Dumayne Property Group Pty Ltd v Balanced Securities; Rennick & Gaynor (A Firm) v Dumayne Property Group Pty Ltd
[2016] VCC 546
•24 May 2016
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
BETWEEN No.CI-15-00798
| DUMAYNE PROPERTY GROUP PTY LTD (ACN 122 056 535) AND OTHERS (accordance to the Schedule attached) | Plaintiff / Defendants by Counterclaim |
| and | |
| BALANCED SECURITIES LIMITED (ABN 54 083 514 685) AND ANOTHER | Defendant / Plaintiffs by Counterclaim |
| HEARD TOGETHER WITH | No. CI-15-01815 |
| RENNICK & GAYNOR (A FIRM) | Plaintiff / Defendant by Counterclaim |
| and | |
| DUMAYNE PROPERTY GROUP PTY LTD (ACN 122 056 535) | Defendant / Plaintiff by Counterclaim |
---
| JUDGE: | HER HONOUR JUDGE KENNEDY | |
| WHERE HELD: | Melbourne | |
| DATE OF HEARING: | 9 and 10 May 2016 | |
| DATE OF JUDGMENT: | 24 May 2016 | |
| CASE MAY BE CITED AS: | Dumayne Property Group Pty Ltd and others v Balanced Securities and another; Rennick & Gaynor (A Firm) v Dumayne Property Group Pty Ltd | |
| MEDIUM NEUTRAL CITATION: | [2016] VCC 546 | |
REASONS FOR JUDGMENT
---
Catchwords: Contract- Preliminary questions under Rule 47.04 of the County Court Rules 2008– determination of the “Repayment Date” of the “loan”– identification of the relevant “loan” in circumstances where 2 facility agreements created in respect of the same facility amount- repayment due on expiry of period which commenced 7 days after “the despatch of mortgage documents to the Borrower”- identification of time at which the mortgage documents were despatched
| APPEARANCES: Case No.CI-15-00798 | Counsel | Solicitors |
| For the Plaintiff / Defendants by Counterclaim | Mr J Tsalanidis | Kalus Kenny Intelex |
| For the Defendant / Plaintiffs by Counterclaim | Dr O Bigos | Thomson Geer |
| Case No. CI-15-01815 | ||
| For the Plaintiff / Defendant by Counterclaim | Mr C Juebner | Obst Legal |
| For the Defendant / Plaintiff by Counterclaim | Mr J Tsalanidis | Kalus Kenny Intelex |
HER HONOUR:
These two proceedings concern a financing transaction between Balanced Securities Limited (“Balanced”) as lender, and Dumayne Property Group Pty Ltd (“Dumayne”) as borrower. Geoffrey Ernest Dumayne (“Mr Dumayne”), Jennifer Anne Dumayne (“Mrs Dumayne”), and Justin William Dumayne were the guarantors. Dumayne’s solicitors in respect of the transaction were Rennick & Gaynor.
Balanced provided a $7,500,000 loan facility to Dumayne for 15 months for the financing of a property development at 50 Washington Street, Toorak VIC 3142.
The first proceeding (CI-15-00798) concerns a dispute about what was the “Repayment Date” (as defined) on which the loan advanced by Balanced to Dumayne became repayable.
However, given 2 facility agreements were in existence, a preliminary issue also arose as to whether the second facility agreement replaced the first agreement, or whether the first agreement remained, subject to a variation only.
The second proceeding (CI-15-01815) concerns a dispute between Dumayne and Rennick & Gaynor. Rennick & Gaynor seeks payment of its legal fees ($23,520.66). Dumayne has a counterclaim against Rennick & Gaynor, subject to the outcome of the first proceeding, relating to the advice given about the loan.
Although the proceedings were both set down on the question of liability only, the parties sought an order for the resolution of a preliminary question as to the appropriate Repayment Date.
The Court was further advised by Counsel for Dumayne that if it is found that the repayment date is 27 June 2013 (as Dumayne contends) then the counterclaim in proceeding CI-15-01815 will not be pursued and Rennick & Gaynor will be entitled to enter judgment for the fees claimed with the question of interest and costs to be resolved subsequently.
Given the agreement of the parties and that the resolution of the “Repayment Date” issue had the capacity to significantly reduce court time, orders were made on 9 May 2016 as follows:
The following preliminary questions be resolved prior to any further hearing of this matter under Rule 47.04:
a.What was the “Repayment Date” (as defined) of the loan (Loan) made by Balanced Securities Limited to Dumayne Property Group Pty Ltd which was repayable in 2013?
b.Was the Loan repaid by the “Repayment Date”?
It was anticipated that, once these questions were resolved, the proceeding would be listed for mediation unless final agreement was otherwise reached.
Accordingly, the primary issue in the case was to identify the relevant “Repayment Date” as defined under the relevant agreement.
Evidence
Mr Dumayne (director of Dumayne) and Mr Stephen Hodges (“Mr Hodges”) (Senior Credit Manager on behalf of Balanced) gave some limited oral evidence.
However, evidence was primarily adduced by way of tender of an agreed number of documents. The background, below, is based on these documents as well as an Agreed Chronology.[1]
[1] Agreed List of Issues and Chronology dated 6 May 2016.
Background
Balanced is a private lender which raises money from the public and on-lends that money on mortgage loans.
Dumayne owned a development property in Washington Street Toorak.
On 19 October 2011 Dumayne (via its finance broker) applied to Balanced for a loan for $7,500,000 for an 18 month term. The loan was required to assist with the development of a 3 storey complex comprising 5 apartments at Washington Street Toorak.
On 24 October 2011 Balanced sent a loan proposal to Dumayne’s finance broker which indicated that Balanced was prepared to lend the $7,500,000 million funds on certain terms and conditions subject to verifying information in the application. The principal amount was to be allocated as follows:
·$1,100,000 for the proposed initial advance;
·$5,200,000 for project related costs; and
·$1,200,000 for interest capitalisation.
The letter was signed by the directors of Dumayne under a statement that they “hereby accept the above offer of finance and agree to the terms and conditions set out above.” They further agreed to charge their interest in the land and to execute a mortgage if required.
On 20 December 2011 Balanced sent a confirmation of finance to Dumayne’s finance broker after checking the valuations and receiving a project report. Dumayne accepted the confirmation of finance on the same day. Mr Hodges gave evidence that Balanced set aside funds at this point in anticipation of the loan.
Then, by courier on 13 January 2012, Balanced’s solicitor sent to Dumayne a letter dated 12 January 2012 enclosing the letter of offer accepted by Dumayne and enclosing a bundle of documentation for execution (26 documents). The documentation included a Facility Agreement as well as a mortgage of land, memorandum of common provisions, and an acknowledgment.
First Facility Agreement
On 6 February 2012 Rennick & Gaynor sent to Balanced’s solicitor a letter enclosing a bundle of documentation executed by Dumayne (dated various dates between 24 January 2012 and 2 February 2012).
The letter also refers to the fact that Balanced had agreed to remove two people as guarantors: Kim Dumayne and Anthia Bobeff. Accordingly, the Facility Agreement executed had their names struck through.
The documentation includes an undated Facility Agreement executed by Dumayne (the “First Facility Agreement”). Although it appears to have been executed by Balanced, Mr Dumayne gave undisputed evidence that Dumayne never received an executed copy of this agreement.
Balanced however alleges that Dumayne is bound by the First Facility Agreement given Dumayne had signed it and returned it to Balanced.
The Agreement provided for a $7,500,000 million loan facility provided over an 18 month “Accommodation Period.” It included an amount of $1,200,000 million as “Interest [capitalisation] Allowance.”
Clause 2.2 provided that the Facility shall subject to the terms hereof commence on the “Interest Commencement Date” and shall expire on the “Repayment Date.”
Clause 4.1 provided that, subject to clauses 4.2 and 4.3, the Borrower shall repay to the Lender the Moneys hereby Secured on the “Repayment Date” or earlier in accordance with Clause 15.
The “Repayment Date” is defined as the date of expiry of the Accommodation Period or such other date as may be agreed between the parties.
The “Accommodation Period” is then defined as a period of 18 months commencing on the “Interest Commencement Date” and ending on the 18 Month anniversary of the Interest Commencement Date or such later date as the parties may agree in writing (unless there was a default).
The “Interest Commencement Date” is then defined as the earlier of:
(a) 7 days after the despatch of mortgage documents to the Borrower; or
(b) upon any Advance by the Lender to the Borrower.
Balanced contends that the letter of 13 January 2012 despatched the mortgage documents such that the “Interest Commencement Date” was 20 January 2012 (being 7 days after despatch of 13 January). It followed that the Repayment Date was 20 April 2013 (being 15 months later, following an amendment to the Accommodation Period as described below ).
Other documents were also returned with the First Facility Agreement. These included the Mortgage and Debenture Deed (x2) as well as various other signed declarations and documents relating to the transaction.
They also included an “Acknowledgment” from the directors in relation to the mortgage to be given to Balanced. This warranted as follows:
“that we have received the Facility Agreement, Mortgage of Land, copies of Memoranda of Common Provisions AA356 and AA689 and ancillary documents (collectively the “Mortgage Documents”) and have read and understood the contents of same. The true purport, nature and effect of the Mortgage Documents and our obligations thereunder have been fully explained to us by our solicitor….” (emphasis added)
Settlement delayed
Settlement did not occur in January as originally envisaged nor by mid-February (as had also been advised).
Rather, on 23 February 2012, Dumayne, via its broker, sent an email to Balanced requesting that Balanced restructure the facility given there was insufficient funds to discharge the existing ANZ facility. The letter proposed that the loan term be reduced to provide a further $300, 000 in interest capitalisation reduction (because the reduction in loan term resulted in lesser overall interest) and that Optima Funding Pty Ltd (“Optima”) (a related company to Balanced) would also provide a second mortgage for $400,000.
In the result this proposal was accepted. Thus Balanced agreed to reduce the interest allowance to $900,000 (from $1,200,000 million) and reduce the Accommodation Period to 15 months so as to free up $300,000 to pay out the ANZ (with a total “up front” initial advance thereby increasing from $1,100,000 million to $1,400,000 million). The total advance of $7.5 million however remained the same.
On 8 March Optima also advised Dumayne that it was prepared to lend $520,000 to refinance the ANZ on a 15 month term subject to verification of information.
Second Facility Agreement
On 20 March 2012 Balanced’s solicitor then sent a letter to Rennick & Gaynor stating that their client was agreeable to the amendment of loan terms as follows:
·that the loan term was amended from 18 months to 15 months; and
·that the interest allowance was amended from $1.2 M to $900,000.
The letter enclosed an up to date Facility Agreement (the “Second Facility Agreement”) for execution. The letter states: “This Agreement will supersede any previous agreement signed by your client in relation to this transaction.”
Dumayne, supported by Rennick & Gaynor, contends that the Second Facility Agreement discharged and replaced the First Facility Agreement. Further, that all the “mortgage documentation” was not “despatched” until this critical Second Facility Agreement was despatched, namely on 20 March 2012. The “Interest Commencement Date” is thereby 27 March 2012 (being 7 days later) with the result that the Repayment date is 27 June 2013 (being 15 months later).
The recitals to the Second Facility Agreement provided:[2]
A. The Borrower and the Guarantors have requested the Lender to make financial accommodation available to the Borrower and the Guarantors subject to the terms of this Agreement.
B. The financial accommodation has been requested from the Lender to assist the Borrower with construction of the Project.
C. The Lender has agreed to provide a facility to the Borrower as requested subject to the execution of this Agreement and fulfilment of the terms and conditions contained herein.
[2] These formed part of the Agreement at clause 21.16.
Clause 2.1 of that agreement provided that the Lender “hereby grants” to the Borrower a loan facility in Australian dollars of an amount not exceeding the Facility Limit ($7.5 M).
The Second Facility Agreement otherwise constitutes a consolidated version of the facility which incorporated the relevant changes. Those changes were the reference to 15 months in the “Accommodation Period” and the substitution of $900,000 for interest allowance.
The Second Facility Agreement is otherwise in almost identical terms to the First Facility Agreement. In particular, the key definitions of “Repayment Date”; “Accommodation Period”; and “Interest Commencement Date” remained the same.
On 28 March 2012 the following occurred:
(a)the Second Facility Agreement between Dumayne and Balanced was executed;
(b)there was an initial loan draw down by Dumayne (with no advances prior to that date);
(c)a Builder’s Side Agreement and Debenture Deed was executed (which both refer to a Facility Agreement dated on the same date); and
(d)the Facility Agreement between Dumayne and Optima was executed (which expired on 27 June 2013).
Post 28 March
From 15 March 2013, solicitors for the parties exchanged correspondence about the correct Repayment Date.
On 8 May 2013 Balanced sent a letter to Dumayne alleging that the loan facility matured on 19 April 2013, but that the loan had been rolled over for a further 90 days.
The loan was ultimately repaid on 27 June 2013.
Whether the Second Facility agreement replaced the First Facility Agreement
As indicated above, Dumayne and Rennick & Gaynor submitted that the Second Facility Agreement replaced the First Facility Agreement. Balanced, however, denied this.
Given the Court was called upon to construct a term “as defined”, it was important to construe that term pursuant to the text, context and purpose of the relevant agreement.[3] It was therefore necessary to identify which agreement was operative.[4]
Principles
[3] Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 325 ALR 188 at [46].
[4] In so doing, I have also presumed that the First Facility Agreement was otherwise binding on the basis suggested by Balanced.
The Victorian Court of Appeal in the recent decision of Schreuders v Grandiflora Nominees Pty Ltd (“Schreuders”) states as follows:[5]
Where the parties enter into an agreement and then enter into a second agreement which varies the first agreement, it may be necessary for the court to determine whether the second agreement brings an end to the first agreement and replaces it with the second, or whether the effect is that the first agreement remains, subject to the variation.
[5] [2016] VSCA 93 at [18] citing Federal Commissioner of Taxation vSara Lee Household & Body Care (Australia) Pty Ltd (2000) 201 CLR 520 at [22].
The Court then identifies the relevant question as follows:[6]
The question whether an amending agreement supersedes rather than varies the principal agreement depends on the objective intention of the parties to the amending agreement as disclosed by the wording of that [second] agreement.
[6] Schreuders v Grandiflora Nominees Pty Ltd [2016] VSCA 93 at [19].
In so doing the Court cited a number of authorities, including a decision in Hillam v Iacullo[7] (“Hillam”) relied upon by Rennick & Gaynor.
Resolution
[7] [2015] NSWCA 196.
Balanced highlighted that there was only ever one “finance transaction” which commenced by application made in October 2011 and the commitment to fund made in January 2012. Further, that the only amendments made were to the Accommodation Period (of 15 months) and the Interest Allowance (of $900,000).
It further sought to rely on various post contractual admissions made by Rennick & Gaynor to the effect that the First Facility Agreement had been “amended.”
Dealing with the second point, I am not satisfied that such evidence was admissible given it was really sought for the purposes of resolving an alleged ambiguity.[8]
[8] See generally Laws of Australia at 7.4.560 and cases cited therein.
However, even if it was, the subjective views and classifications by the lawyers is of very limited utility to the Court’s determination. Instead, as the above authorities make clear, the focus should be on the terms of the Agreements themselves, and particularly the Second Facility Agreement.
Turning then to the Second Facility Agreement, its structure is such that it purports to wholly replace the First Facility Agreement. Thus rather than providing for discrete amendments (which would need to be read in conjunction with the First Facility Agreement) it embodies a wholly new consolidated version.[9]
[9] And see Schreuders v Grandiflora Nominees Pty Ltd [2016] VSCA 93 at [16].
The granting of the facility the heart of the contract also only occurs under the Second Facility Agreement. Thus, the recitals record the agreement to provide a Facility subject to fulfilment of the terms and conditions “contained herein.” Clause 2.1 then provides for the Lender to “hereby grant” the loan facility which “Facility” is defined as the loan facility “granted by this Agreement” (clause 2.2).
There are also a number of other instances wherein reference is made to events occurring under “this Agreement” consistent with a wholesale replacement (see e.g. definitions of “Initial Drawdown Date”; “Moneys hereby Secured”; “Drawdown Date”; “Drawdown”; and “Obligations”).
As highlighted by Counsel for Rennick & Gaynor, if the First Facility Agreement is left as operative, there would be two agreements providing for a facility of $7.5 million. However, it was clearly not intended by the parties that there should be two facilities of $7,500,000. Instead, the evident intention of the parties was for Balanced to be able to sue on the March agreement as a “stand-alone” without any recourse to the First Facility Agreement. Put another way, there was nothing left in the (original) First Facility Agreement which was not wholly covered by the Second Facility Agreement.
As indicated already, however, Balanced sought to support a variation by highlighting that the variations in this case (to the loan term and interest allowance) were of a small degree and not so far inconsistent as to destroy the original contract. In so doing Counsel also sought to distinguish the decision in Hillam wherein the variations were more substantive and inconsistent with the earlier agreement.
However, the changes, in particular, to the loan term, in this case were not inconsequential, with the 15 month term being entirely inconsistent with the loan term under the First Facility Agreement (at 18 months).
Moreover, regardless of the character of the changes, a fundamental problem in Hillam (as here) is that the way the subsequent agreement was structured was that it dealt with “the very same advances for which provision was made by the [earlier] Loan Agreement.”[10]
[10] Hillam v Iacullo [2015] NSWCA 196 at [58].
In any event, the matter is put beyond doubt in my view by the express words of clause 21.4 of the Second Facility Agreement. This is entitled “Entire understanding” and provides as follows:
“This Agreement (including any document referred to herein) supersedes all prior representations, arrangements, understandings and agreements between the parties relating to the subject matter hereof and sets forth the entire complete and exclusive agreement and understanding between the parties hereto relating to the subject matter of this Agreement “(emphasis added).
Balanced sought to submit that this clause merely provided that it was the agreement as amended which governed relations and that it could not undo the fact that the Interest Commencement Date had already occurred.
However, this was straining the obvious express intention of the parties as revealed by clause 21.4. Pursuant to that clause, the parties have expressly provided that “this Agreement” (the Second Facility Agreement) “supersedes” all prior agreements relating to the relevant subject matter (the $7,500,000 million facility to assist with the construction of the Project). Further that “this Agreement” (the Second Facility Agreement) sets forth the complete and “exclusive” agreement relating to the relevant facility.
Whether the Interest Commencement Date had already occurred earlier in time is a separate question however which will be dealt with below.
What was the Repayment Date?
In determining the Repayment Date, the crucial difference between the parties turned on the date that the Accommodation Period commenced, which was measured from the “Interest Commencement Date.”
More particularly, the key question was when there was a “despatch of mortgage documents to the Borrower” pursuant to the definition contained in the Second Facility Agreement.[11]
[11] This followed given any despatch occurred prior to the making of any advance.
This involved a construction of the Second Facility Agreement.
Principles
In the High Court decision of Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd, French CJ, Nettle and Gordon JJ explained the approach to be adopted in the construction of contracts as follows:[12]
The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.
In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.
Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.
However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding “of the genesis of the transaction, the background, the context [and] the market in which the parties are operating”. It may be necessary in determining the proper construction where there is a constructional choice. The question whether events, circumstances and things external to the contract may be resorted to, in order to identify the existence of a constructional choice, does not arise in these appeals.
Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties’ statements and actions reflecting their actual intentions and expectations.
Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption “that the parties … intended to produce a commercial result”. Put another way, a commercial contract should be construed so as to avoid it “making commercial nonsense or working commercial inconvenience”.
Resolution
[12] (2015) 325 ALR 188 at [46]-[51] citations omitted.
The case for Dumayne/Rennick & Gaynor was a relatively simply proposition that a despatch of mortgage documents did not occur until the date on which the last relevant mortgage document was despatched. This did not occur until 20 March when the operative Second Facility Agreement was provided.
The case for Balanced was less clear. At one point, it was submitted that given the documents enclosed with the letter of 12 January at least included “the mortgage documents” that the sending of them by courier was “the despatch of the mortgage documents.” Further, that the Interest Commencement Date should not be triggered merely because of minor subsequent amendments.
However, at another point in submission Balanced suggested that if it was found to be necessary to define, the “mortgage documents” were (a) the mortgage in registrable form and the accompanying memoranda of common provisions, or alternatively (b) documents which include or relate to the mortgage in registrable form and the accompanying memoranda of common provisions, or alternatively (c) the suite of documents enclosed under cover of the 12 January 2012 letter.
Balanced also submitted that its construction was consistent with the commercial purpose or objects to be secured by the contract. In so saying it relied on the evidence of Mr Hodges to the effect that Balanced set aside funds (such that they earned only 1% interest) once confirmation of finance was provided. Its construction of the “Interest Commencement Date” was appropriate given that Balanced “would be entitled to earn interest at the agreed rate as soon as the funds were committed for the loan even if settlement was delayed.”
Finally, it relied on various admissions/positions taken by the parties/ their solicitors about when the despatch of mortgage documents took place.
Resolution
There is no express definition of the concept of “mortgage documents” in the Second Facility Agreement.
However, as the mortgage itself provides, the mortgage was given in consideration of and to better secure “the principal sum lent or agreed to be lent to the mortgagor by the mortgagee.” One would therefore ordinarily consider that the “despatch of mortgage documents” would include the documents necessary for the Borrower to understand the terms on which the principal sum was so lent.
This appeared to be accepted to some extent by Balanced given the First Facility Agreement was included in the “suite of documents” enclosed under cover of the 12 January 2012 letter. However, it would not make sense for the relevant “mortgage documents” to include a loan facility which was no longer operative rather than the (operative) Second Facility Agreement.
Insofar as Balanced sought to rely on a narrow concept of “mortgage documents” no rationale was provided. Moreover, an examination of the text shows that the parties intended that the detailed Facility Agreement was to govern the terms and conditions on which the registered mortgages and the other “Securities” would be provided.
Thus, Clause 7.1 provides that the Borrower and Guarantors agree to provide the Securities (which included the first registered mortgage over Washington Street) in consideration of the Lender making the Facility available and to further secure the Guarantor’s obligations under this Agreement. Further (pursuant to clause 7.2) that “the Facility” [meaning the loan facility granted by “this Agreement”] shall be secured by the Securities.
Clause 7 however goes further. Thus, clause 7.5 explicitly provides that upon execution by the Borrower this Agreement shall create a Mortgage and a Charge in Favour of the Lender over “the Mortgaged Property.”[13] Clause 7.7 then provides that in the event of any inconsistency between the provisions of this Agreement and any of the Securities[14] the provisions of this Agreement shall prevail.
[13] The concept of “Mortgaged property” is defined as the Property or Properties over which the Lender holds “the Securities.”
[14] An example of an inconsistency appears to be the “higher rate” definition; the Facility agreement defines it as 7% above the Acceptable Rate (14.95%) being 21.95%. The mortgage states it to be 20.95%.
It would be completely unsatisfactory for the Lender to despatch the mortgage alone without the operative facility agreement in circumstances where the facility agreement itself also purports to create a mortgage and, further, to prevail over any inconsistent terms in any other mortgage document.
The provisions of the Agreement therefore suggest that the “despatch of mortgage documents” is intended to include the operative Facility Agreement.
It would also be a commercial nonsense for the “Interest Commencement Date” to be triggered in the event that only some, but not all, of the mortgage documents were despatched. I therefore accept the submissions of Rennick & Gaynor that the relevant despatch occurs on the earliest date when the last relevant mortgage document is despatched.
Insofar as the commercial purposes or objects to be secured by the Second Facility Agreement are concerned, they are also ordinarily able to be identified by reference to the contract alone.[15] As the provisions (including the Recitals) make clear, the purpose of the Second Facility Agreement was to provide a “Facility” subject to the terms of that Agreement to assist with construction of the Project. Consistent with that purpose it is appropriate to construe “mortgage documents” to include the relevant facility agreement. This ensures that the Facility does not commence (absent a draw down) until the terms of that Facility have been provided to the Borrower.
[15] Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 325 ALR 188 at [47]-[48] (French CJ, Nettle and Gordon JJ).
Balanced, however, sought to suggest that this construction would be contrary to Balanced’s internal funding arrangements wherein funds were set aside from the moment there was a confirmation of finance. In such circumstances it claimed that, even if no funds had actually been drawn down, that it should be (and was) entitled to interest from the earlier date of 20 January so as to be able to pay investors.
However, the clear words of the Second Facility Agreement indicate that (absent a drawn down) the commencement of the Facility is not dependent on any internal decision of the Lender; rather it is dependent on the timing of the external act of despatching relevant documents to the Borrower. In any event, although there may sometimes be reference to circumstances outside the contract,[16] as was apparently conceded by Balanced, this is restricted to circumstances known, or reasonably assumed to have been known, to both parties at the time the contract was executed.[17] Although Balanced suggested that Dumayne’s mortgage broker could be “assumed” to have been aware of Balanced’s funding model, there was no direct evidence of this. In fact, the only evidence cited was some speculative evidence of Mr Hodges that: “I would say most private lenders have the same practice.” This evidence was inadequate to establish that Balanced’s internal funding arrangements were known, or should reasonably be assumed to have been known, by Dumayne.
[16] Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 325 ALR 188 at [49]-[52] (French CJ, Nettle and Gordon JJ), [108]-[113] (Kiefel and Keanne JJ), [118]-[119] (Bell and Gageler JJ).
[17] Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at [35] (French CJ, Hayne, Crennan and Kiefel JJ); Franklins Pty Ltd v Metcash Trading Pty Ltd (2009) 76 NSWLR 603 at [305]; Oswal v Yara Australia Pty Ltd (No 3) (2011) 86 ACSR 1 at [164].
This is sufficient to dispose of this submission. However, it also appears to be based on a misreading of the clause 5 interest provisions. Thus, the clause which provides for the circumstances in which interest is to be payable is clause 5.1. This makes provision for interest to be calculated and payable only “on the amount drawn down.” Although clause 5.3 provides that the “first interest period” [of 3 months] commences on the Interest Commencement Date, and that the Borrower agrees to pay interest from that Date this is only “for the purpose of calculation of interest” [which is calculated on the basis of consecutive 3 month interest periods- see clause 5.2]. It does not alter the circumstances in which interest is actually “payable” under clause 5.1.
The better view is therefore that Balanced would not be entitled to charge interest from 20 January in any event (in the absence of any drawn down).
Counsel for the various parties also sought to rely on various admissions/ other documents to support their positions.
Presuming, without deciding, that it would be appropriate to look at this material I found it to be of generally limited assistance.
The alleged “admissions”/positions relied upon (even if admissible) were little more than subjective characterisations which shed little light on an objective construction of the Second Facility Agreement.
The one exception was the “Acknowledgment” which was executed in January and was part of the “suite” of documents provided on 13 January. As will be recalled, the document was prepared and executed on the basis that the “Facility Agreement” was within the phrase, “Mortgage documents.” Given it was one of the documents executed together as part of the financing transaction it is appropriate to have regard to it.[18] It is also referred to in the Second Facility Agreement.[19] It fortifies a finding that the “mortgage documents” included the operative facility agreement.
[18] Hoyt’s Pty Ltd v Spencer (1919) 27 CLR 133 at 144; EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2010] WASCA 78 at [104]; Piccolo v National Australia Bank Ltd [2000] FCA 187 at [30] – [32].
[19] See clause 8.1(b)(x) and see Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 325 ALR 188 at [46].
I am therefore of the view that the “mortgage documents” included the Second Facility Agreement. Given this was not despatched until 20 March, it followed that the Interest Commencement Date was 27 March (being 7 days later).
It further follows that the Repayment Date was 27 June 2013 (being 15 months later).
Conclusion
The answers to the questions are:
(a) 27 June 2013
(b) yes
SCHEDULE OF PARTIES IN PROCEEDING CASE No. CI-15-00798
BETWEEN
| DUMAYNE PROPERTY GROUP PTY LTD (ACN 122 056 535) | Plaintiff |
| and | |
| BALANCED SECURITIES LIMITED (ABN 54 083 514 685) | Defendant |
| AND BETWEEN | |
| BALANCED SECURITIES LIMITED (ABN 54 083 514 685) | First Plaintiff by Counterclaim |
| BALANCED APPLICATIONS PTY LTD (ACN 116 175 047) | Second Plaintiff by Counterclaim |
| and | |
| DUMAYNE PROPERTY GROUP PTY LTD (ACN 122 056 535) | First Defendant by Counterclaim |
| GEOFFREY ERNEST DUMAYNE | Second Defendant by Counterclaim |
| JENNIFER ANNE DUMAYNE | Third Defendant by Counterclaim |
| JUSTIN WILLIAM PAUL DUMAYNE | Fourth Defendant by Counterclaim |
0
12
0