Sydney Strata Securities Pty Ltd v Elders Finance Ltd
[1990] FCA 739
•20 Dec 1990
IN THE FEDERAL COURT OF AUSTRALIA ) NEW SOUTIl WALES DISTRICT REGISTRY
) No. G 123 of 1990 GENERAL DIVISION 1
I I
BETWEEN SYDNEY STRATA SECURITIES PTY LTD
i -
Applicant j ,.
- AND: ELDERS FINANCE LTD Respondent
No. G 435 of 1990
BETWEEN: ELDERS FINANCE LTD
Applicant
AND. SYDNEY STRATA SECURITIES PTY LTD
F ~ r s t Respondent
AND: BRIAN FRANCIS DEMPSEY Second Respondent
AND: JOAN DEMPSEY Third Respondent
m: Davies J - i Date: 20 December 1990 Place: Sydney 1 ., I ;:
CORRIGENDA
REOISTRY C A T C H W O R D S
Amendments to the Reasons for Judgment of Davies 1.:
Minutes of Order - Order 2(c) - second line, delete "1A" and insert "11A".
Order 2(c) - fifth line, delete "1137697" and insert *l/SP37697", and insert "21SP37697" [ :. before "3lSP3 1 : Helen Macfarlane
Associate to Mr Justice Davies
02 J A N 1991 2 January 1991 FEMRAl COURT OF
AUSTRWA PRlNUPU
CONTRACT - financier provided funds for acquisition of land for development project on Gold
Coast - alleged representations that financier would finance entire project - whether contract for
provision of finance.
TRADE PRACTICES - whether representations and conduct of financier misleading and
deceptive.
EQUITABLE ESTOPPEL - whether representations constituted equitable estoppel.
SET-OFF - whether claim by financier for possession of property could be set-off against claims
of misleading and deccpt~ve conduct or equitable estoppel.
Trade Practices Act 1974 (Cth) - s.52
Prooertv Law Act 1974 (Qld) - 5.59.
SYDNEY STRATA SECURITIES PTY LTD v. ELDERS FINANCE
G 123 of 1990
ELDERS FINANCE LTD v SYDNEY STRATA SECURITIES PTY LTD & ORS
G 435 of 1990
Dav~es J.
20 December 1990
Sydney
2 1 DEC 1990
A U W PRINUPU REGISTRY
IN THE FEDERAL COURT OF AUSTRALIA ) NEW SOUTlI WALES DISTRICT REGISTRY
1 NO. G 123 of 199n GENERAL DIVISION )
BETWEEN: SYDNEY STRATA SECURITIES PTY LTD Applicant
AND: ELDERS FINANCE LTD Respondent
No. G 435 of 1990
BETWEEN: ELDERS FINANCE LTD Appl~cant
P. AND. SYDNEY STRATA SECURITIES PTY LTD First Respondent
P. AND. BRIAN FRANCIS DEMPSEY Second Respondent
P. AND. JOAN DEMPSEY Thud Respondent
m: Davies J.
: & & l 20 December 1990
Sydney MINUTES OF ORDER : - THE
In G 123 of 1990 the application be dismissed with costs
(a)
There be judgment in the sum of $7,504,738.27 against the flrst, second and third respondents, and each of them.
(b)
The applicant be adjudged entitled to possession of the property known as 63 ShirIey Road, Roseville being the whole of the land comprised in Certificates of Title Folio Identifiers El391438 and Fl391438.
(c)
The applicant be adjudged entitled to possession of the properties known as 21-23 Goodchap Road, Chatswood and 1A Critchett Road, Chatswood being the whole of the land in Certificate of Title Folio Identifier 11786410, and now being the whole of the land in Strata Plan SP37697 including the land in Certificates of title
F o l ~ o Identifiers CPlSP37697, 1137697, 3lSP37697, 4lSP37697, 5lSP37697, 6lSP37697, 7lSP37697, 8lSP37697, 9lSP37697, 101SP37697, lllSP37697 and
12lSP37697.(d) Leave be granted to issue Writs of Posscssion forthwith (c) The respondents pay the applicant's costs of thc proceedings. (f) Liberty to apply be reserved.
: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA ) NEW SOUTH WALES DISTRICT REGISTRY
1 No. G 123 of 1990 GENERAL DIVISION )
BETWEEN: SYDNEY STRATA SECURITIES PTY LTD Applicant
ELDERS FINANCE LTD
Respondcnt
No. G 435 of 1990
BETWEEN: ELDERS FINANCE LTD
Applicant
AND: SYDNEY STRATA SECURITIES PTY LTD First Respondent
AND: BRIAN FRANCIS DEMPSEY Second Respondent
AND: JOAN DEMPSEY Third Respondent
m. Davies J. m: 20 December 1990 Place: Sydney
REASONS FOR JUDGMENT
: ,
In procecd~ngs G 123 of 1990. Sydney Strata Securities Pty Ltd ("SSS") sceks relief in I . .
respect of an alleged breach of contract by Elders F~nance Ltd ("Elders") and of conduct on the
I
part of Elders sald to be misleading and deceptive or likely to mlslead and deceive and therefore
to be in breach of section 52 of the Trade Practices Act 1974 (Cth) and also to found an equitable
estoppel.
In proceedings G 435 of 1990, Elders seeks orders for the possession of certain real estate
in Chatswood and Roseville which was security for moneys lent by Elders to SSS. By way of
defence SSS relies inter alia upon its claims in G 123 of 1990.
Associated with these proceedings was G 371 of 1990 in which Elders sought possession of property on Chevron Island, Surfers Paradise, which had also been security for moneys lent by Elders to S S . That proceeding has been resolved. An order by consent for possession has
been made. However, the financing arrangements respecting that property, which arc the subject
of G 123 of 1990, are very much in dispute.
S S is a property developer whose managing dlrector is Mr. Brian Dempsey. Elders is a
financier. Its Gold Coast Manager in 1988 was Mr. John Kristaps and he remained such until
about September 1989 when he was replaced by Mr. James Swan.
In 1988, Mr. Dempsey had it in mind that S S would acquire a property on Chevron
Island fronting a deep water channel in the Nerang River. Mr. Dempsey thought that the twelve
strata units on the property could be demolished and the property developed by the construction of seven or nine high quality home unlts. As Elders was financing development projects undertaken by SSS in Sydney, Mr. Dempsey in July 1988 contacted Mr. Kristaps about the project. Mr. Kristaps looked at the land. There was another discussion in August 1988. The general principles upon which the project would be financed by Elders were discussed, and a general understanding arrived at.
In September 1988, Mr. Dempsey arranged for the purchase of six of the strata units and
also of two adjoining duplexes which he added to the project.
In January 1989, Elders lent $1,083,000 to SSS to finance those purchases. The finance
provided was 85% of valuation which accorded with the princ~ples which had been discussed.
A letter dated 30 December 1988 approving the loan was sent from Elders to SSS. A copy of that
letter was signed by Mr. Dempsey and returned to Elders. A master mortgagc was executed on
9 January 1989. This mortgage included personal guarantees by Mr. Dempsey and Mrs. Joan
Dempsey and a provision that the mortgagor might apply for and the mortgagee might in its
discretion make further advances though the mortgagee was not obl~ged to do so. Each further
advance (if any) was to be secured by the security of and to bc subject to the terms of the master
mortgage.
In about June 1989, Mr. Dempsey arranged contracts for the purchase of the remaining six strata units and he negotiated for the purchase of an adjoining home, owned by Mrs E. D. Rogers, which was to be added to thc project. The contracts for the units had differing settlement dates. Moreover the prices payable for the units were in most cases well over their
value. No other property was available to add to the security.
In about July 1989, Elders reduce its lending for this type of project. Mr. Kristaps was
transferred to Sydney. The new Manager, Mr. Swan, had discussions with Mr. Dempsey as to
f~nancing the project He considered, however, taking into account the prices that were payable
for the strata units, that the project was not viable. Moreover, it was not the policy of Elders
to lend just for the purchase of strata units and Mr. Dempsey was seeking 100% funding for the purchascs and therefore more than 85% of valuation. The total lent on the propcrties would have
been well over valuation. Accordingly Mr. Swan refused finance and felt that he could not
recommend the proposal to any other financier.
As Mr. Dempsey was unable to arrange finance from any other instltutlon, SSS defaulted 1
on its contracts and the project fell through.
I
Whether contract, misleading conduct or equitable estoppel is relied upon, the principal i : l
question in each case is the extent of Elders commitment to the project as communicated by Mr. , .
IKristaps to Mr. Dempsey. The case put on behalf of SSS is that, in the August 1988 l I: conversation, Mr. Kristaps agreed on behalf of Elders that Elders would finance the entire !. project. On this view, the events which subsequently occurred with respect to the provision for finance of the six strata units and the two duplexes were merely formal steps implementing the
overall contract. Counsel for SSS descr~bed the obtaining of the loan for $1,083,000 as a mere draw-down upon the facility which in August 1988 Elders through Mr. Kristaps had agreed to
provide. The case put on behalf of Elders was that, in the August 1988 conversation, Mr. Kristaps, who was not authorised to approve a loan of the magnitude which was required for the project, did not agree to fund the project or any part thereof and did not commit Elders to doing so but that, in the August 1988 discussion, Mr. Kristaps and Mr. Dempsey merely discussed the general terms upon which finance might be provided by Elders.
It is not in doubt that both Mr. Dempsey and Mr. Kristaps had in mind the total development project. Elders was interested in financing projects of that type, for one of the terms of lending was that it would take a percentage of the gross profit in addition to the rate
of interest charged. Nor is it in dispute that Mr. Dempsey and Mr. Kristaps d~scussed and understood that funding during this stage of acquisition of land would be on the basis of 85% of the pricc paid or valuation, whichever was the less, but that, once the land had been acquired and
all approvals obta~ned, fund~ng would be on the basis on 100% of all costs. Specific rates of interest were not discussed, but the profit percentage was discussed. Mr. Dempscy gave evidence
that 15% was mentioned. It was discussed and understood that the interest payable on moneys
lent would be paid monthly and would not be capitalised.
Notwithstanding that these terms were not set down in any letter by Elders, as had occurred for example in a letter dated July 1988 from Elders to SSS with respect to a Chatswood project in which the funding was on a like basis and was specified in detail, and notwithstanding that i n the conversation between Mr. Dempsey and Mr. Kristaps no words were used to express
a final agreement, such as, eg, "Well that's agreed then. I can act on your assurance that funding wrll be provided? Yes you can.", counsel for SSS submitted that the conversation in August 1988 amounted to a contract and that, in so far as the conversation did not deal wlth some matters, proper commerc~al terms would be implied, eg reasonable time, reasonable or usual interest rates,
the signing of appropriate securities and the giving of appropriate guarantees
Counsel for Elders relied, however, upon the fact that at the time of the August 1988
conversation, the nature and cost of the development were unknown. Plans for the development were not drawn up until August 1989 and in the meantime several possibilities bad been considered. Thus the amount of the funds required was unknown. The time that the project
would take was unknown for the property had not been acquired and Mr. Dempsey stlll bad to negotiate wlth each of the owners of the strata units. Counsel submitted that Elders should not be taken to have committed itself to financing a project which was still mainly an idea, in which the costs were unknown and had not been discussed, in which the length of the term of the loan
was mere speculation, in which the interest rates had not been discussed and in respect of which the securltics had been discussed in the most general terms and matters such as guarantees had
not even been mentioned. In brief, counsel submitted that Elders should not be held to have committed itself to an undetermined project in respect of which the extent of the finance required and the risks involved had not been and could not have been assessed Counsel relied, inter alia, upon the following cross-examination of Mr. Dcmpsey:
"I just want you to tell us how much money, any amount of money, whatever you
wanted, or was there some sort of cap on i t?---No, there was no cap on it.
No cap, whatever you wanted Elders were going to pay, is that what you say?---
Yes.Have you ever, ever come across such an arrangement wlth a financial company at any time in your life before this?---Well no."
There is a conflict of evidence between Mr. Dempsey and Mr. Kristaps as to whether or not Mr. Kristaps said that any funding would require head office approval. Mr. Kristaps' evidence that he made that clcar to Mr. Dempsey that financing would require head office approval did not have the stamp of verisimilitude Nevertheless, there are facts which ought to have led Mr. Dempsey to understand that the matter was not being dealt with just in accordance with Mr. Kristaps' alleged oral say-so given in August 1988. Mr. Dcmpsey was asked to provide financial and other details of SSS and he did so on two occasions in September 1988 and in
December 1988. A valuation of the entire property and of each of the strata units was obtained.
Also obtained was a valuation of the two duplexes These valuatlons were provided to Elders.
Mr. Kristaps was slow in putting in an internal appl~cation for approval of the finance for the
lus t six strata units and the two duplexes When faced with the delay he told Mr. Dempsey that
Elders was behind in its documentation. Mr. Dempscy should not have understood this
documentation to be merely the master mortgage, for the solicitors who acted for SSS, Messrs.
Robinson and Robinson, also acted from time to tlme for Elders A mortgage was a matter with
whlch they could be expected to arrange. Mr. Dempsey ought to have understood that the documentation referred to matters still to be done or considered wlthin Elders organisation. And
Mr. Dempsey ought to have understood that, when he received the letter dated 30 December
1988, signed by Mr. P. C. Grier, Director, who was the Queensland manager of Elders, setting
out the terms on which the loan of $1,083,000 would be granted and when he was required to sign a copy thereof and to return it to Elders, that the matter was not being dealt with just on an ~nformal oral basis between himself and Mr. Krlstaps but on a more formal basis involving
persons other than Mr. Kristaps. By the time Mr. and Mrs. Dempsey had signed the master
mortgage which contained the term that further finance could be applied for but Elders was not bound to grant it and which also included the personal guarantees, Mr. Dempsey had notice that
the matter had passed well beyond the stage of his oral conversation with Mr. Kristaps in August
1988.
Indeed, counsel for Elders has submitted with some force that the contract contended for
is inconsistent with the contract into which SSS and Elders actually entered. The contract in
writing constituted by the letter of 30 December 1988 and the master mortgage specified the moneys lent, the term of the loan, the rate of interest and the security and it provided that Elders may make further advances but was not bound to do so.
Counsel for SSS submitted that the provision of the January 1989 flnance was merely a
particular draw-down and did not affect the overall contractual arrangement between the parties.
Certainly, it was not proposed that the finance then granted be the total of the finance to be
sought and granted with respect to the project. The application which was forwarded to head office, which incidently was not shown to SSS, included the information inter alia,
"... it is the applicants intention to purchase the remaining 6 units to control the total site at which time we will be requested to provide finance on a 100% profit share basis to purchase the rema~ning units and construction of an up-market unit development. At this stage plans have not been prepared. In the event of the applicant not being successful in purchasing the remaining units, our position IS considered to be secure glven the location of the units and our lending margin".
Nevertheless, the letter of 30 December 1988 and the master mortgage of 9 January 1989 do seem
to be inconsistent with the contract alleged by SSS.
There are particular indications that Mr. Dempsey did not in fact regard Mr. Kristaps as
having granted finance in the conversation of August 1988. The letter from SSS to Elders of 16
September 1988, which set out financial and other details of SSS was headed,
"RE: APPLICATION FOR FINANCE".
A fax from SSS to Elders on 15 November 1988 contained the heading,
"RE: APPLICATION FOR FINANCE TO PURCHASE PROPERTIES A T 107- 109 STANHILL DRIVE, CHEVRON ISLAND"
and included the paragraph,
"Our application to Elders is for finance to complete the rest of the pending five
settlements".
A fax from the Dempsey group to Elders on 19 December 1988 described the subject matter as,
"RE: APPLICATION FOR FUNDS - PENDING SETTLEMENTS (4) STANHILL
DRIVE C.I. on 1011189".
All these documents were signed by Mr. Dempsey. Moreover, in none of the conversations wh~ch
took place from July onwards in 1989, after Mr. Dempsey had been advised that Elders was no longer fund~ng this type of development, did Mr. Dcmpsey allege that Elders had contracted to
provlde the flnance, that Mr. Kristaps had committed Elders to the project.
In determining this issue, I have not found it necessary to resolve every conflict of evidence between Mr. Dempsey and Mr. Kr~staps Mr. Dempsey was a careful witness, precise in his words Mr. Kristaps was less careful with bis words. But I think that both witnesses
overstated the position to some extent. For his part, Mr. Dempsey gave too much definition and
significance to words spoken to him by Mr Kristaps and by Mr. Cronan a Sydney manager for
Elders, more than their words deserved. Moreover, much of Mr. Dempsey's statement was a little
stilted, giving the impress~on of being b u ~ l t up in the mind rather than a straightforward rcpetltion of words used. Thus, Mr. Dcmpsey's statement of his conversations with Mr. Swan did not reflect Mr. Swan's manner of speech. Mr Swan's evidence as to what was said has a flow
to it which seems to me much more likely to state what Mr. Swan and Mr. Dempsey actually said.
I prefer Mr. Swan's evidence. And as to a conversation which was the subject of G 435 of 1990
between Mr. Dempsey and Mr. Cronan in April or May of 1990, I prefer Mr Cronan's version.
It seems to me that Mr. Dempsey's evidence was improbable, giving too much definition to and
putting too much weight upon some comment by Mr Cronan which did not have the effect that
Mr Dempsey attributed to it. By the time of that conversation, SSS had commenced litigation
against Elders. It is highly improbable that Mr. Cronan said anything to the effect that he would
waive default of the payment of interest.
These are but examples of why I do not accept Mr. Dempsey's evidence in its totality.
If his evidence is read down and that of Mr. Kristaps is read up, in the sense of assuming that
Mr. Kristaps said more than he has deposed so, there is not a great deal of difference between
the two stories and I look a t the facts on this basis.
It seems to me that the case does not turn upon the credibility of any part~cular witness.
It is clear from the evidence of Mr. Dempsey and of Mr. Kristaps what was the general content
conversations, particularly the conversation of August 1988, constituted a contract or a firm of their discussions of July and August 1988. The question is whether what was said in thosc commitment by Elders to finance the project. In determining this, it is necessary to take an objective view. Two businessmen were dealing w ~ t h each other. Their personal idiosyncrasies were not well known to the other. Therefore, one can look a t this mattcr on the footing of a convcrsation betwecn a property developer and a financier and the qucstlon is, having regard to the general discussion about the project and its financing, was Mr. Kristaps to be taken as committing Elders to the provision of that finance.
As was s a ~ d in the t h ~ r d rule of Masters v. Cameron, (1954) 91 C.L R. 353 at 361: "Cases of the third class are fundamentally different. They are cases in which the terms of agreement are not intended to have, and therefore do not have, any binding effect of their own. Governor & C of the Poor of Kinaston-uvon-Hull v. (1854) 10 Exch. 610 [ l56 E . R . s ~ ~ ] . The parties may have so prov~ded either because they have dealt only with major matters and contemplate that others will or may be regulated by provisions to be introduced into the formal document, as in Surnmerereene v. Parker (1950) 80 C.L.R. 304 or simply because they wish to reserve to themselves a right to withdraw at any time u n t ~ l the formal document is signed. These possibilities were both referred to in Rossiter v w r (1878) 3 App. Cas. 1124. Lord O'Hagan said: 'Undoubtedly, if any prospective contract, involving the possibility of new terms, or the modification of those already discussed, remains to be adopted, matters must be taken to be still in a train of negotiation, and a dissatisfied party may refuse to proceed.'"
The test is an objective one as Isaacs J. explained in Life Insurance CO Ltd v. (1925) 36
C.L.R. 60 at 76-82. See also Gleeson C.J. in Australian Broadcastine Commission v. XIVTH
Commonwealth Games Ltd (1988) 18 NSWLR 540 at 549-51. The subject matter and nature of
the project, the general manner in which finance is provided in the community, the usual requirements associated with financing and the community's perception of the significance of the words used are all matters to be taken into account. In judging the community's perception, regard may be had to other decisions of courts in which decisions have been taken or views expressed with regard to like circumstances. See per Gleeson C.J in Australian Broadcasting
Cor~oration v. XIVTH Commonwealth Games Ltd a t 548.
The following authorities provide guidance. In Montreal Gas C o m ~ a n y v. [l9001
A C. 595, the Judicial Committee held that a written promise that, if satisfied with the
respondent as a customer, the appellant would favourably consider any application by him to renew an exlstlng contract, did not amount to a legal obl~gation to grant its renewal. As Sir Henry Strong said at 599, in delivering the opinion of the Judicial Committee:
"It docs not requlre demonstration to shew that such an undertaking falls short of
contract."
In Life Insurance CO of Australia L a v. the appellant had agreed to grant a loan of a
certaln sum "out of the available funds of the company on a property to be approved by the directors." In separate judgments, Knox C J , Isaacs & Stark JJ. all assumed that this clause was
too vague or uncertain to be enforced as a legal obligation. Likewise, i - n
v. Naughton (1929) 43 CLR 310, where the parties has agreed to sign a contract for sale as soon
as same was available, Knox C.J. Rich & Dixon J.J. said at 317:
"We thlnk, as a matter of construction, that the execution of the further contract was a condition or term of the bargain and not a mere expression of the desire of the parties as to the manner in which a transaction already agreed to will in fact go through (Von Hatzfeldt-Wildenburg v. Alexander (1912) 1 Ch., a t p.289). There was not a final consent of the parties such that no new term or variation
could be introduced in the formal document to be prepared on Princiole~ of Contract, 8th Ed., p. 47). On the contrary the formal contract might contain other terms than those which appear from or are alluded to in the letter, which expresses an agreement to make an indeterminate contract. (See Rossdale v.
(1921) 1 Ch.57, at p.67, per Lord Sterndale M.R., and Chillineworth v. Esche (1924) 1 Ch., at p.114, per m L.J.) The case is not one in which the - parties were content to be bound lmmedlately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms."
In Whitlock v. (1968) 118 C.L.R. 445 Kitto, Taylor, Menzies and Owen JJ. held to be
unenforceable an agreement to grant a lease "upon such reasonable terms as commonly govern such a lease." More recently, in Saoohlre Investment Ptv Ltd v. Burns Philo Trustee CO Ltd (unreported delivered 16 December 1987). Lockhart J. at first Instance said of circumstances
analogous to those now considcred:
"What Mr. Sauer was told by Estate Mortgage was simply part of the ebb and flow of negotiations, not intended to have any contractual force or to be representations of the kind that could be acted upon by businessmen in these
executed by the parties to deal with further advances by Estate Mortgage and circumstances. It was always envisaged that there would be formal documentation Burns Philp. All that preceded the execution of the documents was to this end as it generally 1s in commercial negotiations of this kind."
An appeal from h ~ s Honour's judgment was dismissed.
In my oplnion, Mr. Dempsey and Mr. Krlstaps merely reached a preliminary
understanding that Elders was prepared to be involved in the financing of the project and an understanding of the usual terms upon which such funding was provided. The subject of Mr. Dempscy's proposal was too ill defined and the conversation between Mr. Dempsey and Mr.
Krlstaps was too general to constitute a commitment by Elders to any particular finance. In the
world of finance one generally cxpects the extent of a commltment to be agreed, the subject of the commltment to he agreed and the interest rate, the profit sharing rate and so on to be s ~ e c ~ f i e d and agreed in the light of the risk to be undertaken. In August 1988, the risk was unknown, for the land bad not been acquired and the project had not been settled upon. It seems to me that a business person ought not to have regarded anything that Mr. Kristaps said in the August 1988 conversation as committing Elders to the project hut simply as indicating that the
project as outllned could he financed by Elders and what Elders usual terms would he.
For these reasons, the claim that a contract was const~tuted by the conversation in August 1988 is rejected.
Another matter that I should mention on the subject of contract is that, when Mr. Dempsey sought finance for the purchase of the last six units, he sought 100%
finance for the
purchase of units, which were purchased a t prices over valuation and in the context that the
totality of the purchase prlce was over the valuation of the total property And the project had
not been approved by the Gold Coast City Counc~l, for that approval was not given until December 1989. 1 assume that, had there been no down turn in the economy, had Elders
continued to fund projects of this type and had Mr. Kristaps continued as manager of the Gold Coast office, then finance would have been provided to SSS notwithstanding that the project was
not formally approved by the City Council untll December 1989. But, by the middle of 1989, there had been a down turn in the economy. If this was one reason why Elders ceased to fund
projects such as that which Mr. Dempsey had in mind, then it may be that the head office of Elders would have refused finance to SSS for the acquisition of the six units on the simple basis
that, by that time, the project did not appear to be viable and the application for 100% funding
of the property was not one that a financier could accept. Certainly, this was how Mr. Swan approached the matter for he looked at the application for finance and had in mind the project that Mr. Dempsey proposed and came to the view that, not only was it a proposal that Elders
could not fund, but it was not a proposal that he could not recommend to any other financial
institution.
Counsel for Elders also relied upon s.59 of the P r o ~ e r t v Law AcI 1974 (Qld). Counsel
submitted that the contract concerned the acquisition of an interest in land and said that the contract was not in writing and that there was no part performance thereof. On this last point, however, I must apply the guide given by Wilcox, Foster &Hill JJ. in Australia and New Zealand
Banking GrouD Ltd v. (unreported, delivered 29 November 1990). Accordingly, I reject
the point.
I turn now to the question of the conduct said to be in breach of section 52 of the '&&
Practice5 Act. I assume that this was also the conduct alleged to constitute the equitable estoppel.
The first conduct alleged in the Particulars of Representations was:
"Conduct which induced a~ol icant o embark on Chevron Island Proiect.'
(a) Mr. Kristaps' assertion in August 1988 that the respondent would provide
finance for the project (6); (b) Request for financial information in September 1988 (7,7A); (c) Request to obtain valuation in September 1988 (S), (d) Mr. Kristaps' assertion to Mr Robinson in about December 1988 that respondent would provide settlement moneys for the first eight properties (9)."
The reference in paragraph (a) to "(6)" was a reference to paragraph 6 of the Statement of Claim which alleges an agreement in July or August 1988:
"... that the applicant would borrow and the respondent would lend such funds as
would enable the applicant to buy the land and erect the buildings for the
development."
For the reasons I have already given, I am of the view that Mr. Kristaps did not agree on behalf
of Elders that Elders would provide whatever funds were necessary to enable SSS to purchase the
land and complete the development, nor did he commit Elders to do so.
As to paras (b) and (c), I see nothing misleading o r deceptive or likely to mislead or
deceive in these requests which were merely steps in the provision of finance for the six strata
units and the two duplexes.
Paragraph (d) refers to "(9)" and therefore to para 9 of the Statement of Claim which
states that:
"In or about the month of December 1988 the applicant's solicitor, Mr. Micbael Robinson, was informed by the respondent through Mr. Kristaps that the respondent would provide the settlement moneys to enable the applicant to complete the purchases of the eight contracts it had entered "
I see nothlng misleading or deceptive in this communication. The finance was provided.
I turn now to the events of 1989. The particulars allege:
"C c nduct whi h induce e
final s ~ x ~ r o ~ e r t ~ e s . "
Paragraph (e) of the particulars adopts to paras (a) to (d) with which I have already dealt.
Paras (f) and (g) provide:
provis~on of settlement moneys for first eight properties (12);
"(f)
(g) entry into master mortgage to secure inter aliq further advances (12):
For the reasons I have given 1 see nothing misleading or deceptive or likely to mislead or deceive
in these matters.
Paragraph (h) reads:
"(h) Mr Kristaps' assertion on 24/1/89 at The Rusty Pelican (13);"
This paragraph refers to paragraph 13 of the Statement of Claim whlch pleads that:
"Later in the month of January 1989, the respondent, through Mr. Kristaps again agreed with the applicant, through Mr. Dempsey, to provide the finance to enable the applicant to buy the remaining six (6) properties needed for the applicant to complete purchases of the real estate for the development."
A good deal of the evidence was given about the luncheon at the Rusty Pelican restaurant which
was arranged by PRD, the marketing consultants, and which was attended by two of its firm, two partners from Robinson & Robinson and by Mr. Dempsey and his son Michael. Mr. Kristaps and
his assistant Mr. Evans had been invited but by error went to another restaurant and did not
arrive at the Rusty Pelican for one to one and a half hours after the luncheon had commenced. Mr. Kristaps arrived in a bad mood about 2.00 pm and he and Mr. Evans sat at a separate table.
Subsequently Mr Kristaps and Mr. Evans were invited to joln the others. They did so. It is alleged by Mr. Dempsey that at this luncheon:
"During the Course of the lunch I said to Mr. Kristap(s) or words to this effect:
'Well John we have got eight of them and there are six to go.'
He replied (with) words to this effect:
'Yes mate. Don't forget I will only lend you 85% of the valuations until your have bought the lot or at least you have got contracts on hem. Looking at the valuation you have been paylng premiums. So I suppose you will be paying more premiums with this last six properties. If you can get conditional contracts on the
over all the six contracts and bring the funds in for all the site and reimburse you last six properties that will make it easier for you. I can then take an assignment your monies You will need plenty of equity The units are only old run down
ones.'
I repl~ed (w~th) words to this effect:
'John this is what I am a~ming to do. To take the last six out at the samc time and to have plans approved from Council so that everything w ~ l l fit neatly lnto place. We can take the remaining six out now but I want to pause for a l~ t t le while Just to catch our breath and keep these vendors from being too greedy.'
Mr Kristap(s) said (w~th) words to this effect. 'OK mate, I have the money when you are ready. Just remember you will have
to tic the site up before I can lend you 100%. The funds are there.'
Towards the conclusion of the lunch I sald in the presence of John Kristap(s), words to this effect:-
'Well Brock, [directing my words to Brock W~nton], you can see Elders are fundlng the project. There is no trouble wtth the finance. All we have to do is we demolish the site, and get the plans approved - to sell 50% to overseas buyers off the plan.'"
1 have extracted only some of Mr. Dempsey's statement. Mr. M. S. Robinson and Mr. Michael
Dempsey verified that Mr. Kristaps made a statement to the effect that the funds were available.
This conversation was alleged to be conduct that was misleading and deceptive. But it was not misleading and deceptive unless it inferred a greater degree of commitment to the project than there actually was. Elders was involved with the project and had financed the first stage. Mr. Kristaps looked forward to financing the next stage and tndeed the proposed development.
That was where the profit lay. Did Mr. Kristaps' statement amount to more than this? I thlnk
not. The occasion was an informal one. SSS and Elders had just dealt formally with each other through the letter of 30 December 1988 and the master mortgage of 9 January 1989. Nothing was
said by Mr. Dempsey of an introductory nature, eg, "I need a commitment from Elders
before embarking on the next project" or even "Now that I have your commitment, I shall
proceed to the next stage". indeed Mr. Michael Dempsey said that his father's introductory words
were "So John, how is the finance travelling at the moment for Chevron Island." I take Mr.
and Mr. Kristaps expected to finance it. Kristaps statements to be inconsequential, for Mr. Dempsey was proceeding with the next stage It seems to me that Mr. Dempsey has given too much emphasis to a conversation which
took place on an informal occasion. Mr. Dempsey had many conversations in person with Mr.
Kristaps at h ~ s office and by telephone with Mr. Kristaps. Mr Dempsey kept in regular
communication with Mr. Kristaps. In early 1989, the economy was still looking favourable and Mr. Kristaps saw nothing wrong with the project and expected to finance it to completion. I
doubt that Mr. Kristaps said anything that was incorrect. Mr. Kristaps said that the funds were
there. But, the conversation occurred just after the completion of the financing of the first part of the project for the purchase of the six strata units and the two duplexes In respect of this, Mr. Dempsey had put in an application for finance, had supported the application by valuations
and financial details and had received a letter dated 30 December 1988 setting out the formal extent of the finance granted and the terms of which it was granted. That letter was signed by Mr. P. C. Gricr, who was not a member of the Gold Coast office but was in fact State Manager
for Elders. And the master mortgage had been executed on 9 January 1989. Once one reads
down Mr. Dempsey's statement a little, for he tended to give more definition to statements made
than they deserve, it seems to me that anything said at the Rusty Pelican simply fits into the general pattern of what was occurring. At that stage, Elders was backing the project. Mr.
Kristaps did not say anything at that meeting which should have conveyed a commitment by
Elders to fund the entire project, which even then was still to be planned, and he did not commit
Elders to the provision of any particular finance.
The next conduct relied upon is (i) which reads
the agreement by Mr. Kristaps to prov~de a letter for Mrs. Rogers (15);"
"(i)
This allegation refers to a discussion between Mr. Dempsey and Mr. Kr~staps in or about April Mrs. Rogers would require a clause that the financier to the project would warrant that the or May 1989 when Mr. Dempsey had it in mind that, in the proposed contract with Mrs. Rogers, amount required by Mrs Rogers would be forthcoming. We are not concerned with the actual contract entered into between SSS and Mrs. Rogers, for that contract was entered in subsequently after Elders had made it clear that it may not fund the project. The actual clause of the contract required a guarantee by a bank, which Elders was not. We are concerned with a convcrsation which took place in or about April or May 1989. Mr. Dempsey alleges that Mr. Kristaps agreed to provide such a guarantee. But again this was a t the time when Mr. Kristaps was generally in favour of the project. He was not asked to provide any immediate document and did not d o so. From Mr. Kristaps point of view, there would not have been any particular difficulty in giving
a letter of assurance to Mrs. Rogers ~f Elders was funding the project. So we return to the same
problem.It seems to me that at that stage Elders had not committed itself to the project and that
whatever was said between Mr. Dempsey and Mr. Kristaps in respect to the letter of assurance
to Mrs. Rogers was mainly a technical matter which would be dealt with together with all othertechnical matters. I have no reason to think that anything that Mr. Kristaps said was not his view of how matters would proceed in the future. The crucial question in this as in any other matter in this case is whether it should be understood that Elders was finally committed to provide
finance for the project. It seems to me that the assurance to Mrs. Rogers was a minor matter and that neither party should have misunderstood what was said by the other. Mr. Kristaps was quite
happy to have Mrs Rogers' property included in the development. And he so indicated. But the question is whether Mr. Kristaps committed Elders then and there to the total project. For the reasons I have given in relation to the alleged contract made in August 1988, I think that that did
not happen. Both parties understood that an application had to be made for any finance required and that Elders was not committed without further consideration to the provision of any finance
that was necessary for the proposed development. Even at this stage, In April or May 1989, the
precise nature of the development had not been settled.
The next conduct relied upon, (C), was said to be a recommendation by Mr. Kristaps of
a particular architect, Mr. S. Abedian of Sunland Industries. Although the evidence has differed a little on this point 1 see no significance in it. Mr. Dempsey had arrived at the position where he wished to plan for the future development. He was not satisfied with the advice that he had
obtained to that date. Mr. Kristaps recommended Mr. Abedian, who was an architect operating on the Gold Coast Mr. Dempsey engaged Mr Abedian. As far as the evidence shows, the recommendation was a good one. There has been no suggestion that Mr. Abedian and his firm Sunland Industries failed Mr. Dempsey in any way or were not suited to the task. The allegation
is of course not made in that way but simply is polnting to Elders involvement in the project.
This allegation carries that matter no further.
The next conduct relied upon is:
"(k) the assertion by Mr. Kristaps in May 1989 that the respondent would fund
the remainder of the project (20);"
This particular seems to be supported by evidence from Mr. Dempsey that, in June 1989, after
he has entered into the contracts for the purchase of thc remaining six strata units, he had a
conversation w ~ t h Mr. Kristaps and the latter said:
'Mate you have done exceptionally well indeed. I see no problem with the funding - you say you will get ten villas on the site - very good What are the purchase prices and settlement dates:
This was just another conversation between Mr. Dempsey and Mr Kristaps. They were in frequent communication either by telephone or by speaking to each other in person I do not see
anything in t h ~ s particular conversation which alters my overall view. As I have said, I read
down to some extent the evidence by Mr. Dempsey as to any particular conversation.
The next three matters relied upon are particularised as follows: "(1) the request by Mr. Kristaps for information about settlement dates
and purchase prlces for remaining six properties (22);(m) the first request by Mr. Kristaps to co-ordinate settlement dates for remalnlng six properties (23); (U) the second request by Mr. Kristaps to co-ordinate settlement dates
for remaining six properties (24)".
I sec no particular significance in any of these matters. Mr. Dempsey's application for 100%
finance of the strata units wlth varying settlement dates did not meet Elders policy and was inconsistent with the general principles discussed in August 1988. Mr. Kristaps did his best to
have the settlement dates consolidated with the view that, on that settlement date, the whole
project would such that Elders could grant 100% finance. I see nothing m~sleading or deceptive
in what Mr. Kristaps did. He was doing the best he could for SSS.
The next particulars are described as follows;
"Conduct which induced a~o l i can t to co-ordinate the settlement datcs for t h ~
f ~ n a l six aroaertieg. (0) the requests by Mr. Kristaps in (I), (m) and (U) above."
In respect of these I need say no more than that Mr. Kristaps was attempting to assist SSS to the
best of his ab~li ty. Mr. Kristaps did not then know that finance would be refused. He did no
more than encourage Mr. Dempsey to proceed with the overall plan which they had discussed in the middle of 1988. Mr. Dempsey thought that what was proposed was a good development.
And so did Mr. Kr~staps. I see nothing misleading in what Mr. Kristaps sald.
So we come to the crucial point that Elders, through a different manager, refused finance
for the project. Elders considered that it was not committed to provtde funds for the entire project and therefore that a decision had to be made. Mr. Swan considered the development and came to the conclusion that, not only should Elders not finance it, but that he could not
recommend it to anyone else.
The crucial point therefore is whether Elders was committed to thc project by virtue of
anything that Mr. Kristaps had said. For the reasons I have already given I think that Mr
Dempsey understood or should have understood that Mr. Kr~staps was supportive of the proposal
but that Elders was not comm~tted to grant any application for finance. In these c~rcumstances,
i t seems to me that the application must fail.
I have not particularly discussed the contentions based on equitable estoppel. It seems to
me that this cause of action adds nothing to what could be achieved by contract or section 52 of ! : I
the Trade Practices Act. The crucial question in respect of all causes of actlon is the commitment . .
which Elders made to flnance the project. In my view, Elders did not commit itself to do that.
! - ~ t
Reference was made to Leeion$ v. &&&y (1982) 152 C.L.R. 406, particularly the remarks of i t Mason & Deane JJ. as 435-7, and also to the judgments in The Commonwealth v. Verwaven i r F,'
(1990) 64 A.L.J.R. 540. I need not discuss or add to what was said therein.
3 - . 1, ; i I I i .:
It follows that, in proceedings G 123 of 1990, there must be judgment for the respondent.
1:
Had I been of the contrary view, 1 would not have ordered specific pcrformance of any I' I.:
contract to provide finance. It is generally inappropriate to do so. See Corvers (No 664) Ptv Ltd i v. N.Z.1 Securities Australia Ltd (1989) ASC 58402 at 58418. In the present case, circumstances
have changed. The project is at an end. Specific performance would not be appropriate.
As to damages, SSS claims loss of the profits which it alleges it would have made had the
project been financed to its finalisation. I t had been estimated by Mr. Dempsey that a profit of $3,000,000 would have been made from the sale of 9 home units at $1,500,000 each. Evidence consultants to the project, that the home units could have been sold from March 1990 onwards was adduced from Mr. L. R. Winten, a member of the flrm of PRD, who were the marketing
"off the plan" principally to Japanese investors at that price However, Mr Wlnten's opt~mistic view of the property markets on the Gold Coast was largely destroyed in cross-examination and, when challenged, he was unable to prove any comparable sale. The evidence of Mr. M. J. Ecclcston, a valuer, was much more impressive. Mr. Eccleston referred to comparable sales and
expressed the vlew that by early 1990 "the market had already gone" and it was doubtful that any off-the-plan sales could have been achieved. Mr. Eccleston assessed the sale price of the home
I .
units as planned a t S800.000 each. I accept Mr. Eccleston's opin~on, supported as it IS by the i i
refusal of all the financiers approached in the second half of 1989 to finance the project. The estimate of $1,500.000 per home unit was unrealistically high
On t h ~ s view, there was no loss of profits arriving from any breach by Elders of an
obligation to provide finance In Amann Aviation Ptv Ltd v. The Commonwealth (1990) 22 F.C.R. 527 a t 526-8, 1 discussed the principles of assessment of damages and I need not add to
what was there said. As I am of the view that the project was not a viable one and that profits would not have been made, this is not a case where damages should be awarded for loss of a chance. On the balance of probabilities, losses not profit would have resulted from the continuation of the project.
Had I awarded damages for the alleged misleading conduct, I would have allowed the
following expenditure incurred by SSS:
Herron Todd White $ 2000 Moneys expended on the 6 strata units 164,915 Legal fees 11.644
Legal costs - Orman 7,377 Legal costs - Thomas 500 Legal costs - Rogers 589 Robinson & Robinson 586 Sunland Industries 60.000 McDonald Balanda & Chesters 1,232 Rates Less rent received
To these figures would be added a sum, which I have not calculated, which takes into account
the liabilities which S S incurred to Elders, the acquisition costs of the first 6 units and 2
duplexes and the present value of the land.
In action G 435 of 1990, Elders seeks possession of the Chatswood property. The first
defence IS that of set-off, relying upon the claims made in G 123 of 1990. Counsel for Elders
contended that in the circumstanccs of the case set-off was not available. Counsel referred to Stchar Knittine Mills Ptv Ltd v. Southern Textile Converters Ptv Ltd [l9801 2 NSWLR 514.
However, if in proceedings G 123 of 1990 misleading or deceptive conduct on the part of Elders
had been established and orders had been made under s.87 of the Trade Practices Acl reducing
the liability of S S to Elders, or if equitable set-off had been established because SSS had increased its indebtedness to Elders as the result of inequitable conduct on the part of Elders,
those matters could have been taken into account in G 435 of 1990, for the indebtedness involved
in that proceeding included the Gold Coast indebtedness. It is not necessary to discuss this matter further
Secondly, Mr. Dcmpsey has put forward a conversation with Mr. Cronan in which he alleges that Mr. Cronan said that the interest payable would be capital~sed. This conversation was denied by Mr. Cronan in his evidence. In my opinion, thcre may have been some discussion
between Mr. Dempsey and Mr. Cronan about the payment of interest on the Chatswood property,
but. I do not think it probable that thcre was any waiver or alteration of the obligation by SSS
to pay interest. I have already discussed this matter.
The defence put forward was that SSS would not have continued to complete the
Chatswood development had not Mr. Cronan said the interest would be capitalised. But this
makes no sense. It was to everybody's advantage that the development would be completed. I reject Mr. Dempsey's contention that he may not have completed the total project had not Mr. Cronan made the representation to which I have already referred. By the time of Mr. Cronan's
statement, whatever it was, it was to everybody's interests that the development should be completed so that it could be sold in a completed state. I do not accept that there was any representation by Mr. Cronan which affected the course of events
Accord~ngly, in application G 123 of 1990 the application w ~ l l be dismissed with costs.
In application G 435 of 1990 there will be orders to the effect:
(a)
Judgment in the sum of $7,504,738.27 against the first, second and third respondents, and each of them.
(b)
The applicant be adjudged entitled to possession of the property known as 63 Shirley Road, Roseville being the whole of the land comprised in Certificates of Title Folio Identifiers E1391438 and F1391438.
(c)
The applicant be adjudged entitled to possession of the properties known as 21-23 Goodchap Road, Chatswood and 11A Critchett Road, Chatswood being the whole of the
in Strata Plan SP37697 including the land in Certificates of Title Folio Identifiers land in Certificate of Title Folio Identifier If786410 and now being the whole of the land CPlSP37697, 11SP37697, 21SP37697, 31SP37697, 41SP37697, 51SP37697, 61SP37697,
7lSP37697, 81SP37697, 91SP37697, 101SP37697, 11lSP37697 and 121SP37697.(d) Leave be granted to issue Writs of Possession forthwith. (e) The respondents pay the applicant's costs of the proceedings (I)
L~ber ty to apply be reserved.
1 certify that thts and the preceding 24 pages
arc a true copy of the reasons for judgment of
the Honourable Mr. Justice Davtes.
Associate: d l h -
Date: 20 December 1990 In G 123 of 1990: Counsel for the applicant: Mr. J. N. West Q.C. & Mr. S. L. Walmsley. Solicttors for the applicant: Tress Cocks & Maddox Counsel for thc respondent: Mr. D. E. Grieve Q.C. & Mr. J. C. Kelly Soltcitors for the respondent: Morris Fletcher & Cross Dates of hear~ng
6-7, 10-14 December 1990 Date of ~udgrnent. 20 December 1990 In G of 435 of 1990: Counsel for the applicant: Mr. J. C. Kclly
Solicitors for the applicant Gadens Ridgway Counsel for the respondents: Mr J. N. West Q.C & Mr. S L Walmsley Soltcitors for the respondents: Tress Cocks & Maddox Date of hearing:
6-7, 10- 14 December 1990 Date of judgment: 20 December 1990
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