Manassen Holdings Pty Ltd v Commercial & General Corporation Pty Ltd

[2019] SASC 171

SUPREME COURT OF SOUTH AUSTRALIA

(Civil)

MANASSEN HOLDINGS PTY LTD & ANOR v COMMERCIAL & GENERAL CORPORATION PTY LTD

[2019] SASC 171

Judgment of The Honourable Justice Doyle

30 September 2019

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS - INTERPRETATION OF MISCELLANEOUS CONTRACTS AND OTHER MATTERS

ESTOPPEL - ESTOPPEL BY CONDUCT - PROMISSORY ESTOPPEL

ESTOPPEL - ESTOPPEL BY DEED OR CONVENTION - ESTOPPEL BY CONVENTION

The plaintiffs seek the payment of underwriting commission said to be owing to them by the defendant.

On 10 September 2016 the parties entered into a written underwriting agreement (the Underwriting Agreement).  Pursuant to that agreement the plaintiffs agreed to subscribe for units in a unit trust of which the defendant was the trustee, subject to the satisfaction of certain conditions precedent and a right in certain circumstances to terminate either the agreement or the underwriting obligations under that agreement.  The maximum value of the units for which the plaintiffs might have been required to subscribe was $40 million.

The commercial purpose of the Underwriting Agreement was to enable the defendant to have access to up to $40 million to assist certain companies within the defendant’s group of companies to settle on a contract with the South Australian Minister for Transport and Infrastructure (the Minister) for the sale and purchase of land in and around the State Administration Centre in the Adelaide CBD (the Sale Contract). 

The defendant issued the plaintiffs with a funding notice in respect of the $40 million on 11 October 2016.  However, despite extensions of the date for settlement, the Sale Contract with the Minister did not ever settle.  The plaintiffs were not ultimately required to subscribe for any units in the relevant unit trust, and hence their funding was not required.  The Minister terminated the Sale Contract on 14 December 2016, and on 22 December 2016 the defendant issued the plaintiffs with a revocation notice formally advising that its funds would not be required.

The defendant paid a commission to the plaintiffs of $1.2 million, being the base commission payable under the Underwriting Agreement.  However, the plaintiffs contend that they are entitled to additional commission in the form of a daily fee of $20,000 for the period after 1 November 2016 that they had the $40 million available if called upon by the defendant to subscribe. 

The first limb of the plaintiffs’ case involves a claim that they are entitled to a daily fee of $20,000 for the 30 day period from 1 November 2016, giving a total of $600,000.  They claim that this entitlement arises under the Underwriting Agreement, and in particular upon the proper construction of clause 6.1 and paragraph 1(b) of Schedule 5 of that agreement.

The second limb of the plaintiffs’ case involves a claim that they are further entitled to payment of the daily fee of $20,000 beyond this 30 day period pursuant to a further agreement (the Extension Agreement), being an oral agreement reached at a meeting between representatives of the parties on 30 November 2016. 

In the alternative to these contractual claims, the plaintiffs seek payment of the daily fee based upon either a conventional estoppel or a promissory estoppel. 

Held (per Doyle J):

1.       The plaintiffs’ construction of paragraph 1(b) of Schedule 5 of the Underwriting Agreement is to be preferred. The plaintiffs were entitled to be paid additional commission by way of a daily fee of $20,000 for a period of 30 days, giving a total of $600,000.

2.       The evidence does not establish an objective intention by the parties to be immediately contractually bound by the consensus reached during the 30 November 2016 meeting. Accordingly, the alleged Extension Agreement has not been established.

3.       Promissory estoppel is not confined to representations or assumptions as to the exercise or enforcement of existing legal rights; it may operate in a case where the proponent of the estoppel relies upon an assumption founded in a postulated legal relationship.

4.       The plaintiffs’ reliance on the defendant’s daily fee representation was reasonable in the circumstances, and was induced by the defendant’s conduct. The defendant knew the plaintiffs made such assumption, and knowingly induced the plaintiffs to continue to hold such assumption.

5.       However, the plaintiffs did not incur detriment sufficient to found a promissory estoppel, as the evidence did not establish whether or not the plaintiffs suffered any financial detriment by reason of their decision to keep the $40 million available after 30 November 2016. The non-receipt of the anticipated benefit of the promise was not relevant or sufficient detriment.

6.       Further, and in any event, the defendant’s act of reneging on its representation was not in all the circumstances unconscionable.

7.       The plaintiffs’ claim in conventional estoppel also fails, as the defendant’s conduct did not induce an assumption capable of founding a conventional estoppel, and there was no relevant or sufficient detrimental reliance on the part of the plaintiffs.

CPB Contractors Pty Ltd v Rizzani De Eccher Australia Pty Ltd [2017] NSWSC 1798; Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; Commonwealth v Verwayen (1990) 170 CLR 394, applied.
DHJPM Pty Ltd v Blackthorn Resources Ltd (2011) 83 NSWLR 728; Saleh v Romanous (2010) 79 NSWLR 453; Whittle v Parnell Mogas Pty Ltd (2006) 94 SASR 421, discussed.
Masonic Homes Ltd v Oppedisano & Platinum Property Retirement [2016] SASC 196; Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; Byrnes v Kendle (2011) 243 CLR 253; White v Australian and New Zealand Theatres Ltd (1943) 67 CLR 266; County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193; Watson v Foxman (1995) 49 NSWLR 315; Jones v Dunkel (1959) 101 CLR 298; Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345; Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540; Sagacious Procurement Pty Ltd v Symbion Health Ltd [2008] NSWCA 149; Geebung Investments Pty Ltd v Varga Group Investments (No 8) Pty Ltd (1995) 7 BPR 14,551; Seven Cable Television Pty Ltd v Telstra Corp Ltd (2000) 171 ALR 89; Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647; Kriketos v Livshitz [2009] NSWCA 96; Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1; Giumelli v Giumelli (1999) 196 CLR 101; Aalborg CSP A/S v Ottoway Engineering Pty Ltd (2017) 129 SASR 283; Hammond v JP Morgan Trust Australia Ltd [2012] NSWCA 295; Van Dyke v Sidhu (2013) 301 ALR 769; GE Healthcare Australia Pty Ltd v Medica Radiology & Nuclear Medicine [2013] NSWSC 414; Ashton v Pratt (2015) 88 NSWLR 281; Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582; Hawcroft General Trading Co Pty Ltd v Hawcroft [2017] NSWCA 91; Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466; E K Nominees Pty Ltd v Woolworths Ltd [2006] NSWSC 1172; Construction Technologies Australia Pty Ltd v Doueihi [2014] NSWSC 1717; S & E Promotions Pty Ltd v Tobin Brothers Pty Ltd (1994) 122 ALR 637; Mobil Oil Australia Ltd v Wellcome International Pty Ltd (1998) 81 FCR 475; Tipperary Developments Pty Ltd v Western Australia (2009) 258 ALR 124; Australian Goldfields NL v North Australian Diamonds NL (2009) 72 ACSR 132; Yarrabee Chicken Company Pty Ltd v Steggles Ltd [2010] FCA 394; Leading Synthetics Pty Ltd v Adroit Insurance Group Pty Ltd [2011] VSC 467; Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 6) [2015] FCA 825; Worthington v Worthington (No 2) [2014] WASC 448; Character Design Pty Ltd v Kohlen [2013] WASC 112; Harrison v Harrison [2011] VSC 459; Australian Communications Corporation v Coles Group Ltd [2011] VSC 490; Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2006] QCA 194; Settlement Group Pty Ltd v Purcell Partners [2013] VSCA 370; Seven Network (Operations) Ltd v Warburton (No 2) [2011] NSWSC 386; Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560; Miller Heiman Pty Ltd v Sales Principles Pty Ltd (2017) 94 NSWLR 500; Davis v CGU Insurance Ltd (2009) 104 SASR 422; Outback Energy Hunter Pty Ltd v New Standard Energy PEL 570 Pty Ltd [2018] SASC 8; Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 6) [2015] FCA 825; Alpha Wealth Financial Services Pty Ltd v Frankland River Olive Co Ltd (2008) 66 ACSR 594; Republic of India v India Steamship Co Ltd (No 2) (The Indian Grace) [1989] AC 878, considered.

MANASSEN HOLDINGS PTY LTD & ANOR v COMMERCIAL & GENERAL CORPORATION PTY LTD
[2019] SASC 171

Civil

1. DOYLE J:    These proceedings involve a dispute in relation to the commission payable to the plaintiffs by the defendant under an underwriting agreement.

2. By way of overview, on 10 September 2016 the parties entered into a written underwriting agreement (the Underwriting Agreement).  Pursuant to that agreement the plaintiffs (Manassen Holdings Pty Ltd and R & C Manassen Pty Ltd) agreed to subscribe for, or to procure subscribers for, units in a unit trust[1] of which the defendant (Commercial & General Corporation Pty Ltd) was the trustee, subject to the satisfaction of certain conditions precedent and a right in certain circumstances to terminate either the agreement or the underwriting obligations under that agreement.  The maximum value of the units for which the plaintiffs might have been required to subscribe was $40 million.

   [1]    The C & G Commercial Property Trust (formerly the Commercial & General Office Trust).

3. The commercial purpose of the Underwriting Agreement was to enable the defendant to have access to up to $40 million to assist certain companies within the defendant’s group of companies to settle on a contract with the South Australian Minister for Transport and Infrastructure (the Minister) for the sale and purchase of land in and around the State Administration Centre in the Adelaide CBD (the Sale Contract).  The total funding required to enable the defendant to settle on the Sale Contract with the Minister was in the order of $380 million.

4. The defendant issued the plaintiffs with a funding notice in respect of the $40 million on 11 October 2016.  However, despite extensions of the date for settlement, the Sale Contract with the Minister did not ever settle.  The plaintiffs were not ultimately required to subscribe for any units in the relevant unit trust, and hence their funding was not required.  The Minister terminated the Sale Contract on 14 December 2016, and on 22 December 2016 the defendant issued the plaintiffs with a revocation notice formally advising that its funds would not be required.

5. The defendant paid a commission to the plaintiffs of $1.2 million, being what may be described as the base commission payable under the Underwriting Agreement.  However, the plaintiffs contend that they are entitled to additional commission in the form of a daily fee of $20,000 for the period after 1 November 2016 that they had the $40 million available if called upon by the defendant to subscribe. 

6. The first limb of the plaintiffs’ case involves a claim that they are entitled to a daily fee of $20,000 for the 30 day period from 1 November 2016, giving a total of $600,000.  They claim that this entitlement arises under the Underwriting Agreement, and in particular upon the proper construction of clause 6.1 and paragraph 1(b) of Schedule 5 of that agreement.

7. The second limb of the plaintiffs’ case involves a claim that they are further entitled to payment of the daily fee of $20,000 beyond this 30 day period pursuant to a further agreement (the Extension Agreement), being an oral agreement reached at a meeting between representatives of the parties at the Primus Hotel on 30 November 2016.  The plaintiffs contend that pursuant to this oral agreement the daily fee was payable until either 22 December 2016 (when the defendant revoked its funding notice) (giving 22 days at $20,000, or a further $440,000) or, in the alternative, until 14 December 2016 (when the Minister terminated the Sale Contract) (giving 14 days at $20,000, or a further $280,000).

8. In the alternative to these contractual claims, the plaintiffs rely upon either a conventional estoppel or a promissory estoppel.  The conventional estoppel is pleaded by way of an alternative to both limbs of the plaintiffs’ contractual claim.  It thus involves a claim to the daily fee for the entire period from 1 November 2016 through to 22 December 2016 (or, in the alternative, 14 December 2016).  The promissory estoppel, however, is based upon representations made at the 30 November 2016 meeting and hence only covers the period from 1 December 2016 through to 22 December 2016 (or, in the alternative, 14 December 2016), being the period covered by the second limb of the plaintiffs’ contractual claim.

9. The defendant denies any obligation to pay additional commission.

10. It is convenient to commence by identifying the relevant provisions of the Underwriting Agreement before then setting out the factual context in some greater detail.

    The Underwriting Agreement

11. The parties to the Underwriting Agreement were the plaintiffs (referred to collectively in the agreement as the ‘Underwriter’[2]) and the defendant (referred to as the ‘Trustee’). 

    [2]    See definition in clause 1.4.

12. The recorded ‘Background’ to the Underwriting Agreement included the following statement:

    The Trustee has requested the Underwriter to subscribe for Preference Units in the Trust with an aggregate issue price up to an amount equal to the Maximum Underwritten Amount and the Underwriter has agreed to subscribe for Preference Units in the Trust with an aggregate issue price up to an amount equal to the Maximum Underwritten Amount according to the terms of this agreement.

13. Clause 1.1 defined the ‘Trust’ as the trust constituted by the ‘Constitution’, which in turn was defined as the trust deed in relation to the Commercial & General Office Trust.  The ‘Preference Units’ were defined to mean any preference unit issued, or to be issued, in the Trust.[3]  The ‘Maximum Underwriting Amount’ was defined to mean $40 million.

    [3] The definition continues that the Trust includes the terms described in Schedule 6 (on the basis that the Constitution is amended to include the terms in Schedule 6).

14. The underwriting obligation was contained in clause 2, which provided:

    2.     UNDERWRITING

    2.1     Appointment

    The Underwriter will, subject to the satisfaction or waiver (in the Underwriter’s absolute discretion) of the Conditions[4] and to clause 4, subscribe for, or procure subscribers subscribe for (provided that such subscribers are Underwriter Associates[5]), such number of Preference Units in the Trust with an aggregate issue price equal to the Maximum Underwritten Amount.

    2.2     Funding Notice

    The Trustee may, not later than 5.00 pm on the 9^th Business Day prior to the Funding Date, give the Underwriter a Funding Notice and a Confirmation Certificate provided that the Underwriter has not terminated the Underwriting Obligations[6] under clause 4.1 at any time.

    [4]    Defined as “the conditions precedent set out in clauses 3.1(a) to 3.1(e) (inclusive).”

    [5]    Defined as “an associate of the Underwriter which agrees to be bound by the Unitholder Agreement and the Trust Deed and which is approved (in writing) by the Trustee (acting reasonably).”

    [6]    Defined as “the Underwriter’s obligations under clause 2.”

    2.3     Application by Underwriter

    (a)     If the Underwriter:

    (i)has received a Funding Notice and Confirmation Certificate under clause 2.2; and

    (ii)    has not terminated the Underwriting Obligations under clause 4.1,

    the Underwriter must, on the date on which the Closing is to occur but only immediately prior to the Closing occurring, cause to be lodged with the Trustee applications to subscribe for such Preference Units with an aggregate issue price equal to the Funding Amount[7] together with the application monies by bank cheque or electronic transfer into a nominated account of the Trustee for those Preference Units in aggregate equal to the Funding Amount.

    (b)     Notwithstanding any provision of this agreement to the contrary, in no circumstance may the Trustee at any time issue Funding Notices to the Underwriter in respect of Funding Amounts which in aggregate exceed the Maximum Underwritten Amount and in no circumstance will the Underwriter be required to subscribe for Preference Units or pay any amount to the Trustee in an amount exceeding the Maximum Underwritten Amount.

    [7]    Defined as “the amount determined by the Trustee required to be provided by the Underwriter and as set out in the Funding Notice.”

15. The ‘Funding Date’ was defined in clause 1.1 to mean “the date on which Closing occurs or the date on which Closing is proposed to occur as notified in writing by the Trustee to the Underwriter, as the context may require.”  And ‘Closing’ was defined to mean “the settlement of the acquisition of the Land (as that expression is defined in the Contract for Sale).”

16. The Underwriting Obligations in clause 2 were also subject to certain conditions precedent, as set out in clause 3 of the Underwriting Agreement:

    3.     CONDITIONS

    3.1     Conditions precedent

    The Underwriting Obligations are conditional upon:

    (a)     (GSA) the occurrence of either of the following:

    (i)the Trustee having irrevocably paid or procured payment to the Underwriter of the entirety of the Underwriting Commission[8]; or

    [8]    Defined as “the commission specified in paragraph 1 of Schedule 5.”

    (ii)a General Security Deed in a form and substance satisfactory to the Underwriter (acting reasonably having regard to but not being bound by or bound to accept the comments of the Senior Debt Lender[9]):

    [9]    Defined as “any person to or in favour of whom the Trustee incurs Financial Indebtedness at any time (including the provider of the Senior Debt Facility) but, for the avoidance of doubt, excluding the Underwriter and any Underwriter Associate”; and Senior Debt Facility was defined as “a debt facility in the amount of approximately $297 million to be advanced to the Trustee on or about Closing for the purposes of funding the acquisition of the Land (as that expression is defined in the Contract for Sale) and the South Australian Police Headquarters building (including the retirement of an existing debt facility with Westpac Banking Corporation)”.

    (A)over all of the assets and undertaking of the CPT Trust[10] and which includes the terms set out in Schedule 8 being signed by the CPT Trustee and delivered to the Underwriter provided that Westpac no longer holds any security interest in respect of the CPT Trust or any asset of the CPT Trust, the PPSR is amended to reflect the foregoing, and the CPT Constitution is amended so that clause 20.1 of the CPT Constitution is deleted and the words “or the Personal Property Securities Act 2009 (Cth)” are added after the words “Corporations Act 2001 (Cth)” in clause 14.1(1); or

    [10]   Defined as “the trust constituted by the CPT Constitution”, which was in turn defined as the constitution of trust known as the C & G Commercial Property Trust (the trustee of which was Commercial & General Wholesale Office Pty Ltd).

    (B)over all of the assets and undertaking of a person which is an Eligible Person and which includes the terms set out in Schedule 8 (as if references to the CPT Trust and the CPT Trustee where (sic) references to the person and/or any applicable corresponding trust, as applicable) being signed by the person and delivered to the Underwriter;

    (b)     (Put Option) a Put Option Deed in a form and substance satisfactory to the Underwriter (acting reasonably having regard to but not being bound by or bound to accept the comments of the Senior Debt Lender) under which the Underwriter and the Underwriter Associates have the option to require a person which is an Eligible Person, at any time after the earlier to occur of:

    (i)the first anniversary of the time of Closing; and

    (ii)any security granted in favour of the Senior Debt Lender becoming enforceable,

    to acquire any Preference Units held by the Underwriter and/or the Underwriter Associates (including the rights to any accrued but unpaid income entitlement or any accrued but unpaid commission entitlement) for an amount per Preference Unit held equal to the Put Option Price being signed by all parties to that document (other than the Underwriter) and delivered to the Underwriter;

    (c)     (Unitholders Agreement) a Unitholders Agreement in relation to the Trust which contains:

    (i)a provision that prohibits the Trustee or the unit holders of the Trust from taking any action in relation to a Unitholder Protection Matter without the prior written consent of the holder of the Preference Units, such provision being in a form and substance satisfactory to the Underwriter (acting reasonably having regard to but not being bound by or bound to accept the comments of the Senior Debt Lender) between the Trustee and all unitholders in the Trust as at the time of Closing being signed by all parties to that document (other than the Underwriter) and delivered to the Underwriter;

    (ii)a provision that the entirety of the proceeds of subscription for units in the New WOT Trust[11] received by the New WOT Trustee from or on behalf of any beneficiary or unitholder of the New WOT Trust (or any person who will become a beneficiary or unitholder of the New WOT Trust on issue of units in the New WOT Trust) must first be paid and applied in or toward the acquisition by the New WOT Trustee of any remaining Preference Units before the New WOT Trustee subscribes for any units in the Trust or otherwise applies those proceeds; and

    [11]   Defined as the trust to be established in or about September 2016 with the New WOT Trustee (being Commercial & General Wholesale Office Pty Ltd) as trustee and to be known as the Commercial & General Wholesale Office Trust.

    (d)     (SAPOL Trust Deed Amendment) an amendment to the Constitution in form and substance satisfactory to the Underwriter (acting reasonably) to include changes to the classes of units in the Trust as set out in Schedule 6 and a deletion of clause 20.1 of the Constitution in each case being effected prior to Closing;

    (e)     (New WOT Constitution) the New WOT Constitution settling and the New WOT Constitution being executed and delivered by the New WOT Trustee in a form and substance that is consistent with the obligations that the New WOT Trustee will have under the Unitholders Agreement and that is otherwise satisfactory to the Underwriter (acting reasonably having regard to but not being bound by or bound to accept the comments of the Senior Debt Lender and further having regard to the principles set out elsewhere in the agreement); and

    (f)    (Closing will occur) Closing occurring or will occur by no later than the Relevant Date (or such later date as the Underwriter and the Trustee may agree in writing after the date of this agreement).

    As a separate and independent obligation, the Trustee must satisfy or procure satisfaction of the Condition in clause 3.1(a) within 10 Business Days of the date of this agreement.

    3.2Reasonable endeavours

    The Trustee must use its reasonable endeavours to ensure that the Conditions are satisfied.

    3.3     Condition not satisfied

    Without limiting clause 4.1, if any Condition in clause 3.1 is not satisfied, or waived by the Underwriter, by the Relevant Date (or, in the case of the Condition in clause 3.1(a), by the date occurring 10 Business Days after the date of this agreement) (or such later time agreed by the Underwriter in writing after the date of this agreement), the Underwriter (in its sole and absolute discretion) may terminate this agreement at any time by written notice to the Trustee.

    3.4     Benefit

    The Conditions are for the benefit of the Underwriter only and may only be waived by the Underwriter (in its sole and absolute discretion).

1. In addition to the right to terminate the Underwriting Agreement under clause 3.3, the Underwriting Agreement also provided the Underwriter with the following right to terminate the Underwriting Obligations:

   4.     RELIEF FROM THE UNDERWRITING OBLIGATIONS

   4.1     Right to terminate

   The Underwriter may by written notice to the Trustee before the Trustee issues any Preference Units terminate the Underwriting Obligations if:

   (a)     the Trustee does not give the Underwriter a Funding Notice and a Confirmation Certificate under clause 2.2 by the Relevant Date; or

   (b)     one or more events set out in Schedule 3 occurs.

   4.2     Waiver

   The Underwriter may, by notice in writing to the Trustee, waive any of its rights under clause 4.1.  Any waiver will only affect the Underwriter’s rights specifically waived in such notice.

   4.3     Cessation of Underwriting Obligations

   The Underwriting Obligations cease on the first to occur of:

   (a)     the Trustee issuing such number of Preference Units in the Trust with an aggregate issue price equal to the Maximum Underwritten Amount; and

   (b)     the Underwriter terminating the Underwriting Obligations under clause 4.1 or terminating this agreement under clause 3.3.

2. The payment of fees, commissions and expenses by the Trustee to the Underwriter was governed by clause 6, which was in the following terms:

   6.     FEES, COMMISSIONS AND EXPENSES

   6.1     Fees and commissions

   The Trustee and the Underwriter covenant to one another on the terms of, and the Trustee agrees to pay the Underwriter the fees and commissions set out in, paragraphs 1 and 2 of Schedule 5.

   6.2     Termination

   If the Underwriter terminates its Underwriting Obligations under clause 4.1, the Trustee must still pay the Underwriting Commission[12] but will not have to pay the Conditional Undertaking Fee.[13]

   [12]   Defined as “the commission specified in paragraph 1 of Schedule 5.”

   [13]   Defined as “the fee specified in paragraph 2 of Schedule 5.”

   6.3     Reimbursement of expenses

   (a)     The Trustee must on the date of Closing and on each other date occurring 5 Business Days after a demand made by the Underwriter to the Trustee in writing to do so (provided that any such demand is made on or after 1 October 2016 unless the Underwriter has terminated its Underwriting Obligations under clause 4.1 or this agreement under clause 3.3, in which case the demand may be made by the Underwriter at any time after such termination), pay to and reimburse the Underwriter for any legal fees, costs and expenses (together with any corresponding GST and disbursements) incurred by the Underwriter in connection with this agreement, any document referred to in this agreement, the IM, the Offer and/or the transactions contemplated by any of them.  For the avoidance of doubt, more than one demand may be made by the Underwriter at different times under this clause 6.3(a) in respect of any incurred but unpaid legal fees, costs and expenses (together with any corresponding GST and disbursements).

   (b)     The Trustee must pay and reimburse such fees, costs and expenses even if the Underwriter terminates the Underwriting Obligations under clause 4 or this agreement under clause 3.3.

   (c)     As a separate and independent obligation, the Trustee must, within 5 Business Days of demand, pay to and reimburse the Underwriter the amount of all fees, costs and expenses (including legal fees) (together with any corresponding GST) incurred by the Underwriter in connection with any actual or proposed enforcement of any rights under this agreement.

3. The Underwriting Agreement also included the following potentially relevant clauses: the clause 13.5 provision that payment is not required until presentation of an invoice by the Underwriter; the clause 15.15 provision for interest at the rate of 15 per cent per annum on unpaid amounts; the clause 15.12 requirement that any waiver of rights be in writing; and the clause 15.1 specification that the Underwriting Agreement may be altered only in writing signed by each party.

4. The Underwriting Agreement also included eight schedules.  Relevantly, Schedule 3 was entitled ‘Events causing relief of Underwriter’s obligations’ and provided:

   1.(Default under this agreement) The Trustee is in breach or default of any of the terms and conditions or provisions of this agreement or breaches any warranty or covenant given or made by it under this agreement and if that default or breach is capable of being remedied or its effects overcome that default or breach is not remedied, or its effects not overcome, within 10 Business Days after it occurs.

   2.(Failure to obtain approvals) The Trustee or the Trust does not receive or obtain any necessary unitholder, regulatory or government approvals in relation to or in connection with the issue of the Preference Units.

   3.(Change in trustee) The Trustee retires or is removed as the trustee of the Trust.

   4.(Business) The Trustee disposes, or agrees to dispose, of the whole, or a substantial part, of the business or property of the Trust without the prior written consent of the Underwriter.

   5.(Banking or settlement disruption) A general moratorium on commercial banking activities in Australia is declared by the relevant central banking authority in Australia.

   6.(Indictable offence) A director, the Chief Executive Officer, the Chief Financial Officer or the Chief Operating Officer of the Trustee is charged with an indictable offence relating to a financial or corporate matter.

   7.(Insolvency Event) An Insolvency Event occurs with respect to the Trustee or the Trust or the New WOT Trustee or the New WOT Trust.

   8.(Contract for Sale) The Contract for Sale is terminated, rescinded or amended without the prior written consent of the Underwriter.

   9.(Closing) the Closing does not occur or will not occur by the Relevant Date.

5. Schedule 5 was entitled ‘Commission, Payments and Fees’ and provided:

   1.     Underwriting Commission: The Trustee must pay to the Underwriter:

   (a)     an underwriting commission of 3.0% of the Maximum Underwritten Amount; plus

   (b)     if the Underwriter or any Underwriter Associate subscribes or may be required to subscribe (whether or not it does actually subscribe) for any Preference Unit at any time on or after 1 November 2016, an amount equal to A calculated in accordance with the following formula:

   A = B x C x D

   Where:

   B = 0.05%

   C = the Maximum Underwritten Amount; and

   D = the lesser of the following:

   (i)the number of days from (and including) 1 November 2016 to (and including) the earlier to occur of:

   (A)date of Closing;

   (B)the date of termination of the Underwriting Obligations under clause 4.1; and

   (C)the date of termination of this agreement under clause 3.3; and

   (ii)30,

   by the earlier of the following dates:

   (c)     the date of Closing; and

   (d)     the Relevant Date.

   2.Conditional Undertaking Fee: If on any anniversary of the date of Closing (each an Anniversary) the Underwriter or any of the Underwriter Associates continue to hold any Preference Units (Remaining Units), the Trustee will pay to the Underwriter an amount equal to 3.0% of the product of (i) the issue price of each Remaining Unit and (ii) the number of Remaining Units held by the Underwriter and/or any of the Underwriter Associates in aggregate on the Anniversary, within 7 Business Days of the Anniversary.

6. Schedule 6 was entitled ‘Key Terms of the Constitution.’ The terms contained in the schedule identified that units in the Trust included Preference Units, and set out some of the rights attaching to those units. This relevantly included an entitlement to be paid the ‘Preference Unit Income Entitlement’ as described in paragraph 4 of Schedule 6:

   4.Preference Unit Income Entitlement: During the Payment Period,[14] each Preference Unit will entitle the holder of the Preference Unit (a Preference Unitholder) to receive from the property of the Trust in respect of each month, subject to the Underwriter not being in breach of clause 5 at the relevant time, the following amounts:

   (a)     for each Preference Unit held by a Preference Unitholder on a day during that month up to and including 20,000,000 Preference Units held by Preference Unitholders in aggregate on that day, an amount calculated as 20% per annum of the issue price of the Preference Unit (calculated and accrued daily on the basis of a 365 day year and the relevant day elapsed and on the basis that the outstanding amount (if for any reason and to the extent not paid in that month) compounds monthly until paid to the Preference Unitholder); and

   (b)     for each Preference Unit held by a Preference Unitholder on a day during that month in excess of 20,000,000 Preference Units held by Preference Unitholders in aggregate on that day, an amount calculated as 12.5% per annum of the issue price of the Preference Unit (calculated and accrued daily on the basis of a 365 day year and the relevant day elapsed and on the basis that the outstanding amount (if for any reason and to the extent not paid in that month) compounds monthly until paid to the Preference Unitholder),

   provided that the Trustee must ensure that the minimum amount paid by the Trustee to the Preference Unitholders in aggregate under this paragraph is an amount equal to an amount calculated as 20% per annum of the Base Amount[15] for a fixed six month period.

   [14]   Defined as “the period commencing on the date of first issue of any Preference Unit to the Underwriter or any Underwriter Associate and ending on the date on which none of the Underwriter nor any of the Underwriter Associates hold any Preference Units.”

   [15]   Defined as “the amount of $20 million.”

7. It can be seen from the above that the Underwriting Agreement refers to the ‘Relevant Date’ in various places (for example, clause 3.1(f), clause 4.1(a), Schedule 3 (paragraph 9), and Schedule 5 (paragraph 1(d)).  The Relevant Date was defined in clause 1.1 to mean:

   (a)where Closing will occur after 31 October 2016 only because the Senior Debt Lender requires FIRB approval to provide the Senior Debt Facility, 30 November 2016; and

   (b)     otherwise, 31 October 2016.

   The parties

8. The defendant (C & G) is one of a number of companies that together form the Commercial & General Group of companies (the C & G Group).  It is the ultimate holding company of that group.  The C & G Group is a property group that develops, constructs, manages and invests, together with investor clients, in commercial, industrial, healthcare and residential properties throughout Australia.

9. In the dealings the subject of these proceedings, the defendant was represented by Mr Trevor Cooke (its Managing Director), Mr Jamieson McClurg (its Chief Executive Officer) and its solicitors (Minter Ellison).

10. The plaintiffs are two investment companies controlled by Mr Roy Manassen.  Mr Manassen is a director of both companies, with the second plaintiff being the trustee of the superannuation funds of him and his wife, Ms Cynthia Manassen.

11. Mr Manassen, together with Mr Simon Uzcilas, are the directors of Four Hats Capital Pty Ltd.  The first plaintiff is a 50 per cent shareholder of that company.  Four Hats Capital operates a funds and asset management business through which it identifies, investigates, analyses, negotiates, manages and reports on investments for its clients.

12. Mr Manassen met Mr Uzcilas in the early 2000s when Mr Manassen was moving into retirement, and Mr Uzcilas (as a partner of Four Hats Capital) commenced giving him assistance and advice in relation to various investment opportunities.

13. Mr Manassen’s practice became to refer all of the investment opportunities that came to his attention to Mr Uzcilas for review.  Four Hats Capital charged a fee for this work, and Mr Manassen’s practice was also to offer Mr Uzcilas the opportunity to co-invest with him, which Mr Uzcilas invariably did.  Mr Uzcilas would invest through his company, Forward Movement Pty Ltd, as trustee of the Uzcilas Capital Trust.  Over time, this arrangement led to Mr Manassen and Mr Uzcilas taking up some 14 investment opportunities together, ranging in value from $1 million through to in excess of $50 million.

14. The arrangement between Mr Manassen and Mr Uzcilas was one in which Mr Manassen relied upon Mr Uzcilas and entrusted in him responsibility for all investigations, due diligence, financial modelling, negotiations and communications in respect of their investments.  Mr Manassen did not have any direct or personal dealings with those representing the entities in which they were investing or considering investing.  He intentionally remained an arm’s length decision-maker in respect of their investments.

15. Mr Manassen and Mr Uzcilas generally spoke or met on close to a daily basis about their investments, although they did so less frequently when Mr Manassen was travelling.  During their discussions and meetings, Mr Uzcilas gave Mr Manassen briefings in relation to their existing and potential investments, and also sought Mr Manassen’s input and decisions on opportunities and issues that arose.

16. In about 2015, Mr Manassen and Mr Uzcilas discussed becoming, and for practical purposes became, equal partners in the Four Hats Capital business.  However, this arrangement was not formalised until April 2017 when Mr Manassen became a director, and the first plaintiff a 50 per cent shareholder, of Four Hats Capital.

17. Mr Manassen also regularly shared his investment opportunities with a former business colleague of his, Mr Joseph Nasuti.  Through this arrangement, Mr Nasuti’s company, Nasuti Pty Ltd, became a client of Four Hats Capital.  When Mr Nasuti became involved in investments with the plaintiffs and Mr Uzcilas, Mr Nasuti also left all of the negotiations to Mr Uzcilas.  Mr Uzcilas would keep Mr Nasuti informed through regular conversations and emails.

    The trial

18. The trial of these proceedings occurred over two days.  The documentary evidence consisted largely of an agreed tender bundle of 10 volumes.  The plaintiffs called Mr Manassen and Mr Uzcilas as witnesses.  They gave their evidence in chief by affidavit, and were cross-examined by counsel for the defendant.  While the defendant had filed affidavits from Mr Cooke and Mr McClurg it did not tender those affidavits or call any witnesses in its case.

19. There were ultimately only limited areas of factual dispute between the parties.  The detail of the relevant events and dealings between the parties largely emerges from the documents, and was not generally in dispute.  My findings as to these matters of factual background are set out in the next section of these reasons.

20. Some challenges were made to aspects of the evidence of both Mr Uzcilas and Mr Manassen.

21. As to Mr Uzcilas, the focus of the attack was upon his evidence in relation to his 30 November 2016 meeting with Mr McClurg and Mr Cooke at the Primus Hotel.  I address the detail of the more controversial aspects of Mr Uzilas’ evidence later in these reasons in my consideration of the plaintiffs’ contentions as to the Extension Agreement and estoppel.  It is sufficient for present purposes to observe that I found Mr Uzcilas to be an impressive witness.  His performance as a witness was perhaps distinctive for the deliberate and considered manner in which he answered questions, often after a significant pause to reflect and on several occasions after having the question repeated or clarified.  However, I was satisfied that Mr Uzcilas’ manner was merely a function of his desire to be careful and accurate in his answers, and not a function of him struggling to recall matters, or otherwise being indicative of anything that might cause me to doubt his honesty or reliability.

22. I am also satisfied that Mr Manassen’s evidence was honest and reliable.

    Factual background

23. On 30 June 2016, several companies from within the C & G Group, as trustees for various trusts, entered into the Sale Contract with the Minister for the sale and purchase of the Land (comprising the buildings in the State Administration Centre precinct).  The buildings were to be purchased by the C & G Group and then leased back to the State.

24. The transaction the subject of the Sale Contract (the Transaction) required a total capital contribution of approximately $380 million, which was to be met from various sources.  Of this total sum, approximately $160 million was for the South Australian Police Headquarters (owned by two directors of the C & G Group), and approximately $220 million was for the State Administration Centre precinct buildings.  The Transaction was due to settle on 4 October 2016.

25. The defendant obtained the agreement of Adaptive Capital Partners LLC (Adaptive Capital), subject to certain conditions, to provide the Senior Debt Facility in the amount of $297 million for the Transaction, being approximately 80 per cent of the funding requirement.  The remaining approximately 20 per cent of the funding requirement was to be contributed or raised by the C & G Group.

26. In about late August 2016, one of the proposed investors in the Transaction withdrew.  The C & G Group sought out alternative financing, including by way of a short term underwrite. 

27. It was in this context that the plaintiffs (through both Mr Manassen and Mr Uzcilas) became aware of an opportunity to invest, and then negotiated and agreed to do so pursuant to the terms of the Underwriting Agreement. 

28. Consistent with the practice described above, it was Mr Uzcilas who conducted the negotiations on behalf of the plaintiffs.  According to Mr Manassen, Mr Uzcilas did so with the former’s “full authority”.  However, Mr Uzcilas and Mr Manassen, again in accordance with their usual practice, spoke on an almost daily basis throughout the period of the negotiations, and indeed throughout the period of the plaintiffs’ dealings with the defendant in relation to the Underwriting Agreement.  Mr Uzcilas also sent or forwarded Mr Manassen various emails about his dealings with the defendant throughout this period.

29. Mr Uzcilas understood that if the plaintiffs ended up investing, then he would take an interest in the investment.  Mr Manassen had also offered Mr Nasuti an interest in the investment.  Thus, in negotiating with the defendant, Mr Uzcilas was acting on behalf of each of Mr Manassen (through the plaintiffs), Mr Nasuti (through Nasuti Pty Ltd) and himself (through Forward Movement Pty Ltd).  Mr Uzcilas prepared a table summarising their respective interests in the investment, and Mr Nasuti’s and Mr Uzcilas’ entities became “Underwriter Associates” under the Underwriting Agreement.  However, the agreement itself was between the plaintiffs and the defendant, and the current proceedings have been brought by the plaintiffs.  As such, the background involvement and interest of these other entities is ultimately of no moment.

30. On 2 September 2016, Mr Uzcilas appointed Gadens to act as the solicitors for the plaintiffs in relation to the potential underwriting agreement with the defendant.  From that date onwards, Mr Uzcilas and Gadens for the plaintiffs were engaged in reviewing and negotiating what became the Underwriting Agreement.  The solicitors for the defendant were Minter Ellison, and the main point of contact from the defendant for Mr Uzcilas’ email and telephone communications was Mr Cooke, the Managing Director of the defendant.

31. The parties to these proceedings ultimately entered into the Underwriting Agreement on 10 September 2016.  The Underwriting Agreement was signed by Mr and Ms Manassen on behalf of the plaintiffs.  It was signed by Mr Cooke (pursuant to a power of attorney dated 8 September 2016) on behalf of the defendant.

32. On 8 September 2016, the defendant had requested that the Minister agree to extending the date for settlement under the Sale Contract from 4 October 2016 to 25 October 2016.  On 19 September 2016, the Minister confirmed his agreement to this extension.

1. On 23 September 2016, Mr Uzcilas spoke with Mr Cooke, who informed him that the defendant was likely to draw down $20 million under the Underwriting Agreement, but that he would not know the amount for sure until 11 October 2016 and would confirm the amount at that time.

2. On the same day, Mr Cooke contacted the agent for Adaptive Capital seeking that it provide 90 per cent of the debt funding.  On or about 4 October 2016, Adaptive Capital made its final proposal to advance 90 per cent of the total purchase price to the C & G Group.

3. At around this time it emerged that there had been an omission from the Underwriting Agreement.  It was identified (and discussed between Mr Uzcilas and Mr Cooke) that while paragraph 4 of Schedule 6 provided for payment of a minimum of $2 million[16] in the event that the Transaction settled and Preference Units were issued, there was no provision for such payment in the event that Preference Units were not issued to the plaintiffs.  This oversight was addressed through a letter dated 10 October 2016 from Mr Cooke (on behalf of the defendant) to the plaintiffs confirming that if the Transaction settled without any Preference Units being issued to the plaintiffs, the defendant would pay $2 million to the plaintiffs within five days of settlement (the October Side Letter).  Mr and Ms Manassen countersigned the October Side Letter on behalf of the plaintiffs.

   [16]   Being 20 per cent of the Base Amount of $20 million over a six month period.

4. On 11 October 2016, the defendant issued the plaintiffs with a ‘Funding Notice’ pursuant to clause 2.2 of the Underwriting Agreement for an amount of $40 million.

5. On 12 October 2016, the solicitors for the defendant sent the plaintiffs (through Mr Uzcilas) four of the five documents identified as part of the conditions precedent under clause 3.1 of the Underwriting Agreement. The documents were executed by Mr and Ms Manassen for the plaintiffs later on the same day.  Thus, as at 12 October 2016, it seemed that the only condition precedent document outstanding was a constitution for the Commercial & General Wholesale Office Trust required by clause 3.1(e). Mr Uzcilas understood this document would come into existence once the trust was created.

6. On about 13 October 2016, Adaptive Capital notified the defendant that it wished to change the structure for the finance it was providing from debt to equity.  This presented an obstacle to settlement on 25 October 2016 given that the investment principal was a foreign entity and would require approval from the Foreign Investment Review Board (FIRB) as a precondition to equity investment.

7. On 17 October 2016, in a telephone conversation between Mr Cooke and Mr Uzcilas, the former advised the latter that Adaptive Capital wanted to provide the required capital as equity rather than debt, and that this required a new term sheet.  Mr Uzcilas had recently become aware that Adaptive Capital was the senior lender providing the balance of the funding required to complete the Transaction, and that their solicitors were Clifford Chance.  The changes sought by Adaptive Capital also required changes to the condition precedent documents under the Underwriting Agreement.

8. Between 18 and 23 October 2016, the C & G Group (through Mr Cooke) had communications with both Adaptive Capital and representatives of the Minister about further extending the settlement date under the Sale Contract from 25 October 2016 to 22 November 2016 (on account of the additional steps required by Adaptive Capital’s change to an equity investment, including the need for FIRB approval).

9. On 20 October 2016, Mr Cooke informed Mr Uzcilas that settlement would not be proceeding on 25 October 2016.  However, Mr Cooke did not advise of any later date for settlement.  Mr Uzcilas assumed Mr Cooke would soon update him. 

10. On 24 October 2016, Mr Cooke informed Mr Uzcilas that settlement would take place on or about 22 November 2016.

11. On 28 October 2016, representatives of the Minister informed the C & G Group that the Minister would be issuing a notice of completion on 31 October 2016, but would entertain an offer to extend settlement if the Minister was provided with a bank guarantee issued by an Australian bank, on terms satisfactory to the Minister, within 14 days of the date of service of the notice; and provided arrangements were otherwise in place that would allow the Minister to have complete control over settlement. 

12. The Minister served a notice to complete on 31 October 2016 stating that settlement was to take place on 15 November 2016.

13. By email dated 2 November 2016, Mr Cooke informed Mr Uzcilas that settlement would take place on 15 November 2016.  He added:

    Based on everything I know I cannot see a need for us to call on the underwrite.  As a result, we are planning to simply make a payment to you out of the settlement proceeds.

14. Mr Uzcilas responded to Mr Cooke’s email of 2 November 2016 by email dated 4 November 2016.  Attached to the email were invoices from the plaintiffs and Gadens[17] in anticipation of receiving the payment that had been foreshadowed in Mr Cooke’s email.  The plaintiffs’ invoices claimed a total of $3.5 million plus GST.  This included underwriting commission of $1.5 million, consisting of the base commission of $1.2 million and additional commission of $300,000 (being a daily fee of $20,000 for each day from 1 November to 15 November 2016), plus the minimum Preference Unit Income Entitlement of $2.0 million.

    [17]   The Gadens account dated 3 November 2016 was in the amount of $169,792.81, said to be payable by the defendant under clause 6.3 of the Underwriting Agreement.

15. Also attached to Mr Uzcilas’ email dated 4 November 2016 was a letter dated 3 November 2016 from the plaintiffs, signed by the directors, to Mr Cooke in which they stated:

    The conditions precedent to the Underwriting Obligations remain outstanding and Closing did not occur on or by 31 October 2016.  The Underwriter reserves all of its rights, and does not waive any of its rights, under and in connection with the Underwriting Agreement and the Side Letter.

16. By email dated 4 November 2016, Mr Cooke acknowledged receipt, and stated that the defendant would review and respond with any questions.

17. On 10 November 2016, the C & G Group finally received a term sheet from Adaptive Capital, but FIRB approval had not yet been obtained.

18. On 11 November 2016, the C & G Group sought another deferral of settlement date from those representing the Minister.  The request proposed a Sunset Date of 13 December 2016.

19. On 14 November 2016, and not having received any update, Mr Uzcilas emailed Mr Cooke to check whether settlement was on track for the following day.  He was told that Mr Cooke was in meetings regarding an issue with settlement.

20. Settlement did not occur on 15 November 2016.  The funding to be provided by Adaptive Capital was not yet available, including because FIRB approval had not been obtained.  Mr Cooke telephoned Mr Uzcilas on that day and told him that settlement had not occurred, and that another 10 to 20 days would be needed by Adaptive Capital to get FIRB approval.  By email of the same date, Mr Uzcilas updated Mr Manassen and Mr Nasuti.

21. On 21 November 2016, Mr Uzcilas emailed Mr Manassen.  He said:

    The current status remains, we are legally committed to the $40m but is highly unlikely to be drawn.  I will put this on the agenda and reconfirm with Trevor

22. On 21 November 2016, a representative of the Minister emailed Mr Cooke attaching a letter that informed him that the Minister was willing to allow settlement to take place on 13 December 2016, provided that an attached deed poll was executed and an unconditional bank guarantee from an Australian bank for $5 million was obtained by no later than 28 November 2016.  (While the C & G Group, through Mr Cooke, agreed to these conditions and provided an executed deed poll, the effect of which was to commit the C & G Group to an additional deposit of $5 million that might be forfeited in the event of default, the requested bank guarantee was not ultimately provided.)

23. On 29 November 2016, Mr Cooke advised Mr Uzcilas by text message that the Minister had requested an additional deposit of $5 million and fixed a settlement date of 13 December 2016.  Mr Uzcilas again updated Mr Manassen and Mr Nasuti by email. When Mr Uzcilas and Mr Cooke spoke later that day they arranged to meet the following morning with Mr McClurg at the Primus Hotel in Sydney. 

24. By 30 November 2016, the C & G Group had not paid the additional deposit and was therefore in breach of the deed poll that had been provided to the Minister.

25. On the morning of 30 November 2016, the scheduled meeting between Mr Uzcilas, Mr Cooke and Mr McClurg at the Primus Hotel took place.  Following the meeting, Mr Uzcilas sent Mr Cooke an email confirming their discussions.  Mr Uzcilas’ evidence about the meeting, and the terms of his confirmatory email, are set out later in these reasons when considering the plaintiffs’ contentions as to the Extension Agreement that they allege was reached at the meeting, and confirmed in the email.  It is sufficient for present purposes to note that the plaintiffs contend that at this meeting Mr McClurg or Mr Cooke said that settlement was on track for 13 December 2016, and that the parties agreed the following matters: that the plaintiffs would pay the Gadens invoice but with the defendant to reimburse them upon settlement; that the plaintiffs would defer receipt of their fees until settlement; that the defendant would provide a general security deed to secure these amounts; and that the daily fee would continue to accrue until settlement.

26. On 30 November 2016, Mr Manassen approved payment of the Gadens legal fees, and Mr Uzcilas instructed the plaintiffs’ finance manager to pay these fees.  It is not disputed that those fees were then paid by the plaintiffs.

27. On 2 December 2016, Mr Uzcilas emailed Mr Cooke a general security deed and a draft side letter (the draft December Side Letter) to give effect to the matters that, on the plaintiffs’ case, had been agreed at the Primus Hotel meeting.[18]  The draft December Side Letter commenced by acknowledging that the Underwriting Agreement, the earlier October Side Letter and the Funding Notice all remained in full force and effect.  It then provided:

    [18]   The covering email described it as a side letter that “confirms the extension of the underwriting agreement to after FIRB approval.”

    The Underwriting Agreement is further amended with effect on and from the date of this document as follows:

    1.   The definition of “Relevant Date” in clause 1.1 is deleted and replaced with the following:

    “Relevant Date means 31 January 2017.”

    2.   Paragraph 1 of Schedule 5 is deleted and replaced with the following:

    “Underwriting Commission: The Trustee must pay to the Underwriter:

    (a)an underwriting commission of 3.0% of the Maximum Underwritten Amount; plus

    (b)an amount equal to A calculated in accordance with the following formula:

    A = B x C x D

    where:

    B = 0.05%;

    C = the Maximum Underwritten Amount: and

    D = the number of days from (and including) 1 November 2016 to (and       including) the earlier to occur of:

    (i)the date of Closing;

    (ii)the Relevant Date;

    (iii)the date of termination of the Underwriting Obligations under clause 4.1; and

    (iv)the date of termination of this agreement under clause 3.3,

    on the earlier to occur of the date of Closing and the Relevant Date.”

28. The draft December Side Letter, like the earlier October Side Letter, contained provision for the formal execution of the document by the parties.   However, unlike the October Side Letter, the draft December Side Letter was never signed or executed by the parties.

29. There was an email exchange between Mr Uzcilas and Mr Cooke on 5 December 2016.  Mr Cooke wrote that he had forwarded Mr Uzcilas’ email of 2 December 2019 to Mr Wissam Abwi, who was the defendant’s solicitor from Minter Ellison.  He reported that Mr Abwi had asked “if we are continuing to pay an underwrite fee does that mean that the capital is still available to call?”  Mr Uzcilas responded in the following terms:

    In response to Wissam’s question, in short Yes.  From my understanding we have a legal obligation to provide the funds given you have issued a drawdown notice … which is the reason for the constant need for communication.

    However from my understanding the outstanding conditions to drawdown are satisfactory legals, underwriting fee GSD and unencumbered put counterparty.

    I look forward to Wissam’s response.  We are waiting your response before paying the Gaden’s fee.

30. Mr Cooke responded:

    Makes sense to me.

    FYI I have no correspondence from the State which suggests they will give us time to get FIRB.

    Will let you know if anything changes.

31. On 5 December 2016, Mr Cooke wrote to the representatives of the Minister.  After noting that the defendant had been unable to arrange payment of the additional deposit over the preceding five days, Mr Cooke sought to reassure the Minister of the intention and likelihood of its investor obtaining FIRB approval.  While accepting that FIRB approval had not been contemplated by the Sale Contract, Mr Cooke requested an opportunity to settle on 13 December 2016. 

32. By email to Mr Cooke dated 7 December 2016, the Minister’s representative expressed concern and disappointment over the C & G Group’s failure to comply with its contractual obligations, but indicated a preparedness on the part of the Minister to grant a further indulgence to allow settlement to occur on 13 December 2016.

33. On 7 December 2016, Mr Uzcilas emailed Mr Cooke enquiring whether there was any reason the Sale Contract would not settle on 13 December 2016.  Mr Cooke replied the same day that “the only risk is that the capital doesn’t turn up.”

34. On 12 December 2016, in preparation for settlement the following day, Mr Uzcilas sent Mr Cooke (copied to various other representatives of the defendant) invoices for the fees of Gadens and the plaintiffs.  The Gadens invoices were the 3 November 2016 invoice for $169,792.81 that had been provided earlier and an additional invoice (in its new name, Dentons) dated 9 December 2016 for $4,389.33.  The plaintiffs’ invoices claimed a total of $4.06 million plus GST, comprising $2.06 million by way of underwriting commission, plus the minimum Preference Unit Income Entitlement of $2.0 million.  The underwriting commission of $2.06 million was comprised of the base commission of $1.2 million plus $600,000 for 30 days at $20,000 per day in November 2016, and $260,000 for 13 days at $20,000 per day in December 2016.

35. There was no email or other response from the defendant to these emails.

36. Settlement under the Sale Contract did not take place on 13 December 2016, and on 14 December 2016 the Minister issued the C & G Group a Notice of Termination in respect of the Sale Contract.

37. Mr Uzcilas had been informed on 13 December 2016 by both Mr Cooke and Mr Abwi that the Transaction had not settled.  On 16 December 2016 he was informed by Mr Cooke that the Minister had cancelled the Sale Contract, but that they were working on the possibility of the Transaction completing in January 2017.

38. On 19 December 2016 Mr Uzcilas sent an email to Mr McClurg (copied to Mr Cooke).  Mr Uzcilas noted the lack of communication, and uncertainty as to the current status.  The email included:

    We acknowledge and agree that the Underwriting Agreement, the First Side Letter, the Funding Notice and the Notice remain in full force and effect.  The conditions precedent to the Underwriting Obligations remain outstanding and Closing did not occur on 13 Dec 2016.  The Underwriter reserves all of its rights, and does not waive any of its rights, under and in connection with the Underwriting Agreement and the Side Letter.

39. The email demanded payment of the outstanding invoices, and announced a claim for interest under clause 15.15(a) at 15 per cent if not paid by 21 December 2016.  It also repeated the 2 December 2016 request that the side letter be signed.  Finally, the email sent further copies of the invoices from Gadens and the plaintiffs.  The plaintiffs’ invoices had been amended to remove the claim for $2.0 million on account of the minimum Preference Unit Income Entitlement (on the basis that this was only payable in the event the Transaction settled), and to add amounts of $20,000 (being an additional daily fee for 14 December 2016) and $400,000 by way of reimbursement of the Four Hats Capital fee (purportedly under clause 6.3(c)).  (The claim for reimbursement of this $400,000 fee was later abandoned and is not pressed in these proceedings).

40. Mr Cooke responded by email dated 22 December 2016.  He wrote that the defendant would arrange for payment by 15 February 2017 of $1.8 million[19] plus GST by way of Underwriting Commission under the Underwriting Agreement, as well as the amounts in the Gadens invoices.  The email then noted that Closing had not occurred by 13 December 2016 and it appeared it would not occur.  Mr Cooke added that on this basis the defendant would not require funds from the plaintiffs, and attached a Revocation Notice.

    [19]   That is, the base commission of $1.2 million, and additional commission of $600,000 (being 30 days at the daily fee of $20,000).

41. While the Underwriting Agreement did not provide a mechanism for revoking the Funding Notice, the attached document provided the plaintiffs with formal notice that the Funding Amount of $40 million was not required and that the Funding Notice was revoked.

42. On 19 January 2017, the defendant paid the plaintiffs the amounts claimed in respect of the invoices from Gadens.

43. On 23 January 2017, the plaintiffs served the defendant with a notice of termination dated 22 January 2017, pursuant to clause 4.1 of the Underwriting Agreement.  The effect of the notice was to terminate the Underwriting Obligations under that agreement rather than the agreement itself.

44. On 22 February 2017, the defendant paid the plaintiffs the base commission payable under the Underwriting Agreement, being $1.2 million plus GST.  It did not pay any interest on that sum.  Nor did it pay any amount on account of the additional commission (or daily fee) claimed by the plaintiffs.

    The evidence of Mr Uzcilas and Mr Manassen

45. In addition to giving evidence as to the matters of factual background summarised above, and hence as to which I have already made findings, Mr Uzcilas and Mr Manassen also gave evidence as to their states of mind in relation to the plaintiffs’ underwriting obligations throughout the relevant period, and the plaintiffs’ reliance upon the same.

46. According to Mr Uzcilas, at all times from the issue of the Funding Notice on 11 October 2016 until receipt of the Revocation Notice on 22 December 2016, as the Funding Notice had not been withdrawn, he assumed and believed that the defendant was entitled to call on the plaintiffs to pay the Funding Amount at short notice; albeit upon satisfaction of the conditions precedent under the Underwriting Agreement (which he believed were matters within the defendant’s control), or upon those conditions precedent being waived by the plaintiffs.

47. In particular, Mr Uzcilas continued to have this assumption and belief despite being told on 20 October 2016 that settlement would not be occurring on 25 October 2016.

48. In relation to Mr Cooke’s email of 2 November 2016 stating that he “cannot see a need for [the defendant] to call on the underwrite”, Mr Uzcilas said that he did not interpret this as a revocation of the Funding Notice.  He saw it as a mere indication of Mr Cooke’s expectation at the time, but continued to believe that the plaintiffs might be called upon at very short notice to provide the funding under the Underwriting Agreement.  He said that he advised both Mr Manassen and Mr Nasuti by telephone that day that while the likelihood of funds being required was low, the underwriting obligation and potential liability under the Underwriting Agreement continued to exist until cancelled or revoked by the defendant.  He also emailed Mr Nasuti to similar effect on 4 November 2016.

1. Mr Uzcilas said that he also assumed and believed, throughout the period from 1 November 2016 until receipt of the Revocation Notice that additional commission was accruing (and so would be payable by the defendant) at the daily rate of $20,000 per day. He said that this was why the invoices included amounts for the additional commission at the rate of $20,000 per day.

2. Mr Uzcilas said that his assumptions and beliefs as set out above were at the time confirmed in his mind by the lack of any dispute raised by the defendant when he sent the invoices on 4 November 2016, and then again on 12 December 2016.

3. Mr Uzcilas’ evidence was that he understood that throughout the period from the issue of the Funding Notice through to 22 December 2016, the plaintiffs stood ready, willing and able to meet their funding obligation.  He was aware from his dealings with Mr Manassen that the plaintiffs had funds in excess of $40 million available at call.

4. Turning to Mr Manassen, his evidence was that at all times from receipt of the Funding Notice on 12 October 2016 through to 22 December 2016 he had access to the full amount of $40 million referred to in the Funding Notice through facilities he had arranged with Credit Suisse.  Mr Manassen added that while the facilities were in the name of Manassen Holdings, this did not preclude him from arranging for the second plaintiff, or Mr Nasuti and Mr Uzcilas (through their companies), to take up a share of the investment when the funds were required. 

5. Mr Manassen said that, apart from his discussions with Mr Uzcilas, he did not have any involvement in the dealings with the defendant.  He said that at all times from the signing of the Underwriting Agreement through to the Revocation Notice he assumed that their underwriting commitment of $40 million could be called upon by the defendant.  He regarded the plaintiffs’ obligations under the Underwriting Agreement as remaining alive.  He said that the funds to permit performance of the plaintiffs’ obligations had been set aside, and hence were not available for other investment opportunities.

6. I accept the evidence of both Mr Uzcilas and Mr Manassen, as summarised above, in relation to their states of mind during the relevant period.  There is a slight tension between their evidence that they assumed and believed that the defendant remained “entitled to call on the plaintiffs” to provide the $40 million (or that their obligations in this respect remained “alive”), and Mr Uzcilas’ recognition that this was dependent upon the conditions precedent being satisfied or waived.  However, the sense of their evidence was clear.  It was that they regarded the plaintiffs’ underwriting obligations as remaining on foot with the result that it was necessary to keep the $40 million available.  While at least Mr Uzcilas was cognisant of the conditions precedent, he seems to have regarded these as something of a formality that would either be addressed by the defendant or be waived by the plaintiffs.

7. Critically though, I accept Mr Uzcilas’ evidence (which was consistent with the invoices rendered on behalf of the plaintiffs) that he believed the additional commission was accruing throughout November 2016, and through to at least the expected settlement date of 13 December 2016.  While Mr Manassen did not give evidence in these precise terms, given the nature and regularity of his discussions with Mr Uzcilas, and the terms of the invoices, I am satisfied that he held the same assumption or belief as to the daily fee.

8. As will be seen, these findings are relevant to my consideration of the conventional and promissory estoppels asserted by the plaintiffs.

   The plaintiffs’ claim under the Underwriting Agreement

9. There is no dispute as to the principles governing the interpretation of the Underwriting Agreement. 

10. As I summarised in Masonic Homes Ltd v Oppedisano,[20] by reference to the relevant High Court authorities:[21]

    [20]   Masonic Homes Ltd v Oppedisano [2016] SASC 196.

    [21]   Masonic Homes Ltd v Oppedisano [2016] SASC 196 at [48]-[51].

    Determination of the meaning of the terms of a commercial contract such as the present involves ascertaining the objective intention of the parties to the contract.  This requires consideration of the language used by the parties in the context of the contract as a whole, the surrounding circumstances known to the parties and the commercial purpose or objects to be achieved by the contract.[22]

    [22]   Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at [35]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [40].

    In Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd,[23] French CJ, Nettle and Gordon JJ explained the approach in the following terms:[24]

    [23]   Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104.

    [24]   Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at [46]-[51] (omitting citations).

    The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.

    In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean.  That inquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.

    Ordinarily, this process of construction is possible by reference to the contract alone.  Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.

    However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding “of the genesis of the transaction, the background, the context [and] the market in which the parties are operating”. It may be necessary in determining the proper construction where there is a constructional choice. The question whether events, circumstances and things external to the contract may be resorted to, in order to identify the existence of a constructional choice, does not arise in these appeals.

    Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties' statements and actions reflecting their actual intentions and expectations.

    Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption “that the parties … intended to produce a commercial result”. Put another way, a commercial contract should be construed so as to avoid it “making commercial nonsense or working commercial inconvenience”.

    The distinction between impermissible regard to the parties’ subjective intentions and expectations, and permissible recourse to objective matters (surrounding circumstances) known to the parties, has been the subject of consideration in a number of recent decisions of the High Court.  In Byrnes v Kendle,[25] Heydon and Crennan JJ explained:[26]

    Contractual construction depends on finding the meaning of the language of the contract – the intention which the parties expressed, not the subjective intentions which they may have had, but did not express.  A contract means what a reasonable person having all the background knowledge of the “surrounding circumstances” available to the parties would have understood them to be using the language in the contract to mean. But evidence of pre-contractual negotiations between the parties is inadmissible for the purpose of drawing inferences about what the contract meant unless it demonstrates knowledge of “surrounding circumstances”. And in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd this Court said:

    “It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe.”

    Thus, evidence of prior negotiations will be admissible and relevant insofar as it tends to establish background facts that were known to both parties.  This may include identification of the subject of the contract.[27]  On the other hand, such evidence is not relevant insofar as it consists merely of statements and actions of the parties which are reflective of their actual or subjective intentions and expectations.

    [25]   Byrnes v Kendle (2011) 243 CLR 253.

    [26]   Byrnes v Kendle (2011) 243 CLR 253 at [98] (omitting citations).

    [27]   White v Australian and New Zealand Theatres Ltd (1943) 67 CLR 266 at 271; County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193 at [15].

11. The plaintiffs contend that on the proper construction of the Underwriting Agreement, and in particular clause 6 and paragraph 1(b) of Schedule 5 of that agreement, they are entitled to be paid additional commission by way of a daily fee of $20,000 for the period of 30 days from 1 November 2016.

12. Under clause 6.1 of the Underwriting Agreement, the defendant agreed to pay the plaintiffs the fees and commissions in paragraphs 1 and 2 of Schedule 5; and under clause 6.2, the defendant remained obliged to pay the Underwriting Commission (under paragraph 1 of Schedule 5),[28] despite the plaintiffs having terminated their Underwriting Obligations under clause 4.1.

    [28]   But not the Conditional Undertaking Fee (under paragraph 2 of Schedule 5).

13. Turning to the Underwriting Commission payable under paragraph 1 of Schedule 5, there is no dispute that the plaintiffs were entitled to be paid a base commission of $1.2 million plus GST under paragraph 1(a) (being 3 per cent of the Maximum Underwritten Amount of $40 million).  As mentioned, the defendant paid the plaintiffs this sum on 22 February 2017.  The only dispute in relation to the base fee component of the commission is the issue of interest.

14. As to the additional commission by way of a daily fee provided for in paragraph 1(b) of Schedule 5, it is payable if the Underwriter “subscribes or may be required to subscribe (whether or not it does actually subscribe) for any Preference Unit at any time on or after 1 November 2016”. 

15. The plaintiffs emphasise that it is enough to trigger the obligation to pay the daily fee that they were in a position following 1 November 2016 that they “may be required to subscribe” for Preference Units, and that it was not necessary that they ever in fact have subscribed.  The plaintiffs contend that upon the settlement of the Sale Contract being deferred from 25 October 2016, given that a Funding Notice had been issued, and in the absence of either the Underwriting Agreement or their Underwriting Obligations having been terminated, it remained the case that on and from 1 November 2016 the plaintiffs were in a position that they “may be required to subscribe” for Preference Units.

16. As to the quantum of the daily fee payable, the formula in paragraph 1(b) of Schedule 5 provided for it to be paid at a rate of $20,000 per day (being 0.05% of the Maximum Underwritten Amount of $40 million), for the lesser of (i) the number of days from 1 November 2016 to the earlier of the date of Closing, the date of termination of the Underwriting Obligations under clause 4.1, and the date of termination of the Underwriting Agreement under clause 3.3; and (ii) 30 days.  The plaintiffs contend that as the Transaction under the Sale Contract did not ever close, and there was no termination of either the Underwriting Obligations or the Underwriting Agreement within the 30 days following 1 November 2016, the daily fee was payable under paragraph 1(b) for a period of 30 days, giving a total of $600,000 plus GST.

17. By reference to paragraphs 1(c) and (d) of Schedule 5, the plaintiffs contend that this sum was payable on the earlier of the date of Closing and the Relevant Date.  As the Transaction did not ever close, they contend that the daily fee became payable on the Relevant Date.  While the definition of Relevant Date (set out earlier) provided for it to be extended to 30 November 2016 “where Closing will occur after 31 October 2016 only because the Senior Debt Lender requires FIRB approval to provide the Senior Debt Facility”, it was otherwise 31 October 2016.  Here, because Closing was deferred for reasons that included, but were not confined to, the requirement for FIRB approval, the Relevant Date remained 31 October 2016.  The plaintiffs contend that they were entitled to be paid the additional commission of $600,000 on this day, with interest accruing from that date.

18. The defendant rejects the plaintiffs’ construction of paragraph 1(b) of Schedule 5, and denies that it is obliged to pay the plaintiffs any additional commission by way of a daily fee under that paragraph.  There are essentially two limbs to the defendant’s denial of any liability to pay additional commission under paragraph 1(b) of Schedule 5.

19. The first limb of the defendant’s case in this respect is that the trigger to the plaintiffs’ entitlement to additional commission (namely, that they “may be required to subscribe” for Preference Units) was not established.  It was not established because on and from 1 November 2016, the clause 3.1 conditions precedent to the Underwriting Obligations had not been satisfied or waived, and the plaintiffs were entitled to either terminate the Underwriting Obligations (under clause 4.1, by reason of one or more of the events in Schedule 3 having occurred) or terminate the Underwriting Agreement (under clause 3.3, by reason of any of the conditions precedent in clause 3.1 not having been satisfied or waived by the plaintiffs).  On the defendant’s case, the non-satisfaction or waiver of the conditions precedent, and the existence of these rights to terminate on the part of the plaintiffs, meant that it could not be said that the plaintiffs “may be required to subscribe”.

20. The second limb of the defendant’s case is that, on the proper construction of paragraph 1(b) of Schedule 5, there was no obligation to pay any daily fee under that paragraph in circumstances where Closing did not occur by the Relevant Date.  The defendant relies in this respect upon the concluding words of paragraph 1 of Schedule 5, and in particular the reference in subparagraphs (c) and (d) to the earlier of the date of Closing and the Relevant Date.

21. It is convenient to address these two limbs of the defendant’s case in reverse order.

22. In response to the second limb of the defendant’s case in relation to the construction of Schedule 5, it might be said that this construction would leave the provision for additional commission by way of the daily fee with no work to do, or would prevent a daily fee ever being payable.  However, the defendant does not accept that this would be a consequence of its construction of Schedule 5.  By reference to the definition of ‘Relevant Date’ (which provides for the Relevant Date to be 30 November 2016 rather that 31 October 2016 in the event that Closing is delayed beyond 31 October 2016 only by reason of the need for FIRB approval), the defendant explains that the daily fee would still be payable in the event of a delay in Closing, and extension of the Relevant Date, in circumstances where that occurs only by reason of the need to obtain FIRB approval.

23. The defendant also made reference in this context to circumstances in which Closing was delayed by agreement between the parties.  While it was not made clear, it seems the basis for this submission was the reference to the possibility of the parties agreeing a later date for Closing in clause 3.1(f).  While any such agreement might suffice for compliance with the condition in clause 3.1(f), as it would not result in a change in the Relevant Date, I am not sure it is relevant in the present context.

24. I acknowledge that, in the circumstances where Closing is delayed by reason only of the need to obtain FIRB approval, the Relevant Date will be delayed to 30 November 2016.  However, it does not necessarily follow that the only circumstance in which the daily fee in paragraph 1(b) is payable is in the circumstance where this occurs.  To the contrary, in my view, paragraphs 1(c) and (d) of Schedule 5 do not operate to limit, or temporally confine, the circumstances in which the plaintiffs may become entitled to the daily fee.  Indeed, I do not think those subparagraphs have any role in determining whether or not the plaintiffs are entitled to the daily fee.  Rather, the role of those subparagraphs is merely to fix the date upon which the daily fee becomes payable.

25. The obligation to pay commission arises under clause 6.1 of the Underwriting Agreement, and not Schedule 5 to that agreement.  Under clause 6.1, the defendant agreed to pay the plaintiffs “the fees and commissions set out in, paragraphs 1 and 2 of Schedule 5.”  Understood in this context, Schedule 5 merely provides a mechanism for determining the amount and timing of the fees and commissions to be paid.  In particular, in respect of the Underwriting Commission in paragraph 1, subparagraphs (a) and (b) provide the formulae for determining the amounts of the base commission and additional commission respectively, and subparagraphs (c) and (d) provide the mechanism for determining the date upon which the obligation to pay these commissions falls due.

26. While one might have expected the timing provisions in (c) and (d) to be more clearly separated from the quantification provisions in (a) and (b), I do not ultimately think that anything flows from the drafting technique or structure that has been adopted.  To the extent that the location of (c) and (d), and the structure of the Schedule, are of any consequence, I do not think they favour a construction that would have the matters of timing in (c) and (d) limiting the obligation to pay commission under clause 6.1, as opposed to merely regulating the date upon which the commission becomes payable.

27. But more importantly, I do not think the language used supports the construction inherent in the second limb of the defendant’s case as to the construction of Schedule 5.  There is nothing express in Schedule 5 to the effect that the daily fee in paragraph 1(b) is only payable if the Relevant Date is delayed by reason of the need for FIRB approval.  In my view, the key to understanding the function and meaning of both (a) and (b), and (c) and (d), lies in the introductory words to those pairings of subparagraphs.  The introductory words to (a) and (b) (“[t]he Trustee must pay to the Underwriter”) are consistent with those subparagraphs identifying the commission to be paid; and the introductory words to (c) and (d) (“by the earlier of the following dates”) are supportive of those subparagraphs then identifying when those commissions are to be paid, and not whether they are to be paid. 

28. It is true, as the defendant points out, that the plaintiffs’ construction has the consequence that the daily fee may become payable prior to the amount of that fee becoming ascertainable.  For example, in circumstances where the Relevant Date is not extended, but Closing is yet to occur but expected to occur some time in November 2016, then the daily fee will be payable on 31 October 2016, but the amount of that fee will not be able to be calculated with certainty until Closing occurs or 30 days otherwise passes (and hence the value for ‘D’ in the formula in paragraph 1(b) is determined). 

1. These concerns are reflected in various of the remaining submissions made by the defendant in opposition to the plaintiffs’ contended promissory estoppel, and it is to those submissions that I now turn.

   The representation and assumption

2. As set out earlier, the plaintiffs’ promissory estoppel is formulated in terms of a representation by the defendant at the 30 November 2016 meeting, and corresponding assumption by the plaintiffs, to the effect that the arrangements under the Underwriting Agreement would continue until the expected settlement, and in particular that the underwriting fee would continue to accrue at the daily rate until then.  I have referred to this representation as the daily fee representation.

3. In contesting the evidential foundation for a finding that the daily fee representation was made, the defendant emphasises the authorities to the effect that for a representation to found an estoppel it must be clear and unambiguous.  As French CJ, Kiefel and Bell JJ said in Crown Melbourne Limited v Cosmopolitan Hotel (Vic) Pty Ltd:[82]

   It has long been recognised that for a representation to found an estoppel it must be clear. In Low v Bouverie it was said that the language used must be precise and unambiguous. This does not mean that the words used may not be open to different constructions, but rather that they must be able to be understood in a particular sense by the person to whom the words are addressed. The sense in which they may be understood provides the basis for the assumption or expectation upon which the person to whom they are addressed acts. The words must be capable of misleading a reasonable person in the way that the person relying on the estoppel claims he or she has been misled. The statement that the tenants would be “looked after at renewal time” is not capable of conveying to a reasonable person that the tenants would be offered a further lease.

   [82]   Crown Melbourne Limited v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1 at [35] (omitting citations).

4. In support of its contention that the plaintiffs have not established that the daily fee representation was made, the defendant relies upon submissions similar to those put in opposition to the existence of the Extension Agreement, including by reference to Watson v Foxman.[83]

   [83]   Watson v Foxman (1995) 49 NSWLR 315 at 318-319 (extracted above).

5. While accepting that the evidence must establish a clear representation, the mere fact that the relevant evidence was not sufficient to establish a contractual promise does not preclude the finding of a representation sufficient to found an estoppel.  Indeed, given the focus of the latter upon reasonable reliance and detriment it has been suggested that the degree of certainty may be less than that required to establish a contract, or at least that it is not appropriate to be too prescriptive about what may be required.[84]

   [84]   Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1 at [116]-[117], [143]-[147], [217]-[218].

6. For the reasons I have earlier given, I was not ultimately satisfied that Mr Uzcilas’ evidence of the 30 November 2016 meeting was sufficient to establish the alleged Extension Agreement.  However, I was satisfied that the parties had reached a consensus as to the proposed terms, including that the underwriting fee would continue to accrue at the daily rate.  It was just that I was not satisfied that the parties did so in words or circumstances that established an objective intention that they would be immediately contractually bound by that consensus.  I do not think this conclusion stands in the way of a finding that the defendant made the daily fee representation.[85]  To the contrary, it was implicit in my conclusion that the parties reached a consensus as to the proposed terms and that the defendant made a representation to the effect of the daily fee representation.  In the circumstances of this case, I do not think that it matters that it is not possible for me to say whether it was Mr Cooke, Mr McClurg or both of them who conveyed the representation, or indeed for me to identify the precise words used to convey the representation.  It is enough that I have accepted the evidence of Mr Uzcilas that the defendant, through the words and conduct of its representatives at the 30 November 2016 meeting, conveyed that the daily fee would continue to accrue through to settlement.

   [85]   cf where a contract is not found by reason of a want of certainty or sufficiency of the terms alleged, rather than a want of an intention to create legal relations.

7. I am also satisfied that the plaintiffs made an assumption to the same effect as a result of what transpired at the 30 November 2016 meeting.  I have earlier mentioned Mr Uzcilas’ evidence that he made this assumption, and my acceptance that both he and Mr Manassen assumed that the daily fee would continue to accrue.  The making of such an assumption by Mr Uzcilas is consistent with, and to some extent supported by, the terms of his 30 November 2016 email to Mr Cooke.[86]  As for Mr Manassen, not only was he in regular communication with Mr Uzcilas at the time, but he was forwarded this very email by Mr Uzcilas.  In his covering email, Mr Uzcilas described it as a summary of the meeting, and added “[i]n short all positive”.  The making of the assumption is also consistent with, and to some extent supported by, the plaintiffs’ invoices provided to the defendant on 12 December 2016, which invoices included amounts calculated on the basis that the daily fee was continuing to accrue.

   [86]   See, in particular, paragraph 5 of that email.

8. Before moving to consider the remaining elements of the plaintiffs’ contended promissory estoppel, I note that, on my view of the evidence, the assumption made by the plaintiffs was an assumption that the defendant would pay the daily fee, and hence something short of an assumption that the defendant was bound to pay the daily fee.  However, in my view the plaintiffs had more than a mere hope or expectation that some undefined contract might come into existence, depending upon how the events and negotiations unfolded.  Rather, they assumed that a contract would come into existence in essentially the terms that had been agreed, and that this was subject only to being formalised in writing.  In that sense, I am satisfied that the plaintiffs here were in a position more akin to that held to exist by Debelle J, rather than by Vanstone and Layton JJ, in Whittle v Parnell Mogas Pty Ltd.[87]  And I am satisfied, consistently with the views I expressed earlier (by reference to the reasons of Ward CJ in Eq in CPB Contractors Pty Ltd v Rizzani De Eccher Australia Pty Ltd), that this assumption is capable of founding a promissory estoppel.

   [87]   Whittle v Parnell Mogas Pty Ltd (2006) 94 SASR 421.

   The plaintiffs’ reliance

9. I am also satisfied that the plaintiffs, through Mr Uzcilas and Mr Manassen, relied upon the assumption that they made.  Having formed the assumption that the defendant would conduct itself in accordance with the consensus reached at the 30 November 2016 meeting, including that the daily fee would continue to accrue and be paid, the plaintiffs relied on this by not only paying the invoice from Gadens, but also by not exercising their rights to terminate the Underwriting Obligations or the Underwriting Agreement, and by continuing to ensure that they were in a position to provide the $40 million in funding if called upon to subscribe.  While there may have been other considerations relevant to the plaintiffs’ decisions to act in these ways, those decisions were at least materially influenced by their assumption that they would be paid the daily fee throughout the relevant period.

10. An issue arises as to the reasonableness of the plaintiffs’ reliance upon its assumption in circumstances where I have held that the parties’ communications were not such as to demonstrate an objective intention to be immediately contractually bound by the consensus they reached.  However, this was not a situation where there were significant gaps in the terms that had been agreed, where there was some obvious pre-condition to a contract coming into existence, or where one party had expressly made its preparedness to be bound subject to obtaining instructions or subject to writing.  While it is ultimately a matter of fact and degree, in such circumstances, particularly in a commercial setting,[88] it might be difficult to establish that it was reasonable to rely upon an assumption that a contract would come into existence.  But here, where there was a relatively clear consensus as to each of the essential terms of the contemplated contract, and there was no express qualification to the defendant’s preparedness to formalise that consensus, I do not think my conclusion that there was no objective intention to be immediately contractually bound stands in the way of a conclusion that the plaintiffs’ reliance was reasonable.  Indeed, I am satisfied that the plaintiffs’ reliance was reasonable.

    [88]   See earlier reference to Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582 at 585-586; Seven Network (Operations) Ltd v Warburton (No 2) [2011] NSWSC 386 at [46].

    The defendant’s inducement and knowledge

11. I am satisfied that it was the defendant’s conduct at the 30 November 2016 meeting that induced the formation of the assumption by the plaintiffs (through Mr Uzcilas and then Mr Manassen) that they would be paid the daily fee.  The assumption was not the product of any self-induced mistake by the plaintiffs.

12. Further, having induced the formation of the relevant assumption, I am also satisfied that the defendant thereafter knew that the plaintiffs had made this assumption and took no steps to disabuse the plaintiffs of the assumption.  In that sense, the defendant knowingly induced the plaintiffs to continue to hold the assumption that the daily fee was continuing to accrue.  In reaching this conclusion, I have relied upon various of the communications between the parties following the 30 November 2016 meeting.

13. The first of these communications was Mr Uzcilas’ email of 30 November 2016 to Mr Cooke, sent shortly after the meeting, in which he sought confirmation of six things that had been discussed, including that “[a]ll arrangements will continue until settlement and the underwriting fee will accrue at the daily rate.”  There was no response to this email.

14. The next relevant communication was Mr Uzcilas’ email of 2 December 2016 to Mr Cooke which attached the draft December Side Letter.  The draft December Side Letter provided for an amendment to paragraph 1 of Schedule 5 to ensure that the daily fee continued to accrue.  Again, there was no response from the defendant.

15. Then, on 5 December 2016, in the email exchange between Mr Uzcilas and Mr Cooke referred to earlier in these reasons, Mr Cooke reported a query from the defendant’s solicitor (“if we are continuing to pay an underwrite fee does that mean that the capital is still available to call?”) which assumed the continuing accrual of the daily fee.  And the balance of the exchange between the two, which was predicated upon an ongoing obligation to keep the $40 million in funding available, did not suggest the daily fee was not continuing to accrue.

16. Finally, there were the plaintiffs’ invoices forwarded to the defendant by email dated 12 December 2016, which invoices were calculated on a basis that included the continuing accrual of the daily fee.  Again, there was no response to this email or the attached invoices.

17. In my view, these communications may be fairly summarised as involving the plaintiffs (through Mr Uzcilas) making plain their assumption that the daily fee would continue to accrue, and the defendant remaining essentially silent in response.  While it might be argued that the plaintiffs ought not to have assumed assent from silence, and indeed perhaps ought to have inferred some doubt or uncertainty from the silence, I think that is to read too much into the communications.  I think that is particularly so in light of the terms of the 5 December 2016 email exchange, which in my view provided some positive support for the assumption. 

18. I do not go as far as to suggest that the defendant deliberately or cynically sought to encourage the assumption.  But I am satisfied that the defendant, through Mr Cooke, knew the plaintiffs were assuming the daily fee would continue to accrue, and that its silence during December 2016 induced or encouraged the plaintiffs to continue to hold that assumption.

    The plaintiffs’ detriment

19. In order to found an estoppel, the proponent of an estoppel must establish not only that it would suffer detriment were the other party to be permitted to depart from the relevant assumption, but also detriment of a sufficient nature and extent to render it unconscionable for the other party to so depart. 

20. While it now appears that there is no general principle that confines the operation of an equitable estoppel to “the minimum equity” necessary to reverse the proponent’s detriment, the authorities nevertheless continue to require some sense of proportion between the detriment and the relief sought by the proponent.  In Ashton v Pratt,[89] Bathurst CJ summarised the approach to detriment in the following way:[90]

    The relevant detriment is that which the party asserting the estoppel would suffer, as a result of her original change of position, if the assumption which induced it was repudiated by the party estopped: Delaforce v Simpson-Cook [2010] NSWCA 84; 78 NSWLR 483 at [42] Grundt v The Great Boulder Proprietary Gold Mines Ltd (1937) 59 CLR 641 at 674-675 and Sidhu at [81].

    What now appears clear is that there is no need to mould any remedy in the case of equitable estoppel to reflect the minimum relief necessary to remove the detriment: Giumelli at [48], Delaforce at [56]-[57] and Sidhu at [85]. Prima facie the courts should enforce a reasonable expectation which the party bound created or encouraged. However, relief will be limited where the enforcement of a plaintiff’s expectation would be out of all proportion to the detriment: Delaforce at [62] and Sidhu at [85]. This is because in those circumstances good conscience does not require the promisor be held to his or her promise.

    …

    As was stated by Gageler J in Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd [2014] HCA 14; 88 ALJR 552 at [150] the detriment or harm required to ground an estoppel can be any material disadvantage. Such material disadvantage must be substantial, although it need not be quantifiable in the same way as an order of damages. In the present case Ms Ashton suffered no material disadvantage, certainly not one which could be described as substantial.

    [89]   Ashton v Pratt (2015) 88 NSWLR 281.

    [90]   Ashton v Pratt (2015) 88 NSWLR 281 at [141]-[142], [147].

21. In the circumstances of the present case, even accepting, as I do, that the plaintiffs relied upon an assumption that the daily fee was continuing to accrue by paying the Gadens’ invoice, by not exercising their rights to terminate the Underwriting Obligations or the Underwriting Agreement, and by continuing to ensure they were in a position to provide the $40 million in funding if called upon to subscribe, I do not accept that any of these involved the incurring of detriment sufficient in nature or extent to found the contended estoppel.

22. In the case of the Gadens’ invoice, the defendant ultimately acknowledged its responsibility for reimbursing the plaintiffs and indeed did reimburse the plaintiffs.  I do not consider any detriment incurred by the plaintiffs in this respect to be of a nature or extent to make departure from the assumption that they would be paid daily fees unconscionable.

23. The plaintiffs’ conduct in not terminating, and in continuing to ensure that $40 million was available in case they were called upon to subscribe, is more significant.  In a sense, the plaintiffs are right to contend that they performed their obligations under the postulated contract arising out of the 30 November 2016 meeting, albeit that in the circumstances as they eventuated this consisted merely of keeping the funds available without ever having to pay over those funds.  However, the difficulty is whether this conduct in reliance upon the assumed continuing accrual of daily fees was relevantly detrimental. 

24. The plaintiffs’ evidence was that it had numerous other investment opportunities available to it at the relevant time which it was prevented from exploring, or at least pursuing, by reason of its decision to keep the $40 million held with Credit Suisse earmarked to meet its (assumed) underwriting obligations to the defendant.  However, the difficulty with reliance upon this conduct as constituting relevant detriment is two-fold.

25. First, the plaintiffs’ evidence as to the other investment opportunities was left at a very general level.  The evidence does not reveal anything as to the nature of the other investment opportunities that would enable me to form any view as to the likelihood of those investments being pursued or being profitable, let alone the extent of any profits that might have been earned.

26. Secondly, the evidence does not reveal the return generated on the funds held by the plaintiffs with Credit Suisse.  The plaintiffs’ evidence as to the nature of the facility or facilities with Credit Suisse was again very general.  Mr Manassen acknowledged in cross-examination that the relevant funds were held at least in part in local and overseas equities, and various currencies, with the object of profiting.  But he said that he did not know what return the funds had generated during the relevant period.

27. The net effect of the above is that I simply cannot say whether or not the plaintiffs have suffered any financial detriment by reason of their decision to continue to keep the $40 million available after 30 November 2016. I acknowledge that it will not always be necessary to quantify the detriment relied upon to found an estoppel.  A conclusion that there is sufficient detriment to found an estoppel does not usually turn upon any precise quantification of the detriment,[91] let alone numerical equivalence with the value of the promise sought to be enforced through promissory estoppel.  In some cases, it will be sufficient to establish that the plaintiff embarked upon some alternative course of conduct without needing to descend to any assessment of the financial consequences for it of having done so.[92]  But I do not think the present is such a case.  In circumstances where the evidence leaves it entirely open whether the holding of funds with Credit Suisse resulted in any financial detriment to the plaintiffs at all, I am not persuaded that this constitutes detriment sufficient to sustain the contended estoppel.

    [91]   See, for example, Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560 at [150] per Gageler J, observing that the detriment need not be quantifiable, albeit that it must still be substantial.

    [92]   See, for example, Miller Heiman Pty Ltd v Sales Principles Pty Ltd (2017) 94 NSWLR 500 at [68]-[71].

28. Finally, the plaintiffs rely upon the non-payment of the daily fee for the period following 30 November 2016 as detriment sufficient to found its estoppel.  However, the difficulty with this is that, generally at least, the mere non-receipt of the anticipated benefit of the promise is not relevant or sufficient detriment.[93]  As Brennan CJ explained in Commonwealth v Verwayen:[94]

    The relevant detriment in a case of equitable estoppel is detriment occasioned by reliance on a promise, that is, detriment occasioned by acting or abstaining from acting on the faith of a promise that is not fulfilled.  The relevant detriment does not consist in a loss attributable merely to non-fulfilment of the promise.

    [93]   Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1 at [123].

    [94]   Commonwealth v Verwayen (1990) 170 CLR 394 at 429 (applied in Whittle v ParnellMogas Pty Ltd (2006) 94 SASR 421 at [53]).

1. The rationale for this approach lies in an understanding that the object of promissory estoppel is not the protection of the expectation interest that contract law seeks to protect.  Rather, its object is the prevention of the unconscionable infliction of detriment.  And while, in a lay sense, it might be said to be harsh or unfair not to adhere to a promise, equity requires something more than the making and threatened non-fulfilment of a promise before it will intervene.  A similar point emerges from the passages of Brennan J’s reason in Walton Stores (Interstate) Ltd v Maher,[95] extracted earlier in these reasons.

   [95]   Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 426-427.

   Unconscionability

2. Related to the difficulty for the plaintiffs in terms of identifying relevant detriment, or at least an alternative way of expressing difficulty, is my view that it would not in all the circumstances of this case be unconscionable for the defendant to resile from the representation and assumption that the daily fee would continue to accrue and be paid after 30 November 2016.

3. While unconscionability is a necessary condition of any promissory estoppel, its existence is largely informed by, and difficult to disentangle from, a consideration of the other elements of the estoppel.  Indeed, on one view, it is merely an expression of the conclusion or outcome from a consideration of the other elements of an equitable estoppel rather than a stand alone element.  

4. In the present case, the defendant’s conduct in inducing the formation of the assumption, and thereafter allowing the plaintiffs to labour under it, makes its apparently opportunistic conduct in later seeking to depart from that assumption worthy of criticism.  However, in my view, particularly in light of the difficulties in identifying any substantial detriment on the part of the plaintiffs it cannot be said that it would be unconscionable in the relevant sense for the defendant to renege on its representation that it would pay the daily fee in the period following 30 November 2016.  In this respect, it is significant that both parties in this case were experienced commercial operators who had the benefit of legal advisers in connection with the relevant events.  While I have not found that this commercial context rendered the plaintiffs’ reliance on the representation unreasonable, and hence necessarily fatal to the existence of the contended estoppel, it is nevertheless a relevant consideration in determining whether it would be unconscionable for the defendant to depart from the assumption it induced.

   Conclusion as to promissory estoppel

5. For the reasons set out, the plaintiffs have not made out their case in promissory estoppel. 

   Estoppel by convention

6. The parties proceeded on the basis that the principles governing the operation of an estoppel by convention were accurately summarised by Blue J in Outback Energy Hunter Pty Ltd v New Standard Energy PEL 570 Pty Ltd (by reference to various authorities, including the decision of the Full Court of this Court in Davis v CGU Insurance Ltd[96]).  In that case, his Honour said:[97]

   [96]   Davis v CGUInsurance Ltd (2009) 104 SASR 422 at [32]-[33].

   [97]   Outback Energy Hunter Pty Ltd v New Standard Energy PEL 570 Pty Ltd [2018] SASC 8 at [269]-[271] (citations omitted).

   The elements of estoppel by convention are:

   1.   The parties proceed on the basis of an assumption of fact and/or law capable of forming the foundation of the remaining elements.

   2.   Each party, from the perspective of the other, accepts the assumption as true for the purpose of the transaction in question.

   3.   Such acceptance is intended to govern the legal position between the parties.

   4.   The proponent takes or omits to take action and is entitled to so act in reliance upon the assumption.

   5.   The other party knows that the proponent is so acting.

   6.   The proponent would suffer detriment if the other party were permitted to depart from the assumption.

   7.   It would be unconscionable for the other party to depart from the assumption.

   The first three elements are capable of being satisfied in two different sets of circumstances:

   (a)    the parties make a mutual assumption: ie each party makes the assumption and knows that the other party is making the same assumption and both parties intend it to govern their legal relations;

   (b)    the proponent alone makes the assumption and believes that the other party is making the same assumption and intends it to govern the legal position between the parties when the other party does not actually make the assumption but knows that the proponent is making it in that belief with that intention and plays a causative role in relation thereto (usually by positive conduct but in exceptional circumstances by acquiescence therein).

   The parties do not necessarily need to believe in the truth of the relevant assumption provided that they proceed on the basis as if it were true and the other elements enumerated above are satisfied.

   The plaintiffs’ case

7. The plaintiffs’ case in relation to estoppel by convention was predicated upon an assumption adopted by the plaintiffs, namely that on and from 31 October 2016 (or alternatively 30 November 2016) through to either 22 December 2016 (when the defendant revoked the Funding notice) or 14 December 2016 (when the Minister rescinded the Sale Contract) they:

   (i)may be required to subscribe for Preference Units in the amount of $40 million in accordance with the Funding Notice and otherwise upon the terms of the Underwriting Agreement; and

   (ii)were therefore entitled to receive commission of $20,000 per day during this period (the daily fee assumption).

8. The plaintiffs contend that the parties proceeded and conducted themselves throughout this period of time on the basis that this assumption governed the legal relationship between them; and that they did so each knowing or intending that the other was acting on that basis. 

9. The plaintiffs further contend that departure from this assumption would occasion detriment to the plaintiffs in that:

   (i)by reason of adopting the assumption the plaintiffs lost the opportunity to consider and/or earn income from making an alternative use of the $40 million in funds that would have been used by the plaintiffs to subscribe for the Preference Units; and

   (ii)the plaintiffs will not be paid the additional commission by way of daily fee.

10. In rejecting any estoppel by convention, the defendant relies upon various matters.  In particular, the defendant contends that:

    1.   The assumption in question is an assumption of law, and that estoppel by convention does not extend to such assumptions.

    2.   If the plaintiffs did adopt the relevant assumption, then they did so as a result of their own uncommunicated misunderstanding of the Underwriting Agreement rather than any conduct of the defendant, and that conventional estoppel is not concerned with self-induced mistakes of this nature.

    3.   To the extent the defendant held the same assumption as to the proper construction of paragraph 1(b) of Schedule 5, there was never a communication to this effect between the parties or which was otherwise consistent with the parties knowing they were each proceeding on this basis.

    4.   The plaintiffs did not rely on, or conduct themselves on the basis of, the assumption.  To the contrary, they knew the conditions precedent had not been satisfied or waived, and had expressly reserved their rights.

    5.   The plaintiffs have not established any detriment, at least not of a nature and extent sufficient to found the contended estoppel.

11. Before addressing the defendant’s grounds for contesting the plaintiffs’ case in conventional estoppel, I observe that the conventional estoppel or estoppels relied upon by the plaintiffs cover two analytically distinct periods of time; that is, from 31 October 2016 through to 30 November 2016 (the November period) and from 30 November 2016 through to either 22 December 2016 or 14 December 2016 (the December period).  While the plaintiffs articulate their conventional estoppel claim in terms of a single assumption throughout both periods, in fact there is a difference between the periods that affects the analysis of the plaintiffs’ case.  The difference lies in the basis or foundation for the assumption.  In the case of the November period, the assumption is as to the effect of the Underwriting Agreement; that is, that the daily fee is payable under that agreement.  In the case of the December period, the assumption is as to the existence and effect of the (alleged) Extension Agreement reached at the 30 November 2016 meeting.

12. Related to this, I observe that as I have concluded that the plaintiffs’ assumption about the effect of the Underwriting Agreement was correct, there is no need or room for them to rely upon a conventional estoppel as to the November period.  As such, I do not propose to say much about this aspect of the plaintiffs’ conventional estoppel case.

13. And in relation to the December period, as the conventional estoppel is founded in the representations made, and consensus reached, during the 30 November 2016 meeting, the plaintiffs’ conventional estoppel closely mirrors their promissory estoppel.  It follows that much of what I have said in relation to promissory estoppel is relevant to the plaintiffs’ case in convention estoppel for the December period.

    Assumption of law

14. I accept that the daily fee assumption is an assumption of law.  It is an assumption going to the plaintiffs’ legal entitlement to receive the daily fee under the Underwriting Agreement (for the November period) and then under the Extension Agreement (for the December period).

15. However, as the defendant acknowledged, the balance of modern authority favours the extension of conventional estoppel to assumptions of law.[98]  While the issue has perhaps not been authoritatively determined at an intermediate appellate level, it is appropriate that I follow this authority.

    [98]   Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 6) [2015] FCA 825 at [758]-[779]; Davis v CGU Insurance Ltd (2009) 104 SASR 422 at [33]; Alpha Wealth Financial Services Pty Ltd v Frankland River Olive Co Ltd (2008) 66 ACSR 594 at [27], [164].

    Formation or adoption of the assumption

16. So far as the November period is concerned, while Mr Uzcilas and Mr Manassen did not say in precise terms that they believed and assumed the daily fee was accruing and payable, that was the effect of their evidence.  That assumption follows from their evidence, which I accept, that they believed throughout November that they remained exposed to a call on the $40 million, and is supported by their conduct through the 30 November 2016 meeting in seeking a continuation of the daily fee beyond the end of November.

17. While I am thus satisfied that the plaintiffs adopted the relevant assumption, the difficulty so far as the November period is concerned is in identifying any basis for concluding that the defendant caused or induced that assumption.  Mr Uzcilas’ evidence was that he formed his understanding of the operation of paragraph 1(b) of Schedule 5 on the basis of his own reading of the Underwriting Agreement.  And Mr Manassen did not recall having read the Underwriting Agreement and believed that his understanding of its operation and effect was derived from his discussions with Mr Uzcilas.  In my view, this is fatal to the plaintiffs’ claimed conventional estoppel in respect of the November period.

18. In relation to the December period, as I have mentioned, the assumption is one that is said to have followed from the terms of the representations made, and consensus reached, during the 30 November 2016 meeting with the defendant’s representatives.  On the basis of the findings I have already made in the context of my analysis of the plaintiffs’ promissory estoppel claim, the defendant, through the words and conduct of Mr Cooke and Mr McClurg, induced the plaintiffs, through Mr Uzcilas, to assume that the daily fee would continue to accrue and ultimately be paid by the defendant to the plaintiffs.  But, to my mind, this assumption was in substance one as to the future and hence more appropriately analysed in terms of a potential promissory estoppel.  I consider that the evidence falls short of establishing the assumption said to found the contended conventional estoppel, namely that the defendant was “entitled” to the daily fee after 30 November 2016.  In other words, while the evidence established an assumption that a contractual entitlement would come into existence, I am not satisfied it established an assumption that a contractual entitlement already existed as a result of the 30 November 2016 meeting.  While the distinction is a fine one, it is in my view an important conceptual distinction between the potential operations of the promissory and conventional estoppels contended for by the plaintiffs.

    No mutual assumption

19. The defendant contends that it did not make or hold the assumption relied upon by the plaintiffs, and that even if it had, it did not ever communicate this to the plaintiffs.

20. I accept the factual premise of this contention, but do not accept that it is of itself fatal to the plaintiffs’ case in conventional estoppel.  While the orthodox conventional estoppel involves a mutual assumption between the parties, as formulated in paragraphs (a) and (b) of the passage from Blue J’s reasons in Outback Energy Hunter Pty Ltd v New Standard Energy PEL 570 Pty Ltd,[99] it is not confined to mutual assumptions.  Rather, it extends to assumptions made only by the proponent of the estoppel, but in circumstances where the other party knows the proponent has made the assumption and plays a causative part in relation thereto.

    [99]   Outback Energy Hunter Pty Ltd v New Standard Energy PEL 570 Pty Ltd [2018] SASC 8 at [270], relying in particular in this respect upon Republic of India v India Steamship Co Ltd (No 2) (The Indian Grace) [1989] AC 878 at 913 (where Lord Steyn referred to “the assumption being either shared by them both or made by one and acquiesced in by the other”), referred to with approval in Davis v CGU Insurance Ltd (2009) 104 SASR 422 at [32].

21. In relation to the November period, I am not satisfied on the evidence that the defendant knew of the plaintiffs’ assumption.  Indeed, the correspondence from the plaintiffs reserving their rights was perhaps suggestive that the plaintiffs did not regard themselves as bound to provide the $40 million and perhaps, inferentially, that they might not have been entitled to the daily fee.  But that remains speculative.  The short point is that there is not a sufficient basis in the evidence for me to find the requisite knowledge on the part of the defendant.

22. Further, and in any event, I have already explained why I am not satisfied that the defendant played any causative role in the plaintiffs’ assumption during the November period.

23. As for the December period, for the reasons set out in the context of promissory estoppel, I am satisfied that the defendant induced an assumption that the daily fee would accrue and be paid.  But assuming the relevant assumption, for the purposes of conventional estoppel, is that the plaintiffs were (contractually) entitled to be paid the daily fee, I do not think that the defendant’s conduct went quite so far as to induce this assumption.

    Detrimental reliance

24. So far as the November period is concerned, a further reason why the conventional estoppel must fail is the absence of any relevant or sufficient detrimental reliance on the part of the plaintiffs.  I do not think the evidence went as far as sustaining a finding that the plaintiffs refrained from exercising its rights of termination during November 2016 on the basis of the relevant assumption.  But even if it did, for the reasons I have given in the context of promissory estoppel (given the general nature of the evidence as to the financial implications of continuing to hold funds with Credit Suisse), I am not satisfied that this would suffice.

25. As for the December period, my conclusions as to the absence of relevant or sufficient detriment, and indeed as to the want of unconscionability, apply with equal force to the plaintiffs’ claim in conventional estoppel.

    Conclusion

26. For all of the above reasons, the plaintiffs’ claim in conventional estoppel fails.

    Conclusions and orders

27. For the reasons I have given, the plaintiffs’ claim that they were entitled, under paragraph 1(b) of Schedule 5 to the Underwriting Agreement, to be paid additional commission in the form of the daily fee of $20,000 for the period of 30 days through to 30 November 2016 has succeeded.  It follows that the plaintiffs are entitled to judgment for the amount of $600,000.  However, the balance of the plaintiffs’ claims (that is, under the alleged Extension Agreement and in promissory or conventional estoppel) have failed. 

28. I will hear the parties further as to the issues of interest and costs before entering orders.