manila envelope accompanying the letter of 18 June 2007, he answered:[2]
A.- because of the urgency at the time; what I recall in that envelope is only the guarantee documents, that’s the only thing that I checked in the envelope and I remember seeing that document in an envelope and then forwarding that on. And I honestly can’t recall whether I forwarded that to Gary Winter’s office or whether I forwarded that directly to Carotino, I don’t recall.
Q.Right, well that's the point I -
A. But I didn't check the rest of the documents in the envelope at all only this letter.
Q. You say you opened the envelope and you checked it.
A. Saw that it had the guarantee in it so forwarded that on because it was urgent.
[2] Transcript 178.
When it was put to Mr Wallace that the only document included with the letter of 18 June 2007 was the letter of offer, Mr Wallace to some extent resiled from his initial position that he was “fairly certain” that a guarantee was included with the documents, stating:[3]
A.Actually, if I think back now, I - time, too much time's elapsed so I can't be a hundred per cent certain, no.
Q.That's right.
A. Yep.
Q.Yes. You just cannot be sure now, to tell her Honour, what you recall at all, do you.
A.At this point in time I cannot recall the specific images in my mind of the documents that were in an envelope, no.
[3] Transcript 182.
Mr Wallace again reiterated that he could not remember whether he had sent it to Mr Gary Winter at Kelly & Co or straight to Carotino. Still later, Mr Wallace stated it was likely that he would have sent the whole bundle to the SAFF Companies’ solicitor Kelly & Co for them to distribute out to whoever needed to sign because it was obvious that more than one person needed to execute the document. No evidence was called from anyone at Kelly & Co in this regard.
The only evidence of any urgency in any of the dealings between the various parties was around the time of the settlement of the share sale to Carotino in May 2007. The events of 4 May 2007 did unfold in an atmosphere of urgency as both parties wanted to settle on the following Monday 7 May 2007. The reference by Mr Wallace to sending the documents in June 2007 to Kelly & Co together with his recollection that the matter was urgent at that time might indicate that Mr Wallace has confused communications he had with CBA and Mr Migheli around the time of settlement on 4 May 2007 with subsequent communications he had after receipt of the letter of 18 June 2007. There is no evidence that there was any urgency about the matter in the months subsequent to the settlement. Another possibility is that given the frequency of his dealings with Mr Galbraith on the topic of bank guarantees generally, Mr Wallace may well be mistaken about the subject matter of the particular telephone call he recalled having with Mr Galbraith.
Subsequent email communications between Mr Migheli and Mr Wallace do not shed any further light on this issue. On 13 August 2007 Mr Migheli wrote to Mr Wallace in an email in which he stated:
Hi Rex,
Just a quick follow up reminder that we are still awaiting the documentation that I posted to you late June for the Guarantee etc from Carotino Australia Pty Ltd.
Could you please arrange to forward this to our office as soon as possible.
Nor does the document produced by CBA (P11) which Mr Wallace identified as a copy of an email he sent to Mr Halter on 28 September 2007 take the matter any further:
G’Day Michael
A couple months ago, we sent through some docs from the Commonwealth Bank relating to our debtor finance facility and the docs for the guarantee required by CBA from Carotino Australia P/L. Have you seen/executed/returned these? The bank is chasing me as our facility is to be reviewed as at 30th September and I need all my “ducks in a row”.
Carotino did not challenge the evidence of Mr Wallace that he sent the email P11 to Mr Halter. However Mr Halter denied that he ever received that email. He explained that he keeps an electronic record of all incoming emails. He searched his records and could not find that email. The document itself is in an unusual form. There is no indication on the face of the document that it was sent to Mr Halter. The only reference on the head of the email is the name of a person who I was informed during the trial is someone in the employ of Mr Fischer’s solicitors. In these circumstances and in the absence of any proof as to the provenance of the document P11, I accept Mr Halter’s evidence that he never received that email from Mr Wallace.
Evidence of the bank’s computer records during the relevant period does not assist me to resolve the uncertainty as to whether a formal guarantee document was sent to Carotino for execution either by way of enclosure in the letter to Mr Wallace of 18 June 2007 or otherwise. The computer records do show that a guarantee document was created on 6 June 2007. There are three relevant entries in the computer records about that document as set out below:
Status
Date
Amount
Officer
Docs Sent To Client
06/Jun/2007 03:16 PM
$9,500,000
Chau Van Nguyen
Documentation
26/May/2007 09:58 AM
$9,500,000
Sarah Allison Viney
Preparation
24/May/2007 11:27 AM
$9,500,000
Gareth Harvey
Evidence about the meaning of those entries was given by Mr Peter Russell, who as mentioned was a Manager of the bank in Business Lending Support in Sydney. The word “preparation” refers to preparation of a particular lending application which was completed by Mr Gareth Harvey and submitted to the business lending support division of the bank to arrange for generation of documentation. The word “documentation” relates to the review stage by the officer, in this case named Ms Sarah Viney, whose role it was to ensure that the information in the application was correct before sending it on to the person who actually created the documents. The words “docs sent to client” refers to the person who created the documents, in this case Mr Chau Van Nguyen, and those words would normally mean that the documentation was sent on to the SAFF Companies. However in this case, a further entry in the computer records indicates that the documents were despatched back to Mr Harvey in the business unit and that the client (the SAFF Companies) was not contacted.
Even though the bank’s records show that a letter dated 6 June 2007 addressed directly to Carotino (Australia) Pty Ltd was prepared, the evidence of Mr Russell from the bank was that the records do not say one way or another whether that letter was ever sent with the guarantee. Moreover, according to Mr Russell, that was most unlikely as it would have been inconsistent with the instructions on the computer records which were to send the documentation back to the business unit Manager namely Mr Harvey.
The bank records establish that on 6 June 2007 an employee named Mr Van Nguyen prepared a guarantee document in the name of Carotino. However, that document was not tendered at trial and no evidence was called regarding its terms. The bank records do not establish what happened to that guarantee document and more particularly whether the letter of 18 June 2007 did contain a guarantee.
For the reasons I have discussed neither Mr Migheli nor Mr Wallace assist me in resolving the question of whether a guarantee was ever proffered to the directors of Carotino for execution. There is no record in the bank’s computer system to show a letter was ever forwarded to Carotino enclosing a guarantee for execution. The records also show that no executed letters of offer were ever returned to the bank by the SAFF Companies and no executed guarantee by Carotino was ever received by the bank.
Mr Migheli went on leave in late June 2007 and returned to work in early August 2007. It appears that he left the bank’s employment in late September or early October 2007, rather precipitously. There was no formal handover process by which he gave any other person in the bank instructions with regard to the client, namely the SAFF group of companies.
Shortly after Mr Migheli’s departure from the bank management of CBA’s business connection with the SAFF group of companies was transferred from Sydney to Adelaide and the existing application on the computer records was cancelled. That had the effect that there was no further follow‑up by either the lending support unit or anyone in the bank in relation to the return of the documentation which Mr Migheli had been requesting from Mr Wallace.
Mr Migheli knew, and he never claimed otherwise, that no guarantee document had been signed by Carotino by the time he left the bank in late September or early October 2007.
After Mr Migheli’s departure from the bank no one in CBA followed up the return of the documentation which had been requested by Mr Migheli. The evidence of the bank officers Mr Neil Smith, Mr Peter Russell and Mr Steven Dumican, was that the new officers assigned to deal with the SAFF Companies all made the assumption that a signed guarantee had already been obtained from Carotino.
Nobody from CBA had any contact with any director or employee of Carotino by which Carotino or any of its employees represented to the bank that a guarantee had been signed. There was simply no communication between anyone at CBA and Carotino after Mr Migheli’s departure from the bank in late September or early October 2007. The next relevant communication to Carotino occurred in the context of the current litigation, after the companies went into voluntary administration. In December 2009, after the commencement of the litigation, the bank proffered a guarantee for signature to Carotino via its solicitors.
The evidence as to what did happen at CBA after Mr Migheli left the bank came from Mr Russell, Mr Dumican, Mr Smith and Mr Andrew Perkins, all of whom were employed in various capacities within CBA. Mr Perkins, a Relationship Manager in the Corporate Financial Services section of CBA, first became involved with the SAFF company file in around November 2007 when the bank handed control of the SAFF group file to its Adelaide office. It appears that Mr Perkins’ involvement was minimal and that nothing much occurred as far as he was concerned until August 2008 when he began to check the bank records attempting to find the signed letter of offer of 24 May 2007, a copy of which appeared in the bank records. This occurred immediately prior to carrying out a review of the connection with the SAFF Companies in August 2008. In a report which he prepared in August 2008 Mr Perkins summarised the existing securities in relation to the SAFF Companies. In that document he referred to “a guarantee unlimited as to amount by Carotino (Australia) Pty Ltd” in the status section as “existing”. He said he did that because he had reviewed on the bank record Mr Migheli’s entry earlier noting “G/U by Carotino Australia Pty Ltd…New”. He simply made the assumption that the guarantee documents were in the bank’s security packet and it appears that thereafter the other CBA officers who dealt with the file acted on the same assumption.
Mr Russell, the Business Lending Support Manager from CBA in Sydney, explained generally the procedure involved in the creation of loan and security documentation within CBA. He also explained a number of entries that appear in the bank’s records in relation to the SAFF group of companies. He said that generally guarantees taken from individuals are limited to the amount of the debt and that generally guarantees taken from corporations are unlimited. He did, however, acknowledge that there is an option for limited guarantees to be taken from corporations and agreed that CBA may negotiate in relation to a guarantor having only limited liability. He explained that a negative pledge is required if a company gives an unsupported guarantee. In essence a negative pledge is an undertaking from the guarantor that the guarantor will obtain prior written consent from the bank if it intends to sell its assets other than in the ordinary course of business or to use its assets to support any other advances or loans to any other party. A failure to obtain prior written consent from the bank entitles the bank to call up the debt. The usual clause in relation to a negative pledge can be seen in the example of what the bank called its generic form of guarantee.[4]
[4] Exhibit P2 at 188.
Mr Russell identified a template used by the bank in the creation of a guarantee document. He said this form had been in use by the bank since 2003. The template contains a number of variables. One of the variables relates to the amount of the guarantee, that is whether it is to be limited or unlimited. Another variable is whether the guarantee is supported or unsupported by other security. If the guarantee is unsupported a further variable in relation to the negative pledge clause is also available. Mr Russell acknowledged that on occasions the template used can be varied depending on the particular negotiations between the bank and its client. However, as far as he was aware, the negative pledge was required as a standard clause in all guarantees given by corporations where the guarantee is unsupported. When it was drawn to Mr Russell’s attention that neither the unsupported guarantee sent to Carotino in December 2009, nor a previous unsupported guarantee given by Silver City Petroleum Pty Ltd included a negative pledge clause, Mr Russell said that such a clause should have been included in both guarantees and was unable to explain its absence.
Mr Smith, a Senior Manager at CBA based in Adelaide, was handed the SAFF Companies’ file in January 2009. He claimed the guarantee forwarded to Carotino in December 2009 was identical to CBA’s generic form for a company guarantee unsupported. When it was pointed out to him that the document which had been sent to Carotino in December 2009 did not contain the negative pledge, he agreed that the guarantee sent to Carotino in December 2009 did not actually replicate in its entirety the generic form previously identified by Mr Russell. He was unable to explain why this was so.
Mr Dumican, who became involved with the SAFF group file in about March 2008, said that he went looking for the signed letter of offer of 24 May 2007 and was not able to find it. Like the other bank witnesses this witness also assumed that the bank held an existing guarantee in its security packet. His belief was based on Mr Perkins’ report which described the guarantee from Carotino as “existing”. Mr Dumican gave evidence that he can not now recall the follow up or response to his enquiries because he went on holidays shortly after that period of time. Mr Dumican said that he had never seen a signed letter of offer of 24 May 2007 or the security packet. It appears that because the client companies were in Adelaide and the security packets held by the bank were either in Melbourne or Sydney that it took some time before the bank was able to locate the relevant security packet for the SAFF Companies.
Mr Halter was the only witness called by Carotino. He was one of the directors of Carotino and after 7 May 2007 when Carotino acquired majority shareholding of the SAFF Companies he, together with Mr Fischer and Mr Brown became the directors of the SAFF Companies. Mr Halter said that he would not have purchased the shares in the SAFF Companies if CBA had not first provided its consent.
Mr Halter was also the Group Operations Manager of PharmaCare Laboratories Pty Ltd which owned 49 per cent of the shares in Carotino. As the Operations Manager of Carotino in Australia he appointed Mr Galbraith, an employee of PharmaCare, as the conduit between Carotino and the SAFF group of companies. After Carotino acquired its shareholding Mr Wallace continued to report to Mr Fischer in Adelaide but also on occasion to Mr Galbraith. As Mr Galbraith was based in Sydney the reporting relationship between Mr Wallace and Mr Fischer remained essentially unchanged, however Mr Halter made it clear that the responsibility on the dotted line was ultimately through Mr Galbraith in the Sydney office.
Mr Halter himself did not have any day to day contact with Mr Wallace. Mr Halter said he had never heard of Mr Migheli prior to the commencement of these proceedings, nor did he have any dealings with any other employee of CBA either in Adelaide or in Sydney about this matter. He was never privy to any internal CBA reviews conducted by CBA in relation to the finance facilities offered by them to the SAFF group of companies. In short he had no contact with anyone from CBA prior to the acquisition of a majority shareholding in the SAFF group.
Mr Halter said he signed the letter of 4 May 2007 and expected that in due course he would receive a guarantee document from CBA. He said his usual practice with regard to legal documentation was to share that with the financial controller of Carotino, with their lawyers and with the managing director of Carotino at that time, Mr Toby Browne. No document was ever received from CBA and as he is a busy man he did not turn his mind at any stage as to why the bank had not produced the guarantee for execution.
Mr Halter was cross‑examined about his reasons for signing the letter of 4 May 2007. He explained that he knew the letter of 4 May 2007 was an important document. He understood that the bank’s consent was given in that letter and that Carotino had given an undertaking to execute a guarantee to be produced by the bank. He went on to say that had such a document been produced, Carotino would have reviewed that document and if suitable it would have been signed. One of the matters he expected to have some discussion about when he sighted the formal guarantee document was the extent of Carotino’s liability under the guarantee, for example whether it was to have been limited to 51 per cent equivalent to its shareholding and how it engaged Mr Fischer and his companies in relation to the 49 per cent equivalent to their shareholding. This was a matter he expected to have some discussion about. At no time did any person in the bank ever suggest to him that the letter of 4 May 2007 operated as an immediately effective guarantee from Carotino.
That is a summary of the main evidence on which CBA relies in respect of both the primary claim and the alternative claim for estoppel.
Factual Findings
In light of the fact that there is no dispute as to the events which occurred prior to the signing of the letter of 4 May 2007 I find that the matters set out by way of factual background in [7] – [30] herein have been proved. I do not doubt that all of the witnesses called at the trial, whether they were called for CBA or Carotino, did their best to answer truthfully and accurately when giving evidence. However it is obvious that some of the witnesses’ memories are to a greater or lesser extent impaired. In this respect I found Mr Migheli and Mr Wallace at times contradicted themselves and gave evidence which was both confusing and in the end unreliable. I mean no criticism of either witness but the fact is that I gained the impression from both of them at various times, that their evidence was, perhaps subconsciously, a reconstruction based on what they thought had occurred or should have occurred. The lines of communication between Carotino and the SAFF Companies were informal as was the line of communication between the SAFF Companies and CBA. In these circumstances there was ample scope for the guarantee document, even if it had been enclosed in the letter of 18 June 2007, to have gone astray. In the circumstances I see no reason to disbelieve Mr Halter’s evidence that he never received a guarantee. His evidence although brief was quite straight‑forward and I have no difficulty in accepting him as a truthful witness.
I am satisfied that the bank records show that a guarantee document was prepared by Mr Van Nguyen on 6 June 2007. As previously mentioned this document was not tendered. There is no evidence regarding its terms. Further, the bank records do not show if that document or a letter addressed to the Secretary/Director, Carotino (Australia) Pty Ltd, PO Box 384, Mona Vale, NSW, 1660, dated 6 June 2007 was ever sent to Carotino.
I am satisfied that Mr Migheli sent the letter dated 18 June 2007 with a number of other documents at or around that time. In the usual course of events an inference might reasonably be drawn from Mr Migheli’s own contemporaneous note that he did enclose a document of guarantee for execution by Carotino in the letter of 18 June 2007 to Mr Wallace. However, that conclusion runs directly counter to Mr Migheli’s own evidence that the guarantee could not have been issued let alone sent out prior to the return of the letter of offer. Even though one reading of the wording in Mr Migheli’s letter of 18 June 2007 tends to support CBA’s submission that the enclosures included the guarantee document, Mr Migheli himself was ultimately equivocal about whether that was the case. He plainly appreciated the conflict between the bank’s own records and his recollection that he did enclose the guarantee with the letter of 18 June 2007. When confronted with the records he admitted that he could not be sure whether he enclosed the guarantee.
The strong inference from the evidence of Mr Russell and Mr Migheli in combination is that it is most unlikely that the guarantee was forwarded under cover of the letter of 18 June 2007 as that would have been inconsistent with the instructions which appear in computer records which were to send the documentation back to the business unit Manager, namely Mr Harvey.
I am unable to conclude with any certainty what other documents were included in the letter dated 18 June 2007. It might be a reasonable inference that both the letters of 23 May 2007 (P4 and P5) addressed to the respective SAFF companies were included with the letter. However, that is by no means certain. All that can be said is that the two letters, P4 and P5, were forwarded to the respective recipients named in each letter, South Australian Farmers Fuel Pty Ltd and AF Fuels Pty Ltd, and that they were sent by Mr Migheli. Their presence in the administrator’s file attests to that. However precisely when Mr Migheli forwarded those letters is not possible to say from all of the evidence. I am satisfied that neither of those letters were executed or returned to CBA at any stage.
I am satisfied that Mr Wallace received Mr Migheli’s letter dated 18 June 2007, however I am unable to conclude that a guarantee was actually included in the letter of 18 June 2007. An obvious inference which can be drawn from the evidence of the bank witnesses and the state of the bank records is that the guarantee document prepared by Mr Van Nguyen was sent from the LPC back to the business unit pending receipt by Mr Migheli of the return of the signed letters of offer. I find that no guarantee was forwarded either to Carotino or the SAFF Companies for execution by Carotino in June 2007.
I am satisfied that Carotino did not receive a guarantee for execution from CBA until December 2009. That unsupported guarantee was tendered in evidence, but it did not include the negative pledge clause (clause 24). As such it did not conform with Mr Russell’s description of an unsupported guarantee in a standard form.
As to the issue of CBA’s standard form of shareholder’s guarantee, I find that CBA during the relevant time used a template, which contained a number of variable terms. In effect the bank’s template functioned as a library from which the particular clauses might be extracted and inserted into guarantee documents prepared within the bank’s LPC according to the instructions received from the business unit after negotiations between the parties. The form varies depending on whether the guarantor is an individual or a corporation, whether the guarantee is to be limited or unlimited, whether it is to be supported or unsupported by other security. The evidence also supports the finding that the guarantee required by the bank from a company was not necessarily always an unlimited guarantee. Mr Russell’s evidence supports a finding that whether the guarantee was to be limited or unlimited is a matter for negotiation between the parties. Even though CBA’s standard practice was to insert a negative pledge clause in all unsupported guarantees, this did not always occur. It follows that there was no standard form in use by CBA at the relevant time for the preparation and dispatch of shareholder’s guarantees, and I so find.
Failure to Call Mr Galbraith
Mr Galbraith was not called to give evidence. Mr Morcombe QC, counsel for CBA, submitted that Mr Galbraith was clearly a witness in Carotino’s camp. He suggested that because of the failure on the part of Carotino to call Mr Galbraith to attest to his dealings with Mr Wallace and/or Mr Halter during the relevant period, that an inference in terms of Jones v Dunkel[5] should be drawn against Carotino to the effect that Mr Galbraith’s evidence would not have assisted Carotino’s case. I decline to draw the Jones v Dunkel inference against Carotino for the following reasons.
[5] Jones v Dunkel (1959) 101 CLR 298.
The evidence about Mr Galbraith’s current whereabouts is scant. Evidence was given that he left his employment with PharmaCare on 11 January 2008 and obtained a job with Riviera Boats. There is no evidence about the circumstances in which he resigned from his employment with PharmaCare or what his relationship with the directors of Carotino was at that time. In this respect I do not consider that there is any sound basis to place him firmly in the camp of Carotino as Mr Morcombe suggested.
There is another more fundamental reason why I am not prepared to draw the inference which Mr Morcombe submitted should be drawn. In Jones v Dunkel[6] Windeyer J cited R v Burdett,[7] where Abbott CJ expressed the principle in this way:
No person is to be required to explain or contradict, until enough has been proved to warrant a reasonable and just conclusion against him, in the absence of explanation or contradiction; but when such proof has been given, and the nature of the case is such as to admit of explanation or contradiction, if the conclusion to which the proof tends be untrue, and the accused offers no explanation or contradiction; can human reason do otherwise than adopt the conclusion to which the proof tends?
[6] Jones v Dunkel (1959) 101 CLR 298 at 321.
[7] R v Burdett (1820) 4 B & Ald 95; 106 ER 873 at 4 B & Ald 161 - 162; 106 ER 898.
In State Bank of New South Wales v Brown,[8] Spigelman CJ, commenting on the above passage cited by Windeyer J, said:
[8] State Bank of New South Wales v Brown (2001) 38 ACSR 715 at [16] - [18].
A Jones v Dunkel conclusion that evidence not called would not have assisted a party, entitles the court to more readily draw such an inference. However, that can only be done where other evidence establishes a proper basis for such an inference.
As expressed in Cross on Evidence, above, at [1215]:
... the rule in Jones v Dunkel permits an inference that the untendered evidence would not have helped the party who failed to tender it, and entitles the trier of fact to take that into account in deciding whether to accept any particular evidence which relates to a matter on which the absent witness could have spoken, and the more readily to draw an inference fairly to be drawn from the other evidence by reason of the opponent being able to prove the contrary had the party chosen to give or call evidence ... [Emphasis added]
The formulation "fairly to be drawn from the other evidence" reflects the terminology of Windeyer J in Jones v Dunkel at 312, (most recently quoted with approval by the joint judgment in RPS, above, at [26]):
... where an inference is open from facts proved by direct evidence and the question is whether it should be drawn, the circumstance that the defendant disputing it might have proved the contrary had he chosen to give evidence is properly to be taken into account as a circumstance in favour of drawing the inference. [Emphasis added]
[Citations omitted]
More recently in Howell v Macquarie University[9] Campbell J, with whom Spigelman CJ and Bell J agreed, said:
The only sense in which Jones v Dunkel (1959) 101 CLR 298 establishes a "rule" concerns the inferences of fact that are open to be drawn when a relevant witness is not called. Jones v Dunkel concerned the trial by jury of a negligence action arising from a motor vehicle collision, at which the defendant, who was also the driver of the motor vehicle with which the plaintiff’s vehicle had collided, did not give evidence. The decision related to the adequacy of the trial judge's directions to the jury. I venture to repeat what I said (with the agreement of Beazley JA and Pearlman AJA) in Manly Council v Byrne [2004] NSWCA 123 at [51]-[52] about the consequences that can be drawn from Jones v Dunkel concerning the obligations of the trial judge in a civil trial by judge alone:
“Thus, if a witness is not called two different types of result might follow. The first is that the tribunal of fact might infer that the evidence of the absent witness, if called, would not have assisted the party who failed to call that witness. The second is that the tribunal of fact might draw with greater confidence any inference unfavourable to the party who failed to call the witness, if that witness seems to be in a position to cast light on whether that inference should properly be drawn.
Even though a jury should be directed about the availability of the inferences which are recognised by Jones v Dunkel , it is entirely a matter for the jury whether it actually draws one, or both, of those inferences: Cafe v Australian Portland Cement Co Pty Ltd (1965) 83 WN (NSW) (Pt 1) 280 at 286, 287. Applying this principle to the situation of a trial by judge alone, there is no compulsion on the trial judge to draw either of the Jones v Dunkel inferences.”
In other words, in a civil trial by judge alone Jones v Dunkel licences, but does not compel, the drawing of inferences when a witness is not called. Whether either or both of the inferences are actually drawn is part of the trial judge's task of weighing the evidence.
[9] Howell v Macquarie University [2008] NSWCA 26 at [97] - [98].
The passages quoted above are pertinent to the situation which applies here.
I am mindful that it is CBA who bears the onus of proof in this matter. I have been left unconvinced by the evidence of both Mr Migheli and Mr Wallace whether any guarantee was included as part of the documentation forwarded to Mr Wallace with the letter of 18 June 2007. Mr Halter has denied that he ever received a guarantee for execution. There is nothing in the bank’s records which suggest that the guarantee document created on 6 June 2007 was sent to Carotino at any stage.
In these circumstances I do not consider it appropriate to use the absence of evidence from Mr Galbraith to found an inference that a guarantee was sent. The rule in Jones v Dunkel should not be used to fill a gap in CBA’s case.
The Issues
I have identified the main issues for me to determine as follows. First, did the parties, by executing the letter of 4 May 2007 intend to be immediately bound by a legally enforceable contract of guarantee? If not, then what was the arrangement between the parties? In any case, did the letter contain all of the essential terms and conditions necessary to make it a legally enforceable bargain?
Another issue which arises on CBA’s alternative case is, if the letter of 4 May 2007 is not in its terms an immediately binding guarantee, is Carotino nevertheless estopped from denying that the letter does constitute an immediately binding guarantee? In the alternative, is Carotino estopped from denying that it is now bound to execute a guarantee?
CBA’s position is that the evidence supports the conclusion that the parties intended to reach a concluded contract on 4 May 2007 and that the letter of 4 May 2007 contains all the essential terms and conditions of the guarantee. Specifically, CBA submits that the terms of the guarantee are sufficiently identified by reference to the use of the words in the letter “Shareholders Guarantee, in a standard form”. All of the important terms had been agreed and after the execution of the letter of 4 May 2007 there was nothing further left for the parties to negotiate or to include in their agreement. The fact that Carotino might not have been aware of the terms of CBA’s standard shareholder’s guarantee at the time matters little.[10]
[10] See Tonelli v Komirra Pty Ltd [1972] VR 737; Allcars Pty Ltd v Tweedle [1937] VLR 35.
If the letter of 4 May 2007 is not in its terms an immediately enforceable guarantee, CBA’s first alternative position is that Carotino is nevertheless estopped from denying that the letter constitutes such a guarantee. CBA’s second alternative position is that Carotino is bound to execute a guarantee. It is said that by executing the letter of 4 May 2007, Carotino intended CBA to assume that a contract had been or would be entered into between CBA and Carotino whereby Carotino guaranteed or would guarantee, in accordance with the bank’s standard form shareholders agreements, payment by the SAFF Companies of all monies owing under the receivables agreement. Thus it is unconscionable for Carotino to now deny that it is bound by the contract it executed on 4 May 2007 or that it should now execute such a guarantee.
Carotino does not deny giving an undertaking in the letter of 4 May 2007, but says that the undertaking it gave is an undertaking to sign a guarantee in the future if and when requested to do so by CBA. It was never requested to execute a guarantee in any form until December 2009, by which time the SAFF Companies were in voluntary administration and this litigation had commenced. If the letter of 4 May 2007 does indicate an immediate intention to be bound by a contract of guarantee, then Carotino’s alternative position is that the agreement is not enforceable as its terms are too vague and uncertain.
Contract
General Principles - Intention to be Immediately Bound
The principles which apply in determining whether parties have reached a binding contract have been authoritatively stated and are well settled.
The seminal authority relevant to the present circumstances is Masters v Cameron,[11] where The High Court recognised three categories of cases as follows:
[11] Masters v Cameron (1954) 91 CLR 353 at 360 (Dixon CJ, McTiernan and Kitto JJ).
Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three classes.
Category one:
It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect.
Category two:
Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document.
Category three:
Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.
The Court went on to explain that categories one and two involve a binding contract, whereas category three does not:[12]
In each of the first two cases there is a binding contract: in the first case a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not, and to join (if they have so agreed) in settling and executing the formal document; and in the second case a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution. Of these two cases the first is the more common. Throughout the decisions on this branch of the law the proposition is insisted upon which Lord Blackburn expressed in Rossiter v. Miller when he said that the mere fact that the parties have expressly stipulated that there shall afterwards be a formal agreement prepared, embodying the terms, which shall be signed by the parties does not, by itself, show that they continue merely in negotiation. His Lordship proceeded: " ... as soon as the fact is established of the final mutual assent of the parties so that those who draw up the formal agreement have not the power to vary the terms already settled, I think the contract is completed": see also Sinclair, Scott & Co. Ltd. v. Naughton. A case of the second class came before this Court in Niesmann v. Collingridge where all the essential terms of a contract had been agreed upon, and the only reference to the execution of a further document was in the term as to price, which stipulated that payment should be made "on the signing of the contract". Rich and Starke JJ. observed that this did not make the signing of a contract a condition of agreement, but made it a condition of the obligation to pay, and carried a necessary implication that each party would sign a contract in accordance with the terms of agreement. Their Honours, agreeing with Knox C.J., held that there was no difficulty in decreeing specific performance of the agreement, "and so compelling the performance of a stipulation of the agreement necessary to its carrying out and due completion": see also O'Brien v. Dawson.
Cases of the third class are fundamentally different. They are cases in which the terms of agreement are not intended to have, and therefore do not have, any binding effect of their own: Governor &c. of the Poor of Kingston-upon-Hull v. Petch. The parties may have so provided either because they have dealt only with major matters and contemplate that others will or may be regulated by provisions to be introduced into the formal document, as in Summergreene v. Parker or simply because they wish to reserve to themselves a right to withdraw at any time until the formal document is signed. These possibilities were both referred to in Rossiter v. Miller. Lord O'Hagan said: "Undoubtedly, if any prospective contract, involving the possibility of new terms, or the modification of those already discussed, remains to be adopted, matters must be taken to be still in a train of negotiation, and a dissatisfied party may refuse to proceed. But when an agreement embracing all the particulars essential for finality and completeness, even though it may be desired to reduce it to shape by a solicitor, is such that those particulars must remain unchanged, it is not, in my mind, less coercive because of the technical formality which remains to be made". And Lord Blackburn said: "parties often do enter into a negotiation meaning that, when they have (or think they have) come to one mind, the result shall be put into formal shape, and then (if on seeing the result in that shape they find they are agreed) signed and made binding; but that each party is to reserve to himself the right to retire from the contract, if, on looking at the formal contract, he finds that though it may represent what he said, it does not represent what he meant to say. Whenever, on the true construction of the evidence, this appears to be the intention, I think that the parties ought not to be held bound till they have executed the formal agreement". So, as Parker J. said in Von Hatzfeldt-Wildenburg v. Alexander in such a case there is no enforceable contract, either because the condition is unfulfilled or because the law does not recognize a contract to enter into a contract.
[Footnotes omitted]
[12] Masters v Cameron (1954) 91 CLR 353 at 360 - 362.
In determining whether the parties intended to conclude an immediately binding contract post‑agreement conduct may be taken into account.[13] The conduct may be relevant, among other purposes, in order to show that: [14]
it was not in the contemplation of either party that they were to be bound until all the essential preliminaries had been agreed to, nor until a formal contract had been drawn up embodying all the matters incidental to a transaction of such a nature.
[13] Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 547 - 548 (Gleeson CJ, with whom Hope and Mahoney JJA agreed).
[14] Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647 at 669 (Griffiths CJ), as cited in Abadeen Group Pty Ltdr v Bluestone Property Services Pty Ltd [2009] NSWCA 386 at [112] - [113] (Sackville AJA, with whom Hodgson and Campbell JJA agreed).
It is also permissible to use post-agreement conduct for the purpose of considering: [15]
whether it was inherently likely that the parties to a transaction would have intended to bind themselves to an informally expressed agreement or whether they intended to await a formal contract.
[15] See Abadeen Group Pty Ltdr v Bluestone Property Services Pty Ltds [2009] NSWCA 386 at [115], citing B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147, at 9151 - 9152 (Mahoney JA), in turn citing Clifton v Palumbo [1944] 2 All ER 497 at 499 (Lord Greene MR).
In Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd,[16] Gleeson CJ with whom Hope and Mahoney JJ agreed, observed:
In a case where a court is required to make a judgment concerning the intention of the parties in relation to what might broadly be described as a Masters v Cameron ((1954) 91 CLR 353) dispute, it will normally be of importance that the court have an understanding of the commercial context in which the dispute arises, and a most significant feature of that context will relate to the subject which the parties regard, or would ordinarily be expected to regard, as matters to be covered by their contract. In some cases, such as transactions involving the sale and purchase of land, or leases, courts may properly feel well equipped to form a view on such matters without the need for much evidence. In many cases, however, of which the present is a good example, there is a need for evidence in one form or another as to what subjects would be regarded as requiring agreement between the parties. In this case the best evidence on that subject is to be found in the actual communications between the parties and, in particular, in the issues which they in fact addressed when they set about drafting their detailed contract.
It is to be noted that the question in a case such as the present is expressed in terms of the intention of the parties to make a concluded bargain: see, eg, Masters v Cameron (at 360). That is not the same as, although in a given case it may be closely related to, the question whether the parties have reached agreement upon such terms as are, in the circumstances, legally necessary to constitute a contract. To say that parties to negotiations have agreed upon sufficient matters to produce the consequence that, perhaps by reference to implied terms or by resort to considerations of reasonableness, a court will treat their consensus as sufficiently comprehensive to be legally binding, is not the same thing as to say that a court will decide that they intended to make a concluded bargain. Nevertheless, in the ordinary case, as a matter of fact and commonsense, other things being equal, the more numerous and significant the areas in respect of which the parties have failed to reach agreement, the slower a court will be to conclude that they had the requisite contractual intention.
[16] Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 548.
General Principles - Construction
If an intention to be immediately bound exists, the next question is the construction of the contract. A convenient starting point in the context of the issues which arise in this case is the often quoted passage in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd:[17]
This Court, in Pacific Carriers Ltd v BNP Paribas has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.
[Footnotes omitted]
[17] Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [40].
The search for the objective intention of the parties must be undertaken even where the parties expressly contemplate in an apparently informal document, or in communications made at the time the informal document is prepared, that a formal contract is to be later executed.[18]
[18] See Abadeen Group Pty Ltd v Bluestone Property Services Pty Ltd [2009] NSWCA 386 at [111] (Sackville AJA, with whom Hodgson and Campbell JJA agreed).
Intention of the Parties to be Immediately Bound
With these principles in mind, I turn to consider the issue of whether the letter of 4 May 2007 evidences an intention to be immediately bound by a contract of guarantee. There are a number of considerations which have led me to conclude that the parties did not so intend.
The first consideration relates to an examination of the plain wording of the letter itself. When that letter is read in the light of the circumstances in which it came into existence, I consider that a reasonable commercial person would conclude that the parties’ common intention in executing the letter was to briefly record two matters; the first, CBA’s consent to the proposed sale by its client of 51 per cent of his shares in Australian Farmers Fuel to Carotino; the second, Carotino’s undertaking to execute a guarantee in an appropriate form if and when required to do so by the bank.
I regard it as significant that the letter of 4 May 2007 was drafted in an atmosphere of urgency after Mr Migheli had been subjected to some pressure by Mr Fischer. It was plainly Mr Fischer who was the driving force behind the securing of CBA’s approval, so that the sale agreement between his companies and Carotino could be completed on the following Monday 7 May 2007. Mr Migheli’s main concern, it seems to me, was to satisfy Mr Fischer’s demand that the sale be completed on the following Monday. CBA chose to proceed in the way it did because Mr Migheli formed the view that he did not have time to prepare the necessary documentation to prepare a formal guarantee.
In internal memoranda prepared by Mr Migheli for his superior Mr Moloney, Mr Migheli stated that a letter of undertaking was to be signed acknowledging that “the clients will execute the bank’s security documentation including a new unlimited guarantee from Carotino” (emphasis added). Although this appears in internal memoranda, all that the letter of 4 May 2007 refers to is a “Shareholders Guarantee, in a standard form”.
The terms of the letter of 4 May 2007 are instructive. “The bank hereby consents” is plain enough to convey that CBA was giving its immediate consent. On the other hand Carotino “undertakes to execute and return a Shareholders Guarantee, in a standard form to be provided by the bank within 7 days of receipt”. It seems plain enough that Carotino was undertaking to do something in the future. It was not as one might think would be the usual case, a precondition to the grant of approval that Carotino sign a guarantee that day and deliver it to CBA prior to the sale. One might think if the bank did intend to bind Carotino to an immediately enforceable guarantee that, to borrow the language of J G Starke QC, writing in the Australian Law Journal[19] about a not dissimilar case, that a leading commercial bank such as CBA would have demanded a document in the stringent terms normally deemed desirable for a guarantee to a bank.
[19] J G Starke QC, “Recent Cases: Contract – Loan by a bank to subsidiary of a company – Letter of comfort provided by company – Whether letter of comfort is of contractual effect” (1989) 63 Australian Law Journal 370 at 371.
The second consideration which has led me to the conclusion that the parties did not intend to conclude an immediately binding contract of guarantee on 4 May 2007 is the silence in the correspondence between the bank and Carotino on two important matters. The first is the absence of any reference about whether the guarantee was intended to be limited or unlimited. The second is the lack of clarification about whether the guarantee was intended to be supported or unsupported in which case the bank’s usual practice was to require the negative pledge from the proposed guarantor.
CBA argues that the letter is silent about these matters because it is perfectly clear in all of the circumstances that the guarantor’s liability was to be unlimited. The presence or absence of the negative pledge in the contract of guarantee was a minor matter, the inclusion of which was neither here nor there.
Prior to the execution of the letter of 4 May 2007 the only record of any communication between the bank and Carotino was the communication from either Mr Wallace or Mr Fischer to Mr Migheli advising CBA that Carotino had agreed in principle to give a guarantee. One other internal bank document records the position of Carotino that in due course they intended to meet and have further discussions but were anxious to have the transaction (that is the sale by Mr Fischer of his 51 per cent in the SAFF Companies) proceed on 7 May 2007.
There was no evidence produced of any resolution or minute by the Carotino directors where the issue of the guarantee was discussed. There appears to be no evidence at all of any discussion either within Carotino or between Carotino and CBA about the terms of the guarantee which had been agreed “in principle”. In my view the evidence supports Mr Halter’s expectation that he intended in due course to see a document in respect of which he would obtain advice from his solicitors before executing. Moreover in light of the fact that CBA already held a number of existing securities including guarantees from Mr Fischer and his associated companies to support the receivables facility, I do not consider Mr Halter’s evidence that he expected there would be some negotiations about the precise extent of Carotino’s liability under the guarantee before it was asked to execute the formal guarantee, to be at all unrealistic. It is significant that the guarantee given by Mr Fischer, the previous ultimate owner and later 49 per cent shareholder of the SAFF companies, was limited. In those circumstances I do not accept that it is so plainly obvious that the incoming shareholder’s liability would necessarily need to be unlimited.
Contrary to CBA’s submission and in light of Mr Russell’s explanation about the effect of the negative pledge, I am not persuaded that its inclusion or otherwise is a mere minor matter. Such a clause would have effectively restricted Carotino’s ability to deal with its own assets other than in the ordinary course of business. Whether there was to be a requirement that Carotino obtain the bank’s consent whenever it sought to deal in its assets as such was another significant matter on which the letter of 4 May 2007 is silent.
The third consideration which militates against any intention of the parties to be bound to an immediate contract of guarantee on 4 May 2007 is that nobody in the bank or from Carotino appears to have ever treated the letter of 4 May 2007 as an immediately binding guarantee. Why else would Mr Migheli send out a letter of offer on 18 June 2007, which the parties needed to execute and return to the bank before a formal document of guarantee was drawn up and sent to Carotino? The evidence from CBA’s officers about the bank’s usual procedure in this regard was not disputed. There is nothing in the conduct of the bank after 4 May 2007 to suggest that the bank ever treated the letter of 4 May 2007 as anything other than an undertaking in the future to sign a guarantee and return it within seven days if requested.
The fourth consideration which has led me to the conclusion that the parties did not intend the letter of 4 May 2007 to operate as an immediately binding guarantee is that the evidence does not establish that there was only one document in common usage within CBA at the relevant time which could be described as “Shareholders Guarantee, in a standard form”. This matter is also relevant to the other issue of whether the agreement, however it is characterised, is sufficiently certain to be legally enforceable. A most important variation is whether the guarantee is to be limited or unlimited. Another important variation is whether the guarantee is to be supported or unsupported. Mr Russell frankly conceded that these matters were dependant on negotiations with the particular client. Curiously the guarantee document which was ultimately forwarded to Carotino for execution in December 2009 did not on its face purport to be in accordance with the standard form identified by Mr Russell in that it did not contain the negative pledge seen in clause 24.
Further, at the close of evidence CBA made an application to amend its Statement of Claim in which there are notable inconsistencies in the language used to describe the obligations of Carotino pursuant to the alleged contract. I refused the amendment and have included written reasons for doing so later in this judgment. By the amendment, CBA sought to allege that Carotino was obliged to execute, within 7 days of receipt, a contract of guarantee “in a standard form”. On the other hand, CBA sought an order that Carotino execute, within 7 days, a contract of guarantee:
in the standard form used by the Plaintiff for shareholder’s guarantees as at May 2007, with such guarantee not containing the Plaintiff’s standard clause 24 concerning “negative pledges”.
[Emphasis added]
In other words, whilst the contract sued upon referred to “a standard form”, CBA found it necessary to refer to a more specific contract not including clause 24 when seeking relief from the court.
Against this background, I draw the inference that the use of the word “a” in the letter of 4 May 2007, instead of “the” is significant. There was no standard form of a shareholder’s guarantee in use by the bank at the relevant time. In my view what the words “Shareholders Guarantee, in a standard form” would convey to a reasonable commercial person is that the shareholder’s guarantee which the bank would ask Carotino to execute would be in an appropriate form, after further negotiations between the bank and guarantor.
For these reasons I have concluded that the letter of 4 May 2007 does not evidence an intention by the parties to be immediately bound by a contract of guarantee.
The Construction of the Letter of 4 May 2007
If I am wrong about that and the letter does evidence an intention to be immediately bound by a contract of guarantee, I would still regard the silence of the document about whether the guarantee was limited or unlimited as decisive on the question whether the terms of the contract are so uncertain as to render it unenforceable.
The issue of whether the guarantee was to be limited or unlimited goes to the very heart of the guarantor’s liability. The parties had no contact with one another at any stage about that issue or any other issue. There is no evidence that any director or employee of Carotino ever set out to deceive the bank about its intentions prior to the execution of the letter of 4 May 2007. As I have already mentioned, because the bank already held other securities it is not plainly obvious from the terms of the correspondence that the guarantee in this case was intended to be unlimited.
Courts have considered the situation where a guarantee is entered into between parties, with the extent of liability left blank. In some cases it has been held that the parties intended such guarantees to be unlimited.[20] In others cases, including where it is clear that the credit limit is to be agreed between the parties[21] and where the entire clause referring to liability has been omitted,[22] contracts have been held unenforceable. The case of further negotiations is more accurately described as a lack of intention to be legally bound and is dealt with earlier in these reasons. That case aside, these examples may be distinguished from the present case because there the parties entered into formal, yet incomplete contracts of guarantee. If the parties in this case had executed the document said to be a “Shareholders Guarantee in a standard form” leaving the extent of liability blank, there still would have been a case to make that agreement was uncertain. But here the parties have not even reached that stage, having not executed such a document. Having found that CBA did not at that stage have a single form of standard shareholder’s guarantee, the court is left with the bare terms of the letter of 4 May 2007 and prior surrounding circumstances.
[20] See Caltex Oil (Aust) Pty Limited v Alderton (1964) 81 WN (Pt 1) (NSW); Walsh v Westpac Banking Corporation (1991) 104 ACTR 30; Re Haddard; ex parte R W Jordan Pty Ltd (Unreported, Federal Court of Australia, Sackville J, 20 August 1997).
[21] Relwood Pty Ltd v Manning Homes Pty Ltd [1990] 1 Qd R 481.
[22] GE Commercial Corporation (Australia) Pty Ltd v L & B Enterprises Pty Ltd [2009] NSWSC 770.
For these reasons, even if the parties did intend to be legally bound by the letter of 4 May 2007 as a contract of guarantee, I find that it is unenforceable due to uncertainty.
I bear in mind that the court should endeavour to give effect to commercial arrangements made between two parties at arms length. However on the face of the document I consider it does no more than manifest an arrangement between the two parties whereby CBA gave its consent to the transfer and Carotino would, if asked, execute and return a shareholder’s guarantee in an appropriate form within seven days.
For these reasons I consider that CBA’s primary case must fail.
An alternative contract to sign a guarantee in the future
It follows from what I have said that I am satisfied that there was an arrangement between the parties that Carotino would sign a guarantee in the future. However, the failure of the parties to agree on the terms of the guarantee, whether it should be limited or unlimited and if limited to what extent, demonstrates that this arrangement suffers from the same uncertainty and imprecision that infects the alleged contract of immediate guarantee. If there is no way for the court to determine precisely what is agreed between the parties, how can the court give effect to the arrangement? On the view that I have taken of the evidence, further negotiations were contemplated before any formal contract of guarantee was to be signed. For these reasons I do not consider that the letter of 4 May 2007 evidences a legally binding agreement between the parties, rather it is no more than an unenforceable undertaking in the same vein as a letter of comfort.
In any event, even if there was a binding and sufficiently certain agreement to execute a contract of guarantee in the future and even if such a contract was properly pleaded, the circumstances have changed so much since the making of that contract that it could not now be enforceable. I have found that the delay in presenting the guarantee was entirely the fault of CBA. After 7 May 2007 when Carotino acquired a 51 per cent share in the SAFF Companies, for whatever reason, the conduct of the relevant officers within CBA with regard to following up the question of the guarantee seems to have been inappropriately lax. It does not seem to have been a priority in anyone’s mind after the signing of the letter of 4 May 2007. As I have mentioned earlier that is perhaps not surprising since CBA already had guarantees limited and unlimited from the other shareholders. The proposed new guarantee was additional to considerable securities already held by CBA.
To now require Carotino to sign a guarantee would effectively amount to Carotino approving a payment of the SAFF Companies’ debts to CBA. In that case it could be said that the document to be signed would not have the character of a guarantee, rather it would be a simple agreement to pay a third party’s debt. Further, the requirement stipulated in the letter of 4 May 2007 that the execution and return of such an guarantee be within 7 days of receipt indicates a contemplation of events occurring in the near future, not years down the track when the companies are in voluntary administration and in fact after litigation has commenced between the parties. No reasonable person would think that presentation of the guarantee in December 2009 was within a commercially reasonable time.
Estoppel
The Pleadings and the Law
CBA’s alternative claim is that in the event that there was no binding contract Carotino ought to be estopped from denying that the letter of 4 May 2007, in itself, constitutes a guarantee in the same terms as CBA’s standard form of shareholder’s guarantee as at that date.
The estoppel claim was first raised in CBA’s reply dated 22 January 2010. The final formulation of the estoppel claim is contained in the amended reply of 26 May 2010 where it is pleaded:
5.The Defendant, by reason of signing the facsimile and causing it to be sent to the Plaintiff as pleaded in paragraph 7 of the Statement of Claim, intended the Plaintiff to assume, and in fact induced the Plaintiff to assume, that:
5.1 a contract had been entered into between them; or
5.2 in the alternative, a contract would be entered into between them:
pursuant to which the Defendant would guarantee, in accordance with the terms of the Plaintiff’s standard form shareholder guarantee, that AF Fuels and/or South Australian Farmers Fuel would pay the Plaintiff all moneys owing under the Receivables Agreement, including costs, charges and interest otherwise incurred, being the contract pleaded in paragraph 9 of the Statement of Claim (“the Assumption”).
6.In reliance on the Assumption, the Plaintiff, pursuant to the above pleaded term of the Mortgages, gave its consent to the Defendant becoming entitled to 50 per cent of the voting power in South Australian Farmers Fuel and AF Fuels.
7.At all material times, the Defendant knew that the Plaintiff assumed the Assumption and intended that the Plaintiff act in reliance upon it as pleaded in paragraph 6 above.
8.If the assumption is not fulfilled, the Plaintiff will suffer detriment in that, in reliance upon the assumption, it delayed enforcing its rights against South Australian Farmers Fuel and AF Fuels under the Mortgages and the Receivables Facility until January 2009, whereas it would have sought to enforce those rights against South Australian Farmers Fuel and AF Fuels under the Mortgages and the Receivables Facility at an earlier time.
9.In the premises, it would be unconscionable for the Assumption to be displaced and the Defendant is estopped from denying the existence of the contract pleaded in paragraph 9 of the Statement of Claim and that the matters alleged in paragraphs 6, 7 and 8 of the Statement of Claim give rise to the contract as alleged in paragraph 9 of the Statement of Claim.
Paragraph 9 of CBA’s Further Amended Statement of Claim dated 15 April 2010 states that:
9.In the premises, and by reason of the matters pleaded in paragraphs [6], [7] and [8] above, the Plaintiff and the Defendant made a contract in writing, by which the Defendant agreed:
9.1 to guarantee, in accordance with the terms of the Plaintiff’s standard form shareholder guarantee, that AF Fuels and/or South Australian Farmers Fuel would pay the Plaintiff all moneys owing under the Receivables Agreement; and
9.2 to pay to the Plaintiff, on demand by the Plaintiff:
(a)all moneys then or in the future owing or payable by AF Fuels and/or South Australian Farmers Fuel under the Receivables Facility to the Plaintiff;
(b)all costs, charges and expenses (including legal costs) which the Plaintiff incurred in connection with the contract (including but not limited to its enforcement); and
(c)compound interest on those amounts, at the prevalent rate charged by the Plaintiff from time to time to its other customers on similar accounts.
The matters pleaded in paragraphs 6-8 of the amended reply relate to the letter dated 4 May 2007 and the signing of that letter by the directors of Carotino.
It is not entirely clear from the pleadings that promissory estoppel is the relevant species of estoppel relied on, however in submissions counsel for CBA clarified that CBA relies on a promissory estoppel of the kind identified in Waltons Stores (Interstate) Ltd v Maher,[23] adopted in Commonwealth v Verwayen.[24]
[23] Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387.
[24] Commonwealth v Verwayen (1990) 170 CLR 394 at 502 (McHugh J).
In Waltons Stores, Brennan J identified six matters necessary to establish an equitable estoppel. Those are:[25]
1.the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship;
2.the defendant has induced the plaintiff to adopt that assumption or expectation;
3.the plaintiff acts or abstains from acting in reliance on the assumption or expectation;
4.the defendant knew or intended him to do so;
5.the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and
6.the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise.
[25] Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 428 - 429 (Brennan J).
Brennan J went on to say with regard to the requirement that the defendant induces the plaintiff to adopt the assumption or expectation, that an active inducement is not necessarily required if there is a failure to deny the correctness of the assumption:[26]
For the purposes of the second element, a defendant who has not actively induced the plaintiff to adopt an assumption or expectation will nevertheless be held to have done so if the assumption or expectation can be fulfilled only by a transfer of the defendant's property, a diminution of his rights or an increase in his obligations and he, knowing that the plaintiff's reliance on the assumption or expectation may cause detriment to the plaintiff if it is not fulfilled, fails to deny to the plaintiff the correctness of the assumption or expectation on which the plaintiff is conducting his affairs.
[26] Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 429 (Brennan J).
In the New South Wales Court of Appeal in Silovi Pty Ltd v Barbaro,[27] Priestly JA set out the distinction between common law and equitable estoppel as derived from the High Court decision in Waltons Stores.[28] Priestly JA made seven points relevantly including the following four:[29]
1.Common law and equitable estoppel are separate categories, although they have many ideas in common.[30]
2.Common law estoppel operates upon a representation of existing fact, and when certain conditions are fulfilled, establishes a state of affairs by reference to which the legal relation between the parties is to be decided. This estoppel does not itself create a right against the party estopped. The right flows from the court's decision on the state of affairs established by the estoppel.
3.Equitable estoppel operates upon representations or promises as to future conduct, including promises about legal relations. When certain conditions are fulfilled, this kind of estoppel is itself an equity, a source of legal obligation.
4.Cases described as estoppel by encouragement, estoppel by acquiescence, proprietary estoppel and promissory estoppel are all species of equitable estoppel.
[27] Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466 (Preistly JA, with whom Hope and McHugh JJA agreed).
[28] Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387.
[29] Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466 at 472.
[30] See also articles by the Honourable K R Handley AO: “The three High Court decisions on estoppel 1988-1990” (2006) 80 Australian Law Journal 724 and “Further thoughts on proprietary estoppel” (2010) 84 Australian Law Journal 239.
On one view of the facts CBA’s claim in estoppel appears to be based on the alleged assumption that the letter of 4 May 2007 constitutes an immediately enforceable contact of guarantee. In that sense it is a claim based on an alleged representation of an existing fact. However, by its amended reply CBA appears to refer to a promise that some time in the future a contract would be entered into between CBA and Carotino. Referring to a future contract appears to be the language of a promissory or equitable estoppel.
It is the case for all species of estoppel that they must involve some unjust departure by a party from an assumption of fact induced by that party. This was clarified by Dixon J in Grundt v Great Boulder Proprietary Gold Mines Limited,[31] in relation to the broad category of estoppel in pais (estoppel by conduct), of which estoppel by representation, estoppel by convention and promissory (equitable) estoppel are subspecies. Dixon J said:[32]
The principle upon which estoppel in pais is founded is that the law should not permit an unjust departure by a party from an assumption of fact which he has caused another party to adopt or accept for the purpose of their legal relations. This is, of course, a very general statement. But it is the basis of the rules governing estoppel. Those rules work out the more precise grounds upon which the law holds a party disentitled to depart from an assumption in the assertion of rights against another. One condition appears always to be indispensable. That other must have so acted or abstained from acting upon the footing of the state of affairs assumed that he would suffer a detriment if the opposite party were afterwards allowed to set up rights against him inconsistent with the assumption. In stating this essential condition, particularly where the estoppel flows from representation, it is often said simply that the party asserting the estoppel must have been induced to act to his detriment. Although substantially such a statement is correct and leads to no misunderstanding, it does not bring out clearly the basal purpose of the doctrine. That purpose is to avoid or prevent a detriment to the party asserting the estoppel by compelling the opposite party to adhere to the assumption upon which the former acted or abstained from acting. This means that the real detriment or harm from which the law seeks to give protection is that which would flow from the change of position if the assumption were deserted that led to it. So long as the assumption is adhered to, the party who altered his situation upon the faith of it cannot complain. His complaint is that when afterwards the other party makes a different state of affairs the basis of an assertion of right against him then, if it is allowed, his own original change of position will operate as a detriment. His action or inaction must be such that, if the assumption upon which he proceeded were shown to be wrong and an inconsistent state of affairs were accepted as the foundation of the rights and duties of himself and the opposite party, the consequence would be to make his original act or failure to act a source of prejudice.
[31] Grundt v Great Boulder Proprietary Gold Mines Limited (1938) 59 CLR 641.
[32] Grundt v Great Boulder Proprietary Gold Mines Limited (1938) 59 CLR 641 at 674.
Where the alleged assumption is brought about by a representation, that representation must be clear and unambiguous. In Low v Bouverie[33] Bowen LJ said:
Now, an estoppel, that is to say, the language upon which the estoppel is founded, must be precise and unambiguous. That does not necessarily mean that the language must be such that it cannot possibly be open to different constructions, but that it must be such as will be reasonably understood in a particular sense by the person to whom it is addressed.
[33] Low v Bouverie [1891] 3 Ch 82 at 86.
This statement was cited with approval in Western Australian Insurance Co Ltd v Dayton[34] and in Legione v Hately.[35]
[34] Western Australian Insurance Co Ltd v Dayton (1924) 35 CLR 355 at 375 (Isaacs ACJ).
[35] Legione v Hately (1983) 152 CLR 406 at 435-436 (Mason and Deane JJ).
The person relying on the assumption must have actually understood the representation, by its ordinary and reasonable meaning, to give rise to that assumption. As Evatt J said in Thompson v Palmer[36] a person setting up the doctrine of estoppel has to show, not only that the representation has been made to him, but that he believed in its truth.
[36] Thompson v Palmer (1933) 49 CLR 507 at 522.
Further, reliance on the assumption must be reasonable in two ways. First, it must be reasonable for the representee to adopt the assumption in question on the strength of the representation made. Secondly, the action taken by the representee in reliance upon the representation must be itself reasonable.[37]
[37] See Standard Chartered Bank Aust Ltd v Bank of China (1991) 23 NSWLR 164 at 180 (Giles J) as discussed in The Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) (2008) 39 WAR 1 at [3482] (Owen J).
As to inducement or knowledge on the part of the representee, the representation must be such that the objective reasonable person would believe that it was intended to be acted upon.[38] The test is objective.[39]
[38] Commonwealth v Verwayen (1990) 170 CLR 394 at 445 (Deane J).
[39] Citizens' Bank of Louisiana v First National Bank of New Orleans (1873) LR 6 HL 352 at 360 - 361; Sydney Bolsom Investment Trust Ltd v E Karmios & Co (London) Ltd [1956] 1 QB 529 at 541.
With regard to the detriment suffered by the representee, in Grundt v Great Boulder Proprietary Gold Mines Limited,[40] Dixon J said:
the real detriment or harm from which the law seeks to give protection is that which would flow from the change of position if the assumption were deserted that led to it ... His complaint is that when afterwards the other party makes a different state of affairs the basis of an assertion of right against him then, if it is allowed, his own original change of position will operate as a detriment.
[40] Grundt v Great Boulder Proprietary Gold Mines Limited (1938) 59 CLR 641 at 674 - 675.
Estoppel by convention requires a mutual understanding between the parties as to the assumed state of facts. For example, in Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd:[41]
Estoppel by convention is a form of estoppel founded not on a representation of fact made by a representor and acted on by a representee to his detriment, but on the conduct of relations between the parties on the basis of an agreed or assumed state of facts, which both will be estopped from denying.
[41] Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226 at 244.
Application of Principles to the Facts
Here the question which arises is whether there has been an unconscionable departure by Carotino from a common assumption or an assumption by CBA which has been encouraged or created by Carotino.
CBA’s claim based on estoppel, as I understand it, is that CBA relied on an assumption that by signing the letter of 4 May 2007 Carotino had executed or would execute a guarantee and therefore delayed enforcing its rights against the SAFF Companies until January 2009.
With regard to an estoppel which would prevent Carotino from denying that there was an immediately binding contract, CBA says that if it believed that Carotino had not by signing the letter of 4 May 2007 provided a guarantee it would have never approved of the change in ownership. The difficulty with that submission lies in the terms of the letter of 4 May 2007 itself. As I have previously found the ordinary meaning of the terms found in the letter indicates an arrangement that Carotino sign a shareholder’s guarantee in a standard form to be provided by CBA. Once the shareholder’s guarantee in a standard form was received by Carotino, Carotino then had seven days in which to execute and return it.
I have found that it is not possible to read the terms of the letter as an acceptance by Carotino of an immediately binding contract of guarantee. I consider that the return of the signed letter could not have reasonably induced any bank employee to make the assumption that there was in force a binding guarantee with identifiable terms. Indeed as I have already found there is no evidence that any officer of the bank ever did make that assumption. To the contrary efforts were made to follow up the return of the executed guarantee at a later stage. These included Mr Migheli’s sending of a letter of offer on 18 June 2007 which the parties needed to execute and return to the bank before a formal document of guarantee was drawn up and sent to Carotino. Mr Migheli himself said that the entry he made in the bank’s security register of “G/U by Carotino Australia Pty Ltd … New” was made in the expectation of Carotino doing something in the future.
There is evidence and I have found, that from about September 2007 until December 2009 CBA through its relevant officers did assume that a binding guarantee was in existence. That assumption was based on the erroneous entry in the security register by Mr Migheli which was compounded when Mr Perkins deleted “New” and inserted “existing”. Thereafter all other personnel with responsibility for the matter treated that entry as evidence of an existing security. Nobody thought it was necessary to check the actual security packet to find the guarantee until August 2008 when Mr Dumican made some enquiries about the lack of a signed letter of offer. It follows that the assumption of CBA that there was a contract of guarantee in existence was not based on the letter of 4 May 2007. Further, CBA’s assumption was not induced or encouraged by Carotino. There is no evidence that anyone at Carotino knew that the bank was acting in reliance on the assumption there was a guarantee. There is simply no evidence of any contact between the bank and Carotino during the relevant period.
It is a requirement in relation to the claim of estoppel that the plaintiff acts or abstains from acting in reliance on the assumption or expectation. There is no evidence that the delay caused by the bank’s own assumption that the guarantee was in place has occasioned any additional loss or damage to CBA. CBA has not provided any evidence to show that an earlier calling up of the facility would have resulted in a lesser ultimate loss.
Neither does estoppel by convention apply in this case. Even if it could be said that CBA held the assumption that there was an immediately binding guarantee by the act of signing and returning the letter of 4 May 2007, there is no evidence that Carotino shared that assumption. Indeed to the contrary. Mr Halter deposed to the fact that he expected in due course to receive a form of guarantee that he would submit to his solicitors for consideration before signing.
Is Carotino Estopped from Denying that it is Bound to Sign a Guarantee?
For the reasons I have already stated, I consider that any attempt to hold Carotino to an arrangement in which it agreed to sign a guarantee in the future would be unreasonable in circumstances where there has been a delay of more that two and a half years, the companies in question are in voluntary administration and litigation has commenced between the parties. It follows that it would certainly not be unconscionable for Carotino to refuse to sign such a document in those circumstances. Therefore Carotino can not be compelled to do so.
For these reasons CBA’s alternative claim must also fail.
Late Application to Amend the Pleadings by CBA
On 2 November 2010 counsel for CBA made an oral application to amend the Statement of Claim. Specifically CBA sought to amend paragraph 9 of the Statement of Claim by adding a further sub‑clause 3 to paragraph 9 as follows:
9.In the premises, and by reason of the matters pleaded in paragraphs [6], [7] and [8] above, the Plaintiff and the Defendant made a contract in writing, by which the Defendant agreed:
…
9.3 in the alternative to paragraphs 9.1 and 9.2 above, to execute, within 7 days of receipt of same from the Plaintiff, a contract of guarantee for the amount of the Receivables Facility ($9,500,000) in a standard form used by the Plaintiff for shareholder’s guarantees.
An additional amendment to part 2 of the statement of claim was also sought by amending paragraph 2 of part 2 to seek the following remedy:
or, in the alternative, an order that, within 7 days of the date of this Order, the Defendant do execute a contract of guarantee for the amount of the Receivables Facility ($9,500,000) in the standard form used by the Plaintiff for shareholder’s guarantees as at May 2007, with such guarantee not containing the Plaintiff’s standard clause 24 concerning “negative pledges”.
The amendment was sought at the eleventh hour on the fourth day of the trial. The trial had previously been adjourned from 28 May 2010 at the request of CBA and recommenced on 1 November 2010. Carotino opposed the application.
Mr Morcombe, for CBA, submitted that there is in fact no difference between a contract of guarantee and a binding promise to sign a guarantee in the future. All that was sought by the proposed amendment, so it was submitted, was that an alternative meaning be ascribed to the facts already pleaded in paragraph 9 of the amended Statement of Claim. Mr Morcombe submitted that CBA’s primary claim, as pleaded in paragraph 9 of the amended statement of claim, was not affected by the proposed amendment. He sought to justify the late application for amendment by reference to the perceived position of Carotino evidenced in Carotino’s outline of closing submissions. He said that by that document Carotino appears to have accepted that the letter of 4 May 2007 can be construed as a promise to sign a guarantee by the bank.
Carotino argued that prejudice would flow if the amendment was allowed, pointing to the circumstances of the amendment. Mr Slattery QC referred to previous correspondence between the parties wherein CBA admitted it had never previously sent a guarantee for execution to Carotino prior to the commencement of proceedings. On 27 May 2010 however, on the first day of the trial the bank made discovery of a previously unsighted guarantee said to have been prepared by the bank in June 2007. The trial was ultimately adjourned for a period of six months on the application of CBA. At that time both parties were asked whether there were to be any further amendments to the pleadings in light of the further discovery. CBA indicated that there was to be no such application for amendment. The trial resumed again on 1 November 2010 and evidence was completed. At the close of the case the application to amend the statement of claim was first made.
Mr Slattery argued that between 4 May 2007 and the date when CBA first requested Carotino to sign a guarantee, there had been an irrevocable change of position on the part of Carotino and its relationship with the SAFF companies. Both of the SAFF companies were in voluntary administration. A question of any equitable defence including a defence of laches would then arise. Mr Slattery argued that the cross‑examination of CBA’s witnesses and Carotino’s own case had been presented in accordance with the pleaded action at the time. Mr Slattery suggested that although on its face the application to amend appeared to simply be seeking specific performance on facts already pleaded, the substance of what the amendment sought to do was to allege a new cause of action for specific performance of a different contract.
The power to permit a late amendment to the statement of claim is to be found in the Supreme Court Civil Rules 2006, r 54(4)(a). The overriding consideration on an application to amend a pleading is whether it is in the interests of justice to do so. The general principles which govern applications of this nature have recently been considered by the High Court of Australia in Aon Risk Services Australia Ltd v Australian National University.[42]
[42] Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175.
In that case, the Australian National University (ANU) claimed damages against its insurance broker, Aon Risk Services Australia Ltd (Aon), for failing to arrange the renewal of insurance over certain property. On the third day of a four week trial in November 2006, when the proceedings had been on foot for nearing two years, ANU settled its claims against the insurers. ANU then applied for an adjournment and leave to amend its statement of claim to add a claim that Aon had been obliged to ascertain and declare the correct value of the property to the insurers and provide advice to ANU.
The adjournment application was granted and subsequently application for leave to amend the statement of claim was permitted by the trial judge. After an appeal to the Australian Capital Territory Court of Appeal, which dismissed Aon’s appeal, the matter went to the High Court. In allowing the appeal the Court provided definitive guidance on the principles which apply to the exercise of the Court’s discretion in relation to late applications to adjourn or amend.
This Court in the recent decision of Channel 7 Adelaide Pty Ltd v Manock[43] has discussed the governing principles in the light of the High Court decision in Aon. I am indebted to White and Bleby JJ (as well as to Gray J who dissented in the result) for their analyses of the judgment in Aon. Important matters which need to be considered are whether there has been any undue delay in making the application, the extent to which there will be wasted public resources in granting the amendment, whether there will be inefficiency occasioned by the need to revisit interlocutory processes, whether a trial date would need to be vacated or a trial adjourned, whether there is any satisfactory reason for the delay in applying for the amendment, whether the point to be raised by the amendment would be raised in any event at the trial, the effect on other litigants, the strain of litigation generally to litigants, the nature and importance of the amendment to the party applying, the point the litigation has reached, whether the party has had sufficient opportunity to plead its case earlier, and generally the need to not undermine public confidence in the administration of civil justice.
[43] Channel 7 Adelaide Pty Ltd v Manock [2010] SASCFC 59.
It is perhaps instructive to note that in Channel 7 Adelaide Pty Ltd v Manock,[44] there was no disagreement in substance between the majority and the minority as to the relevant principles. The difference of opinion in the Full Court concerned the application of the principles to the facts. The differing views in Manock underscores the fact that in the exercise of the discretion judicial minds may differ about the weight to be given to the relevant factors both individually and in combination. The outcome of the balancing process sometimes depends on a very fine line being drawn.
[44] Channel 7 Adelaide Pty Ltd v Manock [2010] SASCFC 59.
In its reply dated 8 January 2010, CBA when pleading the issue of estoppel already raised the issue of a promise to sign a guarantee in the future. Paragraph 5 of the reply states:
5.The Defendant, by reason of signing the facsimile and causing it to be sent to the Plaintiff as pleaded in paragraph 7 of the Statement of Claim, intended the Plaintiff to assume, and in fact induced the Plaintiff to assume, that:
5.1 a contract had been entered into between them; or
5.2 in the alternative, a contract would be entered into between them:
Pursuant to which the Defendant would guarantee, in accordance with the terms of the Plaintiff’s standard form shareholder guarantee, that AF Fuels and/or South Australian Farmers Fuel would pay the Plaintiff all moneys owing under the Receivables Agreement, including costs, charges and interest otherwise incurred, being the contract pleaded in paragraph 9 of the Statement of Claim (“the Assumption”)
On one view, at least in relation to the relief sought, it might be said that by the proposed amendment the plaintiff seeks nothing more than specific performance if its alternative claim in estoppel is successful. On the other hand, as Mr Slattery pointed out, the change to the contractual case pleaded if the amendment is permitted is more significant.
I cannot overlook the fact that the parties have conducted the litigation thus far on the basis of the issues pleaded. CBA’s contention that the amendment is justified by the position which Carotino adopted in its closing submissions is in my view misconceived.
Carotino’s position has always been that it did not enter into a legally enforceable immediately effective contract of guarantee, nor was its undertaking to execute a guarantee in a standard form enforceable as the terms of the standard guarantee were never properly identified and the terms thereof are simply too uncertain.
To some extent the issue sought to be agitated by the proposed amendment already arises in the context of the plaintiff’s alternative claim.
CBA’s claim rests on the proper characterisation of the letter of 4 May 2007. If the letter of 4 May 2007 is to be properly characterised as a guarantee then CBA will succeed on the primary claim. If the letter of 4 May 2007 is characterised only as a promise by Carotino to execute a guarantee produced by the bank, then as I have found in any event, the terms of the guarantee are not sufficiently certain as to be legally enforceable. Further, I have found that the circumstances do not give rise any claim based on estoppel.
For these reasons I declined to permit the plaintiff to amend its statement of claim at such a late stage in the trial.
Conclusion
For the foregoing reasons, CBA’s claim is dismissed.
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