St George Bank Ltd v Indigenous Business Australia

[2007] NSWSC 331

CITATION:	St George Bank Ltd v Indigenous Business Australia [2007] NSWSC 331 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	17, 18 October 2007
JUDGMENT DATE :	1 November 2007
JUDGMENT OF:	Hammerschlag J
DECISION:	Summons dismissed with costs
CATCHWORDS:	CONTRACT - Construction - whether vague and uncertain - meaning of "prudential requirements and commitments" - whether default of any such requirements and commitments - DAMAGES - Whether damages alleged were caused by alleged breach
LEGISLATION CITED:	Aboriginal and Torres Strait Islander Commission Act 1989 (Cth) Banking Act 1959 (Cth) Fair Trading Act 1992 (ACT) Trade Practices Act 1975 (Cth)
CASES CITED:	Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522 Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 249 Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503 Brown v Gould [1972] Ch 53 Cohen & Co v Ockerby & Co Ltd (1917) 24 CLR 288 Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 Re VX96A and Insurance and Superannuation Commissioner (1996) 23 AAR 427 Mellstrom v Garner [1970] 1 WLR 603 Poseidon Ltd & Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310 March v Stramare (E&MH) Pty Ltd (1991) 171 CLR 506 Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 Wenham v Ella (1972) 127 CLR 454 Hadley v Baxendale (1854) 9 Exch 341 Allstate Life Insurance Co v Australia & New Zealand Banking Group (No 32) (1996) 136 ALR 627 Ellis v Wallsend District Hospital (1989) 17 NSWLR 553
PARTIES:	St George Bank Ltd (ACN 055 513 070) Indigenous Business Australia
FILE NUMBER(S):	SC 50188/05
COUNSEL:	A.G. Bell SC with N Kabilafkas (Plaintiff) M.R. Aldridge SC (Defendant)
SOLICITORS:	Henry Davis York (Plaintiff) Turks Legal (Defendant)

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

HAMMERSCHLAG J

1 November 2007

50188/2005 ST GEORGE BANK LTD –v- INDIGENOUS BUSINESS AUSTRALIA & ANOR

JUDGMENT

INTRODUCTION

1 HIS HONOUR: The plaintiff is St George Bank Ltd (“the bank”). The first defendant is Indigenous Business Australia which is the successor to the Aboriginal and Torres Strait Islander Commission (“ATSIC”).

2 ATSIC was a body corporate established by the Aboriginal and Torres Strait Islander Commission Act 1989 (Cth) (“ATSIC Act”). It was abolished under the Aboriginal and Torres Strait Islander Commission Amendment Act 2005 (Cth). By operation of that Act the defendant became liable to pay and discharge the liabilities of ATSIC (if any) which are the subject of these proceedings.

3 The bank sues the first defendant for damages for breach of contract and for loss which it says it sustained by conduct of ATSIC which was misleading or deceptive or likely to mislead or deceive in contravention of the Trade Practices Act 1975 (Cth) and the Fair Trading Act 1992 (ACT).

FACTUAL BACKGROUND

4 Durahrwa Training and Development Aboriginal Corporation (“DTDAC”) was a non-profit indigenous community body incorporated under the Aboriginal Councils and Associations Act 1976 (Cth). It was wound up on 20 May 2005 in the Federal Court of Australia on the application of the bank.

5 DTDAC was a parent administrative organisation which provided facilities and services for a group of entities including Durahrwa Commercial Enterprises Pty Ltd (“DCE”), a subsidiary company of DTDAC.

6 DCE conducted a number of businesses including one known as Northern Rivers Tea Estates (“NRT”), a tea plantation business in the Northern Rivers District of New South Wales. It operated plantations at Fairy Hill and Corndale.

7 DTDAC was funded largely, if not exclusively, by loans and grants from ATSIC. Some of its funds were used to finance the activities of DCE including the tea business.

8 On 13 September 2001 ATSIC and DTDAC entered into a loan agreement (“the first loan”) under which ATSIC lent DTDAC $1,392,000 repayable over fifteen years in 168 monthly instalments. The first repayment was to be on the fifteenth day of the month following twelve clear months after the date the loan was fully drawn. The loan was fully drawn on 13 September 2001. The first repayment instalment was due on 15 October 2002, and the second on 15 November 2002.

9 Clause 1.1 of the first loan defined:

(a) “Business” to mean “the business specified to in item 14 of the Schedule”, which in turn defined the “Specified Business” as “Tea grower/producer trading under the name DURAHRWA COMMERCIAL ENTERPRISES PTY LIMITED ACN 096 340 135”;

(b) “Moneys Payable” to mean “all money, including the Loan, interest and other money payable by the Borrower to ATSIC under this Agreement and under the Security Document(s)”; and

(c) “New Company” to mean “Durahrwa Commercial Enterprises Pty Ltd ACN 096 340 135, the company created to operate the Business”.

10 Clause 11.1 of the first loan provided relevantly as follows:

“An ‘Event of Default’ for the purpose of this Agreement shall occur when:

(a) the Borrower fails to pay any Moneys Payable when they are due and payable;

…

(d) the New Company conducts the Business in a manner which may result in the non payment of the Moneys Payable or ATSIC being unable to recover the Moneys Payable, or have the effect of prejudicing ATSIC’s rights in any way to recover the Moneys Payable under the Security Document(s);

(e) the New Company ceases to conduct the Business or fails to maintain or hold any permits or licences necessary to operate the Business or is in breach of any such permits or licences

…

(k) the Business is terminated, dissolved or wound up (or an application has been made or an arrangement has been entered into to terminate, dissolve or wind up the Business) or the Business has been placed under receivership or an encumbrance is created or a receiver appointed over any shareholding in the Business”.

11 Clause 11.2 of the first loan provided:

“If an Event of Default occurs ATSIC shall be entitled to payment of all the Moneys Payable and to enforce all its rights under this Agreement and under the Security Documents.”

12 In early 2002 DTDAC was looking to borrow money to be used to develop a tea plantation which it had recently purchased with ATSIC funding.

13 An agent approached the bank on behalf of DTDAC in March 2002 seeking a loan of $750,000.

14 Mr Michael Conrad was then senior relationship manager at the bank’s branch at 60 Marcus Clarke Street, Canberra.

15 Mr Paul Kane was the bank’s Regional Manager, Corporate and Business Banking, for the Australian Capital Territory.

16 The agent informed the bank that the loan would be guaranteed by ATSIC and that the vast majority of the funding would only be for a 12 month term and would be replaced with other lending guaranteed by ATSIC.

17 By letter dated 13 March 2002 (“the facility letter”) the bank offered DTDAC financial accommodation in the form of an overdraft facility (“the facility”) with a limit of $750,000 subject to review by the bank and variation by it at any time at its discretion.

18 In a section entitled “Term”, the facility letter provided that DTDAC “must repay all … monies due or owing to St.George in connection with the Facility at any time within 24 hours of a demand being made by St.George. The Facility will be fully reviewed by St.George at least annually”.

19 In a section entitled “Security”, the facility letter provided:

“The provision by the Borrower of the following pursuant to the Conditions Precedent:
i) Limited Guarantee of $750,000 by Australian & Torres Strait Islanders Commission (‘ATSIC’). (New security).”

20 In a section entitled “Conditions Precedent”, the facility letter provided:

“The Borrower shall not be entitled to request any Facility Advance after acceptance of this offer and St.George shall not be required or obliged to make available the Facility until St.George has received in a form and on terms satisfactory to St.George:

1. St.George Panel Solicitor is to confirm that the Borrower has the legal capacity to raise Bank funding.

2. The loan security to be provided by the limited guarantee from ATSIC is also exclusive of all accrued interest (including any default interest) and costs that may extend over the limit of $750,000.

3. The Bank acknowledges that no Establishment Fee has been charged for the Facility as the business referrer Capital Corp Finance & Leasing Pty Ltd may charge an alternate fee.

4. ATSIC is to confirm on a yearly basis that DTDAC is not in default of any of their prudential requirements and commitments.

5. In the event that ATSIC confirm that the Borrower is in default of prudential requirements and commitments the Overdraft Facility held with St.George Bank will be deemed to be in default also”. ( emphasis added )

21 The facility letter was accepted by DTDAC under its common seal on 18 March 2002 and was executed by ATSIC under its common seal on the same day.

22 The bank instructed solicitors to prepare security documentation in accordance with the facility letter.

23 On 18 June 2002 ATSIC executed a Deed of Guarantee (“the guarantee”) in favour of the bank as lender. The guarantee was also executed by DTDAC.

24 The guarantee contained the following provisions:

“4A This Guarantee shall only operate during the period stated in item 6 of the Schedule and any demand made pursuant to clause 1 hereof must be made not later than 60 days after the expiration of that period to be a valid demand under this Deed.
5. As a condition precedent to the Lender making demand on the Guarantor pursuant to Clause 1, the Lender must first take reasonable steps to recover the moneys hereby secured provided that:
(a) where item 5 of the Schedule has been completed the Lender shall be deemed to have taken reasonable steps to recover the moneys hereby secured by making reasonable efforts to realise on the Other Securities, as defined in Item 5, pursuant to its power of sale providing such power of sale can be exercised by virtue of the security document or by statute and it is not necessary to seek a court order for sale. The Lender will be taken to have made reasonable efforts by offering the Other Securities once for sale by public auction at the price of a valuation obtained by the Lender and the Lender shall not be required to take any other steps such as appointment of a receiver or manager or otherwise; and
(b) where item 5 has not been completed the Lender shall commence legal proceedings against the Borrower in a Court of appropriate jurisdiction and shall obtain judgment in the event of proceedings being undefended. The Lender will be taken to have taken reasonable legal steps in enforcing any judgment as aforesaid by having execution attempted on the property of the Borrower once and the Lender shall not be required to take any other action in respect of any such judgment if execution is not successful. The Lender shall not be required to institute bankruptcy proceedings. In the event of the Lender being unable to serve originating Court process on the Borrower or any other court process or in the event of the legal proceedings hereinbefore referred to being defended the Lender shall be deemed to have taken all reasonable steps to enforce the Loan without the need to take any other action.”

25 Item 6 of the Schedule specified the period as “Twelve (12) months from the date of this Deed”.

26 Item 5 was not used.

27 The facility was implemented on 18 June 2002.

28 On 28 November 2002 DTDAC wrote to ATSIC asking for an extension of the “payment holiday period” under the first loan for a further 12 months. The basis for the request was cash flow difficulties which were being experienced from the delay in receiving sales income from the tea and the incurring of expenditure in the meantime.

29 By letter dated 6 December 2002 ATSIC approved the deferral for another 12 months from November 2002 to October 2003 and reduced the interest rate to nil during that period.

30 On 10 April 2003 ATSIC and DTDAC entered into a further loan agreement for a further advance of $100,000 to DTDAC (“the second loan”).

31 Clause 11 of the second loan was in terms identical to clause 11 of the first loan.

32 Clause 23 of the second loan provided that DTDAC and DCE “shall each comply with their respective obligations set out in item 16 of the Schedule”. Item 16 of the Schedule was entitled “Special Conditions” and and included the following:

“(1) The existing Bank Guarantee Facility to be re-negotiated between the Borrower [DTDAC] and ATSIC by 26 September, 2003 to the satisfaction of ATSIC.
(2) The Borrower must satisfy ATSIC that there is a reasonable basis for the projected sales tonnages and prices as per the cash flow projections provided by the Borrower covering the periods from January, 2003 to the end of June 2004.
(3) The Borrower acknowledge the ATSIC reservations about the capacity of the business to service its total debts;
(4) That should the anticipated income stream from the proposed tea sales to Woolworths, or subsequent negotiations, not eventuate by 31 March, 2003, this will be treated as, and be deemed to be, an event of default under all securities held by ATSIC in relation to the monies advanced under this Agreement as well as under the Loan Agreement between the Borrower and ATSIC dated 13 September, 2001 thereby entitling ATSIC to exercise all rights and remedies available to it as a result of the occurrence of an event of default;
(5) That the loan funds will be progressively released in line with, and be consistent with, the cash-flow forecast;
(6) That the existing Guarantee and loan, as well as the new loans are to be aggregated and become due and payable if supply contracts with the supermarkets for volumes and prices consistent with the cash-flow projections (as communicated to ATSIC by the Borrower prior to the date of this agreement) have not been negotiated by 31 March 2003;

… “

33 In April 2003 a request was made within ATSIC to Mr Robert King, whose designation at that time was Senior Commercial Officer, to approve an amount of $34,023 for business support for DTDAC. The assistance was needed from ATSIC to meet urgent expenses for the tea business in view of delay in funding from ATSIC’s national office. An internal memorandum recorded that the “Borrowers” (presumably DTDAC) were currently negotiating with Woolworths for sale of the NRT product commencing from early May 2003. The money sought was needed to pay wages, leasing commitments and outstanding invoices in that amount. Only $3,558 was available in their bank overdraft (presumably the facility) and there was concern that if the commitments described were not met the business would fail.

34 At the time, a decision had not been made by Woolworths to buy the tea product and it was expected that Woolworths would make a decision by the end of April 2003.

35 The memorandum recorded that in the meantime NRT’s cash flow had all but dried up.

36 On 30 April 2003 DTDAC was overdrawn beyond its limit. Mr Conrad spoke to Angela Webb of DTDAC and on 6 May 2003 $2,033.01 was deposited and the facility was within its limit.

37 About this time ATSIC retained an organisation known as Prosperity Personal and Corporate Advisors (“Prosperity”) to perform an assessment on behalf of DTDAC on the NRT business. Prosperity produced a report in May 2003. The Prosperity report recorded that the business was facing severe cash flow problems and experiencing a high degree of financial hardship. It identified transfers of grant specific funding between different areas of DTDAC including a transfer in February 2003 to DCE of $9,844. The report stated that the transfer was recognised in the accounts of DTDAC as a “loan from NRT” and stated the following:

“Accordingly, DTDAC is in breach of its commitment to the Commission by disbursing $9,844 in funds to DCE, that are intended for meeting creditor payments in NRT.

We advise that all other transfers made from Legal Services funds were correctly reallocated back to Legal Services.

C onclusion
With exception of the above noted transfer, all funds were disbursed in accordance with funding agreements.”

38 The report made it clear that the financial viability of NRT was in large part contingent on the outcome of negotiations with Woolworths to take the product.

39 On 7 May 2003 ATSIC approved funding to pay NRT’s outstanding accounts in the amount of $34,023. A letter of that date from Mr Paul Ryan, a senior commercial officer within ATSIC, to DTDAC said the following:

“I understand that you have shut down the operation so that the payment of the outstanding wages and invoices in the amount of $34,023 will be the last costs incurred until the future of NRT has been decided.
I also understand that the only ongoing cost will be the equipment lease costs. This matter will also be raised at the meeting with the Programme Manager.
The other matter identified in the Prosperity Report was the sum of $9,844 that was transferred to Durahrwa Commercial Enterprises from NRT funds. Would you please advise me of your proposal to return the funds to the NRT account.”

40 On 8 May 2003 Mr Philip Neal, an ATSIC Development Manager, wrote in an email to Mr Ryan, that he had just spoken with Mr Hegedus (a director of DTDAC) who had advised that the Woolworths tea contract was not likely to materialise. The email records that Mr Hegedus informed Mr Neal that all but one staff member had been put off and that that person would finish the following week and that “the business had been closed down”. The email went on to say:

“From memory, closing down a business is a standard default clause in every BDP loan contract. Irrespective of that clause, DTDAC are in default of the most recent loan contract and under the terms of the loan ATSIC can S.20 now.”

41 The reference to S.20 was a reference to s 20 of the ATSIC Act which was at the relevant time in the following terms:

“(1) The Commission may give written notice to a person or body to whom a grant has been made under this Part stating that the Commission is satisfied that the person or body has failed to fulfil a term or condition of the grant.

(2) A person or body who is given notice under subsection (1) is liable to pay to the Commission an amount equal to:
(a) the amount of the grant; or
(b) so much of the grant as the Commission specifies in the notice.
(3) The Commission may give written notice to a person or body to whom a loan has been made under this Part, stating that the Commission is satisfied that the person or body has failed to fulfil a term or condition of the loan.
(4) A person or body who is given notice under subsection (3) is liable to pay to the Commission, immediately, an amount equal to the sum of:
(a) so much of the amount of the loan as has not yet been repaid; and
(b) any accrued interest that has not been paid;
or so much of that amount as the Commission specifies in the notice.
(5) This section does not affect the availability to the Commission of any legal or equitable remedy for a failure to fulfil a term or condition of a grant or loan made by the Commission under this Part”.

42 On 31 May 2003 DTDAC was again over its facility limit.

43 18 June 2003 was the expiry of 12 months from the date ATSIC gave the guarantee.

44 On 19 June 2003 Mr Conrad spoke again to Angela Webb. He asked her what DTDAC intended to do with the facility and she informed him that they wanted to be able to clear the debt from the sale of a tea plantation. Angela Webb undertook to send him a note. He did not do anything further at that time to formally review DTDAC’s position.

45 About a week later, on 25 June 2003, the facility was brought back into order.

46 Although there had been earlier reference to the tea business having been shut down, on 15 August 2003 DTDAC sought additional financial assistance from ATSIC to support the growth of NRT into a position of profitability. There is reference in documents to the tea business at that time no longer being conducted by DCE but by another entity, Durahrwa Enterprises Ltd.

47 18 August 2003 was 60 days after the expiry of 12 months from the date ATSIC gave the guarantee.

48 On 24 August 2003 a business analyst within ATSIC expressed the view that the business could not demonstrate viability and did not support any additional funding.

49 On 3 September 2003 Mr Tony Jones, a senior account executive of the bank, wrote to DTDAC concerning the annual review and renewal of the facility which was then due in accordance with the facility letter. The bank stated that it required the following information to assist with this process:

· “Copy of 2002 & 2003 (the latter if available) Financial Statements. If 2003 Statements are unavailable please advise whey they will become available.

· Confirmation from ATSIC that Durahrwa Training & Development Aboriginal Corporation (DTDAC) is not in default of any of their prudential requirements and commitments.”

50 The letter went on further to say:

“It is noted that the overdraft was originally provided for a 12 month period, with the intention that it be repaid following receipt of ATSIC funding from various development programs and business activities.
Please advise the intentions of DTDAC with regards to the repayment or continuation of the overdraft facility. If it is the wish of DTDAC to retain the overdraft, St.George Bank will require confirmation from ATSIC that they are prepared to continue providing their guarantee of the facility for a further 12 months.
It would be appreciated if you could reply to the above request by no later than 26 September 2003.
If you have any enquiries please contact me on 6243 5879 or alternatively Michael Conrad on 6243 5374.”

51 On 30 September 2003, as a consequence of the debiting of interest, the facility was overdrawn beyond its $750,000 limit. As at 15 October 2003 DTDAC was overdrawn to the extent of $751,531.04.

52 On 30 October 2003, Mr Hegedus informed Mr Jones that he was in the process of arranging finance for the NRT business and would discuss the overdrawn amount with Angela Webb of DTDAC and rectify the position by the end of the week.

53 An email of 18 November 2003 from Mr Payne of DTDAC to Mr King recorded that NRT closed operations at the end of October 2003. DTDAC’s “Farm Management Account” with the National Australia Bank nevertheless shows a debit for equipment finance on 24 November 2003.

54 On 12 December 2003 the bank wrote to ATSIC recording that no formal reply had been received to written and verbal requests for confirmation of the renewal of the guarantee for $750,000. The bank stated:

“St George Bank Ltd has prudential requirements to ensure continuance of loan security and consequently we are now placed in a position where no confirmation, nor have we received any formal contact from ATSIS regarding this matter, constitutes a default of the facility” [sic]

55 On 12 January 2004 ATSIC appointed receivers to DTDAC.

56 No demand was made by the bank under the guarantee before it expired on 18 August 2003, that is 60 days after the expiry of 12 months from its date.

57 At no time did ATSIC confirm to the bank that DTDAC was or was not in default of any requirement or commitment, prudential or otherwise. It also did not inform the bank of any inability on its part to give any confirmation either way.

THE CLAIM IN CONTRACT

58 Mr A.G. Bell SC who together with Mr N. Kabilafkas appeared, put the bank's claim in contract as follows:

a by pars 4 and 5 of the “Conditions Precedent” in the facility letter (“the notification provisions”) ATSIC undertook on a yearly basis to confirm to the bank that DTDAC was not in default of any of its prudential requirements or commitments, and if it was in such default, to confirm that fact to the bank;

b ATSIC was obliged so to confirm within a year of the facility being granted, that is, by no later than 18 June 2003;

c The occurrence of Events of Default under the first loan and the second loan and non-compliance by DTDAC with the conditions of an ATSIC grant to it constituted default by DTDAC of their prudential requirements and commitments;

d ATSIC failed, in breach of its obligation to provide the confirmation that DTDAC was in default, to confirm that fact to the bank; and

e had ATSIC confirmed any default by DTDAC, the bank would have taken steps, in accordance with its ordinary procedures, to enforce the guarantee. It did not do so and thereby lost the benefit of that security. It consequentially suffered damages, being the amount ATSIC would have been liable to pay it under the guarantee.

59 Mr M.R. Aldridge SC who appeared for the first defendant, put the following:

a the notification provisions were superseded and supplanted by the giving by ATSIC of the guarantee and the bank accordingly had no recourse to them;

b the notification provisions were vague and uncertain and unenforceable, because no certain meaning could be given to the words “prudential requirements and commitments”. It is impossible to know what was meant by a prudential requirement or commitment and the bank had failed to identify what the requirements and commitments concerned were. Also the notion of being in default of an overdraft facility is nonsense. The bank could have called up the loan at any time;

c the notification provisions do not on their proper construction disclose any promissory obligation undertaken by ATSIC;

d if the notification provisions had any operation, all they required of ATSIC was to confirm non-default. Paragraph 5 should be read as deeming a default of the overdraft facility if ATSIC failed to give the confirmation of non-default as required by par 4;

e whatever meaning is to be given to “prudential requirements and commitments”, DTDAC was not in default of them so that if any notice had been given it would have confirmed no default, with the consequence that the bank would have taken no steps to enforce the guarantee before it expired. Accordingly, the bank suffered no damages by the breach; and

f even if ATSIC had notified the bank of the matters which the bank contends constituted default, the bank would still not have acted to enliven the guarantee before it expired and therefore suffered no damage by the breach in any event.

60 A submission that the notification provisions failed for want of consideration was abandoned during oral submissions.

61 I will endeavour to deal with the issues raised by the parties’ contentions in the logical sequence in which they arise.

Did the guarantee supplant the notification provisions?

62 The submission on behalf of the first defendant that the giving of the guarantee supplanted any obligations upon ATSIC in the notification provisions is unsound and can be disposed of shortly.

63 Paragraph 5 provides for a particular event of default under the facility letter. It contemplated the existence of that default being established by ATSIC confirming to the bank default by DTDAC of its prudential requirements and commitments. If the guarantee supplanted the notification provisions, an event of default contemplated in the facility letter would be eliminated. This could not have been the parties’ intention.

64 Cognately, the notification provisions have a field of operation beyond the operation of the guarantee. Put another way, the guarantee is expressed to have been given to secure the obligations of the borrower to the bank pursuant to the terms and conditions of the facility. The notification provisions are such terms and conditions. The guarantee secures the performance of the borrower of those provisions, it does not eliminate them.

65 The provision of the guarantee was clearly a condition precedent to the obligation of the bank to make the facility available. The operation of that condition did not require execution of the facility by ATSIC whereas the obligations, if any, under the notification provisions did. The execution by ATSIC of the facility letter therefore points against the proposition contended for.

66 The giving by ATSIC of the guarantee accordingly did not supplant the notification provisions.

Are the notification provisions vague and uncertain and if not, how do they operate?

67 The notification provisions have a number of self evident shortcomings.

68 The parties did not define what was intended by the phrase “prudential requirements and commitments”, nor did they specify what was contemplated by “on a yearly basis”.

69 Whilst par 4 contains a positive requirement to confirm non-default only, par 5 contemplates confirmation of default but is not expressed so as to clearly impose any positive requirement to do so. It does not require ATSIC to specify the nature of any default which it confirms.

70 Being part of a commercial contract, the principles which are to be applied in interpreting the notification provisions and determining whether they are void for vagueness are the following:

a their meaning is to be determined by what a reasonable person would have understood them to mean. This requires consideration of the language used, the surrounding circumstances known to the parties, the purpose of the transaction and objects which it is intended to secure: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522;

b the fact that words in a contract may have more than one possible meaning, or which, when construed, can produce in their application more than one result does not make the contract void for uncertainty. As long as the words are capable of a meaning, they will ultimately bear the meaning which on their proper construction they are found to mean. The Court is not to take a narrow or pedantic approach in the case of commercial arrangements: Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 at 436;

c the Court treats, so far as possible, dealings between business people as effective and seeks to uphold rather than to destroy bargains: Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503 at 511. Only if it is driven to it will the Court hold a provision void for uncertainty: Brown v Gould [1972] Ch 53; and

d the Court does not make a contract for the parties which they themselves have not made. However, even where the terms of a commercial contract are expressed shortly, elliptically or leaving much to be understood, the Court endeavours to construe its language fairly and broadly without being too astute or subtle in finding defects and having regard to the object which the parties had in mind: Cohen & Co v Ockerby & Co Ltd (1917) 24 CLR 288 at 300; Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109.

71 For the bank it was submitted that “prudential” bears a similar meaning to that given to it by s 5 of the Banking Act 1959 (Cth) which contains a definition of “prudential matters” as follows:

“matters relating to:

(a) the conduct by an ADI, an authorised NOHC, a relevant group of bodies corporate, or a particular member or members of such a group, of any part of its or their affairs in such a way as:
(i) to keep the ADI, NOHC, group or member or members of the group in a sound financial position;
…
(b) the conduct by an ADI, an authorised NOHC, a relevant group of bodies corporate, or a particular member or members of such a group, of its or their affairs with integrity, prudence and professional skill ”. [emphasis added]

72 The acronyms ADI and NOHC are, respectively, short for authorised deposit-taking institution and non-operating holding company. It was not suggested that ATSIC qualified as either.

73 Section 11AF of the Banking Act 1959 (Cth) authorises the Australian Prudential Regulation Authority (APRA) to make or determine prudential standards relating to prudential matters to be complied with by specified entities including ADIs and NOHCs.

74 It was submitted that given that one of ATSIC’s statutory functions was to make loans and to give grants to fund entities such as DTDAC, the phrase connotes, as between ATSIC and DTDAC a legally cognisable obligation relating to sound financial and business practice and that “prudential” should (against that factual matrix) be taken to refer to requirements and commitments imposed on DTDAC under the terms and conditions of loans and grants made by ATSIC to DTDAC. Such terms and conditions included, it was put, the “Events of Default” provisions in the first loan and the second loan and it followed that the existence of such an Event of Default put DTDAC in default of its prudential requirements and commitments.

75 It was put that a failure by DTDAC to comply with the terms of a grant from ATSIC was in a like position.

76 With respect to the first loan and the second loan it was submitted that as at 18 June 2003 (the expiry of a year from the implementation of the facility), DTDAC was in default in the following respects:

a the tea business had been shut down or ceased to be run by DCE in about May 2003 which was an Event of Default under cl 11.1(e);

b DTDAC or DCE (or both) were conducting the tea business in a fashion which may result in the non-payment of the Moneys Payable or ATSIC being unable to recover them, or have the effect of prejudicing ATSIC’s rights to recover them which was an Event of Default under cl 11.1(d);

c by 31 March 2003 the anticipated income stream from the proposed tea sales to Woolworths had not eventuated which, under Special Condition 16(4) of the second loan, was deemed to be an Event of Default under both the first loan and the second loan; and

d DTDAC had not made the repayments required by the first loan on 15 October 2002 or 15 November 2002. This was an Event of Default under cl 11.1(a), even though that default had been waived by ATSIC in its letter dated 6 December 2002.

77 In submissions both parties appeared to accept that “on a yearly basis” required whatever was required to be done by ATSIC to be done on or before 18 June 2006.

78 Neither party drew to the Court’s attention any authority which might be of assistance with respect to the meaning of “prudential requirements and commitments”.

79 The term “prudential risk”, which is used in s 126C(5) of the Superannuation Industry (Supervision) Act 1993 (Cth) was considered by the Administrative Appeals Tribunal in Re VX96A and Insurance and Superannuation Commissioner (1996) 23 AAR 427 at 437. The Tribunal was constituted by Deputy President McDonald and Member McLean.

80 The Tribunal had regard to the Shorter Oxford Dictionary definition of “prudential” and that in the Macquarie Dictionary. The Macquarie Dictionary defines prudence as:

“1. cautious practical wisdom: good judgment: discretion: 2. the quality or fact of being prudent: 3. regard for one’s own interests: 4. provident care in management: economy or frugality.”

81 The Tribunal held as follows:

“Thus, in the context of s 126C(5), the Tribunal must be satisfied on the totality of the evidence before it that the applicant is highly unlikely to pose any risk in the exercise, as an officer of a company which is to be a trustee, of his judgment, wisdom and provident care in the management of the superannuation entities under his control.”

82 It can be fairly safely assumed that the underlying commercial purpose of the notification provisions was to ensure that ATSIC (which presumably had the means of knowledge) would inform the bank (which did not have the means of knowledge) of DTDAC’s failure to meet binding requirements imposed on it to guard against it acting improvidently.

83 It is possible to give the words a sensible and commercial meaning. They are not, in my view, what Harman L.J described in Mellstrom v Garner [1970] 1 WLR 603 as “a farrago of nonsense”.

84 Approaching the matter broadly, fairly and against the commercial background of this transaction, the notion of “prudential requirements and commitments” involves, to my mind, at least the following two elements:

a an identifiable standard of behaviour required of DTDAC which may involve it doing something or refraining from doing something including by ensuring the existence or non-existence of a particular state of affairs;

b the underlying purpose of which is to ensure the taking by DTDAC of provident care in the conduct of its financial affairs.

85 I am inclined to think that the notion comprehends in addition that the standard concerned be externally imposed on DTDAC in the sense that it be imposed either by law or by a person or body which has the power to impose it on DTDAC, irrespective of DTDAC’s wishes. (The reference to “their” in par 4 of the facility letter (which is absent in par 5) is a reference, I consider, to DTDAC not to ATSIC).

86 If this be the case, then obligations incurred under the first loan or second loan agreements would not qualify because they are merely matters of contract which DTDAC had the freedom to accept, reject or re-negotiate. Had the parties intended breach of contractual commitment per se to be a cross-default they could easily have said so. Plainly, not every contractual default under the loans concerns the prudential management by the borrower. The provisions are inserted primarily for the lender’s protection. The same considerations apply with equal force to the terms of a grant from ATSIC. Additionally in this case, none of the specific terms or conditions of the grant, the circumstances under which the grant was sought or given or the precise respect in which DTDAC’s conduct was in default of any such term or condition was established by the bank. The high water mark in the evidence was the contents of the Prosperity report which refers to a breach of a commitment without specifying its source or articulating its terms. Mr Bell accepted that the primary documents in evidence were of no assistance in identifying the source of any requirement that grant funds received by DTDAC were not transferred to some other entity to pay that entity’s creditors.

87 Irrespective of whether external imposition was required, the bank faces a number of fundamental difficulties on the case as it puts it.

88 Firstly, it cannot be said that the existence or non-existence of all or any of the Events of Default specified in the first loan or the second loan is a measure of, or a standard directed to provident care by, DTDAC in the conduct of its financial affairs. They are provisions inserted for the protection of ATSIC and which gave it certain contractual entitlements. For example, ceasing to conduct the tea business or not renewing licences may be provident in the case of a business that is failing, but nevertheless gives rise to an entitlement in ATSIC to call up the loan. Failure to meet loan repayment obligations may be deserving of criticism but may not necessarily be financially imprudent, for example, if the interest rate payable on the borrowings is lower than a rate being obtained on such funds on lent by the borrower to a third person. If the lender is prepared to extend time for repayment, the provident thing may be to obtain an extension especially where repayment could jeopardise the prospects of a fledgling business.

89 Secondly, the terms of the first loan and second loan did not impose upon DTDAC any obligation not to commit an Event of Default or to avoid the circumstances which are deemed to be a default. The existence of such an event merely gave ATSIC the right to demand repayment. As to the grant the conditions of which the bank asserted were breached by DTDAC, it may have been the case that ATSIC was entitled to give written notice to DTDAC under s 20(1) of the ATSIC Act that it was satisfied that DTDAC had failed to fulfil a term or condition of the grant and to require repayment of it or part of it. However, no particular terms nor the breach of them were established by the evidence. Additionally, the terms of the Prosperity report as to the nature of the breach are themselves unclear. It speaks of “dispersing $9,844 in funds to DCE, that are intended for meeting creditor payments in NRT” whereas the evidence was that the funds were used by DCE to pay such creditors. What the breach is, is not clear. Moreover, Mr King’s evidence was that he would have not treated the payment of grant funds to DCE to pay leasing costs as a breach of grant funding arrangements.

90 Thirdly, some of the Events of Default comprehend, and in some cases are restricted to, behaviour not of DTDAC but of DCE (the New Company). The non-eventuation of an agreement with Woolworths by 31 March 2003 was not a matter within DTDAC’s (or even DCE’s) control. Had DTDAC (or DCE) declined a contract offered by Woolworths on uncommercial terms DTDAC could hardly be said to have defaulted in a prudential requirement or commitment.

91 Fourthly, when it comes to the failure to make the repayments under the first loan which were due on 15 October and 15 November 2002 respectively, those failures had been the subject of a waiver by ATSIC on 6 December 2002 so that on any basis, with respect to those matters, as at 18 June 2003 DTDAC was not “in default”. This drove Mr Bell to make the submission that pars 4 and 5 of the notification provisions required ATSIC to inform the bank that DTDAC had once been (and presumably now no longer was) in default. This submission does not have substance. Paragraphs 4 and 5 are directed to the position when confirmation is given and that is on a yearly basis. They are clearly not directed to historical matters where there once might have been, but at the time of any confirmation no longer is any, default. The bank did not rely on a failure by DTDAC to repay the first loan or the second loan upon occurrence of the Events of Default, presumably because ATSIC itself never called up either loan.

92 I also do not accept the submission that the notification provisions were uncertain or meaningless because there is no notion of default with respect to an overdraft facility. A failure to repay an amount owed in accordance with the tenor of a loan agreement is a default whether the loan is on overdraft account or otherwise. In the commercial world it is not usual for banks to call in overdraft facilities which are not in default even though they may have an unfettered right to do so. The notion of default under the facility had commercial practical significance even if it had limited legal significance. Anyway, whether there was or was not default did not erode the relevant primary obligation here which was to notify default or non-default (as the case may be) of prudential requirements and commitments.

93 I accordingly find that:

a obligations undertaken by DTDAC under the first loan and the second loan were not their prudential requirements and commitments;

b if they were, the existence of an “Event of Default” under those instruments did not amount to DTDAC being in default of them; and

c the bank did not establish the existence of, nor the breach of, any particular condition of a grant from ATSIC which was or could be a default of such a requirement or commitment.

94 ATSIC did not, therefore, breach the notification provisions by failing to confirm default.

95 The only case put by the bank was that ATSIC breached by failing to confirm default. It did not put a case that ATSIC breached by not confirming non-default (assuming it was not in default).

96 Mr Aldridge did, however, put that all ATSIC was required to do anyway was confirm the absence of default and that par 5 of the facility letter was to be construed as if the words “fails to” were inserted before “confirm” in that paragraph so that by failing to confirm non-default ATSIC was taken to have confirmed default. This submission is unsound because par 5 (albeit loosely expressed) envisages active confirmation by ATSIC, more importantly it is not ATSIC’s conduct in failing to confirm that is intended to be cross-default by DTDAC of its facility with the bank but default by DTDAC in the prudential requirements or commitments which default was to be confirmed by ATSIC.

97 Paragraph 4 contains a sufficiently clearly expressed promise. Paragraph 5 in shorthand expresses a promise as well if default is the fact. I reject the first defendant’s submission that the notification provisions are not promissory in form or operation.

98 In my view the notification provisions required ATSIC to communicate with the bank and to either:

a confirm (if it was the fact) that DTDAC was not in default of any of their prudential requirements or commitments; or

b confirm (if it was the fact) that DTDAC was in default of prudential requirements or commitments.

99 Notification under pars 4 and 5, however, did not require ATSIC to confirm anything more than simply whether DTDAC was or was not in default (whichever was the case).

100 Although the bank did not make the case that ATSIC breached by not giving confirmation of no default, if it had, to establish breach, it was incumbent on the bank to establish the existence of at least one such prudential requirement or commitment of DTDAC. Having regard to my earlier findings, it failed to establish the existence of any such requirement and therefore failed to establish any breach by ATSIC.

101 In addition, if ATSIC breached the notification provisions by failing to confirm non-default, the determination of whether the bank suffered damage thereby would, on established principle, require comparison between the position it was in without such notice and the position it would have been in had ATSIC performed by giving notice. On the premise that there was no default, ATSIC would have notified non-default. The bank would in that case have had no motivation to make demand under the guarantee and would not have suffered any loss attributable in any way to ATSIC’s breach.

102 It follows that the bank’s claim in contract fails.

103 Although it is not necessary to do so, I will nevertheless proceed to consider the question of damages on the assumption that there was relevant default by DTDAC and that ATSIC should have given, but did not give, confirmation of it.

Damages

104 The bank submitted that damages should be approached on the basis that its loss was the full value of the guarantee because the evidence established on the balance of probabilities that had ATSIC not breached, but rather confirmed default by DTDAC, the bank would have called in the guarantee. Hence, it put, by not confirming default, ATSIC had caused it loss in the amount of the full value of the guarantee.

105 Mr Bell did not initially put that damages should be assessed on the basis that the bank had lost the value of a commercial opportunity, being the opportunity to make demand under the guarantee. After some debate, and perhaps prompted from what fell from the Court, he put the claim for damages on a loss of opportunity basis in the alternative (see Poseidon Ltd & Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 368 per Brennan J; The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64).

106 On reflection, I consider that Mr Bell’s reluctance was well-founded. This is not a case about valuing a lost opportunity. The value of the opportunity to call the guarantee is clear. This is a case about whether that opportunity was lost as a consequence of the asserted breach by ATSIC of the notification provisions.

107 Both Poseidon Ltd & Sellars v Adelaide Petroleum NL and Commonwealth v Amann Aviation Pty Ltd concerned primarily the question whether loss of an opportunity to obtain a commercial advantage or benefit amounted to recoverable loss or damage. Poseidon Ltd & Sellars v Adelaide Petroleum NL concerned a claim for loss pursuant to s 82(1) of the Trade Practices Act 1975 (Cth) and Commonwealth v Amann Aviation Pty Ltd a claim in contract. The High Court recognised in both contexts that damages are available for deprivation of a commercial opportunity and that they are to be ascertained by reference to the Court’s assessment of the prospects of that opportunity eventuating if it had been pursued.

108 It was made clear in the majority judgment in Poseidon Ltd & Sellars v Adelaide Petroleum NL at 53 that when, as is the case here, “the issue of causation turns on what the plaintiff would have done, there is no particular reason from departing from proof on the balance of probabilities notwithstanding that the question is hypothetical.”

109 The issue here is causation, not the value of an opportunity. It is for the bank to establish that ATSIC’s breach caused its loss.

110 In support of the proposition that ATSIC caused the bank’s loss, Mr Bell cited Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310.

111 In that case Glass JA said the following at 315:

“4. It is irrelevant to inquire whether the defendants' default was the dominant, effective or real cause of the plaintiff's loss. If the evidence is suggestive of multiple causation, the inquiry to be made is whether the defendants' default was a cause of the plaintiff's loss: Fitzgerald v Penn (1954) 91 CLR 268 at 273.

5. The test of causation poses the question whether the plaintiff's loss would not have been suffered but for the defendants' default. The question is to be answered by applying that test in a practical commonsense way …

6. If the defendants' conduct is in this sense a cause of the plaintiff's loss, the existence of another concurrent cause which combines to produce the loss is of no relevance.”

112 McHugh JA said at 357:

“In my opinion the above cases do not establish the proposition that a plaintiff in an action for breach of contract must prove that the breach of contract was the real and efficient or dominant cause of the loss which he suffered. In the law of tort it is well-established that it is sufficient that the wrongful act or omission of the defendant is a material cause of the plaintiff's injury or damage. In principle the same rule must apply in the law of contract unless the terms of the contract require the sole or dominant cause to be determined …

Accordingly, to establish a causal connection between a breach of contract and the damage which the plaintiff has suffered, he needs only to show that the breach was a cause of the loss. This is to be decided by the application of commonsense principles. In general, the application of the ‘but for’ test will be sufficient to prove the necessary causal connection. But that test is only a guide. The ultimate question is whether, as a matter of commonsense, the relevant act or omission was a cause”.

113 The common sense approach to causation has been reitereated by the High Court in March v Stramare (E&MH) Pty Ltd (1991) 171 CLR 506 and Wardley Australia Ltd v Western Australia (1992) 175 CLR 514.

114 The general principle is that when assessing damages for breach of contract, the plaintiff is to be put in the position that he or she would have been in but for the breach, that is, the position if the contract had been performed: Wenham v Ella (1972) 127 CLR 454.

115 It has been the case since Hadley v Baxendale (1854) 9 Exch 341 at 354 that a plaintiff is entitled to receive such loss as fairly and reasonably either arises naturally, that is, according to the usual course of things, from the breach, or if it does not so arise, may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract as the probable result of the breach of it.

116 The loss suffered by the bank cannot be said to arise fairly and reasonably from ATSIC's breach of the notification provisions. Nothing flowed fairly and reasonably from that breach. The damages flowed from the failure of the bank to call on a guarantee which it might otherwise have called upon.

117 No submissions were put on either side on the question whether the bank’s loss here was in the contemplation of both parties at the time they made the contract (the facility letter) as the probable result of the breach by ATSIC of the notification provisions.

118 A submission that such loss was contemplated would have faced the steep difficulty that the facility letter does not appear to contemplate a guarantee limited by time and, as appears below, the bank representatives did not know or contemplate that it was so limited. A loss brought about by failure to act quickly enough because of a time limitation could hardly be said to have been in the contracting parties’ contemplation when they had no contemplation of the time limit.

119 However, because the first defendant did not take the point, I approach the matter on the basis that the bank is entitled succeed to the full value of the guarantee if, on the balance of probabilities, it establishes it could and would, but for ATSIC’s breach to give confirmation, have taken the opportunity to make demand under the guarantee.

120 The bank relied on the evidence of Messrs Conrad and Kane as to what they would have done (that is, how they would have acted differently) had ATSIC given notice of default.

121 The weight of evidence of this type will be increased or lessened according to evidence of relevant surrounding circumstances making the witnesses’ evidence more or less persuasive: Allstate Life Insurance Co v Australia & New Zealand Banking Group Ltd (No 32) (1996) 136 ALR 627.

122 In the context of evidence by a medical patient about what he or she would have done if told of certain risks, it has been acknowledged that such evidence may be coloured by the fact that the risks did in fact eventuate. It is open to a court to disbelieve evidence found to be tainted by hindsight: Ellis v Wallsend District Hospital (1989) 17 NSWLR 553 at 581.

123 Mr Conrad gave evidence that if ATSIC had notified the bank on or before 18 June 2003 that DTDAC was in default of any prudential requirements or commitments he would have followed the bank’s standard practice which would have been to make a recommendation to Mr Kane to call in the loan and enforce the guarantee if necessary and if Mr Kane had directed him to do so he would have given the “loan packet” to the bank’s panel solicitors. He said that upon receiving advice that the guarantee was to expire 60 days after 18 June 2003, he would have instructed the bank’s panel solicitor to act expeditiously to ensure that the guarantee could be enforced and to do whatever was necessary in order to enforce the guarantee within the time allowed.

124 Mr Kane’s evidence was that if he had been informed by Mr Conrad at any time between 18 June and 18 August 2003 that Mr Conrad had been informed by ATSIC or any other source that there was “some form of default” by DTDAC in respect of its prudential requirements or commitments he would have taken steps which would have involved instructing Clayton Utz or other panel solicitors to review the security packet and take instant action to protect the bank.

125 To support its contention that the bank would have moved swiftly, reliance was placed by the bank on a hand written notation by Mr Kane when the facility was originally approved in 2002 that “any Event of Default is to be reported to regional manager immediately”.

126 Both Mr Kane’s and Mr Conrad’s evidence was that they were unaware of the time limitation in the guarantee.

127 Mr Conrad gave evidence that on 16 June 2003 he was expecting something from ATSIC in respect of the confirmation contemplated by the notification provisions. However, he did not at any time in July or August 2003 seek confirmation of non-default from ATSIC because he believed he had a guarantee unlimited as to time. For the same reason he did not call up the overdraft.

128 Mr Kane gave evidence that he was never informed that ATSIC had not complied with its obligations to confirm DTDAC’s non-default of its prudential commitments and requirements.

129 There is little doubt that the bank did not act urgently and it is clear, in my view, that neither Mr Conrad nor Mr Kane were aware of the time limitation in the guarantee.

130 Mr Alridge put that the absence of a sense of urgency would have been no different had ATSIC notified a default by DTDAC of prudential requirements and commitments, because that notification would have had no impact on the perception of the bank officers that the bank was fully secured by a guarantee from a Commonwealth corporation which guarantee was unlimited as to time.

131 There is force in this submission.

132 Whilst I am satisfied that once competent solicitors were involved they would have become cognisant of the time limit in the guarantee and things would have moved apace, the evidence did not establish that there would have been any celerity by the bank in getting to the solicitors in the first place.

133 On 3 September 2003 the bank knew that ATSIC’s confirmation of non-default by DTDAC of its prudential requirement and commitments had not been received and made a request for it and for copies of 2002 and 2003 financial statements. It requested a response by no later than 26 September 2003.

134 The bank had not received either the financial statements or the confirmation requested by 12 December 2003. In its letter of that date it requested a formal reply “as a matter of urgency by no later than 13 February 2004” (ie. within two months).

135 This conduct is consistent only with lack of urgency in the knowledge of default, at least by ATSIC of its undertaking to provide confirmation of DTDAC’s non-default.

136 Mr Kane’s evidence was that upon being told by Mr Conrad of any default, he would have taken steps to ensure that appropriate arrangements were put in place ”immediately” to secure the bank’s position.

137 However, the evidence does not establish that Mr Conrad would have acted with any degree of urgency in notifying Mr Kane. The evidence points in the other direction.

138 Notwithstanding Mr Kane’s note that he be notified immediately of any default, the facility was out of order on 30 April, 31 May and 19 June 2003 and there is no evidence that Mr Kane was notified of any default.

139 Mr Conrad’s evidence did not indicate any urgency on his part in the light of these occurrences. This was no doubt also because of his perception that the bank was fully secured by the guarantee.

140 Mr Kane’s evidence was that he would have acted upon being told of any default. This evidence is with the benefit of hindsight of the risk having eventuated. In my view, what Mr Kane would have done would have depended on what the default was or defaults were of which confirmation had been given and his evidence based on hypothesis is of little, if any, weight.

141 However, even accepting Mr Kane’s evidence I do not consider that the bank has established on the balance of probabilities that had ATSIC given it notice of any default by DTDAC it would have acted within time to avoid the dissipation of its rights under the guarantee.

142 The bank has failed to establish that ATSIC’s breach was the cause of its loss.

143 It was put on behalf of the first defendant that even if the bank had acted urgently on or shortly after 18 June 2002, it could not have taken the steps required by cl 5 of the guarantee by the time the demand expired. In aid of this ATSIC called a solicitor, Mr Martin. He gave evidence of the time it would take to obtain default judgment and have execution attempted on the property of DTDAC. If these steps took the times he suggested, demand under the guarantee could not properly have been made.

144 However, Mr Martin’s evidence was predicated upon the bank having proceeded in this Court by way of statement of claim in the ordinary course. It did not take account of the possibility that proceedings might have been taken in this Court in this list where the time periods allowed by Mr Martin would be substantially shorter.

145 I am satisfied that had the bank acted with urgency and in the knowledge of the imminent expiry of the guarantee it could well and truly satisfied the requirements of cl 5 of the guarantee within time.

THE STATUTORY CLAIM

146 The bank pleaded an alternative claim for relief pursuant to the provisions of the Trade Practices Act 1975 (Cth) or of the Fair Trading Act 1992 (ACT) on the basis that ATSIC’s conduct, in not notifying the bank of DTDAC’s default, was conduct in trade or commerce that was misleading or deceptive or likely to mislead or deceive in contravention of s 52 of the Trade Practices Act (Cth) or s 12 of the Fair Trading Act (ACT) each of which sections provide that a corporation must not engage in such conduct.

147 Section 82 of the Trade Practices Act (Cth) (and the corresponding section of the Fair Trading Act (ACT)) provide that a person who suffers loss or damage by relevant conduct of another person in contravention of the Act may recover the amount of the loss or damage. The sections stipulate the causal requirement that the bank’s injury must be sustained “by” ATSIC’s contravention. In this context, as with contract, causation is essentially a question of fact to be determined by reference to common sense and experience: Wardley Australia Ltd v Western Australia at 525.

148 In its submissions (which were very brief) on this alternative claim, it was put that by executing the facility letter ATSIC made a representation that it would notify the bank of defaults by DTDAC in its prudential requirements or commitments, that ATSIC was aware of such defaults and had knowledge that the bank was reliant on it to inform the bank of those matters, and that its conduct in not so informing the bank was misleading or deceptive or likely to mislead or deceive.

149 Having regard to my findings that the bank has not established default by DTDAC of any prudential requirement or commitment, it could not have been misleading on the part of the bank to have failed to have confirmed default.

150 The bank did not put the case that but for ATSIC’s representation it would not have made the loan.

151 It also follows from my finding that had ATSIC notified default, the bank would still have lost the guarantee, that this claim must also fail, because the bank has not established that its loss was caused by conduct on the part of ATSIC.

CONCLUSION

152 The plaintiff’s summons is dismissed with costs.

153 The exhibits are to be returned.

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02/11/2007	-	par 58 - deleted word "its" and replaced with "the bank's"par 116 - delted word "is" and replaced with "ATSIC's" - Paragraph(s) pars 58, 116
02/11/2007	-	no amendment - Paragraph(s) footnote