Duke Nominees Pty Ltd & Anor v D & S Group of Companies Pty Ltd & Ors

[1998] FCA 668

DUKE NOMINEES PTY LTD and CHRIS ANGELOPOULOS v. D & S GROUP OF COMPANIES PTY LTD and SOUTH AUSTRALIAN ASSET MANAGEMENT CORPORATION
No. SG 44 of 1992
FED No. 668/98
Number of pages - 30
Equity - Contract - Practice and Procedure

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY

GENERAL DIVISION

MANSFIELD J

Equity - joint borrowers - obligation to contribute pro rata to obligations under financing agreement - one borrower failing to contribute towards interest liabilities - whether order for contribution should be made against that borrower in favour of other borrowers who paid interest liability.

Contract - farming joint venture - informal arrangement - one joint venturer paid substantial rates and taxes direct - whether that joint venturer entitled in equity to contribution from other joint venturer - whether entitlement to equitable contribution as co-owners modified by joint venture agreement - no accounting as between joint venturers - whether order for contribution should be made.

Contract - oral agreement to provide vendor finance for purchase of pastoral property - whether written document specifying price accurately recorded agreement of parties - question of fact.

Practice and Procedure - set-off - contract to provide finance to joint borrowers - one joint borrower directly paying substantial sum in reduction of indebtedness - one joint borrower for consideration taking assignment of financing agreement and outstanding debt - whether that joint borrower entitled to set-off against personal indebtedness to another joint borrower claims for contribution for pro rata share of payment in reduction of indebtedness and pro rata share of outstanding indebtedness.

Albion Insurance Co Ltd v Government Insurance Office (NSW) (1969) 121 CLR 342, applied

Muschinski v Dodds (1985) 160 CLR 583, applied

ADELAIDE, 16-18 April, 7 and 26-30 May, 3-5 June and 19 December 1997 (hearing), 10 June 1998 (decision)

#DATE 10:6:1998

Counsel for the Applicants: Mr M Blue

with him Mr A Hurren

Solicitors for the Applicants: Fisher Jeffries

Counsel for the First and Second Respondents: Mr P Scragg

Solicitors for the First and Second Respondents: Peter Scragg

Counsel for the Third Respondent: Mr D Howard

with him Mr C Costi

Solicitors for the Third Respondent: Andersons

MANSFIELD J

BACKGROUND

This matter has a long history.

The claim arises from dealings in certain pastoral property in the mid north of South Australia. At material times, and before any transaction relevant to these proceedings, Port Gawler Pastoral Co Pty Ltd ("Port Gawler"), Buckland Park Pty Ltd ("Buckland") and O'Connor Investments Pty Ltd ("O'Connor") together owned various pieces of adjacent land (together called the Buckland Park land). I shall call those three entities together the "Buckland Park Group". That land together with the buildings and improvements on it was separated in to two sections called the Southern part and the Northern part. This proceeding concerns the Southern part, which I shall hereafter call "Buckland Park South". Buckland Park South was immediately South of the Gawler River.

The Buckland Park Group had borrowed substantial sums from the State Bank of South Australia, subsequently called South Australian Asset Management Corporation ("SAAMC"), a body corporate under the State Bank of South Australia Act 1993 (SA). The Buckland Park Group had secured those borrowings by mortgages over the Buckland Park land granted to SAAMC.

By contract dated 26 January 1990 the members of the Buckland Park Group each sold to D & S Group of Companies Pty Ltd ("D & S") one undivided half of each of the separate pieces of land comprising together Buckland Park South. D & S agreed to pay $3,000,000 for that interest in Buckland Park South. Settlement took place on 15 June 1990. At about the same time the Buckland Park Group sold to Naura Pty Ltd ("Naura"), a company also associated with the interests of the share holders of D & S, one undivided half of those separate pieces of adjoining land north of the Gawler River, being the Northern part of the Buckland Park land ("Buckland Park North"). D & S and Naura together borrowed $2.6 million from SAAMC, secured by mortgages over their respective interests in Buckland Park South and Buckland Park North. At the same time, the Buckland Park Group refinanced its arrangements with SAAMC, whereby it borrowed $3.6 million from SAAMC secured by mortgages over its respective remaining interests in Buckland Park South and Buckland Park North. Apart from D & S and Naura having borrowed $2.6 million from SAAMC to finance the acquisition of one half interest in Buckland Park South and in Buckland Park North, SAAMC by its then subsidiary Beneficial Finance Corporation had lent a very substantial sum exceeding $20,000,000 generally to D & S and associated entities involved with it in joint ventures unrelated to the Buckland Park land.

On 25 September 1990 the Buckland Park Group and D & S entered into a contract with Duke Nominees Pty Ltd ("Duke") for Duke to acquire from them one undivided third share of Buckland Park South for $2,275,000. Settlement was proposed for 16 October 1990, but was delayed and ultimately occurred only on 17 December 1990. As steps in the settlement, on 13 December 1990, Duke together with O'Connor and D & S entered into a facility agreement with SAAMC for $4,000,000 ("the 1990 facility"), and mortgaged their interest in Buckland Park South to SAAMC. On 17 December 1990, Duke paid by way of cash and transfer of properties and by way of assumption of debt $2,275,000 to the Buckland Park Group and D & S. Chris Angelopoulos ("Angelopoulos") as a director of Duke, together with Asterios Gerovasilis ("Gerovasilis") and Dennis Xenephon Savvas ("Savvas") as directors of D & S guaranteed to SAAMC the due payment of monies to SAAMC under the financial arrangements then obtaining. The other members of the Buckland Park Group also provided such guarantees.

The starting point of this action was Duke's complaints about how it came to acquire that interest. Angelopoulos, as guarantor, makes similar complaints.

DUKE'S INITIAL CLAIM

It is necessary to refer to the history of this proceeding to identify the issues now to be resolved, and how they arose.

The trial of this matter was first listed for hearing for three weeks from 15 April 1996, but subsequently was altered to commence on 22 April 1996. At the time of that proposed trial, the statement of claim of Duke and Angelopoulos was in its third version. There were seven respondents and various cross claims including a cross claim by D & S against Duke dated 16 April 1996. That cross claim is still a current document. It relates to the third version of the statement of claim of Duke and Angelopoulos.

On the eve of trial, those proceedings were settled against all but D & S and Gerovasilis. The cross claim of D & S against Duke also remained alive. It is therefore necessary to briefly refer to those documents to identify the then issues. The nature and range of the issues has been refined and varied from time to time.

At that time, each member of the Buckland Park Group and SAAMC were respondents, and variously cross-claimants or cross-respondents, as well as D & S and Gerovasilis. In broad terms, the allegations then made related to the six respondents collectively. In addition, there was a discrete claim against a solicitor as seventh respondent. That claim was dismissed by consent. It is not necessary to refer further to it.

The claim by Duke and Angelopoulos against D & S, Gerovasilis, the Buckland Park Group and SAAMC alleged that, between July and December 1990, Gerovasilis on behalf of each of those respondents had a number of discussions with Angelopoulos on behalf of Duke on the topic of Duke acquiring from the Buckland Park Group and from D & S a one-third interest in Buckland Park South for about $2,000,000. That was effectively pro rata the same price as D & S had paid for its then one half interest in Buckland Park South, but adjusted for the purchase costs incurred by D & S and to reflect the overall holding costs incurred since January 1990. It was also contemplated that Duke would assume liability for the mortgage debt owing on Buckland Park South and pay one-third of amounts due under it from time to time. It alleges facts by reason of which both the Buckland Park Group and also SAAMC caused or supported Gerovasilis in that role.

The statement of claim then alleges that Gerovasilis, on behalf of those respondents, made various representations to Duke in the period July to December 1990 concerning the status of, the detailed proposal for, and the potential for, the sub-division of portion of Buckland Park South, as to the actual and potential level of profitability of Buckland Park South, as to its current value, and as to the available means of Duke financing portion of the proposed cost of it acquiring a one-third interest in Buckland Park South. Those representations were said to have been false, and to have led Duke to acquire its one-third interest in Buckland Park South. At that time the previous financial arrangements between SAAMC and D & S and the Buckland Park Group were restructured. The previous mortgages from Buckland Park Group and D & S were discharged, and separate facilities were entered into with respect to Buckland Park North and Buckland Park South. The 1990 facility, it is claimed, led to some $4,000,000 of the pre-existing debt of about $6,200,000 in respect of the Buckland Park land being allocated to Buckland Park South, and being secured upon terms such that Duke, although it had only one-third interest in Buckland Park South and itself required only $1.35 million borrowing to complete its purchase, was a joint borrower with D & S and the Buckland Park Group for $4,000,000, and Angelopoulos and others became guarantors of that debt.

The claim by Duke and Angelopoulos was that the Buckland Park Group, D & S, Gerovasilis and SAAMC were each in the circumstances in breach of a fiduciary duty owed towards each of them, and each engaged in misleading and deceptive conduct contrary to ss 52 and 53(a) of the Trade Practices Act 1974 and acted fraudulently towards Duke and Angelopoulos. They claimed to be entitled to

* the difference between the purchase price and the value of one-third interest in Buckland Park South on its then current value

* indemnity or damages in respect of their liability to SAAMC under the 1990 facility arrangements

* loss of use damages

and other relief.

It is appropriate to note that the allegations were denied by each of them.

The claims against the Buckland Park Group and against SAAMC were settled, and dismissed by consent on 22 April 1996 or were adjourned to enable terms of settlement to be carried out and later dismissed by consent.

All matters listed for trial on 22 April 1996 were to be heard at the same time. As noted, all but the claims against D & S and Gerovasilis were settled. Apart from the claim by Duke and Angelopoulos against D & S and Gerovasilis, and the cross claim of D & S against Duke as expressed in its document of 16 April 1996, no issues remained between the parties. The various cross claims otherwise exchanged between the respondents and the applicants were also resolved. They were either dismissed by consent or adjourned and later dismissed following performance of terms of settlement. The claims of Duke and Angelopoulos against D & S and Gerovasilis, and the cross claim of D & S against Duke, were each adjourned for hearing to 29 April 1996. On 26 April 1996 the Court ordered that that further hearing date be vacated.

There was handed to the Court on 26 April 1996 a document entitled "second further amended statement of claim". It effectively abandoned the Duke and Angelopoulos claim against D & S and Gerovasilis as set out above. The fact of the settlement against the Buckland Park Group and SAAMC, each said to have been party to the alleged misrepresentations, may also lead to that result. The proposed amended claim against D & S and Gerovasilis was for one-third share of the interest and expenses due and payable to SAAMC which, since about May 1993, D & S and Gerovasilis had failed to pay. It asserted that, instead of the Buckland Park Group, D & S and Duke each paying one-third of those ongoing expenses since that time, Buckland Park Group and Duke had each paid an additional one-sixth so as to contribute equally to D & S's liability. A schedule covering the period to 27 March 1996 asserted that Duke had paid to that date $175,476 on behalf of D & S over that period.

On 2 May 1996 the Court fixed a time for the hearing of the application to amend the statement of claim presumably in accordance with that document. There does not appear to have been any order giving leave to so amend the statement of claim. As appears below, the issues proposed to be raised by that document have been raised under another guise.

THE D & S CROSS CLAIM

The D & S cross claim against Duke as expressed before the first trial date was in terms of a document dated 16 April 1996.

It alleges that on or just before 16 December 1990, Duke by Angelopoulos on the one hand, and O'Connor and D & S each through Gerovasilis on the other, agreed orally that of the purchase price of $2.275 million to be paid by Duke for its undivided one-third share in Buckland Park South, $200,000 would be provided by vendor finance, so that Duke actually paid $2.075 million. Each of D & S and O'Connor was to loan $100,000 towards the purchase price. By 1 June 1991, Duke was to repay $100,000 each to O'Connor and to D & S respectively. It was agreed that the advance would be secured by a mortgage over its interest in Buckland Park South. The mortgage document was duly executed. As well as the repayment of the principal sum, it provided for interest from 17 December 1990 at 20 per cent per annum, but to be accepted at 10 per cent per annum if paid in a timely manner. It is then alleged that that debt was not repaid. D & S therefore claims from Duke $100,000 and interest at 20 per cent per annum from 17 December 1990. That claim is hereafter called "the D & S Cross Claim".

When the matter was next before the Court on 14 June 1996, orders were made as follows:

1. Leave to Duke to file and serve defence, set-off and cross claim to the cross claim of D & S (the document of 16 April 1996) by 18 June 1996.

2. Issues raised between Duke and D & S by the cross claim of D & S be heard and determined separately and ahead of the other issues between the parties.

3. D & S to file and serve a reply to the defence of Duke, and to file and serve a defence to the foreshadowed set-off and cross claim of Duke within fourteen days of service of those documents upon it.

4. To the extent necessary the parties should give further discovery.

It is unclear whether the intention of the parties was that the effect of par 2 was that D & S would become dux litis, so that not just the D & S Cross Claim for $100,000 but also any issues arising from the proposed defence, set-off or further cross claim of Duke in response to that cross claim should also be heard.

Duke's defence and foreshadowed set-off and foreshadowed cross claim in response to the D & S Cross Claim was filed and delivered on 21 June 1996, and the D & S defence to that set-off and cross claim was filed on 12 July 1996. Although the issues then identified are still raised before the Court, subsequent amendment has substantially refined and developed those issues. It will be appropriate to refer to them in their current form.

Duke's defence to the D & S Cross Claim denied the vendor financing arrangement, or the execution of the mortgage on about 16 December 1990 as alleged, and denied any indebtedness to D & S under any such document. Counsel for Duke, in opening, explained that the real allegation was that, notwithstanding the terms of the written contract dated 25 September 1990, the arrangement between Duke and D & S was that, at settlement, Duke would have paid exactly the same pro rata for its one-third interest in Buckland Park South as had D & S paid for its interest including the amounts paid by D & S for interest under the financing arrangements in place prior to the 1990 facility and other expenses paid or contributed to by D & S since it first acquired an interest in Buckland Park South in June 1990. He further explained that Duke claimed that, in the application of that agreement, there was not payable by Duke at settlement $2,275,000 but an amount some $200,000 less than that and the shortfall funded by the vendor finance arrangement giving rise to the D & S Cross Claim was "largely a non-existent shortfall". Thus, it is said, there was no consideration for the vendor financing agreement or for the mortgage executed to secure that borrowing.

It also alleged that the 'supported mortgage' was

"incomplete as to certain essential terms; not dated; not executed, or, in the alternative, not fully or properly executed"

so that the alleged loan agreement was never entered into or completed and the purported mortgage is "void, of no force or effect and unenforceable". It further alleged that the terms as to the payment of interest were incomplete and so unenforceable or void for uncertainty, and alternatively were void as being a penalty. D & S joined issue as to those matters.

Those matters are strictly defences to the D & S Cross Claim.

THE DUKE INTEREST CLAIM

Duke also set up by way of set-off and cross claim against D & S a claim based upon the non payment by D & S of its share of the interest and like payments to SAAMC under the 1990 facility, as anticipated on 26 April 1996 in its then proposed further amended statement of claim referred to briefly above.

It alleged that the $4,000,000 loan facility granted by SAAMC to Duke, D & S and the Buckland Park Group in December 1990 became fully due and repayable by reason of default notified by SAAMC on 26 January 1993. At some point thereafter, D & S failed to pay any contribution towards the interest then accruing and towards other relatively minor expenses in respect of Buckland Park South, and Duke together with the Buckland Park Group have each paid their respective one-third contribution towards those amounts and a further one-sixth (that is, they each contributed equally to the D & S one-third contribution) to make up the amount which D & S should have continued to pay. As at 18 October 1996, and from 27 June 1994 being the date of alleged default by D & S in respect of which Duke first made such payments on behalf of D & S, the interest said to have been paid on behalf of D & S by Duke is $175,010.09 and there are further amounts of $37,195.47 paid on behalf of D & S in respect of land tax, and $2,746.68 paid on behalf of D & S for council rates, a total of $214,952.24.

Although encompassing claims beyond interest, it is convenient to call that set-off and cross claim "the Duke Interest Claim". It is a claim formulated upon equitable grounds, based upon the relationship of Duke, D & S and the Buckland Park Group as joint borrowers, and alternatively initially (although no longer) pursuant to the joint venture arrangement between those three entities under which Buckland Park South came to be operated from December 1990.

THE DUKE DEBT RECOVERY CLAIM

The defence, set-off, and cross claim of Duke against D & S as ultimately amended also gave rise to yet a further claim.

It arises under a Deed dated 27 September 1996 between Duke and Angelopoulos of the one part and the Buckland Park Group of the second part as well as SAAMC of the third part ("the September Deed"). Under the September Deed:

* SAAMC agreed to sell to Duke for $1,395,811.30 the interests of the Buckland Park Group and D & S which it then held as mortgagee in Buckland Park South. That sum was two-thirds of the acknowledged value (as between the parties to the September Deed) of Buckland Park South (pursuant to a valuation of 28 February 1995 of $2,800,000) less net proceeds of sale of certain land; the remaining one-third was simply to remain with Duke;

* SAAMC agreed to accept from Duke the further sum of $1,340,216.30 together with the purchase price of $1,395,811.30 and the net proceeds of sale of collateral securities since June 1996 of $413,972.41 making a total of $3,150,000 in settlement of all claims between them, including in partial discharge of its liability under the 1990 facility;

* SAAMC agreed, for the further additional consideration of $10 to assign to Duke its interest under the 1990 facility and the supporting guarantees and the personal covenants in the mortgages supporting that advance in the "Shortfall Debt", i.e. the debt then remaining to SAAMC under the 1990 facility, then identified to be $767,741.91 on the following basis:

Current Debt $3,503,769.51

Less: Sale price $1,395,811.30

Less: Further payment $1,340,211.30

$ 767,741.91.

(At trial, that figure was altered to $744,873.30). That agreement was subject to clause 13 of the September Deed referred to below. I should note that the September Deed provided for the transfer and assignment of the debt due under the 1990 facility to Duke or its nominee. By further Deed dated 15 November 1996, that assignment was effected to Duke. Thus I have described the effect of the September Deed in the manner described above.

Settlement of the September Deed took place on 18 October 1996. On that date Duke paid to SAAMC $1,340,216.30 in reduction of the amounts due under the 1990 facility. It is alleged that one-third of that sum, namely $446,738.77, was paid on behalf of D & S. Duke claims to be entitled to recover from D & S that sum, or to set it off. It is an alternative allegation that Duke has lost the use of the monies so paid, and claims "loss of use" damages as a result: Hungerfords v Walker (1989) 171 CLR 125, on the basis that those sums would otherwise have been applied to reduce its ongoing indebtedness to SAAMC or its ongoing indebtedness to another financier on its overdraft. That 'loss of use' claim relates also to the Duke Interest Claim.

It is further alleged that, as at 18 October 1996, D & S was still indebted to SAAMC in the sum of $744,873.30 (I am using the figure as substituted by leave on 13 February 1997). That sum represents the principal and interest owing to SAAMC at 18 October 1996 after accounting for the payments made in reduction of the interest liability from time to time and for the amounts received on the realisation of certain collaterally secured assets, and as further adjusted by settlement of the September Deed, and by payments separately made by Duke and Buckland Park Group. Before those latter two adjustments the capital and interest outstanding as at 18 October 1996 under the 1990 facility (but, as from 27 August 1994, at an adjusted and lower interest rate negotiated with SAAMC and excluding any interest on unpaid interest) was $3,830,703.90. That figure had altered from the figure current at the time of the September Deed, as then contemplated by the further elapse of time. The debt was calculated as follows:

$3,830,703.90

Settlement pursuant to Clause 9.1 of Deed ($1,395,811.30)

Settlement pursuant to Clause 9.2 of Deed ($1,340,216.30)

Settlement pursuant to Clause 9.3 of Deed ($ 10.00)

$1,094,666.30

Deposits made by Duke,

Buckland Park Group - special account ($ 349,793.00)

$ 744,873.30

On the evidence, the payments under the Deed, and on realisation of assets, were applied to reduction of principal outstanding, so that the sum of $744,873.30 is made up of $557,875.06 outstanding principal and $186,998.24 outstanding interest.

Duke claims that the two total amounts paid by it on behalf of D & S, namely the interest and like payments being $214,952.24 under the Duke Interest Claim and one-third of the payment of $1,340,216.30 namely $446,738.77, together totalling $661,691.01, are monies which it is entitled to recover from D & S simply because it has paid them on its behalf. Additionally, it claims that the sum of $744,873.30 referred to above is the indebtedness of D & S to SAAMC, which was assigned to it by SAAMC by the September Deed together with accumulating interest thereon. The two amounts of $446,738.77 and $744,873.30 allegedly recoverable by Duke from D & S under the September Deed or by reason of payments made pursuant to it are called "the Duke Debt Recovery Claim". In final submissions, it limited its claim, then modified to a set-off only, to one-third of $744,873.30 plus the sum of $446,738.77.

THE RESPONSE OF D & S

The D & S response (other than denials) as ultimately amended at trial, (and after it had had access to the September Deed in its full terms in the circumstances set out below) asserted that:

* SAAMC released it from all liability under the 1990 facility in May 1995, so that it did not default on its allegedly ongoing interest and other obligations thereafter, and any payments by Duke therefore could not have been in reduction of its indebtedness to SAAMC;

* the cross claim pleads new causes of action and should be struck out;

* the Buckland Park South land was not, at the time of the Deed, worth $2,800,000, being the value ascribed to it in the September Deed, but was worth very considerably more than that and in excess of $5,000,000 so as to be sufficient to discharge all liability under the 1990 facility if proper steps had been taken to realise Buckland Park South at its true value;

* the assignment by SAAMC to Duke of SAAMC's rights under the 1990 facility and associated documents included a release of the liability of D & S to Duke, pursuant to clauses 4(a) and (b) of a Deed between Duke and SAAMC dated 7 June 1996 and clause 13 of the September Deed (the Deed of 7 June 1996 was not performed, but is attached to and forms part of the background material to the September Deed);

* the receipt of monies by SAAMC from realisation of collaterally held securities was applied to reduction of principal, whereas by a certain Deed dated 21 April 1996 and by the September Deed, Duke agreed to appropriate those receipts firstly to reduction of interest outstanding;

* Duke and SAAMC have conspired to sell Buckland Park South to Duke at a price considerably less than its true worth, so as to leave a substantial indebtedness to SAAMC by D & S under the 1990 facility (detailed particulars have been given);

* Duke and SAAMC have dealt harshly and unconscionably with D & S contrary to s 51, Trade Practices Act 1974 or are estopped from enforcing the balance of the debt under the 1990 facility;

* the quantum of Duke's claim should be reduced by $353,769.30 and $36,082 respectively by reason of SAAMC having on 27 September 1996 released Duke from liability for $353,769.30 and having discharged the mortgages supporting the 1990 facility, and by reason of SAAMC having paid $36,082 stamp duty on the transfer of Buckland Park South to Duke when that expense is normally paid by the purchaser, and should be further reduced by two-thirds of $413,972.41 as SAAMC credited Duke with the whole of the receipts from sales of collaterally secured land since June 1996, instead of one-third only of those amounts; and

* by reason of Duke, on about 27 September 1996, having released the Buckland Park Group from any further interest liability following the September Deed and extending the time for the Buckland Park Group to pay its share of the then current debt until the onsale of Buckland Park South had been effected, both D & S and Gerovasilis are discharged from any liabilities to Duke at all; or at least until Duke has onsold and realised Buckland Park South.

The detail of the arrangement alleged between D & S and SAAMC of May 1996 is set out in the next section of these reasons.

Duke's reply to the defence to cross claim and rejoinder to reply asserts that between July 1990 and 17 December 1990 Duke, D & S and the Buckland Park Group became joint venturers in the proposed subdivision of portion of Buckland Park South, and agreed to share income and expenses, and profits and losses, equally. Thereafter, D & S was made aware of the payments made by Duke and the Buckland Park Group on its behalf, both with respect to interest under the 1990 facility and with respect to sundry payments relating to the proposed subdivision. Thus, it is said, D & S owed Duke a duty to inform it of any arrangements between D & S and SAAMC concerning D & S's obligations to SAAMC which might touch upon Duke's obligations to SAAMC. It alleges that D & S did not inform it of the arrangement with SAAMC said to have been made in May 1995 until April or August 1996, by reason of which (it is said) D & S is estopped as against Duke from asserting the D & S arrangement with SAAMC of May 1995. The D & S "response" to that reply substantially joined issue, but also set up the case that the proposed joint venture did not come to fruition because Duke refused to execute the joint venture agreement, to consent to development proposals, or to otherwise properly contribute towards and support the proposed joint venture.

The form of the defence and set-off and cross claim of Duke as filed on 27 November 1996 was the then current version of its pleading, and the D & S reply and its defence to the set-off and cross claim of Duke as filed on 11 April 1997 was the then current response before the Court at the time this hearing commenced. It was in the context of those pleadings or proposed pleadings that, on 13 December 1996, the Court tentatively fixed a trial date to commence on 16 April 1997. I then raised the question whether the order of the Court of 14 June 1996 regarding first hearing and determining the D & S cross claim should stand, and whether it extended to issues raised in response by Duke. I indicated that I was disposed to hear and determine all issues other than the original claim by Duke and Angelopoulos against D & S and Gerovasilis, (assuming that claim is still maintainable). I directed that any application to vary that direction should be made within seven days. No such application was made.

For the purposes of ease of reference, the assertion by D & S that Buckland Park South had been sold by SAAMC to Duke under the September Deed at a gross undervalue and in breach of SAAMC's duty to D & S to obtain the best price reasonably obtainable is hereafter called "the D & S Claim of Sale at Undervalue". For the same reason, the assertion by D & S that Duke and SAAMC had conspired together leading up to the September Deed so as to preserve and increase the D & S liability under the 1990 facility to the benefit of Duke and SAAMC is hereafter called "the D & S Conspiracy Claim".

THE D & S CLAIM AGAINST SAAMC

By notice of motion of 5 March 1997 D & S and Gerovasilis applied for orders that SAAMC be joined as a respondent, and that the trial be adjourned to a date to be fixed. The supporting affidavit was only in support of the proposed joinder, so I suspect that the adjournment application was anticipatory of joinder and on the assumption that the parties then would be unable to be ready for trial. It did not explain then why the joinder application was so late.

The basis of the joinder application was threefold:

1. Enforcement of an undertaking said to have been given by SAAMC to D & S in about late May 1995 that it would not seek recovery of money from D & S beyond the terms of a certain Deed of 31 May 1995;

2. the D & S Claim of Sale at Undervalue; and

3. the D & S Conspiracy Claim.

On 11 March 1997, the hearing date of 16 April 1997 was confirmed subject to further consideration of the notice of motion to join SAAMC. As no application to the contrary had been made, it was ordered that D & S and Gerovasilis would be dux litis on the hearing generally. On 20 March 1997, orders and directions were made:

1. That the issues raised by the D & S Cross Claim against Duke of 16 April 1996 and by Duke's amended defence, set-off and cross claim thereto dated 27 November 1996 and by the D & S and Gerovasilis proposed reply thereto handed to the Court on 20 March 1997 (no formal pleading to the document of 27 November 1996 by then having been filed and served), but as noted above leave was given to file and serve such a document approximately in that form but excluding the issues raised by the D & S Claim of Sale at Undervalue, and excluding the issues raised by the D & S Conspiracy Claim, be heard commencing on 16 April 1997.

2. D & S and Gerovasilis have leave to file and serve a cross claim against SAAMC in a form to be approved by the Court, or in a form consented to by SAAMC (without any admission of liability) on or before 3 April 1997. (At that time, counsel then appearing for SAAMC indicated that it was anticipated that SAAMC would be able to be ready for trial at the time then reserved). On 11 April 1997, after further argument, the form of that document was approved and the cross claim filed. I reserved the right to SAAMC to later object to those parts of that document which related to the issues which were not to be tried on 16 April 1997. Consistently with that, I also reserved leave to Duke and Angelopoulos to later make application with respect to those paragraphs of D & S's reply to defence and defence to set-off and cross claim filed on 11 April 1997 (as to which there were also foreshadowed complaints about its adequacy) which were not to be tried on 16 April 1997. SAAMC filed and delivered a defence to that cross claim on 15 April 1997.

3. That the issues proposed to be raised by the proposed cross claim against SAAMC but limited to the issues overlapping with other issues in the proceeding also be heard on 16 April 1997, that is excluding matters raised by the D & S Claim of Sale at Undervalue and by the D & S Conspiracy Claim.

The intent of the directions was that all outstanding issues between D & S and Gerovasilis and Duke and Angelopoulos and SAAMC should be heard save and except those concerning the D & S Claim of Sale at Undervalue, and those concerning the D & S Conspiracy Claim. For reasons referred to above, including the terms of Duke's proposed "second further amended statement of claim", it appeared that Duke's initial claim against D & S and Gerovasilis as formulated was not to be pursued.

The directions hearing was further adjourned to enable the parties to consider what additional directions, if any, were necessary to ensure the matters so identified were ready for trial and to ensure that D & S provided proper particulars of its proposed allegations against SAAMC.

SAAMC's CLAIM AGAINST DUKE

No doubt prompted by the terms of the proposed cross claim of D & S and Gerovasilis against it (at that time leave had not been given to file and serve the proposed cross claim or the statement of claim in support of it in the precise terms proposed), on 2 April 1997 SAAMC applied by notice of motion in relation to the September Deed. It sought specific performance of the September Deed, by restraining Duke from proceeding with its cross claim as then formulated because it was in breach of clause 13 of the September Deed. That motion was supported by an affidavit of Rebecca Field of 27 March 1997.

Up to that time, D & S and Gerovasilis had not been provided with a full copy of the September Deed. Angelopoulos had sworn an affidavit on 13 February 1997 as part of his proposed evidence which referred to the September Deed but excluded significant portions of the Deed. D & S and Gerovasilis to that time had been in the position of making assertions against SAAMC, and against Duke as the assignee of the 1990 facility, somewhat in the dark.

Counsel for SAAMC said that the effect of the excluded portions:

". . . is to prevent Duke from making claims on D & S greater than the amount necessary to establish a set-off, so that Duke may not, we say, raise claims such as that it is pursuing against D & S or Gerovasilis for an amount in reliance upon transactions between Duke and SAAMC, an amount greater than is sufficient to set-off the claims by D & S against Duke arising out of the mortgage [that mortgage being the one sued upon by D & S in the D & S Cross Claim] . . ."

except to the extent that Duke may have a claim which arose earlier in time than the September Deed, based upon its alleged payment on behalf of D & S of half of the one-third contribution which D & S should have been making towards interest under the 1990 facility and similar expenses concerning Buckland Park South. Counsel for SAAMC also later said:

"[T]here is, by virtue of these excised clauses, an effect which prevents D & S being pursued by Duke as the successor of SAAMC in breach of the alleged undertakings and that was the sort of coincidental effect of the provisions in the Deed and therefore has got very considerable significance, we would say, in relation to the current applicant by D & S to rejoin SAAMC into the proceedings."

Duke and Angelopoulos were content to treat that issue as defined by the notice of motion and by Ms Field's affidavit as an issue in the proceedings without further pleadings, and have the question finally determined on that basis, and in the proceedings generally. The issue was solely one of interpretation of the September Deed itself. I made orders accordingly. I also ordered those proceedings to be served on D & S and Gerovasilis. It was necessary to ensure that D & S had the opportunity to have discovery of documents relating to, and to address any evidentiary matters relating to, those matters, and of course to make any submissions with respect to them.

SAAMC's contention is straightforward. Although initially disputed, the point was ultimately conceded by Duke during the course of the trial. I need refer to material relating to it only briefly in those circumstances. Once SAAMC took possession of Buckland Park South, it was faced with the problem of its realisation, a problem which it regarded as both complex and complicated by the ongoing issues and allegations variously between Duke and Angelopoulos, D & S and Gerovasilis, and the Buckland Park Group. On 7 June 1996 it agreed with Duke that Duke should acquire Buckland Park South and that SAAMC would transfer Buckland Park South to it upon certain terms. That agreement lapsed due to certain technical difficulties in its timely performance, and was substituted by the September Deed to which the 7 June 1996 agreement was annexed.

SAAMC contends that clause 13 precludes Duke from suing D & S on the debt owing under the 1990 facility, or related documents, which was assigned to Duke by the September Deed. Clause 13 provides:

"Subject to and conditional upon the said Settlement being effected as hereinbefore provided, the Duke interests (which in this paragraph shall be deemed to include any nominee and/or any assignee thereof):- 13.1 severally covenant (with SAAMC) not to sue D & S, Savvas or Gerovasilis (either immediately or following upon the sale of all or any of the land the subject of the Mortgages) in respect of the debt which is the subject of the Facility Agreement and the Mortgages (or so much thereof as may be owing from time to time) and (as between SAAMC and the Duke interests) release and discharge D & S, Savvas and Gerovasilis from all claims known or unknown, actual or contingent arising out of or in any way relating to the personal covenants by D & S in the Mortgages (including the personal covenants by D & S to repay the debt which is the subject of the mortgages) and from all liability under the Facility Agreement and from all liability under the Personal Guarantee provided that:- 13.1.1 nothing in this clause shall preclude the Duke interests from relying upon the liability of D & S, Savvas and Gerovasilis in respect of the Shortfall Debt in so far as it may be necessary for the purposes of any defence, set-off, cross claim, cross-action or counterclaim to any monetary claim or demand brought or maintained by D & S, Savvas or Gerovasilis (or any of them) against the Duke interests (or any of them) in connection with the Proceedings; 13.1.2 nothing in this clause shall preclude the Duke interests and/or their nominee from bringing or maintaining any action against D & S and/or Savvas and/or Gerovasilis in respect of the Shortfall Debt for the purposes of establishing a set-off, cross claim, cross-action or counterclaim as referred to in paragraph 13.1.1 or for the purpose of obtaining a judgment to be relied upon only by way of cross execution against D & S and/or Savvas and/or Gerovasilis; 13.1.3 nothing in this clause shall preclude the Duke interests from bringing or maintaining any claim against D & S in respect of any payments made by the Duke interests on behalf of D & S to SAAMC comprising interest on monies secured by the Mortgages; and 13.1.4. nothing in this clause shall preclude the Duke interests from maintaining as against D & S their claims for misrepresentation in the nature of those currently pleaded in the Proceedings. 13.2 The Duke interests severally covenant that they will procure a covenant in writing by any said nominee or assignee of the Duke interests which is to the same effect as the covenant by the Duke interests in paragraph 13.1 hereof and will provide the same to SAAMC at or before the Settlement Date. 13.A.1 Nothing herein shall affect, prejudice, detract from or otherwise impair or restrict the rights of the O'Connor Companies to subrogation or contribution with respect to the Facility Agreement, the Personal Guarantee, the Company Guarantee or the Current Debt whether such rights arise by way of statute law or equity. 13A.2 Subject to paragraph 13 hereof, nothing herein shall affect, prejudice, detract from or otherwise impair or restrict the rights of the Duke interests to subrogation or contribution with respect to the Facility Agreement, the Personal Guarantee, the Company Guarantee or the Current Debt whether such rights arise by way of statute law or equity."

SAAMC contends that clause 13.1 is quite explicit. It prevents Duke from pursuing as against D & S or Gerovasilis any claim except, in relation to the issues before the Court,

(1) the Duke Interest Claim (clause 13.1.3)

(2) only to the extent necessary to establish a set-off or cross claim against the D & S Cross Claim, that part of the Duke Debt Recovery Claim as represents recovery of the 'Shortfall Debt' under the September Deed, i.e. the amount said to be outstanding under the 1990 facility and assigned to Duke (clauses 13.1.1 and 13.1.2), and one-third of the payment of $1,340,216.30 by Duke in reduction of liability under the 1990 facility.

Initially, Duke and Angelopoulos contended in response that the September Deed did not prevent Duke and Angelopoulos from seeking judgment from D & S on its cross claim, but might prevent Duke from enforcing that judgment; secondly, that clause 13.1 of the September Deed did not on its proper construction prevent Duke from seeking to recover one-third of the payment of $1,340,216.30 paid directly to SAAMC as part of the compromise of the debt under the 1990 facility, and thirdly that its cross claim for the shortfall debt of $744,873.30 could be pursued notwithstanding clause 13.1 because the September Deed permitted that claim to be pursued at large once D & S maintained any claim against Duke at all - "all bets are off" - even though the claim it does maintain was formulated first in its cross claim of 16 April 1996. If successful, SAAMC's claim meant that the cross claim and set-off of Duke is limited to:

(a) the Duke Interest Claim

(b) those parts of the Duke Debt Recovery Claim relating to the sums of $744,873.30 and $1,340,216.30, but only to the extent that that claim then does not exceed any amount to be recovered by D & S on the D & S Cross Claim so that it may be used to set-off or cross claim to that amount.

In the light of the SAAMC claim against Duke, I allowed D & S and Gerovasilis some time to consider whether they wished to proceed with the D & S claim against SAAMC. They elected to do so.

During the course of the hearing, but after considerable evidence, Duke and Angelopoulos acknowledged that the orders sought by SAAMC in respect of the proper construction of the September Deed were reasonable, and that SAAMC's contention as to the proper construction of the September Deed were generally correct. Specifically, it was acknowledged that the subject matter of the operative part of clause 13.1 (first 9 lines) of the September Deed is the debt due by D & S, Mr Savvas or Mr Gerovasilis under the 1990 facility or the guarantees or the mortgages supporting the advance under the 1990 facility. It was further acknowledged that the provisos in clauses 13.1.1 and 13.1.2 permit Duke to rely upon its rights as assignee of that debt against Duke by way of set-off, defence, cross claim, or set-off of judgment debts, but did not permit Duke to recover from D & S any actual payment of money or any payment of money in excess of any payment sought by D & S under the D & S Cross Claim. Specifically, Duke acknowledged that it would not seek any payment from D & S in these or other proceedings of any judgment sum (after or beyond all claims by D & S to be offset) in respect of monies claimed by way of contribution and including in particular the payment of the sum of $1,340,216.30 in reduction of the debt to SAAMC paid under the September Deed. It was common ground that the September Deed did not preclude Duke from pursuing the Duke Interest Claim. D & S did not contend that the September Deed had any greater effect. The result of that acknowledgment ultimately was that the issues as between SAAMC and Duke on the SAAMC claim against Duke disappeared. Consequently, the issues between D & S and SAAMC on the Duke claim against SAAMC became much less significant.

Then, after the completion of the hearing, and in the course of an application by D & S to make further submissions on a topic not addressed in evidence or in earlier submissions, I was informed that the issues as between D & S and SAAMC had also been resolved so that the D & S claim against SAAMC was to be dismissed. Although there was extensive evidence given on them during the course of the hearing, the consequence is that I need not address that evidence in any detail.

THE SURVIVING ISSUES

Although, at the trial, much evidence was led directed to the D & S claim against SAAMC, the result of the events referred to is that it is not necessary to address that material. The issues which now remain to be determined are those arising in respect of:

(1) the D & S Cross Claim, and the Duke defences to that cross claim

(2) the Duke Interest Claim, and the D & S responses to that, but excluding the allegations no longer maintained by reason of the dismissal of the D & S Claim against SAAMC, namely:

* that SAAMC in May 1995 somehow fully released D & S from liability in respect of the 1990 facility,

* the D & S Claim of Sale at Undervalue,

* and the D & S Conspiracy Claim.

Those claims against SAAMC have been dismissed by consent. The consequence is that those allegations also made by way of defence to the Duke Interest Claim no longer need to be addressed. In particular, for present purposes, it follows from the dismissal of those claims against SAAMC that D & S can no longer seek to have a finding made to support its defence to the Duke Interest Claim that SAAMC released it in May 1995 from all liability under the 1990 facility as it has consented to its claim against SAAMC for such a finding being dismissed

(3) the Duke Debt Recovery Claim, but only in respect of that part of that claim which represents the amounts of $744,873.30 owing under the 1990 facility and $1,340,216.30 paid by Duke in reduction of the indebtedness, and also only to the extent necessary to set-off or cross claim that amount against any amount Duke is ordered to pay on the D & S Cross Claim.

The trial proceeded on various days in April, May and June 1997. Later D & S and Gerovasilis later sought to make yet further submissions. That application was refused firstly because the point sought to be made was not pleaded, and secondly because if leave were sought to yet further amend the pleadings to allege the facts upon which the matter sought to be argued could be raised, it was not apparent that such leave would be given because there was a prospect of significant potential prejudice to Duke and Angelopoulos foreshadowed in the event of any further amendment. In my view, the appropriate course was for D & S and Gerovasilis to first apply to yet further amend their pleadings. It was left to D & S and Gerovasilis to determine whether they wished to do so, as at that point any issues as to prejudice to Duke or Angelopoulos thereby could properly be addressed. There has been no application since then to further amend the pleadings.

EVIDENCE AND FINDINGS

I will not repeat much of the background relevant to the remaining issues. The following matters are established from admissions or assertions in the pleadings, and from the evidence of Savvas, Gerovasilis and Angelopoulos. It is only in respect of significant contested matters that I will discuss the evidence in detail.

I find that pursuant to Heads of Agreement dated 14 September 1990 Duke agreed to acquire from the Buckland Park Group and from D & S a one-third interest in Buckland Park South. The Heads of Agreement specified the price as $2,229,678 plus interest payable by D & S in respect of its borrowings from SAAMC from 16 June 1990 until settlement. That reflected the common intent that, after allowing for the D & S interest payments and other payments by D & S from its acquisition of its interest in Buckland Park South to settlement, the effective price was to be pro rata the same as the price paid by D & S. On 25 September 1990 a formal agreement for sale and purchase was executed to give effect to that proposal. By that time, the purchase price had been expressed as $2,275,000. Settlement was proposed for 16 October 1990, but eventually occurred on 17 December 1990.

It was contended for Duke that, despite the above, the formula agreed upon for the price resulted in an amount being due of $2,101,688 only, so that after adjustments the funding "shortfall" of Duke was not $200,000 but only $26,688. I accept that, as a matter of arithmetic, it is possible to make such a calculation provided it is appropriate not to take into account certain other monies paid by D & S to O'Connor for the Buckland Park Group up to December 1990 as part of the D & S contribution to the then obtaining financial arrangements. There is no evidence which describes precisely how the sum of $2,275,000 came to be inserted in the written contract. It was not questioned then, or at any time prior to settlement, by Duke or by Angelopoulos. That document was prepared by the solicitor then acting for Duke, as well as for other parties to the transaction. There is evidence that D & S between June and December 1990 did incur and pay significant interest costs on its then borrowing, as well as pay the adjustments and outgoings necessarily associated with the acquisition of its interest in Buckland Park South. In his evidence, Angelopoulos did not identify any particular basis upon which he disputed the figure specified in the written contract, and in submissions Duke's counsel presented there was no claim to rectify the written contract in any way; it was said simply not to be the agreement.

I find that, following the "in principle" agreement as then reflected in the Heads of Agreement of 14 September 1990, the parties to the written contract of 25 September 1990 did agree that the purchase price broadly to reflect their "in principle" agreement was $2,275,000. Angelopoulos, in his evidence, did say that he thought that the adjusting process to equate Duke's position with that of D & S was in respect only of D & S's interest payments since June 1990 and the stamp duty it paid on the transfer in June 1990. I do not accept that evidence. He did not explain, to my satisfaction, why the principle underlying the negotiated price as expressed ultimately in that contract of 25 September 1990 should be selective as to D & S's expenses and outgoings. There was, as he acknowledged, a meeting at which the D & S calculation of the appropriate adjustment was explained and discussed. That meeting was attended by solicitors for Duke and for D & S as well as Angelopoulos. It resulted in acceptance of the price specified in the agreement of 25 September 1990. By that time, at least for a period, the solicitors then advising Duke were different from the solicitors for D & S. The justification for the ultimate specified amount was, as Angelopoulos acknowledged, presented before the written contract was signed and albeit briefly was addressed in the presence of his solicitor. It was in the light of that, that Duke signed the written agreement. In my view, the sum of $2,275,000 represented the agreed purchase price. There was no cross-examination of the solicitor present on that occasion (who gave evidence) to suggest to the contrary. Those considerations tend to confirm in my mind the finding that the agreement as expressed in the contract of 25 September 1990 was the agreement between Duke and D & S, including the price at the figure of $2,275,000. It was arrived at in general terms by the application of their 'in principle' approach and through the Heads of Agreement of 14 September 1990. Furthermore, the evidence of Savvas who particularly negotiated the arrangement with Angelopoulos was not challenged to suggest that which was said in evidence about the circumstances of the execution of the 25 September 1990 written contract. In my view, Angelopoulos' evidence was more in the nature of an ex post facto rationalisation of why Duke disputed the D & S Cross Claim.

I find the 'in principle' agreement coalesced into an agreement in terms of the written contract dated 25 September 1990, and that the price was $2,275,000. I also find that there was owing by Duke at settlement an amount which gave rise to the lending arrangement between Duke as borrower and D & S and O'Connor as lenders set out below.

At material times thereafter, Duke held its interest in Buckland Park South with the Buckland Park Group and with D & S also each holding a one-third interest. I also find that, at settlement of Duke's acquisition of its interest, the 1990 facility was entered into by each of those entities, under which each became jointly and severally liable to SAAMC for the sum of $4,000,000 and interest thereon. Those entities granted to SAAMC mortgages over their respective interests in Buckland Park South to secure repayment of that sum, and SAAMC also received other securities and guarantees to which it is now unnecessary to refer.

One of the special conditions of the contract for sale and purchase dated 25 September 1990 was that the parties each would, at settlement, enter into and execute a Joint Venture Agreement and a Sharefarming Agreement in the forms annexed to that contract. The proposed Joint Venture Agreement related to the farming of Buckland Park South and to subdivision of portion of it, and management of the farming operations was to be committed to the Buckland Park Group. The proposed Sharefarming Agreement related to the joint farming of Buckland Park South and Buckland Park North, and so the parties to it as proposed included the owners of Buckland Park North including Naura. The evidence does not suggest that either of those documents was ever executed, either at settlement as contemplated or at all. No steps were taken by any party explicitly by reference to either of those two proposed Agreements.

There was a period, shortly before the settlement, when Angelopoulos on behalf of Duke indicated that Duke had some difficulty in meeting the full cash component of the proposed settlement sum. It was proposed, and agreed, that O'Connor and D & S would each provide vendor finance of $100,000 making a total of $200,000. After adjustments, the amount due at settlement by Duke was $2,254,160 of which (as also agreed) $728,496 was to be paid by the Buckland Park Group and D & S taking a transfer of two other properties owned by Duke and the balance of $1,525,664 in cash at settlement. Of that sum, one-third of the finance provided under the 1990 facility namely $1,333,333 was used, and the balance effectively funded by O'Connor and D & S.

The oral arrangement was made between Savvas for D & S and Angelopoulos for Duke, and referred in general terms to an interest rate proposed of 10 per cent. However, it was agreed between them that the precise details of their arrangement should be as ultimately fixed by their solicitors. It was by their mutual instruction that solicitors were then engaged to prepare the appropriate mortgage, to reflect their instructions and to incorporate detailed provisions as necessary. Those solicitors duly prepared a mortgage document.

In fact, on 13 December 1990, Angelopoulos contacted the solicitors then acting in the settlement for all parties to report the oral agreement for O'Connor and D & S each to provide $100,000 vendor finance to Duke. He told the solicitors the sum of $200,000 was to be loaned until 1 June 1991 with interest at 10 per cent per annum. He said nothing, and nothing had been discussed, about any other rate of interest. The solicitor confirmed the arrangement, in broad terms, with Savvas and then prepared the mortgage document. It was the solicitor who inserted the interest rate at 20 per cent, of his own initiative, because

"I think at the time I drew the document interest (rates) were in that region and the 10 per cent per annum was probably lower than interest rates at the time but it was an amount that was agreed between them. I would've thought it was common practice at that time to insert a rate of interest in the region of 20 per cent reducing to another rate if paid on time."

He was, at the time and as Angelopoulos said in his evidence, the solicitor for Duke.

At that time, according to the evidence, commercial interest rates were commonly between 16 per cent and 18 per cent per annum. Angelopoulos agreed that the rate of 10 per cent, when discussed, was acknowledged to be at a low rate compared to commercial facilities then available, and that he and Savvas may have described that rate as "half rate". In the light of that evidence, I do not conclude that the 20 per cent per annum interest rate specified was a "penalty" interest rate.

I also find that it was within the authority of Duke's solicitor to include within the agreement, and then to reflect the agreement in the mortgage referred to in the next paragraph, terms as to the interest rate payable generally and as to the interest rate payable in the event of its timely payment. That was, and is, a normal commercial arrangement. That general process was what the solicitor was asked to do. Instead of having a written loan agreement, and the security document separately, the solicitor prepared only the security document but I conclude that it reflected and incorporated the agreement between Duke and D & S and O'Connor as refined and expressed in normal commercial terms and addressing in detail many of the matters which the parties by their broad initial arrangement left to the solicitor to incorporate.

Accordingly, by mortgage executed on 16 December 1990 and recording the terms of the loan between Duke and D & S and O'Connor, Duke further mortgaged its interest in Buckland Park South to O'Connor as to $100,000 and to D & S as to $100,000 ("the D & S mortgage") in consideration of O'Connor and D & S having made available to it that sum, by way of vendor finance, at settlement. I also find that the D & S mortgage, by its execution by Duke, constituted acknowledgment by Duke that the D & S mortgage reflected the terms of the oral arrangement and also contained further more detailed terms which Duke thereby agreed to. Under the terms of the D & S mortgage, the sum advanced was repayable on 1 June 1991. It has not been repaid.

The D & S mortgage contains the usual covenants on the part of a mortgagor to pay the principal sum on the due date and to pay interest on the principal sum until it has been repaid. The principal sum, or at least that portion of it attributable to D & S of $100,000, was not repaid on 1 June 1991 and has not yet been repaid. The mortgagor covenants include that interest be payable, calculated at 20 per cent per annum and commencing on 17 December 1990. It also provides a lower rate of interest in the following terms:

". . . PROVIDED ALWAYS that if the Mortgagor not being in default in the observance or performance of any of the covenants herein contained and on the part of the Mortgagor to be observed or performed shall on or before any such interest day pay to the Mortgagee interest on the Principal Sum or so much thereof as shall from time to time be outstanding at the rate of interest set forth in Item 12 of the said Schedule the Mortgagee shall accept such interest in lieu of interest at the rate set forth in Item 10 of the said Schedule . . ."

Item 10 of the schedule sets out a rate of 10 per cent per annum, whereas item 12 sets out a rate of 20 per cent per annum.

The D & S mortgage also provides, in the event of default in payment of either the principal sum or any interest payment, that the mortgagee shall also be entitled to charge and that Duke will pay simple interest on the outstanding sum from default until payment at 20 per cent per annum.

Duke has not repaid the sum of $100,000 to D & S. Nor has Duke made any interest payments to D & S in respect of the sum of $100,000. As a matter of calculation, consistent with the calculation presented by D & S (but adjusted to 30 April 1998) the accumulated interest is $240,827. Duke did not criticise the calculation on any arithmetical ground, nor submit that the form of calculation did not properly reflect the calculation contemplated by the D & S mortgage. I find that, subject to considering the set-off or limited cross claim of Duke in respect of the shortfall debt under the September Deed, that is, the remaining issue under the Duke Debt Recovery Claim, the amount outstanding under the D & S mortgage at 30 April 1998 including capital and interest is $340,827. The particular defences concerning the content and execution of that mortgage were not pursued in submissions.