Equititrust Limited v Boyle & Anor. Griffith Development Company Pty Limited v Equititrust Limited

[2008] NSWSC 630

CITATION:	Equititrust Limited v Boyle & Anor. Griffith Development Company Pty Limited v Equititrust Limited [2008] NSWSC 630
HEARING DATE(S):	10 and 11 June 2008
JUDGMENT DATE :	23 June 2008
JUDGMENT OF:	Smart AJ at 1
DECISION:	See para 63
CATCHWORDS:	Credit Facility Deed, Mortgage and Deed of Guarantee & Indemnity - Default under loan and borrower not able to meet its obligations and complete subdivision - No effective variation of Deeds - Lender not required to sell property before calling on Guarantor - Guarantor not paying - Claim of representation fails - Guarantor liable to pay amount claimed - Equititrust not proceeding against Boyle
LEGISLATION CITED:	Bankruptcy Act
CATEGORY:	Principal judgment
PARTIES:	Equititrust Limited v Norman Clifford Boyle & Anor. Griffith Development Company Limited v Equititrust Limited
FILE NUMBER(S):	SC 011461/06. 020320/07
COUNSEL:	M W Young (Equititrust) No appearance for Mr Boyle Mr R Woods in person (also as director for Griffith Development Co P/Ltd)
SOLICITORS:	Bransgroves Lawyers (Equititrust) No appearance for Mr Boyle Mr R Woods in person (also as director for Griffith Development Co Pty Ltd)

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

SMART AJ

S2007/11461/61
EQUITITRUST LIMITED v NORMAN CLIFFORD BOYLE and RICHARD LEE WOODS

S2007/20320
GRIFFITH DEVELOPMENT COMPANY PTY LIMITED (“Griffith”) v EQUITITRUST LIMITED (“Equititrust”)

JUDGMENT


Mr M W Young appeared for Equititrust . Mr Woods appeared in person and as a Director of Griffith Development Company Pty Ltd for it. Equititrust did not seek to proceed against Mr Boyle. I was informed that on 5 May 2008 Mr Boyle entered into an arrangement under Part X of the Bankruptcy Act . These two actions were heard together by consent, the evidence in one to be evidence in the other.

Introduction

1 About 17 October 2003 Equititrust entered into an agreement (Credit Facility Deed) with Griffith pursuant to which Equititrust progressively lent Griffith $5,424,306.73 (“the loan”) to embark upon an extensive land subdivision at Walla Walla Road, Griffith. Messrs Boyle and Woods guaranteed the obligations of Griffith under the agreement. They also indemnified Equititrust. It was a term of the agreement that:

(a) the loan be repaid 12 months from the date of the initial advance which occurred on 13 November 2003, and

(b) the interest to be paid on the loan from 13 November 2004. Prior to this, interest was capitalised.

The lower rate of interest was initially 10.75% per annum. The higher rate of interest payable upon default was 16.75% per annum. (See the Schedule to the Credit Facility Deed). Griffith defaulted in early 2005.

2 Under cl 4 of the Deed the Borrower was required to provide security. The security specified in Item 9 of the Schedule included:

(a) Mortgage intended to be executed by Griffith over land situated at Lot 21 Walla Walla Road, Griffith (DP 882734, Folio Identifier 21/882734) and to be registered as a first mortgage.

…

(c) Deed of Guarantee and Indemnity and delivered by the Guarantors in favour of the Lender

(d) First registered Fixed and Floating Charge by the Borrower as the Mortgagor and the Lender as the Mortgagee over all the assets and undertaking of the Borrower … present and future

…

Clause 10 of the Credit Facility Deed provides that the Borrower will pay all moneys payable and observe and perform, fulfil and keep all the covenants etc:

Clause 11 is a standard “No waiver” provision

Clause 16 linked up the provisions of the Credit Facility Deed and the Security

3 The Guarantors specified in Item 11 of the Schedule to the Credit Facility Deed are Messrs Boyle and Woods. They have signed that Deed. Clause 31 of that Deed provides:

"31.1 Each guarantor consents to the Lender giving the Borrower the facility provided for in this Credit Facility Deed and the Security and confirms its guarantee to the Lender of the performance of all of the terms, covenants and conditions contained in or implied by this Credit Facility Deed and the Security and confirms that the whole of the terms, covenants and conditions of each Security remain in full force and effect and extent to the facility."

4 Along with the Credit Facility Deed, Messrs Boyle and Woods executed a Deed of Guarantee and Indemnity under which they were jointly and severally liable. The definition provisions are cast in wide terms. Clause 3 provides that the Guarantor unconditionally guarantees to the Lender the punctual performance and observance by the Borrower of all the covenants and provisions of the Security, "including without limitation, the payment of the Money secured by the Borrower at the time or times and in the manner provided for in the Secured Agreement and/or the Security and undertakes to pay the Money Secured to the Lender on demand".

5 Clause 4 contains wide indemnity provisions. Clause 4.3 provides that the Indemnity is not limited or affected by the fact that the Money Secured cannot be recovered from the Borrower for any reason.

6 Clause 8.1 provides that the Guarantor’s liability is not prejudiced affected or discharged by any act, omission incapacity of any person or any event of any description which might otherwise have the effect of prejudicing, effecting or discharging the liability of the Guarantor. There follows a long and broad list of events which are specifically stated not to have this effect.

7 Clause 18.1 provides:

“A certificate in writing signed by an officer of the Lender certifying the amount payable by the Borrower, the Security Provider or the Guarantor or stating any other act, matters or thing relating to this Deed or the Security shall be prima facie evidence of the matters stated therein.”

8 Equititrust alleges that neither the Borrower nor the Guarantors has made any payment although long overdue.

9 By their Further Amended Defences filed 4 September 2007 Messrs Boyle and Woods:

(a) each denied that he was indebted to Equititrust in the amount claimed; stating that Equititrust advised that as at 30 June 2006 the amount owed by Griffith to Equititrust was $4,758,228

and alleged

(b) On or about 26 April 2006 Equititrust advised Mr Woods that it would take no action(s) against him in respect of the claims set out in the Statement of Claim provided inter alia that Messrs Boyle and Woods caused Griffith to sell the Griffith land. Messrs Boyle and Woods relied on conversations in about April 2006 between Mr Woods and Mark McIvor and an email dated 26 April 2006 from Mr Woods to Mr McIvor of Equititrust.

(c) Between about 26 April and 11 May 2006 Equititrust varied the terms of the Agreement to include the following terms:

(i) Griffith would sell the Griffith land for not less than $4,700,000

(ii) Equititrust would contribute approximately $400,000.00 towards Griffith City Council costs of performing remedial works on the Griffith land.

(iii) Equititrust would register a plan of subdivision of the Griffith land, dividing that land into 83 individual titles, prior to completion of the sale of that land

(iv) Equititrust would limit the amounts claimed against Messrs Boyle and Woods on their guarantee and indemnity to an amount of $250,000 each, payable over 24 months in 5 equal 6-monthly instalments, the first to be paid 6 months after completion of the sale of the Griffith lands.

10 Messrs Boyle and Woods relied on partly written and partly oral arrangements (agreement) between Mark McIvor on behalf of Equititrust and Mr Woods between 21 April 2006 – 11 May 2006.

11 Messrs Boyle and Woods alleged that:

(a) About mid July 2006 Griffith entered into a contract for sale of the Griffith land for $4,800,000 with Aizever Pty Limited (Aizever)

(b) In about the first week of August 2006 Mr Woods re-negotiated the sale price under the contract for sale of the Griffith land from $4,800,000 to $5,000,000 whereby Aizever would pay the additional $200,000 by way of Griffith City Council costs in respect of the Griffith land

(c) By about May 2007 Equititrust had failed to make payments to the Griffith City Council in respect of the Griffith land remedial works in accordance with the May variation.

(d) On 29 May 2007 Aizever served Griffith with a Notice of Termination in respect of the Contract for the sale of the Griffith land.

12 In Griffith v Equititrust in Griffith’s General Case Management document Griffith alleged:

(a) between about 26 April and 11 May 2008 Mr Mark McIvor on behalf of Equititrust represented to Mr Woods on behalf of Griffith that Equititrust would register the plan of subdivision for 83 lots and pay all Council contributions and the costs of any outstanding remedial works

(b) about mid July 2006 Griffith entered into a Contract for Sale of the Griffith land for $4,800,000 with Aizever.

(c) about the first week of August 2006 Griffith re-negotiated the sale price under the Contract for Sale of the Griffith land from $4,800,000 to $5m whereby Aizever would pay the additional $200,000 by way of Griffith City Council costs in respect of the Griffith land

(d) by about May 2007 Equititrust had failed to make payments to the Griffith City Council in respect of the Griffith land remedial works in accordance with the Representation

(e) On 29 May 2007 Aizever served a Notice of Termination in respect of the Contract for the sale of the Griffith land

(f) Griffith has been unable to sell the Griffith land as a result of Equititrust’s failure to comply with the Representation

Griffith sought an order pursuant to s 68 of the Fair Trading Act 1987 (NSW) that Equititrust pay to Griffith damages for any loss or damage.

13 In its Defence Equititrust denied that it had ever agreed, either orally or in writing to register the plan and pay Council contributions and outstanding costs. Equititrust denied that it was obliged to make payments to the Griffith City Council but admitted that no payments were made to the Council.

14 Equititrust, while denying the Representation was made, pleaded that even if the Representation was made, Griffith could still have sold the Griffith land. Equititrust admitted that the Griffith land had not been sold but denied that it was as a result of anything Equititrust had or had not done.

15 Equititrust as well as denying the Representation was made pleaded that it cannot know and did not admit Griffith relied upon the Representation. Equititrust further pleaded:

(a) about 30 March 2006 Equititrust commenced proceedings to enforce the guarantee of 17 October 2003

(b) between April and July 2006 Griffith was marketing the Griffith land

(c) in May 2006 Equititrust agreed the plaintiff could have more time, on certain conditions to sell the land and would not pursue judgment until after the auction, being held on 24 June 2006. The auction was rescheduled to 30 June 2006

(d) the property was passed in at auction

(e) Equititrust denied the Representation was made, and accordingly it did not constitute a variation of the agreement

(f) Griffith should not have adopted the assumption or expectation as the Representation was not made. Equititrust denied that it was estopped from acting inconsistently with the Assumption and/or Expectation.

16 These provisions of the Credit Facility Deed and the Deed of Guarantee and Indemnity should be noted:

(a) Clause 4.5 of Credit Facility Deed – variation by mutual agreement
Clause 11.1 of Credit Facility Deed – granting of any time or any other indulgence by the Lender to the Security Provider or Guarantor in relation to any existing or future default under any Security or this Deed shall not be deemed a sanction or waiver of any continuing or recurring breach. Nor shall the Lender’s rights be affected or diminished by the grant of time or any other indulgence.
Clause 8.1 of Guarantee and Indemnity – see above for the general provisions as to non-prejudice or non-affectation or non-discharge and the particular provisions in cl 8.1(1), (2), (3)-(19).
Clause 26.1 of Guarantee and Indemnity – granting of any time or any other indulgence by the Lender to the Security Provider or Guarantor shall not be deemed a sanction or a waiver – in similar terms to cl 11.1 of Credit Facility Deed.
Clause 27.1 of Guarantee and Indemnity – no person has any authority to vary the terms or to waive any of the Lender’s rights except by an instrument in writing executed by the Lender or by an Authorised Officer of the Lender

17 In support of his claim that Equititrust had made the representations Mr Woods relied on a telephone conversation he said that he had with Mr McIvor on 21 April 2006 in these terms:

McIvor: "I have a buyer on Griffith at $4.7 million who will sign a contract now and complete without any delays and if you don't want me to go after you with the resources I have you will cooperate and issue and sign this contract immediately"

Woods: "What are the terms of this sale and what's the situation in regards to GST is the price plus GST?"

McIvor: "I will register the subdivision and pay the Council contributions, the price is inclusive of GST and you will have to deal with that as the vendor, alternatively if you somehow come up with $4.8 million and you pay the council contributions I'll call it quits and walk away without any further recourse to you."

Woods: "Mark this is nuts, we all know this property with 83 titles registered has to be worth $5.5 million, why are we entertaining these firesale prices, if you are hellbent on selling the property now, why don't you just take possession and put it to auction, because if it is auctioned correctly a better outcome would be achieved."

McIvor: I don't want to take possession as this would mean I become liable for the GST, however if you believe the property should be auctioned then you auction it and pay for it and providing you give me a power of attorney to sign the contract for $4.7 million after the auction if you fail to get a better price I will agree to that course of action. Why don't you think about this and come back to me and I will also consider dealing with the proceedings we have against you at the same time."

Woods: "OK leave it with me and I will come back to you."

18 On 21 April 2006 Mr Woods received an email from Mr McIvor in these terms:

"Richard:
We will agree to you conducting an auction program on the property on the following basis:
1. The sales program and proposed contract are acceptable to us
2. You bear the cost
3. The company provides us with a power of attorney to execute a contract and transfers to effect sale to our buyer at $4.7m in the event that a sale at a greater price on acceptable terms is not achieved. Provided agreement is reached on the proposed basis we are agreeable to postponing further action on current proceedings pending the outcome of sale.
Mark"

19 On 22 April 2006 Mr Woods sent this email to Mr McIvor:

Mark:"
Further to our phone conversation yesterday and after due consideration and discussions I am confident that given a proper, effective and correctly targetted (sic) marketing campaign a far better outcome on this property can be achieved.
I am therefore willing and prepared to implement this auction program immediately utilising a local and Sydney agent and bear all the costs associated with this program as opposed to spending this money on legal fees.
If you are in agreement to the above, please confirm by return and I will commence work immediately and submit a full outline to you early next week for your approval.
Based on your agreement to the above I will undertake to enter into any contract sale price in excess of $4.7 million.
Obviously I need to have your lawyers in Sydney confirm to my lawyer John Morrissey that the current proceedings you have commenced will be dismissed until the outcome of this program is known and agreement reached as to any shortfall.

Richard Woods."

20 From the terms of the conversation on 21 April 2006 it appears that Mr McIvor's statement as to registering the subdivision and paying the Council contributions related to Griffith signing a contract for sale for $4.7 million. Mr McIvor believed his buyer had the necessary cash to complete the sale. The price was inclusive of GST. Mr McIvor was sceptical that Mr Woods could do better but was prepared to allow him to try.

21 Mr Woods was acutely conscious of two matters. First, Griffith did not have the money to pay the Council $380,000 it claimed, principally for water and sewerage works for the subdivision and without such payment the subdivision would not be registered. The linen plan would not be released. Secondly, If the land was sold for $4.7 million inclusive of GST he would suffer a substantial loss.

22 Mr Woods claimed that the land with 83 titles registered had to be worth $5.5 million. There did not appear to be a purchaser who was ready willing and able to pay that price.

23 Mr Woods said that on 26 April 2006 he had a further conversation with Mr McIvor in these terms:

"Woods: Mark, I do not believe that $4.7 million inclusive of GST is a fair and reasonable price for this property. I seriously believe we would be far better off putting the property to public auction."

McIvor: "I am happy for you to do that, provided that certain terms and conditions are met."

Woods: "What are they?"

McIvor: We want you to cover all of the auction costs. I also "want you to give us a Power of Attorney which will enable us to enter into the $4.7 million contract with a buyer that we have if you do not achieve a better outcome at the auction."

Woods: "I will consider that and then put something back to you in writing."

24 There was further conversation according to Mr Woods in which Mr McIvor stated that Equititrust would not go into possession as that could make Equititrust liable for GST rates, taxes and other liabilities, such as contractors. Mr McIvor said that he wanted to take the full proceeds of any sale that Griffiths (Woods) made. Mr McIvor insisted Griffith pay all the GST, the Council rates and taxes and any other amounts. Mr Woods stated that Mr McIvor threatened to bankrupt him if he (Woods) did not co-operate (i.e., do what Mr McIvor wanted). Equititrust wanted to avoid going into possession.

25 Mr Woods accused Mr McIvor of having misled him.

26 On 26 or 27 April 2007 Mr Woods sent this email to Mr McIvor:

"Mark
I refer to our phone conversation earlier today and confirm the following:
1. We will undertake to appoint a local and Sydney based agent to auction the property.
2. We will submit a copy of the proposed contract for sale and special conditions and a copy of the proposed marketing program when available. We will pay all costs associated with the auction program
3. We will continue to persue (sic ) our refinancing of the project in an effort to secure a net amount of $4.8 million (excluding Council Contributions) in full settlement of our debt.
4. We will provide a satisfactory document either a Deed or Power of Attorney or the like enabling you/us to execute a contract to your existing buyer at $4.7 mill in the event that a better outcome is not achieved by the conclusion of the auction program, allowing 14 days after the auction to conclude a sale.
5. You will provide written confirmation from your solicitors that a stay of proceedings is agreed to on the basis of the above being undertaken.

Richard Woods"

(There is a discrepancy of 1 day in the dates of some of the emails)

"Richard

Please advise if your lawyer has prepared contracts. My buyer is prepared to sign a contract at $4.7m subject to you not getting a better offer by some agreed date. I'd suggest 14 days from auction date. I want you to sign that contract now. Please give me your lawyers details and tell him to draft this clause. Have you commenced advertising re auction?

I note a very cheeky defence has been lodged on your behalf while I was on holidays. That was clearly not within the spirit of our discussions and is an abuse. I had told you I would forestall action provided you complied with my required terms. Will you sign the contract I require?
All rights reserved.
Mark."

29 By a further email of 11 May Mr McIvor advised Mr Woods:

"Richard,
You have said previously that you can sell the property for $5.5m If this happens and we receive those proceeds [less acceptable legal fee and adjustments] in a timely manner that will be accepted in full satisfaction, If you are not successful I will require in addition to the $4.7m an additional $250k each from yourself and Boyle. I will allow you to pay that progressively by 5 equal payments over a 24 month period at 6 monthly intervals and I will treat your liability as separate to Boyle. If he doesn't honour his part I will have recourse to him only. This proposal is not binding unless in the form of an executed agreement satisfactory to us. It is also not negotiable given it represents a very substantial saving for you and otherwise certain bankruptcy. All rights reserved.
You are authorised to commence the auction program provided you will sign the conditional contract at $4.7m.

Mark"

30 By email of 12 May 2006 to Mr McIvor Mr Woods stated, amongst other things:

"I need to understand and have your intentions in regards to the shortfall position and your intended actions in the event that the best price achieved is in fact your buyer at $4.7 mill; please advise."

31 Mr Woods was worried about the situation which could develop and the losses he would face. If the property was sold by Griffith or under the power of attorney for $4.7 mill he would face heavy losses including payment of GST of $470,000.

32 By FAX of 15 May 2006 Griffith (per Mr Woods as Director) wrote to Equititrust:

"We confirm our agreement to the following conditions to achieve a satisfactory resolve to the matter as advised by you:

1. We will undertake to effectively market the property and put it to auction on 24 June 2006.

2. We will instruct our solicitors to prepare a separate contract for sale for a sale at a price of $4.7 million and arrange to duly exercise that contract to be held in escrow by our Sydney solicitors John Morrissey, with an irrevocable authority to release that contract to you 14 days after the auction date if a better sale price has not been achieved.

3. Confirmation from your solicitors Bransgroves that the current proceedings commenced in the Supreme Court against Woods and Boyle be dismissed.

4. In the event that clause 2 above is envoked, Equititrust will limit its claim against each guarantor individually for a maximum sum of $250,000 each, payable by 5 equal 6 monthly instalments."

33 Mr McIvor responded thus by email of 16 May 2006 to Mr Woods:

"Dear Richard,
I refer to your fax of 15th May. It is intended that contracts be exchanged at $4.7m but be conditional on your not achieving a better price by a certain agreed date. Please instruct your solicitors accordingly. Proceedings will need to remain 'on foot' until the matter is satisfactorily documented.
Mark"

34 At the auction on 30 June 2006 the Griffith land was "passed in". By his email of 3 July 2006 Mr Woods advised that they were in negotiations with two potential purchasers.

35 Mr McIvor by his email of 4 July 2006 to Mr Woods responded:

"Please do not make any commitment without our authorisation. We also have a party interested in purchasing."

36 Mr Woods proceeded with his negotiations and on 13 July 2006 Griffith exchanged contracts with Aizever at $4.8m. That contract had some unusual features in that the deposit payable was but $100,000 and was payable within 7 days of the date of contract (cl 63). Clause 62 provided that the contract was dependent upon the purchaser obtaining finance. Clause 40.1(a) provided that completion of the contract was subject to and dependent upon Griffith City Council and any other necessary authority approving of the subdivision substantially in accordance with the plan of proposed subdivision annexed to the contract. That showed the land divided into 83 lots. Clause 40.1(d) provided that completion of the contract was subject to and dependent upon the issue by the Land Titles Office of a separate title upon the subdivision taking effect and the issue of a Certificate of Title allowing the property to be dealt with separately.

37 It was not a sale of the property in its "as is" condition. The terms of the contract with Aizever were so conditional that they would not satisfy the least demanding mortgagee.

38 Mr Woods said that he was invited to become a director of Aizever by a Mr Horton who apparently controlled the purchaser, a developer. Mr S Matthews, a financial broker who had acted for Mr Horton was present when the invitation was extended. Mr Matthews said that Mr Horton said that Mr Woods had a role to play in sales and marketing. Mr Matthews thought that could have an adverse impact on the purchaser's ability to raise finance. Mr Matthews added, "It was deemed that that was to become a minority shareholding role position and a directorial role at that point with the express intent of it being related to sales and marketing. In cross-examination Mr Matthews said that he understood that Mr Woods was to have some beneficial interest in Aizever. Mr Woods insisted that he was to be only a director.

39 Mr McIvor became concerned that this was not "an arms length transaction."

40 Mr McIvor said that Equititrust had gone into possession "Only more recently". Mr McIvor stated as early as April 2006 he was anxious that

(a) Equititrust should not become liable for GST
(b) Equititrust should not be liable to meet the Council's subdivisional charges including the head works charges (sewerage and water)
(c) the registration costs.

Mr McIvor said that as at April 2006 Equititrust was faced with an incomplete subdivision which could have led to very substantial liabilities for Equititrust if it had gone into possession.

41 Mr Woods in cross-examination agreed that the main basis for Griffiths' claim was that during the telephone conversation he had on 21 April 2006 Mr McIvor said that Equititrust would pay for the subdivision and council contributions. This was an oral agreement. Mr Woods also relied on the emails sent. Mr Woods gave this evidence.

"Q. So there is certainly no emails that were sent from you to Mr McIvor or from Mr McIvor to you in April 2006 that said Equititrust was going to pay the council contributions or for the registration of the plan of subdivision, was there?
A. No those terms and conditions were to be included in special conditions of the contract of sale that was being prepared."

42 No such conditions were included in the contract for sale between Griffith and Aizever. No other contract was produced which contained such conditions.

43 Nor did such conditions appear in the letter of 15 May 2006 summarising the position or in any of the written communications (in which I include emails) passing between Messrs McIvor and Woods. These were important conditions. Mr Woods said that these conditions were "a matter of a verbal conversation between Mr McIvor and myself" and they were never referred to or confirmed in any subsequent letter or facsimile.

44 This is odd when so many other matters were reduced to writing and Mr Woods did from time to time confirm the contents of conversations in writing. Mr Woods sought to explain the absence of written confirmation of the conditions by reference to the conditions to be included in the contract and Mr McIvor's knowledge that Griffith did not have the financial capacity to meet those obligations and that there would be no sale and no completion of the contract unless Mr McIvor under the facility agreed to advance those sums to Griffith Council.

45 I think that Mr McIvor probably mentioned that Equititrust was prepared to pay the Council contributions and for the registration of the plan of subdivision but only in the context of Griffith signing a contract for sale at $4.7 million with the buyer Equititrust had found. Mr McIvor believed that that buyer had the necessary cash and that the proposed sale would be completed promptly. If there was a prompt sale by Griffith to the buyer found by Equititrust that would result in Equititrust recovering most of the moneys due to it relatively quickly. Griffith, however, would still have substantial liabilities. Mr Woods mistakenly proceeded on the basis that Equititrust would pay the amounts in any event.

46 The proposed arrangement was never consummated nor reduced to writing.

47 Equititrust produced a detailed statement of indebtedness totalling $8,769,360.57. That included the principal, interest, default interest, amounts paid to contractors to carry out work and sundry advances paid in connection with work done or to be done.

48 As yet the property has not been sold. Equititrust has had to carry out a lot of work at the site.

49 Mr Woods submitted that Equititrust has not yet suffered a loss as the security asset has not yet been realised or disposed of and any perceived or real financial loss cannot be determined until the security property has been sold and liquidated.

50 That is not a permissible approach. Equititrust suffered loss when the loan was not repaid when it fell due. Under the guarantee the moneys payable under the contract Facility Deed and the Mortgage fell due and became payable. Under cl 3.1 of the Guarantee there was an unconditional guarantee of payment of the money secured under the Security at the time or times and in the manner provided. Further, the Deed contains an Indemnity in wide terms.

51 Equititrust does not have to wait until the security is realised before it calls on the guarantors. Mr Woods has promised to pay the amounts due under the Deed. If he pays the amount due he may seek contribution from the borrower. That is probably a theoretical remedy in the circumstances of the present case.

52 Mr Woods submitted that Equititrust should be estopped from obtaining a judgment in the amount sought and that any judgment should be limited to $250,000 as a result of a variation to the Loan Agreement (Credit Facility Deed) and Guarantee entered into between Equititrust and Mr Woods on 11 May 2006

53 The email of 11 May 2006 proceeded on the basis that if Mr Woods was not successful in selling the property for $5.5m in a timely manner and the sale of the property at $4.7m was completed promptly (presumably to the buyer introduced by Equititrust) Equititrust would require an additional $250k each from Mr Woods and Mr Boyle. It was not a general agreement by Equititrust not to pursue Mr Woods for more than $250,000. Neither eventuality took place. The "sale" by Griffith to Aizever at $4,8m, subsequently increased to $5m and which depended upon Equititrust paying the Council and registration costs (or someone else on behalf of the vendor paying those costs which was most unlikely) and Aizever being able to obtain finance was not within the contemplation of the email. Further, the email stated "This proposal is not binding unless in the form of an executed agreement satisfactory to us (Equititrust). It is also not negotiable … All rights reserved." Given the terms of the Credit Facility Deed and the Deed of Guarantee as well as the terms of the email an executed agreement was necessary.

54 Mr Woods relied on the steps taken and the emails sent but they were not sufficient and did not amount to a variation of the original deeds. Any alleged variations had to comply with the terms of the original deeds and a further executed agreement as set out in the email of 11 May 2006.

55 Mr Woods contended that Equititrust had attempted to create confusion as to whether the contract for sale of the property to Panorama or another buyer included Council contributions being paid and individual titles registered. I do not think that this is so.

56 Mr Woods conceded that Griffith was in default under the loan from February 2005. Mr Woods contended that this was due to the previous civil contractor going into liquidation and that Equititrust had taken over complete control and management of the subdivision. Mr Woods contended that Equititrust was at all times aware that Griffith had no financial resourses or capabilities since February 2005 and that the Griffith land was the only asset the company owned. Mr Woods submitted:

"The inconsistency [in Equititrust's position] arises in the constant threats being levelled by Mr McIvor to the second defendant if the second defendant did not sign the Panorama contract and do all things asked by the Plaintiff, however if the Panorama contract was exchanged how were registered titles to be provided if the Plaintiff did not intend paying the Council contributions in order to complete the sale. It is therefore obvious that the Plaintiff intended to register the titles under the Panorama contract in order to conclude the sale at $4.7 million."

(The second defendant is Mr Woods and the plaintiff is Equititrust).

57 Equititrust was entitled to decide the circumstances in which it would pay the Council contribution and registration costs. It was entitled to proceed upon the basis that it was prepared to pay these in respect of buyers it introduced, being satisfied that they probably had the cash to complete the sale promptly. It (Equititrust) was not prepared to pay them in respect of other proposed purchasers. The Aizever "contract" and Mr Woods' association with Aizever would not be acceptable to many a mortgagee in possession. This left it up to Griffiths or Mr Woods or some other person to pay the Council contribution and registration costs. Equititrust was under no obligation to pay these.

58 Mr Woods submitted that he has acted in total good faith in selling the mortgaged property and complied with all the requests of the mortgagee (Equititrust) based on the variation to the loan agreement of 11 May 2006 which Equititrust repudiated.

59 There was no effective variation of the original deeds. Mr Woods did not regard the various limited proposals of Equititrust for the sale of the Griffith land as satisfactory. He was not prepared to agree to the terms of Equititrust. Nothing was consummated. Any variations had to be embodied in a written agreement. Mr Woods was not entitled to take the parts of Equititrust's proposals that he liked and ignore the other parts of the proposals.

60 It should be pointed out that under cl 24.1 of the Credit Facility Deed Griffith irrevocably appointed Equititrust its attorney with extensive rights. Clause 24.2(2) provided that Griffith would from time to time and at all times ratify any exercise of a right by an attorney. See also the wide powers conferred on the Attorney under cl 24 of the Mortgage conditions contained in Memorandum 6306967U filed at Land and Property Information New South Wales. The mortgage is registered as No AA 244405H

61 Mr Woods submitted that Griffith has suffered damage as a result of the repudiation of Equititrust of the variation agreement and as a result of its alleged misleading conduct. Griffith quantified its damages from September 2006 until June 2008 as follows:

Auction cost $ 9.630.00

Legal costs – contracts preparation

& negotiations 4,685.00

Council rates from Sept '06-June'08 16,856.00

Land Tax 12,571.00

1st Mortgage interest & default charges

Sept '06 – June '08 $2,028,596.00

Directors time and expenses 16,432.00

$2,088,770.00

62 However, there was no effective variation agreement and therefore no repudiation by Equititrust. Nor was there any misleading conduct on the part of Equititrust.

63 The basic problem was that Griffith defaulted and that Mr Woods did not meet his obligations as guarantor. Mr Woods is presently liable to pay Equititrust the amount sought of $8,769,360.57. He will be entitled theoretically in due course to receive contribution from Griffith. Equititrust does not have to sell the Griffith land before it sues Mr Woods.

Decision
1. There will be a verdict in favour of Equititrust Limited for $8,769,369.57 with judgment accordingly against Mr Woods in proceedings 11461 of 2006.
2. Having regard to the terms of clauses 8 and 31 of the Credit Facility Deed and the Deed of Guarantee and Indemnity, especially cl 21.1 Mr Woods must pay Equititrust's costs on an indemnity basis and it is ordered accordingly in action 11461 of 2006.


3. In proceedings 20320 of 2007 there will be a verdict in favour of Equititrust Limited with judgment accordingly.

4. Griffith Development Company Pty Ltd is ordered to pay the costs of Equititrust Limited in action 20320 of 2007.

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