RHG Mortgage Securities Pty Ltd v Elektra Purchase No 19 Ltd - [2009] NSWSC 258

No judgment structure available for this case.

CITATION: RHG Mortgage Securities Pty Limited & Ors v Elektra Purchase No. 19 Limited [2009] NSWSC 258

HEARING DATE(S): 16/03/09 - 20/03/09, 23/03/09

JUDGMENT DATE :
8 April 2009

JURISDICTION: Equity Division
Commercial List

JUDGMENT OF: Einstein J

DECISION: Parties to bring in short minutes of order.

CATCHWORDS: Contracts - Subscription Agreement pursuant to which Notes in the sum of $750,000,000 were issued - Construction - Rectification - Principles - Right to rectification of Subscription Agreement a chose in action capable of assignment - Whether Indemnity Amounts and Interest Amounts were calculated in good faith and in a commercially reasonable manner as required by contractual documents - Duty of good faith does not require a party to subordinates its own interest so long as the pursuit its of those interests does not entail unreasonable interference with the enjoyment of a benefit conferred by the express contractual terms - Whether Defendant incurred any "currency exchange and basis swap costs associated with the Note Subscriber funding its holding" of the notes "using financial accommodation raised in Euros" - Restitution-Jones v Dunkel-Meaning of "currency exchange and basis swap costs"

LEGISLATION CITED: Corporations Act 2001 (Cth)

CATEGORY: Principal judgment

CASES CITED: Adler v Australian Securities and Investments Commission [2003] NSWCA 131
Australasian Performing Right Association Ltd v Austarama Television Pty Ltd [1972] 2 NSWLR 467
Baker v Paine (1750)1 Ves Sen 456; 27 ER 1140
Ball v Storie (1823) 1 Sim & St 210
Bishopsgate Insurance Australia Ltd v Commonwealth Engineering (NSW) Pty Ltd [1981] 1 NSWLR 429
Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153
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
Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329
Farrow Mortgage Services Pty Ltd (in liq) v Slade and Nelson (1996) 38 NSWLR 636
Fowler v Fowler (1859) 4 De G & J 250; 45 ER 97
Frederick E Rose (London) Ltd v William H Pim Junior & Co Ltd [1953] 2 QB 450
Green v AMP Life Ltd [2005] NSWSC 370; (2005) 13 ANZ Ins Cas 90-124
Hooker Town Developments Pty Ltd and Anor v The Director of War Service Homes (1973) 47 ALJR 320
Irnham v Child (1781) 1 Bro CC 92
Jones v Dunkel (1959) 101 CLR 298
Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336
Marquis of Townshend v Stangroom (1801) 6 Ves Jun 328
Masterton Homes Pty Limited v Palm Assets Pty Limited & Ors [2008] NSWSC 274
Mortimore v Shortall (1842) 2 Dr & War 363
New South Wales Medical Defence Union Ltd v Transport Industries Insurance Co Ltd (1986) 6 NSWLR 740
Overlook v Foxtel [2002] NSWSC 17
Pukallus v Cameron (1982) 180 CLR 447
Ryledar Pty Ltd v Euphoric Pty Ltd (2007) Aust Contract R 90-254; [2007] NSWCA 65
Slee v Warke (1949) 86 CLR 271
Stormriders Pty Ltd v Copperart Pty Ltd [2004] NSWSC 809
Toll (FCGT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165
Westland Savings Bank v Hancock [1987] 2 NZLR 21

TEXTS CITED: JD Heydon, Cross on Evidence, 6th ed, Butterworths, Sydney, 2000
Meagher, Gummow & Lehane’s, Equity: Doctrines & Remedies, 4th Ed (2002) Butterworths LexisNexis [26-010].

PARTIES: RHG Mortgage Securities Pty Limited (First Plaintiff)
RHG Home Loans Pty Limited (Second Plaintiff)
RHG Treasury Services Pty Limited (Third Plaintiff)
Receivables Servicing Pty Limited (Fourth Plaintiff)
Elektra Purchase No. 19 Limited

FILE NUMBER(S): SC 50207/08

COUNSEL: Mr I Jackman SC, Ms J Taylor (Plaintiffs)
Mr M Speakman SC, Mr M Lawrance (Defendant)

SOLICITORS: Mallesons Stephen Jaques (Plaintiffs)
Allens Arthur Robinson (Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

Einstein J

Wednesday 8 April 2009

50207/08 RHG Mortgage Securities Pty Limited & Ors v Elektra Purchase No. 19 Limited

JUDGMENT

The proceedings

1 The proceedings relate to a Subscription Agreement dated 10 January 2008 entered into between, inter alia:

2 Pursuant to the Subscription Agreement Notes in the sum of $750,000,000 were issued by the plaintiffs to HVB.

3 The defendant Elektra Purchase No. 19 Ltd [Elektra], is the transferee of the interest in all of the Notes held originally by HVB and the assignee of all of HVB’s rights in relation to the Subscription Agreement pursuant to two Deeds of Assignment between HVB and Lehman Brothers International Europe [Lehman Brothers] in the first instance and between Lehman Brothers and Elektra in the second instance [Deeds of Assignment].

The central issues

4 Without being exhaustive the central issues litigated appear to involve:

(a) Factual issues involving what was assigned and when, and

(a) Whether Elektra can claim that an agreement to which it was not a party should be rectified; and

(a) Whether Elektra has incurred any “currency exchange and basis swap costs associated with the Note Subscriber funding its holding” of the Notes “using financial accommodation raised in Euros” since the Notes were transferred and the Deeds of Assignment were executed, that is, whether Elektra has incurred any relevant costs; and

Flow chart of relevant issues

5 The defendants flowchart of relevant issues provides a convenient vehicle for an understanding of the ordered approach to the issues:

The further Deeds of Assignment

6 Part way through the hearing HVB and Elektra executed further Deeds of Assignment to cope with the plaintiff's contention that such deeds were necessary to assign to the respective assignees, the rights of the assignors to obtain a court order rectifying a Transaction Document to the extent (if at all) that the assignees did not already have those rights.

7 By reason of the nature of the issues [and in particular the claim for rectification] the parties descended to an extraordinarily detailed analysis of the many drafts and terms sheets exchanged at a time anterior to the execution of the Subscription Agreement.

8 Before setting out the background facts it may be convenient to note some areas of principle.

The principles concerning rectification

9 In a recent decision [Masterton Homes Pty Limited v Palm Assets Pty Limited & Ors [2008] NSWSC 274] the principles which inform the remedy of rectification were examined principally by reference to the decision of the Court of Appeal in Ryledar Pty Ltd v Euphoric Pty Ltd (2007) Aust Contract R 90-254; [2007] NSWCA 65.

10 The principles examined in Masterton and are presently adopted for the purposes of principled approach to the issues which fall for determination.

11 It seems convenient to firstly note the convenient summary of their Honours observations appearing in the headnote:

i. The common intention that is required for a grant of rectification is subjective. Proof of the subjective intention of the parties to the contract is fundamental to the grant of rectification. (Campbell JA, Mason P and Tobias JA agreeing);

ii. For rectification to be granted where the parties have purposely and deliberately chosen the words of their contract, there must be clear and convincing proof that the parties held a common intention which is contrary to those words and that those words were chosen by mistake. It is less likely that the parties were mistaken as to the meaning of the words where they are clear and unambiguous , or where they had a common intention which was fundamentally inconsistent with the words they had deliberately employed. (Tobias JA, Mason P and Campbell JA agreeing);

The type of the intention relevant to rectification

12 In examining the type of intention relevant to rectification, Campbell JA observed as follows:

“[267] By contrast, the type of intention that is relevant to rectification of a contract is the subjective intention — sometimes called the actual intention — of the parties.

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales

was actually agreed upon

Rectification ensures that the contract gives effect to the parties' actual intention

Returning to parole evidence

13 In examining the admissibility of parole evidence Campbell JA further observed:

“[269] One way in which it can be seen that it is subjective intention that matters for rectification, concerns the evidence admissible in a rectification suit. Notwithstanding that the contract that it is sought to rectify is in writing, and notwithstanding the common law rule that parol evidence is not admissible to contradict a written agreement, parol evidence is receivable, in an action seeking rectification, to establish what was the intention of each of the parties to the contract: Ball v Storie (1823) 1 Sim & St 210 at 219 ; 57 ER 84 at 88; NSW Medical Defence Union Ltd v Transport Industries Insurance Co Ltd(1986) 6 NSWLR 740 at 751 and 752; Farrow Mortgage Services Pty Ltd (in liq) v Slade and Nelson(1996) 38 NSWLR 636 at 642; Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd(1995) 41 NSWLR 329 at 332 per Mahoney A-P; Brambles Holdings Ltd v Bathurst City Council(2001) 53 NSWLR 153 at 164, [27]; Green v AMP LifeLtd [2005] NSWSC 370 ; (2005) 13 ANZ Ins Cas 90-124 at [172].

[270] It is also possible to have evidence from the draftsperson of the document stating what his or her instructions were, and that particular words were included in the document by mistake: Mortimore v Shortall (1842) 2 Dr & War 363 at 370 per Sir Edward Sugden.

Baker v Paine

Fowler v Fowler

Upon the question of rectifying a deed, the denial of one of the parties, that it is contrary to his intention, ought to have considerable weight. Lord Thurlow, in Irnham v Child (1781) 1 Bro CC 92) says, "The difficulty of proving that there has been a mistake in a deed is so great, that there is no instance of its prevailing against a party insisting that there was no mistake." And Lord Eldon, in Marquis of Townshend v Stangroom (1801) 6 Ves Jun 328), after observing that Lord Thurlow seems to say that the proof must satisfy the Court what was the concurrent intention of all the parties, adds, "And it must never be forgotten to what extent the Defendant, one of the parties, admits or denies the intention.”

Codelfa Construction Pty Ltd v State Rail Authority of NSW

Toll (FCGT) Pty Ltd v Alphapharm P/L

Outward expression of accord

14 Campbell JA dealt with this matter [at 273] and following. That analysis repays careful reading. Importantly his Honour observed as follows:

“[281] In my view, when the fundamental requirement for granting rectification is a continuing common intention of the parties, it is of more assistance to concentrate on what is needed before an intention of the parties to a negotiation counts as a common intention. In my view, when that intention relates to the terms upon which they will contract with each other, it is still necessary for them to know enough of each other's intentions for it to be said that there is a common intention. They might come to know of each other’s intentions in this way through those intentions being directly stated, or they might come to know of them through the various other means by which one person’s intention can become known to another person. Those means can sometimes involve a process of conscious and deliberate inference. Those means can sometimes involve simply perceiving a gestalt in a series of events. Those means can depend to some extent on the people involved sharing a common understanding of how particular bodies of knowledge or markets or social institutions they are operating in work — the experienced surgeon, or the experienced chess player, can sometimes see what another surgeon, or chess player, is seeking to do, in a way that an inexperienced person cannot. What matters for present purposes is that for a negotiating party to perform actions or say words from which the other party can gather his or her intention is itself a form of communication. Negotiation of any contract takes place in a context in which various facts are known or assumed by the negotiating parties. Sometimes, for example, if a contract is negotiated in a context where there are well understood business practices and conventions, and nothing is said about those practices and conventions not applying, it can be legitimate to conclude that both parties to the contract intended to act in accordance with those practices and conventions, even if they did not expressly communicate to each other that they intended to act in accordance with those practices and conventions. This view of what is needed before an intention is a common intention, accords, it seems to me, with the Australian case law since Joscelyne.

Australasian Performing Right Association Ltd v Austarama Television Pty Ltd

[1972] 2 NSWLR 467

Hooker Town Developments Pty Ltd and Another v The Director of War Service Homes

The consensual relationship there referred to is, I think, the common intention with which the document was executed.

Bishopsgate Insurance Australia Ltd v Commonwealth Engineering (NSW) Pty Ltd

[1981] 1 NSWLR 429

What many of the cases do make clear, however, is that the firm accord or common intention which must be established as a basis for rectification must be one that has been manifested in the words or conduct of the parties and not merely one which remained undisclosed in the course of the negotiations. But this is a different thing from a requirement that the respective intentions must be communicated …

[285] From the distinction that Yeldham J here draws between an intention being “disclosed” and being “communicated”, it appears that he is restricting "communicated" to communicated by express statement.

Westland Savings Bank v Hancock

[1987] 2 NZLR 21

… while there need be no formal communication of the common intention by each party to the other or outward expression of accord, it must be objectively apparent from the words or actions of each party that each party held and continued to hold an intention on the point in question corresponding with the same intention held by each party.”

15 His Honour concluded as follows:

]

“this is my intention”

16 Hence the following propositions hold true:

i. For a party seeking to obtain a decree of rectification of the Agreement, it must adduce clear and convincing evidence that proves the document embodying the Agreement does not reflect the parties “common intention”: Ryledar Pty Ltd v Euphoric Pty Ltd (2007) Aust Contract R 90-254; [2007] NSWCA 65 per Tobias JA at [151]; Pukallus v Cameron (1982) 180 CLR 447 at 452, 456; Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 per Mason J at 349, 350.

Ryledar Pty Ltd v Euphoric Pty Ltd

Frederick E Rose (London) Ltd v William H Pim Junior & Co Ltd

“In order to get rectification it is necessary to show that the parties were in complete agreement on the terms of their contract, but by error wrote them down wrongly…”.

both

that the document was executed through some form of mistake

Ryledar Pty Ltd v Euphoric Pty Ltd

Meagher, Gummow & Lehane’s, Equity: Doctrines & Remedies,

Ryledar

Slee v Warke

17 The second element of what a plaintiff must prove in a rectification suit is that the common intention was not given effect because of some mistake.

18 From the extensive case law at least the following parameters of the principles concerning rectification are not in doubt:

i. The existence of a concluded antecedent agreement in the term sought to be added or omitted from a contractual document is not necessary in order to found an entitlement to rectification. [ eg Slee v Warke (1949) 86 CLR 271 at 280.3-.7, Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 at 350.3 (Mason J), Pukallus v Cameron (1982) 180 CLR 447 at 456.5 (Brennan J)]

ii. Rectification is available even though the parties are under no misapprehension as to the language of their contractual document but rather their mistake is as to the legal effect of that language. [ Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329]

iii. Evidence can be led as to pre-contractual and post-contractual facts from which inferences may be drawn regarding the intention of the parties and as to the relevant actual intentions of each of the parties [ NSW Medical Defence Union Ltd v Transport Industries Insurance Co Ltd (1986) 6 NSWLR 740 at 752C-F]. . Stormriders Pty Ltd v Copperart Pty Ltd [2004] NSWSC 809 at [47]; Ryledar Pty Ltd & Anor v Euphoric Pty Ltd (2007) Aust Contract Reports 90-254; [2007] NSWCA 65 at [184].

NSW Medical Defence Union Ltd v Transport Industries Insurance Co Ltd

Short overview of integers of the critical documents

19 The critical documents are the Subscription Agreement and the Series Supplement [which Supplement sets out the terms and conditions upon which the notes of the particular series were issued]. Also of relevance is the Trust Deed of 8 December 2004.

20 Clause 3.4 of the Series Supplement makes clear that the Notes will, upon issue, be in the form of registered debt securities, will be constituted under, and the obligations of RHG under the Notes will be constituted by, the Subscription Agreement, the Trust Deed and the Series Supplement and will be denominated in A$. Clause 3.4 further provides that the entitlement of a holder of a Note (as applicable) is determined by registration as a holder of that Note in the Register of Holders in respect of the Series.

21 Clause 8 of the Series Supplement is of general significance dealing with cash flow allocation methodology. Clause 8.8 [generally referred to as “the waterfall”] deals with the distribution of total available income in respect of monthly payments to be made: that is to say on each month there are a series of payments were to be made in a particular order of priority.

22 Relevantly at clause 8.8 one finds the following provisions concerning distribution of available income:

(e) fifth, pari passu and ratably to the Class A Noteholders, the Class A Interest Amount for the Payment Period ending on (but excluding) that Payment Date and any unpaid interest in respect of previous Payment Periods (but excluding any amounts payable under clause 3.13 (“Withholding tax”) in respect of the Class A Notes);

(f) sixth, to pay pari passu and ratably to the Class B Noteholders, the Class B Interest Amount for the Payment Period ending on (but excluding) that Payment Date and any unpaid interest in respect of previous Payment Periods (but excluding any amounts payable under clause 3.13 (“Withholding tax”) in respect of Class B Notes);…

(k) eleventh, to pay any other amounts owing not in the nature of principal to the Note Subscriber or the Holders of any Notes, including, for the avoidance of doubt, any amounts payable under clause 10.7 (“Funding costs indemnity”) of the Subscription Agreement;

23 The maturity date for the Notes was 2039.

24 It is pursuant to the Subscription Agreement that the Note Subscriber agrees to subscribe.

25 Some of the terms of the Subscription Agreement relate to the initial subscription and their operation was in effect spent by the time of the assignments in June/July 2008.

26 Other terms and conditions of the Subscription Agreement continued on an ongoing basis-for example clause 5.7 dealing with representations and warranties in the following terms:

The representations and warranties made in clause 5.1 (“Representations and warranties by RMS and the Manager”) (other than in respect of paragraphs 5.1(g), 5.1(h), and 5.l(u)), clause 52 (“Representations and warranties by the Originator”) and clause 5.4 (“Representations and warranties by the Servicer”) (other than in respect of paragraphs 5.4(b) and 5.4(d) will be deemed to be repeated on each Payment Date with reference to the facts and circumstances then subsisting.

27 Clause 7 of the Subscription Agreement included a number of what might be called ‘boilerplate’ type provisions imposing obligations on RHG whilst there would be an amount owing under the notes.

28 Hence the effect of the plaintiff's case was that upon an assignment of all of the Notes, it was not only clause 10.7 which no longer operated: the proposition was that in fact all of the future obligations of RHG, the Manager, the Originator and the Servicer would terminate.

The Funding Costs letter - 16 January 2008

29 On or about 16 January 2009 the parties entered into the following letter agreement which was duly signed on their behalf:

RAMS Mortgage Securities Trust Series UniCredit (1) Series Supplement

1. We refer to the document entitled “RAMS Mortgage Securities Trust Series UniCredit (1) Series Supplement” dated on or about 10 January 2007 between, among others, RHG Mortgage Securities Pty Limited (ABN 30 094 753 349) in its capacity as trustee of the RAMS Mortgage Securities Trust in respect of Series UniCredit (1) (Trustee), RHG Home Loans Pty Limited (ABN 67 053 725 741) (Originator), RHG Treasury Services Pty Limited (ABN 15 086 255 950) (Manager) and Bayerische Hypo und Vereinsbank AG, Singapore Branch (UniCredit) (Series Supplement). Unless the context otherwise requires or unless otherwise defined in this letter, capitalised terms and expressions used in this letter have respective meanings given to them in the Series Supplement (whether directly or by reference to one or more other documents).

(a) the definition of “Interest Rate” set out in clause 13.2 (“Definitions”) of the Series Supplement; and

and hereby notify the Trustee, the Manager and the Originator that the aggregate percentage per annum calculated by UniCredit for all purposes of and connected with those clauses is 0.12% (the Funding Costs Percentage) until we notify you otherwise (such further notice not to apply in respect of any Payment Period prior to the seventh Payment Period).

(a) the “Interest Rate” in respect of a Class of Notes and for a Payment Period and, the Class A Interest Amount and the Class B Interest Amount, must each be calculated and paid inclusive of the Funding Costs Percentage (to the extent of 0.11% per annum) and otherwise in accordance with the Series Supplement, and

4. This letter is a “Transaction Document” for all purposes of and connected with the Series Supplement.

5. This letter is governed by the laws of the State of New South Wales.

Elektra's position concerning clause 14.30 of the Subscription Agreement

30 Clause 14.30 is in the following terms:

“The obligations of RMS, the Manager, the Originator and the Servicer under this agreement terminate on the earlier of:

(a) all Secured Money owed under the Notes or to the Note Subscriber being repaid; and

31 Elektra submits that it remains entitled to the indemnity under clause 10.7 in either of two ways:

i. The Subscription Agreement should be rectified by deleting clause 14.30(b).

(a) “holds” in clause 14.30(b) refers to holding legal title to the Notes (or alternatively at least a beneficial interest in the Notes) and HVB did not hold such an interest, and

Rectification of clause 14.30

32 Very extensive attention was placed by both parties to the relevant content of the materials which passed between the parties and their respective solicitors from the commencement of the drafting of the material terms sheets. The nine very well stacked volumes of the Court book contained the numerous e-mails passing between in the main, Mr Smith of Mallesons acting for RHG and Mr Jenkins of Blakes acting for HVB.

33 Ultimately the holding is that the parties intended the Subscription Agreement to operate as if clause 14.30(b) were absent and that the parties’ common intention was that if the Note Subscriber for the time being assigned all of its Notes, it could also assign all of its rights under the Subscription Agreement: this holding being based upon a close analysis of the evidence before the Court as well as the appropriate inferences to be drawn from the whole of the circumstances. In short the necessary clear and convincing evidence of that common intention has been established.

34 In giving the reasons for this finding it becomes necessary to slowly travel through a number of documents as well as to deal with the evidence given by the relevant witnesses.

35 The exercise which follows includes an examination of:

i. The parties’ common intention as shown in the term sheet between 30 October 2007 and 30 November 2007.

ii. The parties’ common intention as shown in the draft transaction documents between 17 and 28 December 2007.

iii. How clause 10.7 ended up in the Subscription Agreement.

iv. The inherent tension between clauses 12(b) (and other clauses) of the Subscription Agreement on the one hand and clause 14.30(b).

v. The absence of a rational explanation for a clause 14.30 “carve out" from clause 12(b).

vi. The evidence of Mr Tyndall about his state of mind.

36 The devil lies in the detail and for this reason it becomes necessary to travel through these drafts with care. In the main the defendant's submissions are adopted in terms of this exercise.

The term sheet between 30 October 2007 and 30 November 2007

37 The search for the ultimate common intention as at 10 January 2008 begins by an analysis of whether there was any and if so what common intention throughout November 2007 that HVB could assign some or all of the Notes with an entitlement to an indemnity with respect to currency exchange costs.

38 That there was such a common intention throughout November 2007 is clear from:

i. the “final” version of the “Indicative Terms and Conditions” [the “Term Sheet”] enclosed with the engagement letter dated 28 November 2007 and countersigned on 30 November 2007, and

39 From 30 October 2007 until the final version of 28/30 November 2007, each version of the “Indicative Terms and Conditions” contained the following entry or a substantially similar entry with respect to “Transfer”:

Corporations Act

40 This meant that the Term Sheet contemplated that HVB could transfer some or all of the Notes.

41 In each version of the Term Sheet from 30 October 2007, the Notes carried interest. In each such version, that interest included various permutations.

42 Each permutation included a Funding Margin described as follows:

43 Hence as the defendant has contended, on the drafting of the Term Sheet throughout the period between 30 October 2007 and 30 November 2007:

i. HVB could assign some or all of the Notes with a funding indemnity with respect to currency etc costs, and

ii. In the event of such an assignment (including all of the notes), the indemnity would not cease.

iii. Accepting that the parties contemplated that the Term Sheet would not record the final terms and conditions of their transactions, it documented the parties’ intentions as at 30 November 2007.

The evidence given by Mr Goddard in relation to the Term Sheet

44 Mr Goddard’s evidence with respect to the Term Sheet was as follows:

i. “[T]he contents of the indicative terms and conditions reflect[ed] as at 30 November 2007 [his] best understanding of the proposed transaction with HVB” “[a]t a high level … but there was still much work to be done in preparing the final documents that had to be signed”.

ii. “By the time [he] had signed the letter of engagement of [28] November 2007 [he] had reviewed at least several drafts of the indicative terms and conditions”.

iii. Mr Goddard was “thoroughly familiar with the contents of the version of the indicative terms and conditions … that was enclosed with the signed letter of [28] November 2007”.

iv. Mr Goddard was “aware at the time [he] signed the 28 November 2007 letter that the indicative terms and conditions included [the] passage about transfer …”.

v. Mr Goddard thought “[o]bviously if the note was moved there would be a coupon attached to the note, the note was an A$ note so the coupon plus the prescribed margin would be carried over with the note”.

45 The finding is that Mr Goddard throughout November 2008 intended that the notes could be assigned in whole or in part with a currency exchange funding indemnity. His evidence that even in October and November 2007 his position was that HVB would not be allowed to assign any entitlement to any indemnity with respect to currency exchange costs is rejected. That evidence is inconsistent with the material referred to above.

46 There is no evidence of any document in which Mr Goddard protested about terms of the Term Sheet dealing with assignability and funding margin. His evidence was that from the very start of the transaction he wanted things in writing or by e-mail. Hence the best evidence of his intention is what he agreed to in writing: that is to say the Term Sheet.

The evidence of Mr Williams’ in relation to the Term Sheet

47 Mr Williams’ position with respect to the Term Sheet was as follows:

i. He saw several drafts, which he “thoroughly” reviewed.

ii. He communicated no objections to Mr Goddard about the notes being transferable.

iii. He understood that the notes would be transferable in whole or in part .

iv. He understood that with a transfer of notes there would be a transfer of interest entitlement.

48 On the other hand he disagreed in cross-examination that he understood that a transfer of notes carried with it a transfer of funding margin entitlement and suggested that he was not “completely focused” on it.

49 This evidence contradicts his evidence in iii, iv and v above. As the defendant has contended it contradicts the clear effect of the “thoroughly” reviewed drafts and final version. Eventually he could not recall what was the “problem” with the funding margin being assignable with the notes.

50 Of particular concern in terms of assessing his reliability was the fact that he changed some of his answers across the two days when he was being cross-examined. His evidence given on 16 March [transcript 62 and following] was that as a general proposition, he understood at the time of his e-mail of 30 November 2007 that the notes would be transferable: that is to say that there could be a transfer of some notes or all of the notes. It was quite plain that on his then evidence, his understanding at 30 November 2007 was that the notes were transferable in the sense that the holder could transfer some or all of the notes [see also transcript 63.25]

51 Yet on 17 March he first gave evidence that as at 30 November 2007 his understanding had been that all [as opposed to some] notes must be transferred [transcript 99]. The transcript of the cross examination then includes the following:

Q. And do you agree that the answer you gave yesterday was correct?
A. I’m not sure, today and maybe it’s having seen the term sheet again maybe that has steered me in a direction.

Q. You’re saying now you’re unsure what you understood by that line?
A. Perhaps I was unsure as at November 2007.

Q. Well you say you’re unsure now do you?
A. Yes.

Q. What you thought then?
A. Yes correct.

52 Clearly very special care requires to be given to his evidence particularly when suggesting that he had clear recollections of his then states of mind. The very same problem infects his evidence as to his latest states of mind.

53 In short his evidence that at all times he intended that the obligations of the plaintiffs under the Subscription Agreement would cease upon HVB assigning its interest in all of the Notes it held [including any entitlement to indemnity costs under clause 10.7 of the Subscription Agreement] is rejected. He claimed to have a similar intention even at the time of the terms sheets – yet their terms clearly contradict him.

54 He acquiesced in the drafts between 17 and 28 December 2007.

55 He was unable to point to any document in which he had communicated to HVB a disagreement with the proposition that the funding margin would be transferable with the notes. He never communicated with anyone at HVB in writing disagreeing with the funding margin being included as part of interest. Nor was he present at any oral communication by Mr Goddard to HVB to the effect that the funding margin should be not be transferable with the notes.

Mr Tyndall

56 Mr Tyndall understood that under the Term Sheet, “a transferee of the Notes would be entitled to receive the Funding Margin, because in the term sheet the Funding Margin formed a part of the interest payable on the Notes and the Notes were transferable”.

The following period of time - the drafts between 17 and 28 December 2007

57 The drafting history of the Subscription Agreement and the Series Supplement between 17 and 28 December 2007 reflected the parties’ intention throughout that period that:

i. the Note Subscriber could transfer some or all of its notes, and

58 After the engagement letter dated 28 November 2007 [countersigned on 30 November 2007], the first drafts of the transaction documents were emailed by Mr Smith of Mallesons to, among others, Mr Ng of Blakes, Mr Jenkins of Blakes, Mr Tyndall and Mr O’Brien of HVB, and copied among others to Messrs Williams and Goddard. As the defendant contended those drafts included the following features:

i. The Series Supplement did not deal with any costs referable to currency exchange etc.

any other amounts owing not in the nature of principal

“On each Payment Date, the Originator agrees to pay to the Note Subscriber an amount equal to the cost of converting the BBSW Rate to EURIBOR with reference to the Principal Outstanding of the Notes for the previous Payment Period.”
The draft Subscription Agreement contained a clause 11 headed “Dealing with interests” as follows:
“Neither party may assign or otherwise deal with its rights under this agreement in respect of the Series or allow any interest in them to arise or be varied, in each case, without each other party’s consent other than is expressly contemplated by the Transaction Documents in respect of the Series.”

The draft Subscription Agreement contained a clause 13.20 headed “Termination” as follows:

“The obligations of RMS, the Manager, the Originator and the Servicer under this agreement terminate on the earlier of:

(a) all Secured Money owed under the Notes or to the Note Subscriber being repaid; and

59 Draft transaction documents then passed between the parties’ respective lawyers as follows (in each case to or copied to Messrs Tyndall, Williams and Goddard):

i. 17 December 2007 11.20pm – Blakes to Mallesons.

ii. 21 December 2007 1.22am – Mallesons to Blakes.

iii. 24 December 2007 7.18pm – Blakes to Mallesons.

60 The drafts which Blakes circulated on 17 December 2007 had the following features:

“Note: Not agreed. HVB requires these amounts to form part of the interest calculation corresponding to the notes."

Subscription Agreement, the

“(a) RMS, the Manager, the Originator and the Servicer may not assign or otherwise deal with its rights under this agreement in respect of the Series or allow any interest in them to arise or be varied, in each case, without the Note Subscriber’s consent other than as expressly contemplated by the Transaction Documents in respect of Series.”

“The obligations of RMS, the Manager, the Originator and the Servicer under this agreement terminate on the earlier of:

61 In short on Blakes’ drafting:

i. HVB could assign some or all of the notes.

ii. The currency etc indemnity was part of interest.

62 The Mallesons drafts of 21 December 2007 in response to the Blakes drafts of 17 December 2007 had the following features:

“a percentage notified by the Note Subscriber to the Manager equal to the cost of converting Australian Dollar payments for that Payment Period to Euros, as if the Notes had been issued in Euros.”

ii. Clause 3.4 of the Series Supplement included the amendment which Blakes had proffered on 17 December 2007 viz reference to Subscription Agreement.

63 Further the Mallesons drafts were sent after Mr Williams had “carefully” reviewed the Blakes drafts. Mr Williams had understood HVB’s position to be that the Interest Rate was to include BBSW/EURIBOR funding cost. The Mallesons drafts were sent after Mr Williams had told Mr Smith which Blakes changes he agreed with and which Blakes changes he disagreed with.

64 From 21 December 2007, Mr Williams knew that the Mallesons drafts were in the forms in which they had been despatched. He had this knowledge and understanding: T85.45-87.17.

65 From 21 December 2007 Mr Williams:

“… understood … that the effect of the draft Series Supplement and Subscription Agreement as proffered by Mallesons to Blakes would be that the Note Subscriber could assign some or all of the notes including a future entitlement to interest including an element referable to currency exchange costs”

66 The covering email stated that some changes may not be acceptable to ratings agencies. The covering email stated “[w]e have highlighted below key provisions for discussion…”. One was “paragraph (b) of the definition of Interest Rate (compensation of Euro funding)”.

67 Hence subject to what was said in the covering email, the position at 21 December 2007 was that there would be an “uncapped” “indemnity” with respect to currency etc. costs as part of the interest rate; some or all of the notes could be transferred; the entitlement to interest including with respect to that indemnity could be transferred with some or all of the notes; this was so even if clause 14.30(b) operated in accordance with its terms.

68 As the defendant had contended, on the balance of probabilities it would appear extremely unlikely that Mallesons would have proffered revised drafts in this form if their clients did not intend that there be assignability of the “currency indemnity” in this way.

The evidence given by Mr Williams concerning the so-called "problem" which the rating agencies were said to have

69 In his evidence Mr Williams referred to what he described as "a problem" with the ratings agencies Moodys and Standard and Poor, which he variously identified as follows:

70 Mr Williams’ cross-examination included the following:

“Q. Going back now to paragraph 14 of your statement was it your understanding throughout the period from 17 December 2007 when Blakes proffered drafts until this response on 21 December 2007 from Mallesons that the issue with the rating agencies was as described in the words you spoke in paragraph 14 of your statement?
A. I think the issue is perhaps a little bit more specific than just the waterfall, it was - they’ve got an issue with the cost of the hedge because it’s not included in the required payments component of the waterfall.
...

Q. So when you say that the rating agencies had some issue, as I understand your evidence beyond what you told Mr O’Brien, the required payments, could you explain to his Honour with reference to clause 8.8 if that’s appropriate what the issue was?
A. Yes. From a ratings perspective the rating agencies will want to see that the obligations under any currency exchange is included in the definition of required payments of the trust. The required payments if you like are all the expenses that must be met to keep the trust solvent. Points beyond the required payments aren’t so much of an issue if they do or do not occur.”
[Mr Williams’ witness statement]:

“Q. Look please at 8.8 on page 574, was it your understanding shortly after 17 December 2007 that the ratings agencies would have a problem if the indemnity in respect of currency exchange appeared in (a) to (e) of clause 8.8?
A. Yes because it was an unknown amount.

71 The defendant submits and I accept that none of those matters required the absence of a fully assignable uncapped funding indemnity. It would appear that whatever problem there was would not differentiate between an assignment of 99.9% of the notes and 100% of the notes.

72 Insofar as Mr Williams gave evidence under cross-examination of wishing to protect against the situation where a new assignee might have an unlimited claim for an indemnity for currency costs, that evidence is not accepted as reliable.

73 The matter generally related to Mr Williams’ evidence that where HVB hypothetically would assign some but not all of the notes, he had an understanding that both HVB and the new assignee would be making a claim for indemnity for currency costs.

74 Mr Williams’ evidence was that he had anticipated that HVB's claim would be no more than approximately 12 basis points and drawn attention to his perception that in a situation of partial assignment, there would be a question of reasonable costs.

75 When he was asked as to whether he had had any understanding or expectation as at 10 January as to whether the fact that HVB was still there, would have had an impact on what in a practical sense, the new assignee might be charging, his answer was that the costs should be in line with the costs that HVB had agreed to through the Costs Agreement of 16 January 2008.

76 I formed the view during the hearing that the entirety of his evidence of this suggested concern was unreliable. The materials before the Court gave no reason to imagine that RAMS subjectively considered itself so exposed that it would not permit a continuation of the funding indemnity if there were an assignment of 100% of the notes: whilst it was prepared to have that exposure to an unknown assignee in an uncapped amount with 99% or all but one of the notes.

77 In so far as the Costs Agreement was put forward it is important to note that this agreement was not made until 16 January 2008. It was not established that as at 10 January 2008 the parties contemplated that agreement. There was no evidence to suggest that as at 10 January 2008 there was any commitment binding or in principle by HVB to limit the collective indemnity under both agreements to 12 basis points. And even if it had been the case that RAMS had had some expectation that the Costs Agreement would be entered into, that would not have assisted the plaintiff's position with respect to the six months during which it was to subsist. It simply bound an assignee so that if HVB purported to assign its rights under the Subscription Agreement with respect to some notes, the assignee of those rights would also take with it, this, in effect variation to those rights for the first six months. In short if it bound the assignee in that way for the first six months it would make no difference in terms of the total exposure to the funding indemnity as to who held notes and in what combinations. As Mr Speakman contended:

In other words, compare three cases. HVB continues to hold 100% of the notes, situation one. Situation two, an assignee holds 100% of the notes. Situation three HVB holds some notes and an assignee holds the balance of the notes in proportions that don’t matter. In each of those three situations, for the six months during which this letter agreement subsisted, in respect of all of the notes the liability would be capped for the funding indemnity at 12 basis points. In other words it made no difference whether there was an assignment of no notes, some of the notes or all of the notes, the exposure of RAMS would be the same, 12 basis points….

Now let’s take an alternative hypothesis and that is that Mr Williams was not talking about the letter agreement but talking about something else. Now in our submission, in practical terms, RAMS is just as exposed with a 99.9 percent assignment to some mystery, unidentified assignee uncapped as it is with a one hundred percent assignment. And to suggest that there is some kind of moral suasion or as my learned friend put it, standard of comparison because the holder of one note has capped its cost at twelve-basis points in the six months, to suggest that that is some reason to oppose a one hundred percent assignment but not a 99 percent assignment… is a nonsense.

Why would three or four months into this process, the holder of 99.9 percent of the notes take any notice of what the parties had agreed would be a flat rate several months earlier? It is a nonsensical proposition in our respectful submission.

So the first stage is, it’s off the radar. The second stage is, during the six months it makes no difference. The third stage is, what happens after six months? After six months this cap ceases, after six months and allowing for the parties contemplated the likelihood or at least the prospect, the likelihood that there will be a turning out, this facility may not go until 2039, the maturity of the notes, accepting all that, there was obviously still a real prospect that the transaction documents would still be on foot, six months down the track. And six months down the track, the twelve-basis points caps has gone. There is no obligation on HVB to do anything in particular other than its contractual obligation to calculate in good faith and in a reasonably commercial manner.

The Blakes drafts of 24 December 2007 in response to the Mallesons drafts of 17 December 2007

78 The Blakes drafts of 24 December 2007 in response to the Mallesons drafts of 17 December 2007 had the following features:

The Mallesons drafts of 28 December 2007

79 The Mallesons drafts of 28 December 2007 had the following features:

i. They were after Mr Williams had reviewed the Blakes drafts of 24 December 2008.

ii. The drafts accepted as part of the definition of "Interest Rate” in the Series Supplement the paragraph (b) which Blakes had proposed in the 24 December 2007 drafts.

iii. Clauses 12 and 14.30 of the Subscription Agreement were unchanged.

Conclusion with respect of the period between 17 and 28 December 2007

80 Ultimately a close examination of the above materials makes good the proposition that every draft passing between the parties between 17 and 28 December 2007 permitted an assignment of some or all of the notes and in their terms had a “currency indemnity” passing across to the assignee even where all notes were assigned.

Explaining the genesis of clause 10.7

81 The Blakes’ drafts of 31 December 2007 had the following features:

“a percentage per annum (calculated by the Note Subscriber in good faith and a commercially reasonable manner and notified to the Manager) equal to the currency exchange and basis swap costs associated with the Note Subscriber funding its holding of that Class of Notes for that Payment Period using financial accommodated raised in Euros provided that the percentage per annum included in the Interest Rate by this paragraph (b) must not exceed [0.11%] for any Payment Period.”

82 The changes arose out of issues raised by the ratings agencies. See also emails of 28 December 2007 4:13pm, 28 December 2007 7:57pm, 29 December 2007 11:02am and 31 December 2007 11:40am. The ratings agencies issues did not turn on any distinction between some notes and all notes.

83 I accept that on the evidence the changes were proffered by HVB’s lawyers. The finding is that they had nothing to do with any requirement of the RAMS companies.

The inherent tension between clauses 12(b) and 14.30(b)

84 Clause 12(b) of the Subscription Agreement provided:

85 I further accept that the language of clause 12(b) is emphatic. On its face it clearly contemplates any combination of an assignment of some or all of the rights under the Subscription Agreement and some or all of the notes.

86 In all of the circumstances there is considerable substance in the defendants contention that it is inherently implausible that the parties would have agreed:

i. on the one hand to such an open ended right of assignment (including with respect to all notes and all rights under the Subscription Agreement),

87 I accept that this would create a nonsensical notion of assignment – an assignment which has the effect of losing the very rights which are assigned.

88 Further Clause 14.30(b) of the Subscription Agreement is inconsistent with the tenor of Clause 14.23. That Clause was entitled “Rights and obligations to inure” and provided:

89 As the defendant has contended, Clause 14.30(b) of the Subscription Agreement was also inconsistent with the tenor of clause 3.4 of the Series Supplement, which read as follows:

Subscription Agreement

90 Clause 3.4 contemplated, in a sense, an “attachment” of the Subscription Agreement to the Notes, which would be inconsistent with rights under the Subscription Agreement terminating in the event of an assignment of all (but not some) of the Notes.

Was there a rational explanation for a clause 14.30 "carve out"?

91 When one compares:

i. the position of an assignment of all of the notes on the one hand and

ii. an assignment of, say, all but one of the notes or of 99.9% of the notes on the hand,

92 Nor did anything in any requirements of the ratings agencies produce any such relevant difference.

Subsequent conduct

93 The principles concerning the receiving of post contractual facts on a rectification claim have already been set out. Ultimately the following analysis therefore holds true:

i. The entry by the parties into the funding costs letter on or about 16 January 2008 is evidence of the parties’ common intention (at 16 January) that HVB, as the original Note Subscriber, would be entitled to recover its currency exchange and basis swap costs under clause 10.7 of the Subscription Agreement even though it did not “hold” any Notes. An inference may be drawn that the parties’ intention was the same six days earlier when the Subscription Agreement was signed.

a) The letter agreement bound an assignee, so it made no difference to the RAMS’s groups total exposure in the first 6 months how the notes were distributed as between HVB and assignees ie 100% HVB, 100% assignee or a split of 100% between HVB and assignees. As to Mr Williams’ understanding, the answer at T111.30-.31 contemplates that an assignee would be bound by the letter agreement made 16 January 2008; there is no reference to a mere “standard of comparison”.

The evidence of Mr Tyndall

Mr Tyndall’s state of mind

94 The finding is that at the time of execution of the Series Supplement and Subscription Agreement, Mr Tyndall had the following intentions and beliefs:

i. "[I]f HVB assigned all of its rights to the Notes, then the Subscription Agreement would not terminate and the assignee would get the benefit of RAMS' obligations under the Subscription Agreement."

95 The finding is that Mr Tyndall was not conscious of the contents of clause 14.30 (b) of the Subscription Agreement. He was closely cross-examined on the process which he had adopted in his discussions with Blakes concerning the sundry proposed changes. He repeatedly gave evidence that he had not discussed all of Blakes' proposed changes with them:

“They wouldn’t draw our attention to them, they would actually give us the document and say - so they sent us the document, we wrote back the comments, we ticked or we wrote comments beside them, we sat down with them and we went through our comments and ticks at the time. And then when they - they said fine, we’ll make those changes. We didn’t sit down and go through every underline that they’ve done.” [transcript 149]

“[Mr Jenkins] would actually say, here’s our suggested amendments and if you have anything contrary to them, please write against them and that’s what we do. We’d write back and say, we’re not happy with these or we’re - you know, we want this and we’d write comments on them and John O’Brien and myself did that.”[ transcript 149]

“…they don’t go specifically to each clause. No, they wouldn’t do that.” [transcript 150.4]

“you don’t go through line by line. You actually, your Honour, I take that back and my comment is, is that when you actually provide the documents, you get the documents, you write down your comments against them, you tick the ones that you think you’re correct, the ones you think incorrect are like you write your - when you see the..(not transcribable).. you go through what you’ve written and the detail and then you leave it to them to finalise and send the documents over.” [transcript 150.10]

“Q. And you had discussed with Blake Dawson, in your meeting on 17 December, all of the proposed amendments which Blake Dawson had underlined in the drafts that were before you on 17 December; correct?
A. No. We had talked about - and this is what we talked about yesterday - what they had issues with the documents and we talked about what we had issues with the documents, and then confirmed, you know, what was the view and instructions in regards to those issues.” [transcript 190.29]

96 Mr Tyndall's version is consistent with what was reflected in the Term Sheet so far as assignability and funding margin were concerned.

97 Indeed it is fair to say that one would not have necessarily expected Mr Tyndall to have found Clause 40.30 [which lived at the back of the boilerplate clauses] when there was the emphatic assignment clause at clause 12.

98 The finding is that his evidence was in general reliable.

99 This is not to suggest that Mr Tyndall did not, on occasion appear to have some difficulty in explaining how he had differentiated as between:

i. on the one hand, his focus on what the commercial issues were within the documents;

100 In my view he gave reliable evidence in the following two answers:

Q. You didn't regard it as part of your responsibility to actually read any of those draft documents that had emanated between 24 December and 10 January, did you?
A. No, I delegated that to our lawyers and the other people to do the sign-offs.

Characterising the significance of the evidence of Mr Tyndall

101 An issue arose as to the relevance of Mr Tyndall to the proceedings.

102 The finding is that in the circumstances which obtained, he was the relevant mind of HVB being clearly the most senior HVB executive involved in the negotiations. The finding is that he did not cease to be the relevant mind merely because he went on holidays in late December 2007. His cross-examination must be understood in context. In that respect the following propositions hold true:

i. By the time that Mr Tyndall left, the drafting of the Transactions Documents was near completion. Those commercial matters had been thrashed out over many negotiations since late September 2007. While Mr Tyndall may have regarded himself as having no responsibility for decision-making about drafting, he was the decision-maker on matters of substance, which matters of substance had largely been resolved by the time he left.

a) Mr Tyndall had several conversations with Mr O'Brien while Mr Tyndall was in Tokyo about the rating agency's requirements.

b) On or around 2 January 2008 he participated in a conference call with Messrs O'Brien, Goddard and Williams.

c) On 10 January 2008 he ascertained from Mr O'Brien that required approvals within HVB had been obtained.

“John O'Brien would call me and I would have discussions with him while I was on my holidays and we would discuss various issues and then he would get my confirmation on them.”

e) Before executing documents on 10 January 2008, he confirmed with Mr O'Brien that they were in substance the same as the draft Series Supplement and Subscription Agreement that he had reviewed on 21 December 2007 and that all internal sign-offs had been obtained.

iii. Mr Tyndall only signed the Transaction Documents after he had confirmation from Mr O'Brien that they were “in substance the same” as the drafts which Mr Tyndall had reviewed on 21 December 2007 ie that there were "no material changes". Thus Mr Tyndall still had the "final say".

Mr Tyndall gave the following evidence:

103 Ultimately Mr Tyndall's absence overseas furnishes a partial explanation for the mistake that was made: that is to say it was a contributing cause to clause 14.30 (b) remaining notwithstanding Mr Tyndall's intention as to assignability and indemnity.

The evidence of Mr Goddard

104 Mr Goddard was clearly relevant mind of the plaintiffs.

105 He had carriage of the negotiations of the term sheet. When day-to-day carriage passed to Mr Williams, Mr Goddard still reviewed at a high level to check for conformity with the term sheet.

106 Despite earlier evidence in his witness statement and in cross-examination suggesting to the contrary, Mr Goddard ultimately agreed in cross-examination with key propositions as follows:

“Q. And you understood at 10 January 2008 that the clause enabled the Note Subscriber to assign its rights under this agreement, namely the Subscription Agreement and if it chose to do so transfer all of its notes?
A. To transfer the A dollar notes, yes.

107 There was no re-examination of Mr Goddard at all and therefore no attempt to explain what he meant by his answer.

Jones v Dunkel and related considerations

108 It is important to recall the so-called rule in Jones v Dunkel (1959) 101 CLR 298. This may be summarised as follows:

“The unexplained failure by a party to give evidence, to call witnesses, or tender documents… may - not must - in appropriate circumstances lead to an inference that the uncalled evidence would not have assisted that party's case. The appropriate circumstances exist where it was within the power of the party to tender the evidence which was not tendered.” (JD Heydon, Cross on Evidence, 6th ed, Butterworths, Sydney, 2000 at [1215])

Jones v Dunkel

A Jones v Dunkel

Adler v Australian Securities and Investments Commission

109 Neither of the litigating parties saw fit to call on its solicitors who were essentially responsible for the drafting and iterations earlier dealt with in these reasons. Both sought to take advantage by reference to Jones v Dunkel.

110 Naturally the defendant had to discharge the onus of proof in relation to its rectification claim. It however contended that it had discharged that onus by reference to what Mr Jenkins had stated in sundry e-mails and by reference to the detailed corroboration in the term sheet, the drafting history and similar. The proposition was that a solicitor could discharge his or her responsibility to the client by providing a marked up document for the client to read by going through the important clauses [but not necessary by going through each and every clause].

111 It is often difficult for the Court to treat with the submission that a Jones v Dunkel inference should be drawn against a particular party especially because that inference is not able to fill gaps in the evidence. In the circumstances which presently obtain it does not seem to me appropriate for the Court to do otherwise than to draw the inference that the respective parties determined not to call Mr Jenkins nor Mr Smith for the simple reason that the uncalled evidence would likely not have assisted their respective cases.

112 At the end of the day there was sufficient material in evidence which emanated from the respective solicitors to permit the Court to determine the rectification issue: in particular the evidence of those who were called by the parties and the detail within the documents before the Court were of special assistance.

113 The pervasive findings accept that a common intention of the type contended for by the defendant has been established. The reasons have already set out the inherently implausible proposition that the parties would have agreed:

i. on the one hand to an open-ended right of assignment (including with respect to all notes and all rights under the Subscription Agreement);

114 The reasons have also travelled through the inconsistencies between:

i. Clause 14.30 (b) of the Subscription Agreement and the tenor of Clause 14.23;

Title and standing issues

115 As the pleadings make clear, the plaintiffs deny the entitlement of Elektra to seek rectification of the Subscription Agreement, on the basis that Elektra is not a party to that agreement, but an assignee.

116 The entitlement of the party to the agreement, HVB, to seek rectification is also denied, on the basis that HVB has assigned its rights under the agreement. That is, if the plaintiffs are correct, the assignments of 18 July 2008 had the consequence that they became the only entities able to seek rectification of the Subscription Agreement.

117 However as the defendants have contended the right to rectification of the Subscription Agreement is a chose in action capable of assignment. Most likely, it was assigned by the Deeds of Assignment executed on 18 July 2008 as a right “under” the Subscription Agreement.

118 Ultimately the matter was put beyond doubt by an assignment made during the course of the trial.

119 In any event, each of Elektra and HVB had an interest in seeking rectification of the Subscription Agreement appropriate to be recognized – Elecktra as assignee of the agreement, and HVB under its obligation (owed to Lehman Bros, who in turn owe the same obligation to Elektra) to take all steps reasonably required to give effect to the transactions contemplated by the Deeds of Assignment.

Good faith and commercial reasonableness

120 The final bracket of submissions covered a number of extremely close and often complex technical issues. In each instance the approach taken by the defendant is accepted as pervasive and consequently adopted.

Construction of clause 10.7 and paragraph (b) of the definition of “Interest Rate”

121 There are two issues:

(a) whether Elektra has funded its holding of the Notes “using financial accommodation raised in Euros”;

Whether Elektra has funded its holding of the Notes “using financial accommodation raised in Euros”

122 It is clear that Elektra acquired the Notes using funds advanced by Arabella, that Arabella advanced those funds in Australian dollars and that Elektra’s obligation to Arabella is to repay in Australian dollars.

123 The process by which those funds were raised was:

i. Arabella issued Commercial Paper, denominated in Euros, sufficient to raise sufficient funds in Euros which, when exchanged for Australian dollars would allow Elektra to acquire the Notes;

ii. Arabella entered into foreign exchange swaps, under which it exchanged the Euros raised by the Commercial Paper for Australian dollars;

124 The terms of the foreign exchange swaps matched the terms of the Commercial Paper. When the Commercial Paper falls due, the exercise is repeated. Arabella has entered into 22 swaps (and undertaken 22 issues of Commercial Paper) since June 2008.

125 Notwithstanding that the funds ultimately advance to Elektra are Australian dollars, the finding is that Elektra has “used” financial accommodation raised in Euros within the meaning of clause 10.7. It is necessary to have regard to the Commissioning Agreement between Elektra and Arabella. It was pursuant to that agreement that Arabella advanced funds to Elektra.

126 The Commissioning Agreement contemplates:

i. that Arabella will request Elektra to acquire receivables, in this case, the Notes (Recital A);

127 Albeit that Arabella issues the Commercial Paper in its own name, it does so “for the account (i.e. for the benefit and at the expense) of” Elektra: clause 2.

128 Consistently with that, Elektra indemnifies Arabella against all of its obligations under the Commercial Paper: clause 7.1.

129 In the light of those provisions, I accept that the issuance of the Commercial Paper is properly characterised as a service provided by Arabella to Elektra, in order to allow Elektra to acquire the Notes. That is how the matter is described in clause 7.1 of the Commissioning Agreement (first sentence).

130 An arrangement under which Commercial Paper is issued by Arabella in Euros:

i. for Elektra’s account; and

using

131 Under the Commissioning Agreement, Elektra is liable to indemnify Arabella for Arabella’s liabilities under the swaps: clause 7.1. Those amounts, for which Elektra is liable to indemnify Arabella, are costs “associated with” Elektra’s funding its holding of the Notes in the manner described above.

The meaning of “currency exchange and basis swap costs”

132 Clause 10.7 of the Subscription Agreement and paragraph (b) of the definition of “Interest Rate” in the Series Supplement refer to “currency exchange and basis swap costs”.

133 There are two issues:

i. Ultimately, it did not appear that the plaintiff contended that as a matter of construction FX swaps are not “currency exchange swaps”. However, for the sake of completeness, an analysis must be made regarding the nature of the transactions that Arabella entered into.

Analysis of the swaps Arabella has executed: were they “currency exchange swaps”?

134 The swaps that Arabella has entered into are commonly referred to in financial markets as “foreign exchange swaps” or “FX swaps”.

135 There is also evidence that the phrase “currency swap” bears a technical meaning in financial markets. That meaning is:

A derivative contract to exchange any type of ongoing payments which give rise to a foreign currency exposure.

136 The FX swaps executed by Arabella are not “currency swaps” within that definition because they do not involve the exchange of ongoing payments.

137 Clause 10.7 does not refer to “currency and basis swap costs”, it refers to “currency exchange and basis swap costs”. While “currency swap” may bear a specific meaning in financial markets, there is no evidence that “currency exchange swap” bears a corresponding meaning nor, indeed, any technical meaning at all:

i. “currency exchange swap” is not a term defined in the Glossary of Terms published by the UK Association of Corporate Treasurers;

ii. the phrase was unfamiliar to Mr Rush, who has 28 years’ experience working in financial markets and as a financial risk management consultant;

138 During cross-examination, Mr Witts eventually conceded that he could not find the composite term and that his definition was an “educated opinion”.

Q. And it’s correct, isn’t it, that a Google search of the phrase “Currency exchange and basis swap costs” returns no hits in which that phrase is used, isn’t it?
A. That is correct and in that regard I agree with Mr Rush [transcript 469.16-19].

…

Q. It’s not a term that you located in any of the glossaries of financial terms that you looked at, is it?
A. As a composite term, no [transcript 469.32-34].

…

Q. So would it be fair to say that what you say in section 5.1 as the meaning of currency exchange and basis swap costs is really an educated opinion as to what the term must’ve intended to mean, it’s not a statement of what you have in the past heard it or seen it is to mean?
A. In relation to the basis swap costs that--

139 It would be misconceived to find that by using a phrase that appears to be a confusion of the two technical terms – “currency swap” and “foreign exchange swap” – the parties intended to adopt one technical meaning to the exclusion of the other.

140 As the defendant has rightly contended, given that, on its ordinary meaning, “currency exchange” is synonymous with “foreign exchange”, a reference to a “currency exchange swap” should be construed as including a foreign exchange swap or FX swap.

141 That conclusion is supported by the surrounding facts:

i. As at 10 January 2008, rolling FX swaps and a currency swap (such as a cross-currency interest rate swap) were alternative means by which HVB could have converted funds raised in Euros into Australia dollars. There is no rationale for construing clause 10.7 so as to indemnify HVB for the costs of one alternative, but not the other.

142 Mr Witts also acknowledged this synonymity in cross-examination.

Q. Sorry, I think you said a moment ago that in financial markets, “currency exchange” and “foreign exchange” can be used interchangeably?
A. Yes.

The broader dispute as to the meaning of “currency exchange and basis swap costs”

143 There is a broader dispute between the parties over the meaning to be given to “currency exchange and basis swap costs” in clause 10.7. Essentially:

i. Elektra says the phrase refers to the costs of entering into the swaps used to convert funding raised in Euros to Australian dollars;

incremental

144 Mr Witts purports to give expert evidence about the meaning of the phrase “currency exchange and basis swap costs” as a matter of “standard market usage”. The finding is that the phrase has no specialised meaning in financial markets:

i. in his 28 years’ experience, Mr Rush has never heard the composite phrase used before this case;

ii. the plaintiffs proved unable to point to a single document in which the phrase has been used outside the transaction the subject of these proceedings;

iii. the term is not included in the Glossary of Terms published by the UK Association of Corporate Treasurers, extracts of which are annexed to Mr Witts’ report.

a calculation by the Note Subscriber; and

145 I accept as pervasive the defendant’s submission that objectively, each of those things suggests that the parties did not have in mind some specialised meaning of “currency exchange and basis swap costs”, especially if Mr Witts is correct and the specialised meaning results in there being only a single way to calculate those costs. There would, for example, have been no cause for Mr Williams to be concerned about the costs an assignee might claim under the indemnity if those costs could only be calculated one way.

146 In consequence it is appropriate to construed clause 10.7 by giving the words their ordinary meaning. In that regard, the construction advanced by Elektra gives the words their ordinary meaning:

i. “currency exchange and basis swap costs” are the costs of the “currency exchange swaps” and “basis swaps” associated with funding the Note Subscriber’s holding of the Notes;

incremental

absolute

147 The Court may also have regard to the surrounding circumstances:

i. The Notes were to be denominated in Australian dollars.

ii. It was in the contemplation of both parties that HVB would fund its acquisition of the Notes by funds raised in Euros.

iii. It was in the contemplation of both parties that, for the purpose of acquiring the Notes, HVB would convert funds raised in Euros to Australian dollars through FX swaps or cross-currency swaps.

148 In those circumstances, viewed objectively, the “currency exchange and basis swap costs” referred to in clause 10.7 are the costs referred to in point iv above.

149 As the defendant has contended two further circumstances count against the construction advanced by the plaintiffs:

i. First, the incremental cost described in Mr Witts’ report is an amount that will always be driven towards zero by the activities of arbitrageurs. The likelihood is that the parties did not intend that HVB be indemnified against an amount that would be driven towards zero, especially when it is clear from clause 10.7 that the parties contemplated that the amount of the indemnity might exceed the 0.11% pa cap in paragraph (b) of the definition of “Interest Rate”.

(a) The interest payable on the Notes (at BBSW plus 0.80% pa) was $4,030,936.50.

(b) According to Mr Witts, the “currency exchange and basis swap costs” for the month were $211,380.93.

(c) Arabella’s actual funding costs for the month were $4,640,401.78.

$4,030,936.50	+
$211,380.93
$4,242,317.43	–
$4,640,401.78
-$398,084.35

150 In regards to the first circumstance, Mr Witts, in cross-examination, had conceded that Arabella was never intended to act as an arbitrager in its dealings.

Q. But you are not suggesting, are you that Arabella has been acting as an arbitrager, are you?
A. No.

Q. And the swaps that Arabella has entered into were not entered into as part of an arbitrage transaction, were they?
A. No they were not in your definition of arbitrage and okay I accept in the arbitrage definition as well.

151 In regards to the second circumstance, Mr Witts confirmed that there could be a loss to HVB under his calculations.

152 It is also legitimate for the Court to have regard to the heading of clause 10.7, although it cannot override the words of the clause. Here, the heading “Funding Costs Indemnity” suggests that the amount against which the indemnity is given is an actual cost of HVB, rather than a notional amount. That is also consistent with the purpose of clause 10.7 being to protect HVB against an actual cost.

Calculated in a “commercially reasonable” manner

153 There is no issue concerning the quantification of the indemnity charged to RAMS for the month of July 2008 ($67,941.70), as that amount was charged at the 0.12% pa rate that had been agreed on 16 January 2009.

154 In respect of the other amounts in issue, the following table sets out the amount actually charged to RAMS and the different amounts that Mr Witts and Mr Rush say ought to have been charged.

WGW-1	Invoiced amount	Witts amount	Rush amount
Aug 08	Tab 5	328,755.60	nil	1,551,546.08
Sep 08	Tab 12	357,173.17	31,013.59	1,617,989.94
Oct 08	Tab 18	1,556,512.13	211,380.93	2,082,888.24
Nov 08	Tab 24	1,220,739.73	nil	1,307,754.99
Dec 08	Tab 29	1,012,103.22	500,953.56	983,502.04
Jan 08	Tab 30	968,150.91	566,074.44	967,231.03
Feb 08	(3 Mar 09)	1,313,043.99	262,047.95	1,312,481.52

155 Notably Elektra does not seek to defend the calculation of the amounts claimed in August and September 2008. As the construction of clause 10.7 advanced above has been accepted, and Mr Rush’s calculations are accepted, then the amounts claimed were less than Elektra was entitled to claim, so that the plaintiffs are not entitled to restitution.

156 In respect of the amounts claimed between October 2008 and February 2009:

i. Elektra has accepted that the addition of a further 11 basis points over and above its costs was an error.

157 However and as the defendant has submitted, the net effect of those errors is that the amounts claimed by Elektra between October 2008 and February 2009 were still less than the amounts Elektra was entitled to claim, as assessed by Mr Rush.

158 In contrast to their reliance on the Witts Report, the plaintiffs sought to attack the methodology of the Rush Report, primarily on the grounds that its findings that the amount claimed under the indemnity provision compares the Australian dollar cost of funds on a fully covered borrowing with an unhedged borrowing, which is subject to currency risk. The plaintiffs contended that it is an invalid comparison according to standard market practice.

159 Mr Rush’s cross-examination yielded a concession that the above assumptions Mr Rush made were incorrect:

Q. Your methodology would mean that Arabella has an effective Euro cost of funds without incurring any currency risk, correct?
A. Yes

Q. The only way, I suggest to you, that Arabella would have an effective Euro cost of funds would be if Arabella had an open, that is, unhedged currency risk?
A. Correct. It would have the effect of the Euro cost of funds.

160 Notwithstanding this, these contentions do not assist the plaintiff’s case. No such contention was advanced directly against the actual invoiced amounts. Rather, they were advanced against the Rush Report in light of the fact that the amounts calculated by the Rush Report are materially different from the actual invoiced amounts in any case.

161 The final question is whether the defendant’s calculation of the invoiced amount itself was commercially reasonable. I have dealt with the flaws in the plaintiff’s arguments regarding the definition of “currency exchange and basis swap costs”. However, this is separate and distinct from dealing with the actual amounts claimed by the defendants.

162 One of the plaintiff’s major points of contention was that the calculations were not commercially reasonable because a large number of costs that they alleged were not “currency exchange and basis swap costs” were included in those calculations. These included what were described as “credit loading costs” and “variability costs”.

163 Mr Witts acknowledged during cross-examination that the memorandum [3041A] explaining the increase to HVB’s funding costs from 26 July 2008 contemplated cross-currency basis swaps and not foreign exchange swaps.

Q. I accept that. This memorandum contemplates a cross currency interest rate swap, do you agree with that?
A. I think it’s a cross-currency basis swap, yeah.

Q. It doesn’t contemplate an FX swap, does it?
A. No it does not.

164 The evidence suggests that a cross-currency basis swap is, in fact, a type of basis swap that appears in Appendix 5 of the Witts Report on page 39. The answer to the first question extracted above indicates that the words “basis” and “interest” are used interchangeably.

165 Further, in regards to the costs of the cross-currency basis swaps, Mr Witts conceded that such costs would include variability and credit loading costs, which is inconsistent with his definition of “currency exchange and basis swap costs”.

Q. And the cross-currency basis swap contemplates entering into a cross currency basis swap with a counterparty, the bank has regard to that counterparty’s credit, do you agree with that?
A. That is correct. [transcript 483.33-36]

…

Q. So that from the bank’s perspective, something that is a credit loading cost may not be a currency exchange and basis swap cost, do you agree with that?
A. Sorry, I thought you were saying “you do agree with that”. Sorry, yes, I do agree with that.

Q. But from the counterparty’s perspective, the counterparty will simply see a single price?
A. Yes, the counterparty would see the single price.

Q. So from the counterparty’s perspective, the amount that the bank had charged for the risk that the bank takes in being exposed to the credit of that counterparty, from the counterparty’s perspective, that amount would appear to be a cost of the swap?
A. Yes that’s right. You are suggesting, well – sorry.

Q. Do you agree with that?
A. Yes.

166 The finding is that the variability and credit loading costs that make up part of the calculation enunciated in the proposal to increase the indemnity amount constituted “basis swap costs”.

167 The plaintiffs contended that the inclusion of such costs meant that the calculation of the indemnity amount was not commercially reasonable. The finding is that as such costs were valid “basis swap costs” their inclusion could not be said to be otherwise than calculations reached in a commercially reasonable manner.

Good Faith

168 It is well established that a duty of good faith does not require a party to subordinate the party’s own interest so long as pursuit of those interests does not entail unreasonable interference with the enjoyment of a benefit conferred by the express contractual terms so that the enjoyment becomes (or could become), in words used by McHugh and Gummow JJ in Byrne v Australian Airlines Ltd (1995) 185 CLR 410, “nugatory, worthless or, perhaps, seriously undermined” (Overlook v Foxtel [2002] NSWSC 17 at [65] per Barrett J).

169 Mr Tyndall and Mr Ulrich were the subject of the plaintiffs’ attack. Of the two, Mr Tyndall bore the brunt of it.

170 In relation to Mr Tyndall, two main criticisms are made by the plaintiffs.

171 First, it is said that Mr Tyndall artificially inflated the costs charged to RAMS in order to pressure them into refinancing (“terming out”) the Notes. That submission is rejected.

172 There is nothing dishonest or lacking in good faith in one party to a contract recognising that there is a collateral advantage to exercising a legal right under the contract. That is what Mr Tyndall did. Importantly, the contemporaneous documents show that Mr Tyndall was always cognizant of the requirement that the amounts charged to RAMS be calculated in good faith and a commercially reasonable manner as numerous instances of communications between him and his advisors explicitly express the need to calculate the amounts in such a manner.

173 For instance, the very beginning of the memorandum regarding increased funding costs states that:

as long as these costs are calculated in good faith and a commercially reasonable manner

174 A list of the references in the evidence to the steps that Mr Tyndall took to confirm that the amounts to be charged to RAMS were commercially reasonable makes the point:

18 June 2008	Sought legal advice from Allens Arthur Robinson on the content of the obligation to calculate amounts in good faith an a commercially reasonable manner
25 June 2008	Emailed funding costs memorandum to Clive Parfitt for advice
26 June 2008	Flew to Munich to meet with Helmut Petit for advice. Discussed the funding costs memorandum with him.
27 June 2008	Sought confirmation from Helmut Petit that his calculation was reasonable. Provided Allens Arthur Robinson advice to Helmut Petit.
27 June 2008	Flew to London to meet with Clive Parfitt for advice
27 June 2008	Sought confirmation from Clive Parfitt that his calculation was reasonable. Provided Allens Arthur Robinson advice to Clive Parfitt.
28 June 2008	Sought advice from Brian Wong of HVB
1 July 2008	Sought advice from Jasper Gale of Lehman Bros.
4 July 2008	Telephone call with Helmut Petit.
4 July 2008	Sought advice from Dean Muir of ANZ
8 July 2008	Sought advice from Jasper Gale of Lehman Bros.
4 July 2008	Sought advice from Chad Quinn of NAB
11 July 2008	Sought confirmation from Mark Lewis and Philippe Blin of HVB
14 August 2008	Sought advice from Helmut Petit
14 August 2008	Sought advice from Jasper Gale of Lehman Bros.
14 August 2008	Sought advice from Brian Wong of HVB
17 September 2008	Sought advice from Peter Berckelman of Barclays Capital
9 October 2008	Sought advice from Brian Wong
16 October 2008	Sought advice from Clive Parfitt

175 Amongst other things, Mr Tyndall sought advice from no less than six other people with experience in pricing swaps. As the defendant has contended the extensive steps that Mr Tyndall took are not consistent with charging an arbitrarily inflated price.

176 The plaintiffs have submitted that Mr Tyndall intentionally included costs – credit loading costs and prepayment or variability costs – that he knew were not “currency exchange and basis swap costs” in the amounts charged to RAMS, the theory being that Mr Tyndall never told the people from whom he was seeking advice that the indemnity from RAMS was limited to currency exchange and basis swap costs.

177 That theory does not withstand scrutiny. Firstly, it has already been shown that the inclusion of such costs was commercially reasonable. Secondly, correspondence between Mr Tyndall and his advisors indicates that Mr Tyndall referred very specifically to “currency exchange and basis swap costs”.

178 An example is an email from Mr Tyndall to Mr Parfitt on 27 June 2008:

Dear Clive,

basis swap and foreign exchange costs

Could you give your input if this calculation is reasonable and includes all costs to be considered?

179 Another instance was Mr Tyndall’s correspondence with Dr Petit on the same day regarding the same subject matter.

Dear Helmut,

fx and basis swap costs

we are obliged to determine the amount in a commercial manner and in good faith

180 This correspondence also suggests that Mr Tyndall’s advisors were also aware of the requirement of good faith and commercial reasonableness.

181 As regards Mr Ulrich, in relation to the amounts claimed in August and September 2008, the contemporaneous documents support Mr Ulrich’s evidence that he simply charged the amounts directed by Mr Tyndall. In relation to the amounts charged from October 2008 onwards, the finding accepts as reliable Mr Ulrich’s evidence that he believed RAMS was obliged to pay the amounts claimed. As Mr Tyndall was acting in good faith, Mr Ulrich, whose actions were completely in line with Mr Tyndall, also acted in good faith.

182 The parties are to bring in short minutes of order.

*********

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Citations

RHG Mortgage Securities Pty Ltd v Elektra Purchase No 19 Ltd [2009] NSWSC 258

Most Recent Citation

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CITATION:	RHG Mortgage Securities Pty Limited & Ors v Elektra Purchase No. 19 Limited [2009] NSWSC 258
HEARING DATE(S):	16/03/09 - 20/03/09, 23/03/09
JUDGMENT DATE :	8 April 2009
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Einstein J
DECISION:	Parties to bring in short minutes of order.
CATCHWORDS:	Contracts - Subscription Agreement pursuant to which Notes in the sum of $750,000,000 were issued - Construction - Rectification - Principles - Right to rectification of Subscription Agreement a chose in action capable of assignment - Whether Indemnity Amounts and Interest Amounts were calculated in good faith and in a commercially reasonable manner as required by contractual documents - Duty of good faith does not require a party to subordinates its own interest so long as the pursuit its of those interests does not entail unreasonable interference with the enjoyment of a benefit conferred by the express contractual terms - Whether Defendant incurred any "currency exchange and basis swap costs associated with the Note Subscriber funding its holding" of the notes "using financial accommodation raised in Euros" - Restitution-Jones v Dunkel-Meaning of "currency exchange and basis swap costs"
LEGISLATION CITED:	Corporations Act 2001 (Cth)
CATEGORY:	Principal judgment
CASES CITED:	Adler v Australian Securities and Investments Commission [2003] NSWCA 131 Australasian Performing Right Association Ltd v Austarama Television Pty Ltd [1972] 2 NSWLR 467 Baker v Paine (1750)1 Ves Sen 456; 27 ER 1140 Ball v Storie (1823) 1 Sim & St 210 Bishopsgate Insurance Australia Ltd v Commonwealth Engineering (NSW) Pty Ltd [1981] 1 NSWLR 429 Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 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 Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329 Farrow Mortgage Services Pty Ltd (in liq) v Slade and Nelson (1996) 38 NSWLR 636 Fowler v Fowler (1859) 4 De G & J 250; 45 ER 97 Frederick E Rose (London) Ltd v William H Pim Junior & Co Ltd [1953] 2 QB 450 Green v AMP Life Ltd [2005] NSWSC 370; (2005) 13 ANZ Ins Cas 90-124 Hooker Town Developments Pty Ltd and Anor v The Director of War Service Homes (1973) 47 ALJR 320 Irnham v Child (1781) 1 Bro CC 92 Jones v Dunkel (1959) 101 CLR 298 Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 Marquis of Townshend v Stangroom (1801) 6 Ves Jun 328 Masterton Homes Pty Limited v Palm Assets Pty Limited & Ors [2008] NSWSC 274 Mortimore v Shortall (1842) 2 Dr & War 363 New South Wales Medical Defence Union Ltd v Transport Industries Insurance Co Ltd (1986) 6 NSWLR 740 Overlook v Foxtel [2002] NSWSC 17 Pukallus v Cameron (1982) 180 CLR 447 Ryledar Pty Ltd v Euphoric Pty Ltd (2007) Aust Contract R 90-254; [2007] NSWCA 65 Slee v Warke (1949) 86 CLR 271 Stormriders Pty Ltd v Copperart Pty Ltd [2004] NSWSC 809 Toll (FCGT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 Westland Savings Bank v Hancock [1987] 2 NZLR 21
TEXTS CITED:	JD Heydon, Cross on Evidence, 6th ed, Butterworths, Sydney, 2000 Meagher, Gummow & Lehane’s, Equity: Doctrines & Remedies, 4th Ed (2002) Butterworths LexisNexis [26-010].
PARTIES:	RHG Mortgage Securities Pty Limited (First Plaintiff) RHG Home Loans Pty Limited (Second Plaintiff) RHG Treasury Services Pty Limited (Third Plaintiff) Receivables Servicing Pty Limited (Fourth Plaintiff) Elektra Purchase No. 19 Limited
FILE NUMBER(S):	SC 50207/08
COUNSEL:	Mr I Jackman SC, Ms J Taylor (Plaintiffs) Mr M Speakman SC, Mr M Lawrance (Defendant)
SOLICITORS:	Mallesons Stephen Jaques (Plaintiffs) Allens Arthur Robinson (Defendant)