Hammer v Sunman
[1999] FCA 966
•16 JULY 1999
Hammer v. Sunman [1999] FCA 966
Trade Practices
TRADE PRACTICES - conduct that is misleading or deceptive - representations allegedly made under authority of first mortgagee of property to second mortgagee - express and implied representations - whether representations made - whether made with authority of first mortgagee - whether misleading - reliance - whether representation moved applicant not to take action it would otherwise have taken
Trade Practices Act 1974 (Cth) s 52
Fair Trading Act 1987 (NSW) s 42
Lam v Ausintel Investments Australia Pty Ltd (1990) ATPR 40-990 cited
Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) (1988) 39 FCR 546 cited
Yorke v Lucas (1985) 158 CLR 661 cited
ANDREW HAMMER, JOSEPH HAMMER AND JOLAN FULOP v ANTHONY SUNMAN
NG 259 OF 1996
LEHANE J
16 JULY 1999
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 259 OF 1996
BETWEEN: ANDREW HAMMER, JOSEPH HAMMER AND JOLAN FULOP Applicants
AND: ANTHONY SUNMAN Respondent
#DATE 16:07:1999
JUDGE:
LEHANE J DATE OF ORDER: 16 JULY 1999 WHERE MADE: SYDNEY
THE COURT ORDERS THAT:
1. The application be dismissed.
2. The applicants pay the respondent's costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 259 OF 1996
BETWEEN: ANDREW HAMMER, JOSEPH HAMMER AND JOLAN FULOP Applicants
AND: ANTHONY SUNMAN Respondent
JUDGE: LEHANE J DATE: 16 JULY 1999 PLACE: SYDNEY
REASONS FOR JUDGMENT
Background 1 This case concerns a block of units in Bondi Road, Bondi, known as the Palage. The Palage comprised 128 residential units, a small number (apparently three) of what were described as "commercial units" and fifty-five garages and car parking spaces. A strata plan had been registered in respect of the property, so that there was a separate marketable title to each of the units and each car parking space and garage. For some time up to 29 October 1993 the entire property was owned by a partnership comprising the applicants: Mr Andrew Hammer, his brother Mr Joseph Hammer and their sister Mrs Jolan Fulop. The partnership had several substantial investments in real property in the Sydney metropolitan area. In mid-1993 the applicants decided to make their most substantial investment: on 8 July 1993 they contracted to buy for $14,000,000 the building known as Caltex House in Kent Street, Sydney. They decided to raise a substantial part of that sum by selling the Palage.
2 The partnership had operated the Palage as a motel and serviced apartments. Shortly before 29 October 1993, the applicants had entered into contracts to sell thirteen units. On 29 October 1993 they sold the rest of the property: they sold to Foxprize Pty Limited (Foxprize) one hundred residential units, the three commercial units and the fifty-five garages and car parking spaces; they sold the remaining fifteen residential units to Destunija Pty Ltd (Destunija), a company associated with Foxprize. The principal of both Foxprize and Destunija was Mr John Hawkins, a real estate agent.
3 The total purchase price payable by Foxprize was $11,657,700. Of that sum, Foxprize borrowed from Permanent Trustee Australia Limited (Permanent) the sum of $7,600,000. It executed in favour of Permanent a first mortgage of the one hundred residential units. $2,557,700 came from the applicants by way of vendor finance: that finance was made available by two separate loans, one secured by a second mortgage of the one hundred residential units and the other by a first mortgage of the commercial units, garages and car parking spaces; but the two mortgages were "cross-collateralised"; that is, each was also security for the debt secured by the other. The balance of the purchase price came from a company called Maboli Pty Ltd (Maboli). Maboli also lent to Destunija to enable it to buy the fifteen units: both loans were secured by a first mortgage of those fifteen units, a third mortgage of the one hundred residential units purchased by Foxprize and a second mortgage of the three commercial units.
4 Permanent lent to Foxprize, and took its mortgage, as trustee of a trust known as the Howard Mortgage Trust, the manager of which was Howard Funds Management Limited (Howard). During the period with which this case is concerned, the chairman of directors of Howard was Mr Robert Blann. Mr Blann was also substantially interested in, and the moving spirit of, Maboli. The respondent, Mr Sunman, is a solicitor. During the relevant period, he was a sole practitioner, practising at Woollahra. He had acted for several years for what was known as the Howard group. He acted for Permanent and Howard on the transaction with Foxprize; he also acted for Maboli in relation to its mortgages. In addition, though I do not think that anything turns on this, he acted for Foxprize on sales of units which took place over some months after the purchase was completed. He did not, however, otherwise act for Foxprize in connection with its dealings with the three mortgagees.
5 It will be necessary, later in these reasons, to consider in detail some aspects of what happened after the loans were made, the purchase by Foxprize completed and the mortgages taken. For the present it is sufficient to record, without being more specific, that Foxprize defaulted and all the lots in the Palage were ultimately sold; and that, while realisations were sufficient to discharge Foxprize's indebtedness to Permanent, the applicants suffered a loss. They claim that that loss resulted from conduct of Mr Sunman, acting on behalf of Permanent and Howard, which, they say, infringed both the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1987 (NSW) and they claim damages from him accordingly. The applicants made similar claims against Mr Blann, who was joined as second respondent. However, on the fourth day of the trial orders were made giving effect to a settlement between the applicants and Mr Blann. Accordingly, the only issues outstanding are those between the applicants and Mr Sunman.
Applicants' claims 6 The conduct of Mr Sunman, on which the applicants rely, is pleaded in par 4 of the amended statement of claim and the issue of reliance is dealt with in par 5. I shall set those paragraphs out in full. Mr John Lloyd was the applicants' solicitor; otherwise the paragraphs speak for themselves:
"4. On 23 February, 1994 and at all times thereafter down to 4 August 1994 Permanent and Howard severally, each acting by and through Mr Sunman, represented to the Applicants:-(a) that Foxprize had paid all money due and payable by way of interest under Permanent's First Mortgage up to 28 February 1994 (`the First Representation').
(b) that until Permanent notified the Applicants to the contrary, Permanent would from and after 28 February, 1994 charge Foxprize interest payable under Permanent's First Mortgage at the lower concessional rate of 10.95% per annum and not at the higher penalty rate of 14.95% per annum notwithstanding that Permanent was entitled to charge Foxprize interest under Permanent's First Mortgage at the higher penalty rate (`the Second Representation')
(the First Representation and the Second Representation being together referred to as "the Representations").
Particulars
(i) The Representations were express and implied.
(ii) Insofar as the Representations were express they were made orally by Mr Sunman at a meeting between Mr Sunman, Mr Blann, Mr Andrew Hammer and Mr John Lloyd held on 23 February 1994.
(iii) Insofar as the Representations were implied, they were implied from the facts that Mr Lloyd, on behalf of the Applicants, wrote to Mr Sunman on 21 February, 1994, 25 February 1994, 10 March 1994, 24 March 1994 and 4 August, 1994 specifically referring to the Representation as orally expressed by Mr Sunman on 23 February 1994 in terms and in circumstances, (namely the circumstances referred to in paragraphs 1, 2 and 3) which imposed upon Mr Sunman a duty to the Applicants if their understanding of the Representation as made by Mr Sunman on 23 February 1994 were incorrect, immediately and in unequivocal terms, to disclose the true position to the Applicants.
5. In reliance on the Representations the Applicants did not immediately on 23 February 1994 or at any time thereafter down to 4 August 1994
(a) perceive that Foxprize had made default under the Applicants' Second Mortgage by failing to pay the interest due and payable under Permanent's First Mortgage up to 28 February 1994 and that in consequence thereof the margin of security for the Applicants' Second Mortgage had become and was continuing to be materially reduced
(b) insist upon Foxprize performing its obligation under the Applicants' Second Mortgage to deliver to the Applicants evidence that Foxprize had paid all interest due and payable under Permanent's First Mortgage up to 28 February 1994
(c) take steps to enforce their rights against Foxprize and its guarantors arising in consequence of Foxprize's default under the Applicants' Second Mortgage and under the Applicants' First Mortgage.
(d) redeem Permanent's First Mortgage and take a transfer to themselves as mortgagees of Permanent's First Mortgage, and thereafter retain the Common Security until able to sell the units comprising the same at prices sufficient to clear all moneys then owing under Permanent's First Mortgage and the Applicants' Second Mortgage (including the moneys secured under the Applicants' First Mortgage which were collaterally secured by the Applicants' Second Mortgage).
Particulars
The Applicants had, on 9 February 1994, served upon Foxprize notices under section 57(2)(b) of the Real Property Act 1900 requiring Foxprize to remedy its said defaults under the Applicants' Second Mortgage and the Applicants' First Mortgage referred to in paragraph 1(f)(ii) and 1(f)(iii) above."
7 It may be noted, first, that the conduct pleaded is that of Permanent and Howard severally, each acting through Mr Sunman, not conduct of Mr Sunman as principal; secondly, that crucial to the outcome of this case is what was said at a meeting on 23 February 1994 between Mr Sunman, Mr Blann, Mr Andrew Hammer and Mr Lloyd; and, thirdly, that it is said that the applicants suffered loss by reason of the conduct complained of because they did not (as, had they known the truth, they say they would have done) redeem and take a transfer of Permanent's mortgage. The applicants' damages claim rests on the proposition that had they been told the truth on 23 February 1994, they could and would have borrowed, at a rate of interest significantly less than that payable to Permanent, a sum sufficient to pay the full amount owing to Permanent and, having done so, would have sold the units in the Palage for a sum sufficient to recover all Foxprize's indebtedness to the applicants.
8 It is then pleaded that the representations were misleading and deceptive, or likely to mislead and deceive, contrary to s 52 of the Trade Practices Act and to s 42 of the Fair Trading Act: that was so because, it is said, Foxprize had not paid interest due to Permanent up to 28 February 1994 and Permanent charged Foxprize interest at the "higher penalty rate of 14.95% per annum". Mr Sunman is said to have been knowingly concerned in the contravening conduct of Permanent and Howard because at the time he made the representations, acting or purporting to act on their behalf, he ought reasonably to have known that the representations were false in material particular or were materially misleading.
9 One issue which obviously arises on that pleading is whether the conduct complained of, if it happened, was attributable to Permanent or Howard. The representations are said to have been made by Permanent and Howard, through Mr Sunman; the conduct of Permanent and Howard in making the representations is said to have infringed both the Trade Practices Act and the Fair Trading Act; Mr Sunman is said to be liable because he was involved in the conduct. It is not pleaded that conduct of Mr Sunman directly infringed the Fair Trading Act. Necessarily, therefore, a question arises as to Mr Sunman's capacity, or authority, at the meeting of 23 February 1994. Apart from that matter (and the related issue of Mr Sunman's "investment"), the factual issues between the parties may be summarised as follows. First, were the representations, or was either of them, made? Secondly, if either of the representations was made, was it false, misleading or deceptive? Thirdly, if so, did the applicants act, or refrain from acting, on the faith of it as pleaded? Finally, if so, have the applicants established that they have suffered loss in consequence in so acting, or refraining from acting, and, if so, in what amount?
Events preceding meeting on 23 February 1994 10 There were some differences in detail between the terms of the loan deeds and mortgages between Permanent and Foxprize and those between the applicants and Foxprize, and I shall return to the details which matter for present purposes, but in most respects they are identical: Mr Lloyd, in preparing documents for the applicants, used, by arrangement with Mr Sunman, the forms which Mr Sunman had used for Permanent. The amounts lent, of course, were different. The rates of interest, however, were the same: interest was payable to both Permanent and the applicants at what was described as a "Higher rate" of 14.95 per cent per annum reducible to 10.95 per cent per annum in the absence of default and if interest was paid within seven days of the due date. The provisions for the payment of interest differed and are in some respects, to say the least of them, confusing. In the case of the Permanent document, there seems to be a mismatch between the concepts of "Interest Period" and "Interest Payment Date" and, whereas each document provides clearly for the payment of interest in advance, I understood that it was accepted on both sides that it was payable in arrears. I do not think that in the end anything turns on this. What matters is that, whereas under the applicants' document interest was payable monthly, on the first day of each month, interest was payable to Permanent only on the first day of every second month, the first payment thus being due on 1 January 1994. The Permanent document provided, but the applicants' document did not, that interest was payable also on "the date upon which the Lender releases part of the Mortgaged Property upon receipt of a Prepayment".
11 "Prepayment" is of some significance. Each loan deed provided that the mortgagee would release from the security lots which were sold if, in the case of Permanent's document, Permanent received the greater of $80,000 and 85 per cent of the gross sale price of the lot sold and, in the case of the applicants, if they were paid a sum specified, in relation to the lot, in a schedule to the loan deed: the specified sums ranged between $10,000 and $22,000. Both loan deeds provided that, if Foxprize failed to make a payment of interest on the due date, the lender might capitalise the unpaid interest (cl 6.6); each also provided that, at the time of a partial discharge, the lender might appropriate all or part of the amount prepaid to outstanding interest. Clause 7.2(c) provided that:
"should there be [at the time of prepayment] monies due from the Borrower to the Lender on account of Interest or otherwise hereunder the Lender may at its discretion appropriate the sum of money received ... either as to Interest, Principal or otherwise in such manner as it may determine notwithstanding any direction as to the method of its payment or appropriation which may be given by the Borrower."
There was also, in cl 11.4 of each document, a general provision for "Appropriation where insufficient moneys available":
"Amounts received by the Lender should be appropriated between principal interest and other amounts as the Lender determines. Any such appropriation overrides any appropriation made by the Borrower."
12 The applicants, by 29 October 1993, already had reason, as a result of earlier transactions, to doubt the reliability of Foxprize and Mr Hawkins. Further reasons were not long in coming. Foxprize did not pay the interest due to the applicants on 1 December 1993 (or on any subsequent due date for payment of interest); additionally, Foxprize failed to perform obligations, undertaken in connection with its purchase, to do certain work on some of the units. During January, Mr Lloyd, on behalf of the applicants, prepared and served on Foxprize (and on certain guarantors) demands for payment; he also served on Foxprize a notice under s 57(2)(b) of the Real Property Act 1900 (NSW). Because of doubts about the validity of that notice, further notices were served subsequently; the precise history of that does not matter. Also in January, Mr Lloyd, on the instructions of the applicants, in turn instructed counsel to draw the documents necessary to institute proceedings in the Supreme Court of New South Wales to recover possession of the property mortgaged to the applicants. On 9 February, Mr Hawkins wrote to Permanent on behalf of Foxprize acknowledging that because Foxprize was in default under the applicants' mortgage it was in default also under Permanent's mortgage and that, accordingly, Permanent was entitled to take possession under its mortgage and to exercise its power of sale. Then, on 18 February, Foxprize executed, in favour of Permanent, a deed by which (if it were accepted) it surrendered possession to Permanent. Permanent, however, did not then accept the deed: instead, Maboli, apparently with the approval of Permanent and Howard, entered into a form of de facto possession which involved Maboli (through Mr Blann) controlling the continuing business (of a motel and serviced apartments) and, apparently, directing the process of selling units; where units were sold, however, Foxprize was named as vendor.
13 During January and February, Mr Lloyd and Mr Sunman spoke on several occasions and there was correspondence between them. On 24 January, according to Mr Lloyd, Mr Sunman told him that Permanent's interest had not been paid and that Permanent proposed to commence proceedings in the Commercial Division of the Supreme Court. Mr Sunman's evidence was that he did not recall stating that Permanent's interest had not been paid (he denied foreshadowing the commencement of proceedings), though he understood that in fact interest had not been paid. However, shortly afterwards Mr Sunman had a conversation with Mr Brett Howard, the managing director of Howard. The terms of the conversation are not controversial. Mr Sunman's account of it is as follows:
"Sunman: ... I understand from the second mortgagee's solicitors that they are in the process of commencing proceedings for possession because their interest has not been paid, and I think you should consider what action you should be taking in relation to your unpaid interest.Howard: I have seen Hawkins a number of times over the last week and I have agreed with him that we will apply parts of the purchase price from the sales of the units towards outstanding interest, and I have waived the penalties so that interest will be calculated at the lower rate.
Sunman: That's fairly generous of you.
Howard: I think he is trying very hard, and the Christmas/January period is not a good time for sales. The only thing is though, he has asked that we maintain the confidentiality of this arrangement and not tell Hammer.
Sunman: Why would he want that? I would have thought Hammer would be pleased that you've waived the penalties.
Howard: I don't know, maybe he just wants to keep his business to himself.
Sunman: I'm not comfortable with that. We have an obligation to answer the questions put to us by the second mortgagee. They are in the same position as the mortgagor requesting details.
Howard: Could we say, if they ask, that interest is `up to date' or `paid to the end of the month'?
Sunman: It would depend on the question they ask. It might be sufficient, but if they asked how the interest was paid or asked for a copy of the account we would have to tell them.
Howard: I agree with that. Let's see what they ask for."
14 Discussions and correspondence between Mr Lloyd and Mr Sunman during the period dealt with sales and partial discharges of mortgage; who had, or should have, possession of various parts of the mortgaged property; the Supreme Court proceedings which the applicants contemplated; a suggestion that Maboli might, on some terms, pay out the applicants' mortgages; and, particularly, the payment of interest. Some of the detail of what was said on the subject of interest is controversial; but what is clear is that there was some "off the record" (as Mr Sunman put it) or "without prejudice" (as Mr Lloyd put it) discussion of a possibility that a basis might be found for agreement that the various mortgagees would accept interest, despite default, at the rate of 10.95 per cent per annum. Then on 22 February Mr Sunman and Mr Lloyd had a conversation the terms of which are not substantially in controversy. It included the following exchanges:
"Lloyd: What is happening, is the Third Mortgagee taking possession?Sunman: The Third Mortgagee does not want to take formal possession. It wants to do things so that Foxprize is still registered as the owner. On the weekend there were four (4) sales and they are negotiating with others. The Third Mortgagee is putting in a lot of money for things like advertising, finishing the refurbishments, installation of intercom and garage doors. ...
Lloyd: In any event has the First Mortgagee been paid interest? Because if I settle today I may have to send out new notices and my clients are exposed. I thought you said that the First Mortgagee was paid to the end of February.
Sunman: I haven't got written instructions as to when the interest was paid to. I was only told verbally by the First Mortgagee that it couldn't exercise its rights until after the 1st March, 1994 as until then there was no default.
Lloyd: I want a conference of the Mortgagees as my clients will not tolerate this matter getting out of their control. They are at risk, especially if the first mortgage is in default. ..."
15 Mr Lloyd wrote to Mr Sunman on the same day seeking confirmation of a number of the matters discussed and reiterating his strong request for a meeting. Among the matters of which Mr Lloyd sought written confirmation was the following:
"Please advise if the First Mortgagee, Permanent Trustee Australia, has been paid interest up to and including the 28th February, 1994 and whether that company considers that the mortgagor has complied with the terms and conditions of the mortgage as at the date hereof and up to and including 28th February, 1994."
16 Mr Sunman did not reply to that letter. However, a meeting - the crucial meeting - was held the following day at Mr Sunman's office.
Meeting on 23 February 1994 17 The meeting began at 8:45 am and continued for about one hour. Those present were Mr Sunman, Mr Blann, Mr Andrew Hammer and Mr Lloyd. Though there are sharp differences about some aspects of the discussion, there is substantial common ground, generally, as to what was said. The appropriate starting point, I think, is the most detailed account, that of Mr Sunman. He had previously given an account in an affidavit sworn in the Supreme Court proceedings ultimately commenced by the applicants to seek an order for possession under their mortgages. Mr Sunman's record of the conversation, assisted by a review of that earlier account, was as follows:
"Sunman: Well John you have asked for this meeting, what do you want to know?[At this point Mr Lloyd may have said the meeting was to be without prejudice on all sides but I cannot presently recall.]
Sunman: Before we begin, I want to make clear who Mr Blann and I are representing. Whilst I act for the first mortgagee and Mr Blann has some influence with the Mortgage manager, we are not representing the first mortgagee, and the first mortgagee is therefore not at this meeting.
Lloyd: We are here to discuss what the future of this matter will be, in view of the default of the mortgagors. Firstly, can you (Mr Blann) tell us the manner in which you are apparently in possession of the property.
Blann: Interest has not been paid to the third mortgagee and I had a discussion with Mr Hawkins, who at my request put a representative of the third mortgagee, i.e. myself into defacto possession of the building for the purposes of running the short term accommodation/motel type business and the management of the continued efficient and orderly sale of the balance of the lots in the building.
Lloyd: Mr Blann, tell me what exactly is being done in the premises and in what capacity are you in the property.
Blann: Although we have a Deed of Surrender of Possession to Permanent Trustee duly signed by Foxprize, that Deed is in the hands of Mr Sunman, but has not been formally accepted, as I am of the view and so is the first mortgagee, that an orderly sale of the units, ostensibly in the name of Foxprize is the preferred way to proceed so that all mortgagees obtain a maximum return. In my view the best way to sell the units is by way of contracts which guaranteed incomes to proposed purchasers. This would mean that the management business of the building would continue.
Lloyd: Before my clients sold the building, they were selling the units simply as units and anyone who bought could either move in or lease it in the normal course. At that time there was no lease-back arrangement and yet there were lots of enquiries to purchase in those terms. We are not happy with the idea that there are guarantees being given.
Blann: Well I am in the property now. We have taken the view that this is the way to sell it and this is the way we intend to continue.
We will have to put money in to complete the renovation of the common areas of the units, and it is only on this basis that we will do so.
Hammer: Do you know what has happened to the income from the business?
Blann: No, we are still trying to find that out, we feel that there has been more earned from the business than has been spent on the renovations, but we are still looking into that.
Lloyd: My clients are particularly exposed should the first mortgagee's interest accrue, and the longer it takes to sell these units, the more the first mortgagee's interest will accrue. Has the first mortgagee's interest been paid?
Sunman: The first mortgagee's interest has been paid up to 28th February, but immediately after that date, given the present circumstances, Foxprize will obviously not be able to pay interest, as it is unable to do so, and will be in automatic default under the mortgage. Let's have an orderly sale programme.
Hammer: Do you think that selling the units with a lease-back is a proper way to go? Another way would be to sell them with vacant possession.
Blann: I think this is the quickest way and the best way to get the highest prices.
Sunman: As we have said, Mr Blann has people going through the books of the motel and assessing whether or not he is prepared to advance any further monies to get the units renovated and sold more quickly. A critical issue in making that decision is what is your attitude to continuing to grant partial discharges of your second mortgage over the units, and carspaces for the amounts stated for the respective units and carspaces in your Deed of Loan.
Lloyd: We will probably agree to do that provided any further surplus was also paid to us to go towards paying out interest.
Mr Hammer is very worried about the present situation as Foxprize hasn't paid the interest on either his first or second mortgages and there are very few sales taking place.
Sunman: I understand your concern, but the situation may not be that serious. If proper steps are taken, everyone should receive all monies due to them. I have made a calculation of the possible outcome of all sales, this has been calculated on the assumption that there is agreement that all the mortgagees will charge interest at the lower rate.
Hammer: Can I have a copy of your calculations, as I can't understand what you are saying without seeing it.
Sunman: Certainly, I will get a copy made. (I left the room and had copies made of the documents, copies of which are annexed and marked `ADS 6').
Lloyd: Your figures may or may not work, but certainly would not work if a certain number of lots were not sold per week. If these proposals were to be implemented, you would need to refer to the minimum number of lots that would be sold weekly and we would also refer to matters such as interest rates being charged by all parties concerned including the first mortgagee, and in what way my clients would start getting interest during any possible proposed orderly sale period.
Sunman: Do you agree to accrue interest under your mortgage at the concessional rate if the trustee does?
Lloyd: We are not agreeing to anything. At the moment we are concerned for our principal, let alone the rate of interest. We are looking for a complete package. We are here to find out what you propose to do.
Sunman: Maboli is obviously the most vulnerable. As third mortgagee, it can only recover after both principal and interest of the first and second mortgages are repaid. If they are willing to put in more money to get the units in a saleable condition, it can only ultimately be to your client's benefit.
Lloyd: This will only work if a sufficient number of units are sold every month and we have to keep an extremely close eye on it. This can only be a temporary arrangement. If not enough sales are made in an orderly sale regime, then units will have to be sold by the mortgagees under the power of sale.
Sunman: I believe that if we keep control of the situation, and sell the units in this manner, it will work out with everyone getting paid.
Hammer: We want to know exactly what is going on. We may leave things as they are in the meantime with Maboli attending to orderly sales, but we want regular updates, perhaps daily or once a week.
Blann: I agree with that, we will talk each week.
Sunman: I will do a draft priority deed as between the second and third mortgagees and send that to you.
Before the meeting ended, I recall again asking Mr Lloyd:
Sunman: Do you agree to accrue interest under your mortgage at the concessional rate if the trustee does?
Lloyd: We are still considering that."
18 A number of questions arise. The first is whether Mr Sunman announced, at the beginning of the meeting, that he did not represent Permanent at the meeting and that Permanent was not there. Mr Andrew Hammer and Mr Lloyd both gave accounts of the meeting; neither included that statement. However, Mr Hammer, when asked whether Mr Sunman, near the beginning of the meeting, said that although he was the solicitor for Permanent, he was not representing Permanent at the meeting, answered "he might have said that". And Mr Lloyd gave the following evidence:
"By the way, Mr Sunman had made clear at this meeting just after you said it is without prejudice, that he was not there representing Permanent Trustee and that he was there representing Maboli? - To the best of my recollection that is true.He is of course the solicitor for Permanent Trustee but he has made clear at the meeting that for today's purposes he has his Maboli hat on? - I don't even know if he said `I am not representing' - if he said anything. He said that the first mortgagee is not here. Rough words to that effect."
Mr Lloyd, however, was not prepared to concede that that meant that things said by Mr Sunman during the meeting, concerning the first mortgagee, would not then and there bind the first mortgagee. However that might be, in the light of that evidence I accept that Mr Sunman used substantially the words, in relation to the first mortgagee, which he attributes to himself.
19 Secondly, there is a question whether Mr Lloyd said that the meeting was to be without prejudice on all sides. Mr Sunman did not recall; Mr Hammer was "not certain" but would not deny it. Mr Lloyd, like Mr Sunman, had given two accounts, one in the Supreme Court proceedings and a second for the purposes of these proceedings. In the former, he had attributed to himself the statement that the meeting was to be without prejudice on all sides. His second account omitted that statement. Mr Lloyd's cross-examination included the following exchanges:
"... The Supreme Court affidavit, in its account of the meeting of 23 February, commences by recording that you said the meeting was to be without prejudice on all sides and Mr Sunman agreed. Is that true? - I think that was true.Why did [you] not include that in paragraph 25 of the affidavit in these proceedings? - I omitted to do it, there's no particular reason, I just omitted to do it, it wasn't in my recollection. ...
When you said the meeting was to be without prejudice, did you mean by that anything you said at the meeting could not be held against you or your client? - When I, normally when I say without prejudice at a meeting, that is the intent ...
So from your point of view you understood that by uttering those words you and your client could not be held bound to whatever you might say during the meeting? - I would say that's true.
You didn't say, this meeting is without prejudice on our part. You said, it's without prejudice on all sides? - Well, I didn't say on all sides.
Just have a look at your Supreme Court affidavit, Mr Lloyd. Did you say `this meeting is to be without prejudice on all sides'? - It does say that.
Yes? - I don't recall me saying, `on all sides'."
To the extent that it matters, the appropriate conclusion is, I think, that Mr Lloyd said that the meeting was to be without prejudice and did not limit that proposition to his own side, and I so find.
20 Thirdly, and importantly, there is the question, what was said about interest? There are two aspects of that question, one relating to each of the pleaded representations. For the present, I shall simply describe the competing accounts. I shall consider later the findings to be made.
21 The first aspect is the alleged representation about payment of Permanent's interest up to 28 February. Again, it is convenient to start with Mr Sunman. His account accepts that the topic arose in the context of a concern, expressed by Mr Lloyd, that the applicants, as second mortgagees, had an exposure which increased as Permanent's interest accrued and the sale process was delayed. Mr Sunman said, according to his own version, that interest had been paid up to 28 February but immediately after that date, given the present circumstances, Foxprize would not be able to pay interest, as it could not, and would be in automatic default. Mr Sunman added, "Let's have an orderly sale programme".
22 Mr Lloyd gave two accounts, one in the Supreme Court proceedings and the other in his affidavit for these proceedings. Mr Sunman, in his Supreme Court affidavit, did not dispute this aspect of Mr Lloyd's earlier account. In that earlier account, Mr Lloyd attributed to Mr Sunman this statement:
"The First Mortgagee's (Permanent Trustee Australia Limited) interest has been paid up to and including the 28th February, 1994 but immediately after that date the mortgagor would obviously not pay any more interest as it was unable to do so then there would be an automatic default under the First Mortgage. However, if orderly sales continue the First Mortgagee would capitalise its interest."
23 His more recent account bears, except in one striking respect, a close resemblance to that earlier account and, with a similar striking exception, an even closer resemblance to Mr Sunman's account (Mr Lloyd's affidavit was sworn and filed earlier than Mr Sunman's). Mr Lloyd's second account has Mr Sunman saying:
"The First Mortgagee's interest has been paid up to the 28th February. But immediately after that date Foxprize will obviously not pay any more interest as it is unable to do so and there will be an automatic default under the first mortgage. Let's have an orderly sale programme. Everyone including you will charge interest at the concessional rate of 10.95%."
24 Mr Andrew Hammer gave two accounts in his affidavit evidence, a very brief account in an affidavit sworn on 24 October 1996 and a more extended version in an affidavit of 30 March 1998. The earlier of the two accounts is as follows:
"Me: Are you telling us that Foxprize has paid the interest due under the first mortgage?Sunman: Yes. Interest had been paid up to the end of the month."
The later account attributes the following exchange to Messrs Lloyd and Sunman:
"Lloyd: What is the position with respect to Foxprize's obligations to Permanent Trustee under the first mortgage? Are Foxprize's interest payments up to date?Sunman: Yes. Foxprize is up to date. It has paid interest due under the Permanent Trustee First Mortgage up to the 28th February, 1994."
Then, towards the end of the meeting, Mr Hammer, according to his account, sought confirmation:
"Hammer: Did I understand it well that Foxprize has paid all the interest to Permanent to the end of February?Sunman: Yes, it has paid to the end of February."
25 There is, of course, no doubt - it is a theme common to all of the accounts - that Mr Sunman said that Permanent's interest had been paid to the end of February. The reason why it may be important to know how it was said, however, is the meaning the applicants seek to attribute to it, namely that the interest had been paid by Foxprize from its own resources: it had not been capitalised nor had it been paid from the amounts received by Permanent upon sales of units (twelve) which had been completed. It may be interpolated that the undisputed fact was that Foxprize had not paid interest to Permanent from its own resources in that sense. In fact, the interest payable on 1 January had been paid not by appropriating sale proceeds, as was intended, but by capitalisation: as Mr John Thomas, an officer of Howard who was responsible for the day-to-day management of the Palage loan, explained to Permanent in a letter of 10 January 1994:
"On 24 December 1993 units 413 and 416 both settled however, as I was absent on that day, the net proceeds of these sales amounting $160,000.00 was erroneously applied as a principal reduction instead of firstly reducing outstanding interest of $144,600.00.Accordingly we have journalled $144,600.00 from principal to interest in accordance with the provisions of the mortgage agreement."
If it matters, there is no suggestion that Mr Sunman knew about that. He knew that Foxprize had not paid the interest from its own resources; his belief was that it had been appropriated from sales proceeds, in accordance with the arrangements of which Mr Howard had informed him.
26 In cross-examination Mr Hammer maintained his version of what had been said. Mr Lloyd, whose affidavit in this respect substantially mirrored Mr Sunman's version, asserted in cross-examination that Mr Hammer asked the direct question, "Did Foxprize pay the interest?" He did not include that in either of his affidavits because, as he said, "I didn't think that that part was material". Mr Hammer's version was not put to Mr Sunman in cross-examination; indeed, the cross-examination of Mr Sunman proceeded on the basis that his evidence about the words which he used was correct. Similarly, closing submissions on behalf of the applicants proceeded on the footing that Mr Sunman's version, from the applicants' point of view, was sufficient; there was what can fairly be described as a passing reference to the version given by Mr Hammer in his two affidavits.
27 As for the second representation, I have already quoted Mr Lloyd's evidence. He attributes to Mr Sunman, at the end of his statement about payment of interest up to 28 February, likely subsequent default and the desirability of an orderly sale programme, the words "Everyone including you will charge interest at the concessional rate of 10.95%". His Supreme Court affidavit did not attribute those words to Mr Sunman: rather, in the context of the proposal that there be an orderly sale programme, his evidence had been that he, Mr Lloyd, had said:
[Your] figures may or may not work but certainly would not work if a certain number of lots were not sold per week. If these proposals were to be implemented we would need to reduce it to writing which would then need to refer to the minimum number of lots that would be sold weekly and which would also refer to matters such as interest rates being charged by all parties concerned, including the First Mortgagee (Permanent Trustee Australia Limited) and in which way my clients (the Plaintiffs) could start getting interest during any proposed orderly sale period. We would also need information from the First Mortgagee on a running basis as to the principal and interest outstanding from time to time."
28 Mr Sunman's response, recorded by Mr Lloyd, was simply "At the moment I don't have instructions from the First Mortgagee ... as to what precisely it is willing to do".
29 Mr Hammer's evidence, in his earlier affidavit, was that "at a later time during the meeting" Mr Sunman said "the first mortgagee will only charge interest at 10.95% instead of 14.95% in the meantime until you are notified to the contrary". In his affidavit of 30 March 1998, he deposed to the following exchange between Mr Lloyd and Mr Sunman:
"Lloyd: Mr Hammer is very worried about the present situation as Foxprize hasn't paid the interest on Mr Hammer's First and Second Mortgages and there are few sales taking place.Sunman: I understand your concern but the situation is not so serious. If proper steps are taken everybody will receive all moneys due to them. I have made a calculation of the possible outcome of all sales. Permanent will only charge the lower rate of interest, 10.95% and not the penalty rate, even though it would be entitled to charge the penalty rate."
Mr Sunman denied the statements, as to the interest rates which Permanent would charge, attributed to him by Mr Lloyd and Mr Hammer. He accepted that he remarked, when referring to his calculations, that they had been made on the assumption that all mortgagees would charge interest at the lower rate.
30 I shall defer discussion of the evidence given in cross-examination about this alleged representation.
31 The handwritten "calculations" handed over by Mr Sunman at the meeting assumed some significance. They are as follows:
"@ 28th February
Garage/car spaces yet to complete 46 @ 10 K
460,000
10,580,000"
It is not disputed that that document is substantially correct so far as it states the amount owing to the first mortgagee as $6,900,000 and correct in stating that no interest was due to Permanent, but unpaid, as at 28 February. It is also clear that, had any of the participants in the meeting turned his mind to the question, he would have realised that if, as was the case, Permanent had received at least $80,000 upon completion of the sale of each of the units which had been sold, then the full amount so received had not been applied to the principal: it must have been applied to something else, presumably interest.
Events following the meeting 32 Mr Hammer reflected overnight on what had passed at the meeting; the following morning he spoke to Mr Lloyd who, in turn, wrote to counsel, Mr Gray. The letter was lengthy. It informed Mr Gray of what had happened before and during the meeting and sought his advice on various matters. It is quite plain that Mr Lloyd was, throughout the course of the dealings concerning the Palage, heavily dependent on Mr Gray. Sufficient has been disclosed (as a result in many cases of waiver of a privilege which had been claimed) to demonstrate that there was a constant flow of discussion and correspondence between Mr Lloyd and Mr Gray throughout the relevant period. In his letter of 24 February, Mr Lloyd recounted the discussion of the informal taking of possession of the mortgaged property by Maboli, the proposed orderly sale programme, including the method of selling with a lease-back, and the statements made about payment of interest to Permanent. On that topic, Mr Lloyd wrote:
"Further discussions took place as to whether the First Mortgagee had been paid its interest, as we indicated that our clients were particularly exposed should the First Mortgagee's interest accrue and that the longer the period of not selling the Lots the more the First Mortgagee's interest would accrue. We were advised by Mr Sunman that the First Mortgagee's interest had been paid up to and including the 28th February, 1994 but that immediately after that date, the Mortgagor would obviously not pay any more interest as he was unable to do so and that there would be automatic default under the First mortgage. However, if orderly sales continued the First Mortgagee would capitalise its interest. We advise [sic] that this scenario would be very unsatisfactory to our client as interest of the First Mortgagee amounted to something in the vicinity of $2,100.00 per day. ..."
Significantly, Mr Lloyd informed Mr Gray that, having initially been disposed to acquiesce in the orderly sale programme, the applicants on further reflection had decided that they wished to arrange an immediate mortgagee sale of the remaining lots for a number of reasons, the underlying concern being the likely increase in their exposure, and decrease in their margin of security, should the process continue for a substantial period while Permanent capitalised interest falling due to it but unpaid.
33 Mr Gray's advice has not been disclosed.
34 It is sufficient to describe later events briefly, and with a fairly broad brush.
(a) Deeds of priority 35 There had been discussion at the meeting on 23 February of a suggestion that some agreement in writing should be reached between the mortgagees. Mr Sunman prepared draft deeds of priority between the applicants and Maboli. Among other things, those documents would have confirmed the applicants' obligation to discharge from their security lots which were sold upon payment of the scheduled amounts. They would also have incorporated an agreement by the applicants that if Permanent calculated the interest due to it by Foxprize at the lower rate, the applicants would do likewise. Mr Sunman pressed Mr Lloyd to arrange for prompt execution of the deeds of priority. Mr Lloyd, however, sought the advice of Mr Gray on them and, having received that advice, proposed a considerably more elaborate document, to which Permanent would have been a party as well as the applicants and Maboli. That document was sent by Mr Lloyd to Mr Sunman on 15 March. Mr Sunman made it clear that the revised document was not acceptable and that, particularly, Permanent could not and would not agree to be a party to such a document. There the matter rested. No documents, of the kind contemplated at the meeting, were ever executed.
(b) Payment of interest out of sales proceeds 36 On 9 March 1994 Mr Sunman informed Mr Lloyd that Permanent was applying sales proceeds to interest. Evidently, that came as a surprise to Mr Lloyd. In a letter which he wrote to Mr Sunman on the same day he complained in general terms about what he saw as a process whereby the applicants were kept in the dark, punctuated from time to time by surprising discoveries. He went on:
"It was only in our discussions today that it was revealed to us that the First mortgagee had applied moneys received and receivable in relation to recent and imminent settlements to payments of its interest rather than its principal. This action by the First Mortgagee, as we explained to you, was extremely important for our clients' security, and may be of some comfort."
Mr Sunman agreed to provide a letter from Howard confirming that Howard would indeed apply proceeds to interest. That letter was provided on 10 March. Howard confirmed two matters:
"I confirm that it is our intention to continue applying proceeds of sale as indicated above. Should this position alter, we will give the second mortgagee appropriate notice.I also confirm that we are prepared to make available to the second mortgagee ... a monthly statement of transactions on the above mortgage."
37 Meanwhile, on 10 March, Mr Lloyd, in a long letter to Mr Sunman, returned to his theme:
"We also note in the Writer's discussions with your Mr Sunman yesterday, Mr Sunman indicated to the Writer that in relation to the Deed, the Mortgage manager intended to and was applying payments received in favour of the first mortgagee of any settlement of any units in payment of outstanding interest rather than principal. As we indicated we were surprised that this information had not been forthcoming from you as it was central to our client's concern as to the time it would take to have an orderly sale proceed. When we raised the question of why we were not appraised [sic] of the first mortgagee's intentions in this regard the Writer was simply told, `Well, you didn't ask'. We would have thought that a decision such as abovementioned was essential information to be passed on to the second mortgagees, as the second mortgagees would not have any way of contemplating asking a question relating to the first mortgagee's policy."
(c) Supreme Court possession proceedings 38 By 24 March 1994 it was clear that the applicants had rejected the "orderly sale" proposal. On that day Mr Lloyd wrote to Mr Sunman:
"Unless we receive your advices by 5 p.m. today that Permanent Trustee Australia Limited will exercise its Power of Sale and that the Registered Proprietor is prepared to execute a Deed of Surrender to our clients, we have been instructed to commence proceedings in the Federal Court to obtain possession of all the relevant lots in the Strata Scheme and thereafter to exercise our clients' power of sale."
39 The applicants filed their summons in the Commercial Division of the Supreme Court in mid-April. Permanent was not named as a defendant. Mr Sunman found out about the issue of the summons shortly before its return date, 29 April. He instructed counsel to appear on behalf of Permanent, to apply to have Permanent added as a defendant and to inform the Court that Permanent had taken possession under the deed of surrender delivered to it some months earlier. It is not necessary to trace the course of the proceedings. On 11 October 1994 the applicants obtained a money judgment and, as against Foxprize, an order for possession.
(d) July and August account statements 40 Howard, in its letter of 10 March 1994, had undertaken to supply to the applicants, through Mr Sunman's office, monthly statements in relation to Foxprize's account with Permanent. Howard did not hasten to do so. Mr Lloyd wrote a series of letters to Mr Sunman seeking assurances that Permanent would retain possession under its first mortgage, indicating considerable dissatisfaction with the speed at which lots were being sold and making, and repeating, requests for the provision of accounts. In a letter of 5 July, after complaining that he had great difficulty in discussing with Mr Sunman matters going to the relationship between Permanent and the applicants because of Mr Sunman's other role as solicitor for Maboli, Mr Lloyd wrote:
"Would you please reply to our letters of the 9th, 20th, 21st, 22nd, 23rd and 28th June, 1994 in relation to information sought concerning the First Mortgagee's accounting in relation to payments of principal and interest under its mortgage."
Mr Lloyd sent a further, even more insistent letter, on 7 July. Finally, at a meeting on 27 July, Mr Sunman was handed a print-out headed "draft" which accounted for interest and principal due from, and payments made (or credited) by, Foxprize to Permanent. That document revealed that outstanding interest had been capitalised on 7 January 1994 and that, subsequently, sales proceeds had been allocated, in part, to interest. It showed also that interest had been accrued at the lower rate of 10.95 per cent per annum. On 4 August Mr Lloyd wrote to Mr Sunman. Among other things he wrote this:
"We also note that at the meeting of the 27th July, 1994 we were handed a `Draft Schedule of moneys owing by Foxprize Pty. Limited to Permanent Trustee Company ltd. Our clients are perusing same. We would, however, make the comment that at a meeting which took place on the 28th February, 1994 [sic] between Mr. A. Hammer, Mr. R. Blann, Mr. R. A. Sunman and the Writer, in response to a question whether the interest had been paid to Permanent Trustee Company Limited by Foxprize Pty. Limited, your Mr. Sunman stated that `Interest has been paid to the end of February. No doubt Foxprize will not be able to pay interest on the 1st March, 1994, at which time the Power of Sale will arise'. It would appear that such statement was misleading as it is now obvious, that the First Mortgagee capitalised its interest from the commencement of the mortgage, as the Mortgagor never actually paid interest. Had our clients been aware of this fact they would, no doubt, have adopted a different course: in particular they would have called up those mortgagors immediately at that stage."
Mr Lloyd proceeded to complain about a perceived conflict of interest on the part of Mr Blann and to give notice that the applicants would "be taking the appropriate proceedings against all relevant parties as a result of losses which our clients have suffered and will hereafter suffer directly as a result of the actions of the First Mortgagee, its agent or manager or Foxprize Pty. Limited or Mr. Hawkins."
41 On 16 August Mr Lloyd wrote that he required "an up to date accounting which is more definitive [than] the `draft' which was handed to our client, Mr. Andrew Hammer, at a meeting between Mr. Hammer, Mr. Sunman, Mr. Blann and the Writer". During August a revised document was provided. A significant number of adjustments had been made. Notably, interest was charged at 14.95 per cent per annum from 1 March 1994; and all interest payments falling due were treated as capitalised on the due date.
(e) Redemption proposals 42 Mr Lloyd continued to express, in correspondence with Mr Sunman, discontent with the way in which, and particularly the rate at which, units in the Palage were sold. On 31 October 1994 Mr Sunman sought the applicants' reaction to a proposal, submitted by an agent, for the "bulk sale" of the forty-eight units then remaining unsold. The proposal was, in essence, that a single purchaser buy twenty-four units for $82,000 each, settlement to take place between six and eight weeks after exchange, and the remaining twenty-four units for $100,000 each, settlement to take place one year after exchange. Mr Sunman provided Mr Lloyd with two "scenarios" prepared by Howard, one contemplating sale of all units separately, the other assuming acceptance of the bulk sale proposal. Mr Lloyd on 4 November sought Mr Hammer's instructions. He concluded his letter with the following observation:
"We note that you may also wish to discuss with us the question of paying out the First Mortgage altogether and taking a transfer of the unsold units. We presume that this will only be mooted if Alternative B [the bulk sale] was not to be employed by the First Mortgagee."
Mr Hammer's instructions in response to that letter are reflected in a letter which Mr Lloyd wrote on 7 November to Mr Sunman:
"Our clients urge the first mortgagee to adopt Alternative B. ... If Alternative B is to be adopted, then as at the settlement of the first 24 units within 6 to 8 weeks of exchange of Contracts, our clients would take a transfer of the balance of the First Mortgage to themselves or their nominee. ...If, despite this expression of our clients' preference for expeditious realisation of the security property, the first mortgagee adopts Alternative A, and in consequence our clients sustain increased losses, the amount of the increased losses will be included in any claim which our clients may make against the first mortgagee when the security property has been fully realised."
43 A letter from Mr Sunman commenting on Mr Lloyd's proposal and asking for clarification of aspects of it elicited a somewhat revised version. The revised proposal was, however, overtaken by the event that the first mortgagee elected to pursue alternative A, rather than alternative B. Mr Lloyd responded that the applicants wished to discharge Permanent's first mortgage immediately. Further correspondence ensued as to whether, among other things, Permanent was entitled to demand a release and what should be done about sales made, but not completed, by Permanent as first mortgagee. Ultimately, the proposal did not proceed: by late February 1995 contracts had been entered into to sell all the remaining lots.
Consideration of issues between the parties (a) The representations 44 I shall deal first with the second of the two representations pleaded. It is:
"that until Permanent notified the Applicants to the contrary, Permanent would from and after 28 February, 1994 charge Foxprize interest payable under Permanent's First Mortgage at the lower concessional rate of 10.95% per annum and not at the higher penalty rate of 14.95% per annum notwithstanding that Permanent was entitled to charge Foxprize interest under Permanent's First Mortgage at the higher penalty rate."
45 There was no suggestion that this representation was made otherwise than expressly and orally at the meeting on 23 February 1994. Although the particulars to paragraph 4 of the amended statement of claim suggest that the representations (both of them) were express and implied, the correspondence referred to in the particulars as to representations "insofar as they were implied" plainly relates only to the first representation: that interest had been paid up to 28 February. There is no doubt that at the meeting there was discussion, as there had been discussion previously between Mr Sunman and Mr Lloyd, of a possibility that the mortgagees would charge interest at the concessional rate. According to Mr Sunman's account, he raised the topic himself: he asked Mr Lloyd if the applicants would agree to accrue interest at the concessional rate if the trustee did so, to which, according to Mr Sunman, Mr Lloyd replied that the applicants were not agreeing to anything. Mr Sunman's account also records his suggestion that he would prepare a priority deed; he did so subsequently, and the document contemplated that interest should be charged at the concessional rate.
46 It is, of course, by no means surprising that the correspondence during the months immediately following the meeting did not refer to the second representation, assuming that it had been made. The applicants had no reason to suppose that Permanent was charging interest at any rate other than the concessional rate, and the draft statement of account presented to Mr Hammer in July confirmed that that was what had been done. Nor, perhaps, is it surprising that Mr Lloyd would not particularly have thought of the second representation (assuming that it was made) when he prepared his affidavit for the Supreme Court proceedings: that affidavit was, after all, sworn on 9 June 1994. What is, perhaps, rather more surprising is that the original statement of claim filed by the applicants on 29 March 1996 made no mention of the second representation but complained only of the first. It is also somewhat surprising that, by contrast with what was said in correspondence about the first representation, there was, so far as the evidence goes, no immediate, or even delayed, protest once it became evident in August 1994 that Permanent proposed to claim interest, accrued after 28 February 1994, at the higher rate.
47 Additionally, there are aspects of the evidence of Mr Hammer and Mr Lloyd about this representation which, I think, do not inspire great confidence in it. First, I have mentioned that there might be nothing particularly surprising about the omission of an account of the second representation from Mr Lloyd's Supreme Court affidavit. However, that affidavit does include the following exchange which, of course, finds an echo in Mr Sunman's evidence:
"Did you read the document before you filed it? I read it cursorily but not critically.Did you satisfy yourself that it reflected the instructions you had received over an extended period from Mr Hammer? - No, I didn't.
Did you rely upon some other person as having performed that task? - Yes, I - counsel basically drew that up. I had a look at it - I didn't critically look at it.
To your knowledge, had counsel, that's Mr Gray had the benefit of any conferences with Mr Hammer prior to counsel providing you with the draft for filing? - To the best of my recollection, no, because he was involved in these proceedings throughout and he had information to be able to ...
Your practice was to fire letters off to Mr Gray as and when events occurred and he would then respond with his usual promptitude, is that right? - Yes.
When he came to draft this, did he still have, to your knowledge, in his chambers, all of the material that you had exchanged between you over the previous, almost 2 years? - I don't recall, I think that he may have sent some of the material back to me in relation to other matters, I don't know what he had."
72 Whether Mr Hammer saw or considered the document or not (I am inclined to think he did not) it would be surprising if the pleading took the form it did if, as he says, Mr Hammer had made clear to Mr Lloyd what he would have done had he been told the true position on 23 February.
73 In summary, I find it difficult to see, and it has not been explained, why on 23 February it would have made a difference, in the circumstances, to know by what means interest had been paid; Mr Lloyd's evidence about what he was told by Mr Hammer of what the applicants would have done notably lacks specificity; the other applicants, with whom Mr Hammer says he discussed what might be done, did not give evidence; later actions and correspondence do not provide support for the proposition that the applicants would have redeemed Permanent's mortgage; to the extent that they suggest what the applicants would have done, they suggest that the applicants would have taken a different course. Having regard particularly to those matters, I am not satisfied, on the balance of probabilities, that, had Mr Sunman not made the first representation, the applicants would have paid out and acquired Permanent's mortgage. That conclusion does not involve, as counsel for the applicants suggested that such a finding would involve, a conclusion that Mr Hammer and Mr Lloyd conspired to give false evidence, and I make no such finding. The conclusion does, of course, mean that, applying the civil standard, I do not accept Mr Hammer's evidence as to what the applicants would have done; but no more.
74 In those circumstances I do not think any purpose is to be served by considering what is the extent of the loss in respect of which, if I had held otherwise, the applicants would have been entitled to damages.
Conclusion 75 For the reasons I have given, the application is dismissed with costs.
I certify that the preceding seventy-five (75) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lehane.
Associate:
Dated: 16 July 1999
Counsel for the Applicant: Mr V R W Gray Solicitor for the Applicant: John Lloyd & Co Counsel for the Respondent: Mr J T Gleeson Solicitor for the Respondent: Blake Dawson Waldron Date of Hearing: 15-18 June 1999, 21-25 June 1999 and 1 July 1999 Date of Judgment: 16 July 1999
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