Richani v Andin Pty Ltd & Xenophou No. DCCIV-02-1266

RICHANI v ANDIN PTY LTD AND XENOPHOU
[2003] SADC 181
Judge Rice
Civil
Introduction

This is an action by the plaintiff against the defendants upon a contract. The circumstances whereby the contract between at least the second defendant, Theodore Xenophou (“Mr Xenophou”), and the plaintiff, Harry Richani (“Mr Richani”), came into existence were not the subject of significant dispute.
Mr Xenophou had undertaken the development of apartments in the city of Adelaide. The apartments were to be known as the Botanic Apartments and the site was in behind the Botanic Hotel and certain buildings that faced East Terrace, Adelaide. Mr Xenophou referred to the development as 9 East Terrace, Adelaide. It was proposed by Mr Xenophou that there be 93 luxury apartments constructed within an eight storey complex. Mr Xenophou purchased the site in his own name and had obtained both council and building approval. However, Mr Xenophou was having considerable difficulty in raising the $14 to $15 million necessary to finance the project.
Mr Richani had known Mr Xenophou for a number of years. In fact, according to Mr Richani, but denied by Mr Xenophou, Mr Richani was generally promoting the Botanic Apartments at Mr Xenophou’s request. On one occasion they met by chance at the Adelaide Casino. The inability of Mr Xenophou to obtain the necessary finance was the subject of discussion between them. Mr Richani said that Mr Xenophou said he would give Mr Richani a unit in the new development if he, Mr Richani, was able to arrange finance for the development. (The discussion is referred to in detail below.)
Following that meeting, Mr Richani arranged for himself and Mr Xenophou to meet a representative of the St George Bank. Mr Richani had previously obtained finance from the St George Bank for a much smaller development. As far as the evidence discloses, Mr Xenophou had not had any previous dealings or negotiations with the St George Bank for this or any other project. The St George Bank was a new player in the area of lending for commercial developments in this State. At the meeting itself, Mr Richani and Mr Xenophou signed an agreement written out by Mr Xenophou.
The agreement, dated 16th September, 1996, is reproduced and discussed below. Although it expressly says it “....is to confirm an agreement....” between Mr Xenophou and Mr Richani, it was treated, for the purposes of the pleadings and trial, as representing and embodying the agreement between the parties. It was subject to certain conditions but the essence of it was that if Mr Richani could “arrange”, through the St George Bank, a construction loan of $14,400,000, Mr Xenophou would give him a unit in the development as “....his full and final commission.”
It is fair to say on the evidence that Mr Richani arranged the meeting but did little more. What followed were protracted negotiations between Mr Xenophou and the St George Bank and the proposed builder. Although no point is taken on it, the St George Bank merged with the Advance Bank, a subsidiary of which was Bank SA, and Mr Xenophou continued negotiations with Bank SA. The bank made a number of offers of finance, but these were subject to certain pre-conditions. Some of the pre‑conditions could not be met and others were substituted or varied. Although the time for the acceptance of certain offers lapsed, Mr Xenophou and the bank continued with their negotiations. Eventually, by letter dated 15th December, 1997, all of the pre-conditions to the bank’s offer of finance for the project were met and the money advanced. The Botanic Apartments have now been completed. Mr Richani now claims his commission pursuant to the agreement. For some time he thought nothing eventuated from the meeting but, when he saw the construction commence, he unsuccessfully approached Mr Xenophou for his commission. Mr Xenophou said then, and now, that Mr Richani had no entitlement to a commission.
The plaintiff’s case
The plaintiff, Mr Richani, puts his case in either of two ways. The first manner in which it is put is that he entered into an agreement with Mr Xenophou acting as agent for the first defendant, Andin Pty Ltd (“Andin”), whereby the plaintiff agreed to arrange the finance. Alternatively, the plaintiff says that, if Mr Xenophou had no authority to enter into the agreement concerning finance (with the plaintiff) on behalf of Andin, then Mr Xenophou is in breach of his warranty of authority such that Mr Richani cannot enforce the contract against the company and thereby has been caused loss for which he claims damages.
The defendants’ case
Mr Xenophou appeared for himself and Andin. Neither defendant was represented by counsel. I permitted Mr Brook, who was the solicitor for both defendants, to address me in reply because of Mr Xenophou’s absence at that time.
Broadly speaking, the defendants answer the claim in these ways. First, it is said that any case put forward on the basis of agency is flawed, not least because Andin was never mentioned in the discussion at the casino or in the written agreement and Mr Xenophou never held himself out as in any way representing Andin.
Further, the defendants say that the agreement had certain pre-conditions, none of which was proved to have been met. The defendants say that Mr Richani did not “arrange” a construction loan, that the agreement is void for uncertainty or has been frustrated. Those various matters are also dealt with below.
Relationship between Mr Richani and Mr Xenophou and the meeting on 16th September, 1996
Mr Richani said in evidence that he had known Mr Xenophou for a period time and had visited his home on a regular basis. Mr Richani said Mr Xenophou asked him to endeavour to sell, as a land agent, two properties on Gorge Road at Newton (TP28‑9 and P4). More importantly, Mr Xenophou asked him to attempt to sell the Botanic Apartments project as a “going concern” because of the difficulties that were being experienced in obtaining finance for the project (see P2 and P3). Offers of finance that were made to Mr Richani did not come to fruition (TP29).
Independently of his dealings with Mr Xenophou, Mr Richani was seeking finance for a development of his own. He had had a meeting with Mr John Blunt (“Mr Blunt”) of the St George Bank. Mr Richani said that the St George Bank was a new bank in Adelaide and wanted to finance big developments. He said its approach was aggressive and it was eager to look at any developments that Mr Richani could bring to it. Although no time-frame was given for these dealings, it was clearly before 16th September, 1996 and probably in the early part of 1996.
At some stage not long before 16th September, 1996, at the Casino, Mr Xenophou put a proposition to Mr Richani which the latter expressed in this way (TP31):-
“Q.What was the proposition.
A.The proposition was if I could assist in any way to obtain finance for him, introducing perhaps financial institution that will finance the project, he would pay me in a way of a commission for arranging that finance.
Q.What was the commission to be.
A.We had - we originally were talking about - I asked him for $100,000 plus a unit. That would total about the going rate for finance brokerage. Then we bartered, sort of haggled a bit and he says ‘No, no, I can’t come up with any cash, I will not pay you any cash, but I am willing to pay a unit freehold’. Then it was accepted by me and I asked him specifically to write it in a way of contract as it comes, as a layman’s contract or whatever, and bring it with him at our meeting which I have arranged straight after my discussion with him at the casino.
Q.So the initial discussion occurred at the casino.
A.It did.
Q.What part of the casino was it.
A.We were sitting at the bar on the ground floor.
Q.As a result of that, you had struck a bargain that you would look for finance for him for the Botanic Apartments.
A.Yes.”
Following that discussion, Mr Richani spoke with Mr Blunt and made an appointment for the following Monday, 16th September, for Mr Richani and Mr Xenophou to see him. Mr Richani said he asked Mr Xenophou to bring proof of their agreement to the meeting. Significantly, Mr Richani said that he did not tell Mr Xenophou in advance with whom the meeting was to take place. On the Monday morning Mr Richani met Mr Xenophou in Hindmarsh Square, Adelaide and took him to Mr Blunt’s office at the St George Bank. Although Mr Richani is not certain about it, he left the meeting at some stage to retrieve various plans and specifications from the boot of his car (TP32). Mr Richani said that, at the conclusion of the meeting, he asked Mr Xenophou for the letter of agreement, it was signed by both of them and witnessed by Mr Blunt (TP33).
Mr Blunt, when called by the defendants, confirmed that it was his signature as witness on the document. He did not know anything of the contents of the document. Mr Blunt did not know whether or not it was prepared at the meeting or prior to it (TP97). He was merely asked to be a witness to the signatures.
As can be seen from the text of the letter below, there are a number of references to the “St George Bank”. I have already mentioned that, on Mr Richani’s account, he did not tell Mr Xenophou in advance that they were going to the St George Bank for finance. I accept Mr Richani’s evidence on this point. I find he did not mention in advance the name of the financial institution because he did not want Mr Xenophou going behind his back and depriving him (Mr Richani) of his fee (TP47-8). The likelihood is that Mr Xenophou prepared the agreement while Mr Richani was collecting items from the car. There is no doubt that it was available for Mr Blunt to witness the signatures before the end of the meeting.
I also accept Mr Richani’s evidence that the meeting lasted a considerable time (TP32). Mr Blunt said the meeting had been arranged by Mr Richani and lasted about two hours. Mr Blunt said the general details of a loan proposition were discussed. Those present at this meeting were Messrs. Richani, Xenophou and Blunt, plus Mr Joe Jackson (“Mr Jackson”) also of the St George Bank. Mr Blunt acknowledged that the St George Bank was entering the market, was keen to do business and was competitive in its lending propositions (TP98).
There is no doubt, and I so find, that Mr Richani arranged the meeting with the St George Bank. I find that the meeting lasted at least a couple of hours and that Mr Richani participated in the discussions concerning a funding proposal. I find that, in practical terms, Mr Richani did not do anything further. Although he was prepared to be further involved nothing more of substance was expected or asked of him by Mr Xenophou (TP34, 37).
The essence of the case for Mr Richani is that he claims to be entitled to his fee or commission because he got the two parties together and finance was able to be secured (TP37-8), albeit after considerable negotiation as to terms, pre-conditions and conditions.
Terms of the agreement of 16th September, 1996
Before moving to a consideration of what followed from the initial meeting with Mr Blunt, it is the appropriate time to reproduce the text of the written agreement and make certain observations about it. I have already mentioned that, although the document is expressed “....to confirm an agreement....”, the case was fought on the basis that it embodied the contract between the parties.
The signed agreement is in Mr Xenophou’s handwriting. It is on the letterhead of “Castle Building Co. Builders and Estate Developers” with “Theodore Xenophou Principal”. The handwriting is as follows:-
“16/9/97
To:    Harry Richani
         26 Liberator Drive
         Paralowie   S.A.   5108
This letter is to confirm an agreement between myself, Theodore Xenophou and Harry Richani in relation to the development known as 9 East Tce Adelaide. If Harry Richani can arrange through the St Georges Bank a construction loan of a minimum of $14,400,000 with interest capitalized during the construction period at the ruling rates of interest (approx $10.5%) I’m prepared to give a unit on level three (3) free of charge to Harry Richani, as his full and final commission.
This offer is subject to the offer from St George’s Bank coming earlier that (sic) the offer from Baulderstone-Hornibrook who are negotiating now with Adelaide Bank and Dresdner Bank. Also subject to acceptable terms from St George’s Bank and strict confidentiality.
Acceptable approval must be confirmed by Xenophou’s solicitors.
(Signed)     T. Xenophou  Witnessed by
                  H. Richani  John Blunt
  16/9/96”
A number of observations need to be made. First, there are a number of copies of this agreement, but the best appears to be exhibit P9. (The original was not produced.) An examination of that document reveals that everything except the signatures of Mr Richani and Mr Blunt is a photocopy. The signatures of Mr Richani and Mr Blunt are original. Not only must this document have been written out by Mr Xenophou in Mr Richani’s absence, it was also photocopied.
Secondly, there is no reference to the first defendant, Andin Pty Ltd. Indeed, there is no mention of the person or entity to whom the construction loan is to be offered. The construction loan is obviously in relation to the development known as 9 East Terrace, Adelaide.
Thirdly, Mr Richani became entitled to his commission, assuming certain conditions were fulfilled, if he could “arrange” a construction loan of a particular type. What is meant by “arrange” is not defined or specified. Much will depend upon what the parties intended by the use of that word.
Fourthly, leaving to one side the conditions of the construction loan, there were four other conditions: that the offer from the St George Bank come before another offer upon which Mr Xenophou was waiting; that there be acceptable terms from the St George Bank; that there be strict confidentiality and that “acceptable approval must be confirmed by Xenophou’s solicitors.” As to the last of those, the writing is not entirely clear. It appears to be “Xenophou’s solicitors”, that is, the solicitors for Mr Xenophou or (but less likely) “Xenophons, Solicitors”, that is, the firm of solicitors of which Mr Xenophou’s son is the principal.
These four discrete conditions (being apart from the construction loan) are also discussed below. However, it is able to be observed at this stage that the offer of finance from the St George Bank came before any other offer of finance and was in fact the only offer of finance (although the provision of the finance actually came from Advance Bank Australia Ltd/Bank SA because of the bank mergers). Further, the terms of the offer from the St George Bank were eventually acceptable. Yet further, there was no suggestion by the defendants that “strict confidentiality” was not observed. Finally, concerning “acceptable approval”, although there is no time mentioned for the obtaining of this approval, Mr Xenophou acknowledged that he did not seek any approval because the negotiated terms were acceptable to him and he did not see the need for legal advice (TP225).
Fifthly, Mr Xenophou and Mr Richani have each signed in their personal capacities.
And finally, assuming all the conditions of the loan were fulfilled, the agreement signed by Mr Xenophou recites that “....I’m prepared to give a unit....to Harry Richani....”. In other words, on its face, Mr Xenophou has agreed in his personal capacity to give a unit in the development to Mr Richani.
Did the plaintiff “arrange” a construction loan?
Although the actions of the plaintiff needed to relate to a construction loan of a specified type, nothing is said in the words of the agreement as to what is meant by the word “arrange”. It is therefore necessary to determine the meaning of the words used by the parties. That determination must be undertaken by an objective assessment of their intention: Hospital Products Limited v United States Surgical Corporation and Others (1984) 156 CLR 41 at 62.
The word “arrange” is capable of a range of meanings in the context of this contract. It could mean to formulate a proposal for the finance needed together with the search for a lender, attendance and participation in meetings with a prospective or actual lender, following through with correspondence and any further negotiations and ensuring that all pre-conditions imposed by a lender are fulfilled so that the loan is actually secured. Although that list may not be exhaustive, it represents a range of activities that could be encompassed by the word “arrange”. The word “arrange” could also embrace some, but not all, of those sorts of activities. The main question here is whether “arrange” means no more than getting the borrower and lender together and a construction loan is thereby secured (and I proceed upon the assumption, for present purposes, that the loan is obtained as the result of the introduction).
The construction of this agreement necessarily involves a consideration of the factual setting in which it was made. In this context I rely upon the oft-quoted words of Mason J (with whom Stephen and Wilson JJ agreed on this point) in Codelfa Construction Proprietary Limited v State Rail Authority of New South Wales (1981‑1982) 149 CLR 337 at 352:-
“The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.
It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification.
Consequently when the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties’ presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but it would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract.”
That position was confirmed by the majority of the High Court in Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 76 ALJR 436 at 439, para. [10]:-
“[10] In Codelfa, Mason J (with whose judgment Stephen J and Wilson J agreed) referred to authorities..............which indicated that, even in respect of agreements under seal, it is appropriate to have regard to more than internal linguistic considerations and to consider the circumstances with reference to which the words in question were used and, from those circumstances, to discern the objective which the parties had in view. In particular, an appreciation of the commercial purpose of a contract: Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989 at 995-996; [1976] 3 All ER 570 at 574:-
‘presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.’
Such statements exemplify the point made by Brennan J in his judgment in Codelfa (1982) 149 CLR 337 at 401:-
‘The meaning of a written contract may be illuminated by evidence of facts to which the writing refers, for the symbols of language convey meaning according to the circumstances in which they are used.’ ”
(See also Hydra Pty Ltd v Holmes & Holmes [2002] SASC 14 at paras.64 and 65, Abram & Anor v A.V. Jennings Ltd [2002] SASC 417 at paras.46-50 and Kowalski v Lochlee Pty Ltd [2003] SASC 95 at para.40.

I proceed now to apply those principles. As I understand the position, as the parol evidence rule excludes extrinsic evidence of the antecedent negotiations, I have disregarded those negotiations. However, there is much to be gleaned from the context and situation in which Mr Xenophou found himself in mid-1996.
I accept the evidence of Mr Richani that Mr Xenophou had told him that he (Mr Xenophou) had been trying “....to obtain finance through banks and nobody in Adelaide would even look at the project” (TP32). I have already touched upon other evidence (and I accept) that, at Mr Xenophou’s request, Mr Richani had tried to sell the apartments project “....before it starts as a going concern because of the financial situation” (TP29). As Mr Richani put it, no-one would finance the situation at the time. Mr Xenophou acknowledged as much (TP222-3).
Allied to the difficulty in obtaining finance for the apartments, Mr Xenophou personally was in a difficult financial situation. In December, 1993 Mr Xenophou mortgaged the land comprised in Certificate of Title Register Book Volume 5060 Folio 100 (which was all the land upon which the apartment development was to take place plus certain shops that faced directly on to East Terrace). The mortgage was for security up to $1,500,000, with interest at 15 per cent and interest repayable on 10th June, 1995. The land was mortgaged to M. Dallwitz Trusts Pty Ltd. The security made allowance for further advances (see exhibit P1 at 319 Mortgage No. 7626525).
Although it is over a year later, some of the same land (now CT Volume 5176 Folio 161, the shops facing East Terrace) was the subject of a mortgage between the same parties, this time for an amount of $3,721,000, of which $2,756,075 was already advance on Memorandum of Mortgage No. 7626525. The later mortgage was in substitution for the earlier one referred to above (exhibit P1 at 335). Even though little is spelled out in the documents, I infer that there were further advances on the first mortgage and/or accumulated interest that led to the increased consideration on the later mortgage.
The important point that I find is that, prior to the agreement in September, 1996, Mr Xenophou was unsuccessful in his efforts to obtain finance for the project or sell it as a going concern. He agreed he was desperate to get the project off the ground (TP169). There is no doubt that Mr Xenophou viewed this as “his project” (TP52). Further, the evidence discloses that Mr Xenophou knew Mr Richani as another property developer. He did not know him as a financier, but really as someone doing the same type of work as Mr Xenophou. To the extent that Mr Xenophou said that Mr Richani was not entitled to a commission because Mr Richani was not a financier, I reject that evidence. In my view, objectively viewed in the particular circumstances of this development, the term “arrange” meant no more than to get the borrower and lender together and, if a construction loan of the specified type came about, Mr Richani became entitled to his commission. It was an introduction that, if it bore a particular type of fruit, entitled Mr Richani to the agreed fee.
It is said by Mr Xenophou and on his behalf that “....the reward for his introduction is so disproportionate to the consideration he had to provide as to make the plaintiff’s case implausible.” In the circumstances of this case, there is nothing implausible about such an arrangement. Mr Xenophou was very keen from a personal and commercial perspective to see this development to fruition in his hands. He was unable to secure an offer of finance through any source and was prepared to give Mr Richani a unit if he could successfully introduce a source who would agree to provide a construction loan. Obviously Mr Richani stood to gain significantly for relatively little effort, but that was nonetheless the agreement. I expect that Mr Richani negotiated such a good deal for himself in the knowledge that he knew of a potential source of finance that was not known to Mr Xenophou. Mr Richani had had dealings with the St George Bank and was aware of its desire to enter the commercial development market on competitive terms. Therefore, in my view, it was sufficient if Mr Richani introduced or found the St George Bank for Mr Xenophou. More, of course, had to be done before Mr Richani was entitled to his commission or fee. The introduction must have caused the St George Bank to offer a construction loan that fulfilled certain criteria.
Did the introduction cause the St George Bank to offer a construction loan?
I have already touched upon the fact that the St George Bank merged with Advance Bank Australia Limited and Bank SA also merged with Advance Bank Australia Limited (see Bank Merger (BankSA and Advance Bank) Act, 1996, No. 41 of 1996). In his affidavit, D5, Mr S. Osborne put it that in January, 1997, St George Bank Limited purchased Advance Bank Australia Limited and also thereby acquired the Bank of South Australia. The practical result of those mergers for the purpose of this case was that Bank SA took over the commercial property lending previously undertaken by St George Bank. As will be seen, initial negotiations with St George Bank for a construction loan were taken over by Bank SA. If the view is taken that Mr Richani’s introduction caused a construction loan to be offered and accepted, no point was taken that any such loan came from Bank SA rather than the St George Bank.
Earlier in these reasons I dealt with the meeting at the St George Bank on 16th September, 1996. Although Mr Richani arranged the meeting, he did little after that. Mr Richani was prepared to be involved further, but nothing of substance was asked of him. In a practical sense, he did nothing to advance the negotiations other than participating at the meeting on 16th September, 1996.
What followed were quite protracted negotiations between Mr Xenophou and the St George Bank. The stages of those negotiations are as follows:-
1.The St George Bank made an indicative offer on 18th September, 1996, that is, an offer which was really a basis for further discussions, a starting point. The borrower was to be a special purpose vehicle company. However, the facility was for only $8,225,000 at 10.75 per cent, with the builder providing the balance. That indicative offer was not acceptable and more negotiations took place.
Mr Xenophou had discussions with the Adelaide Bank prior to his involvement with Mr Richani on 16th September. The agreement, P26, makes reference to any offer from the St George Bank coming before the offer from Baulderstone-Hornibrook (“Baulderstone”), who were negotiating with Adelaide Bank and Dresdner Bank. By letter dated 24th October, 1996 (P1-41), the Adelaide Bank said it was unable to continue with the application.
2.On 25th October, 1996, the St George Bank made another indicative offer for $15,153,000 at 10.75 per cent (P1-42). The facility was divided into two parts, $10,000,000 and $5,153,000. The second part of the facility was to be supported by an irrevocable guarantee from a bank acceptable to St George Bank for $5,153,000. As with the first indicative offer, the borrower was to be a company but this time Andin Pty Ltd is specifically referred to. This indicative offer also had many conditions, particularly relating to adequacy and proof of pre-sale contracts on the units. More discussions followed.
3.On 19th November, 1996, the St George Bank made its first offer of “Loan Facilities - Andin Pty Ltd” (P8 original, P1-58 copy). It was for a total amount of $14,903,000 at 10.25 per cent again divided into two facilities, one for $9,603,000 and the other for $5,300,000. Amongst the many conditions was a guarantee to be provided by Mr Martin Dallwitz up to $2,000,000, itself supported by a guarantee from the National Bank in favour of the St George Bank. Another of the conditions was an irrevocable guarantee from a bank acceptable to the St George Bank for $5,300,000 in support of the second part of the facility. Drawings on that guarantee “....may only be made to cover un-budgeted cost over‑runs or default on the part of the builder.” Mr Xenophou was also required to provide a guarantee and indemnity.
Acceptance by the borrower of the Offer of Facilities was to be made to the St George Bank within seven days or the offer lapsed (P1-66). I find that Andin Pty Ltd accepted the Offer of Facilities by an acceptance dated 29th November, 1996. The Common Seal of the company was applied and Mr Xenophou signed both as director and secretary (P1-68). I find that Mr Xenophou and Mr Dallwitz signed the Guarantor’s Acceptance which is undated (P1-67). One would expect that those two documents were signed by Mr Xenophou on the same occasion.
I have noted that the Borrower’s Acceptance is dated 29th November, 1996. By letter dated 28th November, 1996, the St George Bank confirmed to Mr Xenophou “....that the date for your acceptance of our offer has been extended until 6 December 1996” (P1-69). The Borrower’s Acceptance appears on page 10 of the offer from the St George Bank dated 19th November, exhibit P8 (the Guarantor’s Acceptance is on page 11). The Borrower’s Acceptance bears this form of typed words:-
“The borrower hereby accepts the Offer of Facilities set out in the letter dated 19th November, 1996 on the terms and conditions stated therein.”
I have found that Andin Pty Ltd accepted as borrower and that Mr Xenophou accepted as a guarantor. In fact, Mr Xenophou said it did not look like his signature on the documents. Further, he said that, not only did he not accept the offer referred to in the documents, but that he refused the offer within two days (TP83, 86, 132, 144-145). I reject that evidence. Mr Xenophou denied his signature and acceptance of the offer (with its conditions) for purposes of his own, in an attempt to avoid personal or corporate liability in this case.
The acceptance of the offer of finance did not, of itself, secure the finance. As mentioned, that offer required the fulfilment of a number of pre‑conditions required by the bank before it was bound to provide the finance. By letter dated 13th December, 1996, the St George Bank indicated that it still did not have the original of the letter of offer of 19th November, 1996, executed by all parties. The tone and text of the letter however, indicates the parties were proceeding on the basis of an acceptance of that offer (P1-70).
4.By memorandum dated 3rd June, 1997, Mr Joe Jackson, Senior Manager, St George Bank, wrote to Mr Steve Osborne, Bank SA, about the project. His memorandum commences with this paragraph:-
“Sponsor of the project, Theo Xenophou, and his solicitor, Justyn Peters, called by appointment today to meet with Steve Osborne and the writer. The purpose of the meeting was to update the Bank on progress in achieving pre-settlement conditions of Letter of Offer dated 19 November 1996 and to effect hand-over of control of the file to BSA.”
Amongst the discussions concerning meeting those pre-conditions, it was noted (P1-79) that Mr Dallwitz’s guarantee was unable to be supported by a National Bank guarantee in favour of St George Bank. The inability of Andin Pty Ltd/Mr Dallwitz to meet this pre-condition became the subject of yet further negotiations and re-working.
5.By letter dated 8th July, 1997, Bank SA wrote to the directors of Andin Pty Ltd making an “Offer of Facility” in substitution for the St George Bank offer of 19th November, 1996. The opening paragraph reads as follows (P1-92):-
“As a result of our recent discussions, Bank of South Australia a Division of Advance Bank Australia Limited A.C.N. 002 953 335 (the ‘Bank’) is pleased to offer you the facilities set out below (‘Facility’). The Facility is in substitution for the facilities offered by St. George Bank Limited under letter of offer dated 19 November 1996 (the ‘St. George Letter’). The Bank’s standard facility conditions attached to this letter (‘Conditions’) are incorporated in this letter and form part of the agreement which results from acceptance of the offer contained in this letter (‘Agreement’).”
The St George letter is referred to later (P1-102):-
“The Customer and each Guarantor hereby acknowledge and agree that the St. George Letter has expired and that the Customer shall not attempt to make any drawing or other utilisation of the St. George Letter.”
The various pre-conditions still required Mr Dallwitz provide an irrevocable bank guarantee and/or cash to an amount of $2,000,000. This pre-condition continued to be a problem.
The second part of this facility was for an amount of $5,300,000 to be supported by an irrevocable guarantee from the builder, Baulderstone “....for drawing only in respect of cost overruns under the Building Contract and the costs of default by the Builder (the ‘Works Bank Guarantee’)” (P1-97). (See also memorandum of 16/7/97 to the various parties from Bank SA, P1-108).
By a document dated 17th July, 1997, Andin Pty Ltd accepted the offer as customer/borrower and Mr Xenophou and Mr Dallwitz as guarantors. Bank SA, for reasons unexplained, seems only to have had a copy of that acceptance (P1-109). Mr Xenophou produced the original of that document, marked P19, but then doubted whether it was his signature or that of Mr Dallwitz (TP178-179). Again, I reject that evidence whereby he expresses those doubts. Mr Xenophou expressed those doubts for his own purposes, namely in an endeavour to avoid the evidential basis for Mr Richani’s claim.
6.As touched upon above, the provision of an irrevocable guarantee for $2,000,000 by Mr Dallwitz continued to be a problem. Bank SA was asked to consider a variation of that pre-condition whereby that requirement would be deleted in favour of a proposal that Mr Dallwitz would provide $900,000 for the foundations to be laid, thereby complying with the development approval timeframe. In that event the total facility would be reduced from $14,903,000 to $14,003,000. There was an acceptance by Mr Xenophou and Mr Dallwitz of this variation (P1, 112-119).
7.By letter dated 8th August, 1997, Bank SA made another “Offer of Facility”. The introductory paragraph reads as follows:-
“As a result of our recent discussions, Bank of South Australia a Division of Advance Bank Australia Limited A.C.N. 002 953 335 (the ‘Bank’) is pleased to offer you the facilities set out below (‘Facility’). This letter and the Facility is in substitution for the facilities offered by:
•St. George Bank Limited under letter of offer dated 19 November 1996 (the ‘St. George Letter’); and
•the Bank under letter of offer dated 8 July 1997 (the ‘First Bank Letter’).” (P1-120)
This offer was accepted by Andin Pty Ltd and by Mr Xenophou on 15th August, 1997. By virtue of the matters referred to in the preceding paragraph, Mr Dallwitz was no longer a guarantor.
8.     Not surprisingly in the scheme of these negotiations, there was a variation to this facility. This variation, dated 29th October, 1997, was also accepted by Andin Pty Ltd and Mr Xenophou (P1, 149-151).
9.     Amongst the pre-conditions was a guarantee to be provided by the builder, Baulderstone, in the amount of $5,300,000 as “....security for performance of the design and construction phase of an 8 Storey Apartment block at No. 9 East Terrace, Adelaide....”. That security was provided (P1, 248-249). Mr Xenophou seems to have completely misunderstood this pre-condition. He thought, or said he thought, that Baulderstones were putting in finance in the amount of $5.3 million (TP79-82). That is simply incorrect (P1, 248-249).
10.    By letter dated 15th December, 1997, Bank SA notified Andin Pty Ltd that all pre-conditions had been met and that construction funds were available. The full text of the letter is as follows:-
“I refer to the Bank’s Letter of Offer dated 8th August 1997 and subsequent variation to facility dated 29th October 1997.
I advise all pre-conditions have been met to the Banks satisfaction.
The construction funds of $11,751,000 is available for drawing, on a cost to complete basis, in line with the Letter of Offer, Variation to Facility and Facility Agreement.” (P1-251)
Although it is not made clear in that letter, the “Offer of Facility” is for a total amount of $14,003,000. The rate of interest was 9.40 per cent.
As is common ground, the apartments have now been built. The customer and borrower was Andin Pty Ltd. Mr Xenophou, in his personal capacity, was the only guarantor.
Discussion
I return to the question whether the introduction caused the St George Bank/Bank SA to offer a construction loan that fulfilled certain criteria. No point was taken that the essentials of the construction loan concerning the amount, interest rate and capitalization of interest during the construction period, were not met. On my own assessment of the evidence they were met.
Properly understood, did the introduction cause that construction loan to be “arranged” through the St George Bank? It is clear that there were at least two indicative offers each of which was the subject of negotiation. The indicative offers led to an “Offer of Loan Facilities” on 19th November, 1996. That offer was accepted within a time acceptable to the bank. Some pre-conditions to the funds being made available were not met. The pre-conditions were re-negotiated and re-worked. The fact that offers lapsed is not determinative of the matter.
Another “Offer of Facility” was made on 8th July, 1997. That offer was accepted on 17th July. One of its significant pre-conditions that was unable to be fulfilled related to Mr Dallwitz providing a bank guarantee in the amount of $2,000,000. Mr Dallwitz could, however, offer $900,000 towards the foundations being done to comply with development approval time-frames. That was acceptable to the bank and Mr Xenophou. The offer was re-worked.
The bank made another “Offer of Facility” on 8th August, 1997 which was also accepted. This offer, although itself subject to yet another variation in October, 1997, was the offer that had all its pre-conditions fulfilled. Hence the bank indicated by letter of 15th December, 1997 that the funds were available to commence the project. The fact that the offer was made to a special purpose company does not affect the matter. The bank rightly assumed a regular acceptance of the offer.
Do these twists and turns and difficulties in arriving at acceptable pre-conditions and conditions to a construction loan mean that there is no causal link between the initial introduction and the final loan? I think not. The parties were effectively the same. The purpose of the loan remained constant. The total finance required fluctuated only a little. Discussions and negotiations were ongoing, with genuine attempts on all sides to reach agreement.
There was a continuity between the initial introduction and into the indicative offers and offers of facilities, the last of which was acceptable. It would be very surprising in the context of this development if the formula acceptable to all parties could have been struck at the first attempt. After all, Mr Xenophou had not been able to achieve that with the Adelaide Bank. In this case, with each failed attempt at reaching the right formula, the parties continued to work and re-work the pre‑conditions and conditions. Eventually, those negotiations came up with an acceptable formula. In my view, the initial introduction on 16th September, 1996 led to and caused a construction loan fulfilling certain stated criteria, to be offered and accepted. That part of the agreement was met.
These cases tend to depend upon their individual facts. I have had regard to authorities, particularly Moneywood Pty Ltd v Salamon Nominees Pty Ltd (2001) 177 ALR 390, which supports the approach I have taken.
Remaining conditions from agreement of 16th September, 1996

As touched upon earlier, this agreement or “offer” as it is referred to in the agreement, was subject to some additional conditions that can be stated as follows:-
1.that any offer of finance for a construction loan from the St George Bank come before any offer from Baulderstones who were negotiating with the Adelaide Bank and Dresdner Bank;
2.that the offer of a construction loan had to be on acceptable terms from the St George Bank;
3.that strict confidentiality was to be observed by Mr Richani;
4.that “acceptable approval must be confirmed by Xenophou’s solicitors”.
As to the first of these, the offer from the St George Bank did come before the Baulderstone/Adelaide Bank offer. The Adelaide Bank did not proceed with the application or make any offer. The offer from the St George Bank/Bank SA was the only offer of finance.
As to the second, it is not, strictly speaking, an additional condition but I have included it for the sake of completeness. As I have dealt with in the major part of these reasons, terms that were eventually acceptable were offered by the St George Bank.
As to the third concerning strict confidentiality, there was no evidence to suggest that Mr Richani treated the matter with anything other than strict confidentiality. I find that Mr Richani observed strict confidentiality.
As to the fourth, the evidence does not disclose in positive terms that acceptable approval was confirmed by Mr Xenophou’s solicitors. The “approval” must refer to the loan conditions, not the agreement with Mr Richani. Mr Xenophou had as the firm of solicitors advising him, Xenophon & Co, the principal of which was Mr Xenophou’s son, Mr N. Xenophon. The evidence did disclose, however, that Mr Xenophou was being advised by Mr J. Peters who represented that he was a solicitor (see P16 and P18). More importantly, Mr Xenophou acknowledged in his evidence that he had not sought legal advice or perhaps detailed advice about the acceptability of conditions because he had the knowledge and experience to work that out for himself. He agreed he “....didn’t have a need to go (to) a solicitor” before agreeing to the terms that were actually accepted (TP225). In that sense those terms were not approved by his solicitors, but that was at his election. It is clear that that condition was included as a safeguard or protection for him and was therefore solely for his benefit. He had the power to waive that condition and I find that he did so (see Willing and Another v Baker and Another (1992) 58 SASR 357).
In my view all of the conditions whereby Mr Richani became entitled to “....his full and final commission,” have been fulfilled.
It remains to consider now whether there is a unit on level 3 that Mr Richani can take or whether an equivalent in damages should flow and against whom the judgment should be.
A unit on level 3 or damages
The initial indicative offer of 18th September, 1996 stipulated that the borrower was to be “a special purpose vehicle company, details of which are yet to be advised.” Although Andin Pty Ltd was the proposed borrower in the preliminary negotiations with the Adelaide Bank, the initial discussions with the St George Bank were not so specific. In fact, the requirement that the borrower be “a special purpose vehicle company” would seemingly have precluded Andin Pty Ltd because that was a company incorporated in 1991 with Mr Xenophou as a director and holding one of the two issued shares (P1, 256-264). Mr Xenophou described Andin Pty Ltd as a “family company....I got the company for my family” (TP196).
Historically, Andin Pty Ltd did in fact become the borrower. The units or apartments were registered in the name of Andin Pty Ltd and that company sold the units to various purchasers. On that basis, one of the arguments advanced on behalf of Mr Xenophou, the second defendant, is that even if an enforceable entitlement has been shown to have accrued, the contract has been frustrated because Mr Xenophou no longer has the ability to transfer a unit to Mr Richani. Because the bank insisted, so the argument goes, that the development be by a special purpose company (here, Andin Pty Ltd), Mr Xenophou has been deprived of the ability to transfer a unit and thereby the contract has been frustrated.
Whilst it is correct that the bank required that the development be undertaken by a special purpose company, it did not have to be that way and Mr Xenophou should not be able to avoid his personal civil liability by agreeing to the bank’s requirement. Furthermore, the acceptance by Mr Xenophou of that requirement by the bank could have been subject to Mr Xenophou’s civil liability because Mr Xenophou was aware of the possibility of such a requirement.
As noted, the bank required the development be undertaken by a special purpose company. Although Andin had been nominated by the Adelaide Bank as a potential borrower, that was not known to Mr Richani. There is no reason to suppose the St George Bank would have been prepared to use that company, especially as it seemed to want a company that was new or unused and without any adverse financial history. There was nothing in the discussions between Mr Xenophou and Mr Richani as to suggest Mr Xenophou was acting as agent for anyone else. In fact, the agreement of the 16th September, 1996 specifically refers to a personal agreement and undertaking. Reliance upon agency by the plaintiff has not been made out.
I also note that at the time of the agreement Mr Xenophou was the owner of the site upon which the development was to take place. The sale of the site to Andin did not take place for some time.
On the view that I have taken of the matter, it has not been proved that Mr Xenophou was in any way acting as an agent for Andin Pty Ltd when the agreement of 16th September, 1996 was signed. It was Mr Xenophou’s intention and the wording of the agreement that he would personally undertake to pay in the form of a unit if all conditions were fulfilled. Although he has deprived himself of the ability to transfer a unit to Mr Richani on that level, he should pay the value of a unit on that level. The third level is not the same as the third floor; the second floor is the third level.
Quantification of damages
Mr Xenophou should pay in damages an amount equivalent to the value of a unit on level 3 calculated as at the time Mr Richani’s entitlement accrued. That time was about December, 1997 when all of the pre-conditions had been fulfilled and Bank SA made funds available to commence the project.
It is also clear from the evidence that units on that level varied in value, being the value at which it was proposed that they be sold once built. They had different lay-outs, had different views and were in different positions.
The agreement was not void for uncertainty because no specific unit was nominated. For my purposes I will proceed on the basis of the cheapest unit on that level, being the basis upon which Mr Xenophou would have proceeded (TP185). Mr Xenophou would have had to make an election.
Even if Mr Xenophou remains as the owner of a unit on level 3, it would not now be appropriate to transfer any such unit, not least because I would expect it has a greater value than was the case in December, 1997. The value of the cheapest unit upon the initial offering was $145,000 (TP194). In my view it is not appropriate to use a value of a later time. Interest on the Supreme Court scale will be calculated from December, 1997 on the $145,000. The interest I have used is the average for that period, namely 6.4 per cent per annum. The interest component is $55,680.
There will be judgment for the plaintiff against the second defendant, Mr Xenophou, in the amount of $200,680 inclusive of interest.
There will be judgment for the first defendant, Andin Pty Ltd, against the plaintiff.
I will hear the parties on the question of costs.

[2003] SADC 181

23 December 2003