Tawilla P/L & Ors v Farrow Mortgage Services P/Limited (in Liq)

[1995] QCA 370

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND  Appeal No. 71 of 1995

Brisbane

[Tawilla P/L & ors. v. Farrow Mortgage Services P/Limited (In Liq.)]

BETWEEN:

TAWILLA PTY LTD, SUMMITCO PTY LTD, JOHN WATSON
QUINN and PANJAN PTY LTD

(Plaintiffs)  Appellants

AND:

FARROW MORTGAGE SERVICES PTY LIMITED
(IN LIQUIDATION)

(Defendant)  Respondent

REASONS FOR JUDGMENT - THE COURT

Judgment delivered 18/08/1995

This is an appeal from an order made by a Chamber Judge on 23 March 1995 that this action be heard by judge alone.  That order was made under R.S.C. O. 39 r. 8, which, so far as presently material, provides as follows:

“The Court or a Judge may direct the trial without a jury of any cause ... requiring any prolonged examination of documents ... which cannot in their or his opinion conveniently be made with a jury ... .”

The appellants’ argument in this Court accepted that they could not succeed if it was open to the Chamber Judge to conclude that the trial would require a prolonged examination of documents which could not conveniently be made with a jury.

Presently, the pleadings consist of a Third Amended Statement of Claim by the appellants against the respondent, a Third Further Amended Defence and Counterclaim, and a Third Amended Reply and Answer.  The parties’ disputes arise out of secured loan transactions involving the respondent as lender and the appellants as either borrowers or guarantors.  The other appellants are all associated with the appellant, Quinn, who is a solicitor.  There were a number of loans on various dates between 1987 and 1990, made pursuant to various Deeds of Loan and secured over properties at various places in Queensland, including Maryborough and environs, a suburb in Brisbane, and a variety of locations on the Gold Coast.

The respondent’s counterclaims involve the most straightforward of the parties’ disputes, involving a claim for moneys owing and interest, recovery of possession of the properties, an account of rental and profits derived from the properties during specified periods, an order that that amount, together with accretions, be paid to the respondent in part satisfaction of its entitlement under the Deeds of Loan and the securities, and damages suffered by the respondent by reason of its having been restrained from appointing an agent or receiver to take possession of certain of the properties or to exercise its power of sale with respect to those properties on the appellants’ undertaking as to damages in the usual form.  Those claims were for the most part based upon the Deeds of Loan and associated security documents.  However, the respondent further alleged that the terms of that documentation were varied by a further agreement made on or about 14 February 1990, and that that further agreement was evidenced in letters from the appellants’ solicitors to the respondent’s solicitors dated 6 and 8 February 1990, a letter from the respondent’s solicitors to the appellants’ solicitors dated 14 February 1990, and a letter from the appellants’ solicitors to the respondent’s solicitors dated 14 February 1990.  Paragraphs 10 and 11 of the respondent’s Third Further Amended Defence and Counterclaim are in the following terms:

“10.     The terms of the 14th February Contract Agreement effected a refinancing of the outstanding loans from the Defendant to the plaintiffs and varied that terms of the security documents inter alia as follows:

(a)the loans balances in each case would be fixed as at the 1st December, 1989;

(b)that the term of each loan would be extended to the 1st December, 1991 save and except for the loan secured over the property at 155 Sydney Street, New Farm which expired in August, 1992;

(c)that the interest applicable and payable in respect of all loans would be

(i)for the period 1st December, 1989 to the 1st June, 1990 the net rental income from the secured properties;

(ii)for the period 1st June, 1990 to the 1st December, 1991 at the rate of 15% to be capitalised monthly to the extent of $500,000.00 but upon accrual of capitalised interest of $500,000.00, interest was to be paid monthly at the rate of 15% or if not paid when due monthly at the rate of 22%.

(d)that the Defendant acquire the property at Queen and Scarborough Streets, Southport from Panjan Pty Ltd for the sum of $3,000,000.00;

(e)that the costs of and associated with the proposals be to the account of the plaintiffs and the Defendant.

11.      In breach of the terms alleged in paragraph 10(c) the plaintiffs

(a)failed to pay the net rental income or the whole of the net rental income from the secured properties from the period 1st December, 1989 to the 1st June, 1990; and

(b)failed to pay any of the accruing monthly interest after capitalisation to the extent of $500,000.00, such limited being reached in September, 1990.”

The appellants’ Third Further Amended Answer admits the loans alleged by the respondent and says that there was a further loan by the respondent to the first appellant, Tawilla Pty Ltd, of $675,000 made on 1 August 1988.  Further, it is admitted by the appellants that there was an agreement made on 14 February 1990, that one of the letters dated that date - but which one is not specified - “in part evidenced that agreement”, but denied that the further correspondence alleged by the respondent “constituted the 14 February agreement”.  It is admitted that “the terms set out in sub-paragraphs 10(a) to 10(e) [of the respondent’s Third Further Amended Defence and Counterclaim] were some of the terms of the agreement” of 14 February 1990, but denied that that agreement “effected a refinancing of the outstanding loans” from the respondent to the appellants.  Further issues raised by the appellants in relation to that agreement are best left for the moment.

The appellants’ principal claim is that a contract was entered into on or about 7 November 1990 by six letters:

(a)from the respondent’s solicitors to the appellants’ solicitors dated 29 October 1990;

(b)from the appellants’ solicitors to the respondent’s solicitors dated 30 October 1990;

(c)from the respondent’s solicitors to the appellants’ solicitors dated 5 November 1990;

(d)from the appellants’ solicitors to the respondent’s solicitors dated 7 November 1990;

(e)from the respondent’s solicitors to the appellants’ solicitors dated 13 November 1990; and

(f)from the appellants’ solicitors to the respondent’s solicitors dated 13 November 1990.

According to the appellants, it was thereby agreed as follows:

“3.       By a contract entered into on or about 7 November 1990 the plaintiffs, by Quinn, and the defendant, by O’Connor, agreed as follows:

(a)the defendant would enter into a covenant not to sue any of the plaintiffs subject to the plaintiffs’ compliance with the terms of the agreement;

(b)the defendant would lend to the plaintiffs the sum of $1,668,000.00.  The plaintiffs would grant (by way of variation to existing mortgages of properties referred to in Schedule “B” or by fresh mortgage) security over those properties listed in schedule  “B” for the advance.  The term of the loan to be three (3) years;

(c)in respect of the Maryborough property:

(i)Tawilla would sell same;

(ii)Tawilla would lend to the purchaser of same an amount of $910,000 on completion of the sale;

(iii)Tawilla would take a mortgage over the property as security for that loan;

(iv)the terms of the mortgage would be:

(1)a principal sum of $910,000.00;

(2)a higher and acceptable rate of interest at 20% and 15% respectively;

(3)a term not exceeding the term of the mortgage of the property by Tawilla to the defendant;

(v)the mortgage would be cross collateralised and if the property were sold the full proceeds would be payable to the defendant;

(d)the defendant would take control of the properties (other than the schedule “B” properties) (“the said properties”) and thereafter retain or market the said properties as it sees fit in its absolute discretion;

(e)the plaintiffs:

(i)would acknowledge the defendant’s power of sale over the said properties;

(ii)would confirm indebtedness as at the date the 7 November agreement was to be carried into effect;

(iii)would provide full cooperation and assistance in the sale of the said properties;

(f)on completion of the arrangements the defendant would assume liability in respect of land tax and rates on the said properties;

(g)on completion of the arrangements the plaintiffs would account for all rent received from the said properties and make payment to the defendant of amounts received by them by way of rent but not paid by the plaintiffs to the defendant;

(h)the plaintiffs would bear the costs and stamp duty on the securities referred to at (d) above; otherwise the plaintiffs and the defendant bear their own costs;

(i)the plaintiffs and the defendant would execute a form of mutual release in respect of all claims of each against the other;

(j)a formal written agreement would be drawn by the defendant and executed by the plaintiffs and defendant.”

The apparent anomaly involved in the latter two letters forming part of the chain of correspondence put forward as containing an agreement entered into on or about 7 November 1990, i.e., some days before the letters were exchanged, is not explained.

One consequence attributed by the appellants to the agreement of 7 November 1990 is that it was “made ... in novation of” the 14 February agreement.  An alternative contention by the appellants is that, by the agreement of 7 November 1990, the parties “abandoned” the agreement of 14 February 1990.  Paragraphs 10 and 11 of the respondent’s Third Further Amended Defence and Counterclaim are otherwise denied by the appellants, which further allege that their “obligation to account for the funds referred to” in sub-paras. 10(a) and (b) of the respondent’s Third Further Amended Defence and Counterclaim and the respondent’s “obligation to perform its part of the 7 November agreement are dependent obligations”.  It is also asserted by the appellants that “by reason of the 7 November agreement [they] were not in default of the respective bills of mortgage”, and they deny that the respondent was entitled to give notices (which it did on 30 July 1991) demanding payment of the whole of the principal sums and interest due and secured by various bills of mortgage and guarantees and delivery of possession of various of the properties, and indicating its intention to exercise its power of sale in respect of those properties, or that the appellants were obliged to comply with those notices.

As an alternative to their primary contention that the identified correspondence in October and November 1990 contain the 7 November 1990 agreement, the appellants allege that they assumed that such an agreement existed or, alternatively, expected that a deed of compromise on the terms they say are embodied in that agreement would be brought into existence and that the respondent would not be free to withdraw from provision of the deed and execution of it, that the respondent induced the appellants to adopt that expectation, that they acted in reliance upon the assumption, as the respondent knew and intended, that their “action will occasion them detriment in the wasted time and expenditure aforesaid if the assumption or expectation is not fulfilled”, and that the respondent “has failed to act to avoid that detriment whether by fulfilling the expectation or otherwise”.  Accordingly, the appellants allege in para. 8 of their Third Amended Statement of Claim:

“8.       In the premises the [respondent] is estopped from asserting that it is entitled not to bring into existence the deed of settlement and to execute same, or alternatively is obliged in equity to compensate the [appellants] for the considerable time and inconvenience incurred by them to their detriment.”

The Third Amended Statement of Claim includes 16 particulars of how the respondent “induced the [appellants] to adopt [the] expectation” referred to, including correspondence, and 15 particulars of how the appellants “acted in reliance upon the assumption”, including correspondence, a variety of activities taken in relation to an attempt to dispose of the Maryborough property and associated expense, including documentary material, a report, a schedule of insurance, certificates of currency in respect of insurance, advertising, issuing legal proceedings, and compliance with statutory obligations.  In addition, the record contained 47 pages of other particulars apparently related to the Third Amended Statement of Claim, which include reference to further documentation.

According to the material available to the Court, the appellants’ further assertions are that they are, and at all material times were, ready, willing and able to carry out the terms of the 7 November 1990 agreement, but the respondent denies that it made such an agreement and refuses to carry it out.  The relief which they claim is as follows:

“In respect of the 7 November claim:

1.(a)       Specific performance of the 7 November agreement.

(b)All necessary and consequential accounts, directions and enquiries to be taken and made.

(c)Alternatively, damages for breach of contract in lieu of specific performance.

(d)Damages in any event for delay in performing the 7 November agreement or alternatively failure to perform the contract.

(e)A declaration that the [respondent] is estopped from failing to bring into existence a deed in accordance with the terms set out and alleged to be the terms of the 7 November agreement;

(f)Equitable monetary compensation to compensate the [appellants] for loss suffered by them as a consequence of the [respondent’s] failing to perform the terms alleged to be the terms of the 7 November agreement;

(f)Further or other relief.

...
6A.     A declaration that the [appellants] are entitled to set of any damages or other monetary compensation awarded to them against any liability otherwise owed by them to the [respondent].”

Further issues between the parties, apart from denials of various factual allegations by one or other of the appellants and the respondent, include the respondent’s assertions that the items of correspondence relied upon by the appellants for the 7 November 1990 agreement do not constitute a concluded contract or, in the alternative, “any such contract (which is denied) was made subject to the execution of a formal contract by the [appellants] and the [respondent], which formal contract has not been executed”.  By way of further alternative, it is said by the respondent “that any contract arising from the items of correspondence referred to therein was and is void for uncertainty”, and a number of matters of uncertainty are particularised.  Further, the respondent alleges that if there was a contract the appellants repudiated it and refused to be bound thereby and again a number of further matters, some relating to documentation, are particularised.

So far as concerns the appellants’ estoppel claim, the respondent asserts that, even if the facts referred to are true (which is denied):

“(a)... no estoppel is raised in favour of the [appellants];

(b)such facts do not attract relief by way of absolute estoppel;

(c)further the [appellants] have suffered no loss, damage or inconvenience such as to attract compensation.”

It is unnecessary to discuss the issues in the litigation further to conclude that the appellants’ argument that the requirements of R.S.C. O. 39 r. 8 have not been satisfied is entirely devoid of merit.  It is beyond serious controversy that there are a substantial number of documents which must be examined by the tribunal of fact for the purpose of deciding by reference to them and associated oral evidence a number of legally complex issues in part dependent on the construction of those documents in the context of other events and circumstances.
It was not only open to the Chamber Judge to form the view that he did, but no other view was reasonably open to him.

The appeal should be dismissed with costs.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND  Appeal No. 71 of 1995

Brisbane

[Tawilla P/L & ors. v. Farrow Mortgage Services P/Limited (In Liq.)]

BETWEEN:

TAWILLA PTY LTD, SUMMITCO PTY LTD, JOHN WATSON
QUINN and PANJAN PTY LTD

(Plaintiffs)  Appellants

AND:

FARROW MORTGAGE SERVICES PTY LIMITED
(IN LIQUIDATION)

(Defendant)  Respondent

FITZGERALD P.
  DAVIES J.A.
  MOYNIHAN J.

Judgment delivered 18/08/1995

REASONS FOR JUDGMENT - THE COURT

Appeal dismissed with costs to be taxed

CATCHWORDS:     CIVIL LAW - order made by Chamber Judge that the action be heard by judge alone SCR O. 39 r. 8 - whether it was open to the Chamber Judge to conclude that the trial would require a prolonged examination of documents which could not conveniently be made with a jury

Counsel:E.J.P. Lennon Q.C. with him D. Savage for the Appellants

P. North Q.C. with him P. Hastie for the Respondent

Solicitors:Quinn & Company for the Appellants

Corrs Chambers Westgarth for the Respondent

Date(s) of Hearing:      10 August 1995