Coomera Resort Pty Ltd v Kolback Securities Ltd
[1998] QSC 20
•20 February 1998
IN THE SUPREME COURT
OF QUEENSLAND
Brisbane No.1321 of 1994
Before the Hon. Mr Justice Mackenzie
[Coomera Resort Pty Ltd v. Kolback Securities Ltd & Ors]
BETWEEN
COOMERA RESORT PTY LTD
(ACN 050 911 156) Plaintiff
AND
KOLBACK SECURITIES LIMITED
(ACN 010 560 586) First Defendant
AND
KOLBACK GROUP LIMITED
(ACN 003 190 501) Second Defendant
AND
PAUL LEVINSON BOND
Third Defendant
AND
LANDBASE HOLDINGS LIMITED
Fourth Defendant
AND
YUZO NAGANO
Fifth Defendant
AND
ROBERT ADRIAN PITT
Sixth Defendant
AND
PRD REALTY PTY LTD
(ACN 009 954 956)
Seventh Defendant
AND
DONALD DIETZ
Eighth Defendant
No. 1329 of 1994
[Kolback Securities Ltd & Anor v. Coomera Resort Pty Ltd]
BETWEEN
KOLBACK SECURITIES LIMITED
(ACN 010 560 586) Plaintiff
AND
KOLBACK GROUP LIMITED
(ACN 003 190 501) Second Plaintiff
AND COOMERA RESORT PTY LTD
(ACN 050 911 156) Defendant
JUDGMENT - MACKENZIE J.
Judgment Delivered 20/02/1998
CATCHWORDS:
AGENCY - real estate agent - whether breach of legal duty by reason of failure to conform with Code of Professional Conduct; Auctioneers and Agents Act
CONTRACT
breach - cll 13, 12 & 24 and contractual duties of a fiduciary nature
condition and warranties
exclusion clause -construction of cl.25.1 -whether liability for misleading and deceptive representations is excluded
frustration - whether possibility that finance might not be obtained was an event that would radically alter the situation envisaged by the parties upon entry into the agreement
misrepresentation
repudiation - whether Kolback’s refusal to provide correspondence with Metway(cl.24.1), withdrawing the application for interest guarantee(cl.9.4) and failing to obtain conforming offer were instances of repudiation and accepted by Coomera, discharging it from further performance
whether issue of writ, in pursuance of its rights under the agreement, terminating on the grounds that the relationship had irretrievably broken down, was capable of acceptance by the other party
termination - contractual preconditions: finance to be obtained within 9 months - whether Coomera could terminate without giving reasonable notice because finance had not been obtained
uncertainty - whether content of golf course land and venture land resolved to sufficient certainty - whether the precise area which is to be excised from a larger parcel can be ascertained according to objective criteria to render it certain
DAMAGES - quantum and remoteness
conspiracy - whether costs of unravelling conspiracy not recoverable as costs of the action, are recoverable as damages for conspiracy
equitable compensation for breach of fiduciary duty
CRIMINAL LAW - soliciting and offering secret commission; s442B Criminal Code
EQUITY- fidiciary duties
between joint venturers - whether owed during period prior to execution of venture agreement - character of obligations to be imposed by the agreement - whether relationship sufficiently developed / identifiable transactions related to furthering the proposed joint venture had taken place
between real estate agent and principal- conflict of interest and duty: arrangement to obtain secret commission - whether pleading of failure to disclose, as a breach of fiduciary duty is sufficient - whether allegation was essentially of prima facie disloyalty by agreeing to the arrangement, not rebutted by disclosure to and consent of principal - whether causal relationship between non-disclosure and entry into the venture agreement by Coomera - effect of breach of fiduciary duty on parties and factors influencing award of equitable compensation-
ESTOPPEL - by convention
EVIDENCE - admissibility - co-conspirators rule
INTERPRETATION - terms of venture agreement
‘venture asset’ - ‘any compensation receivable by virtue of any resumption of any part of the land’- whether Railway Compensation Moneys venture asset - joint venturers post agreement course of conduct
‘venture land’, cll 1.2, 2, 5, 9.1 and 21.1 - whether Kolback has a claim to 50% interest in the land
cl 25.1 - exclusion clause
JOINT VENTURES - fiduciary duties between joint venturers
PRACTICE - sufficiency of pleading
statement of claim - allegation of ‘unlawful means’ conspiracy - omission of specific allegation of intention to injure/ cause harm to plaintiff - whether this element had to be proved for this type of conspiracy
statement of claim - whether pleading of failure to disclose, as a breach of fiduciary duty is sufficient or known to Australian law
PRINCIPAL AND AGENT - liability of agent - principal’s right to recovery of quantifiable undisclosed / secret commission and to rescind contract of agency
TRADE AND COMMERCE -Trade Practices Act, s.52- misleading and deceptive conduct -
representations concerning financial aspects of the affairs of one of the joint venturers
whether statement that Kolback could provide a guarantee of $12 million was an expression of judgment/ opinion or fact
Kolback- company of substance with assets and credibility and ... debt-free, capacity to introduce funds
false statement to ASX - whether awareness of the statement or any loss suffered
TORT
unlawful means conspiracy - whether agreement for secret commission - whether unlawful means: commission of offence; s.442B Criminal Code - whether predominant purpose or pleading of intention required - proof of damages: whether costs of unravelling conspiracy quantifiable and possibly recoverable
whether conspiracy to cause someone to breach a fidiciary duty sustainable in law as an unlawful means conspiracy cf conspiracy to commit criminal offence, breach of contract or a tort
deceit - statements that Kolback was a company of substance with assets and credibility and ... hopefully debt-free by the end of 1992
WORDS AND PHRASES - construction of contract
‘golf course land’-‘indicative area and approximate location’- meaning of indicative
Ahern v. The Queen (1988) 165 CLR 87
Ansett Transport Industries (Operations) v. Australian Federation of Air Pilots (1991) 1 VR 637
Beach Petroleum NL v. Johnson (1993) 43 FCR 1
Bill Acceptance Corporation Ltd. v. GWA Ltd (1983) 78 FLR 171
Briginshaw v Briginshaw (1938) 60 CLR 336
Brisbane City Council v. Group Projects Pty Ltd (1979) 145 CLR 143
British Motor Trade Association v. Salvadori (1949) 1 Ch 556
Brown v. Gould (1972) Ch. 53
Canny Gabriel Castle Jackson Advertising Pty Ltd v. Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321
Chettle v. Brown (1993) 2 Qd R 604
Codelfa Construction Pty Ltd v. State Rail Authority of NSW (1982) 149 CLR 337
Connell v. Bond (1992) 8 WAR 352
Demagogue Pty Ltd v. Ramensky (1992) 39 FCR 31, 33
Derry v. Peek (1889) 14 App Cas 337
F & G Sykes (Wessex) Ltd v. Fine Fare Ltd (1967) 1 Lloyds Rep. 53
Gemstone Corporation of Australia Limited v. Grasso (1994) 62 SASR 239
Global Sportsman Pty Ltd v. Mirror Newspapers Ltd (1984) 2 FCR 82
Godecke v. Kirwin (1973) 129 CLR 629
Goodchild Fuel Distributors Pty Ltd v. Holman (1992) 59 SASR 454
Gould v. Vaggelas (1983) 157 CLR 215
Havenbah Pty Ltd v. Butterfield (1974) 3 ALR 347
Heritage Properties (No. 3) Pty Ltd v. Coles Supermarkets Australia Pty Ltd (1993) Q Conv R 54-448
Hillas & Co Ltd v. Arcos Ltd (1932) 147 LT 503
James v. ANZ Banking Group Ltd (1986) 64 ALR 347
Kabwand Pty Ltd v. National Australia Bank Ltd (1989) ATPR 40-950
L.S. Harris Trustees Ltd v. Power Packing Services (Hermit Rd) Ltd (1970) 2 Lloyds LR 65
Lonrho Ltd v. Shell Petroleum Co. Ltd (No.2) (1982) AC173
Lonrho PLC v. Fayed (1992) 1 AC 448
Maguire v. Makaronis (1997) 144 ALR 729
May & Butcher Ltd v. The King (1934) 2 KB 17
McKernan v Fraser (1931) 46 CLR 343
Meehan v. Jones (1982) 149 CLR 571
Metall Und Rohstoff AG v. Donaldson Lufkin and Jenrette Inc. (1990) 1 QB 391
Northern Territory v. Mengel (1995) 185 CLR 307
Parkdale Custom Built Furniture Pty Ltd v. Puxu Pty Ltd (1980) 43 FLR 405
Permanent Building Society (in liq) v Wheeler (1993) 11 WAR 187
Prints for Pleasure Ltd v. Oswald-Sealy (Overseas) Ltd (1968) 3 NSWSR 761
Progressive Mailing House Pty Ltd v. Tabuli (1985) 157 CLR 17
Reading v. A.G (1951) AC 507
Roots v. Oentory Pty Ltd (1983) 2 Qd.R 745
Shevill v. Builders’ Licensing Board (1982) 149 CLR 620
Sutton v. A.J. Thompson Pty Ltd (In Liq) (1987) 73 ALR 233
Sutton v. Gundowda Pty Ltd (1950) 81 CLR 418
Thorby v. Goldberg (1964) 112 CLR 597
Tobacco Institute of Australia Ltd. v. Australian Federation of Consumer Organisations Inc (1993) 38 FCR 1
United Dominions Corporation Ltd v. Brian Pty Ltd (1984) 157 CLR 1
United Builders Pty Ltd v. Mutual Acceptance Ltd (1978-9) 144 CLR 673
Upper Hunter County District Council v. Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429
Wardley Australia Ltd v. Western Australia (1992) 175 CLR 514, 526
Williams v Hursey (1959) 103 CLR 30
Womboin Pty Ltd v. Reichelt (unreported, SCNSW, 5175/92 25 August 1995)
Yenidje Tobacco Co Ltd (1916) 2 Ch 426
York Airconditioning and Refrigeration (A’Asia) Pty Ltd v. The Commonwealth (1949) 80 CLR 11
Counsel:In No.1321 of 1994
Mr R.N. Chesterman QC, with him Mr M.K. Conrick and Mr L.F. Kelly for the plaintiff.
Mr P.H. Morrison QC, with him Ms J.H. Dalton for the 1st, 2nd and 6th defendants.
Mr R.V. Hanson QC, with him Mr J.C. Sheahan for the 7th and 8th defendants. (Mr Hanson QC appeared for the 7th and 8th defendants from the 19 September 1998)In No.1329 of 1994
Mr P.H. Morrison QC, with him Ms J.H. Dalton for the 1st and 2nd plaintiffs.
Mr R.N. Chesterman QC, with him Mr M.K. Conrick and Mr L.F. Kelly for the defendant.
Solicitors:In No.1321 of 1994
Clayton Utz for the plaintiff.
Minter Ellison for the 1st, 2nd and 6th defendants.
Thynne & Macartney for the 7th and 8th defendants.In No.1329 of 1994
Minter Ellison for the 1st and 2nd plaintiffs.
Clayton Utz for the defendant.
Date of hearing: 18 August 1998 to 26 September 1998 (excluding 25 August 1998) and 1 and 2 October 1998.
IN THE SUPREME COURT
OF QUEENSLAND
Brisbane No.1321 of 1994
Before the Hon. Mr Justice Mackenzie
[Coomera Resort Pty Ltd v. Kolback Securities Ltd & Ors]
BETWEEN
COOMERA RESORT PTY LTD
(ACN 050 911 156) Plaintiff
AND
KOLBACK SECURITIES LIMITED
(ACN 010 560 586) First Defendant
AND
KOLBACK GROUP LIMITED
(ACN 003 190 501) Second Defendant
AND
PAUL LEVINSON BOND
Third Defendant
AND
LANDBASE HOLDINGS LIMITED
Fourth Defendant
AND
YUZO NAGANO
Fifth Defendant
AND
ROBERT ADRIAN PITT
Sixth Defendant
AND
PRD REALTY PTY LTD
(ACN 009 954 956)
Seventh Defendant
AND
DONALD DIETZ
Eighth Defendant
No. 1329 of 1994
[Kolback Securities Ltd & Anor v. Coomera Resort Pty Ltd]
BETWEEN
KOLBACK SECURITIES LIMITED
(ACN 010 560 586) Plaintiff
AND
KOLBACK GROUP LIMITED
(ACN 003 190 501) Second Plaintiff
AND
COOMERA RESORT PTY LTD
(ACN 050 911 156) Defendant
JUDGMENT - MACKENZIE J.
Judgment delivered 20 February 1998
INDEX
The Action and the Parties....................................................................................................... 1
Other Witnesses Cross-Examined............................................................................................ 3
Other Evidence........................................................................................................................ 4
Complaints about cross-examination of witnesses..................................................................... 5
Bond’s prior acquaintanceships................................................................................................ 5
The Issues............................................................................................................................... 6
Relief Sought........................................................................................................................... 8
Explanation of Methodology................................................................................................... 11
History of Hoko’s connection with Coomera Land................................................................. 12
Dealings between Douglas and Bond in relation to fees........................................................... 12
Instructions to PRD to seek joint venturer (August-October 1991).......................................... 16
PRD’s activities after Omura’s decision to sell (October 1991-July 1992)............................... 17
Other offers prior to execution of venture agreement............................................................... 18
The venture agreement........................................................................................................... 18
(a)Constitution of venture and interest of the venturers....................................................... 19
(b)Management Committee.............................................................................................. 19
(c)Dealings with the land (cl.5) ........................................................................................ 19
(d)Kolback’s obligations with regard to finance (cl.9)........................................................ 20
(e)Relationship between the parties................................................................................... 21
(f)Events of default and consequences.............................................................................. 21
(g)Golf course land ....................................................................................................... 22
(h)Commission................................................................................................................. 22
Events concerning liability for commission............................................................................... 23
Initial Funding (August-October 1992)................................................................................... 24
Proposals to Fund Golf Course (October 1992-June 1993).................................................... 25
“Decision” to Proceed under Original Agreement (June-August 1993)..................................... 25
Further Proposal to Fund Golf Course through Metway (August 1993-February 1994)........... 26
Other Proposals - Interest Subsidy (February-March 1994)................................................... 26
Concurrent Discussions about Metway Funding (March-April 1994)...................................... 26
Separation of Golf Course and the Venture Development (April 1994).................................... 27
Complaints about Form and Implementation of Agreement (May-July 1994)........................... 27
“Termination” and subsequent events (August 1994)............................................................... 29
Credibility - Omura................................................................................................................ 31
Credibility - Pitt..................................................................................................................... 32
Events of Default by Kolback?............................................................................................... 32
Conspiracy as Pleaded........................................................................................................... 34
Conspiracy - Kolback, KGL and Pitt................................................................................... 36
Conspiracy - Dietz and PRD.................................................................................................. 45
Conspiracy - what has to be proved and pleaded................................................................... 48
Can Conspiracy be Based on Breach of Fiduciary Duty?........................................................ 56
Was there a fiduciary relationship between Kolback and Coomera before the
joint venture?......................................................................................................................... 57
Breach of fiduciary duty - PRD.............................................................................................. 58
Submissions about the representations.................................................................................... 62
Representations Concerning Guarantee................................................................................... 74
Debt Reduction...................................................................................................................... 74
Was the Company one of substance and credibility?............................................................... 75
Representation of capacity to introduce funds......................................................................... 78
Reliance................................................................................................................................. 80
Contravention of Section 52 of Trade Practices Act................................................................ 82
Deceit.................................................................................................................................... 82
Repudiation by Refusing to Provide Correspondence with Metway......................................... 84
Repudiation by Withdrawing Application for Interest Guarantee.............................................. 85
Repudiation by Failing to Obtain Conforming Offer................................................................. 87
Breach of fiduciary duty/contract - Kolback, KGL, Pitt.......................................................... 90
Alleged false statement by Kolback to Australian Stock Exchange.......................................... 95
Uncertainty............................................................................................................................ 97
Frustration........................................................................................................................... 108
Repudiation by Issue of Writ................................................................................................ 109
Termination Without Breach................................................................................................. 111
Has Kolback an interest in the land?..................................................................................... 113
Exclusion Clause.................................................................................................................. 114
Railway Compensation Moneys........................................................................................... 115
Would the Agreement Have Proceeded?.............................................................................. 116
How should the matter be resolved?..................................................................................... 118
Summary of Findings, Orders and Declarations..................................................................... 120
The Action and the Parties
The proceedings in both actions arise from the failure of a business relationship the object of which was to develop land at Coomera as a residential development surrounding a resort golf course. The circumstances in which the venture was entered into, the reasons why it came to a premature end and which of the parties bears responsibility are at the heart of both actions.
The land to be developed had been purchased in 1989 by Hokojitsugyo (Hoko) a Japanese investment company of which Mr Omura (Omura) was the president. The plaintiff in No 1321 of 1994 and defendant in No 1329 of 1994 Coomera Resort Pty Ltd (Coomera) was a wholly owned subsidiary, incorporated in Australia, of Hoko and was the corporate vehicle for the project.
The first and second defendants in No 1321 of 1994 and plaintiffs in No 1329 of 1994, Kolback Securities Limited (Kolback) and Kolback Group Limited (KGL), are related companies. Kolback was the joint venturer with Coomera and is a wholly owned subsidiary of KGL. At all material times the 6th defendant Robert Adrian Pitt (Pitt) was chairman of directors of both. Under a venture agreement signed on 9 July 1992, of which more will be said later, Kolback was to be the venturer and KGL a guarantor of its obligations.
The 3rd defendant Paul Levinson Bond (Bond) was engaged as a consultant to Hoko in relation to the project. He was appointed a director of Coomera, but was dismissed by Omura in November 1992. Judgment for damages to be assessed was obtained on 15 May 1996 against him. He has also been declared bankrupt, but leave to proceed against him was given in the Federal Court on 8 August 1997. He was out of Australia at the time of trial. Pitt and Bond were actively involved in Australia in the negotiation of commercial arrangements between Hoko and Kolback, although Omura as President of Hoko was acknowledged to have the final say in relation to Hoko’s interests.
The 5th defendant Yuzo Nagano (Nagano) was a Japan based English speaking employee of Hoko or its subsidiaries in Japan. He was also appointed a director of Coomera and acted as a channel of communication with Omura whose English was taken to be for practical purposes non-existent. I should record that from my observations during the trial, Omura was apparently aware of some English words, but gave no indication of greater fluency than that. Omura gave evidence at the trial through an interpreter and relied on Japanese translations or explanations of English documents being prepared for him throughout the whole period of the relevant events. Nagano came under suspicion by Omura and was dismissed in July 1993. Judgment for damages to be assessed was obtained against him on 26 February 1996.
The 4th defendant Landbase Holdings Limited (Landbase) is a company incorporated in Liberia and is alleged to be the means by which a secret commission was to be secured. No other details about it or the person said to be its President, Mr Choi (Choi), could be discovered. Telephone calls by a private investigator posing as an investor to the number on Landbase’s letterhead were answered by a secretarial company, the employees of which would not divulge any helpful information. Measures designed to get Choi to contact the “investor” remained unanswered. The address for Landbase on the letterhead was that of the secretarial company. Enquiries there about Bond produced no positive response. The only documents purporting to be from Landbase are photocopies. No originals have ever been discovered and the only source from which Landbase communications were received was Bond. One of the issues in the trial is the identification of who were involved in the procuring of the secret commission if one was in contemplation. Final judgment was obtained against it pursuant to an order of Thomas J on 1 July 1996.
The 7th defendant PRD Realty Pty Ltd (PRD) is a real estate agent on the Gold Coast and the 8th defendant Donald Dietz (Dietz) was director of its Special Projects Division. It is alleged that Dietz was a party to an arrangement to have a secret commission paid to Landbase and that PRD is liable for his actions.
Other Witnesses Cross-Examined
A number of witnesses swore affidavits and were cross-examined on them. There will be a more comprehensive analysis of their evidence in the judgment and in the attached appendix. What follows is identification of them and the principal issues to which their evidence related. Paul Stewart Hewson (Hewson) was a director of Kolback who gave evidence of his interaction with Pitt and evidence concerning the state of the company at relevant times. Terrence George Salotti (Salotti) was also a director of Kolback and gave evidence of correspondence with Pitt shortly before and after the venture was entered into.
Gordon Douglas (Douglas), a director of PRD, gave evidence principally of a previous occasion upon which Bond had been paid a share of PRD’s commission at Bond’s request. William Karel Ludwig Rameau (Rameau), a subordinate of Dietz’s, gave evidence principally relating to an allegation made by Pitt that a secret commission was being paid to Bond by PRD. Mark Odgers-Jewell (Jewell), financial controller of PRD at the relevant time, gave evidence of the accounting system. Brian James Conrick (Conrick), a solicitor, and Douglas Gordon Robbie (Robbie), a consultant retained by Omura, gave evidence of visiting the site office and speaking to a member of the project team James Lawrence Forsyth (Forsyth), and each gave his recollection of the conversation. George William Asbey-Palmer (Palmer) was involved in assisting Kolback in the joint venture negotiations and in the early stages of its implementation. He gave evidence, denied by Pitt, that Pitt and he had a conversation showing that Pitt had knowledge at an early stage of an arrangement under which Bond and Nagano were sharing half of PRD’s commission. Masaaki Ikeda (Ikeda), an architect fluent in Japanese and English and resident in Sydney who was the nominee of Coomera under the venture agreement after Bond was dismissed, gave evidence of his dealings with Hoko and Kolback in that capacity. Graeme William Stanley Brown (Brown), the officer of Metway who was negotiating for finance with Pitt, gave evidence in connection with those negotiations. Peter Athol Wise (Wise) gave evidence concerning telephone calls made from a hotel room rented on behalf of Nagano following a meeting on 26 November 1992 to which some attention was given in the evidence without anything of significance emerging.
There were also a number of expert witnesses. Since the worth of Kolback was in issue there was evidence from accountants Marian Micalizzi and David John Van Homrigh. Since the value of a land fill site in Western Sydney was relevant to the question there was evidence from valuers John Steven Howes, William Hershall McRae and Wayne Richard Retallick. One of the issues concerning the value of the land was the cost of remediation of the site to enable it to be used for industrial purposes. Several witnesses who fit the general description of environmental engineers, Anthony Colenbrander, Richard Robert Ryall, Phillip James Mulvey and Robert Henry Amaral gave evidence as to these matters. Klaus Kerzinger, an officer of the relevant local authority in New South Wales at the time at which certain remedial works were agreed on gave evidence as to the negotiations in that regard.
Other Evidence
A number of other affidavits were tendered the deponents of which were not required for cross-examination. Most of this evidence will not require detailed elaboration. Where the affidavits contribute to the resolution of the matter their substance will be referred to in the appropriate section of the judgment or Appendix. Amongst the large mass of documentary evidence is correspondence generated during the period with which the proceedings are concerned. Most of it is between persons and corporations already mentioned.
Some relevant correspondence was to and from Mr Katsu Tokita (Tokita). He is not a defendant. He is an English speaking Japanese citizen who was involved in assisting in relation to the project and advising Omura in relation to it. He ceased to be employed by Hoko in about February 1992 and did not give evidence. It can be mentioned conveniently at this point that both Tokita and Nagano frequently used the acronym FO in correspondence to refer to Mr Omura. It is common ground that it stands for “Fucking Omura”.
In the later stages of the relevant period, a Japanese lawyer Shiro Kuniya (Kuniya) was involved on behalf of Coomera. He did not give oral evidence for health reasons.
Complaints about cross-examination of witnesses
Complaint is made in the written submissions about the manner in which Mr Pitt on the one hand and Mr Omura on the other were cross-examined. The cross-examination did not exceed proper or acceptable limits. Indeed, given the nature of the issues raised with respect to the conduct of each, it fell noticeably short of the robustness which is seen as a matter of course in the jurisdiction in which such allegations are more commonly in issue. In any event, the mere fact that the jurisdiction in which this matter was heard is the civil jurisdiction does not mean that cross-examination cannot be robust if the occasion warrants it. No valid complaint can be made in this regard.
Bond’s prior acquaintanceships
In 1991, Dietz had known Bond for about 10 years. For some of that time they were associated in a real estate business in which each had an interest. This business association ended about the end of 1986 but they and their respective families remained close friends.
Douglas had known Bond for about 12 years, firstly as a competent competitor in the real estate industry, then as PRD’s employee in the mid-1980's and then as a developers’ representative. In 1991-2, Bond was allowed to use space in PRD’s office because of the time he was spending there in connection with Hoko’s affairs. Rameau had known him for about 20 years, firstly as a “Swipe” distributor and later as an agent engaged by Rameau to sell business premises owned by Rameau’s advertising company. He had never directly worked with him. After the initial meeting involving Bond and Pitt and PRD employees, Rameau was excluded, the reason being advanced that it was because of a personality clash with Bond.
It is not clear when Pitt first met Bond. He thought it was after the option proposal in February 1992. He was cross-examined as to whether it was earlier, when he had inspected the land in November 1991 but had no recollection of meeting him then. It is sufficient to say that Pitt did not know Bond before Kolback became involved in negotiations in connection with the land.
The Issues
It was common ground that the factual issues were the same in both actions as between Coomera and Kolback, KGL and Pitt. The pleadings are long and complex but in opening Mr Chesterman summarised the case for Coomera against all defendants succinctly into a number of propositions in two categories. The first category was concerned with matters which Coomera claimed resulted in the venture agreement being voidable and voided by Coomera or being liable to be set aside under the Trade Practices Act or as having been repudiated by Kolback, which repudiation was accepted by Coomera bringing the venture to an end. Under this category a number of allegations arose:
1.There was a conspiracy by Kolback, Pitt, PRD and Bond and/or Nagano and a breach of fiduciary duty to permit Bond and/or Nagano to take a secret commission through Landbase.
2.Coomera was induced to enter the venture agreement by deliberate misrepresentations or misleading or deceptive statements as to Kolback’s financial position.
3.Kolback repudiated the agreement by not providing Coomera with correspondence with Metway concerning the terms of finance.
4.Kolback repudiated it by making four misrepresentations, fraudulently or in breach of s.52 of the Trade Practices Act, to induce Coomera to agree to relieve Kolback of the obligation to provide an interest security provided for in the venture agreement. The four misrepresentations which, it was alleged, were made fraudulently and in breach of s.52 were the following:
·that Kolback was debt-free;
·the effect of cl.9.1 of the venture agreement that Kolback provide Coomera with a cash bond or other similar security sufficient to cover the interest payments for each ensuing twelve month period;
·the attitude of Metway with respect to the interest security obligation;
·Kolback’s intention to secure an additional $14.5 million for construction of the golf course.
5.Kolback misrepresented its financial position during the currency of the venture.
6.Kolback repudiated the agreement by failing to obtain offers of finance conforming to the requirements of the venture agreement and failed to notify Metway of the respects in which the finance offered did not accord with them.
7.Kolback made a false statement to the Australian Stock Exchange that contracts had been let for civil works on the project allegedly for the purpose of supporting Kolback’s share price, not for the purposes of the venture. It was alleged that the statement endangered the venture in that if the falsity of the statement had been detected it would adversely reflect upon Kolback in the market and consequently upon Kolback’s ability to perform the agreement.
8.Kolback repudiated the venture agreement by issuing the writ on 29 August 1994 claiming that the venture was at an end and had been terminated by it, when the 21 days within which Coomera might remedy any default had not expired.
The second category of issues arise out of construction of the venture agreement and, it was submitted, fell to be decided if Coomera failed on the first group of issues. In other words if Coomera failed to establish that the venture agreement was voidable or liable to be set aside or had been repudiated the consequences of that fell to be decided, largely as a question of construction of the venture agreement. In this category were the following:
9.The agreement was uncertain because the golf course land had to be defined and this was never done precisely.
10.Independently of breach of the agreement Kolback had failed to obtain finance on terms conforming to the agreement and that by the time Coomera delivered its notice on 2 August 1994 it was entitled to terminate the venture by reason of that failure.
11.On its proper construction the venture agreement did not transfer any interest in the land to Kolback. Kolback’s claim to an immediate half interest in the land was therefore unsubstantiated.
12.If there was a transfer of such an interest it would be a forfeiture against which relief could be granted since Kolback was not entitled to a windfall of that proportion.
13.Kolback was estopped from asserting that it had acquired an interest in the land under the venture as a result of a variety of statements made in company documents about the nature of its interest.
14.If the venture agreement did transfer an interest in the land to Kolback it created a debt of $20 million owed by Kolback and Coomera jointly to Coomera.
Relief Sought
Reflecting the matters set out in the preceding chapter the following relief was sought:-
In action 1321 of 1994:
1.Against Kolback and KGL
In the alternative:
·a declaration that the venture agreement was avoided by the notice of 2 August 1994;
·an order under s.87 of the Trade Practices Act declaring the venture agreement void ab initio;
·a declaration that the venture agreement was terminated by the notice of 2 August 1994;
·a declaration that the agreement was frustrated on or about 3 August 1994 by the inability to obtain finance;
·an order for rescission for misrepresentation.
Also sought were:
·damages for breach of contract, deceit conspiracy and under s.82 and/or s.87 of the Trade Practices Act for contravention of s.52;
·equitable compensation for breach of fiduciary obligations;
·declarations, in the alternative, that no interest or estate in the land was acquired by Kolback upon entering into the agreement; that Kolback was estopped from asserting that it acquired any such estate or interest; that $20 million was due by Coomera and Kolback to Coomera and the debt accrued on or about 3 August 1994.
2. As against Pitt:
·damages pursuant to s.82 and/or s.87 for breach of s.52 of the Trade Practices Act on the basis that he was a person involved in the contravention of s.52 by Kolback and/or KGL;
·damages for conspiracy.
3. As against PRD:
·declarations that the joint venture is avoided by the notice of 2 August 1994; that cl.37 is void or unenforceable; that no commission is payable by Coomera to PRD;
·an order under s.87 of the Trade Practices Act declaring the venture agreement void ab initio;
·damages under s.82 and/or s.87 for contravention of s.52 of the Trade Practices Act for fraudulent misrepresentation and for conspiracy;
·equitable compensation for breach of fiduciary obligations.
4.As against Dietz:
·damages under s.82 and/or s.87 for contravention of s.52 of the Trade Practices Act on the basis that he is a person involved in PRD’s contravention;
·damages for conspiracy.
In action 1329 of 1994 Kolback and KGL as plaintiffs claim the following against Coomera:
·declarations that:
- Kolback’s notice of 18 August 1994 was effective to terminate the venture agreement on and from 10 September 1994;
- Kolback was entitled to either purchase Coomera’s interest in the venture or appoint a receiver;
- Kolback’s and Coomera’s respective interests in the venture and venture assets were 50%;
- the venture assets included the venture land, the railway compensation moneys, the old railway land and other miscellaneous items;
- Kolback and KGL were entitled to $895,430.25 of the railway compensation money;
- there were liabilities of the venture of $273,933 of which Coomera was liable to pay $248,787.
- damages, including damages for lost opportunity to profit.
Explanation of Methodology
In the following chapters and the appendix events are set out in chronological sequence without any preconception that the evidence is admissible or inadmissible against individual defendants. Questions of admissibility will be dealt with separately as necessary. The chapters in the judgment contain the essential facts for an understanding of the broad sweep of what occurred. The accompanying detailed analysis of the interaction between the venturers(Appendix) is included for the purpose of demonstrating the intricacy, fluidity and complications of their relationship, giving some insight into why it was so, and to demonstrate why I have reached the conclusion that there was a significant chance that the project would not have proceeded on the terms of the venture agreement in any event. This method which necessarily involves some compression of discussion, is necessary to avoid inordinate length in the main section of the judgment.
Omission of reference in the judgment to matters mentioned in the detailed analysis does not mean they have been disregarded in reaching ultimate conclusions. Some matters raised in the comprehensive written submissions may not be specifically referred to in the detailed analysis. They have been considered in reaching conclusions in the judgment on the issues in respect of which they have been raised.
History of Hoko’s connection with Coomera Land
The land was purchased in November 1989 by Hoko from Triko Project Management Pty Ltd for $22,000,000 which, together with expenses, represented an outlay by Hoko of over $24,000,000. FIRB approval was given on 10 April 1990 with a condition that the project commence within 18 months. PRD was agent for the vendor. Omura had a concept under which a residential development with a resort and golf courses would be constructed. When the Japanese share market fell and there was a general downturn in economic conditions in the early 1990's Hoko suffered substantial liquidity problems. Hoko’s Australian accountants and solicitors proposed that the land be transferred from Hoko to Coomera. Omura agreed with the proposal, and the decision was made to do so. The consideration was to be $27,000,000, to be satisfied by the issue of shares to Hoko by Coomera. On 5 April 1991, Coomera was incorporated with Omura, Bond and Nagano being appointed directors. On 26 June 1991, FIRB approval was given to transfer the land from Hoko to Coomera. A contract for the transfer of the land was executed. It is common ground that notwithstanding the contract the land has not to this point been conveyed to Coomera. It was not suggested that anything turned on this for the purposes of these proceedings.
Dealings between Douglas and Bond in relation to fees
Douglas was aware that Hoko had been sold the land in 1989 by the division of PRD headed by Dietz. He recalled that PRD had not received its commission because the vendor company went into liquidation before settlement. He also gave evidence that a Japanese company MACC had been paid $150,000 on the basis that it had introduced Omura to the property and acted as middleman in the transaction. In 1990 he had numerous meetings with Bond concerning the development of the land. Douglas was not convinced that it was a viable project until he undertook a trip to the United States with Omura, Tokita, Nagano and Bond in March 1990. Arising out of that trip PRD was appointed to retail the land when it was developed. A draft marketing agreement for submission to Hoko was drawn up. Omura came to Australia in May 1991 and from 13 May until his departure on 16 May 1991 he was involved in activities concerning the project. One issue at that time was the proposed resumption of land by Queensland Rail for the construction of the Brisbane-Gold Coast line and the siting of a railway station on or adjacent to the land.
The morning following Omura’s return to Japan, Douglas had a breakfast meeting with Bond and Tokita during the course of which Bond said that in his role as local advisor to Coomera he would be doing a lot of the work that PRD would normally do in fulfilling its obligations under the marketing agreement. He went on to say that he was having difficulty organising a financial package for himself and that the best way for that to be rectified was for him to get part of the fee PRD was to receive. He suggested .5% of the sale price of land in the development. Douglas gave evidence that he told Bond that before there could be such an agreement he would need written acknowledgment by the vendor and that he would have to have the arrangement approved by his lawyer. Either Bond or Tokita said that that would not be a problem because Nagano had agreed. Douglas said that he believed that such an arrangement would be illegal unless the vendor was aware of it. He made an entry in his diary for 17 May 1991 immediately after the meeting to the following effect: “Change marketing agreement to reflect point five per cent going to Bond. Present Tokita, Bond - Nagano has agreed.”
Under cross-examination he said that he was surprised when Bond said he wanted a better package. He believed it was something which concerned Bond and his employer and was not PRD’s problem but agreed to pay the fee. Although there is no written note of the event, he said that he had subsequently phoned Nagano about the proposal. He also said he had spoken to his solicitor. There is, likewise, no note supporting this evidence notwithstanding the concern he had about the legality of the transaction. Neither of these contacts was referred to in his affidavit. He explained this by saying that he had thought a lot about the matter and recalled them since he had sworn his affidavit. No written acknowledgement by Hoko or Coomera that the arrangement had approval was produced. He also accepted that no change had been made in the marketing agreement to reflect that .5% commission was to go to Bond. Douglas thought that the draft sent to Hoko may have been sent before the conversation with Bond. He also said that the issue of the marketing agreement became academic within weeks because the economic situation and, in particular, Hoko’s financial crisis meant that the proposal was not going to proceed.
Because of the amount of work PRD was doing in connection with the project without any income being generated a monthly consultancy fee of $12,500 per month was provided for in the draft marketing agreement. According to Douglas’ evidence, he first became aware of Landbase at about the time when PRD entered into the consulting agreement which provided for payment of the .5% fee to that company. He was told by Bond or Tokita that Landbase would act as an interface with the developer although he agreed in cross-examination that such an arrangement was unnecessary. He said that the reason he was prepared to entertain the arrangement was that he believed Bond formed an absolutely integral link of communication between the Japanese and the consulting team. He believed, from his experience of dealing with Japanese companies, that if he had objected to the arrangement PRD would have lost the business. He thought that the negotiation of that agreement was conducted by Jewell and Bond. On 28 May 1991 Bond had written to Jewell advising that he had sent a copy of the consulting agreement to Choi for approval. Douglas signed the document on 30 May 1991 and the photocopy produced purports to be signed by S Choi on behalf of Landbase on 5 June 1991. No original was produced. He agreed that he had not raised the matter with Omura. He maintained, despite the absence of supporting evidence and the failure to refer to it in his affidavit, that he had communicated with Nagano on the subject. He said that while he understood the need to have a written acknowledgement from the vendor the collapse of the project meant that events overtook him before he had to pay any moneys. He said that he had asked Bond if he had any connection with Landbase and Bond said he had no connection other than dealing with it as a company able to introduce buyers of real estate from Hong Kong and other areas of Asia. On 5 August 1991 PRD sent an invoice for $36,000 for work performed pursuant to the marketing agreement. Douglas’ affidavit was to the effect that it had not been paid but in his evidence he said that he had recently discovered that it had been paid and of that sum $15,000 had been paid to Bond. On 14 August 1991 there was a meeting with Bond and Tokita at which Douglas was informed that PRD would be paid only $7,500 per month. Of that sum $2,500 per month was to be paid to Bond as a consultancy fee for work he was doing in relation to the project. Douglas did not regard this arrangement as improper because it did not involve payment of commission to Bond. In effect he was being remunerated for his work, not by way of a proportion of sales. This arrangement was confirmed the following day.
In cross-examination Douglas was asked about correspondence concerning the marketing agreement which had ensued with Tokita at a time after the breakfast meeting on 17 May 1991. Despite a letter being written by Douglas on 12 June 1991 in reply to Tokita’s letter of 10 June 1991 proposing substantive alterations to the agreement from PRD’s point of view in other respects, no mention was made of the change in arrangements insofar as it related to payment of .5% of PRD’s commission due PRD to Landbase. Douglas did not offer any explanation for that, other than the assertion that the agreement became academic within weeks and that he was merely responding to the matters raised in Tokita’s letter. At about that time PRD was given instructions by Coomera to attempt to introduce a joint venturer and Douglas’ involvement ceased. He was not involved in negotiations leading to the joint venture. Dietz took over responsibility for the project.
Douglas’ evidence had unsatisfactory features but this phase of the matter is somewhat limited in its use because there is no compelling evidence that Dietz was aware of the transactions. As it does not have a direct impact on the issues concerning formation of the joint venture it is not necessary to go into more detail than to say that. I am satisfied that Douglas was uncomfortable about the arrangement to pay a fee to Landbase based on sales on two scores. The first was that, as he said, it was coming out of his pocket. The second was that he was concerned about the character of the transaction. Given the sequence of events involving the agreements to pay moneys to Bond and Landbase, that is not surprising since it would have required a degree of naivety that I could not detect in him for him to fail to be gravely suspicious about Bond’s place in the scheme of things. However I am also satisfied that he was prepared for commercial reasons to submerge his serious misgivings and acquiesce in the transaction without probing it or, more particularly, by not doing anything that might bring it to Omura’s attention. The failure to amend the marketing agreement when the opportunity was available and the fact that there was no communication in writing to Coomera or any other part of the Hoko Group about it demonstrate this.
Instructions to PRD to seek joint venturer (August-October 1991)
Bond gave instructions to PRD through Dietz to seek a venture partner for a fee of 5% of asset value, with half the commission to go to Landbase if the venturer was introduced through Hong Kong. Bond reconfirmed that he would receive $2,500 per month project marketing fee out of PRD’s $7,500. Dietz and Rameau tried unsuccessfully to find a venture partner. On 25 September 1991, they contacted Pitt but before he had time to respond, Omura decided to sell the land. Tokita proposed to Bond that PRD be sole agent, suggested that PRD seek 5% commission and referred to the “Club” being profitable through the deal. Dietz was given a copy of this letter.
PRD’s activities after Omura’s decision to sell (October 1991-July 1992)
Dietz thereupon proposed 5% commission, which Omura amended to 3%. When Bond told Dietz and Rameau that PRD would be in conjunction with Landbase and get 1.5% they objected fruitlessly. Originally the Sole Agency Agreement covered only a sale but at some unidentified time, probably when a joint venture seemed likely, it was amended accordingly by Bond.
On 3 December 1991, Pitt discussed and inspected the property with Dietz and Rameau and on 10 December 1991 a letter was written about various possible prospects, including Kolback and Landbase and referring to interest by Landbase on behalf of a Hong Kong client. In February 1992 Pitt proposed a series of options. Dietz suggested that this was a “try-on” and it was rejected by Omura. (Coomera submits that these events were in furtherance of a conspiracy) A discussion then followed of a joint venture based on Coomera contributing the land and Kolback the cost of development, with equal sharing of net profits after recoupment of the value of the land and development costs. The proposal appeared acceptable in concept. However, Coomera sought a firm commitment for the golf course to be built. On 26 March 1992, heads of agreement were signed.
Drafting of the agreement proceeded and Pitt sounded out Metway about funding. Omura began to be concerned that the project might not be completed if Kolback was unable to provide the necessary funds and about mortgaging the land at the outset. On 22 June 1992, Pitt wrote a letter allegedly designed to assure Omura of Kolback’s capacity to perform an agreement of the kind proposed. Notwithstanding inquiries made about Kolback’s profile, Omura remained concerned about ensuring that funds were definitely in place. On 7 July 1992, Pitt wrote another letter explaining Kolback’s objectives and allegedly attempting to allay his concerns. Two days later, the venture agreement was signed.
Other offers prior to execution of venture agreement
A letter of 28 January 1992 from Bond to Dietz refers to a meeting between Rameau and a developer named Fitzgerald who offered $11,000,000 over 4 years for the land. That offer was rejected with an intimation that Omura might negotiate at, say, $18,000,000. The letter dated 21 February 1992 from Dietz to Bond in which confidence is expressed that Pitt will make an offer also refers to a meeting between Dietz and representatives of Villaworld. The letter records that an offer in the vicinity of $5,000,000 was suggested which Dietz told them was nowhere near what was being asked and was totally unacceptable. Bond confirmed on 24 February 1992 Coomera’s unwillingness to pursue negotiations with Villaworld.
There is also evidence that in discussions with an officer of the Department of Housing a verbal offer of $11,000,000 by means of a term contract was made. This offer was never committed to writing because when it was mentioned to Bond verbally he was unenthusiastic about an offer of that amount. Advice that such an offer had been made was never sent in writing to Coomera or Hoko. This was rationalised on the basis that it was far below what Omura was seeking and for cultural reasons his sensitivities had to be protected. Rameau thought that the offer was made in the second half of 1991. If that is correct it was apparently still considered a possibility on 19 June 1992 as it was one of the alternative strategies referred to at a meeting between Bond, Lazarides, Pitt and Dietz on 19 June 1992.
The venture agreement
The venture agreement and the project management agreement were executed on 9 July 1992 by Pitt and Bond on behalf of their respective companies. It is convenient to summarise some of the provisions of the venture agreement to demonstrate how it was intended to operate.
(a)Constitution of venture and interest of the venturers.
By cl. 2 Coomera and Kolback agreed to become venturers. In consideration of Kolback performing its obligations Coomera agreed to pay 50% of the profits of the venture in a manner governed by cl.21 which sets out an order of application of sales proceeds as follows:-
(i)Payment of Coomera’s pro-rated land entitlement;
(ii) Repayment of principal borrowed;
(iii)Payment of project costs outstanding at the date of settlement of a sale or disposal;
(iv)Distribution of the surplus between the venturers according to the interest in the venture of each venturer.
Each venturer was to have a 50% interest in the assets of the venture (schedule, item 3). The venture assets were described as land, benefit of approval, plans, finance procured, benefit of contracts, cash belonging to the joint venture, the benefit of work done for the venture, proceeds of insurance and rights of purchasers of land in respect of the golf course land.
(b)Management Committee
The management committee was to consist of one representative of each venturer and had authority to act for and commit the venture. The actions of a nominee were binding on the party appointing the nominee.
(c)Dealings with the land (cl.5)
The venturers were to arrange for Coomera to be registered as proprietor. However Coomera was not a trustee for the venturers. Kolback was not to caveat in respect of the land. The land was to be mortgaged or charged only in accordance with cl.9. The title deeds were to be held in escrow by Feez Ruthning to be used only to register a mortgage for venture finance or other dealing and sub-division and the issue of separate titles for the golf course land.
(d)Kolback’s obligations with regard to finance (cl.9)
Kolback’s obligation was to procure all venture finance as and when required by the business plan. It was required to be on commercial terms acceptable to the venturer subject to the following requirements:-
(i)The venture financier must agree to Coomera receiving its pro-rated share of the proceeds of the sales of land;
(ii)Such entitlement was to be documented and secured in a manner satisfactory to Coomera.
(iii)Interest was not to be capitalised against any security over the land;
(iv)Coomera was not to be liable to the venture financier or otherwise for interest;
(v)Kolback would not be in default if finance was procured on normal commercial terms and conditions then currently available in the market place, even if such finance was not acceptable to a venturer;
(vi)Coomera and Kolback would be joint borrowers and jointly and severally liable for venture borrowings.
As between venturers liability was in proportion to their interests in the joint venture. Coomera was obliged only to give a mortgage to secure moneys advanced for the project.
If finance was not procured within 3 months of the adoption of the business plan or 9 months of the venture agreement, whichever was the earlier venturer was entitled to terminate by written notice. Kolback was obliged to procure KGL to guarantee repayment of borrowings, interest and expenses of borrowings and by executing the venture agreement KGL agreed to give such guarantee.
Kolback was obliged to pay interest and other expenses on all venture borrowings up to $20,000,000. It was obliged to pay such sums as they fell due from its own funds. Coomera had no liability for venture borrowing costs but for borrowing costs for borrowings between $12,000,000 and $20,000,000 Coomera might secure or pay them and deduct them from Kolback’s entitlements. Any borrowing costs over $20,000,000 were to be a venture expense.
No venture expenditure was authorised except in accordance with annual or 6 month budgets or as otherwise agreed having regard to the business plan. (e) Relationship between the parties
By cl.12, the venturers covenanted to co-operate in the venture business and to use best endeavours to ensure its success. By cl.13 they acknowledged that the relationship was of a fiduciary nature. By cl.24 the venturers covenanted to be just and faithful in all transactions relating to the venture and to inform the other venturer of things concerning the venture.
(f)Events of default and consequences.
By cl.18 the following were events of default:-
(i)Failure to perform the agreement, such failure not being remedied within a reasonable time. There was provision for a notice specifying the breach and requiring the party in default to remedy it. There was then an obligation to remedy within 21 days.
(ii)Winding-up of venturer.
(iii)Appointment of receiver and manager to the venturer.
(iv)Occurrence of a ground which would be a ground for dissolution if the joint venture were a partnership; and
(v)Breach by Kolback of the project management agreement.
A non-defaulting venturer could give 21 days notice within 28 days of knowledge of the breach of intention to terminate. The termination was effective if the breach was not remedied, or the parties agreed otherwise.
(g)Golf course land
By cl.32, The golf course land was not an asset of the venture and Kolback was declared to have no right to it. Coomera expressed its intention to develop the golf course from its pro-rated entitlement, funds obtained by Kolback by using its best endeavours to secure $2,000,000 for the purpose and its own borrowings. Coomera agreed to consult Kolback and to consider its recommendations including those as to timing, to maximise the beneficial effect of the golf course on the project. Coomera stated its intention to finally resolve the planning, layout and timing of the golf course before construction or development of the land commenced but that did not commit Coomera to undertake the development. Kolback was obliged to use its best endeavours to secure $2,000,000 to be used by Coomera to develop the golf course. Acceptance of the loan was at Coomera’s discretion. The security for the loan would be a first registered charge over the golf course land and Coomera’s interest in the venture. Interest on this sum was to be a venture expense and the $2,000,000 was to repaid out of Coomera’s pro rated entitlement.
(h)Commission
The venturers acknowledged that PRD in conjunction with Landbase was the effective cause of their introduction to one another. That was at best a fiction. It is also to be noted that a Japanese translation prepared by Nagano for Omura omitted any reference to Landbase. The commission was to be a joint fee to PRD and Landbase, of 3% of $20,000,000. It was to be a venture expense. It was agreed to pay the sum in three equal instalments each of $200,000 the first of which was to be paid within 30 days of the execution by the venturers of the joint venture agreement or approval under the Foreign Acquisitions and Takeovers Act, whichever was the later and the second and third instalments at such times and in such manner as the venturers might agree with the agents.
This is by no means a comprehensive summary of all the provisions of the venture agreement. However it deals with matters relevant to the issues arising at this stage of events.
Events concerning liability for commission
On 7 July 1992, Salotti had made known his reservations about the lack of precision as to when commission had to be paid. It is apparent from the tenor of Salotti’s letter that he had had previous discussions with Pitt about some aspects of the venture. On the same day an agreement was reached between Dietz, Pitt and Bond that the two subsequent payments would fall on the first and second anniversaries of the first payment. Pitt maintained that the timing of the agreement was purely coincidental. He suggested that the fax from Salotti had been received after close of business on that day. That is not borne out by the fax markings which show that it was sent at 13.25, presumably Perth time, since that was where Salotti was based. When questioned about whether any thought had been given to Landbase’s interest in deferment of the second and third payments for 12 months and 2 years respectively he said that he was only concerned about the commission due to PRD. With apparent reference to Salotti’s fax of 7 July 1992 Pitt wrote to him on 13 July 1992 advising that he had been unable to negotiate any improvement in the position about making the payment of commission subject to finance. Furthermore he did not tell Salotti that an agreement had been made to pay in three instalments covering a 2 year period. What he said was that “we have confirmed with Coomera Resort that the 2 subsequent commission payments will only be paid when the venture is “comfortably” able to do so.” Another aspect of this letter received attention in connection with a demand made by PRD for payment of the first instalment which had remained unpaid. Pitt gave evidence that he became extremely angry when the letter of demand was received. He agreed that the agreement provided for the first payment of $200,000 to be made 30 days after execution of the agreement or after FIRB approval. However he maintained that it was understood in the negotiations that the deferment for 30 days was to allow finance to be obtained in the expectation that approval would have been given by them. He maintained that PRD had a moral obligation if not a legal one not to claim commission until the finance had been obtained. The letter of 13 July 1992 to the extent that it would have been read by Mr Salotti as saying that an attempt had been made to have the payment of commission deferred until finance had been approved was not frank. If one accepts Pitt’s version of events he had in fact negotiated what he believed was a deferment until finance had been obtained but it had not been included in the agreement in those terms.
Initial Funding (August-October 1992)
On 5 August 1992, Metway approved an advance of $800,000 for a feasibility study and $100,000 for interest. The offer was accepted by the nominees at a meeting on 25 August 1992, the legitimacy of which as an MCM was subsequently disputed by Omura. After the Metway documentation was sent, Omura said that he accepted that the land must be mortgaged for the second stage of funding but that he had not been advised of the need to do so for the first stage. After that discussions ensued inconclusively for the next few weeks with a view to having Kolback’s interest protected.
Proposals to Fund Golf Course (October 1992-June 1993)
The issues dominating this period, which was characterised by increasingly acrimonious correspondence, were the following:
Omura’s desire to build the golf course earlier than would otherwise be possible;
Discussion of possible means of doing so, including variations of the venture agreement which would be required;
Complaints that Omura kept changing his position;
Whether there had been a decision at the meeting on 27 November 1992 that finalised the definition of the golf course, with Pitt asserting it had and Omura asserting that it had not, because further advice had to be obtained from the architect;
Pitt’s concern that Omura’s failure to settle golf course issues was delaying the project;
Pitt’s belief that the business plan could be delayed no longer;
Pitt’s insistence that Kolback was not instigating changes to the venture agreement, but only seeking them to accommodate Omura’s proposals;
Omura’s complaint that there should be an independent third party as project manager, with the implication, resented by Pitt, that there was a conflict of interest inherent in the existing arrangement under the venture agreement whereby Kolback was project manager.
Omura’s suggestion that the venture engage in building condominiums initially dismissed by Pitt but later discussed on the basis that it might be entertained if profitability could be demonstrated, or that Coomera could do it on its own without objection;
Non-payment by Hoko of its share of expenses;
Complaints by Omura about not being informed about approaches to financiers, and Pitt’s reply.
The final letter was a request by Pitt for written confirmation that, notwithstanding the continuing existence of the venture agreement, Kolback should proceed to seek finance to allow early construction of the golf course.
“Decision” to Proceed under Original Agreement (June-August 1993)
On 27 June 1993, a decision was taken to revert to the original venture agreement. Soon after, Pitt went to Metway for a $12,000,000 facility. Omura confirmed the decision. Pitt reminded Coomera of its obligations to mortgage the non-golf course land. Coomera’s response was that it would do so only if the whole $12,000,000 was paid to the venture account. Pitt maintained that this was contrary to and in breach of the agreement. On 16 August 1993 the possibility of Landbase being involved in a secret commission was discussed by Ikeda with Coomera’s solicitor.
Further Proposal to Fund Golf Course through Metway (August 1993-February 1994)
Notwithstanding the previous decision to proceed under the agreement and perhaps as a result of Omura’s attitude to mortgaging the land, during this period possibilities for funding early construction of the golf course were explored by Pitt and Metway, and conveyed to Omura. The sticking point was that not all funding thought necessary by Omura would be firmly in place. At one point, Metway was unwilling to fund except as a staged project. However, after representations by Pitt, a letter of offer for $12,000,000 with 10.1 million to be drawn was issued. Kolback was prepared to accept the offer, but it contained requirements unacceptable to Omura, which Pitt had foreshadowed in his early correspondence with Metway.
During this period, Omura requested detailed information about approaches to financial institutions but was not given it in terms which fitted that description. Omura was also concerned over what he perceived to be the lack of equality in the project. His concept of “fair burden spirit” principally involved the notion that Coomera was not receiving a fair return from the project because of its pre-venture costs and that the “cash flow” (the arrangements governing returns from the project) must be adjusted in Coomera’s favour.
The correspondence throughout this period shows a rising level of abruptness again.
Other Proposals - Interest Subsidy (February-March 1994)
Pitt then set about finding other ways of having the golf course built, including an interest subsidy to Coomera. Robbie was appointed to advise Coomera.
Concurrent Discussions about Metway Funding (March-April 1994)
Omura responded on 23 March 1994 to Metway’s offer of 19 January 1994 by saying that several points, especially the veto power, were unacceptable. Pitt tried to persuade him that the terms were reasonable for a project of this kind. On 8 April 1994, Metway made a new offer, which Pitt again urged should be accepted. Omura was concerned that the golf course and residential projects were dealt with in the one security. He also complained again that Coomera’s burden was unequal. He set out his terms for an approach to Metway and proposed that the agreement be terminated on 10 May 1994 if finance had not been obtained. Pitt remonstrated that Coomera had requested the inclusion of the golf course in the application and that its tardiness in replying and changes of position had led to delay for which Kolback was not responsible. He rejected 10 May 1994 as the termination date, saying Kolback would require a reasonable time to approach other financiers. In the end, he agreed to go back to Metway on the basis of Coomera’s requirements while pointing out the risk that Metway might not give ground.
On 20 July 1994 Omura replied saying that he would like to know Metway’s response to his comments, which had never been waived. Some had been accepted but some had not. He had made his best efforts to respond in a timely way notwithstanding the complexity of the offer in a foreign language. He said he could not give his requirements for finance because he was unfamiliar with finance in Australia. He said that the land price of $20 million represented a concession on his part because it had cost him more. He believed that holding costs were a “project cost” under the agreement. He believed that the agreement still provided for capitalisation of interest and requested Metway’s response to that and other comments by 27 July 1994. He did not agree that he was responsible for delay.
On 27 July 1994 Pitt wrote to Metway enclosing a list of Coomera’s concerns. The letter contains a concession by Pitt that capitalisation of interest does not conform with the venture agreement. The question whether an arrangement outside the terms of the agreement with Metway could be reached to allow for a clause relating to compounding of interest to be deleted on Kolback undertaking to pay interest. On 2 August 1994 notice of termination by Coomera was delivered to Kolback.
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