Manno Kingsway Pty Ltd as trustee for the Manno Kingsway Unit Trust v Rose

[2024] NSWSC 1065

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Manno Kingsway Pty Ltd as trustee for the Manno Kingsway Unit Trust v Rose [2024] NSWSC 1065

Hearing dates:

30-31 January, 1 February 2024

Date of orders:

23 August 2024

Decision date:

23 August 2024

Jurisdiction:

Common Law

Before:

Campbell J

Decision:

(1) Judgment for the plaintiff against the defendant in the sum of $1,300,000, plus accrued interest under the Loan Agreement.

(2) The parties are to confer to agree the amount of interest due up to today and file a minute of consent order recording their agreement in the registry by 13 September 2024. In default of agreement each party is to lodge written submissions not exceeding three pages in length with my chambers setting out the amount and calculation for which they contend together with the reasons why that order should be made.

(3) The defendant is to pay the plaintiff’s costs.

Catchwords:

CONTRACTS – formation – vicarious performance – past consideration – conventional estoppel – binding agreement reached under fourth category Masters v Cameron (1954) CLR 353 – post-contractual conduct indicative of formation of a binding agreement – no “common assumption” preventing enforcement of agreement to attract conventional estoppel

Cases Cited:

Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309

Australian Medico-Legal Group Pty Ltd v Claireleight Mosman Pty Ltd [2017] NSWCA 218

Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61

Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty Ltd In the matter of Combined Projects (Arncliffe) Pty Ltd [2020] NSWSC 1778

Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Aust) Ltd (1986) 160 CLR 226

Fox v Percy (2003) 214 CLR 118

Hirachand Punamchand v Temple [1911] 2 KB 330

Kestell v Davey (No 3) [2023] WASC 289

Manny v Rose [2022] NSWSC 1671

Masters v Cameron (1954) 91 CLR 353

Moratic Pty Ltd v Gordon [2007] NSWSC 5

North v Brown [2012] EWCA Civ 223

Pao On v Lau You Long [1979] UKPC 17

Realestate.com.au Pty Ltd v Hardingham (2022) 277 CLR 115; [2022] HCA 39

SAS Realty Developments v Kerr [2013] NSWCA 56

Sinclair, Scott & Co v Naughton (1929) 43 CLR 310

The Nominal Defendant v Cordin [2017] NSWCA 6

Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165

Twenty Ninth Macorp Nominees Pty Ltd v Normal George [2017] VSC 136

Wakim v Wakim [2017] NSWSC 1283

Watson v Foxman (1995) 49 NSWLR 315

Winau Aust Pty Ltd v LCC Property Development Pty Ltd [2022] NSWSC 1258

Texts Cited:

J D Heydon, Heydon on Contract (2019, Thomson Reuters)

Category:

Principal judgment

Parties:

Manno Kingsway Pty Ltd as trustee for Manno Kingsway Unit Trust (Plaintiff)
Christopher Peter Rose (Defendant)

Representation:

Counsel:
T Boyle (Plaintiff)
D Parish (Defendant)

Solicitors:
Dentons Australia (Plaintiff)
Brown Ward King (Defendant)

File Number(s):

2023/00120366

JUDGMENT

1. By further amended statement of claim filed 30 January 2024, the plaintiff, Manno Kingsway Pty Ltd as trustee for the Manno Kingsway Unit Trust (“Manno Kingsway”) claims judgment against the defendant, Christopher Peter Rose, in debt founded on a loan agreement entered into by the parties on 2 February 2022 (“Loan Agreement”). Manno Kingsway relies on this agreement and seeks repayment of the loan in the sum of $1.3 million from Mr Rose, plus expenses and accrued interest at the rate prescribed by the Loan Agreement. At the commencement of the hearing, the total amount claimed was $1,321,496.30.

Background

2. Mr Rose is an experienced property developer. He has undertaken developments since the mid-1990s. [1] Mr Robert “Roy” Manassen is the sole director and shareholder of Manno Kingsway. He is said by Mr Rose to be a ‘high-net-worth’[2] company director of various entities collectively referred to as the Manassen Group of companies. [3] Since they first met in 2014, Mr Rose and Mr Manassen have together pursued several development projects in New South Wales. One such project is the construction of an eleven-story apartment and retail/commercial premises at Gerrale Street, Cronulla commonly referred to as “Wavelength” (“Wavelength Project”).

   1. JCB1 p 157 (Affidavit of C Rose, [5]); T54.20-50.

   2. JCB1 p 161 (Affidavit of C Rose, [18]).

   3. JCB1 p 33 (Second Affidavit of R Manassen, [8]).

3. Mr Rose and Mr Manassen conducted their dealings on the basis of a developer/investor relationship. In broad terms, Mr Rose would identify a site suitable for development, undertake a feasibility study and, if satisfied with the feasibility of a project on the proposed site, enter into negotiations to secure option agreements with the landowners concerned. [4] Mr Rose would subsequently bring the opportunity to Mr Manassen’s attention with a view to obtaining funding for the conduct of the project. [5] If interested, Mr Manassen would then conduct his own analysis into the project’s prospects, to make a decision as to whether to invest, and if so, how his investment should be structured. [6]

   4. JCB1 p 158 (Affidavit of C Rose, [7(a),(b),(c),(d), (e)]).

   5. JCB1 p 158 (Affidavit of C Rose, [7(f)]).

   6. JCB1 p 36 (Second Affidavit of R Manassen, [17]).

4. Against this background of previous dealings, on 15 December 2016 Mr Rose and Mr Manassen – through their respective corporate entities – entered into an investor’s agreement setting out the funding structure for the Wavelength Project (“Investors Agreement”). This agreement was varied a number of times, until the final amendment deed was executed on 26 November 2019. What follows is my summary of the Investors Agreement in its final form, as well as the pertinent facts established by the unchallenged evidence read in the proceedings. These are facts which I accept:

1. the acquisition and development of the project was to be undertaken by the newly incorporated special purpose vehicle (SPV), Iridium Developments Pty Ltd (“Iridium”) as trustee for Iridium Development Trust (“Iridium Trust”); [7]

   7. JCB1 p 187 (Loan Agreement, Exhibit “CR-1” p 5).

2. Mr Rose would be Iridium’s sole director;

3. Mr Rose and Mr Manassen would each hold 50% shares in Iridium and 50% of the ordinary units in the Iridium Trust; [8]

4. Mr Manassen’s investments would be preference equity in that the preference units in Iridium Trust subscribed for and issued to Mr Manassen’s entity would be paid ahead of ordinary units; [9]

5. Mr Manassen as a preference unit holder would receive 30% per annum return on his preference units. That is, upon completion of the project he would have a priority return on his initial investment plus 30% per annum, compounding up to the date for distribution of profits; [10]

6. the remaining profits would be distributed among the ordinary unit holders on a 50/50 basis; [11] and

7. Mr Manassen would fund the acquisition of the land, while Iridium would obtain funding from a third-party lender for construction costs. [12]

   8. JCB1 p 187 (Loan Agreement, Exhibit “CR-1” p 5).

   9. JCB1 p 36 (Second Affidavit of R Manassen, [19(a)]); JCB1 p 163 (Affidavit of C Rose, [25(c)]).

   10. JCB2 p 134 (Deed of Variation of Investors Agreement, Exhibit “CR-2”); JCB1 p 37 (Second Affidavit of R Manassen, [20]); JCB1 p 163 (Affidavit of C Rose, [25(e)]).

   11. JCB1 p 163 (Affidavit of C Rose, [25(f)]).

   12. JCB1 p 163 (Affidavit of C Rose, [25(d),(g)]).

5. On the same day as the Investors Agreement, Iridium entered into a development management agreement with an entity controlled by Mr Rose, QPS Developments Pty Ltd (which later changed its name to FQP Pty Ltd (“FQP”)). Under this agreement, FQP as project manager would oversee the delivery of the Wavelength Project for a management fee of $14,583 (plus GST) per month for 24 months. [13]

   13. JCB2 pp 95-99 (Development Management Agreement, Exhibit “CR-2”); JCB1 p 37 (Second Affidavit of R Manassen, [21]).

6. The Wavelength Project was subject to two sets of delays. The first set of delays arose from drawn out negotiations with various third-party lenders for construction costs. While Iridium had acquired the land in mid-2017,[14] and had obtained development consent in February 2018,[15] it was not until November 2019 that the funding terms with a willing third-party lender were finalised. [16] As to the second set of delays, various COVID-19 related public health orders during the period from March 2020 to October 2021 meant that the project’s progress was significantly curtailed. As such, it was not until November 2021 that the construction phase of the Wavelength Project neared completion. [17]

   14. JCB1 p 164 (Affidavit of C Rose, [33]).

   15. JCB1 p 165 (Affidavit of C Rose, [34]).

   16. JCB1 p 169 (Affidavit of C Rose, [58]).

   17. JCB1 p 173 (Affidavit of C Rose, [81]).

7. As the Wavelength Project’s neared completion during the months of November and December 2021, Mr Manassen and Mr Rose held discussions to reassess their respective financial position and potential returns.

8. On 26 November 2021, following a meeting between the pair held two days earlier, Mr Manassen emailed Mr Rose setting out his position. Mr Manassen expressed the opinion that Mr Rose was unlikely to obtain a share of the profit at the project’s completion once Mr Manassen’s preference units were paid out. This was said to be attributable to the updated calculation for internal rate of return (“IRR”) sitting at only 10%, presumably due to the project not progressing as well as the parties initially anticipated. In this context, Mr Manassen offered to pay Mr Rose $150,000 to be split between himself and Mr Vince Battaglia (an external consultant for the project) whose fees were outstanding, or in the alternative, invited Mr Rose to “[p]ut a proposal to me for a loan that we can discuss”. [18] It appears that Mr Manassen’s proposals were prompted by Mr Rose’s comment during that last meeting, “$1m would mean more to me today than $10m in 3 years” [19] . From this Mr Manassen formed the impression that Mr Rose was “totally at wits end… [a]lso maybe personally strapped for cash”. [20]

   18. JCB1 p 238 (Exhibit “CR-1” p 56).

   19. JCB1 p 237 (Exhibit “CR-1” p 56).

   20. JCB1 p 237 (Exhibit “CR-1” p 56).

9. On 29 November 2021, Mr Rose responded by email expressing his “’extreme’ disappointment and offence”. Among other things, Mr Rose expressed particular unhappiness that the first set of delays, in his view, was solely attributable to Mr Manassen’s futile “insistence” on pursuing a certain lender while “ignoring [t]erm sheets from others”, which had resulted in a “complete standstill of the project”. [21] Mr Rose’s particular grievance was that – despite his accrued or ongoing expenses and liabilities for the project – the delays had deprived him of cashflow from returns that would otherwise have materialised, all the while benefitting Mr Manassen for the reason referred to at [4(5)] above i.e., the accrual of Mr Massen’s preferences. Mr Rose concluded, “I cannot have a situation where I walk away from such a successful project with nothing” [22] . This was especially so in circumstances where he had taken on very heavy financial burdens including the need to personal guarantee the construction loan, and having to fund a prospective purchaser who had yet to pay her deposit in order to meet the qualifying pre-sales level required by the third-party lender.

   21. JCB1 p 239 (Exhibit “CR-1” p 57).

   22. JCB1 p 243 (Exhibit “CR-1” p 61).

10. To move forward, Mr Rose, in his email of 9 December 2021 proposed, inter alia, “Manassen Group to provide $1 million working capital loan to FQP for 24 months at 5%” [23] (my emphasis). Mr Manassen responded on the same day enquiring how the $1 million was to be repaid and what security was available.

    23. JCB1 p 266 (Exhibit “CR-1” p 61).

11. On 13 December 2021, Mr Rose and Mr Manassen met again in person. It is Mr Rose’s evidence that, upon reiterating his grievances referred to at para [9] above, Mr Manassen said words to the effect of “I am happy to give you a short term loan to tide you over…” (my emphasis). [24]

    24. JCB1 p 175 (Affidavit of C Rose, [96]).

12. On the same day at 12:45 PM, Mr Manassen sent an email summarising their earlier meeting, and wrote “[w]e will lend $1m to [Mr Rose] by 24^th Dec for 1 year at 5%” (my emphasis), subject to a conditions including: [25]

1. “[n]o litigation against any Manassen entities…;

2. [h]alf the $1m will go to [Mr Battaglia]; and

3. [a]fter a 12% interest coupon is calculated from [Mr Manassen’s accountant], the 50% profit share will be determined”.

   25. JCB1 p 269 (Exhibit “CR-1” p 87).

13. Within 2 minutes of receipt, Mr Rose responded “[c]onfirmed Roy”. [26]

    26. JCB1 p 268 (Exhibit “CR-1” p 86).

14. On 24 January 2022, Manno Holdings Pty Ltd (“Manno Holdings”) on Mr Manassen’s instructions advanced $1.3 million to Mr Rose.

15. On 2 February 2022, some nine days after the advance, the parties (or their corporate entities) entered into the Loan Agreement and a Deed of Release for the Wavelength Project (“Deed of Release”).

16. For present purposes, it is unnecessary to set out the terms of the Loan Agreement in detail. It is sufficient to record the following:

1. the “Operative provisions” reads:

IT IS AGREED in consideration of the Lender agreeing to provide financial accommodation at the request of the Borrower and the Guarantor that the parties are bound by the terms and conditions of this document.

2. “Lender” is Manno Kingsway, and the “Borrower” is Mr Rose;

3. loan amount in the sum of $1.3 million for a term of 12 months;

4. interest rate of 3.85% per annum, and default rate of 3.85% plus 3% per annum; and

5. under cl 2(c), the loan was subject to the provision of executed copies of the Deeds of Release.

Summary of the parties’ cases

17. The parties’ interpretation of the basis of the advance, and by extension, the Loan Agreement itself was heavily disputed, not the least because payment of the advance predated the Loan Agreement. Insofar as Mr Rose bears at least an evidential onus of establishing a basis for the advance other than as a loan, it is convenient to address his case first.

18. Mr Rose does not plead any defence of unconscionability, nor has he brought a cross-claim. Rather, Mr Rose contends that this Court, taking into account both the circumstances leading up to the advance and the broader context of the parties’ long-standing relationship, ought to find that the $1.3 million was advanced for the purpose of being applied to the costs and liabilities of the Wavelength Project to be brought to account on completion of the project. Mr Rose has consistently maintained in his written and oral evidence that at all relevant times, his understanding of the advance was that it would be reconciled against the profits of the Wavelength Project at its completion. ^[27] I interpolate this does not change its character as an advance but may raise a question about when repayment fell due.

    27. T79.38.

19. In particular, Mr Rose points out that Mr Manassen’s email of 13 December 2021 referred to at [12(2)] above constitutes the true legal basis of the advance. It is submitted that this characterisation finds support from Mr Rose’s conduct where he, upon receipt of the advance, paid $450,000 to Mr Battaglia and applied $320,000 as a repayment of the personal loan he had made to a prospective purchaser referred to at [9] above. Mr Rose contends that these payments, to the extent they were made for the benefit of Iridium and derivatively Mr Manassen, were consistent with his characterisation of the advance.

20. Mr Rose further relies on the following contentions to discharge any repayment obligation under the Loan Agreement:

1. First, Manno Kingsway has not advanced any money under the Loan Agreement and thus is not entitled to repayment under it. While the “Lender” under the Loan Agreement is defined as Manno Kingsway, it was in fact Manno Holdings that advanced $1.3 million, a non-party to the Loan Agreement;

2. Secondly, there is no consideration moving from Manno Kingsway to Mr Rose. The advance predated the parties’ entry into the Loan Agreement by some nine days, notwithstanding the terms of the Loan Agreement referred to at [16(1)] above; and

3. Thirdly, Manno Kingsway is estopped from enforcing the Loan Agreement in circumstances where Mr Manassen knew, at the time of requesting Mr Rose to sign the Loan Agreement, that Mr Rose’s understanding was that the advance would be reconciled after the completion of the Wavelength Project. [28]

   28. T47.30.

21. Manno Kingsway, on the other hand, proffers a starkly different characterisation of the advance. Manno Kingsway’s case, as opened, was characterised to be “relatively straightforward:” ^[29] $1.3 million was advanced pursuant to the Loan Agreement; Mr Rose paid interest on the loan for most of the term; the principal was not paid at the termination of the agreement; and notwithstanding numerous demands, remains outstanding and interest continues to run.

    29. Plaintiff’s written outline of submissions, [1]; T6.12.

22. Manno Kingsway contends that none of the contentions raised by Mr Rose affect the fundamental aspects of Manno Kingsway’s claim for repayment under the Loan Agreement. It points out that Mr Rose’s contentions amount to nothing more than traversing matters involving the conduct of non-parties to the proceedings, the issues of which in any event do not properly arise by reason of Mr Manassen’s entities having the benefit of releases under the Deed of Release.

Deed of Release

23. It is convenient at this juncture to note the following provisions of the Deed of Release (referred to at [15] above): [30]

    30. JCB2 p 582 (Exhibit “RM-2”).

1. under the heading “Background” (which are recitals):

1. para “B” provides: “[a]t the request of Rose, Manassen has caused Manno Kingsway (a related party of Manassen) to make the [loan] to Rose on certain terms set out in the [Loan Agreement]”;

2. para “C” provides: “[i]n consideration for Manassen causing Manno Kingsway to make the [loan] under the terms of the [Loan Agreement], and as a condition of the [Loan Agreement], the Rose parties have agreed to release the Manassen Parties from all and any Claims relating to the Project on the terms set out in the [Deed of Release]”;

2. under the heading “Definitions and interpretation” (cl 1):

1. “Claim” means: “all claims, demands, debts, liabilities, accounts, costs […] and other amounts payable to third parties whether accrued, actual, contingent or prospective and includes any right to challenge or submit to taxation of legal costs and expenses and whether or not the facts, matters and circumstances are known to the Parties at the date of this document”;

2. “Project” means: “the residential development project to be undertaken on [the land owned by Iridium and located at: (a) 49-51 Gerrale Street Cronulla, NSW 2230; and (b) 55-57 Gerrale Street Cronulla, NSW 2230]”;

3. clause 2 provides: “[u]pon and with effect from the date of this Deed, the Rose Parties unconditionally and irrevocably release the Manassen Parties from any Claims that they presently have, may have or could or might at any future time have or have had, against the Manassen Parties in respect of any matter arising directly or indirectly out of or in connection with any of the following: (a) the Land; (b) the Project; (c) the Trust; (d) the Investor Agreement; […] (f) any interest held directly or indirectly by any party in the Land, the Project and/or the Trust; […] (h) any debt due or claim to monies lent in connection with, relating to, or arising out of or under, any of the matters referred to in sub paragraphs (a) to (e) of this clause 2; and

4. clause 3 provides: “[t]his Deed may be raised or pleaded by the Manassen Parties as a complete defence to the continuance or commencement of any proceedings or Claim brought by the Rose Parties… against the Manassen Parties…”.

Consideration

24. I return to the contentions raised by Mr Rose which I have summarised at [20] above.

Performance

25. Dealing with the first contention, Mr Rose alleges that Manno Kingsway amending its statement of claim in September 2023 to include a reference to it “causing” Manno Holdings to advance $1.3 million is a clear acknowledgement that no money was advanced by Manno Kingsway, and as such, there arises no repayment obligation. However, in the absence of any clause in the Loan Agreement prescribing strict performance, it is open, in my view, to me to consider other types of performance including vicarious performance.

26. As is well known, vicarious performance is a means by which a party meets its obligation through the acts of a third party: Hirachand Punamchand v Temple [1911] 2 KB 330 and is permissible unless the contract specifically requires the promisor’s personal performance: J D Heydon, Heydon on Contract (2019, Thomson Reuters) at [21.130].

27. The case of North v Brown [2012] EWCA Civ 223 (applied by Richmond J in Winau Aust Pty Ltd v LCC Property Development Pty Ltd [2022] NSWSC 1258 at [31]) is instructive as it has many factual similarities to the present. There, the borrower contended that she was not obliged to repay the loan because the money was advanced through a company controlled by the lender and his wife, notwithstanding he had entered into the loan agreement in his personal capacity. In rejecting the borrower’s contention, Lewison LJ (Burnton and Kay LJJ agreeing) said at [6]:

“In the present case the contract was one for the provision of money. There can be no question but that if [the lender] had instructed his bank to make payments to [the borrower] that would have been performance of the contract. Likewise, if he had written her a monthly cheque. Why then should it make any difference that he directed the company to make the payments? The very essence of money is that it is a depersonalised medium of exchange. It is not therefore dependent on the personality of whoever provides it. Moreover, in the modern world the provision of money is not even a physical thing. As in this case, money is routinely transferred by electronic debits and credits in bank accounts. But in strictly legal terms even money in a bank account does not belong to the accountholder; it belongs to the bank. The accountholder is the banker’s creditor to the extent of the credit balance in his account. So, the transfer of money is in legal terms the assignment or partial assignment of a debt owed by the bank from one person to another. It is therefore the very essence of a contract to provide money that it will in most cases involve an assignment of the chose in action. In other words, the contract was one by which [lender] undertook to procure a result, namely the transfer of money to [borrower]”.

28. I reiterate there is no provision in the Loan Agreement prohibiting vicarious performance of Manno Kingsway’s obligation to advance $1.3 million to Mr Rose.

29. Quite the contrary, clause 8.9(a) expressly provides:

“The Lender may assign, novate or otherwise deal with its rights and/or obligations under this agreement, the Security, any Other Agreement, or any other collateral document or security, or any part of them. The Borrower must execute any documents which in the Lender’s opinion are reasonably necessary for those purposes. The Borrower must not assign, novate or otherwise deal with its rights or obligations under this agreement, the Security, any Other Agreement, or any other collateral document or security” (my emphasis).

30. Adopting Richmond J’s reasoning in Winau at [32], clause 8.9(a) is significant because by agreeing to Manno Kingway’s entitlement to unilaterally assign its obligations under the Loan Agreement, Mr Rose indicated he did not regard Manno Kingsway’s personal performance of its obligations to be essential. Indeed, Mr Manassen’s email of 13 December 2021 referred to at [12] above stating “we will lend…” (without specifying which entity) was promptly confirmed by Mr Rose without any objection.

31. I have not overlooked Mr Manassen’s evidence that Manno Holdings is “the banker” to the Manassen Group of companies,[31] and that the advance of $1.3 million was internally recorded in the accounts of Manno Holdings bearing the description “Chris Rose – Loan to Chris Rose via Manno Kingsway”. [32] I also note it is Mr Rose’s own evidence that in his dealings with Mr Manassen, he understood Mr Manassen’s role as the guiding mind of the entities within the Manassen Group. In his affidavit of 15 August 2023, Mr Rose said (at [28]-[29] and [31]):

“… During the course of our dealings, [Mr Manassen] directed various entities to invest or pay funds with regard to any of the projects.

At all times, I have proceeded on an assumption in dealing with Mr Manassen that he had complete control and authority in dealing with any funds he paid or steps he contemplated in our commercial dealings.

…at all times in dealing with Mr Manassen he, by his conduct, represented that he had complete control over all funds invested. This conduct was such that they were in substance either his or within his control, irrespective of which entity held those funds from time to time”.

31. JCB1 p 34 (Second Affidavit of R Manassen, [9]).

32. Exhibit A, p 1 (Tab 1).

32. In these circumstances and having regard to Mr Rose’s knowledge of Mr Manassen’s arrangement of his entities, I am satisfied that Manno Kingsway vicariously performed its obligations in conformance with the terms of the Loan Agreement. For the reason referred to at [30] above, I accept Manno Kingsway’s submissions to the effect that the source of the advance was in any event immaterial to Mr Rose. It follows that Mr Rose’s first contention fails.

Past consideration

33. Turning then to the second contention, Mr Rose invokes the principle that past consideration is not good consideration: SAS Realty Developments v Kerr [2013] NSWCA 56 at [69]-[70] (Ward JA, as the President then was). He submits that the Loan Agreement is ineffective because the advance of $1.3 million predated the parties’ entry into it.

34. Over the course of the hearing, this contention evolved into a dispute as to which of the categories of case identified in Masters v Cameron (1954) 91 CLR 353 the parties’ exchange of emails on 13 December 2021 (see paragraphs [12]-[13] above) fell. Manno Kingsway on one hand submitted that a binding agreement was reached under either the first or the so-called fourth category; Mr Rose on the other submitted that the parties’ exchanges fell into the third category, meaning no binding agreement was reached.

35. For the reasons below, I am satisfied that the exchange of emails on 13 December 2021 constituted a binding agreement, the substance of which, in my view, fell into the fourth category in Masters v Cameron. That is to say, the offer contained in Mr Manassen’s email of 12:45 PM on 13 December 2021 was accepted by Mr Rose’s email of 12:47 PM, and the parties were content to be bound immediately and exclusively by the terms set out in Mr Manassen’s email, while expecting to make a further contract (i.e., the Loan Agreement) in substitution for the first (informal) contract, containing, by consent, additional terms: Sinclair, Scott & Co v Naughton (1929) 43 CLR 310 at 317 (per Knox CJ, Rich and Dixon JJ). In this regard, there can be no question of unenforceability by reason of past consideration because the agreement was purely executory. Although the parties had yet to enter into the documentation formalising the Loan Agreement, the advance was made in substantial proximity to the parties’ entry into it.

36. First, it is plain that the Loan Agreement – as seen from the increased loan amount of $1.3 million at the interest of 3.85% – contains different terms to the agreement reached between Mr Manassen and Mr Rose on 13 December 2021, namely, a loan amount of $1 million at the interest rate of 5%. This is because on 14 December 2021 at 11:06 AM, Mr Rose sent a second responsive email to Mr Manassen’s email of 13 December 2021, stating “Hi Roy… Forgot to add the return of the deposit on 801. I understand from Phil this has now been released…”. [33] Here, the reference to “801” is the penthouse apartment in the Wavelength Project for the purchase of which Mr Rose had personally lent $315,000 to the prospective purchaser to satisfy the qualifying pre-sales level required by the third-party lender (see [9] above). [34] While the events subsequent to Mr Rose’s email of 14 December 2021 are somewhat unclear on the evidence, I infer that there were consensual variations at some stage which increased the loan amount by $300,000 and reduced the interest rate from 5% to 3.85%. I observe that these changes seem to be for Mr Rose’s benefit.

    33. JCB1 p 270 (Exhibit “CR-1” p 88).

    34. JCB1 p 171 (Affidavit of C Rose, [70]).

37. Secondly, Mr Rose’s conduct following the entry into the Loan Agreement is indicative of recognition of being bound by it. As is well recognised, a court deciding whether an agreement was reached is bound by the principle of objectivity by reference to “what each party by words and conduct would have led a reasonable person in the position of the other party to believe” and not upon the parties’ actual beliefs and subjective intentions: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 179 ([40]). The material “words and conduct”, as recently explained by Ball J in Manny v Rose [2022] NSWSC 1671 (by reference to Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309), must show that the parties intended to be bound their agreement (at [27]).

38. In my view, the content of the email exchange in the context of their ongoing dealings demonstrate, objectively that Messrs Manassen and Rose intended to be bound by the agreement reached on 13 December 2021 and intended to formalise the agreement by signing commercially appropriate documentation. Another circumstance of some importance is Mr Rose’s post-contractual conduct of paying monthly interest for ten months. This demonstrates that Mr Rose not only intended to be bound by the Loan Agreement, but in reality, acted on it. In the period between February and December 2022, Mr Rose made the following ten periodic payments to Manno Holdings, each bearing the description “FROM CHRIS ROSE INTEREST MANNO” (my emphasis): [35]

    35. Exhibit A, pp 14-31 (Tabs 5 to 14).

Date	Amount
1.	22 February 2022	$4,799.31
2.	23 March 2022	$4,250.82
3.	28 April 2022	$4,113.70
4.	20 May 2022	$4,250.82
5.	21 June 2022	$4,113.71
6.	21 July 2022	$4,250.82
7.	22 August 2022	$4,250.82
8.	12 October 2022	$4,113.70
9.	22 November 2022	$4,113.70
10.	23 December 2022	$4,250.82
Total		$42,508.22

39. Significantly, Manno Kingsway points out that these payments reflect the 3.85% interest rate prescribed in the Loan Agreement accruing monthly on the amount of $1.3 million, calculated on a daily basis. For instance, the amount of $4,799.31 in the first row is derived from applying the interest rate to the period from 24 January 2022 (being the date of advance) to 31 January 2022 yielding the sum of $959.96 and adding it to the amount of $3,839.45 calculated for the period between 1 February and 22 February 2022.

40. In cross-examination, Mr Rose accepted that these payments were consistent with the payment of interest to Manno Holdings over a 12-month period, [36] and said that it was either himself or FQP who made the payments. [37] Mr Rose sought to explain away the significance of his conduct by saying that it was his usual practice to pay the invoices (or payment requests) received from Mr Manassen’s accountant. He sought to maintain that he would sometimes pay moneys to Mr Manassen to “help him out” even without being obliged to do so. [38] Mr Rose qualified his answers by reference to his understanding of the advance, and accepted he was “at pains” to say that he had always understood the advance would be reconciled at the conclusion of the Wavelength Project. [39]

    36. T79.46.

    37. T79.1.

    38. T79.18-20.

    39. T79.46.

41. I do not accept Mr Rose’s evidence to the effect that he made these payments simply because he was asked to do so by Mr Manassen. It is highly improbable that an experienced property developer like Mr Rose, who had been engaged in property development since 1991 or 1992 [40] , would pay not an insignificant sum over the period of almost a year without having an (at least implicit) understanding of what these payments entailed. It should be borne in mind he was somewhat “strapped for cash” at the time which was the genesis of the loan. This makes it most unlikely that he would absent-mindedly pay forty-two odd thousand dollars to Mr Manassen’s entities without checking whether he was obliged to. Also telling, in my view, is that the amount and timing of the payments coincide with the terms of the Loan Agreement. This strongly indicates that Mr Rose had regarded himself as bound by the Loan Agreement. In any event, as the High Court of Australia held in Realestate.com.au Pty Ltd v Hardingham (2022) 277 CLR 115; [2022] HCA 39 at 133 (per Gordon J), Mr Rose’s signing of the Loan Agreement is a strong indicator that he had “read and approved its terms or [was] willing to take the chance of being bound its contents”. Accordingly, Mr Rose’s second contention is not made out.

    40. T54.21.

42. As I have made clear, my consideration of Mr Rose’s post-contractual conduct of making periodic payments is limited to determining the question as to whether a binding agreement was reached on 13 December 2021, and not as to the effect of the Loan Agreement (Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 at [25]-[26] (per Heydon JA). In my view, Mr Rose’s subjective belief as to the effect of the Loan Agreement – absent any reliable contemporaneous evidence – is beside the point as to the formation of a valid agreement, and should not be afforded much weight bearing in mind the fallibility of human memory in the context of litigation (Watson v Foxman (1995) 49 NSWLR 315 at 319 (per McLelland CJ in Eq). The following observation of Ball J in Manny v Rose at [33] is apposite:

“… It is common ground that evidence of subsequent events is admissible in relation to the question whether parties reached a binding agreement: see Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 at [25] per Heydon JA; Australian Medico-Legal Group Pty Ltd v Claireleight Mosman Pty Ltd [2017] NSWCA 218 at [70] per White JA. However, that principle does not displace the objective theory of contract. The fact that after the alleged contract has been entered into one party or the other asserts that there is no binding contract is nothing more than the subjective expression of that party’s belief. It is not relevant to the question whether the parties reached an agreement at some earlier point in time. Nor was it suggested in this case that the parties by their conduct had abandoned the agreement reached…”

43. I reiterate it was unnecessary to consider the question of unenforceability by reason of past consideration because I have found a binding agreement was reached by the exchange of emails on 13 December (under the fourth category in Masters v Cameron). Having said this, even if my characterisation is wrong and no agreement was reached under the third category, it remains my view that the Loan Agreement is nevertheless binding applying a functional test by treating the advance and entry into the Loan Agreement as forming part of one single transaction. In Twenty Ninth Macorp Nominees Pty Ltd v Normal George [2017] VSC 136, Almond J said (at [231]-[232]):

“In my view, a functional test should be applied in this case. I have already found that a head agreement was reached… It is plain that this head agreement, the advance of funds by [the lender] on 2 May 2012 (pursuant to [the borrower’s] urgent request), the documentation of the transaction on the same day and the execution of the transaction documents by 6 May 2012 form part of a single transaction, with the execution of the transaction documents reflecting the fact of the earlier agreement.

Even if this were not so, the plaintiff would still be able to enforce the agreement. In Pao On v Lau You Long [[1979] UKPC 17], their Lordships made it clear that consideration can support a later agreement in certain circumstances. Their Lordships said to this effect:

An act done before the giving of a promise to make a payment or to confer some other benefit can sometimes be a consideration for the promise. The act must have been done at the promisor’s request, the parties must have understood that the act was to be remunerated either by a payment or the conferment of some other benefit and payment or the conferment of a benefit must have been legally enforceable had it been promised in advance.”

44. Kestell v Davey (No 3) [2023] WASC 289 is to the same or similar effect. Smith J said (at [453]):

“Although it is established that the time of assessment with respect to which consideration is to be assessed is the time at which the contract is made, consideration will not be past consideration even if it was provided before the making of the promise for which it is alleged to be consideration, where the making of the promise and the provision of the consideration are part of the same transaction. When, by reason of their genesis, background, negotiation and terms, multiple agreements can in substance be viewed as part of a single transaction, then the courts are not bound to apply a strictly chronological test, such that, where the giving of consideration and the making of the promise are substantially one transaction, the exact order of events is not decisive.”

45. By reference to the above, it is plain that Manno Kingsway’s transfer of the funds on 24 January 2022 at Mr Rose’s request of 9 December 2021 (see [11] above) amounted to the “act” described in Pao On. In the absence of any submission by Mr Rose that the advance was a gift, there is no available inference other than that Manno Kingsway’s act of advancing the funds was effected in consideration of Mr Rose’s promise to repay the principal in accordance with the terms of the loan agreement and pay interest in the meantime. In this regard, I am satisfied – having regard to the genesis, background, negotiation and terms of the Loan Agreement – that Manno Kingsway’s advance of the loan and Mr Rose’s promise of repayment are substantially one transaction.

Estoppel

46. Mr Rose initially advanced defences of both promissory estoppel and conventional estoppel. Only the latter was finally pressed after what was said to be a telling “concession” by Mr Manassen during cross-examination. Mr Rose submits that Mr Manassen conceded that at the time Mr Rose entered into the Loan Agreement Mr Manassen knew that Mr Rose had the understanding that the advance would be reconciled at the project’s completion. And Mr Manassen is thus precluded from insisting on performance of Mr Rose’s repayment obligations. The following exchange occurred in Mr Manassen’s cross examination: [41]

Q. And you knew, when you asked [Mr Rose] to sign [the Loan Agreement], that the $1.3 million had already been advanced, that being on 24 January. That’s correct, isn’t it?

A. Yes.

Q. You knew when you asked him to sign this agreement that he understood that the true nature of the agreement between you and him was that the money advanced on 24 January would be reconciled after the completion of the Wavelength project. That’s right, isn’t it?

A. Yes.

Q. That’s something you understood as well? That must follow, mustn’t it?

A. Yes.

41. T47.25-38.

47. In Moratic Pty Ltd v Gordon [2007] NSWSC 5, Brereton J summarised the elements of conventional estoppel as follows (at [32]):

“… In common law conventional estoppel, it is necessary for a plaintiff to establish (1) that it has adopted an assumption as to the terms of its legal relationship with the defendant; (2) that the defendant has adopted the same assumption; (3) that both parties have conducted their relationship on the basis of that mutual assumption; (4) that each party knew or intended that the other act on that basis; and (5) that departure from the assumption will occasion detriment to the plaintiff.”

In the case at hand the designation of the parties should be reversed.

48. Notwithstanding Mr Manassen’s apparent concession, I do not accept that he is estopped from enforcing the Loan Agreement. There is no evidence before me, and Mr Rose must carry the legal onus here, which establishes: (i) Mr Manassen had in fact adopted Mr Rose’s characterisation of the advance as the conventional basis of their relationship so as to amount to conventional estoppel (Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Aust) Ltd (1986) 160 CLR 226 at 244-5); nor (ii) satisfy the other elements identified by Brereton J in Moratic v Gordon.

49. To the contrary, in my view it is Mr Rose who has resiled from the mutually adopted assumption of the Loan Agreement operating as a loan agreement as the legal basis of their relationship. First, it was Mr Rose who initially requested a loan from Mr Manassen on 9 December 2021 (see [10] above). Secondly, Mr Manassen over the course of his dealings with Mr Rose never indicated the advance was a gift, but consistently characterised the advance as a personal loan to Mr Rose, separate from the other moneys invested by him and his entities (see [8], [11]-[12] above). Thirdly, it is Mr Rose’s own evidence that Mr Manassen offered to provide him with a “short term loan” to “tide him over” merely some hours before making the offer contained in Mr Manassen’s email of 13 December 2021 (see [12] above). In the absence of any evidence to the contrary, it is difficult to accept that there was a fundamental change to the nature of the advance in that short period of time either between offer and acceptance or over the period from 13 December 2021 to 24 January 2022 when the funds were advanced. Moreover, the conventional estoppel “defence” suffers from the consideration that it is but one of a suite of disparate “defences” put forward to deflect legal liability. A party is entitled to run alternative defences, but they will not necessarily make happy or compatible bedfellows. A defence based on a mutual assumption that the principal need not be repaid until the final accounting of the Wavelength Project might have been more persuasive if it had been the defence.

50. The asserted “common assumption” is to my mind entirely inconsistent with the content of the exchange of emails (or lack thereof) between Mr Manassen and Mr Rose in the period between December 2022 and January 2023 when the agreed terms of the loan was approaching expiry. On 27 December 2022, Mr Manassen wrote to Mr Rose: [42]

“Chris… We are heading overseas and will be away for a while so just wanted to understand your intentions regarding repayment of the $1.3m loan. I know it doesn’t expire until February but I would like to understand the plan going forward. On balance, repayment is my preference… Please appreciate I can’t extend any loan on the current terms. As a fall-back position I will offer a 2 year loan… paid monthly at 4% plus BBSW…”.

Mr Rose responded on the same day “[j]ust away at the moment but will get back to you by the 10^th”. [43] On 10 January 2023, not having heard from Mr Rose, Mr Manassen sent an email requesting an update. When this email went unanswered, Mr Manassen sent a further email on 12 January 2023 saying “Fair go Chris. What’s the plan?”, [44] but again did not receive a response.

42. JCB2 pp 722-3 (Exhibit “RM-2”).

43. JCB2 p 722 (Exhibit “RM-2”).

44. JCB2 p 722 (Exhibit “RM-2”).

51. The above exchange of emails is significant for two reasons. First, it tells strongly against the existence of a “common assumption” in the manner alleged by Mr Rose, but rather – insofar as Mr Rose did not rebuke or contradict Mr Manassen’s email of 27 December 2022 in any way – indicates that Mr Rose had in fact proceeded on the basis of the advance operating as a loan due and payable in twelve months. If indeed Mr Rose had genuinely held a different view, one would expect his reaction to the 27 December 2022 email to have been drastically different. Secondly, it demonstrates a very significant difference between Mr Manassen’s email and the answers he gave in cross examination, casting doubt as to whether his concession, if such it was, was properly made.

52. In closing submissions, Mr Boyle of counsel, who appeared for Manno Kingsway submitted that the third question put to Mr Manassen and his answer were “terribly ambiguous” [45] because there were two questions. It was not squarely put to Mr Manassen as to the precise content of his understanding, nor did Mr Manassen provide a clear answer. Mr Boyle further submitted that such line of questioning was prone to confuse Mr Manassen particularly in the context of ascertaining his subjective understanding at the time. In my view – other than to observe that the second part of the third question is non sequitur – it is unnecessary to consider whether Mr Manassen’s purported concession was properly made, bearing in mind the long line of authorities establishing the primacy of contemporaneous documents over the evidence given by the witnesses.

    45. T140.25

53. In Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty Ltd In the matter of Combined Projects (Arncliffe) Pty Ltd [2020] NSWSC 1778, Ward CJ in Eq (by reference to The Nominal Defendant v Cordin [2017] NSWCA 6) said at [1880] “I accept the force of the submission… to the effect that contemporaneous documents – such as, here, the contemporaneous emails pointing to the signing of cheques… – are more likely to prove the objective facts than the recollections of witnesses at a later time”. Similarly, in Wakim v Wakim [2017] NSWSC 1283, Sackar J (by reference to Fox v Percy (2003) 214 CLR 118) said at [77] “Contemporaneous documents will almost be a far more reliable guide than observations of a witness’s demeanour”. I did not find Mr Manassen’s subjective opinion of what was going on in Mr Rose’s mind probative of any fact in issue. I am unsure whether he made the concession as to his own thinking given the double-barrelled question.

54. I interpolate if I am wrong in my assessment and there indeed was a common assumption between Mr Manassen and Mr Rose that the Loan Agreement was not to be enforced until the completion of the Wavelength Project, Mr Manassen’s answers in the cross examination would not be inconsistent with his email of 27 December 2022. Here, Mr Manassen offered to not enforce the terms of the Loan Agreement by offering to extend the loan for a further two years. This offer was not taken up by Mr Rose and he allowed the term of the loan to expire without any attempt at repayment. In my opinion, the “radio silence” from Mr Rose is inconsistent with the asserted common assumption. One would have expected at the very least protestation that repayment was not due until final accounting on the project. This proposition is of course entirely at odds with the legal documentation that Mr Rose freely signed. I am satisfied that Manno Kingsway has proved its case in debt and should have judgment accordingly.

Orders

55. I make the following orders:

1. Judgment for the plaintiff against the defendant in the sum of $1,300,000, plus accrued interest under the Loan Agreement.

2. The parties are to confer to agree the amount of interest due up to today and file a minute of consent order recording their agreement in the registry by 13 September 2024. In default of agreement each party is to lodge written submissions not exceeding three pages in length with my chambers setting out the amount and calculation for which they contend together with the reasons why that order should be made.

3. The defendant is to pay the plaintiff’s costs.

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Endnotes

Amendments

23 August 2024 - Order (2) the word "todays" amended to "today"

Decision last updated: 23 August 2024