Pan Foods Co Imps & Dists Pty Ltd v Ausn & NZ Bnking Group Ltd

[1999] HCATrans 385

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M25 of 1999

B e t w e e n -

PAN FOODS COMPANY IMPORTERS & DISTRIBUTORS PTY LTD, PANAGIOTIS KAPOBASSIS, MARIA KAPOBASSIS, DIMITRIOS THEODOROPOULOS and ANDRIANA THEODOROPOULOS

Appellants

and

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED, CARSON & McLELLAN and ANDREW JAMES McLELLAN

Respondents

GLEESON CJ
McHUGH J
KIRBY J
HAYNE J
CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 17 NOVEMBER 1999, AT 10.17 AM

Copyright in the High Court of Australia

MR H.C. BERKELEY, QC:   If the Court pleases, I appear for the applicants with my learned friends, MR M.J. COLBRAN, QC, and with us, our learned friend, DR. K.P. HANSCOMBE.   (instructed by GSM Lawyers.

MR J.H. KARKAR, QC:   If the Court pleases, I appear with my learned friend, MS W.A. HARRIS, for the respondents.  (instructed by Freehill Hollingdale & Page)

GLEESON CJ:   I think that the Registrar has notified the parties that I hold a number of shares in the respondent company.  I only mention that in case anybody wants to take any objection to my sitting.

CALLINAN J:   I think the parties are similarly aware in my own case.

GLEESON CJ:   Yes, Mr Berkeley.

MR BERKELEY:   Your Honours, we said what we wanted to in support of our case in our line of argument and I do not think it would be improved if I spent two hours going through it again.  What I propose to do if I may is just make some comments on my learned friend’s written submissions so that he can deal with them when it comes to his turn to address.  Before I start that, we wish to apply to amend the notice of appeal by adding a further clause 2A in these terms.  Clause 2 mentions a judgment of her Honour Justice Kenny, and we want to add these words as 2A:  “It was not open to her Honour to infer that the Bank had ‑ ‑ ‑

GLEESON CJ:   Just a moment.

MR BERKELEY:   I am sorry, your Honour, we have not had it typed out.

KIRBY J:   Is this in answer to the points that Mr Karkar makes in his submissions?

MR BERKELEY:   Yes, he refers to this, your Honour.

KIRBY J:   You are now seeking to repair the point that he made?

MR BERKELEY:   It is between the…..and the ground, your Honour, but I am.

GLEESON CJ:   “It was not open to her Honour to infer”?

MR BERKELEY:   “That the Bank had in fact formed an opinion under clause 18(q) of the debenture”.

GLEESON CJ:   Is that it?

MR BERKELEY:   Yes, that is it, your Honour.

GLEESON CJ:   Is that opposed, Mr Karkar?

MR KARKAR:   Yes, your Honours.

GLEESON CJ:   On what ground?

MR KARKAR:   Your Honours, on several grounds.  This very ground was in fact included in the appellants’ draft notice of appeal in support of their application for special leave.  It was deliberately dropped from the notice of appeal.

KIRBY J:   Yes, but the issue was alive, was it not, in the Court of Appeal?

MR KARKAR:   Yes it was alive, your Honour.

KIRBY J:   And it is not suggested that there is any evidentiary change that would have arisen if it had been put on the original notice of appeal.  What is the procedure on fairness to your client of allowing this point now to be raised?  You lose a strategic point that you made effectively in your submissions, but is there any procedure or evidentiary disadvantage to your client?

MR KARKAR:   There is, your Honour, and it is this:  we have prepared this appeal on the basis that there was a deliberate decision to abandon that ground and, indeed, the appeal book was prepared on the basis that there are no issues of fact in dispute; that the only issue of fact that is ‑ ‑ ‑

KIRBY J:   But that could be repaired by your putting, if you are caught on the hop, a written submission later dealing with it.  It would only be - I only speak for myself - if there were some evidentiary disadvantage to you in the way the trial was conducted, that would now, the matter being before us, prevent our looking at all the issues that are properly raised in the appeal book.

MR KARKAR:   Well, your Honour, there are two matters that I wish to put in relation to that:  one is that I will need to refer to the evidence that ‑ ‑ ‑

KIRBY J:   Yes, you make that point that the appeal book has been prepared on the basis that the evidence has not been put before us that would otherwise have been relevant on that point.

MR KARKAR:   Indeed.  Now, one other way of dealing with it, we thought about it, is perhaps to simply refer your Honours to the discussion of the evidence by each of the members of the Court of Appeal.  Each of their Honours discussed the issue of the jeopardy to the assets.  There was no discussion by his Honour the trial judge in relation to that matter, but we think that that is still unsatisfactory, because we will need to take your Honours to a number of things.  We will need to take your Honours first of all to the accountants’ reports, which point up the insolvency of the company and the jeopardy to the assets.  We then need to refer your Honours to the internal memoranda of the Bank officers that considered those reports and then we need to refer your Honours to the statements of the Bank’s witnesses and we will need to refer your Honours to their oral evidence and cross-examination.  We would submit, your Honours, that it is just too late at this stage for this to happen.

The other point that we wish to make, and wish to make strongly, is that the basis upon which special leave was granted in this case was that there was no evidentiary or factual issues.

GLEESON CJ:   Mr Karkar, if you find, as a result of the way in which this argument is presented, that you will need to add supplementary material to the appeal papers or seek leave to put in writing some additional submissions, then that course will always be open to you; but what we are anxious at the moment to do is not shut the appellant out from putting any argument that is legitimately available to the appellant and, in addition, to press on with the hearing of the appeal.

MR KARKAR:   Yes.  Your Honours, might I just refer to the basis upon which special leave in this case was granted, because that special leave in this case was granted was on the basis that there was no evidentiary dispute between the parties.  Might I refer your Honours to ‑ ‑ ‑

GLEESON CJ:   You can take it we have all read the transcript of the proceedings on the application for special leave.

MR KARKAR:   If your Honours please.  I have nothing - - -

GLEESON CJ:   Yes, the application to amend the notice of appeal is granted.  Will you file not later than 2.15 this afternoon an amended notice of appeal in accordance with that, Mr Karkar?

MR KARKAR:   Yes, your Honour. 

MR BERKELEY:   Would your Honour excuse me a moment, I would just like to say something to my solicitor.

GLEESON CJ:   Yes, Mr Berkeley. 

KIRBY J:   Just closing that last point, Mr Berkeley, it would seem reasonable that if you are now opening up a matter, you being the appellant, which is not adequately covered in the appeal books which you had the responsibility of preparing, then the burden of putting evidentiary material that may be relevant to the elucidation of that matter would fall on you, rather than on Mr Karkar.  You are the one who is raising the ground of appeal.  You are the one who has the carriage of the appeal.  You are the one who had the obligation to prepare the appeal papers.

MR BERKELEY:   We are happy to do that, your Honour, if my learned friend tells me what it is.  Can I ask your Honours to turn to page 222 of the appeal book.  Her Honour has…..the previous page setting out the facts which she thought were relevant to this point, and we do not dispute those facts.  But we have stated this ground of appeal rather more narrowly than in the draft notice of appeal so as to make it clear there is no dispute of facts.  What her Honour said at line 9 is:

It must, it seems to me, be inferred from the circumstances of the company as disclosed to the Bank (particularly in the report of 3 June 1994), from the Bank’s acceptance of the accountants’ recommendation in that report, and from the consequent appointment of the receiver pursuant to the debenture that an officer of the Bank held the opinion –

Now, we concede quite readily that if an officer of the Bank had turned his mind to the matter, he would have held that opinion, but what we do not concede is that he turned his mind to it.

GLEESON CJ:   Yes, the facts demonstrate, do they not, that no officer of the Bank who turned his opinion to it could possibly have come to any other conclusion?

MR BERKELEY:   That is right, your Honour, but there is absolutely dead silence as to what is – it is set out in our outline.  That is the point.  So it is not a matter of whether the facts are in dispute; the facts are set out.  The question we ask the Court to consider is:  was it justified to draw that inference or was it just speculation?

KIRBY J:   Her Honour says:

It must, it seems to me, be inferred from the circumstances of the company as disclosed to the Bank –

It is an unusual thing, I know, but usually we do have the evidence about the circumstances.

MR BERKELEY:   I understand.

KIRBY J:   And usually we do not rely on the decision of the intermediate court only.  We can have a look for ourselves, a little peep.  It does happen sometimes, you know.  All these big appeal books we do occasionally peep at.

MR BERKELEY:   The question is not whether the Bank officers were entitled to draw a conclusion of the facts.

GLEESON CJ:   We could probably just have a look at page 197 line 20 just for a start.

MR BERKELEY:   I am not sure that I am not selling a red herring to your Honours, but did your Honour say line 20?

GLEESON CJ:   Page 197 line 20.

MR BERKELEY:   Yes.

GLEESON CJ:   We may not need to look much further than that.

MR BERKELEY:   Well, it is all relevant to the question.  The question “Could an officer who considered the matter come to that opinion” just does not arise.  Our question is, “Is there any evidence an officer, in fact, had that opinion?”  And the trial judge found that there was not and if my learned friend says there is something that indicates that he did, in fact, turn his mind to the question, then we are happy to put it before the Court, but I cannot think what it is at the moment.

GLEESON CJ:   Mr Karkar will probably say it would be amazing if the officer had not had that opinion.

KIRBY J:   Astonishing.

MR BERKELEY:   Well, I want to make some comments about my learned friend’s submissions under the topics which we set out in our submissions and if I could start off with clause 5.2 of the general conditions at paragraph 37 of the Bank’s submissions, our learned friends say the notice operated as a termination of the Bank’s obligations under the agreement pursuant to clause 11.1(d) of the general conditions, which are at page 89 of the appeal book, and their submission goes along these lines:  because the Bank demanded all the money which was due under the facilities, therefore, they terminated the Bank’s obligations under the agreement.  It really inverts what the agreement says, that is to say, liability to repay is a consequence of a determination under 11.1; it is not a cause of it.

GLEESON CJ:   What about paragraph (e), Mr Berkeley?

MR BERKELEY:   I will come to that, your Honour, later, if your Honour would allow me to do it, because the fact is it is perfectly obvious that this was a notice that - we can perhaps assume that some Bank manager went to the Bank’s solicitor and said, “We want to appoint a receiver.”  And the Bank’s solicitor has looked at the debenture and they gave a notice for the purpose of clause 1 of the debenture and it must be very doubtful whether anybody thought about these general conditions at the time or not.

Now, it was a bit of a shambles and what the Bank is, in effect, trying to do, in our submission, is to make a silk purse out of a sow’s ear and it is very difficult because it is not directed at any of this at all.  Now, the difficulty about it is, if you look at the notice at page 106, the notice raises its own difficulties because it is dated 14 June and it is served on 15 June and it requires repayment on 16 June and requires repayment of the money set out in the Second Schedule and that was taken to be the indebtedness of 9 June.  When I come to it, your Honours will hear that my learned friend’s submission says that amount was wrong anyway.

KIRBY J:   Is that Appendix C to the notice of contention, because I did not get Appendix C.  I only have Appendix A.

MR BERKELEY:   I am sure my learned friend will do something about that, but ‑ ‑ ‑

KIRBY J:   It may be to the submissions of the respondent.

MR BERKELEY:   I am quite happy to give your Honour my copy because all that document is is a document handed up at the trial to the trial judge setting out the plaintiffs’ – the Bank’s submission as to what the state of affairs was which was not accepted by the trial judge in this judgment.  That is what that document is.

GLEESON CJ:   Can I ask you a question of fact about page 108, Mr Berkeley?

MR BERKELEY:   Yes, your Honour.

GLEESON CJ:   I do not have any difficulty understanding the first two items in that schedule but the third and fourth items, they refer, do they, to commercial bills?

MR BERKELEY:   I think that was for the purchase of stock, your Honour.

GLEESON CJ:   For the purchase of stock which had been ‑ ‑ ‑

MR BERKELEY:   Brought over from Greece.

GLEESON CJ:   Yes, but the bills had been drawn down or rolled over and were not payable, on their face, until some time in the future, is that right?

MR BERKELEY:   I think the first two were bills that were rolled over from time to time and they were not repayable until – one assumes the first one was February and perhaps due in August and so on, and they were rolled over all the time.

GLEESON CJ:   Six month bills.

MR BERKELEY:   I assume so, your Honour.  I think my recollection is that that is so.  As I understand it, these two were for specific purchases of stock and when the stock arrived or whatever the maturity date was they had to be repaid and they were not rolled over unless further stock was in transit.

GLEESON CJ:   So, reading together what appears on page 89 with what appears on page 108, what this notice purported to do in relation to the third and fourth items on the Second Schedule was to make payable on 16 June amounts which absent the notice would not have become payable until some date in the future.

MR BERKELEY:   Yes.  It accelerated the obligation to repay and that would apply to each item on that page, your Honour.

GLEESON CJ:   Thank you.

KIRBY J:   There is a contrary submission, I think, in view of the general default.  Is that not so?

MR BERKELEY:   I am sorry, your Honour.

KIRBY J:   There is a contrary submission because of the rights which were alleged to have come to the Bank by reason of the general default.

MR BERKELEY:   Is your Honour saying to the debenture or the general conditions?

KIRBY J:   I think the general conditions.

MR BERKELEY:   The general conditions require notice to be given before default accelerates.  The Bank has an option if a default happens whether to accelerate repayments of the principal outstanding or not and that requires a notice of a particular kind which I will discuss later.  It is only a default under the debenture that makes the money repayable without demand.

KIRBY J:   That may have been what I was thinking of.  I think it arises on the notice of contention.

MR BERKELEY:   It is clause 18, your Honour.

KIRBY J:   Anyway, you press on.  That may be a matter in reply.

MR BERKELEY:   Yes.  It is important to understand this.  The Bank’s obligation under the agreement – from time to time there has been a confusion between the expression “facility” and the moneys advanced under these.  The facility in each case is an offer by the Bank to advance moneys up to a certain limit and in two cases for certain purposes and, as long as the agreement exists, the Bank has an obligation to go on advancing money up to that limit.

Now, if you terminate the Bank’s obligations under the agreement or if the Bank terminates its obligations, under clause 1 it can cancel an unused facility limit - that is cancelling part of its obligation.  Under clause (d) it can terminate all its obligations.  That is, it does not accelerate repayments.  It says, “When the maturity date comes along, you’ve got to repay but in the meantime we don’t have to advance you any further money on the expiry of the existing advances”.  Then under (d), which is the most stringent one, the Bank can say, “We are accelerating the date of repayment and we want it all now if there’s a default.  If there’s not a default we want it in 30 days”.

Those are distinct matters and a demand for all the money or for such money as is outstanding does not terminate the obligations and make further advances.  The Bank has to do that separately.  I suppose my learned friend says that is another thing that is implied by the form of words which were used and in any event to terminate the obligation under the agreement you need to have a notice which complies with clause 15 and you have to have some form of words which say - or some form or the other that the Bank has terminated its obligations.

HAYNE J:   Was any part of this dispute concerned with the Bank’s failure to perform obligations?  Was not the dispute entirely centred upon ‑ ‑ ‑

MR BERKELEY:   No, this is an entirely new argument – I am sorry, your Honour.

HAYNE J:   Was not the debate centred entirely on whether the customer owed the Bank money, rather than whether the Bank owed any obligation to the customer?

MR BERKELEY:   That is so, your Honour.  I mean, this is an argument which has never been put before.  I am not objecting to that, as long as the Court is in a position to decide any question of fact involved.  What the argument involves is this:  “Because we have terminated our obligations, you have to pay all the money back”.

Now, if I could go on to the next point which is to do with 11.1(e) ‑ ‑ ‑

GLEESON CJ:   This is the point on which the President decided the case in the Court of Appeal, is that right?

MR BERKELEY:   Well, he had to decide two points there.  He had to decide this point, and he had to decide the point under clause 15, whether the notice was given in writing by an authorised representative.

GLEESON CJ:   Well, that is all part of the same point, but the President decided, as I understand it, that the receiver was properly appointed because of a combination of clause 10.1(j) on page 88, 11.1(e) on page 89 and 15 on page 91.

MR BERKELEY:   Yes.  Yes, we accept that that is his Honour’s finding, your Honour, and if he is right that is the end of the matter.  We do not have to worry about the debenture, but the question is, in paragraph 39 of their submissions our learned friends say that although the notice given does not use the word “declare”, that was the effect of the notice and there is an additional which they make which I will mention now, and that is clause 43 of the Bank submissions and clause 47.  Our learned friends discuss clause 11 upon the basis that it is what they call a promissory term.  Now, this clause does not put any obligation upon the Bank at all.  All it does is say, if A happens, the Bank may do B, and if the Bank does B, then C follows; and if the Bank attempts to do that and does not do it properly, that is not a breach of contract.  The only consequence is that they have not done the acts required by clause 11.

We would say, if one is to draw an analogy, it is not with a promissory term, but it is with an option, or we call it a condition preceding.  It does not matter much what you call it, but the party stipulated for a particular event is accelerating the customer’s obligation to repay immediately, or to repay the money that had been advanced.

HAYNE J:   And what are the essential elements of that event for which you say they stipulated that are encompassed by the word “declare”?

MR BERKELEY:   Your Honour, we would say that it is to make a statement and it creates an obligation.  There is a difference between making a declaration and making a demand or request.  A demand or request assumes – the demand which was made was for the performance of an existing obligation.  That is, an obligation which existed before the demand was served.  But the demand assumes that the obligation exists.  In fact that is what the demand says, “We demand the money which you have covenanted or agreed to pay”.  But a declaration creates a new obligation in substitution for the existing contractual obligation.

HAYNE J:   It creates a new obligation or gives effect to a contractual stipulation.  What I want to understand is what you say is the core of the content of the stipulation embodied by the word “declare”.

MR BERKELEY:   I have been looking at this for four years and I am almost tempted to say I would like to understand it as well.

HAYNE J:   Except I have to write something.

MR BERKELEY:    Yes, your Honour.

GLEESON CJ:   Does it mean anything different from “announce”?

MR BERKELEY:   “Announce”, “state”, yes, your Honour, but it cannot assume that the - one can use all sorts of synonyms for it, your Honour, but the ‑ ‑ ‑

GLEESON CJ:   Well, what about, “Here is some bad news”?

MR BERKELEY:   “Behold, I bring tidings of great joy”.  That is what I said to my learned friend when I told him I was going to ask for an amendment of the notice of appeal.  But the question is whether the notice does that, and it goes further than that because it has to declare that the - I will come back to it, your Honour.  We say it is the distinction between a statement and a request or an announcement and a request.  A demand to pay money that is contextually not owing to it until some time in the future is not the same as a statement that notwithstanding the existing obligation, that money will be outstanding, it says, on a particular day.  Now, it is a matter of first impression, your Honour.  I do not think I can elaborate it further.

But there is a point which follows from that because it has to be a declaration that the principal outstanding on that day, and all other moneys, are due and payable.  If you look at the notice, whatever that day means, it does not mean 9 July 1994.  If the notice had said, “We demand payment of all moneys outstanding, the principal outstanding and just pay us”, if the words of the clause, even if it did not use the word “declare”, “take notice that the principal outstanding are due and payable at 10 am on 16 June”.  There is no necessity at all to state any sums of money.  But what they have done is to say, “We want the moneys, particulars of which are stated in the schedule”, and if you look at the schedule you get the indebtedness at 9 June 1994.  Now, one of these accounts was an overdraft.  Cheques were going in and out of it all the time.  Whatever it was on 9 June 1994, it is highly unlikely that it was the same on 16 June.

HAYNE J:   Does clause 11.1(e) permit the Bank to declare money to be due and payable on a future day?

MR BERKELEY:   I would read it, your Honour - it is ambiguous, but I would read it is meaning on the date - well, yes, that must be so, your Honour, because this may be a 30 days notice, so it would be a declaration that “30 days after the service of this notice, the principal outstanding, et cetera, is due and payable”.  That would be a perfectly good notice.  But the Bank did not do that.  It demanded payment of the money due on a past day and with the practical certainty that it would not be the same on the 16th, one week later.

GLEESON CJ:   Well, presumably a declaration within the meaning of clause 11.1(e) is a formal expression that it is the will of the Bank that moneys that otherwise would not be payable until some time in the future will become payable now.

MR BERKELEY:   Yes, your Honour.  In fact, that is what our learned friend said in paragraph 50 of their submissions.  They said, the notice must convey, A:

that the Bank.....is calling up its loans” –

and B:

all outstanding moneys.....are thereupon due and payable.

Now, they may well have done B, but they have not done A.  In fact, they probably do not have to say A because if they say, “We are making all the money payable”, it follows as a matter of operation of the clause that it therefore becomes due and payable.

Now, this is not a case, your Honours, where failure to comply with the condition means that the Bank is not going to get its money, but the question is whether what the Bank did was to accelerate the obligation to repay.  If they want to do that, then our simple proposition is that they ought to do what they stipulated for; it is their form and the customer is entitled to require that too, and it is not as though there is any difficulty in doing it.  We come back to the same old point that they never turned their minds to this clause, and it is not surprising if they failed to do what the clause required when they were intending to do something else.

If I could then go on to clause 15.3 at page 91.  In paragraph 51 of their submission, our learned friend says this notice was, in fact, given by Mr Bew, he instructed the solicitors to prepare the notice and he handed the notice to Pan Foods.

GLEESON CJ:   Did the notice have to be signed by anybody?

MR BERKELEY:   No, your Honour, but if this notice had been posted and one of the appellants went downstairs in the morning and picked it out of the letterbox, there would not have been anything there to show that it had been given by Mr Bew.  It would not be Mr Bew’s notice, it would be the solicitor’s notice and therefore the respondents are forced to say what they said in paragraph 51.  It became his notice because he adopted it and they say adopted it by instructing its preparation and by personally handing it over.

KIRBY J:   Why is that not a good answer?  I mean, he actually took the trouble to turn up and hand it over.

MR BERKELEY:   Your Honour, if that is what is required, to make it a Mr Bew’s notice, then it is a notice which is partly in writing and partly in conduct, that is the giving of it, and we say there has to be something in the notice which identifies it as Mr Bew’s notice.  It has to be in writing.

KIRBY J:   He hands it over.  I mean, this is the sort of point that would have delighted somebody in Dickens’ time.  It really seems completely alien to the way in which the law should operate in a commercial context today.  Now, in contracts of guarantee there are rules of great strictness but it does not seem to me that that ought to be extended to this particular stipulation here.  The man handed it over.  What more could he do, except to say, “This is my notice.”?  I mean, really, it must not turn on such a point.  People would laugh at the law if that was the sort of point that would succeed in this case in my humble opinion.  I say these things so that you can respond.  I do not have a closed mind, but there is a tiny little chink there that might be open, but, really, it seems completely unreal in a commercial context with large funds.

MR BERKELEY:   Yes, your Honour, but the unreality – that is so, your Honour, but the unreality arises from what has happened, that is to say, the Bank is drawing in aid a provision which it never sought to comply with.

KIRBY J:   Well, you say that is the question, whether it did comply with it.

MR BERKELEY:   Accidentally.

KIRBY J:   Mr Bew, who had the authority, went along and handed it over just to make sure that you got.

MR BERKELEY:   Perhaps I did not make myself clear, your Honour, but our point was the Bank never sought to comply with it.  They were not going there with clause 15 in mind.  That is the whole problem about this case.  The fact is the commercial reality is the Bank relied upon a document, if we are right, they were not entitled to rely on.

KIRBY J:   But that is your first argument, is it not?

MR BERKELEY:   No, that is my last argument.

KIRBY J:   Well, I am dealing now with your second argument, which seems to have neither legal merit and it is certainly not practical commercial merit.

MR BERKELEY:   Your Honour, they are seeking to rely upon the general conditions which they did not have in mind at all.  What they were trying to do was to comply with the debenture.  Now, that is the commercial reality, if we are going to look at the commercial reality.  They put forward these general conditions.  The general conditions contain quite specific conditions as to when the money becomes repayable, either on demand or on default, and the commercial reality is the Bank did not follow what was set out in their own contract.  The commercial reality is they followed the debenture.

KIRBY J:   Well, the first requirement of the clause is that it must be given by an authorised representative.  The other requirements only arise if it is necessary to have a deemed or notional giving and receiving.

MR BERKELEY:   Your Honour, if I might put a gloss on what your Honour said.  The point is most easily made if I turn the phrase around a bit.  A notice by the Bank from a customer must be given by an authorised representative in writing and, if delivered to the customer’s address, receipt is having been given and received when delivered.  What (a), (b), (c) and (d) do is to fix the time of delivery because, if, for instance, it is a 30‑day notice, you can make the time the 30 days run from the time of delivery and it makes that distinction. 

First, it has to be given in writing and then after it is delivered and our learned friends call in aid in paragraph 53 clause 15.1 and they say, if you look at the notice of default, supposing that was signed by a solicitor, why should the customer be in default?  But clause 15.1 only applies, if you turn to page 86, of the defaults on (e), (f) and (g), which do not require to report anything.  They require a notice.  Then 15.1:

A notice from the Customer to the Bank must be given by the Customer itself (if an individual) or by an Authorised Representative in writing and delivered (by hand or by mail) to the Bank –

one gets the same distinction between ‑ ‑ ‑

KIRBY J:   But you have accepted in your answer to the Chief Justice that it was not necessary for it to be signed by any specific person.

MR BERKELEY:   No, your Honour.

KIRBY J:   And, therefore, what is required is that, in fact, the notice of demand should come from the Bank.  I mean, why do we not just put some Tippex or a little yellow sticker over the last section, just ignore it?  It is a surplus.

MR BERKELEY:   Yes.

KIRBY J:   You have accepted it does not have to be signed by any particular person.  Are you saying that on its face this is a demand by Messrs Freehill Hollingdale & Page, solicitors.

MR BERKELEY:   No, they are doing that as agents for the Bank but the provision does not say, “The Bank can give a notice”.  It says, “It must be given” by “an authorised representative”.  It does not say, “It must be given by the Bank”.  In 15.1 it says it:

must be given by the Customer itself (if an individual) or by an Authorised Representative…..the customer.

KIRBY J:   But it was given by the authorised representative; it was given physically.

MR BERKELEY:   That is if you ‑ ‑ ‑

KIRBY J:   “I give, I receive”.

MR BERKELEY:   That faces difficulty because of the expression “must be given” – “in writing” and the distinction which the two subclauses make between giving and delivering.

KIRBY J:   So you are, in effect, saying it has to be signed by the authorised representative?

MR BERKELEY:   No, but it has to be the manager’s notice and it has to appear in the document because if it does not appear in the document it is not given in writing by the authorised representative.  It is the solicitor’s notice.  One can think of reasons for that.  I mean, the customer knows that it will usually be the manager who consults…..that he has considered the matter before the notice goes and he knows the name of the person to whom he can make representations and that has to appear in the document.

KIRBY J:   Well, it may be what the law requires but it will be an added chapter to “Bleak House”.

MR BERKELEY:   Well, my clients will not…..but I understand the force of what your Honour is saying.  The question is:  is that what the clause required?

KIRBY J:   In order to understand the strictness with which the law must approach your submission and this document, is there any general principle that you can invoke similar to the principles which were looked at in the case of contracts of guarantee in Tricontinental and other cases that have said that ‑ ‑ ‑

MR BERKELEY:   Not in relation to this, your Honour.

KIRBY J:    ‑ ‑ ‑ notice of this kind will be construed with great strictness because here is a big bank, well funded, well advised, that can look after itself and if it is going to take these steps the law says it must do so with meticulous accuracy and care.  Now, is that a principle that the law has applied to these sorts of notices or that you argue the law should apply?

MR BERKELEY:   No, your Honour, but we might ask if the customer decides to give notice to the Bank and had a notice signed by solicitors whether the Bank would be bound to regard that as sufficient.  It would go both ways, your Honour.

KIRBY J:   I would hope so in a commercial relationship.

MR BERKELEY:   These provisions are put in there for some purpose.  The Bank has something in mind.

KIRBY J:   But to be construed - and please correct me if I am wrong in my approach here - one would think construed in the normal English language way in a commercial relationship between an organisation, a business organisation and a bank for commercial purposes involving quite considerable sums of money.

MR BERKELEY:   Yes.

KIRBY J:   Now, one would normally approach that as a commercial document and give it a sensible, practical interpretation as would befit such a relationship.

MR BERKELEY:   But if I could go back to the other situation where the customer is required to give a notice ‑ ‑ ‑

HAYNE J:   That trips on the particular way in which “authorised representative” is defined at page 93, because the authorised representative must be notified to the Bank.

MR BERKELEY:   Yes, your Honour, but it would not be good enough for the customer’s solicitors to sign the notice or to give the notice.  It has to be given by a specified person.

KIRBY J:   I can see the force of the argument if it was simply the solicitors turned up with the notice, but here it is adopted.  It is handed over.  It is given.

MR BERKELEY:   Yes.  What Justice Buchanan said, it is open to be treated on that facts that way, that Mr Bew was not handing it over as his notice, he was handing it over as the solicitor’s notice.

KIRBY J:   That is a bit unreal, is it not, with respect to his Honour?

MR BERKELEY:   It is, and because under the debenture a notice calling up the loan can be signed by the solicitors for the Bank.  Now, the next matter I wish to raise is this question of whether the debenture is available at all for finding out or whether the debenture, in any way, stipulates the terms of the repayments of the moneys advanced and we have said generally what we want to about that in ‑ ‑ ‑

GLEESON CJ:   Just before you go into these further arguments, if we were against you on the arguments you have been putting so far, we do not get into any of these other further arguments, do we?

McHUGH J:   If this Court adopted the approach of President Winneke the appeal fails.

MR BERKELEY:   Yes.  The answer to your Honour the Chief Justice is yes.

KIRBY J:   Mr Berkeley, I should have asked you at the beginning, I was going to ask Mr Karkar, but I think it is fairer that I say it to you.  I sat quietly as you, as it were, launched into your argument to respond to the written submissions.  Now, I have read all the written submissions but it sometimes is hard in the midst of lots of other cases to be sure that you have all the issues in.  We can put to one side the Fair Trading Act.  That is not our concern.  We can put to one side estoppel.  That has been dropped from the notice of contention.  But I am still not absolutely sure that I understand, as it were, conceptual framework of the case and understand the way in which one could approach the matter in a logical fashion.

Now, just speaking for myself, it would be helpful to me if you would say, “These are the three or four issues in the case and if you decide Justice Winneke’s way it is a snake and then you go right out of the case.  If you don’t decide it that way then you decide it Justice Kenny’s way and you have to deal with three issues.”  Now, if you could just do that at the beginning that would have been helpful to me but if you would do it now, I would still be grateful.

MR BERKELEY:   All right, your Honour, I will do it now.  By the time the trial came on this was a claim for trespass and conversion.

KIRBY J:   I understand how that can happen.

MR BERKELEY:   And then the Bank’s answer to that was, “We were entitled to appoint a receiver because we called up the loan under the general conditions and the money was immediately due and repayable and that entitled us to appoint a receiver under clause 19 of the debenture.”  Alternatively, “The debenture entitled us to call up the loan at any time by demanding payment and the notice we gave did that and thereupon we were entitled to appoint a receiver.”

Thirdly, as a third alternative, “There was an act of default under clause 18(q) of the debenture which entitled us to appoint a receiver without demanding payment.”  Now to that we put in a reply attacking the notice and saying, “(a) the debenture was irrelevant and (b)” – well, 18(q) came up in the course of argument.  It was not pleaded.  When it came up we said there was no evidence that any Bank manager had that opinion and then there was a rejoinder which put in waiver but that is not there any longer.  Is that what your Honour wanted?

KIRBY J:   Well, that is generally what I wanted.  You see, counsel come to us and they have lived with the problem for a long time.  I have read the judgments of the Court of Appeal.  I have read the written submissions but there are multiple issues in the matter and, speaking for myself, it is always helpful if counsel say these are the conceptual issues that the Court has to deal with because you can read them as assiduously and carefully as you will but we will never be able to absorb - I speak for myself, I will never be able to absorb them with the time that is available to me that is available to counsel.

McHUGH J:   Are these not the issues?  First of all, did the money become payable under clause 11.1(e)?

MR BERKELEY:   Yes, your Honour.

McHUGH J:   To prove that, to satisfy that ground, the Bank had to prove an event of default had occurred within the meaning of 10.1(j); that a notice was given which complied with 11.1(b) and that the notice was given in the manner required by clause 15.3?

MR BERKELEY:   Yes, your Honour.

McHUGH J:   And Justice Winneke found for the Bank on each of those.

MR BERKELEY:   Yes, your Honour.  There was no dispute about the event of default.

McHUGH J:   Yes.  In respect of those issues, Justice Kenny found that the notice did not comply with clause 11.1(b) so the case for the Bank failed so far as she was concerned on that.  So far as clause 18(q) was concerned, the Bank was entitled to enforce the security:

if the Mortgagor is carrying on business at a loss and in the opinion of any officer of the Bank further prosecution by the Mortgagor of its business will endanger this security –

Now, Justice Winneke did not deal with that issue, did he, except I think he may have agreed with the trial judge in respect of ‑ ‑ ‑

MR BERKELEY:   He was not sure.

McHUGH J:   He was not sure.

MR BERKELEY:   He expressed some doubt about it but he did not consider it.

McHUGH J:   But Justice Kenny did deal with that issue but, according to your argument, she skipped over one issue.  She held that the relevant opinion could be inferred without dealing with the anterior issue.

MR BERKELEY:   Yes, which is what I am coming to now.

McHUGH J:   Yes.

MR BERKELEY:   There are two clauses in the debenture which will deal with repayment.  There is clause 1 which says it is due and payable on demand and all the judges who have dealt with this said that cannot be right because we have this debenture executed in 1988 and six years later the Bank comes along and says, “We going to recast everything and we are going to give you a new agreement.  This is it and there will be new securities, and you will have to pay the costs of those new securities.”  That never happened, but I was not concerned to argue that the old document has been revoked before the new debenture was signed.

But when one looks at the agreement, that includes, the agreement as defined as the letter of offer, the special conditions and the general conditions.  The general conditions have got exhaustive provisions for acts of default, many, the majority of which are substantially the same as those in the debenture, but some of them are not quite as stringent, and it has ‑ ‑ ‑

McHUGH J:   If I could interrupt you.  The point is, if I recollect correctly, is that Justice Kenny could only make the finding in relation to clause 18(q) if – sorry, the debenture cannot be read in isolation from the facility agreement.  That is your point, is it not?

MR BERKELEY:   That is right.  I mean, the point that was made - Justice Buchanan stated it in this way, that the agreement was the primary……of the intention of the parties in 1994, and it contains these exhaustive – we would say, it covers the field.  It contains exhaustive provisions about acts of default and making money payable either on immediate notice or on 30 days’ notice.  Those two matters also dealt with in the debenture in inconsistent terms.  So we would say the debenture clause 19 says that if the money is due and not paid, then the Bank can appoint a receiver, but we would say if you look at the transaction as a whole in the circumstances in which the agreement was made, you have to go to the agreement to find out whether that has happened, and the debenture is not ‑ ‑ ‑

McHUGH J:   Yes, and the trial judge held that the moneys advanced under the facility agreement did not become payable pursuant to 18(q) because the debenture could not be read in isolation from the facility.

MR BERKELEY:   That is right, your Honour.

McHUGH J:   That point Justice Kenny did not deal with.

MR BERKELEY:   But I would like to elaborate on that a bit because our learned friends said in their paragraphs 18 and 23 that there was no inconsistency between the two documents.  But if I could go to page 87 of the appeal book and just take two or three examples before I go to clause (j):

(d) (bankruptcy or winding up) if a bankruptcy notice is issued in –

and so on, that appears in almost the same terms in clause 18(a) of the debenture, but 18(a) does not contain these words:

it is not dismissed or withdrawn within 10 Business Days –

Now, if the Bank could rely on both documents, they could call up the money or appoint a receiver because a bankruptcy notice is issued, and the customer would not have the opportunity of getting it dismissed within 10 business days.  There must be an inconsistency there, we would say.  The same with (e) which is almost the same terms as 18(b) of the debenture, but 18(b) does not include the words:

and is not removed within 10 Business Days –

on the third line, and the same applies to clause (h) on this page:

is unable, within five Business Days, to satisfy the Bank –

and so on.

McHUGH J:   Is the theory of your case that the Bank really was directing its mind to the debenture at all relevant times?

MR BERKELEY:   Well, your Honour, we say it is obvious.

GLEESON CJ:   Another possible point of view is that the Bank was confronted with an embarrassment of riches when it came to provisions upon which they might rely in order to make these moneys immediately due and payable.

MR BERKELEY:    That is right, your Honour, and then the question is whether they were wrongly advised.  They might have been told that the debenture gave powers in addition to those in the agreement.  That has sometimes been held.  There is a case in the Privy Council our learned friends have referred to but in that case, at least, one of the advances which was made some weeks before the debenture was executed and the opinion of the Privy Council, I think, delivered by Lord Goff said “In the circumstances, the debenture varied the agreement” and, indeed, our learned friends say that in paragraph 29 at page 11 of their outline, that it is very hard to understand how a debenture executed in 1988 varies an agreement executed in 1994.

GLEESON CJ:   But the sequence of the arguments went this way, did it not?  There was apparently a great deal of bother about the pleadings early on and getting straight the allegations that were being relied on against the Bank, but it is not an over simplification to say, is it, that the Bank said, “We appointed this receiver under our debenture”.  You said, “But you cannot look at the debenture alone, you have to also look at the general conditions”, and the Bank said, “All right, let us look at the general conditions” – clause 11, and the President said “That is right”.

MR BERKELEY:   I understand that, your Honour.  If I could go to page 88 of the appeal book, clause (j), which is the one now relied on by the Bank.  If I might compare that with clause 18(q) which is at page 99 of the appeal book:

(q) if the Mortgagor is carrying on business at a loss and in the opinion of any officer of the Bank further prosecution by the Mortgagor of its business will endanger this security -

Now the circumstances set out in (q) are entirely within the terms set out in clause (j), that is, any opinion under clause (q) is also an opinion under clause 10(j) of the general conditions, but clause (j) is in wider terms.  So one could have an opinion under clause (j) which was not an 18(q) opinion, but an 18(q) opinion is always an opinion under clause (j) as well.

Now the difficulty about that is that one document says if you have an opinion as set out in clause 18(j), to call up the loan you must give a notice; and the other document says if you have an opinion you do not have give a notice.  It becomes payable ipso facto at the option of the Bank.  If these documents are part of one transaction, they cannot stand together.

In the Bank’s notice, the respondents’ notice of contention, clause 4, they raise the point which we have raised by our amendment to the notice of appeal and, basically, for the reasons we have set out in our own written submissions, not only is there no evidence of Mr Bew having an opinion along the lines in 18(q), but the evidence points in the other direction.  Mr Bew’s state of mind sounded peculiar within his own knowledge.  He gave evidence at the trial.  He said he had an opinion under the 10.1(j) of the general conditions.  He did not say anything about an opinion under the debenture.  He did not refer to that.

McHUGH J:   Was 18(q) in the pleadings at that stage, relied on in the pleadings?

MR BERKELEY:   It was never in the pleadings, your Honour; it was raised in the course of argument.  The Bank relied on the debenture, but – I think I ought to find it – page 47 of the appeal book, 27(h), and it has got no reference to 18(q) and there is no reference to any facts which would be relevant to 18(q).  And then there is a further paragraph of the defence at page 51, paragraph 35 – in my copy it is 5B, but it is actually 35B – which is the money being payable on demand.  No, there is no reference anywhere in the pleadings to clause 18(q) and, as I say, it was laid for first time in argument and we did not mind dealing with it, because, as far as we were concerned, there was no evidence to support it.

HAYNE J:   Well, as to that factual question, what is the significance, if any, to be attached to the memorandum noted at page 198, in the last two lines on page 198 in President Winneke’s judgment, and going over to page 199?

MR BERKELEY:   I understand that, your Honour.  It is an opinion that – I better go back to the terms of the debenture ‑ ‑ ‑

HAYNE J:   “Further prosecution of the business will endanger”.

MR BERKELEY:   “Endanger the security”.  That requires a comparison of the amount of the debt and the value of the security and what is likely to happen in the future.  Now, the Carson & McLellan gave a report and said, “You ought to appoint a receiver forthwith.”  It would be a very laid‑back manager that did not go along with that, but what Mr Bew had in mind, I do not know, and he did not tell us, as to that.

KIRBY J:   I would like to get clear whether or not the point that you are making now is an objection to the procedural unfairness or trial unfairness that was worked upon your client by the court considering the debenture anyway, except in general terms, because of the way in which paragraph 27B is pleaded.

MR BERKELEY:   No, I did not object to that, your Honour.

KIRBY J:   Well, what is your point of referring to that?

MR BERKELEY:   The point is this that the question is whether ‑ ‑ ‑

KIRBY J:   Let me express it, as I think you might be going to say, that the Bank did, it is true, rely on the debenture, but in order to make good a reliance on (q), it had to bring forward specific evidence concerning the belief as to the endangering of the security and that it did not do.  Is that it?

MR BERKELEY:   It goes further than that, but I am indebted to your Honour.  The Bank’s primary case was this, was payable on demand under clause 1 of the debenture.  That was their case and that was what they had in mind all the way along and that is what the documents show, the notice itself.

Now, on the second day of the trial they amended their pleadings to rely on the terms of the debenture for that purpose, but they did not rely on 18(q) at that time; they came up in final addresses and, all I am saying is that, with that history, it is very unlikely that Mr Bew ever turned his mind to the opinion that he might have had, if he had thought about it.  I mean, he could have had the opinion; if he had thought about it he would almost certainly have had the opinion.  The fact is, to have an opinion you have to have thoughts going through your head in a particular direction, you have to consider the matter and the pros and cons and make assessments of debts and values and so on.

McHUGH J:   But does it not follow, as night follows day, from a series of objective facts?  First of all he has got the McLellan report in front of him, saying that there was no option but to appoint a receiver and manager; then on 6 June you find him noting that it was “clear that the business cannot be restructured” and steps have got to be taken to ensure a wind-down of the operation and the realisation all of its assets and then you have the instructions given to draw the notice of demand.  Now, from those factors, is not the inference irresistible that Mr Bew had formed the opinion that without immediate action the Bank’s security was in danger?

MR BERKELEY:   I do not know, your Honour.  I mean, what we know is, the Bank was advised to appoint a receiver.  That is the point.  He might have just accepted Mr McLellan’s advice without turning his mind.  They knew this business was ‑ ‑ ‑

McHUGH J:   But why would he have done this?  Why would he have taken steps or written a note saying that the Bank “should proceed to ensure that the company immediately commences a wind-down of its operations”?  This is a company which has got excessive debt.

MR BERKELEY:   Yes, your Honour.

McHUGH J:   And then he instructs the solicitors to draw the notice of demand.

MR BERKELEY:   What he says was that his opinion was that this was a material adverse circumstance.

McHUGH J:   Yes, I appreciate that.

MR BERKELEY:   And we have to accept that, but it works both ways.  If that is what he was relying on and then giving instructions, it does not follow that he had the opinion, a more specific, a less general opinion, which appears in 18(q).

KIRBY J:   But is it not a sounder way to draw the evidence out for the purpose of conclusions to draw it from objective facts than the solemn statement of a person like Mr Bew getting into the witness box and saying, “Yes, I turned my opinion to it and my opinion at the time was this and I did that.”?  I mean, the devil himself knoweth not the mind of man, whereas objective facts are a much surer foundation for a court’s conclusion.

MR BERKELEY:   All the objective facts will tell your Honour is what Mr Bew might have thought if he had turned his mind to it.

McHUGH J:   But the point is he must have turned his mind to it.  Is that not the point against you?  It is impossible to think that he would have thought other than, “Golly, unless we take some immediate action, we are in trouble here and this debenture is not going to be sufficient to secure this excessive indebtedness.”  Here is a business, excessive debt, profit margins are down, if they exist at all, and you get this flurry of activity from him.  Surely that must have been what he was thinking.

MR BERKELEY:   Your Honour, we would say, with respect, it is speculation.  He realised this business was in difficulties and he was advised by the accountant appointed…..to appoint a receiver and we do not know what else he was thinking about.  All you know is that there is the materials ‑ ‑ ‑

McHUGH J:   I know, but I find it almost impossible to think he would not have thought, “I’d better cover myself and the Bank.”

KIRBY J:   Absolutely.  Himself first and the Bank second.

MR BERKELEY:   Well, that is right, and it would have been ‑ ‑ ‑

McHUGH J:   And if he did, then it must be because he had thought the security is in danger.

MR BERKELEY:   Well, then why did he not say so when he had the chance to?  It is because he never turned his mind to it.  I mean, that is the whole problem.  He was there in the witness box and said, “I’ve got this opinion”, and did not say any other opinion.  He never thought about it and nobody ever thought about it.  They were going under clause 1.

HAYNE J:   Your case then is, is it, that there being no evidence from Bew of positive advertence to the particular clause of the debenture, that denies the Bank capacity to depend upon that clause?

MR BERKELEY:   Well, let us assume that is all they had to go on, your Honour, and ‑ ‑ ‑

HAYNE J:   But is that part of the proposition?

MR BERKELEY:   Yes, that is right, your Honour.

HAYNE J:   And, in particular, if Bew, without adverting to the clause of the debenture, formed what might be called a commercial judgment that the account was going badly, was going badly to the point where unless the Bank acted now the Bank would be at risk of losing money, that would not be sufficient to enliven 18(q).  Do you go that far?

MR BERKELEY:   Your Honour, there may have been – the difficulty is there are a number of reasons why the Bank might have appointed a receiver.  One is that the Bank manager had that.  The other is that he may have accepted the recommendation of the accountant.  The situation is as though Mr Bew had never given evidence – let us suppose that – because it would not have made it any better.  Mr Bew does not get in the witness box and then counsel says, “Well, we didn’t call him.  He is here.  He’s been sitting in court.  We didn’t call him, but he must have thought that because look at the objective facts.”

McHUGH J:   But I do not think you are answering Justice Hayne’s question.  If I understood his Honour’s question to you, it was this.  Supposing he had never looked at 18(q) but nevertheless, in his mind, he thought that the Bank security was in danger.  Could the Bank then rely on 18(q)?

MR BERKELEY:   If he had that opinion the Bank could rely on it, if he had the opinion before they appointed the receiver.

McHUGH J:   Even though he did not even know of the existence of 18(q), never looked at it in his life?

MR BERKELEY:   Yes – no – well, he did not say he knew ‑ ‑ ‑

HAYNE J:   So the question is one of the commercial assessment made by the Bank rather than advertence to particular clauses.

MR BERKELEY:   He did not say he had ever looked at 10.1(j).

HAYNE J:   No.

MR BERKELEY:   But that was not to the point.  They did not make an issue of that.  He came out and he stood in the witness box and he said that was the sort of opinion that he had at the time.

KIRBY J:   I suppose you have this much going for you, that the form of the debenture is in the control of the Bank.  The Bank can put in it what it wants.  It is in a position of commercial power to do that anyway.  It could have worded (q) in terms of “if the mortgagor is carrying on business at a loss and the further prosecution of that business would endanger the security objective consideration” but instead the Bank chose to posit its operation upon the opinion of a particular officer, possibly in order to avoid questions as to whether, in fact, objectively the business was in a bad way and to foreclose them by saying if an officer of the Bank has the opinion, that is it.  That opinion may be wrong but if the evidence is given of that, that is it.  And the Bank did not in this case prove the opinion which triggers the subparagraph and if they do not do that on their form, that is their lookout.  Is that how you put it?

MR BERKELEY:   Yes, your Honour.

KIRBY J:   And is that what Justice Buchanan held?

MR BERKELEY:   Yes, he held that - no, I do not think he dealt with it. 

McHUGH J:   No, he did not deal with the issue.

MR BERKELEY:   That is what the trial judge held and Justice Kenny held the opposite and the other two judges never dealt with it.

KIRBY J:   Well, I think there is more in that point than I thought at first and especially when one adds to it the fact that Mr Bew did give evidence of forming an opinion on another matter and did not bother to give evidence on this the inference, then one would take from his silence that he did not form an opinion and if that is in the Bank’s form and is the trigger for the operation of the clause, too bad.  They have not proved the trigger.

HAYNE J:   The other point that perhaps should be mentioned in this connection is the inclusive definition of the term “officer of the Bank” at page 103, Mr Berkeley.  I am not quite sure how far that inclusive definition would go but it is not every employee of the Bank that is encompassed by the expression and therefore, presumably, you would seek to say that the opinion must be an opinion formed by a person of particular rank within the Bank.

MR BERKELEY:   I would think so, your Honour, I do not think it would be the teller.  But there was another Bank manager, Mr Williams, who gave evidence too and he said he had the 10.1(j) opinion but he is in the same position as Mr Bew and they were the only two people called on behalf of the Bank.

KIRBY J:   Now, if the debenture point falls out the Bank has to succeed or fail on the general conditions.

MR BERKELEY:   Yes, your Honour.

KIRBY J:   And if you lose on the second of the general condition points argued, that is to say the giving point ‑ ‑ ‑

MR BERKELEY:   We only have to get over one hurdle, your Honour.

GLEESON CJ:   Thank you, Mr Berkeley.  Yes, Mr Karkar.

MR KARKAR:   If the Court pleases.  Might I just remind your Honours of the terms of the fresh ground of appeal.  It was that it was not open to her Honour to infer that the Bank had formed an opinion.  We would submit that there was ample evidence from which her Honour could infer that the Bank had formed its opinion.  We have prepared for your Honours a document which effectively sets together the various findings of the judges in the Court of Appeal on this issue.

KIRBY J:   Now, Justice Hayne has drawn attention to the specific definition of “officer of the Bank” so it is not every cashier, it has got to be a specific officer.

MR KARKAR:   Yes.

KIRBY J:   Who are the officers relevant?  Mr Williams and Mr Bew?

MR KARKAR:   Mr Williams and Mr Bew.

KIRBY J:   And Mr Bew and Mr Williams gave evidence about forming other opinions but did refrain from giving evidence of forming the opinion relevant to debenture.

MR KARKAR:   They gave evidence that they had, as a result of the reports and the accounts that were received, formed a view that there was material adverse change in the state of affairs of the company.  They did not specifically advert to 10.1(j) or to 18(q) and they were cross-examined on that, so, that it is not quite correct to say that they did not advert to 18(q) in their evidence.  They gave general ‑ ‑ ‑

KIRBY J:   How do we resolve this, ourselves?

MR KARKAR:   The document I am just about to give your Honours actually contains excerpts from the judgments of President Winneke, Justices Kenny and Buchanan who dealt with this and quoted from the evidence and from the reports.  Might I give your Honours that document?

GLEESON CJ:   The question that we are examining, as you point out, is whether an inference was open, not whether it was right.

MR KARKAR:   Indeed, your Honours, and that is what ‑ ‑ ‑

KIRBY J:   But if one started just on ordinary Jones v Dunkel principles from a point that a witness with the relevant authority being the officer of the Bank concerned gives evidence, as we are told by Mr Berkeley, on one matter as to the forming of an opinion and does not give it on another the inference would, one would think, be drawn – query, whether it has to be drawn - but it is an opinion that he did not form because had he formed it he would have given evidence of it.

MR KARKAR:   Yes.  Well, we take issue with the statement of our learned friend.  The evidence that your Honours will see from the judgments of the Court of Appeal are to the effect that Mr Bew and Mr Williams formed an opinion that there was a material adverse effect, but assuming ‑ ‑ ‑

KIRBY J:   Would not one construe this clause, with fair strictness against you, given that it is a form document, that you are in control of the form, that you could have worded it as an objective matter, but instead you worded it in terms of an opinion and that your witness who had the power to do so was not called to give evidence of that opinion which triggers the clause?

MR KARKAR:   We would, with respect, disagree that one would construe the document with strictness.  One would construe it to enable the court to determine what the intention of the parties were but your Honour Justice Kirby pointed out that this is not a guarantee.  This is a primary document, it is a primary contract.  And of course what your Honour is concerned with is not so much construction of the document, that is to say construction of the debenture.  No one here is saying that there is any doubt about it.  The question is really how you construe the evidence before the court, and did the evidence enable her Honour to make the inference that her Honour, in fact, made.  We would submit that the objective facts here were just overwhelming.  The first accounts that were delivered showed that the company was insolvent and that it had a deficiency of something like $400,000 – a very substantial amount for a company of this size.

Those accounts, together with the first report of Carson & McLellan, showed that the Bank had exercised its rights there and then, your Honours, would have meant a loss on its security of $550,000.

McHUGH J:   That is your biggest point, it seems to me, because even if you had enforced immediately you would confine your losses to 500,000.

MR KARKAR:   Precisely, your Honour.  And what is more, of course, the report went on to say, and the report was accepted, the opinion was accepted and adopted as the opinion of the relevant officers, that if you allowed the company to continue to trade, it was going to incur further losses, thereby of course jeopardising the security.

KIRBY J:   But do we not have to ask the question not in general terms or in vague terms, but as at the moment that the debenture is allegedly called into operation?  We have to ask:  as at that moment was the opinion which is invoked, which is 18(q) ‑ ‑ ‑

MR KARKAR:   The relevant time is a time prior to the appointment of the receiver because ‑ ‑ ‑

KIRBY J:   Any old time, or is it not the time when the Bank’s remedies are invoked?  Is that not the time when one would scrutinise the opinion of the officer?

MR KARKAR:   One cannot state it with precision, your Honour, but here the time that we are concerned with is relatively short.  It commenced ‑ ‑ ‑

GLEESON CJ:   Was there any time over a period of three months before the appointment of the receiver when the opinion would not have been correct?

MR KARKAR:   No, your Honour.  Indeed, the irresistible fact was that this company was insolvent, was trading at a loss, was going to continue to trade at a loss and thereby eroding the security.

GLEESON CJ:   As I understand it - correct me if I am wrong - the entire context in which all of this arose was a review being conducted by the Bank and its accountants after the termination date for the purpose of deciding whether to renew the facility.

MR KARKAR:   Indeed, your Honour.

GLEESON CJ:   The alternative being not to renew the facility.

MR KARKAR:   Indeed.

KIRBY J:   But presumably during that process of review, no one had finally reached the opinion or - correct me if I am wrong - the opinion that 18(q) refers to.

MR KARKAR:   Well, we would submit, your Honour, that that is ‑ ‑ ‑

KIRBY J:   You say as early in the three months before they had formed that opinion and they were simply waiving the Bank’s right or they were not prosecuting the Bank’s right under the debenture?

MR KARKAR:   What they were doing was that when they received the accounts, which was in April 1994, they saw that the company was insolvent and that had they exercised their security there and then they were going to lose $550,000 on their securities.  There was going to be a shortfall in the security.  What they did, as an honourable bank would do with a long‑standing customer, rather than put the receiver in there and then, they decided to engage accountants to see whether the company can be salvaged and the accountants came back and said, “Look, your security is going to be continually eroded” - and the words “eroded” were used by Justice Buchanan and Justice Winneke - “your security was going to continue to be eroded unless you can restructure this company in such a way that you return it to a profit.”

Having been given that report, the Bank decided to see whether a restructure could take place and the second report told us that a restructure could not be had and, therefore, continuation of the business ipso facto was going to lead to an erosion of the security, and that is what the memorandum that I believe your Honour Justice McHugh referred to at the bottom of page 198 was directed to, and that was, of course, on 6 June, that is to say about 10 days prior to the service of the notice.  Now, the objective facts are such that it was an irresistible inference available to her Honour to conclude that Mr Bew and Mr Williams formed the relevant opinion under clause 18(q).

KIRBY J:   Well, why did he not give specific evidence of it, as he apparently did about the opinion formed under the general terms and conditions?

MR KARKAR:   I am not sure, your Honour, that one is correct in saying that he gave specific evidence about the 10.1 ‑ ‑ ‑

KIRBY J:   Well, I just do not know because we do not have the transcript of the trial and maybe that is a legitimate complaint on your part, but the fact is we do not have it.  Did the trial judge make any finding on this?  The trial judge, conventional theory says, has certain advantages in this sort of matter.

MR KARKAR:   Indeed, and that is why the document that I gave to your Honours is devoid of any reference to what the learned trial judge decided, because his judgment does not contain any examination of the evidence upon which he concluded ‑ ‑ ‑

McHUGH J:   That was because he held that the moneys advanced under the facility agreement did not become payable pursuant to clause 18(q) because the debenture could not be read in isolation from the facility agreement.

MR KARKAR:   I am not sure that his Honour decided that, your Honour.  I do not believe that that point was argued before his Honour, as I do not believe that the point was argued before the Court of Appeal, but that is beside the point.  What I think his Honour did ‑ ‑ ‑

McHUGH J:   Well, he did say the debenture must be read in the context of the letter of offer and the general conditions.

MR KARKAR:   That was in relation to clause 1 of the debenture which said the mortgagor shall duly pay on demand, and his Honour there decided that that clause is subservient to the clause in the agreement and the letter of offer which made the moneys payable on 30 days notice.

McHUGH J:   Is this why you say that this point or this criticism of Justice Kenny was never really a point at any stage in the case before the Court of Appeal?

MR KARKAR:   It was raised in the context of clause 1.

McHUGH J:   Yes.

MR KARKAR:   There was no general statement of principle contended for by the appellants before the Court of Appeal - I was not engaged at the trial – that the debenture, as such, could not be utilised by the Bank unless and until the moneys fall due under the agreement.  It is, in our respectful submission, a far-reaching and radical submission.  I mean, the statement of it, in our respectful submission, is sufficient to reject it because a debenture performs quite a distinct function from a loan agreement.  A loan agreement gives rise to personal rights and obligations ‑ ‑ ‑

McHUGH J:   But was not there a provision in the letter of offer which said its conditions prevailed over whatever was to the contrary?

MR KARKAR:   Yes.  The general conditions said that the provisions in the letter of offer would prevail over the general conditions and the special conditions.

McHUGH J:   And the special conditions, to the debenture, yes.

MR KARKAR:   There is no reference in that to the debenture.  Indeed, I will take your Honours in a moment to the provisions of the general conditions which themselves contemplate that the moneys may become due and payable under a security instrument prior to them becoming due and payable under the loan agreement and independently of it.

KIRBY J:   But if the Bank has control of this and it is laying down these conditions and it, in its letter of offer, makes specific reference to some of its documentation and not to this one, why would not one then, as I gather the primary judge did, say, “Well, you have to look at the entirety, you have to look at the generalities of the debenture and the specificities of the particular terms and conditions of the particular loan and you just have to read them all together and make what you can of them”?  You could have said, “It is all subject to the debenture” but you did not.

MR KARKAR:   We, of course, would not cavil with the proposition, your Honour, that of course you have got to read all of the transaction documents together but ‑ ‑ ‑

GLEESON CJ:   But without the assumption that banks are not people who wear belt and braces.

MR KARKAR:   Braces, indeed.  Banking, of course, is a very risky business.  I mean, it is riskier than insurance.

KIRBY J:   I do not think you need to emphasis that submission too much.

CALLINAN J:   Not this week after the results of last week, Mr Karkar.

KIRBY J:   I think that is the weakest of your argument so far.

McHUGH J:   Yes.  Macquarie Bank did very well yesterday.

MR KARKAR:   This Bank did very well a couple of weeks ago, your Honour.

HAYNE J:   Reflecting the degree of risk it underwent, no doubt, Mr Karkar.

MR KARKAR:   But coming back to your Honour Justice ‑ ‑ ‑

KIRBY J:   Where were you, Mr Karkar, before you went off into the world of fantasy?

MR KARKAR:   I was seduced into it by your Honour the Chief Justice.  But, your Honours, we do not for a moment cavil with the proposition that you have got to read all of these documents together, but it is another thing to say that you set at nought the provisions of clause 18 of the debenture which sets out events of default rendering the moneys due and payable and, more importantly, rendering the floating charge automatically enforceable, or it fixes the charge.  Now, if my learned friend’s submission is correct, it would lead to absurd results.  Take the situation, and it is not unusual, where the Bank’s loan agreement consists of a letter of offer and it says that this facility is available for 12 months and it provides for no events of default, as many letters of offer do not, yet you have a debenture which does provide for events of default.

My learned friend’s argument would be that you could not exercise your rights under the debenture because it is subservient to the loan agreement until the moneys are payable under the loan agreement.  That is to say, if you had a non-monetary default of a very serious kind like a liquidator being appointed, you could not utilise your rights under clause 18 because the moneys are not payable under the agreement.  That, in our respectful submission, would be contrary to principle ‑ ‑ ‑

McHUGH J:   It also has the more specific submission though, does it, that 10.1(j) and 18(q) are basically irreconcilable?

MR KARKAR:   What he said to your Honours is that 18(q) is encompassed within 10.1(j).  That does not detract that you can give each of them independent operation.

KIRBY J:   Because of the different consequences that flow.

MR KARKAR:   Yes.

KIRBY J:   The one going to personal obligations, the other going to the assets.

MR KARKAR:   The rights in rem, yes, your Honour.  That is the fundamental proposition that we put to your Honours, that the function that is served by a debenture is completely different from the function that is performed by a loan agreement.  One creates rights in the assets, rights in rem, which need protection and, your Honours, need protection quickly, whilst the other creates personal rights and obligations.

KIRBY J:   I am still curious, Mr Karkar, as to how this Court can resolve a question – if one comes to the interpretation of 18(q) and says, “Its meaning is special.  The Bank chose a particular clause, it works on the opinion of an officer and we have a submission that he gave some opinions and he did not give this opinion, and therefore it is not brought into play”.  Now, how do we, in the absence of transcript which was available to the primary judge and was available to the Court of Appeal, resolve that issue?

MR KARKAR:   Well, it can be resolved in one of two ways, in our respectful submission.  First of all, your Honours, we, of course, embrace what my learned friend told your Honours this morning, that the opinion within 18(q) is encompassed within 10.1(j) and he is, of course, right.  If you form the opinion under 10.1(j), ipso facto you are forming an opinion under 18(q).

HAYNE J:   I thought his proposition was the inverse of that, Mr Karkar.  It was that an opinion under 18(q) is always an event under 10.1(j), but not vice versa.

MR KARKAR:   Yes, precisely, 18(q) is always within 10.1(j), and that is what he said.  Your Honour, we would submit that there can be no doubt that 10.1(j) opinion was proved.

KIRBY J:   I think you ought to assume that from the vigorous nodding of the head in the negative that that is not what Mr Berkeley did submit.  So that you will not be foreclosed of the opportunity of dealing with it, you had better deal with that on that possibility.

MR KARKAR:   Yes.  The other way we would deal with it is to refer your Honours to the evidence as set out in the judgments of their Honours in the Court of Appeal.

KIRBY J:   Do both sides invite us to deal with it without reference to evidence but with reference to so much of the evidence as is referred to in the opinions in the Court of Appeal?

MR KARKAR:   Well, I did not hear my learned ‑ ‑ ‑

KIRBY J:   You do.

MR KARKAR:   I do.

KIRBY J:   You say it is enough for your purposes.  This Court does not have to go to the original evidence, do not have to have our usual peep to see if the Court of Appeal got it right or the primary judge got it wrong; we can just go on the basis of the objective facts recorded in the Court of Appeal.  That is what you say.

MR KARKAR:   Yes.  Well, the other way of dealing with it is, as your Honour, I think, suggested to me this morning that we could supplement our argument ‑ ‑ ‑

KIRBY J:   I just do not know how I am going to deal with it.  I mean, Mr Berkeley says he gave one opinion, he did not give another and the one does not necessarily lead to a conclusion on the other and, indeed, the absence of a specific opinion on this clause is fatal to your invocation of it.

MR KARKAR:   Yes.

KIRBY J:   Now, I do not know how to deal with that and it is up to you both to sort that out.

MR KARKAR:   It really is up to my learned friend, with the greatest respect, your Honour, because it is his ground of appeal.

KIRBY J:   That may well be right.

MR KARKAR:   He referred your Honours to none of the evidence.  He specifically excluded it from the appeal book and all we can do on the present state of the book is to do what we did in the document that we handed up to your Honours, to refer your Honours to the evidence as recited by the three judges of the Court of Appeal, his Honour the trial judge having not dealt with the evidence but, in truth, your Honour, the matter is in my learned friend’s hands.  He has not referred your Honours to any evidence which would justify his first ground of appeal and, if for no other reason, that ground ought to be rejected because there was no reference by him to any of the evidence.

Now we would submit that, having regard to what their Honours said in the Court of Appeal on this point, the inference is irresistible that Mr Bew and Mr Williams formed the 18(q) opinion and that is the best we could do on the material.

GLEESON CJ:   Yes, we have understood that point.

MR KARKAR:   Your Honours, might I very briefly say ‑ ‑ ‑

KIRBY J:   Can I just ask you on that, I got an impression reading the reasons in the Court of Appeal that Mr Williams was a bit more optimistic about the business of the appellants than Mr Bew, that big, bad Mr Bew came along and then the shutters went down.  Now, is that an incorrect inference?

MR KARKAR:   I do not think there is anything in the evidence to lead your Honour to think that.  What happened is that Mr Williams left his position and Mr Bew took over from him.  Mr Bew, of course, was the person who asked the accountants to do the second report, to indicate to him whether the company could be salvaged but the evidence is rather the other way, that Mr Bew was anxious to see whether this company could be returned to profit and he engaged accountants accordingly.

KIRBY J:   But you agree with this much of Mr Berkeley’s submission, that Mr Bew did not give express evidence in terms “I formed the opinion dot dot dot 18(q)”.

MR KARKAR:   Yes, that is so.

KIRBY J:   He did not give that evidence.

MR KARKAR:   He did not give that evidence.

KIRBY J:   And it is left to inference and the trial judge did not draw the inference because he took a different approach, but you say the Court of Appeal with its fact‑finding role was entitled to draw the inference and, indeed, that the inference was irresistible in all of the facts of the case.

MR KARKAR:   Yes, your Honour.

McHUGH J:   I was wrong in putting to you that the trial judge did not make a finding.  He did make a finding adverse to you, did he not, at page 139 of the book?

MR KARKAR:   What his Honour said was that “there is no express evidence”.  That is at page 139 and he then found ‑ ‑ ‑

McHUGH J:   But that is in a context where he has seen Mr Bew give evidence and, notwithstanding that he has seen Mr Bew give evidence, he makes a finding that you cannot rely on (q).

HAYNE J:   And he considered “inference” in the next few lines.

MR KARKAR:   He concluded that the onus had been not discharged and I hope I did not lead your Honour to think otherwise.

McHUGH J:   No, no.  I was the one that put it to you.  I put it to you that the trial judge decided it on the interrelationship between the two documents, but he did in one sense, but he also dealt with this opinion.

MR KARKAR:   Yes, but the interrelationship aspect of his Honour’s judgment related only, in our respectful submission, to clause 1.

McHUGH J:   To clause 1, you say, yes.

KIRBY J:   It is a very short treatment and I suppose one can say it has to be weighed against a very large amount of objective material.

MR KARKAR:   Indeed.

KIRBY J:   Which you would say did not forbid the Court of Appeal from drawing the inference which it did.

MR KARKAR:   Exactly.  Your Honour, his Honour did not at first instance refer to any of the evidence on this subject.  He simply made the conclusion that your Honours see on page 39.

KIRBY J:   If you succeed on the 18(q) point, it is a snake and you go straight out of the game.

MR KARKAR:   Subject, of course, to this argument of my learned friend that I could not rely on clause 18 of the debenture at all because I have got to show that the moneys were due and payable under the loan agreement.

GLEESON CJ:   Well, the most direct method for you to succeed is in reliance on clause 11.1 of the general conditions.

MR KARKAR:   Yes, yes.

KIRBY J:   Well, I think I have been detaining you from getting to those by my fascination with the debenture.

MR KARKAR:   Might I just give five reasons, your Honours, and very shortly, why the submission of our learned friend that clause 18 does not operate or that the debenture itself does not make the moneys due and payable unless they are due and payable under the loan agreement.  First of all, we would submit that looking at the debenture itself, there is nothing in it which indicates that it should not be given the operation which it has on its face and looking at the other transaction documents, they similarly indicate that the debenture should have an independent operation, and might I take your Honours to ‑ ‑ ‑

McHUGH J:   Is this still part of your first point or is this the second point?

MR KARKAR:   This is the second point, yes.

McHUGH J:   This is the second?

MR KARKAR:   Yes.  I have left ‑ ‑ ‑

McHUGH J:   No, but you said you were going to give five points.

MR KARKAR:   Sorry, this is the first point.

McHUGH J:   So this is part of the first?

MR KARKAR:   Yes, that is to say, looking at the transaction documents there is nothing in them - whether debenture or the others, there is nothing in them which would indicate that the debenture should not have an independent operation.

KIRBY J:   One day in a case like this we will have a whiteboard or a blackboard or some other board which has the issues and the various – I mean, any other rational mode of communication would do that, but we do not even have a piece of paper with these issues on them.  One day we will be helped in the way that we should be.

MR KARKAR:   Some of those issues are referred to, your Honour.

KIRBY J:   They are hidden there.  They are hidden there.  There is no doubt they are there in all the paper, but the skill of counsel – I just speak for myself – is to simplify, conceptualise, because that is ultimately what we have to do.

MR KARKAR:   I accept what your Honour says.  Might I now give, in a hopefully clear form, why we would submit that this argument is unsustainable.  One is a reference to the documents themselves.  The debenture itself is clear on its face.  If one then were to go to the general conditions, one will see in them provisions that contemplate that the moneys would become due and payable under a security document before they were due and payable under the general conditions.  We refer in our written submissions to clause 10.1(a) and 10.1(k), your Honours, as two provisions in the general conditions that recognise that the moneys may become payable and under the debenture, or the security under the debenture, may become enforceable, even if the moneys were not due and payable under the facility agreement.  So 10.1(a) provides that it is an event of default:

if the Customer or a Surety fails to pay any amount which is due and payable by it under the Agreement or any other Transaction Document;

and transaction document, of course, encompasses the debenture.

Similarly, 10.1(k)(i) does the same thing and in 10.1(k)(iv), it contemplates that security may become enforceable prior to the monies becoming payable under the general agreement.  So if one is looking at the intention of the parties, we would submit that they intended that the debenture should have independent operation.  Similarly, your Honours, the letter of offer contemplates an independent operation to the security document.  At page 71 of the appeal book in clause 6, your Honours will see that it is there provided that the conditions precedent to the use of the facilities include the provision of, amongst other things, this debenture.

The second reason that we advance is the one we have already mentioned, that the general conditions and the debenture perform separate and distinct functions and must be given an operation consistent with the distinct functions that they perform.

The third reason is the effect of the argument is that the rights of a debenture holder under the debenture are postponed to the date of termination of the loan agreement thus leaving the secured creditor in jeopardy in relation to his assets, and that would not, we would submit, be the intention of the parties.

Fourthly, we submit that the argument is inconsistent with the multitude of cases, including your Honour the Chief Justice’s decision in Fire Nymph in the Court of Appeal in New South Wales, which recognised that the occurrence of an event of default under a debenture is to work an automatic crystallisation of the floating charge.  The effect of the argument is that the floating charge would never crystallise on the debenture unless something occurs under another agreement.

Finally, we would say that the argument is contrary to principle and particularly to the decisions of the Privy Council in DFC Financial Services Ltd v Coffey, which we refer to in our written submissions, and it is also contrary to the decision of the Court of Appeal of New Zealand in Dovey Enterprises Ltd v Guardian Assurance Public Ltd, which is another decision that we have referred to in our ‑ ‑ ‑

KIRBY J:   What do you say is the holding in those two decisions?

MR KARKAR:   The holding of those two is that the debenture operates independently of the loan agreement, that is to say ‑ ‑ ‑

KIRBY J:   That would surely have to depend on the particular terms of the debenture and loan agreement in question, would it not?  I mean, you could by your letter of offer have excluded one or made one specifically subject; I mean, it all depends on the arrangements in the particular case.

MR KARKAR:   We would accept that, but in the Privy Council DFC Financial Services Ltd held that the debenture, in fact, varied the date of payment in the loan agreement, because it made the moneys due and payable immediately upon the happening of a certain event under the debenture and Dovey, your Honours will note, was concerned with this very debenture; it was an ANZ debenture with identical provisions.

GLEESON CJ:   Yes.

MR KARKAR:   This is, your Honours, all we want to say in relation to the debenture.  Before I go to the notice under the general conditions, might I take up what your Honour Justice Kirby suggested that I should do, and just identify the issues, as we see them, arising in this case.  The first issue in relation to the debenture is, was an 18(q) opinion formed?  If the answer to that is yes, then the next question is, was the Bank entitled to appoint a receiver under clause 19 of the debenture?  If the answer is no, then, as your Honour the Chief Justice suggested, the question becomes, was an opinion under 10.1(j) formed?  And the answer to that must be yes; there is no dispute about that.  And, if that is so, did we give an appropriate notice under clause 11.1 and in the manner required under clause 15.3?  That is, in essence, how we see the issues.

GLEESON CJ:   Is another way of expressing the issues as follows.  The question, it has the validity of the appointment of the receiver.  The power to appoint the receiver depended upon the indebtedness of the appellants becoming immediately due and payable.  There are different provisions upon which the Bank claims to be entitled to rely in support of the conclusion that the indebtedness became immediately due and payable.  One such provision is clause 11.1(e) of the general conditions.  Another such provision is the provision of the debenture to which all of your argument so far has been directed.  It is possible that the Bank was entitled to rely on either or both or neither of those provisions and that is the question.

MR KARKAR:   Your Honour, I cannot express it any better.  They are the issues.  Encompassed, of course, in what your Honour suggested the issues were is the general argument that the Bank may not be entitled to rely on the debenture at all to make the moneys due and payable because the general conditions are the sort of repository of its rights to declare the moneys due and payable.  I have, as your Honour has suggested, dealt with the debenture and might I now proceed to deal with the provisions of clause 11.

KIRBY J:   As to that first issue, the 18(q) issue, there is no question if the answer to 18(q) is yes that the entitlement to a point under 19 then arose?

MR KARKAR:   Your Honour, our submission is that there can be no question that if 18(q) were satisfied the Bank was entitled to move under 19.

KIRBY J:   You understand there to be an argument that even if you succeed on 18(q) that 19 does not come into operation.

MR KARKAR:   Yes, I understand that.

KIRBY J:   Remind me of what the point on that is.

MR KARKAR:   It is said, your Honour, that clause 18 effectively should be struck out because there are in the general conditions, clause 10 which deals with events of default and that covers the field.

McHUGH J:   And that was the basic point which was certainly in the forefront of the special leave application.  Yet, the then applicants claimed that Justice Kenny had not looked at that issue but had gone straight to the 18(q) point.

MR KARKAR:   Yes.

GLEESON CJ:   What page do we find clause 19 on?

MR KARKAR:   It is on page 99, your Honour.

GLEESON CJ:   Thank you.  So clause 19 would pick up 11.1(e) of the general conditions regardless of the operation of clause 18?

MR KARKAR:   Yes.  The first question that arises in relation to clause 11.1(d) and (e), your Honours, is whether the notice was given.  We would submit that there are several reasons why, in this case, it should be held that the notice was given.  The word “given” in our respectful submission, does not mean sign or any term of similar import as the learned trial judge found.

Upon the proper interpretation of the word, read, of course, in the context of the general conditions, it is the anterior act of receiving and it is so used in the general conditions and it is a synonym with the words “delivered”, “sent” or “transmitted” as used in clauses 15.3(a), (b) and (c).  We point out to your Honours that when the general conditions require the document to be signed they are expressly so provided and we have referred your Honours to a number of those provisions in the written submissions.  We referred your Honours to a number of decisions, including one of this Court, that is Sydney City Council v Garbett in which your Honour Justice McHugh delivered the principal judgment, where the word “give” was treated as being synonymous with deliver or send or transmit.

Now, if there is a requirement that the giver must adopt the notice, we would submit that Mr Bew did manifestly, in this case, adopt it, first, by instructing its preparation and, secondly, by handing it himself to the representatives of Pan Foods.  So we would submit that the notice was given.  Going to clause 11.1, we would submit that that notice, notwithstanding that it was, on its face, a demand for payment of moneys, did two things.  It terminated the obligations of the Bank under the agreement, that is under paragraph (d) of the clause, and it declared the principal outstanding and unpaid interest due and owing.

We have gone to a great deal of submission in our written submissions on those two matters.  I do not know that I can be of any further assistance to your Honour in adding to what we said there.  We would submit that there can be no doubt, taking both a strict view of the clause and a substantial view of compliance, that the Bank did both of these things.

HAYNE J:   In the case where the authorised representative is not somebody falling in the latter part of the definition, so it is not another person nominated by notice but is a director, secretary or manager, do you say that it is sufficient for 15.3 that as a matter of objective fact the notice is authorised by a person within that class?

MR KARKAR:   Yes, we would, your Honour.

HAYNE J:   Thus, is the contrast at least partly encompassed by the alternative way in which the clause might have read about notices being given and appearing on their face to be given by, that all that is required is the objective fact that it was given, it need not appear on its face that that is so?

MR KARKAR:   Yes, we would submit that that is the correct analysis, but, of course, in this case one does not need to go that far because Mr Bew was an authorised representative and that is common ground.  He himself instructed its preparation and he himself physically gave it to the directors.

KIRBY J:   But the recipient would not know that he was an authorised representative.

MR KARKAR:   He need not know, in our respectful submission.

KIRBY J:   Therefore, your answer to Justice Hayne’s question is it is enough that objectively he was ‑ ‑ ‑

MR KARKAR:   He was, yes.

KIRBY J:    ‑ ‑ ‑ there is no obligation to aver that or prove it to the recipient.

MR KARKAR:   Yes.  Again, in this case, your Honour, they would have known it because an authorised representative is designated as being a manager and they knew that Mr Bew was a manager.

KIRBY J:   Where is the definition of “authorised representative”?

MR KARKAR:   It is on page 93, your Honour.  Your Honour will see in the last three lines:

and person whose title includes the word manager –

We would submit that there is nothing in what my learned friend sought to do in distinguishing between, on the one hand, a declaration, and on the other hand, a request.  If the request comprehends a statement or an announcement, then it is ipso facto a declaration.

For these reasons, if the Court pleases, we submit that the appeal should be dismissed.

GLEESON CJ:   Thank you, Mr Karkar.

MR KARKAR:   Yes.  Your Honours, it is might be of assistance to your Honours if I handed up this document which is a comparative analysis of the events of default, on the one hand, that appear in the debenture, and on the other, in the general conditions.  It tells your Honours which conditions, or which events of default are in the debenture that are not in the general conditions and which are and which perform different functions.  If the Court pleases.

Your Honour Justice Kirby said this morning that your Honour did not have an  ‑ ‑ ‑

KIRBY J:   No, that has been handed up.  I have that now.

GLEESON CJ:   Yes, Mr Berkeley.  I gather from the way the case has been argued that neither of you wants to rely on any further material that is not in the appeal books.  I am not encouraging you to rely on it.  I just want to get clear that that is the position.

MR BERKELEY:   I do not, your Honour.

MR KARKAR:   Yes, that is our position.

GLEESON CJ:   Yes.  Yes, Mr Berkeley.

KIRBY J:   But may we act upon the findings of fact made by the Court of Appeal?

MR BERKELEY:   We would ask your Honour also – in relation to 18(q) we would ask your Honour also to look at the judgment of the trial judge at page 139 of the appeal book.

KIRBY J:   That was the point that was drawn to a notice earlier?

MR BERKELEY:   Yes, because it was only dealt with by Justice Kenny, as far as I remember.  The learned President did not deal with it and Justice Buchanan did not.

GLEESON CJ:   Yes.

KIRBY J:   Well, that presumably is because, as the Chief Justice pointed out in his analysis, there are many ways to skin a cat, or at least arguably, and if you take one route you do not have to get to 18(q).

MR BERKELEY:   I understand that, your Honour.  It was put by my learned friend that our proposition was that we had a debenture and a loan agreement; you can never rely on the debenture or making a demand for repayment under the debenture.  We were not saying that.  We were saying in the particular circumstance of this case and the way these documents came into existence, it is a consequence that the primary…..of the agreement between the parties was the loan agreement and that sets out in great deal when money is repayable and what are events of default.

Now, then he said that clauses 10.1(j) and 18(q) have different functions and it is not so.  I mean, all clause 18(q) does if it operates is in personam.  It makes the money repayable and that triggers off the ability to enforce the security and 10.1(j) does the same.  It makes ‑ ‑ ‑

HAYNE J:   Is that right, Mr Berkeley?  If we go to page 99 of the appeal book the introductory rubric of clause 18 is:

The moneys hereby secured.....become due and payable and the security hereby created shall immediately become enforceable ‑ ‑ ‑

MR BERKELEY:   I understand that, your Honour, but at least so far as it is relevant to this case, the way of enforcing the security is to appoint a receiver under clause 19, and that says:

At any time after the moneys hereby secured become payable –

I mean, all the Bank has to do if it wants to appoint a receiver is to deliver notice under clause 11 in the circumstance of this case, and two minutes later they can appoint a receiver – one minute later.

GLEESON CJ:   But it also has significance in relation to the crystallisation of the charge, does it not?

MR BERKELEY:   Yes, your Honour, that would be so.

HAYNE J:   And where is the charging and associated provision?

MR BERKELEY:   I will have to look for it, your Honour, and my learned friend might be able to help me.  I am indebted to him; my learned friend says clause 17.

HAYNE J:   Yes, thank you.

GLEESON CJ:   It is a fixed charge in relation to some assets and a floating charge in relation to others.

MR BERKELEY:   In the usual form. 

HAYNE J:   And at line 60, it automatically crystallises upon moneys “becoming payable”.

MR BERKELEY:   Yes, that is right, your Honour; the same effect which follows from the operation of clause 10.1(j) and clause 11.

HAYNE J:   But the consequence of clause 18(q) if enlivened ‑ ‑ ‑

MR BERKELEY:   Is that you do not have to give a notice.

HAYNE J:   - - - is automatic crystallisation.

MR BERKELEY:   It is awkward because it says:

at the option of the Bank –

and how that is to be exercised, I do not know.  I mean, if they appoint a receiver it would obviously be an exercise of the option, but this Bank do not do anything, if the Bank has a choice, and the Bank undoubtedly has to do something to indicate that it has made that choice.

This is about the argument that my learned friend put.  We have a letter of offer here which says these moneys are advanced and it is apparent looking at the document that the facility is to run from year to year.  I think, your Honour the Chief Justice said that if they were not renewed in February, they terminated, but that is probably not so, your Honour, if you look at clauses like clause 7 and page 72:

The facilities are subject to Annual Review so that (in accordance with the General Conditions) the Bank may terminate them…..or –

et cetera –

by giving 30 days’ notice to the Customer.

Then there is a clause 10(b):

That the bank be provided with the following information.

(b) full audit of stocks and debtors on a yearly basis as at 30/6.

If you look at the facilities themselves, for instance, at page 71:

Fees:  …..$550 payable on 15 August in each year in respect of the year which ended on the preceding 31 July.

So the judges who dealt with this in the Court of Appeal - I think it is right for me to say - they all agreed with the trial judge that – in fact, it was raised.  That is right, the Bank said it automatically terminated on 28 February 1994.  The trial judge found against that.  All the judges in the Court of Appeal agreed with it and my learned friend’s contention to the contrary was withdrawn.

We have got this agreement.  The Bank agrees to advance this money.  They agree to advance it from year to year and in the first instance it is for a definite term of at least one year.  The opportunity to call up loan does not arise.  Unless there is a default it does not arise until, at the earliest, February of this next year.  Now, what the Bank is saying is, “We entered this agreement on 28 February 1994.  The next day we could have demanded the money under this 1988 debenture”.  Now, that is what the respondent is asking your Honour to say the intention of the parties was and all the judges who have dealt with it so far have come to the conclusion that it was not the intention of the parties and we say the same argument – exactly the same argument applies to – if that is so, then there is no difficulty in taking the same approach to clause 18 which is mainly a provision for repayment in certain circumstances and asks, “Did the parties intend to rely on the general conditions or did they rely on the debentures, or at least when there was a conflict between two provisions which was to prevail?”  My last submission is this:  the ‑ ‑ ‑

HAYNE J:   Just before you leave the question of term, what is the significance on page 70, at line 6 or 7, of the termination date given; similarly at line 25 and so on?  What is the significance of those dates

MR BERKELEY:   It says:

28/2/1994
(Subject to Annual Review).

Then you go to the provision of “Annual Review”, or at leas the provision, at page 7.  That is:

28 February, subject to the provisions of clause 7 -

at page 72.  Then if you go to clause 11 of the general conditions, it says:

upon conducting an Annual Review…..by 30 days’ notice –

the Bank can do certain things.

Mr Colbran was kind enough to draw my attention to clause 8 at page 72 and the review date 28 February in each year.  Now, it was put to my learned friend, I think your Honour Justice Hayne said it, that it need not appear on the face of the document that it was given by the authorised representative.  The same would apply to clause 15.1 and even beyond the face of the document that was given by the customer or an authorised representative of the customer.  If that is correct, we ask rhetorically:  what is the point of it otherwise?  Those provisions must be there to communicate something by one party to the other.

KIRBY J:   Not necessarily.  The point of it may be to ensure that in the internal processes of the Bank the proper officer makes the decision and that that is something which the Bank holds out in its relationship with the customer, that a proper officer will make the decision.

MR BERKELEY:   But we have the same words in clause 15.1 and it is unlikely that it is merely to ensure that the customer or an authorised representative of the customer makes the decision or provides the information.  There are a number of things required to be done by notice, some of them are set out in clause 9 of the agreement.  I will just check and make sure that that is right.  Yes, at page 86, the customer has to give the Bank notice of certain things happening – litigation and so on.  It is highly unlikely the Bank would be satisfied with the notice which did not indicate that it came from a customer or an authorised representative.  One would have thought the Bank had that there so it would know from whom the information came, and we would say the same ought to apply in the opposite direction.  If the Court pleases.

GLEESON CJ:   Thank you.  We will reserve our decision in this matter and we will adjourn until 10.15 tomorrow morning.

AT 12.42 PM THE MATTER WAS ADJOURNED