Pioneer Park Pty Limited (in liquidation), Clifford John Carpenter, Merlo Australia Pty Limited v Australia and New Zealand Banking Group Limited - [2006] NSWSC 883

No judgment structure available for this case.

CITATION: Pioneer Park Pty Limited (in liquidation), Clifford John Carpenter, Merlo Australia Pty Limited & Ors v Australia and New Zealand Banking Group Limited [2006] NSWSC 883

HEARING DATE(S): 17/7/06 - 21/7/06, 24/7/06-28/7/06, 31/7/06-4/8/06, 9/8/06-11/8/06, 14/8/06-17/8/06, 21/8/06, 24/8/06

JUDGMENT DATE :
20 September 2006

JURISDICTION: Equity Division
Commercial List

JUDGMENT OF: Einstein J

DECISION: ANZ was on 10 June 1999 entitled to enforce its registered mortgage debenture dated 25 January 1996 over the assets and undertaking of Pioneer Park [previously Domino Mining Equipment Pty Ltd] for the purpose of s 436 of the Corporations Law (as it was then).

CATCHWORDS: Banker and customer - Claim by Pioneer Park Pty Ltd [previously "Domino Mining Equipment Pty Ltd"] that ANZ and New Zealand Banking Group Ltd wrongfully placed the company into administration and then liquidation in breach of terms and conditions of the banking agreements which regulated their relationship - Contract - Documenting of loan facilities - Whether certain facilities were provided for a fixed term or at least until an annual review date - Bank gives 30 days notice of termination of facilities expressly pursuant to provision dealing with right to review facilities - Notice impotent and misconceived - Subsequent notice demands immediate payment of amount said to be due - Shepherd v Felt & Textiles (1931) 45 CLR 359 - Whether ANZ entitled to rely upon validity of either or both notices in terms of other bases by way of events of default now said to have been available - Contract - Proper construction of facilities agreements - Reasonableness of opportunity to comply with demand - Good faith and reasonableness - Whether imported as implied terms into banker customer relationship - Trade Practices - Fair Trading - Misleading and deceptive conduct - Estoppel - Insolvency - Events of default - Gearing ratio formula - Whether particular failures to perform contractual obligations were remediable - Evidence - Jones v Dunkel - Principles - Dobbs Clause

LEGISLATION CITED: Bankruptcy Act 1924 (Cth)
Bankruptcy Act 1996 (Cth)
Civil Procedure Act 2005 (NSW)
Conveyancing Act 1919 (NSW)
Corporations Act 2001 (Cth)
Evidence Act 1995 (NSW)
Fair Trading Act 1987 (NSW)
Limitations Act 1969 (NSW).
Real Property Act 1900 (NSW)
Trade Practices Act 1974 (Cth)

CASES CITED: Adler v Australian Securities and Investments Commission [2003] NSWCA 131
Alcatel Australia Ltd v Scarcella & Ors (1998) 44 NSWLR 349
Allen v Carbone (1975) 132 CLR 528
Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549
Australia and New Zealand Banking Group Ltd and Ors v Pan Foods Company Importers and Distributors Pty Ltd and Ors - [1999] 1 VR 29
Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540
Batson v de Carvalho (1948) 48 SR (NSW) 417
Braithwaite v Foreign Hardwood Co [1905] 2 KB 543
British and Beningtons Ltd v North Western Cachar Tea Co [1923] AC 48
Bunbury Foods Pty Ltd v National Bank of Australasia Ltd (1984) 51 ALR 609
Bunge Corporation, New York v Tradax Export SA, Panama [1981] 1 WLR 711
Burger King Corporation v Hungry Jack's Pty Ltd [2001] NSWCA 187
Byrne v Australian Airlines Ltd (1995) 185 CLR 410
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337
Commonwealth Homes & Investment Co. Ltd v. MacKellar (1939) 63 CLR 351
Concut Pty Ltd v Worrell (2000) 75 ALJR 312; 176 ALR 693
Dobbs v the National Bank of Australasia Ltd (1935) 53 CLR 643
General Credits Ltd v Wenham (1989) 18 NSWLR 570
Inland Revenue Commissioners v Raphael [1935] AC 96
Jones v Dunkel (1959) 101 CLR 298
Landers v Schmidt [1983] 1 Qd R 188
L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235
Lustre Hosiery Limited v York (1935) 54 CLR 134
Manifest Shipping Co Ltd v Uni-Polaris Shipping Co Ltd [2001] 2 WLR 170
Massey v Sladen (1868) LR4Ex 13
Matthews v Brodie [unreported, Supreme Court of Victoria, McGarvie J, 2 April 1980, BC 8000008]
McMahon v State Bank of New South Wales (1990) 8 ACLC 315
Mercer v Whall (1845) 5 QB 447
Minion v Graystone Pty Ltd [1990] 1 Qd R 157
Mobile Innovations Pty Ltd v Vodafone Pty Ltd [2003] NSWSC 166
Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449
Overlook v Foxtel [2002] NSWSC 17
Pan Foods Company Importers & Distributors Pty Ltd & Ors v Australia and New Zealand Banking Group Ltd & Ors (2000) 170 ALR 579
Pioneer Park Pty Ltd (in liq) v ANZ Banking Group Ltd and Ors: [2005] NSWSC 498 and [2005] NSWSC 832
Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234
Ridgway v The Hungerford Market Company (1835) 3 Ad and El 171; 111 ER 378
Sandell v Porter (1966) 115 CLR 666
Schellenberg v Tunnel Holdings Pty Ltd (2000) 170 ALR 594
Shepherd v Felt & Textiles (1931) 45 CLR 359
Southern Cross Interiors Pty Ltd (in liq) v Deputy Commissioner of Taxation (2001) 53 NSWLR 213
Tricontinental Corp v HDFI Ltd (1990) 21 NSWLR 689
Tymshare Inc v Covell 727 F2d 1145 (1984)
Williams v Frayne (1937) 58 CLR 710

PARTIES: Pioneer Park Pty Limited ACN 002 706 881 (in Liquidation); Clifford John Carpenter; Merlo Australia Pty Limited; Merlo Wholesale Pty Limited and Domino Hire Pty Limited [Plaintiffs]
Australia and New Zealand Banking Group Limited [Defendant]

FILE NUMBER(S): SC 50156/04; 50163/04; 50096/05; 50118/05

COUNSEL: Mr JJ Garnsey QC, Mr B Connell (Plaintiffs)
Mr J Gleeson SC, Mr J Thomson (Defendant)

SOLICITORS: PMF Legal (Plaintiffs)
Minter Ellison (Defendant)

THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

Einstein J

Wednesady 20 September 2006

50156/04 Pioneer Park Pty Limited (in liquidation) v Australia and New Zealand Banking Group Limited

50163/04 Clifford John Carpenter v Australia and New Zealand Banking Group Limited

50096/05 Merlo Australia Pty Limited & Ors v Australia and New Zealand Banking Group Limited

50118/05 Australia and New Zealand Banking Group Limited v Clifford John Carpenter

JUDGMENT

The proceedings

1 The Pioneer Park group of companies and Mr Clifford Carpenter [who was at all material times a director of each of the group companies] bring these proceedings against the Australia and New Zealand Banking Group Ltd claiming that Pioneer Park Pty Ltd was wrongfully placed into administration and then liquidation in breach of the terms and conditions of the banking agreements which regulated their relationship.

2 ANZ had on 3 May 1999 purported to give 30 days notice terminating the facilities and had on 8 June 1999 demanded the immediate payment of an amount said to be due.

3 The proceedings whilst involving many issues, centrally include the allegation by the Pioneer Group that ANZ had mistakenly proceeded in terms to give the termination notices pursuant to clause 9 of the General Conditions [which regulated the loans] upon the basis that the facilities were by then provided at least until an annual review date, whereas in fact, certain of the facilities are said to have been for a fixed term which, by the General Conditions, could not be terminated until the end of that term.

4 Without being exhaustive it may be noted that ANZ amongst its several disparate defences, contends that even if it had mistakenly proceeded on the above basis, it is entitled to establish a contractual justification for the termination letters, inter alia relying upon Shepherd v Felt & Textiles (1931) 45 CLR 359 [for the proposition that it is entitled to go outside of the express basis for the termination given in the letters of termination and to rely upon other bases now also said to have been available].

General background

5 The general background to the proceedings was usefully recited in two interlocutory judgments: Pioneer Park Pty Ltd v ANZ Banking Group Ltd and others: [2005] NSWSC 498 and [2005] NSWSC 832, inter alia noting the September 2004 grant of leave under s237 of the Corporations Act to Mr Carpenter to bring the proceedings on behalf of Pioneer Park

6 Following the commencement of the several sets of proceedings described in those judgments, orders were made for all proceedings to be consolidated in this Court and the final hearing proceeded in terms of an amended consolidated summons.

The plaintiffs

7 The five plaintiffs to that summons are:

i. Pioneer Park Pty Ltd [previously “Domino Mining Equipment Pty Ltd”]

ii. Mr Clifford John Carpenter

iii. Merlo Australia Pty Ltd

iv. Merlo Wholesale Pty Ltd

The business of the Group

8 Pioneer Park [under its previous name] had at various times between 1990 until on or about 10 June 1999 [the date when voluntary administrators were appointed under part 3A of the Corporations Law] manufactured and sold heavy machinery particularly in the coal mining industry. The machines were very expensive, purpose built machines, long in production, high in cost, and low in volume.

9 It was the owner of certain assets including land known as Lot 1 Lake Road, Tuggerah, New South Wales.

10 It was ultimately controlled in its day to day operations by Mr Carpenter, who was at all material times the general manager and a director of Pioneer.

11 The position with respect to the Merlo Companies was as follows:

Merlo Australia

i. Until 4 February 2000 Merlo Australia was exclusively licensed by Merlo SPA Industrie Metalmeccanica (“Merlo SPA”), a company incorporated in Italy to import into Australia and distribute and sell in Australia, products manufactured and supplied by Merlo SPA (the “Merlo Products”). Merlo Australia pursuant to the licence, imported into Australia and authorised Merlo Wholesale to sell the Merlo Products in Australia.

Merlo Wholesale

12 Domino Hire carried on the business of acquiring and hiring heavy equipment for use in industry including the coal mining industry. It hired out machines manufactured by Pioneer to coal mines, principally, and those machines were usually purchased by the hirer on the expiry of the hiring.

13 Mr Carpenter also ultimately controlled the day-to-day operations of Merlo Australia, Merlo Wholesale and Domino Hire.

Retreat Group structure

14 The Group Structure was not in issue. Essentially that structure had been recorded in the following chart:

The case put

15 The gravamen of the Group's case is that:

i. ANZ was not entitled to enforce its charge and appoint administrators under section 436C of the Corporations Law;

ii. the administrators were thus not effectively appointed liquidators by section 446A of the Corporations Law;

16 Merlo Wholesale and Merlo Australia also claim that their loan facilities were terminated in breach of the terms and conditions of their facility agreements with ANZ.

17 The second to fifth plaintiffs each claim that as well as Pioneer Park, they suffered damage from misleading and deceptive conduct of ANZ in contravention of the Trade Practices Act and the Fair Trading Act.

The central issues

18 The central issues concern:

[it is common ground that there were many variations to the banking facility contracts. The crucial relevance of the search for contractual terms regulating each of the facilities concerns the need to ascertain:

a) whether a pleaded event of default has been established by ANZ;

or

Trade Practices Act

Fair Trading Act, 1987

19 The following recital of the central issues put forward by ANZ, albeit not being necessarily entirely exhaustive, suffices for present purposes to give more adjectival detail to the precise questions requiring to be answered:

Issue 1: What were the relevant terms of the original facilities granted in January 1996 as amended in May 1996?

Issue 2: What variation, if any, was effected to the terms of the facilities by ANZ’s letter of 3 March 1997?

Issue 3: What changes, if any, to the contractual arrangements were brought about by the facility letters of April, June and October 1998?

Issue 4: Was ANZ in breach of contract in maturing the $500,000 bill to the overdraft account on 1 December 1998?

[The essential proposition was put by Mr Garnsey QC appearing for the group in the following terms:

Issue 6: Assuming ANZ succeeds in defending its actions from the charge of breach of contract, what are the consequences for the proceedings?

Issue 7: Do the Merlo companies have any claim?

Issue 9: Do any of the Carpenter interests have a claim under the TPA which adds anything to the contract causes of action?

The alleged events of default

20 It is convenient to shortly summarise the alleged events of default relied upon by ANZ:

Insolvency or inability to pay debts

[ANZ has pleaded that at all material times Pioneer Park was insolvent or unable to pay its debts. However during the hearing ANZ contended that the insolvency or inability to pay debts is alleged to have occurred at least by May 1999 and likely by an earlier date].

Material change in circumstances

c) Breach of contractual gearing covenant [General Conditions 10 (1) (n)]

Failure to provide signed and audited accounts

[The allegation is that:

· At all material times the following terms were express written terms of the agreement between Pioneer Park and the Bank:

(a) Pioneer Park would provide to the Bank its consolidated annual financial statements as soon as they became available, but not later than 120 days after the end of each financial year;

(b) Pioneer Park would provide to the Bank its consolidated balance sheet and profit and loss accounts for each financial half year as soon as they became available, but not later than 90 days after the end of each financial half year. They must be certified by a director or secretary as giving a true and fair view of Pioneer Park's financial position as at the end of the half year;

(c) Pioneer Park would provide to the Bank the annual financial statements of any related entity as soon as they became available, but no later than 120 days after the end of each financial year; and

(d) Pioneer Park would provide to the Bank any financial or other information the Bank asked for by the time specified by the Bank.

· No signed accounts were ever delivered for the income year ended 1998.]

Reliability of witnesses

21 It is convenient to next deal with the reliability of the witnesses called.

Mr Carpenter

22 Mr Carpenter had been an experienced chartered accountant and qualified auditor admitted to the “B” list of liquidators and had acted as a receiver or liquidator of many companies. He had held a number of directorships of private and public companies.

23 Mr Carpenter had made several affidavits. He was extensively cross-examined for many days. He clearly had an abiding interest in the result of the proceedings.

24 It is generally not possible to accept his evidence as reliable unless it is corroborated by contemporaneous documents or by evidence given by another witness whose evidence, in turn, is accepted as reliable. The fact is that his sense of grievance in terms of what he regards as disgraceful conduct by ANZ, colours much of the evidence which he gave: witness his evidence (at transcript [332][333]):

[I was} very angry but because of my nature and so on, and my training, actually I controlled it and so I was going to my solicitor to handle it, at this stage, and to the chairman and we were dealing with the punches as they came, one at a time. I wasn't on the broad brush approach because, well, it was terrible and you did mention or it has been mentioned many times why did I show Mr Soper the rumble in the jungle, which I mean, that's almost laughable now, but the message there, which I don't think Mr Soper picked up at all, was just sometimes the little guy gets up and fights and holds his ground, and that was Mohammed Ali against George Foreman, but I think Mr Soper went away thinking, this guy's a nut but there was a message that I was trying to convey to him, that he was the bully boy, he was standing over me and, well, I was going to hold my ground, for better or worse.”

25 Notwithstanding the several occasions on which he was reminded of the need to give responsive answers, he often followed the answer with some form of commentary.

26 An example of the unreliability of his evidence concerned his alteration of position [examined in the reasons] in relation to his recollection as to whether he had or had not even received the crucial ANZ letter of 3 March 1997.

27 A further reflection on his credit involves the transactions engaged in during the second half of May 1999 examined in the reasons.

28 A reflection on his credit is to be found upon a close examination of the AMP shares transaction [examined in the judgment], the salient features of which involved:

i. Mr Carpenter purporting to act as the officer entering the transaction on behalf of both his own company, Retreat, as well as Domino Mining;

ii. the transaction being one whereunder Domino Mining would acquire AMP shares from Retreat at their listing price in a circumstance in which Mr Carpenter believed that the shares would come on at about $18 [there being no written documenting of the so-called "agreement" to enter into the transaction];

iii. there being no resolution of the board of directors of Domino Mining to the effect that it had agreed that when the shares would be listed, it would buy the shares at the listing price or at the highest price achieved at any time on the listing day;

iv. the AMP shares opening at $35, peaking at $45 for less than a minute and closing at the end of the 15th of June listing day at $23. The shares thereafter going no higher than $23;

v. Domino Mining effectively making an immediate notional loss of in excess of $700,000;

vi. Retreat making an immediate gain from the transaction of roughly the same order;

vii. the transaction being used to clear up intercompany loans: the funds notionally paid to Retreat were then used to repay its loan from Domino Hire, which in turn repaid a loan from Domino Mining;

29 Other examples of the unreliability of particular parts of his evidence are dealt with in the reasons.

Mr David Henderson

30 Evidence was given by Mr David Henderson who, together with his late brother Mr Robert Henderson, had known Mr Carpenter since they were at school together and continued to enjoy a close personal friendship and social acquaintance with Mr Carpenter.

31 Both he and his brother had been associated with Mr Carpenter by way of a professional association and common directorships. Until Mr Carpenter ceased practice as a chartered accountant in about 1991, Mr Carpenter’s firm provided accounting and audit services to D & R Henderson and associated companies. After that time, Mr Carpenter joined the board of D & R Henderson as a director, and both the Henderson brothers joined the boards of Domino Mining Equipment, and subsequently the boards of Merlo Wholesale, Merlo Australia and Domino Hire, Mr Carpenter being a director and chairman of those companies. Both the Hendersons remained on the boards of Pioneer, the Merlo Companies, and Domino Hire until they resigned from those boards, in about mid 1999.

32 Although Mr Henderson gave evidence on a range of topics including his attendance at meetings of Pioneer companies, the central proposition of special significance in relation to these proceedings [sought to be put forward by the Pioneer Group through Mr Henderson as a witness] was that the group companies could not be said to have been insolvent at any particular point in time because the Hendersons [whether through their own companies or through their personal finances] were prepared to provide the necessary shortfall in working capital or indeed to refinance all of the ANZ facilities were this to be necessary.

33 The evidence is dealt with below in some detail. However at this early point in the judgment dealing with reliability of witnesses, it has to be said that Mr Henderson's evidence was coloured by his strong beliefs:

i. that the information given to him by Mr Carpenter about the circumstances leading to the administration of the Group was and is true;

ii. that Mr Carpenter's grievances against ANZ are well founded;

iii. that ANZ acted vindictively towards Mr Carpenter;

iv. that ANZ had absolutely no basis to terminate the facilities of Pioneer when it did;

34 Mr Henderson exhibited what can only be described as a very poor recollection of meetings which he attended and of his then knowledge and/or belief as to the circumstances of the Pioneer group. On many many occasions he answered to the effect that he could not recollect.

35 In my view his evidence requires to be extremely carefully monitored. The reliability of that evidence is very strongly affected by his closeness to Mr Carpenter. It must be tested by the contemporaneous written documents. They often do not support evidence which he gave in the witness box. This is not to suggest that he knowingly gave false evidence, but only that as one often finds in court cases, witnesses may come to believe that a particular state of affairs was the case some years ago when, in fact, the contemporaneous written documents which go into evidence [and the whole of the matrix of fact established inter alia by other witnesses] demonstrates that that state of affairs was in fact quite different.

36 His recollection in relation to the circumstances in which Pioneer Park came to purchase AMP shares was also very vague. Essentially that recollection was that he, his brother and Mr Carpenter had had discussions prior to the date of listing from which he had understood that Pioneer was to purchase the shares. However there was nothing which he did as a director of Pioneer prior to the date of listing to commit that company to the purchase of the shares, unless a motion to that effect had been passed at a board meeting: [the evidence included no such minute/motion of or passed at any board meeting].

37 His evidence included:

Q. Mr Henderson, one thing that that I am trying to follow is whether there was, as far as you can recall it, in terms of whatever involvement you can recall having with the AMP share issue, some form of documenting of an agreement and I wondered whether you could recall at any stage through the discussions, whenever they were, to do with the as it were AMP share sale, any form of agreement documenting just what it is that was the transaction?
A. … I don't recall us having any formal document. All I recall at the time, at the time of the AMP share matter, in the media and in the community was that it was considered a windfall opportunity at the time and as such, it was regarded by us as such and by many in the community as such.

whatever arrangement

[Transcript 732]

38 As the judgment below details, Mr Carpenter took it upon himself to act for all parties to the transaction [transcript 217.02]. These were shares which were acquired by Domino Mining at $45.00 and subsequently sold for a price below $23.00, such that as already observed, Domino Mining lost $700,000 on sale of the shares. The informal approach to the transaction reflects badly on the credit of the directors, the terms and dealings having been left to the unfettered discretion of Mr Carpenter, who then took advantage of his position to make a windfall gain.

39 In fairness to Mr David Henderson there are a number of indications in the evidence that he was not consulted by Mr Carpenter of actions he was taking, even in relation to putting forward offers by D & R Henderson Pty Ltd.

40 The burden of the evidence given by Mr Henderson was that had they been asked, he and his brother would have caused D & R Henderson Pty Ltd to write a cheque immediately for $2.5 million to take over ANZ securities at the material time [transcript 870.20]. Curiously no such cheque was ever written notwithstanding the groups travails at the time. The matter is dealt with in the judgment.

41 Under cross-examination Mr Henderson was taken to a letter from P.A. Somerset and Co solicitors written by Mr Paul Fordyce to Minter Ellison acting for ANZ [dealing with Domino Mining and Merlo Wholesale] commencing:

42 Under cross-examination Mr Henderson gave evidence that he had not seen this letter at the time; he did not believe that Mr Carpenter had any discussion with him about whether he was going to instruct Mr Fordyce to make the offer; he had no knowledge that at about this time his company was offering $150,000 for all of the ANZ securities over the company; the letter had come as complete news to him in the witness box; he was unable to give any explanation as a director of the company as to how the offer could have been made on behalf of the company and could not offer any explanation as to why the company was offering the bank the amount in question for its securities.

43 It is plainly possible that Mr Carpenter was by no means candid with Mr Henderson in relation to other activities of the Group and perhaps with the benefit of the whole picture, Mr Henderson may have been dissuaded from his very strong belief in everything which Mr Carpenter had put to him back then.

Mr Nielsen

44 The evidence given by Mr Nielsen is extensively examined through the judgment. That section of the judgment is self-explanatory and the respective findings concerning his reliability are to be found in that section. There is no suggestion but that he carried out his level best to adequately recall the events of the time in the course of his giving of evidence.

Mr Soper

45 Mr Soper was the person with the carriage of the relevant accounts from early December 1998 until they were terminated and took the decision to enforce the Bank’s securities and appoint Administrators.

46 The detailed reasons deal with the finding rejecting his evidence that in completing the 11 December 1998 diary note, he had intended the diary note to record both a ‘take on review’ and ‘the annual review’. Likewise the reasons explain the finding that the occasion when Mr Soper formed the view that the materials which he had examined constituted an event of default within the meaning of clause 10 (1) (k) of the General Conditions, had nothing to do with and was not a part of any annual review but involved only the giving of an instruction to Ms Agsten that a clause 10 (1) (k) event of default had been identified [for the purpose of the ANZ being in a position to send the 4 February 1999 letter to the Group's solicitors].

47 Mr Soper accepted and relied on Mr Carpenter’s various assurances that refinancing was imminent in deferring termination of the remaining facilities.

48 As with a number of the other witnesses, his precise recollection of conversations had been materially aided by diary notes and memoranda. As appropriate the reasons given in the judgment travel into more detail where conflicts as between his evidence and the evidence particularly of Mr Carpenter, require resolution. In one specific instance certain of Mr Soper's evidence [in relation to the 11 December 1998 meeting with Mr Carpenter] is found to be reliable and Mr Carpenter's evidence shown to be inaccurate by reference to Mr Carpenter’s own diary note of that meeting.

49 In the result and as the reasons make clear, in some areas his evidence is rejected and in some areas his evidence is accepted. The contemporaneous documents assist in this regard

Ms Agsten

50 Ms Agsten's evidence is detailed in the reasons which follow. She did demonstrate some real uncertainty in terms of her recollection of the events at hand. However it is clear that in giving her evidence she was doing the best that she could to recall the events which occurred some considerable time ago.

Mr Brennan

51 Mr Brennan was the senior Bank officer confirming the decision to transfer file to Group Credit Management at the end of November 1998, including instructions to High Risk to spill the bill maturing 1 December 1998 to overdraft.

52 Mr Brennan’s evidence is regarded as generally reliable, he again, as with many of the other ANZ witnesses called, being heavily reliant upon contemporaneous documents.

Mr Harvey

53 Mr Harvey was the responsible bank officer involved in communications relevant to the construction of the 7 October 1998 facility variation letter. He had the discussion with Mr Carpenter on 20 November when it was agreed that Pioneer could have 3 months to refinance at Pioneer’s request. The evidence in that regard is examined carefully in the judgment.

54 His evidence is regarded as generally reliable. It is consistent with the contemporaneous documents.

Mr Kilcran

55 Mr Kilcran gave evidence corroborating Mr Harvey as to the communications relevant to construing the 7 October 1998 facility variation letter. In a number of instances he had prepared diary notes which are discussed in the judgment.

56 His evidence is accepted as reliable.

Mr Staples

57 In my view Mr Staples [who was the external accountant for Pioneer Park] appeared to be a careful and conscientious witness whose evidence was consistent with his past practices. However his evidence concerning parameters of concern in relation to the gearing ratio issue raises certain real doubts [most particular by reference to his belief that he had calculated an external debt ratio for June 1998 using a particular electronic file] examined in the reasons.

Mr Donovan

58 Mr Donovan [a former Pioneer employee] gave evidence about the decline in the fortunes and prospects for the business over the period leading up to the insolvent administration. His evidence is accepted as reliable

Mr Martin

59 Mr Martin [another former Pioneer employee as ‘purchasing officer’] gave evidence of problems which had been encountered in obtaining parts from suppliers in the period leading up to the insolvent administration of Pioneer, and of the system of releasing cheques to pay critical suppliers when payment was necessary to procure more supplies. His evidence is accepted as reliable.

Mr Hall

60 Mr Hall was the administrator and first liquidator. He reviewed Pioneer’s position at the commencement of the administration and documented and gave evidence of various statements and claims made by Mr Carpenter in that context. His evidence is accepted as reliable.

Mr Slater

61 Mr Slater worked for Mr Hall at the premises during the administration, and confirmed parameters of activity at that time. He also managed the process of collecting Pioneer’s records and the recording of what was kept and what was discarded. His evidence is accepted as reliable.

Other witnesses

62 It is strictly unnecessary to travel through all of the other witnesses who were called. As and when appropriate they receive mention in the judgment. They included:

i. Mr Farquhar who valued Pioneer’s Plant and equipment and Stock for Mr Hall.

ii. Ms Johnson who proved the records of one of Pioneer’s suppliers, “Steelmark”, showing continuous failure to pay within trade terms from July 1998 to April 1999.

63 As it has been unnecessary to deal with quantum, it is not necessary to treat with the evidence going only to that issue.

The history of the transactions

64 As one would anticipate, the express terms and conditions governing the accounts and facilities of the group with ANZ are to be found in a number of documents which represent the agreement between ANZ and Pioneer, as banker and customer, and Mr Carpenter as guarantor, as varied from time to time.

The initial contacts

65 The initial contacts between ANZ and Pioneer are recorded principally in an ANZ diary note (B Vol 6 Tab 38) dated 29 December 1995 prepared by Mr M A Jones, Mr Neilson’s “Manager’s Assistant”, which records a series of meetings held with Mr Carpenter and Pioneer “to discuss the possible refinancing of company’s facilities currently held with St George Partnership Bank”. [Mr Neilson being the relationship manager for the groups accounts between January 1996 and August 1998].

66 On the first page of the ANZ Diary Note of 29 December 1995 there appears the following:

“Current facilities held with St George are tabled below. Facilities sought to accommodate refinance and company’s ongoing requirements are outlined under proposed limits.

$000,s

Current Limits

Proposed Limits

Variation

Ter’n
Date

Proposed Margin / Fee

Domino Mining Equip P/L

FDA – Term Loan

OD

DOC O/S

FCDL

Revolving:
Terminating

2,250

600

0

600
2,250

2,500

500

2,000

400

2,900
2,500

+250

+100

+2,000

+400

+2,500
+250

5 years

Subject to A/R

1.25% / -

1.0% / 1.5%

Standard Rates

Note: LAF of 0.5% approx $27K

TOTAL

2,650

5,400

2,550

67 It is apparent that the proposed limit for the FDA – Term Loan was $2,500,000 and the termination date was five years. On the second page of that diary note, the following appears:

“ORIGINAL PURPOSE OF FACILITY & REPAYMENT SOURCE & TIMING

…

FDA – TERM LOAN

Purpose: Assist with the purchase of Tuggerah premises.

The General Conditions

68 The letter of offer of 8 January 1996 (B Vol 6 Tab 39) contained the following:

“General Conditions and Specific Conditions
Our General Conditions (Second Edition 1995) apply to the facilities as well as any applicable Specific Conditions (Second Edition 1995) to the facilities. Both the General Conditions and any applicable Specific Conditions are enclosed with this letter of offer.”

“Annual review

The next review date will be on 31 January 1997

69 The General Conditions (being the Second Edition 1995) of ANZ (B Vol 5 Tab 30) contain the following provisions:

2.

Term of the facilities

We will provide each facility for the agreed period unless:

(a) you default and we exercise our option to terminate a facility; or

(b) there is a change in law that prevents us from providing a facility.

NOTE: You will be in default if you break your obligations under this agreement. To find out what default means, see clause 10; for our rights if you are in default, see clause 11.

The agreed period means:

(a) if the letter of offers sets out a specific termination date for the facility, at least the period until the specific termination date;
(b) if the letter of offer says that the facility is available at least until the next review date, at least until the next review date ;
(c) if the letter of offer says that the facility is “on demand” – the period until we demand repayment.

Different facilities may be provided for different periods

…

9. Review of the facilities

Right of review

(1) we have a right to review the facilities (and the conditions of the facilities, including pricing and securities) in accordance with this clause.

What we can do on a review

(a) to change any of the conditions of the facilities provided to you; or

(b) to terminate a facility, but only if the letter of offer says that the particular facility is provided until at least the review date.

we must give you at least 30 days’ notice, unless you agree to a shorter period. If we give notice before the review date, the notice period cannot expire before the review date.

alter the period which we have agreed with you to make a facility available (see clause 2 for agreed period);

(a) the changes take effect from the day when you accept the changes; and

(b) if you do not accept the changes before the end of the notice period then, with effect from the end of the notice period, all the facilities become repayable on demand by us.

(4) If we give you notice under sub-clause (2) that we wish to terminate a facility, then termination takes effect at the end of the notice period. You must pay us immediately upon termination the outstanding money under the facility (including any costs or losses determined under clause 7(2)).

Our rights under other clauses

(a) the rights we have if you are in default; or

…

10. Default

Events of default for all customers

(a) failure to pay: you fail to pay on time an amount that is due and payable by you under a transaction document;

(i) insolvency:

(i) you suspend payment of your debts;

(iii) you take a step for the purpose of entering into a compromise or arrangement with any of your creditors or with any of your members;

…

(k) change in circumstances: circumstances arise that, , may have a material adverse effect on:

…

(n) failure to perform obligations: you breach an obligation under a transaction document and either:

(i) the breach cannot be remedied; or

(ii) if it can be remedied – we give you a written notice requiring you to remedy it and 5 business days later, it is still not remedied.

[This paragraph does not cover cases that are covered by other paragraphs of this sub-clause or by sub-clauses (2) to (7)]

Companies – additional events of default

(a) winding up: an application is made, a resolution is passed or an order is made for your winding up;

…

11. Consequences of default

Our options

…

(a) terminate immediately some or all of our obligations under this agreement;

(b) change immediately some or all of the conditions on which one or more of the facilities are made available (in particular, we may cancel an unused facility limit by reducing the facility limit for the facility or we may make the facility “on demand”);

(c) make some or all of the money that is or may become owing to us in respect of one or more of the facilities immediately due and payable to us (this includes the face value of all outstanding bills); and

(d) require you to provide us with enough cash to cover us for any contingent liabilities we may have under a facility (for example, a contingent liability under a letter of credit).

(3) we will give you written notice after acting under sub-clause (2)(a) or (b).

16 Waiver

(a) we do not waive any right that we have in connection with this agreement merely because we do not exercise it, or do not exercise it as soon as we can; and

24. Inconsistency

(1) If there is an inconsistency between the letter of offer and either these General Conditions or the Specific Conditions for a facility, the letter of offer prevails.

(2) If there is an inconsistency between these General Conditions and the Specific Conditions for a facility, the Specific Conditions prevail.

[emphasis added]

The Annual Review date

70 It will be recalled that a note to clause 2 of the General Conditions made plain that different facilities might be provided for different periods and that details of the periods for which ANZ agreed to provide a particular facility would be set out in the relevant ANZ offer.

71 In much of what follows, tracking what was the annual review date with respect to all facilities [where a particular facility had not been given an identifying date as its termination date] becomes important. Likewise following the proper construction of a term that all facilities are subject to annual review [followed by detail of the next review date] becomes important. The crucial questions become what were ANZ’s contractual rights and what were the Groups correlative contractual rights.

Letter of offer dated 8 January 1996 and variation by letter of 17 May 1996

72 By the letter of offer dated 8 January 1996 (B Vol 6 Tab 39) ANZ agreed to provide facilities to Pioneer. The facilities are listed as follows:

Facility	Facility Limit
AUD
Overdraft	500,000
Fixed Rate Fully Drawn Advance	2,500,000
Documentary Credit/Documents Surrender No. 1 Facility	2,000,000
Documentary Credit/Documents Surrender No. 2 Facility	77,000
Foreign Currency Dealing Limit	400,000
Indemnity Guarantee – Performance Bond	206,000
Financial Guarantee	2,845,000
Total Limits	8,528,000

73 The Facilities Schedule to the Letter of Offer (MFI-1 p6) specified:

Findings as to the facilities at inception

74 Focussing upon the relevant issues, the following are the Court's findings with respect to the relevant terms of the regional facilities properly construed:

(i) the Letter of Offer incorporated the General Conditions which in clause 2 expressly provides for an “agreed period” [which, if the Letter of Offer sets out a specific termination date for a facility, is “at least the period until the specific termination date” and, if the Letter of Offer says that the facility is available at least until the next review date, “at least until the next review date”, or for a purely “on demand” facility, is the period until the Bank demands repayment];

(ii) the 8 January 1996 letter of offer included a fixed rate fully drawn advance facility (“FRFDA ” ) of $2.5 million with a stated termination date of 5 years from the date of drawdown;

(iii) hence the Fully Drawn Advance Facility case was clearly at inception , a facility with a specific termination date;

(iv) this is so notwithstanding the statement in the Letter of Offer: “The facilities are subject to annual review. The next review date will be on 31 January 1997”;

a) change any of the conditions of the facilities; or

[30 days notice was required unless the customer agreed to a shorter period];

(vi) for the purpose of General Condition 9(2), on an annual review the Bank was entitled to change the conditions of the FRFDA, but was not entitled to terminate it (absent a default). This is expressly stated in clause 9(2)(b) and in the Explanatory Notes to that subclause;

(vii) hence, under the General Conditions, for a term of a facility to be limited by annual review, the Letter of Offer must contain a statement in substance to the effect “that the facility is available at least until the next review date” (clause 2(b)) (as defining “the agreed period”, and to be contrasted to 2(a) referring to a provision for a specific termination date) or “that the particular facility is provided until at least the review date” (clause 9(2)(b));

(viii) the statement in the Letter of Offer that “The facilities are subject to annual review” receives attention later in the judgment;

(ix) the effect of such a review, in relation to the term of a facility, depends upon whether the facility is for an agreed period for a fixed term, or not , and relies upon the application of clause 9 of the General Conditions to the type of facility;

(x) in this context it must be borne in mind that the letter of offer (specifying the fixed term) by virtue of clause 24 of the General Conditions takes precedence over all other documents ;

(xi) under the 8 January 1996 letter, the company was obliged to make principal reductions of approximately $1 million over the term of 5 years of the FRFDA;

(xii) under the 8 January 1996 letter, all facilities were subject to conditions, including an obligation to provide consolidated annual financial statements within 120 days after the end of the financial year; half yearly statements not later than 90 days after the end of each financial year (certified by a director or secretary) and gearing was to reduce to approximately 1.8:1 by FYE June 1998 calculated in accordance with a specified equation;

(xiii) under Clause 10 of the General Conditions, events of default included ‘insolvency’; ‘circumstances arising that in the Bank’s opinion may have a material adverse effect on the customer’s business, assets or financial condition, or the customer’s ability to perform its obligations under any transaction document’; ‘failing to pay any creditor before the end of any grace period’ or ‘breach of any obligation under a transaction document that could not be remedied or, if it could be remedied, remained unremedied after 5 business days notice’;

Implication of implied terms – good faith/reasonableness

75 The Group contends that there was also an implied term that any rights of the bank under clauses 9 or 11 had to be exercised in good faith and reasonably.

76 There certainly was no express term to this effect.

77 In Mobile Innovations Pty Ltd v Vodafone Pty Ltd [2003] NSWSC 166 the Court had occasion (at [604] et seq) to give close consideration to the current state of law in terms of the implication into commercial contracts of inter alia, the duties of parties:

i. to exercise good faith in the performance of such contracts;

78 For present purposes it is sufficient to simply repeat the following observations there made [none of which were adversely commented on in the appeal from the decision, which turned on a factual analysis]:

Good Faith

613 As a general proposition, the current state of the law in New South Wales is that there will usually be implied by law into commercial contracts made between parties at arms length, a term requiring the exercise of good faith in the performance of such contracts. Such a term takes its place alongside the implied obligations:

· to do all such things as are necessary to enable the other party to have the benefit of the contractual promise;

· not to hinder or prevent the fulfilment of the purpose of express promises made in the contract.

Alcatel Australia Ltd v Scarcella

Burger King Corp v Hungry Jack's Pty Ltd

614 The recent decision of the New South Wales Court of Appeal in Burger King Corp v Hungry Jack's Pty Ltd [2001] NSWCA 187 includes some particular focus upon the implied term of reasonableness, making the point that the Australian authorities make no distinction of substance between that term and the implied term of good faith. The close association of ideas between the terms ‘unreasonableness', ‘lack of good faith’ and ‘unconscionability’ is emphasised in Burger King at para 170 and para 171 where the judgment of Priestley JA in Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at 263 and 265 is cited.

Burger King

‘Rolfe J observed that in Alcatel, Sheller JA at 369 appeared to equate the notions of “reasonableness” and “good faith”. Whilst Sheller JA did not say that in terms, his review of the case law and academic and extra-judicial writings on the topic, clearly support the proposition.”

Overlook v Foxtel [2002] NSWSC 17

“[63] But what are the content and effect of such an implied term? This question was the subject of discussion by the Court of Appeal in Burger King. Sheller, Beazley and Stein JJA referred to the observation of Sir Anthony Mason in his 1993 Cambridge Lecture (see now (2000) 116 LQR 66 at 69) that the concept “embraced no less than three related notions”, being:

(2) compliance with honest standards of conduct; and

(3) compliance with standards of conduct which are reasonable having regard to the interests of the parties.”

[64] There is some overlap here with the terms implied by law as referred to in Peters (WA) Ltd. Sir Anthony's duty of “loyalty to the promise itself” may well include the duties not to hinder fulfilment of the promise's purpose and to do everything necessary to enable the other party to have the benefit of the promise. The more substantial and separate content of the duty of good faith itself would therefore seem to lie in the second and third limbs of Sir Anthony's formulation - that is, adherence to standards of conduct which are honest, as well as being reasonable having regard to the parties' interests.

Byrne v Australian Airlines Ltd

Burger King

[66} Dr Elisabeth Peden of the University of Sydney has characterised the effect of the good faith requirement in contractual performance as follows (“Incorporation of Terms of Good Faith in Contract Law in Australia”, (2001) 23 Syd L Rev 222):

“Most basically, by using the obligation to perform in good faith as a principle of construction the courts are merely required to ensure that the parties have genuinely adhered to the bargain which they entered into. This will require an examination of the whole contract and the underlying intentions. Strict rights may not be adhered to, if in the context of the contract as a whole, this would subvert the character of the contract. Most cases that discuss the concept do so in terms of negatives, that is, what is not in breach of good faith. This makes sense, since it is the context of the contract read as a whole that will indicate what is appropriate and what is not.”

[67] Viewed in this way, the implied obligation of good faith underwrites the spirit of the contract and supports the integrity of its character. A party is precluded from cynical resort to the black letter. But no party is fixed with the duty to subordinate self-interest entirely which is the lot of the fiduciary: Burger King at para 187. The duty is not a duty to prefer the interests of the other contracting party. It is, rather, a duty to recognise and to have due regard to the legitimate interests of both the parties in the enjoyment of the fruits of the contract as delineated by its terms.

Manifest Shipping Co Ltd v Uni-Polaris Shipping Co Ltd

“Unless the assured has acted in bad faith, he cannot, in my opinion, be in breach of a duty of good faith, utmost or otherwise.”

Renard Constructions (ME) Pty Ltd v Minister for Public Works

Burger King

“It is a phrase without general meaning (or meanings) of its own and serves to exclude a wide range of heterogeneous forms of bad faith. In a particular context the phrase takes on specific meaning, but usually this is only by way of contrast with the specific form of bad faith actually or hypothetically ruled out.”

Tymshare Inc v Covell

“The doctrine of good faith performance is a means of finding within a contract an implied obligation not to engage in the particular form of conduct which, in the case at hand, constitutes ‘bad faith’.”

[71] Scalia J went on to say that the contract itself will indicate the content of the duty in the sense that it is imbued or infused with the obligation not to engage in particular conduct.”

617 An important consideration, as Barrett J held in Overlook v Foxtel, is that the implied duty of good faith does not require a party to subordinate its contractual rights…

Obligation of good faith and reasonableness

680 The pleaded implied term is that Vodafone will act in good faith and reasonably in exercising its powers under the ASP .

681 As with the above analysis in terms of duty to co-operate, the far more difficult question in terms of implication of a good faith or reasonableness term concerns extrapolating from the general to the particular. The real question is as to the reach of the term. Precisely what conduct will constitute a relevant breach of these duties?

682 As already pointed out, this is one of those cases where likely there is an assimilation of the duties of cooperation and of good faith/reasonableness. In that sense both sets of duties extend to cover duties to act honestly and duties to have regard to the legitimate interests of the other party.

79 Whilst the decision in Vodafone was of course confined to the particular terms of the contract there under consideration, it may at least be said that in the case presently before the Court, the reach of the implied obligations, [both of the group as well as of ANZ], to act in good faith and to act reasonably, can only be assessed having regard to the provisions of the contract which regulated the granting of the facilities. Neither party was required to subordinate its contractual rights.

Compliance with the terms of the original letter of offer

80 The original letter of offer was accepted on 10 January 1996 and all conditions precedent satisfied by Pioneer and by Mr Carpenter as guarantor by 25 January 1996. About that date the funds of the Fully Drawn Advance Facility were drawn down.

81 Pursuant to the Security Schedule of the Letter of Offer, Pioneer granted a mortgage debenture by way of fixed and floating charge over its assets and undertaking to ANZ to secure moneys owing under the facilities granted by ANZ.

82 Further, again pursuant to the Security Schedule to the Letter of Offer Pioneer entered into a registered Real Property Act mortgage of the Tuggerah Property. That mortgage incorporated the ANZ’s Memorandum of Common Provisions no. 0466274.

The variation effected by the Bank's letter of 17 May 1996

83 As is clear from what follows, under the 17 May 1996 letter, the FRFDA was reduced from a $2.5 million limit to a $500,000 limit, with the termination date remaining 5 years from the date of drawdown. The limit was now interchangeable with the limit on the new $2 million commercial bill acceptance discount facility (”CBAD”) which also had a termination date of 5 years form the date of drawdown. The arrangement remained for principal reductions of approximately $1 million over the 5 year term, now across both facilities. All other conditions, including the existing General Conditions, remained unchanged.

The background to the 17 May 1996 variation

84 After security documents had been executed and provided. and a limited guarantee provided by Mrs Carpenter, and an unlimited guarantee provided by Mr Carpenter, discussions took place between ANZ and Pioneer, which related, [in respect of the major part of the fixed rate Fully Drawn Advance Facility (as to $2 million),] to substitution of a variable rate Commercial Bill Acceptance/Discount Facility enabling greater flexibility to obtain more favourable interest rates.

85 The results of those discussions were set out in the letter of 17 May 1996 from ANZ to Mr Carpenter and Pioneer and were accepted in writing by Mr Carpenter for Pioneer on 29 May 1996. The letter confirmed the agreed fixed term for the Fully Drawn Advance Facility and the Variable Rate Commercial Bill Acceptance/Discount Facility (“FDA/CBADF”) reading as follows:

“Domino Mining Equipment Pty Limited

Following our recent discussions, we are pleased to offer variations to some of the conditions on which the existing facilities are provided as follows

Fixed Rate Fully Drawn

Advance Facility

Facility limit: $500,000 (interchangeable with Commercial Bill Facility – Total Limit $2,500,000)

Termination date: 5 years from date of drawdown
…

Specific Conditions: Specific Conditions for the facility were enclosed in Letter of Offer dated 8/1/96

Variable Rate Commercial Bill

Acceptance/Discount Facility

Facility limit: $2,000,000.00 (representing the aggregate face value of the bills) Interchangeable with Fixed Rate Fully Drawn Advance Facility – Total Limit $2,5000,000.

Termination date: 5 years from date of drawdown.

…
Specific Conditions: Specific Conditions for the facility are enclosed.

Foreign Currency

Dealing Facility

(For this purpose we adjust the face value of the customer’s obligation under each transaction by a multiplier (determined by us). The process includes conversion of any foreign currency amount to the equivalent amount in AUD).

Termination date: Not before the next review.

…
Existing Conditions

86 The specific conditions of the Variable Rate Commercial Bill Facility do not appear to contain anything material.

87 Domino Mining accepted the 17 May offer on 29 May 1996.

88 It is clearly the case that the term of the FDA/CBADF continued to be 5 years from the date of drawdown. The term was then and continued to be clearly a fixed term within clause 2(a) of the General Conditions and the facilities were to continue until the specific termination date of five years from date of drawdown. The term was noted to expire on 3 May 2001.

Was the agreed fixed term of the FDA/CBADF ever varied? The Bank's letter of 3 March 1997

89 This issue raises an important question of credit as to whether any or all of the terms of the letter of 3 March 1997 ever bound the parties. If all the terms of this letter came to bind the parties then the express term that the overdraft facility was given a termination date: "not before the next review date" would mean that, on each annual review thereafter, ANZ had the right under clause 9 (2) of the General Conditions, not only to change conditions attached to the facility, but also to terminate the facility on 30 days notice.

[It is appropriate to note at this stage that nothing in the later letters of 6 April 1998 or 9 June 1998 affected this position giving the overdraft facility a termination date as ‘not before the next review date’. Those intermediate letters add nothing to the subject, otherwise than that it was not proposed to vary extant conditions not affected by the intermediate letters.

90 The letter of 3 March 1997, signed by Mr Nielsen who was at the time the relationship manager for the southern region of ANZ personally familiar with the Group's accounts and arrangements, was relevantly in the following terms:

LETTER OF OFFER

We are pleased to offer the facilities set out below to: DOMINO MINING EQUIPMENT PTY LTD ACN 002 706 881

Summary of facilities

Facility	Facility Limit AUD
*Overdraft	750,000
Fixed Rate Fully Drawn Advance	350,000
Commercial Bill – Fixed /Variable	2,000,000
Encashment of Cheque Facility	5,000
*Documentary Credit/Documents Surrender No.1 Facility	2,000,000
Foreign Currency Dealing Limit	685,000
Indemnity Guarantee – Performance Bond	206,000
Financial Guarantee	422.256
Total Limits	6,418,256

(*Denotes Interchangeability)

Details of the facilities are set out in the facilities schedule to this letter of offer.

Security

Securities for the facilities are set out in the security schedule to this letter of offer.

Financial reports

· Your signed audited annual financial statements O/A DOMINO MINING EQUIPMENT PTY LTD as soon as they are available but not later than 120 days after the end of each financial year.

· Your balance sheet and profit and loss accounts for each financial half-year as soon as they are available, but not later than 90 days after the end of each financial half-year. They must be certified by a director or secretary as giving a true and fair view of your financial position as at the end of the half-year.

· The annual financial statements of any corporate surety as soon as they are available, but no later than 120 days after the end of each financial year.

· The annual financial statements of any related entity soon as they are available, but no later than 120 days after the end of each financial year.

· The annual financial statements of any surety which is an individual, on or before each review date.

· Evidence of renewal of life insurance policy over CLIFF CARPENTER to be reviewed annually.

· Provision of current copies of insurance policies (ie. noting the ANZ Bank as mortgagee/interested party) over the security items held, detailed in the Security Schedule of this Letter of Offer.

Annual review

The facilities are subject to annual review . The next review date will be on 30 November 1997.

General Conditions and Specific Conditions

Our General Conditions (Second Edition 1995) apply to the facilities as well as any applicable Specific Conditions (Second Edition 1995) to the facilities. Both the General Conditions and any applicable Specific Conditions are enclosed with this letter of offer.

For the purpose of Clause 3 of the General Conditions, the applicable rate of interest is the Bank’s reference rate plus margin, plus 2% pa.

Other Conditions

Approved facilities as tabled are subject to the following additional covenants:-

1. Year ending June 1997 audited accounts to substantiate minimum value of $4M with regard to stock and debtors.

2. Effective gearing to evidence a reducing trend from maximum 3.1:1 as at year ending June 96 and to achieve a level of approx 1.8:1 by FYE June 98 calculated as per the following equation:

Total liabilities_________________

Shareholders Funds – Intangible Assets

3. No payment of Dividends and/or increase in loans to shareholders/directors/associated companies are to be made without the prior written acknowledgment/ agreement of the Bank.

4. 2RM over Directors home is to be considered for release upon satisfactory completion of Army Contract.

5. Take out of adequate Keyman Insurance on Chairman, Cliff Carpenter, for assignment to the Bank or provision of existing Life Policies being assigned to the ANZ Bank with a minimum Surrender Value of $350K.

6. Documentary Credit/Surrender Facility is to be subject to Froward Exchange Cover being taken out or alternatively set procedures being agreed to monitor FX movements, arrangement of cover etc.

Conditions precedent

Our obligation to make any facilities available is subject to our being satisfied that you have complied with clause 4 of the General Conditions.

Offer period

Our offer is available for acceptance until the close of business on 23 April 1997, unless otherwise extended by the Bank in writing.

We may withdraw our offer at any time before you accept it if we become aware of anything which, in our opinion, adversely alters the basis on which we made our offer.

Acceptance

91 The terms of the attached Facilities Schedule are appended as Appendix 1 to the Judgment.

92 It is appropriate to note that part of the Facilities Schedule [which is not reproduced in Appendix 1] includes the following:

Customer Information Sheet

This information sheet is attached to assist you in completing the steps necessary to accept our offer and satisfy those things required by the Bank before it will make the facilities available…

To accept our offer:

· SIGN the attached duplicate letter of offer where indicated on page 12 and 14

· RETURN the signed duplicate letter of offer to the Bank at our address shown in the letter, by 23 April 1997.

Certain other information and documents must also be provided before the Bank will make the facilities available:

The following documents are provided with this offer:

· Extract of minutes of a meeting of directors of the company approving the transaction documents for acceptance. An example is enclosed with this letter for your convenience."

93 Of critical significance is the fact that:

"Termination date: Not before the next review date (Temporary OD $250,000 to clear in full by 20/4/97)."

"Termination date: Not before the next review date."

94 Had the letter been accepted, it would establish that the anterior fixed five-year term of the FDA/CBADF had been varied by agreement: resulting in the FDA having a termination date of 31 December 2001 and the CBADF having a termination date as "not before the next review date”, which was to be on 30 November 1997.

Dealing with the issue

Evidence given by Mr Carpenter

95 Mr Carpenter:

i. in his affidavit of 14 November 2005, gave evidence that he could not recall receiving the letter of 3 March 1997 and that he had no recollection or record of ever having received or signed such a document and did not believe that he had ever received it or agreed to it on his behalf or on behalf of Pioneer or that Pioneer ever accepted that letter [paragraph 47];

now

(a) that he showed the letter to Mr Robert Henderson who advised him not to sign it;

(b) that he then telephoned Mr Nielsen and said that he was not going to agree to the document and would not sign it;

(c) that Mr Nielsen responded by telling him that he was not the first person to pick up on the matter, to leave it with Mr Nielsen , and that it had come from head office;

96 The cross-examination of Mr Carpenter on the subject [transcript 405 et seq] simply elicited that although up until 14 November 2005, Mr Carpenter had taken a consistent position in a number of courts, [including instructing counsel to cross-examine], on the basis that he had never received the letter, he was unable to identify what caused his memory to be improved, save to say that he thought this was in a general discussion with Mr Fordyce. In answer to the proposition that there were various parameters in respect of which the letter recorded the grant of facilities which were taken up [such as an encashment of cheque facility which he requested in early 1997] in respect of which he had accepted the benefit, Mr Carpenter gave evidence that he did not even know of these matters.

97 His cross-examination included the following:

A. No.

Well, I say absolutely as far as I can recall

…

HIS HONOUR: Q. So you are unable to agree or deny, is that correct, because you have no recollection?
A. Correct, your Honour.

MR GLEESON: Q. And do you have any recollection whether he told you that if there was to be any clarification, it would have to come from the customer service unit of the bank as opposed to him?
A. No, no.

Q. Do you deny he said that?
A. Yes. I have no recollection of it .

Q. Is it the fact, Mr Carpenter, that you well knew that this letter was to record the basis of your continuing facilities from the bank and if you wished to vary it you would need to say so in writing to the bank.
A. No, no.

[Transcript 410/411]

Evidence given by Mr Nielsen

98 Mr Nielsen who was called by the Pioneer parties, gave evidence that:

i. the letter of offer of 3 March 1997 was never signed or accepted by Mr Carpenter;

ii. after he had sent the letter he had not received any response to it and had asked his assistant to make inquiries of Mr Carpenter about the letter;

iii. Mr Carpenter then telephoned him and said that he had some reservations about signing the letter because of what seemed to be changes to the terms of the advances;

iv. Mr Carpenter had said that he needed some clarification about that matter before he could take the matter any further;

v. Mr Nielsen had said to him that if he needed clarification, it would have to come from the ANZ, ‘CSU’ which was responsible for preparing the document and that he would need to have Mr Carpenter's concerns put into writing ;

99 Mr Nielsen gave evidence [affidavit 12 July 2006 paragraph 22 et seq] that in the normal course [according to usual practice with which he was familiar], had a signed letter of offer of 3 March 1997 been received, the receipt of it would have been recorded in a brief diary note, as it was deemed a security document and would have been forwarded to CSU for appropriate recording. He did not recall ever receiving an accepted offer of the letter and did not believe that one was ever received.

100 Mr Nielsen’s evidence was that after the conversation with Mr Carpenter, there were communications and negotiations between Mr Carpenter and ANZ concerning variations to certain details of other facilities and there were subsequent communications including the variation letter of 6 April 1998 accepted in late April 1998. So far as his recollection was concerned, the letter of 3 March 9097 was never accepted before or after these other letters had been accepted.

Examining the evidence given by Mr Nielsen in an attempt to follow the respective credit memoranda and variation letters through his eyes

101 The internal records of ANZ are the cause of considerable confusion in endeavouring to ascertain how ANZ viewed the 3 March variation letter. The confusion is proliferated by reason of the evidence given by Mr Nielsen.

102 Bearing in mind the intense significance of the issue to the Group's case it appropriate to pay close attention to the evidence given by Mr Nielsen under cross-examination concerning:

20 November 1998

591 Diary note of Ms Kerri Huelin [12/388] records financial monitoring of Domino Mining following receipt of audited consolidated accounts together with management accounts for three (3) months period to September 1998. In respect of Merlo Australia and its controlled entities, it was noted that the trading performance of the Merlo group improved slightly over the last twelve (12) months to record a small profit. Merlo Wholesale sales for the period ended 30 June 1998 are recorded as $1.205 million dollars with a net profit before tax of $84,000.00. Profit for the September quarter was noted to be significantly below budgeted levels with sales being 53% below budget. And it is noted that operating expenses are $3,000 over budget, despite the fall in turnover. In view of the above trading results and the company’s history of poor budgeting, the ability to achieve projected profitability levels for 30 June 1999 must be questioned. In relation to Merlo Australia, the diary note refers to the loss in Merlo Australia for the period ended 30 June 1998 of $75,000 compared to a loss of $53,000.00 tabled in management accounts previously furnished and analysed in the diary note of 13 August 1998. Results for the September 1998 quarter were described as disappointing, with a profit of $2,000.00 compared to a budgeted profit of $29,000.00. The diary note states “the fall in sales is attributed to the general down turn being experienced in the industry”. “The company has budgeted for a NPBT of $134K for the twelve (12) months to 30/6/99. In view of the above, trading results to the three (3) months to 30/6/98, the history of poor budgeting the company’s ability to meet to forecast for 30/6/99 must be further investigated and critically assessed. The appointment of an independent investigative accountant to assess budgets and ongoing group viability is considered appropriate, if we are to continue to maintain a banking relationship with this group”.

592 In respect of the Merlo Australia security position, this was assessed as disclosing a shortfall of $788,000.00 compared to the total limits of the facilities, and a security indicator of “F” was considered appropriate. A CART assessment indicated a rating of 8 in respect of Merlo Australia and controlled entities. Mr Brennan’s handwritten note at the end of this diary note, recommends immediate transfer to GCM to enforce an exit strategy and as to appointment of an IA, would be left to GCM. Mr Pidcock agreed to the transfer and recommended various steps be taken immediately. So far as the Merlo facilities were concerned, the note “OD temp $52.5K has cleared and can now be cancelled. Meantime CCR 8F confirmed O/A Merlo Australia P/L and Merlo Wholesale P/L…” Mr Pidcock also stated “docy….O/S limit to reduce to $450K (run off of residual to take until May 1999). No further L/C establishments”.

11 December 1998

593 The diary note prepared mainly by Mr Soper as his record of conducting the annual review which had been due 30 November 1998 [13/407]. This document also covers the Merlo facilities and notes that the documentary credit/O/S facility has been placed on a reduction basis only with runoff of L/C’s throughout the first half of 1999. [This is consistent with the diary notes of 20-28 October noted above.] Mr Soper calculated the Bank’s security over Merlo Wholesale was worth $233,000.00 less than the amount of the outstanding facilities. The diary note records Mr Carpenter’s intention to refinance Merlo Wholesale through the Commonwealth Bank. Soper decided not to raise a provision in respect of Merlo Wholesale at that point, noting to review that position in May if necessary.

20 January 1999

594 Diary note of Mr Soper of this date [13/432] records a request from Mr Carpenter for a new letter of credit to be opened for Merlo Wholesale. Mr Soper advised Mr Carpenter that the limit for the Merlo Wholesale facility had been pegged at $422,000.00 on the basis that the facilities had expired on 30 November 1998 and the Bank was not going to extend facilities to the Domino Mining group on the basis that the refinance was to take place by 28 February 1999. Mr Carpenter apparently said that the establishment of the letter of credit was extremely important. Mr Soper indicated that the Bank would look at the situation in some detail and get back to him.

21 January 1999

595 Diary note of Mr Soper [13/433] records him telephoning Mr Carpenter to propose a way the Bank could extend letters of credit within existing facilities if outstanding letters of credit were prepaid.

596 In respect of one particular matter concerning the Merlo facilities it is to be noted that:

i. Mr Carpenter gave evidence in his 14 November 2005 affidavit at [128] that in January 1999 that he learnt that the letter of credit facility was to be capped at the level of existing drawings of about $425,000;

ii. in oral evidence he said this was the first he learnt this had happened (transcript 418);

iii. however, the documentary evidence [12/360] shows that this was agreed between Mrs Stewart and Mr Harvey as early as October 1998, in a context where Mrs Stewart on behalf of Merlo and Mr Carpenter was seeking an indulgence from the Bank to allow letters of credit to be drawn over their approved limit;

vi. the finding is that on the balance of probabilities it is implausible that Mrs Stewart would have agreed such a significant variation without purporting to, and obtaining, the consent of Mr Carpenter. [ The cross-examination of Mr Carpenter dealt with this matter at 418 et seq]

Q. What I want to suggest to you, and tell me whether you are in a position to agree with it, disagree or can't remember, is that on [about 20 October 1998] ..the bank actually agreed to allow a temporary overdraft up to $170,000 to reduce to $50,000 by 26 October and to clear in full by 31 October in accordance with the advice you had given as recorded in the first paragraph.
A. Yes.
…
Q. I want to suggest to you that he told you that he would support the payment, that is allow that temporary overdraft, in the absence of any alternative source of funds on the part of Merlo Wholesale, subject to the two conditions he lists, one of which was no further letters of credit to be established without specific approval. Do you agree with that?
A. I agree that that's what's written there. I don't remember him saying that.

Q. Do you deny that he said words to that effect?
A. I don't remember so I can't deny or confirm.

Q. I want to suggest to you that the letter of credit did put the Merlo Wholesale account into overdraft of $162,000 on the following day. Do you remember that or not?
A. No.

Q. And it was reduced to $50,000 by 28 October, that by 9 November the debit was still $51,000. Do you remember that?
A. No.

Q. And I want to suggest to you that on 20 October you made an arrangement for temporary financial accommodation for Merlo Wholesale under which the agreement was there would be no further letters established without specific approval….

Q. Are you able to deny that?
A. I don't remember him saying that.

Dealing with the cases

597 In essence the claim for breach of contract appears to be for breach by ANZ of implied terms to exercise rights and powers in good faith, to co-operate in the performance of the contract and not to conduct itself to frustrate the performance by Merlo Australia, Merlo Wholesale or Mr Carpenter of the agreements between them and ANZ.

598 Merlo Wholesale and Merlo Australia appear to be advancing claims for breach of contract based on a facility which Merlo Wholesale had with the Bank allegedly “for its benefit and for the benefit of Merlo Australia”.

599 As ANZ has submitted, this assertion is not supported by any evidence directed to that issue. Hence it does not seem to be shown that Merlo Wholesale held the facility on trust for Merlo Australia.

600 Merlo Australia's case in contract is simply answered by a lack of privity. The short position is that save for the encashment facility, Merlo Australia was not a party to any relevant contract. In these circumstances it is impossible for Merlo Australia to establish a claim for breach of contract.

601 ANZ has additional defences in relation to the claims pursued by the Merlo companies.

Claims statute barred

602 Importantly these include the contention that the claim is statute barred. The breach of contract occurred more than six years prior to the Merlo Companies being added to the proceedings.

603 As pleaded, the cause of action for breach of contract accrued on or shortly after 11 December 1998, with the consequence that it became statute barred on or shortly after 11 December 2004. The Merlo proceedings were commenced after that date, on 22 June 2005 by summons in proceedings number 5009 of 2006. Hence these claims are defeated by the statutory extinguishment of the cause of action effected under the Limitations Act 1969 (NSW).

604 The Merlo companies have sought to outflank this defence by contending that ANZ confirmed the causes of action by its letter of the 11 May 1999 and by its subsequent conduct in commencing and prosecuting the proceedings as well as by instituting in prosecuting proceedings against Mr Carpenter on the Guarantee.

605 There is no substance in this attempt to outflank the limitations defence. The simple fact is that the breach contended for occurred prior to the six year period.

606 The Group's submissions misconceive the proper analysis of what is constituted by confirmation of a course of action: see General Credits v Wenham (1989) 18 NSWLR 570 at 574. Confirmation means ANZ taking some step to acknowledge that the company had a cause of action for breach of contract. ANZ took no such step but acted to the contrary.

Causation

607 Another answer to the claim by the Merlo companies is to be found in the causation issue. The Merlo companies’ contend that the Italian licensor effectively took away the licence.

608 Such evidence as is before the court, suggests that the Italian licensor was concerned by reason of Merlo being part of a group which was in financial difficulties. On 21 June 1999 Merlo SPA informed both the Australian Merlo companies that because of the appointment of the administrators to Pioneer, the continuation of the licence of Merlo Australia to import and distribute and sell Merlo product for Australia was in doubt and on 26 October 1999, Merlo SPA gave notice of termination of the licence on 4 February 2000. Another concern was that Merlo SPA had the view that Mr Carpenter's company was too small to service the Australian territory.

609 In truth once Pioneers respective cases fail, it is extraordinarily difficult, where there were no fixed facilities, to see any particular loss having been suffered by Merlo Wholesale by reason of receiving a notice giving 30 days notice terminating the facilities and then paying out the $270,000 called for. This may be discerned from the following excerpt of the Group's final submissions in reply:

“[T]he breach lies essentially in the inclusion of the Merlo companies in the purported review of 11 December 1998, after the irreversible decision to exit the Pioneer and Merlo companies, the decision depending upon the ANZ’s wrongful conduct and breach of contract and in contravention of the Trade Practices Act in relation to Pioneer, that “washing over” into the Merlo companies leading to the termination of their facilities after the purported review dated 11 December 1998, which the Plaintiffs say was spurious and carried out in bad faith, that is, with a predetermined end.

610 Even the Group's opening submissions, following a recitation of the claims that Pioneer was wrongfully placed into administration and in liquidation and that ANZ was not entitled to enforce its security documents, emphasised that Merlo Wholesale and Merlo Australia as well as Pioneer, suffered damage from the relevant misleading and deceptive conduct of the ANZ. The claim by the Merlo companies was so closely tied to the claims by Pioneer that an attempt to separate out some form of damage sustained by the Merlo Companies simply fails. The essence of the claim depended upon the principal Pioneer claim succeeding, which it has not.

The alleged loss

611 There are also major obstacles in the face of the claims for loss. It is however unnecessary to travel into this area.

612 No actionable misrepresentations are shown on the evidence. No relevant reliance is shown, no relevant detriment arising out of such reliance is shown.

Other matters

The Dobbs clause issue

613 Clauses 35 and 38 of the Guarantee signed by Mr Carpenter on 25 June 1996 were in the following terms:

35.

Notices, demands and certificates from ANZ will be signed

ANZ agrees that all notices, demands and certificates that ANZ gives the guarantor under this guarantee will be signed by an ANZ officer or by a lawyer acting for ANZ

Note “ANZ officer” is defined in Clause 46…

38. Bank certificates and their effect

I agree that ANZ may give a certificate concerning any of the following matters:

(a) the amount of the guaranteed money owing as at a specified day;

(b) for the purposes of clause 17:

(i) the applicable interest rates;

(ii) the dates for payment of interest;

(iii) the periods for the circulation, payment and capitalisation of interest;

(c) the amount of loss referred to in clause 9.1;

Note Clause 9.1 refers to currency conversions

(d) whether the customer is, or I am, in default;

(e) making a demand or giving a notice.

I agree that such a certificate as to a matter referred to in paragraph (a) or (c) is final and binding on me to the full extent permitted by law.

I agree that such a certificate as to any other matter is sufficient evidence of the accuracy of its contents.

614 Mr Phillip Kerr, a manager in the Corporate Portfolio Management (NSW) group employed by ANZ, signed a certificate of debt dated 20 June 2006, purporting to do so pursuant to clause 38.

615 The certificate was in the following terms:

Certificate of Debt

1. This certificate is pursuant to clause 38 of the Guarantee and Indemnity dated 25 January 1996 ( Guarantee ) between Australia and New Zealand Banking Group Limited and Mr Clifford Carpenter in respect of obligations incurred by or at the request of Pioneer Park Pty Ltd (In Liquidation) (formerly known as Domino Mining Equipment Pty Ltd).

2. I certify that on 8 December 1999, the amount of money secured by the Guarantee, which amounts comprise the ‘guaranteed money’ within the meaning and for the purposes of the Guarantee is the sum of $399,769.60.

3. The Australia and New Zealand Banking Group Limited also claims interest in accordance with section 100 of the Civil Procedure Act 2005 from 9 December 1999 to the date of judgment, if successful. As at 20 June 2006, the interest claimed is $247,643.58 calculated at the daily rate of $98.57.

616 Mr Carpenter's counsel contended that clause 38 was materially different from that considered in Dobbs v the National Bank of Australia Ltd (1935) 53 CLR 643 in that ANZ itself and not an officer, was said to be the nominated author of the certificate. This submission is not of substance for the reason that although the clause refers to ANZ, under clause 35 all such certificates must be signed by an ANZ officer. Neither substance nor effect distinguishes these circumstances from those considered in the High Court decision.

617 Mr Kerr's evidence was that he had "inspected the Bank's books and records in relation to the amount outstanding to it by Mr Carpenter" (paragraph 3 of his affidavit). Mr Kerr certified that on 8 December 1999 the amount due to the Bank by Mr Carpenter was the sum of $399,769.60.

618 The documents on which Mr Kerr relied in calculating the debt were produced to the Court (MFI-P6). Mr Kerr was shown MFI-P6 and confirmed that it comprised the documents he had relied upon in producing his certificate of debt. Those documents included:

i. an 'account balance' of $380,303.67; and

$399,769.61

(b) an account statement dated 8 December 1999 [ANZ.004.302] recording the 'account balance' of $380,303.67; and

$399,769.61

619 Mr Kerr's affidavit [paragraph 6(b)] made clear that the Civil Procedure Act 2005 interest that was claimed by the Bank had been calculated by the Bank's solicitors and the calculation was attached to his affidavit (Annexure 'C'). That does not alter the conclusiveness of Mr Kerr's certificate.

620 No attack was made on Mr Kerr's determination and certification that the debt due to the Bank on 8 December 1999 was $399,769.60 (verified by primary Bank documents put to him in cross-examination and unchallenged) or his evidence that no payments had been made to reduce the debt owed to the Bank. The calculation of the statutory interest merely followed by way of application of the statutory formula and rates – neither of which were challenged.

621 In the result there is no substance in the contention that ANZ is unable to rely on the certificate to establish moneys owing by Mr Carpenter under his guarantee.

Claim for damages by Mr Carpenter

622 Mr Carpenter claims damages for distress, embarrassment, hurt feelings and physical inconvenience said to have been caused by the consequences of the Bank appointing administrators to Pioneer. These damages are claimed on an aggravated basis.

623 The only contracts to which Mr Carpenter was a party were his contracts of guarantee for the Pioneer and Merlo Wholesale facilities respectively. These contracts exclude any entitlement to claim damages based on ANZ's dealings with the customers (as distinct from any equitable rights as surety which are not excluded by the terms of the guarantees for this purpose).

624 As ANZ has submitted, on no view did any contract between Mr Carpenter and ANZ carry with it any assurance or promise that Mr Carpenter would be able to continue earning remuneration from Pioneer.

625 Nor did such contracts carry any assurance or promise that Mr Carpenter would not need to deal with the stress, vexation and worry that might arise on an insolvent administration of Pioneer in which the employees of Pioneer were unable to receive payment of their entitlements.

626 In any event the general rule is that damages of this nature do not flow from a breach of contract. To the extent that Mr Carpenter claims to have suffered any 'physical inconvenience, such inconvenience is not of a nature which is immediately connected with any assumed breach of contract by the Bank so as to fall within the limited exception to the general rule (cf Hobbs v The London and South Western Railway Co (1875) LR 10 QB 111).

627 Whilst it is unnecessary to go further, ANZ is correct in its submission that insofar as the Group has led evidence from Mr Bridger of Pitcher Partners, this does nothing more than to carry out some calculations of the remuneration that Mr Carpenter might have received on a projected basis had Pioneer continued in business and prospered.

628 In light of the findings there is no substance to these claims.

Returning to the untidy contractual position

629 Before concluding these reasons it seems to me a fair observation that a deal of the difficulties which have arisen in relation to this litigation stem from the particularly untidy contractual position which existed by the date when the 3 May 1999 and later the 8 June 1999 letters were sent to Pioneer Park. The first letter has been shown to have been invalid in terms of the proper contractual analysis. For the reasons given, ANZ’s entitlement to rely upon the later notice has been upheld.

Short minutes of order

630 The approach taken has been to deal with the central structural issues. Leave is granted to the parties to raise any particular claim or defence which they may contend has been overlooked in the reasons. Subject to that leave being exercised, the parties will be required to bring in short minutes of order on which occasion costs will be able to be dealt with. A timetable for the way forward will be set shortly.

*****************

Actions

Download as PDF Download as Word Document

Citations

Pioneer Park Pty Limited (in liquidation), Clifford John Carpenter, Merlo Australia Pty Limited v Australia and New Zealand Banking Group Limited [2006] NSWSC 883

Most Recent Citation

ANZ Banking Group Ltd v Carpenter [2007] FMCA 1589

Cases Citing This Decision

6

Brighten Pty Limited v Bank of Western Australia Limited [2010] NSWSC 133

Cases Cited

31

Statutory Material Cited

10

Shepherd v Felt & Textiles of Australia Ltd [1931] HCA 21

Pioneer Park Pty Limited (in liquidation) v Australia and New Zealand Banking Group Limited; Clifford John Carpenter v Australia and New Zealand Banking Group Limited [2005] NSWSC 498

Pioneer Park Pty Limited v ANZ Banking Group Limited [2005] NSWSC 832

CITATION:	Pioneer Park Pty Limited (in liquidation), Clifford John Carpenter, Merlo Australia Pty Limited & Ors v Australia and New Zealand Banking Group Limited [2006] NSWSC 883
HEARING DATE(S):	17/7/06 - 21/7/06, 24/7/06-28/7/06, 31/7/06-4/8/06, 9/8/06-11/8/06, 14/8/06-17/8/06, 21/8/06, 24/8/06
JUDGMENT DATE :	20 September 2006
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Einstein J
DECISION:	ANZ was on 10 June 1999 entitled to enforce its registered mortgage debenture dated 25 January 1996 over the assets and undertaking of Pioneer Park [previously Domino Mining Equipment Pty Ltd] for the purpose of s 436 of the Corporations Law (as it was then).
CATCHWORDS:	Banker and customer - Claim by Pioneer Park Pty Ltd [previously "Domino Mining Equipment Pty Ltd"] that ANZ and New Zealand Banking Group Ltd wrongfully placed the company into administration and then liquidation in breach of terms and conditions of the banking agreements which regulated their relationship - Contract - Documenting of loan facilities - Whether certain facilities were provided for a fixed term or at least until an annual review date - Bank gives 30 days notice of termination of facilities expressly pursuant to provision dealing with right to review facilities - Notice impotent and misconceived - Subsequent notice demands immediate payment of amount said to be due - Shepherd v Felt & Textiles (1931) 45 CLR 359 - Whether ANZ entitled to rely upon validity of either or both notices in terms of other bases by way of events of default now said to have been available - Contract - Proper construction of facilities agreements - Reasonableness of opportunity to comply with demand - Good faith and reasonableness - Whether imported as implied terms into banker customer relationship - Trade Practices - Fair Trading - Misleading and deceptive conduct - Estoppel - Insolvency - Events of default - Gearing ratio formula - Whether particular failures to perform contractual obligations were remediable - Evidence - Jones v Dunkel - Principles - Dobbs Clause
LEGISLATION CITED:	Bankruptcy Act 1924 (Cth) Bankruptcy Act 1996 (Cth) Civil Procedure Act 2005 (NSW) Conveyancing Act 1919 (NSW) Corporations Act 2001 (Cth) Evidence Act 1995 (NSW) Fair Trading Act 1987 (NSW) Limitations Act 1969 (NSW). Real Property Act 1900 (NSW) Trade Practices Act 1974 (Cth)
CASES CITED:	Adler v Australian Securities and Investments Commission [2003] NSWCA 131 Alcatel Australia Ltd v Scarcella & Ors (1998) 44 NSWLR 349 Allen v Carbone (1975) 132 CLR 528 Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549 Australia and New Zealand Banking Group Ltd and Ors v Pan Foods Company Importers and Distributors Pty Ltd and Ors - [1999] 1 VR 29 Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 Batson v de Carvalho (1948) 48 SR (NSW) 417 Braithwaite v Foreign Hardwood Co [1905] 2 KB 543 British and Beningtons Ltd v North Western Cachar Tea Co [1923] AC 48 Bunbury Foods Pty Ltd v National Bank of Australasia Ltd (1984) 51 ALR 609 Bunge Corporation, New York v Tradax Export SA, Panama [1981] 1 WLR 711 Burger King Corporation v Hungry Jack's Pty Ltd [2001] NSWCA 187 Byrne v Australian Airlines Ltd (1995) 185 CLR 410 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 Commonwealth Homes & Investment Co. Ltd v. MacKellar (1939) 63 CLR 351 Concut Pty Ltd v Worrell (2000) 75 ALJR 312; 176 ALR 693 Dobbs v the National Bank of Australasia Ltd (1935) 53 CLR 643 General Credits Ltd v Wenham (1989) 18 NSWLR 570 Inland Revenue Commissioners v Raphael [1935] AC 96 Jones v Dunkel (1959) 101 CLR 298 Landers v Schmidt [1983] 1 Qd R 188 L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235 Lustre Hosiery Limited v York (1935) 54 CLR 134 Manifest Shipping Co Ltd v Uni-Polaris Shipping Co Ltd [2001] 2 WLR 170 Massey v Sladen (1868) LR4Ex 13 Matthews v Brodie [unreported, Supreme Court of Victoria, McGarvie J, 2 April 1980, BC 8000008] McMahon v State Bank of New South Wales (1990) 8 ACLC 315 Mercer v Whall (1845) 5 QB 447 Minion v Graystone Pty Ltd [1990] 1 Qd R 157 Mobile Innovations Pty Ltd v Vodafone Pty Ltd [2003] NSWSC 166 Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449 Overlook v Foxtel [2002] NSWSC 17 Pan Foods Company Importers & Distributors Pty Ltd & Ors v Australia and New Zealand Banking Group Ltd & Ors (2000) 170 ALR 579 Pioneer Park Pty Ltd (in liq) v ANZ Banking Group Ltd and Ors: [2005] NSWSC 498 and [2005] NSWSC 832 Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 Ridgway v The Hungerford Market Company (1835) 3 Ad and El 171; 111 ER 378 Sandell v Porter (1966) 115 CLR 666 Schellenberg v Tunnel Holdings Pty Ltd (2000) 170 ALR 594 Shepherd v Felt & Textiles (1931) 45 CLR 359 Southern Cross Interiors Pty Ltd (in liq) v Deputy Commissioner of Taxation (2001) 53 NSWLR 213 Tricontinental Corp v HDFI Ltd (1990) 21 NSWLR 689 Tymshare Inc v Covell 727 F2d 1145 (1984) Williams v Frayne (1937) 58 CLR 710
PARTIES:	Pioneer Park Pty Limited ACN 002 706 881 (in Liquidation); Clifford John Carpenter; Merlo Australia Pty Limited; Merlo Wholesale Pty Limited and Domino Hire Pty Limited [Plaintiffs] Australia and New Zealand Banking Group Limited [Defendant]
FILE NUMBER(S):	SC 50156/04; 50163/04; 50096/05; 50118/05
COUNSEL:	Mr JJ Garnsey QC, Mr B Connell (Plaintiffs) Mr J Gleeson SC, Mr J Thomson (Defendant)
SOLICITORS:	PMF Legal (Plaintiffs) Minter Ellison (Defendant)