Tipperary Developments Pty Ltd v The State of Western Australia - [2009] WASCA 126

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: TIPPERARY DEVELOPMENTS PTY LTD -v- THE STATE OF WESTERN AUSTRALIA [2009] WASCA 126

CORAM: WHEELER JA
McLURE JA
NEWNES JA

HEARD: 16-20 MARCH 2009

DELIVERED : 22 JULY 2009

FILE NO/S: CACV 92 of 2006

BETWEEN: TIPPERARY DEVELOPMENTS PTY LTD
Appellant
AND
THE STATE OF WESTERN AUSTRALIA
Respondent

ON APPEAL FROM:
Jurisdiction              :  SUPREME COURT OF WESTERN AUSTRALIA
Coram  :MURRAY ACJ
Citation  :TIPPERARY DEVELOPMENTS PTY LTD -v- THE STATE OF WESTERN AUSTRALIA [2006] WASC 137
File No  :CIV 2490 of 1992, CIV 1473 of 1994, CIV 1878 of 1994

Catchwords:

Contract - Oral agreement - Scope and content - s 4 Statute of Frauds - Whether 'guarantee' - Proper law of the contract - Authority of agent of State to enter contract - Intention to create legal relations

Estoppel - Whether s 4 Statute of Frauds impediment to estoppel claim - Whether 'something more' than oral promise required

Negligent misrepresentation - Whether trial judge determined all of appellant's case - Authority of agent of State to make representations - Falsity of representations - Whether reasonable grounds to make representations - Whether breach of continuing duty to disclose

Release - Whether oral release agreement open on evidence - Whether oral agreement releases respondent - Deed of release - Whether deed enforceable by respondent - Construction of deed - Whether deed releases respondent - Rectification or specific performance of deed

Costs - Notice to admit facts - Where no positive finding made - Turns on own facts

Legislation:

Bankruptcy Act 1924 (Cth)
Companies (Queensland) Code
Constitution Act 1889 (WA)
Constitution Acts Amendment Act 1899 (WA)
Corporations Law, s 95A
Property Law Act 1969 (WA), s 9, s 10, s 11
Rules of the Supreme Court 1971 (WA), O 66 r 1(1), O 66 r 3(2)
Statute of Fraud 1677 (Imp), s 4

Result:

Appeal dismissed
Cross-appeal upheld in part

Category: A

Representation:

Counsel:

Appellant: Mr B C Oslington QC & Mr J C Giles
Respondent: Mr C L Zelestis QC & Mr K M Pettit SC & Mr A J Sefton

Solicitors:

Appellant: Brennan & Co
Respondent: State Solicitor for Western Australia

Case(s) referred to in judgment(s):

Actionstrength Ltd v International Glass Engineering IN GL EN SpA [2003] 2 AC 541
Agius v Sage [1999] VSC 100
Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309
Akai Pty Ltd v The Peoples Insurance Company Ltd (1996) 188 CLR 418
Anfrank Nominees Pty Ltd v Connell (1989) 1 ACSR 365
Attorney‑General (Ceylon) v AD Silva [1953] AC 461
Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540
Australian Securities Commission v Malborough Gold Mines Ltd (1993) 177 CLR 485
Buckland v Buckland [1900] 2 Ch 534
Butler v Powis (1845) 2 Collyer 156; 63 ER 679
CH Giles & Co Ltd v Morris [1972] 1 WLR 307
Collin v Holden [1989] VR 510
Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329
Commonwealth v Verwayen (1990) 170 CLR 394
Cropper v Smith (1884) 26 Ch D 700
Dawes v Tredwell (1881) LR 18; Ch D 354
Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55; (2004) 218 CLR 471
Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95
Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89
Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480
Friend v Brooker [2009] HCA 21
Frontier Petroleum NL v Anzoil NL (Unreported, WASC, Library No 970286, 4 June 1997)
Giumelli v Giumelli (1996) 17 WAR 159
Hansen Beverage Co v Bickfords (Australia) Pty Ltd [No 2] [2008] FCA 601
House v The King (1936) 55 CLR 499
Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896
John Pfeiffer Pty Ltd v Rogerson (2000) 203 CLR 503
Jones v Bartlett (2000) 205 CLR 166
Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563
Kyra Nominees Pty Ltd (in liq) v National Australia Bank Ltd (1986) 4 ACLC 400
Legione v Hateley (1983) 152 CLR 406
Leroux v Brown (1852) 138 ER 1119
Lewis v Doran (2004) 208 ALR 385
Maralinga v Major Enterprises Pty Ltd (1973) 128 CLR 336
Masters v Cameron (1954) 91 CLR 353
McDermott Black (1940) 63 CLR 161
Meadow Gem Pty Ltd v ANZ Executors & Trustees (Unreported, VSC, 11 June 1996)
Middleton v Aon Risk Services Australia Ltd [2008] WASCA 239
Mincode Pty Ltd v Isa Pty Ltd (1996) 17 WAR 245
Minister for Youth & Community Services v Health & Research Employees Association of Australia (1987) 10 NSWLR 543
Monarch Petroleum NL v Citco Australia Petroleum Ltd (1986) WAR 310
Moschi v Lep Air Services Ltd [1973] AC 331
Mutual Life & Citizens' Assurance Co Ltd v Evatt (1968) 122 CLR 556
New South Wales v Bardolph (1934) 52 CLR 455
NMFM Property Pty Ltd v Citibank Ltd [No 11] (2001) 187 ALR 654
Northside Developments Pty Ltd v Registrar‑General (1990) 170 CLR 146
Otway v Braithwaite (1678) Finch 405; 23 ER 221
Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451
Pape v Commissioner of Taxation [2009] HCA 23
Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221
Perre v Apand (1999) 198 CLR 180
Powercell Pty Ltd v Cuzeno Pty Ltd [2004] NSWCA 51
Prestige Residential Marketing Pty Ltd v Depune Pty Ltd [No 2] [2008] NSWCA 341
Quick v Stoland Pty Ltd (1998) 29 ACSR 130
Re A & K Holdings Pty Ltd [1964] VR 257
Re Sugden's Trusts; Sugden v Walker [1917] 2 Ch 92
Riches v Hogben [1986] 1 Qd R 315
Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 76 ALJR 436
Russo‑Chinese Bank v Li Yau Sam [1910] AC 174
Sandell v Porter (1966) 115 CLR 666
Scook v Premier Building Solutions Pty Ltd (2003) 28 WAR 124
Southern Cross Interiors Pty Ltd (in liq) v Deputy Commissioner of Taxation (2001) 53 NSWLR 213
Spring v Guardian Assurance Plc [1995] 2 AC 296
Stocker v Wedderburn (1857) 3 K & J 393; 69 ER 1162
Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245
Sunderland Marine Insurance Co v Kearney (1851) 16 QB 925
Tepko Pty Ltd v Waterboard (2001) 206 CLR 1
The Bell Group Ltd v Westpac Banking Corporation [No 9] [2008] WASC 239
Tipperary Developments Pty Ltd v The State of Western Australia [2006] WASC 237
Toll (FGCT) Pty Ltd v Alphapharm (2004) 219 CLR 165
Townsend v Collova [2005] WASC 4
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
Water Board v Moustakas (1988) 180 CLR 491
Winks v WH Heck & Sons Pty Ltd [1986] 1 Qd R 226
Wright v Goff (1856) 22 Beav 207; 52 ER 1087

WHEELER JA: I have read in draft the reasons for decision of McLure JA. I agree with her Honour's ultimate conclusion that the appellant's claim against the State must fail and the appeal be dismissed. So far as the specific grounds of appeal, the notice of contention, and the cross‑appeal are concerned, I agree with her Honour's conclusions, save that I would not decide grounds 3(b), 3(d), 4(b) and 4(e) of the cross‑appeal, concerning the question of whether the giving of a guarantee to the appellant was outside the ordinary activities or functions of a government, and the question of intention to create legal relations. I also reach a somewhat different conclusion from her Honour concerning the estoppel ground, ground 4 of the grounds of appeal.
Save as mentioned above, I agree with her Honour's reasons and have nothing to add. I set out my own reasons in relation to those issues in respect of which I take a different view below.

Ordinary activities or functions of government

Although there is academic commentary which strongly argues for a different view, neither party in the present case challenged the correctness of the proposition which emerges from New South Wales v Bardolph (1934) 52 CLR 455, that a State Premier has authority to enter into contracts, in the absence of specific statutory authority, in respect of matters which are within or incidental to the ordinary and well recognised functions of government. I therefore deal with this issue on the basis that no broader authority to enter into contracts exists. The controversy in this case, then, is a factual one concerning the trial judge's finding that the provision of the guarantee was part of the ordinary activity of government.
His Honour's findings in relation to this matter are set out (Tipperary Developments Pty Ltd v The State of Western Australia [2006] WASC 237) at [313] and [314]:
It is asserted by the defendant that it could not be regarded as part of the ordinary functions of officials such as Dowding and Edwards to commit the State potentially to pay $50M to [the appellant] on the basis of oral assurances and a telephone discussion, when the $50M was not being provided to the State but to a private merchant bank with liquidity problems, which the State was endeavouring to support. However, to my mind that misses the point. The history of the matter, I think, establishes that the State had made a commitment, for reasons concerned with the State's economic wellbeing, to the support of Rothwells. At the time in question, then, it had, as a commercial activity of government, committed very substantial funds, in one way or another, to Rothwells and had undertaken a very substantial liability, potentially at least, in relation to those public moneys.
I see no reason to hold that in 1988, as much as today, it was not part of the ordinary activity of government to enter into commercial transactions, at least those which may, as I think this was, reasonably be supposed to be for the benefit of the State. The contract was made in the terms that I have described. It was valid and enforceable, subject to one consideration raised by way of defence.
His Honour's findings in these paragraphs appear to me to equate the transaction concerning the $50 million deposited into Rothwells to enable withdrawal of the GESB money with the grant of the $150 million NAB indemnity which had been given earlier. A financial crisis is capable of constituting an emergency which will enliven the exercise of executive power: Pape v Commissioner of Taxation [2009] HCA 23. It may be accepted that where a financial institution is capable of being seen as one important to the economy of a State, and where the survival of that institution is threatened, with potentially serious consequences for the State's economy, it is an "accepted" function of government to endeavour to provide financial support to that institution, to persuade others to do so, and to commit State funds for that purpose. Although one would expect the occasions on which a State would be required to use the power to be rare, it may well be appropriate to regard a function of providing financial support in this way as being an ordinary function, albeit one the exercise of which will rarely be required.
However, the alleged guarantee in the present case was given in very different circumstances. His Honour's findings about those circumstances were as follows.
The process which initiated the transactions the subject of this appeal began with a decision that the State Government Insurance Commission (SGIC) and the Government Employees Superannuation Board (GESB) should sell the Perth Technical School (Perth Tech) site. Three prospective purchasers made bids, and the preferred tenderer was a consortium which included the appellant ([27]). In a decision which appears to have had no commercial connection with the process of selling the Perth Tech site, Dowding considered that an advantage might be obtained "for Rothwells" by requiring the successful tenderer to deposit the sum of $50 million with Rothwells ([29] ‑ [30]).
The purpose of requiring that $50 million deposit was in order to extricate a deposit of that amount which GESB had, at some earlier time, made with Rothwells (the GESB deposit). The desire to extricate those moneys arose because Dowding thought that they might arguably be regarded as the property of those civil servants who made contributions to the superannuation fund, who might not take kindly to the placement of their funds with Rothwells, at a time when it was known that Rothwells had problems of some kind. It was therefore desirable that GESB be able to withdraw the money before the end of the financial year, when it would become necessary to report the deposit in the published accounts of GESB ([30] ‑ [31]).
It was represented to the tenderers that the deposit of $50 million with Rothwells was an essential condition of an agreement to sell the Perth Tech site and negotiations were terminated at a point when the tenderers expressed their unwillingness to do so and were only restarted once Anderson, on behalf of the appellant, had indicated that he was prepared to accede to that condition ([38], [42], [77]). Those representing the State at the time explained to those representing the appellant that the purpose of the $50 million deposit was to enable GESB funds to be extricated, that the government would have been happy to put in moneys to replace those funds, but could not do so through SGIC or other instrumentalities, and that the reason for seeking to retire the GESB deposit was a political one ([55], [61]). As his Honour found, those representing the State declined to put any of their assurances in writing ([67]).
The transaction which emerges from the evidence which his Honour recited and accepted, in the paragraphs to which I have referred, was not a commercial one, however broadly that term is understood, but a narrowly political one in that it was intended to serve the interest of a particular ministry, rather than the interest of the public or any section of the public. The requirement for the deposit of $50 million had no rational connection with the commercial transaction involving the sale of the Perth Tech site. While, in other circumstances, a request that a party deposit a sum into Rothwells might (as with the NAB guarantee discussed by McLure JA at [34]) be seen as part of a process of ensuring support for a troubled institution of importance to the State, and therefore part of the accepted functions of government, this was not a transaction which was, as originally conceived, intended to provide any additional support to Rothwells. Rather, it was intended to replace one deposit in Rothwells with an identical sum from a different source, so that the original depositor's funds (the GESB deposit) could be withdrawn in order to avoid political embarrassment. In the end, of course, the transaction did involve the provision of additional support to Rothwells, since its deteriorating financial position meant that the GESB deposit could not be withdrawn as anticipated, but that circumstance cannot be used in order to recast the original transaction.
The respondent's pleading was in the following terms. The State had denied that it had sought the deposit of moneys into Rothwells for the reasons ultimately found by his Honour, and had denied that there had been any assurances that the State would see that the appellant was repaid. The pleading in the alternative, in par 33(b) of the second further reamended defence and counterclaim of 6 July 2005, was baldly that the alleged guarantee was not made in the ordinary course of administering a recognised part of the government of the State. The particulars of that pleading, found in the answers to amended request for further and better particulars of defence dated 25 August 1996 were as follows:
3.2 & It is not within the ordinary course of administering a recognised 3.3 part of the Government to:
(a)purport to give a guarantee for the repayment of $50 million to be deposited in a private merchant bank, namely Rothwells;
(b)purport to give an assurance that the Government would see the plaintiff's money was safe in Rothwells; or
(c)purport to give a government guarantee or assurance of repayment in those circumstances,
and it is not within the ordinary course of administering a recognised part of the Government that:
(d)the Government provide financial support to Rothwells such as to enable Rothwells to repay the Tipperary advance;
(e)the Government provide financial support to Rothwells such that Tipperary would not suffer loss in respect of the Tipperary advance; or
(f)the Government indemnify Tipperary in respect of any loss suffered by Tipperary by reason of Rothwells' failure to repay any part of the Tipperary advance,
for the reasons that:
(g)there was no practice within government of entering such contracts and the alleged contract was not pursuant to any established service of government;
(h)the alleged contract was not necessary for the proper functioning of government;
(i)the alleged contract concerned a large amount of money;
(j)the practice of government was for the Treasurer to issue a written guarantee or indemnity;
(k)the alleged contract was concerned with the provision of funds by a private company to another private company neither of which was related to government;
(l)there was no recognised office, department or organisation involved in the alleged contract on behalf of the government;
(m)the alleged contract did not have a commercial character for the State and was not incidental to any State industrial or commercial undertaking.
Although they are put negatively, pars (g), (h), (k) and (m) appear to have the effect of denying, in my view correctly, any rational connection between the deposit of $50 million in Rothwells by the appellant and the sale of the Perth Tech site to the appellant, and of denying, at least, that the contract of guarantee was necessary for the proper functioning of the State. No further particulars of those denials were sought.
If it were simply a matter of referring to the pleadings and to the findings of fact made by the learned trial judge, which I have outlined above, I would have concluded that, having regard to the facts which his Honour plainly accepted, he was in error in characterising the transaction in question here as a commercial transaction which might reasonably be supposed to be for the benefit of the State. That conclusion would have consequences for the question not only of whether the transaction was part of the ordinary and accepted functions of government (which it plainly would not be), but also for the question of whether there was an intention to create legal relations. That is because the fact that the transaction cannot be characterised as one related to ordinary and proper governmental purposes would be capable of giving rise to an inference that the parties must rationally have understood that the transaction would be advantageous to those acting on behalf of government only to the extent that it was not publicly disclosed; that, in turn, would lead to a conclusion that it was unlikely that they would have expected that it was intended that the agreement be enforceable, if breached, by litigation.
The difficulty with reaching the conclusions which I have foreshadowed above, in relation to these grounds of cross‑appeal, is that, notwithstanding the facts which his Honour found and notwithstanding the state of the pleadings, during the course of the appeal both parties avoided any suggestion that the transaction was in any way an abnormal or improper one. The respondent, in its submissions, was concerned not with the substance of the transaction, but with the procedures leading up to it. The heart of the respondent's written submissions on this point appears to be contained in par 211 of its written submissions which reads:
Any further financial support to be provided by the respondent to Rothwells required a decision of Cabinet, at the very least. Any decision made would go no further than its terms allowed. It would not add a new dimension, of unlimited breadth, to the concept of the ordinary or recognised functions of government.
That is, it was not contended that it was outside the ordinary and accepted functions of government to engage in a transaction of this kind, but only that it was not within the ordinary and accepted functions of government to give an effectively open‑ended guarantee of financial support in the course of engaging in such a transaction.

The broader issues were raised from time to time with the parties by the court. For example, at page 106 of the transcript, McLure JA put to counsel for the appellant that one might regard the whole exercise (that is, the transaction I have described) as "very tawdry". The response was that that was not a claim made by the respondent. Similarly, at page 288, McLure JA put to counsel for the respondent the following proposition:
But, see, the point is, everybody knows, you would think, that the state is proceeding in a way that you might raise your eyebrows about. He [Anderson] knows that. I was talking earlier about the whiff test. I mean, everybody knows this is very odd. Anderson knows he's getting oral assurances, he doesn't want to put anything in writing because he knows the state is not going to, he's been told that by [Edwards], and there are obvious reasons why the state is not going to anyway. They would have to explain it to their constituents.
The only response made by counsel for the respondent was, "Well, the inference is that it's not to be put in writing because it's going to be denied that it's legally binding."
The attitude of the parties no doubt serves to explain the way in which his Honour came to make the findings which he did in [313] and [314]. It raises yet again the question of the proper approach for an appellate court to take when the parties conduct their case on a basis inconsistent with what appears to the court to be the correct approach. This case is unusual, in that it is not a case of a party failing to raise a factual issue; all the facts which appear to me to be relevant are contained in the findings of the trial judge, and no party complained that those findings were not open to him. Nor is it a case of the court taking a view of the law which is different from the view upon which the parties appear to have proceeded: cfFriend v Brooker [2009] HCA 21 at [111] ‑ [118] per Heydon J.
Having closely considered the transcript of the appeal in the light of the considerations I have discussed above, it seems to me that, notwithstanding that the court drew attention to the apparent lack of propriety of the transaction on more than one occasion, it was never squarely put to the parties that they should address argument directed to a possible conclusion that the transaction was outside the ordinary and accepted functions of government, not because it involved the guarantee of a large amount of money, but because of the features to which I have referred to at [6] ‑ [12]. Natural justice would therefore require that the parties should have an opportunity to address that question.
However, as appears from the reasons of reasons of McLure JA, with which I agree, it is not necessary to determine grounds 3(b), 3(d), 4(b) and 4(e) of the cross‑appeal in order to determine this appeal. In those circumstances, it appears to me pointless to delay the matter further or to cause extra expense to the parties by inviting further submissions (see Spring v Guardian Assurance Plc [1995] 2 AC 296 at 316 per Lord Goff of Chieveley). In those circumstances, notwithstanding that it is normally the duty of an intermediate appellate court to deal fully with the issues raised by the grounds, both of an appeal and of a cross‑appeal, I do not determine those grounds of the cross‑appeal.

Estoppel

Again, my conclusions in relation to this matter would have been affected by the factual analysis set out above, if it had been open to me, in the absence of further submissions from the parties, to give effect to it. That is because it is unlikely that Edwards would have represented that the promises he made were enforceable, in circumstances where those promises formed part of a transaction which it was most unlikely that those acting on behalf of government would have wished to see made public. If no such representation was made, then the "something more" than an oral substantive promise, required by the reasoning in Actionstrength Ltd v International Glass Engineering IN GL EN SpA [2003] 2 AC 541, and at least by Mason CJ and Wilson J in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 (at 406) could not be found.

I would add that it appears to me that, although Waltons Stores contains observations which could support a different conclusion, the narrow basis upon which it appears to me that s 54A of the Conveyancing Act 1919 (NSW) was held inapplicable in that case was as follows.
Mason CJ and Wilson J simply concluded that there was no substance in an argument based on s 54A for the reasons given by the other judges (at 408). That leads one to examine those reasons. Brennan J clearly took the view that, because it is the equity which is enforced and not the contract, s 54A has no application (at 433). However, Deane J had concluded that there was an assumption that there was a binding agreement in existence (that is, that the relevant formalities including therefore s 54A had been complied with) (at 444). He considered that s 54A did not apply, because there had been part performance (at 445). He accepted that s 54A might operate in some circumstances to render unenforceable an agreement which was the product the operation of an estoppel, giving an example. In Waltons Stores, however, because of the nature of the assumption (that is, that there was a binding agreement), the estoppel precluded denial of a binding agreement and there was no scope for the operation of s 54A to render that assumed agreement unenforceable (at 446). His Honour noted, but left open, the possibility that it could be held that s 54A "applies only to real contracts and agreements and does not apply to an assumed agreement". While his Honour's reasons would provide some support for a broader principle then, it seems to me that Deane J's conclusion concerning s 54A was directly related to the assumption which he found to exist, which assumption would necessarily have involved an assumption that s 54A had been complied with. Gaudron J expressly found that the assumption was that an exchange of parts had taken place and there was therefore necessarily an assumption that the agreement was duly executed so that "the question of compliance with s 54A ... becomes irrelevant" (at 464).
On that analysis, it appears to me that, applying by analogy the reasoning in Waltons Stores, an equitable estoppel of a kind which would preclude reliance on s 4 of the Statute of Frauds is established only if there is a representation which includes or involves a representation that an enforceable guarantee will be, or has been, given.
McLURE JA: This is an appeal from the decision of Murray ACJ dismissing the appellant's action against the State of Western Australia (the State) relating to a $50 million commercial bill discount facility

provided by the appellant to Rothwells Ltd (Rothwells) in March 1988 (the facility).

The facility was solicited by the State. Before any part of the moneys the subject of the facility were repaid to the appellant, Rothwells was placed in provisional liquidation. That occurred on 3 November 1988. Sometime later Rothwells went into liquidation. The appellant suffered a significant loss as a result of providing the facility to Rothwells.
The appellant claimed against the State for breach of contract, negligent misrepresentation and in estoppel. The State denied those claims and pleaded a positive case to the effect that the State and the appellant had entered into an oral agreement whereby the appellant agreed to release the State from all claims relating to the facility (the oral release agreement) which agreement was reflected in a formal deed of release dated 30 December 1989 (Deed of Release). In the alternative, the State applied to rectify the Deed of Release to conform with the oral release agreement.
The trial judge dismissed the appellant's claims in contract, estoppel and negligent misrepresentation. In particular the trial judge held that (1) in March 1988 the State orally agreed with the appellant to guarantee Rothwells' obligations to the appellant arising under the proposed facility (the March oral agreement); (2) the March oral agreement was unenforceable under s 4 of the Statute of Frauds which applied because the proper law of the agreement was the law of Western Australia; (3) the doctrine of estoppel had no application because it would have defeated the operation of s 4 of the Statute of Frauds; (4) although the State, by its duly authorised agents, had made a representation that Rothwells was basically sound with temporary liquidity problems, the representation was made on reasonable grounds and thus was not false or misleading; and (5) there was no breach by the State of any continuing duty to advise of developments in Rothwells' financial position.
The State was largely successful in its release defences. The trial judge held that the appellant had released the State from all relevant claims pursuant to the oral release agreement, which agreement was specifically enforceable, and that although the Deed of Release did not release the State, it should be rectified so as to do so.
The State filed a notice of contention and a cross‑appeal. A large number of issues arise for determination in the appeal. They include what the trial judge found to be the scope and content of the oral promise(s) the subject of the March oral agreement; were the agents who acted for the State duly authorised to enter into the March oral agreement on behalf of the State; did the parties have an intention to create legal relations; is the March oral agreement within s 4 of the Statute of Frauds; is the proper law of the contract that of Western Australia or New South Wales (which has no equivalent to s 4 of the Statute of Frauds); is s 4 of the Statute of Frauds an impediment to the appellant's estoppel claim; did the trial judge fail to determine all of the appellant's misrepresentation case, and if so, was there a breach of a representation that the State would continue to financially support Rothwells; did the State's agents have authority to make the representations complained of; did the trial judge err in finding that there were reasonable grounds to represent that Rothwells was basically sound; did the State became aware of information concerning Rothwells' financial situation which it was under a continuing duty to disclose to the appellant; was it open on the evidence to find an oral release agreement; is the oral release agreement specifically enforceable; on its proper construction does the Deed of Release apply to the State and if not did the trial judge err in ordering rectification of the deed.

Factual background

The events in question took place against the backdrop of the stock market crash that occurred in the week commencing 19 October 1987. Rothwells was a listed public company carrying on business as a merchant bank primarily in Western Australia under the chairmanship of Mr Laurie Connell. Rothwells accepted deposits in various forms from public and private investors, paying comparatively favourable interest rates, and loaned money to borrowers. Its major asset was its 'receivables' that is, debts owed to it by borrowers.
As a consequence of the stock market crash, a run on Rothwells commenced around 22 October 1987 with depositors demanding the return of their funds. That caused very significant liquidity problems which would have required Rothwells to cease trading on Monday 26 October 1987. A rescue package was swiftly organised over the weekend of 24 and 25 October 1987 (commonly known as 'the rescue weekend').
The principal organisers of the rescue package were Peter Beckwith and Alan Bond, directors of Bond Corporation Holdings Ltd (BCH) assisted by James Yonge and others from Wardleys Australia Ltd (Wardleys). If the rescue was to succeed it had to be in place by 26 October 1987. This timeframe did not permit a proper review of Rothwells' financial position. Assurances were given to those asked to participate in the rescue, including the State, that Rothwells was basically sound but had liquidity problems. The assurances were fortified by the Annual Report and Audited Accounts of Rothwells for the year ending 31 July 1987 which were published in September 1987.
The weekend rescue package comprised three major elements. First, a private sector capital raising of $150 million underwritten by Wardleys. As that would take some time to arrange, Wardleys organised a $150 million facility provided to Rothwells by the National Australia Bank (NAB) guaranteed by the Hong Kong and Shanghai Bank. That facility was provided by NAB on 26 October 1987 and repaid from the proceeds of the capital raising. Secondly, there was a further $150 million facility provided to Rothwells by NAB supported by an indemnity in writing from the State. This facility was also provided on 26 October 1987. Thirdly, there was to be an injection of $70 million by Connell, $20 million in the form of equity and the balance in the form of a subordinated loan. The trial judge was unable to reach a conclusion about the extent to which Connell complied with his undertaking [23]. On 25 October 1987 details of the weekend rescue package were publicly announced by the then Premier of Western Australia, Mr Brian Burke.
Government instrumentalities had been involved in providing liquidity to Rothwells in the days prior to the rescue weekend. Two government instrumentalities that prominently figure in the Rothwells saga are the State Government Insurance Commission (SGIC) a body corporate established under the State Government Insurance Commission Act 1986 (WA) and the Government Employees Superannuation Board (GESB) a body corporate established under the Government Employees Superannuation Act 1987 (WA). Mr Tony Lloyd, an Assistant Under-Treasurer, was Chairman of the GESB. Lloyd was appointed the Managing Director of Rothwells with effect from 1 January 1988. Mr Kevin Edwards was at the material time the Executive Director of the Department of Premier and Cabinet and Deputy Chairman of the SGIC. Mr Wyvern Rees was the Chairman of the SGIC.
On 22 October 1987 the GESB deposited $5 million in Rothwells. On the same day the SGIC acquired from the partnership of LR Connell & Partners (comprising Connell and his wife) for the sum of $30 million a 50% interest in a property trust which had an interest in the Perth Technical School site. The proceeds were to be deposited in Rothwells. That transaction was settled on 23 October 1987.
Rothwells' liquidity problems continued after the rescue weekend. Rothwells had 'lent long' against short term deposits. It had facilities with banks and other financial institutions to enable it to fund its obligations to depositors. These facilities began to be withdrawn in the aftermath of the crash.
In early November 1987 the SGIC and the GESB purchased a number of CBD properties from companies in the Bell Group, including a further part of the Perth Technical School site and adjacent properties (the Parmelia Hotel and the Forrest Centre). In addition, the SGIC purchased the Bell Group Ltd's shareholding in BHP. It was a condition of these Bell transactions that the vendors deposit $50 million in Rothwells. That payment was made by Bell Resources Ltd (BRL).
In addition, deposits of $50 million were each made by the SGIC and the GESB in January 1998 [24].
In January 1988 the SGIC and the GESB placed the Perth Technical School site on the market. Tenders were called. The preferred tenderer was a consortium comprising the appellant, a company controlled by Mr Warren Anderson, and Consolidated Press Holdings Ltd (CPH), a company controlled by Mr Kerry Packer. The State imposed a separate condition on the sale being that the successful purchaser deposit $50 million in Rothwells.
The condition was imposed at a meeting on 16 March 1988 at the appellant's Sydney office attended by (inter alia) Anderson, Mr Don Bourke representing CPH, Edwards, Lloyd and Rees. The State's contractual offer of a guarantee was found to have been made at this meeting. Lloyd had with him at the meeting the audited financial statements of Rothwells for the half‑year ended 31 January 1988 (the January audited accounts). They were signed on 11 March 1988 and disclosed net assets of around $261.5 million.
As a result of the March oral agreement found by the trial judge, the appellant entered into the facility with Rothwells, the terms of which are recorded in a letter from Rothwells dated 18 March 1988 (the facility agreement). The term of the facility was 12 months. Pursuant to the facility agreement, the appellant made the following payments for the purchase of commercial bills accepted by Rothwells:

31 March 1988

$15 million

6 April 1988

$10 million

11 April 1988

$5 million

12 April 1988

$10 million

13 April 1988

$10 million

The money to purchase the commercial bills was borrowed by the appellant from CPH. The parties and the trial judge in his reasons variously describe the moneys paid for the commercial bills under the facility agreement as a deposit in, or loan to, Rothwells. Although not technically correct, I will continue that practice.
The State's stated purpose in requiring the purchaser to deposit $50 million in Rothwells was to enable Rothwells to repay to the GESB the $50 million it had deposited at the end of January 1988. However, continuing liquidity problems prevented the appellant's funds from being used for that purpose.
The appellant and CPH entered into a contract in writing dated 18 March 1988 to purchase the Perth Technical School site which became known as Stage 1 of 'Westralia Square' (Westralia Square) which purchase was settled in the names of nominee companies, Sharland Pty Ltd (Sharland) and Skeat Pty Ltd (Skeat) in June 1988. Under the contract (as varied) the SGIC and the GESB provided a rental guarantee and were required to contribute to a property trust.
By June 1988 the SGIC and BCH had each acquired 19.9% of the issued shares in BRL. Like Rothwells, BRL was in financial difficulty. The acquisition was investigated by the then corporate affairs regulator, the National Companies and Securities Commission. The investigation was settled on the basis that BCH would make a full takeover bid for BRL. The SGIC and BCH agreed that the SGIC would not accept the takeover offer on condition that BCH deposit $100 million in Rothwells. Fifty million dollars was deposited on 3 June 1988 and was immediately used to repay the GESB.
In July 1988 State Cabinet was advised that Rothwells' financial problems were not confined to liquidity. It also had an asset deficiency of some $300 million ‑ $400 million. In that knowledge, the State embarked on yet a further attempt to rescue Rothwells from its dire financial situation culminating in the notorious PICL transaction. PICL stands for Petrochemical Industries Company Ltd, a company that was effectively owned and controlled by Connell and Mr Dallas Dempster. Under the PICL transaction, which settled on 17 October 1988, the State and BCH purchased PICL and its ownership of a proposal to establish a petrochemical industry and plant. The purchase price was $400 million of which $350 million was payable to Connell's company Dalleagles Pty Ltd. Dalleagles/Connell was required to use the proceeds to purchase $350 million of bad debts owed to Rothwells by Connell‑related entities. This is what would be described in the current global financial crisis as the removal of toxic assets from Rothwells' balance sheet.
In July 1988 the appellant and Rothwells entered into a further (and fuller) agreement in writing setting out the terms and conditions of the facility agreement. By the end of July 1988 Anderson was aware that Rothwells was in difficulty honouring the bills endorsed to the appellant. Anderson pressed for and eventually succeeded in obtaining a formal deed of variation of the facility agreement which was dated 17 October 1988. It provided that the facility be reduced by $19.5 million to $30.5 million by 28 October 1988 with the balance to be paid by the end of March 1989. There was a suggestion that the payment by Rothwells due on 28 October 1988 might be funded from moneys received by Rothwells as a result of the PICL transaction. The appellant's legal adviser, Mr Bert Gianotti, a partner in the Perth office of Mallesons Stephen Jaques, was advising in relation to the proposed variation. Gianotti advised Anderson that he should insist on a deed of variation and condition it upon the provision of satisfactory written assurances of repayment to be given by a 'third party' by which the trial judge found he clearly meant the State [176]. That requirement was not pursued by the appellant.

Rothwells failed to pay the sum of $19.5 million on 28 October 1988. On 3 November 1988 Rothwells was placed in provisional liquidation. The State, through its solicitors Robinson Cox, retained the services of Whitlam Turnbull & Co to provide services to the State and the SGIC concerning Rothwells‑related matters.
Continuing disputes relating to the rental guarantee and property trust undertaking resulted in the SGIC and the GESB offering to purchase the interest of Sharland and Skeat in Westralia Square. Whitlam Turnbull was appointed before the parties had formally committed themselves to the transaction. Mr Neville Wran and Mr Malcolm Turnbull provided the services on behalf of Whitlam Turnbull. In early December 1988 Turnbull met with Anderson and re‑negotiated the purchase of Sharland and Skeat's interest in Westralia Square. It was common cause that a State‑imposed condition of the purchase of Sharland and Skeat's interest in Westralia Square was that the appellant and Anderson provide a release. Wran had a telephone conversation with Anderson on 21 December 1988. The trial judge found that the oral release agreement was made during that telephone conversation [270]. The Deed of Release was prepared by Robinson Cox. The appellant and Anderson did not seek any amendments to the deed presented to them for execution. They signed it on 23 December 1988 although the document bears the date 30 December 1988. The deed was held in escrow until that date being the date of settlement of the sale of Sharland and Skeat's interest in Westralia Square to the SGIC and the GESB.

The appellant's contract issues (ground of appeal 1)

The appellant contends in ground of appeal 1 that the trial judge should have held that the March oral agreement was not a contract of guarantee or alternatively, that the law of Western Australia was not, or not proven to be, the proper law of the contract. The first issue is the scope and effect of the contractual promises.

The scope and effect of the contractual promises (ground of appeal 1(a))

The parties disagree on the scope and effect of the findings made by the trial judge as to the terms of the March oral agreement. The appellant contends the trial judge found that the State made two promises in the following terms:
1.If the appellant deposited $50 million into Rothwells then the State would continue to support Rothwells financially to the extent necessary to ensure that Rothwells would repay the loan (the first contractual promise);
2.If the State failed to perform the first contractual promise, the State would accept the obligation of repayment.
The State contends the trial judge found that it agreed to ensure that Rothwells would repay the loan when it became due or undertake the obligation of repayment itself. For their respective positions, the appellant relies on [69] and [304] of the trial judge's reasons and the State relies primarily on [65] ‑ [70], [318] and [319].
In [65] the trial judge refers to Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245 and cites the following passage from the judgment of Mason CJ:
There are, however, two common classes of guarantee of the payment of instalments by the principal debtor. The first is an undertaking by the guarantor that if the debtor fails to pay an instalment he will pay. This is a conditional agreement. The guarantor's obligation to pay arises on the debtor's failure to pay. The second is an undertaking by the guarantor that the debtor will carry out his contract. Then a failure by the debtor to perform his contract puts the guarantor in breach of his [256].
In [66], the trial judge compares the two classes of guarantee identified in Sunbird and contrasts them with a third category on which the appellant was said to rely. The trial judge said:
I take it, therefore, that a promise by a guarantor to pay the debt owed by a debtor if that party fails to repay it, and the promise by a guarantor to be answerable for the failure by another to perform a contract will equally, in law, constitute contracts of guarantee. On the other hand, a promise given to a third party to support another by putting that person in funds so that the other person will have the capacity to perform a contractual obligation or to pay a debt would not constitute a contract of guarantee because, in that form of agreement, the promisor is not undertaking to the promisee to be answerable in any way for the debt or default of another, but is making a separate contractual agreement, with its own obligations, upon the breach of which the promisee may sue directly. For reasons to which I shall later refer, that is a distinction relied upon by the plaintiff in this case. [The appellant] asserts that on 16 March, Edwards, for the State, made an offer which Anderson, for [the appellant], accepted, which was not an offer to guarantee the repayment of the $50M, but resulted in the formation of a contract of the latter kind discussed above [66].
Before making a factual finding as to the terms of the March oral agreement, the trial judge rejected the appellant's contention. He said:
In my opinion, however, that is not a distinction which can be maintained in this case. I do not accept that Mr Anderson misunderstood what he was told, so as to characterise the effect of it as a guarantee when that was not what was being given. Anderson's evidence, which I accept, was that Edwards merely declined to provide the guarantee in writing: not that he declined to provide the guarantee orally, but he did not want it to be available as a matter of record [67].
Anderson's evidence to which the trial judge refers in [67] is summarised by the trial judge in [44]. According to the trial judge, Anderson made it perfectly clear that he understood what was being said by Edwards amounted to a guarantee. Anderson's evidence was that he understood that a guarantee was given when the guarantor promised that if the principal debtor did not pay then the guarantor would, or that if the person principally responsible to do something did not do it, the guarantor would see that it was done.
After rejecting the appellant's contention, the trial judge set out his findings as to what was promised. He said:
The preponderance of evidence which I accept, clearly supports the conclusion that Edwards, purporting to speak for the Government of the State, promised that if the prospective purchasers of the Westralia Square site deposited, in some form, $50M into Rothwells for a relatively limited period of 6 or 12 months, then the depositors could be assured that the Government would continue to support Rothwells, which was represented to be an institution which was financially sound, although suffering from temporary liquidity problems, and the Government would ensure that Rothwells would repay the loan when it became due or would undertake the obligation of repayment itself.
I am not prepared to find, on the basis of Anderson's evidence alone, that Edwards represented that the securities which would be provided for the deposit to be made would be of the highest quality, 'gilt edged'. It seems to me that Mr Anderson genuinely believes those words were used, but in my opinion it is more probable that in so thinking he has reconstructed a view about the tenor of the conversation which is illusory. In my view, outside of the operative terms of the assurances, in the form of oral guarantees, there is nothing independently of those promises which might itself constitute a contractual promise. What was said otherwise about the Government 'standing behind' Rothwells, 'being in for the long haul', 'seeing it through to the end', and the like was mere puffery, uncertain of meaning, not intended to create binding contractual relations and, in short, devoid of any contractual content [69] ‑ [70].
After making the relevant factual findings, the trial judge turned his attention to the determination of the issues by the application of the law to the facts. In the course of considering whether Premier Dowding (who replaced Brian Burke in February 1989) and Edwards had authority to enter into a contract of guarantee on behalf of the State, the trial judge restated his contract finding in slightly different terms. He said:
What was asserted was that an express oral agreement was made between the State, as I would find acting through Edwards, and [the appellant], acting through Anderson, the terms of which were that if [the appellant] deposited $50M into Rothwells, then the State would continue to support Rothwells financially, to the extent necessary to ensure that Rothwells would repay the loan or, failing that, the State would accept the obligation of repayment [304].
The trial judge returned to the issue of the terms of the March oral agreement in the course of his consideration of whether it fell within s 4 of the Statute of Frauds. In that context he said:
[If s 4 of the Statute of Frauds] applies, it is obviously fatal to this head of claim, not by making the contract void or invalid, but by making it unenforceable against the State, which declines to be bound. The plaintiff makes a number of answers to the application of the section. In the first place, as I have mentioned, it asserts that the contract made was not a contract of guarantee. Properly construed, it says the contract was not one to answer for the debt or default of another, but a separate contractual agreement with its own obligation. It describes it as an agreement by the State to indemnify [the appellant] against loss arising out of its loan to Rothwells. It says that that is of a different character and the obligation to indemnify arose once loss was occasioned by the making of the loan, regardless of any continuing liability on the part of Rothwells to repay the debt.
I accept that such a distinction may be drawn but not, in my opinion, in this case. The contract made was, so far as the State is concerned, a promise that it would ensure that Rothwells repaid the loan when it became due, or, failing that, it would undertake the obligation of repayment itself. Both terms constitute a guarantee to support the primary liability of Rothwells to repay. Only if Rothwells failed to do so would the State's liability arise. The State did not assume the primary liability to see that [the appellant] was repaid. It did not undertake simply to indemnify [the appellant] against any loss it might suffer as a primary liability it assumed for itself, in parallel with the primary liability of Rothwells. On the contrary, the State undertook to support the primary liability of Rothwells [318] ‑ [319].
The trial judge approached his fact‑finding against the backdrop of the relevant legal principles. It is to those principles that I now turn. Section 4 of the Statute of Frauds 1677 (Imp) applies in Western Australia but not in New South Wales. Section 4 relevantly provides:
No action shall be brought … whereby to charge the defendant upon any special promise to answer for the debt, default or miscarriage of another person; … unless the agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing and signed by the party to be charged therewith or some other person thereunto by him lawfully authorised.
The term 'guarantee' does not appear in the statute. A number of conditions must be met in order to fall within s 4. First, there must be three parties involved who for convenience I will refer to as the debtor, the creditor and the guarantor. Secondly, the debtor must be and continue to be liable to the creditor for the debt, default or miscarriage in question. Thirdly, there must be no liability on the guarantor unless and until the debtor has failed in its duty to the creditor. That is, in order to fall within the statute, the liability of the guarantor to pay the creditor must be conditional upon the debtor's default. In this sense, it is said that the debtor's liability is primary (which is why the debtor is commonly described as the principal debtor) and the liability of the guarantor is collateral or subsidiary. Upon the debtor's default, both the principal debtor and the guarantor are liable to the creditor in respect of the amount owing. However, the fact that the debtor is primarily liable does not mean the creditor must first exhaust its rights against the principal debtor before seeking recovery from the guarantor.
In essence, if the 'guarantor' would be liable to the creditor irrespective of whether the principal debtor is liable or has made default, the contract falls outside the Statute of Frauds.
Whether or not the State provided an oral guarantee within s 4 of the Statute of Frauds depends upon the proper construction of the March oral agreement. The task is to objectively determine the common intention of the contracting parties having regard to the language used, the surrounding circumstances known to the parties and the purpose of the transaction: Toll (FGCT) Pty Ltd v Alphapharm (2004) 219 CLR 165 [40].
In order to determine the intended scope of the trial judge's finding, it is necessary to put the two categories of guarantee identified by Mason CJ in Sunbird in their proper context. Mason CJ was considering the view of Lord Diplock in Moschi v Lep Air Services Ltd [1973] AC 331 that the nature of a guarantor's obligation was 'to see to it that the debtor performed his own obligations to the creditor' not to himself pay a sum of money to the creditor. It followed that a creditor's remedy lay only in damages for breach of the contract of guarantee.
In Moschi the guarantor 'personally guaranteed the performance by [the debtor] of its obligations' to make instalment payments under a contract for the sale of goods. The debtor committed a repudiatory breach of the contract which was terminated by the creditor with the consequence that the creditor became entitled to loss of bargain damages from the debtor. The question in issue was whether the creditor could recover loss of bargain damages from the guarantor. That in turn depended on whether the guarantor's obligation was confined to the payment of instalments or whether the guarantor had in effect undertaken that the principal will carry out his contract. Lord Diplock, adopting a rule applicable to all guarantees, held it was the latter. Lord Reid rejected any common rule, but came to the same conclusion based on the construction of the contract of guarantee in question.
Mason CJ in Sunbird agreed with Lord Reid's approach. However, it is apparent from his reasons in Sunbird that in both categories of guarantee identified by Mason CJ, the guarantor's liability to the creditor only arises upon the debtor's failure to perform his obligations owed to the creditor.
The appellant claimed the trial judge found that the State's promise was that if the appellant deposited $50 million in Rothwells, the State would continue to support Rothwells financially to the extent necessary to ensure that Rothwells would repay the loan. The appellant claims the trial judge found in effect that the State had agreed to take positive steps to ensure that Rothwells had the financial standing and capacity to repay the loan to the appellant when it became due and payable in March 1989. That is, the State's obligation was to take positive steps directly (by itself) or indirectly (by placing obligations on third parties) to provide Rothwells with funds to enable it to continue to trade until it had satisfied its indebtedness to the appellant by a payment that was not a voidable preference under the insolvency laws. Accordingly, the appellant contends the State was in breach of its promise when Rothwells went into provisional liquidation in November 1998. That is, the State's liability to the appellant does not arise upon Rothwells' failure to perform its obligations to the appellant. It is clear from the trial judge's reasons as a whole that he did not make, or intend to make, a finding to that effect. In [66] the trial judge contrasted the two Sunbird categories of guarantee with the nature of the State's obligation for which the appellant contended below and in the appeal. In [67], [318] and [319] he expressly rejects the appellant's formulation and characterisation of the State's obligations. Paragraphs [69] and [304] have to be construed in that context together with [70] in which the trial judge makes his intention unequivocally clear. What was said about 'standing behind' Rothwells and other similar expressions was mere puffery not intended to have contractual effect. The operative terms of the finding in [69] are confined to the oral guarantees that 'the Government would ensure that Rothwells would repay the loan when it became due or would undertake the obligation of repayment itself'.
In summary, the trial judge intended the first limb of the contractual promise to be that the government would ensure Rothwells would repay the loan when it became due (being a promise which gave rise to a claim for damages for breach of the contract of guarantee upon Rothwells' default) and the second limb to be a promise to itself answer for the default by Rothwells in the payment of its debt to the appellant (thus entitling the creditor to sue the guarantor for the debt or liquidated demand). The appellant does not challenge the correctness of the finding. Both limbs found by the trial judge fall within s 4 of the Statute of Frauds.

The proper law - Western Australia or New South Wales (ground of appeal 1(b))

The proper law of a contract is the system of law by reference to which the contract was made or that with which the transaction has its closest and the most real connection: Akai Pty Ltd v The Peoples Insurance Company Ltd (1996) 188 CLR 418, 440 ‑ 441. If it is apparent from the terms of the contract that the parties intended a particular system of law to apply, their intention will prevail: Akai (441). In determining the parties' intention, the ordinary common law rules of construction apply. However, it is not a question of implying a term as to choice of law. The High Court said:
There is, in truth, only one question here, and that is whether, upon the proper construction of the contract (which may include an expression of choice in direct language), the court properly may conclude that the parties exercised liberty given by the common law to choose a governing law for their contract. If the answer to this is in the negative, then the law itself will select a proper law (442).
Applying the ordinary rules of the common law relating to the construction of contracts, this court is unable to infer that the parties intended their contract to be governed by reference to a particular system of law.
The appellant placed particular reliance on the principle of validation which is to the effect that the parties would have intended that their agreement be binding and enforceable. If that factor is to have any weight, it could only be so in the context of inferring the parties' intention. It would have no relevance where as here, the proper law is that with which the March oral agreement has its closest and most real connection. Relevant factors in that assessment ordinarily include the place where the contract was made, the place of performance of the contract, the place of residence or business of the parties and the nature of the transaction or subject matter of the contract.
The trial judge said he was unable to make a finding as to when, how and to whom the appellant accepted the State's offer which became the March oral agreement. The appellant contends the trial judge should have made the following factual findings. First, the March oral agreement was made no later than 18 March 1988 because that was the date of the contract of sale of Westralia Square to the appellant and CPH. It was also the date of the facility agreement. Secondly, that Anderson accepted the oral March offer in a telephone conversation with Dowding on 18 March 1988. Thirdly, Anderson made the telephone call to Dowding from Sydney.

Neither Anderson nor Dowding gave evidence that Anderson, on behalf of the appellant, informed Dowding in the telephone conversation on 18 March 1988 that it accepted the State's offer. There is no proper evidentiary basis for a finding to that effect. In any event, even if all the findings sought by the appellant were open on the evidence, it would not result in a finding that the proper law was the law of New South Wales. The evidence establishes that Anderson's phone call on 18 March 1988 was made to Dowding in Perth. I will assume without deciding that the law relating to the formation of a contract is the same in Western Australia and New South Wales. A contract is made at the place where the last act necessary to make the contract binding is performed. A contract is not formed until there is acceptance and that acceptance has been communicated to the offeror. The general rule is that a contract is made at the place where the communication is received (cf the postal rule). As the communication was received by Dowding in Perth, the March oral agreement would have been made in Western Australia.
The trial judge found that the guarantee if called upon would be honoured in Western Australia either by the State ensuring that Rothwells had the funds to enable it to repay the $50 million, or by directly making that payment itself [325]. The appellant challenges the second limb of the finding, contending there is no cogent evidence establishing that the State would itself directly make the payment to the appellant in Western Australia.
The evidence established that the appellant was incorporated, and had its business premises, in New South Wales. The meeting on 16 March 1988 in which Edwards was found to have made the contractual offer took place at the appellant's New South Wales office. Anderson lived in New South Wales. There was no evidence that the appellant conducted any business from any office in Western Australia or that it banked in Western Australia. However, at the time of the commercial dealings involving the State and the appellant, the appellant was and continued to be represented by the Perth office of the law firm Mallesons Stephen Jaques. The finding made by the trial judge was open.
Moreover, there are other connections with Western Australia. First, the State of Western Australia was a party to the March oral agreement. Secondly, the debtor was carrying on business primarily in Western Australia. Thirdly, the March oral agreement was collateral to the contract of sale of Westralia Square to the appellant (and CPH). The making of the March oral agreement was a condition precedent to the sale of Westralia Square [71] ‑ [75], [299]. Fourthly, the purpose of the March oral agreement was to facilitate the repayment of a State instrumentality, the GESB. The evidence establishes that the transaction did indeed have its closest and most real connection with Western Australia. The trial judge was correct to conclude that Western Australia was the proper law of the March oral agreement.
The State in its cross‑appeal contended that s 4 of the Statute of Frauds applies even if the law of New South Wales is the proper law of the March oral agreement, relying on Leroux v Brown (1852) 138 ER 1119. By an oral agreement between the plaintiff and the defendant made in France the plaintiff agreed to enter into the service of the defendant. Section 4 of the Statute of Frauds (UK) rendered an oral agreement of that type unenforceable. However, the agreement was enforceable by the law of France. The plaintiff commenced proceedings in England. The court held that s 4 of the Statute of Frauds is a matter of procedure and therefore the contract could not be sued upon in England.
Matters of substance are governed by the lex causae (the law of the cause of action) and matters of procedure are governed by the lex fori (the law of the forum). The appellant says the decision of the High Court in John Pfeiffer Pty Ltd v Rogerson (2000) 203 CLR 503 applies by parity of reasoning to render s 4 of the Statute of Frauds a matter of substance rather than procedure for the purpose of determining whether the matter is governed by the proper law of the contract or the law of the forum (if that is different).
In John Pfeiffer the plaintiff sued in the Supreme Court of the Australian Capital Territory for damages in tort for personal injury suffered in New South Wales. New South Wales legislation limited the amount of damages that could be awarded to the plaintiff for non‑economic loss. The law of the Australian Capital Territory imposed no relevant limit. The court held that the limitation on damages, not being directed to governing or regulating the mode or conduct of court proceedings, was a matter of substance rather than procedure and was therefore governed by the lex loci delicti (the law of the place where the tort was committed) not the lex fori. The High Court said:
[M]atters that affect the existence, extent or enforceability of the rights or duties of the parties to an action are matters that, on their face, appear to be concerned with issues of substance, not with issues of procedure. Or to adopt the formulation put forward by Mason CJ in McKain [v RW Miller and Company (SA) Pty Ltd (1991) 174 CLR 1] 'rules which are directed to governing or regulating the mode or conduct of court proceedings' are procedural and all other provisions or rules are to be classified as substantive (543 ‑ 544).
Applying the reasoning of the High Court in John Pfeiffer, s 4 of the Statute of Frauds would be characterised as substantive not procedural for the purpose of the conflict of laws. Accordingly, the section only applies because the proper law is that of Western Australia.

Authority of Premier and Edwards to give guarantee

The trial judge found that (1) Dowding as Premier had actual authority to enter into the contract of guarantee on behalf of the State [299]; (2) as a result of being so authorised by Dowding, Edwards had actual authority to enter into the contract of guarantee on behalf of the State [299]; (3) alternatively, Edwards had ostensible authority to do so [301].
In all the authority issues that arise, the State relies on Edwards' refusal at the meeting on 16 March 1988 to give a guarantee in writing. For convenience I deal here with the relevant findings and evidence on that subject.
The evidence of Anderson and Bourke accepted by the trial judge was that at the meeting on 16 March 1988 Bourke asked Edwards whether he would give a written guarantee of repayment by Rothwells of the $50 million loan. Edwards refused, saying he could not do that ([44], [56]). Edwards' evidence in cross‑examination is as follows:
I'm suggesting to you that [Mr Bourke] asked whether the government was prepared to guarantee the loan?---I don't know. You would have to ask Mr Bourke.
That you responded that you were not able to do this?---Well, I certainly declined an invitation to put it in writing, yes.
I'm suggesting you declined an invitation to give a guarantee?---Well, if I put it in writing, it potentially would become a guarantee, yes.
I'm suggesting he asked you if you were prepared to give a guarantee and you said you weren't able to?---Well, I certainly wasn't able to (ts 997).
Although Edwards knew an oral guarantee was unenforceable, he did not communicate that to Anderson whose evidence was that he did not know that to be the case (ts 708). The trial judge said:
Anderson's evidence, which I accept, was that Edwards merely declined to provide the guarantee in writing: not that he declined to provide the guarantee orally, but he did not want it to be available as a matter of record [67].

Actual authority (cross‑appeal grounds 3(a) and 4(a))

The position of the parties to the appeal is that there is no relevant Western Australian legislation relating to the authority of members of the executive arm of the State Government to bind the State. I will proceed on that basis. The position in Western Australia is to be contrasted with that of the Commonwealth.
The authority of members of the executive arm of the Commonwealth Government to enter into contracts on behalf of the Commonwealth involving the committal of public money is regulated by the Financial Management and Accountability Act 1997 (Cth), the Financial Management and Accountability Regulations 1997 (Cth) and Chief Executive's instructions made thereunder.
The general principles concerning the liability of the Crown for contracts made by its ministers and officers were explained by Starke J in New South Wales v Bardolph (1934) 52 CLR 455:
[C]ontracts made on behalf of the Crown by its officers or servants in the established course of their authority and duty are Crown contracts, and as such bind the Crown. The nature and extent of the authority may be defined by constitutional practice or express instructions, or inferred from the nature of the office or the duties entrusted to the particular officer or servant. It is not every contract made or purporting to have been made by an officer or servant of the Crown on its behalf that will bind the Crown, but only such as are within the authority delegated to that officer or servant. The authority is a matter which ultimately falls for determination in the Courts of law (502).
If a contract is made for and with the authority of the State, the State and not the agent is liable on the contract. This rule depends partly upon the general rules of the law of agency and partly on public policy: Minister for Youth & Community Services v Health & Research Employees Association of Australia (1987) 10 NSWLR 543, 557 (McHugh J).
It was also held in Bardolph that although parliamentary appropriation of moneys is not a condition of the validity of a contract with the Crown, it is an implied term of such a contract that payment by the Crown shall only be made out of moneys appropriated by Parliament.
There was no evidence in this case of any constitutional practice or express instructions conferring authority on Premier Dowding. I take the starting point to be that the Governor in Council, on whom the executive power of the State is conferred by the Constitution Act 1889 (WA) and the Constitution Acts Amendment Act 1899 (WA) (Constitution Acts), has authority to bind the State in contract. The Constitution Acts make no reference to the position of Premier. Subject to one qualification, the nature and extent of the Premier's authority has to be inferred from the nature of his office. The qualification arises from Bardolph. The majority in that case (Rich J, Dixon J with whom Gavan Duffy CJ agreed) held that the Crown has a power independent of statute to make such contracts as are incidental to the ordinary and well‑recognised functions of government ((496) (Rich J), (507) (Dixon J)). The clear implication is that statutory authorisation is required for the Crown to make a contract that is not incidental to the ordinary and well‑recognised functions of government. I do not understand the parties to dissent from that proposition
Starke J took a different view. He stated that the authority of a Premier or responsible minister is not unlimited but was not confined to the ordinary activities or functions of government. He said:
In each case, the character of the transaction, and also constitutional practice, must be considered. The question of authority, in the case of contracts providing for the carrying on of the ordinary activities or functions of government, presents, as a rule, but little difficulty; other contracts, however, must be considered each in relation to its own facts (502 ‑ 503).
Within the field of ordinary functions identified by the majority, the Prime Minister and a State Premier has authority across the whole field of such activity ((495) (Rich J), (507) and (515) (Dixon J), (518) (McTiernan J)).
Academic commentators take the strongly expressed view that the executive power to contract without statutory authorisation is not limited to the ordinary functions of government but covers all contracts: Seddon N, Government Contracts: Federal, State and Local (3rd ed, 2004) [2.6], fn 44; Hogg P and Monahan P, Liability of the Crown (3rd ed, 2000) [9.4]. Seddon states that apart from its place in the federation, there should be no limit on the executive power of the State to enter into contracts [2.17], [2.19]. Notwithstanding the controversy, neither party challenged the correctness of Bardolph.
However, the State challenges (cross‑appeal grounds 3(b) and 4(b)) the trial judge's finding that the provision of the guarantee was part of the ordinary activity of government. The trial judge held that it was part of the ordinary activity of government to enter into commercial transactions which may reasonably be supposed to be for the benefit of the State [314]. In reaching that assessment, he had regard to the history (the indemnity and other earlier deposits by government instrumentalities) which established that the State had made a commitment for reasons concerned with the State's economic wellbeing to the support of Rothwells.
The State did not contend that the grant of the $150 million NAB indemnity or the imposition of a requirement that the purchaser of Westralia Square deposit $50 million in Rothwells were outside the ordinary functions of government. I am unable to distinguish those activities from the provision of a guarantee to the appellant. The State does not rely on any specific evidence on the subject of what is and is not part of the ordinary functions of government nor advance a principled basis or test for doing so. None of the aforementioned State activities would pass a 'raised eyebrows' test of what is out of the ordinary but no‑one contends that is the legal test. The State has failed to discharge the burden of demonstrating that the trial judge erred in failing to find that the provision of the guarantee to the appellant was outside the ordinary activities or functions of government.
Applying Bardolph, it follows that Premier Dowding was authorised to enter into a contract of guarantee for and on behalf of the State. That being so, Dowding could delegate that authority to Edwards, either by the grant of actual or ostensible authority. The next issue is whether Edwards had actual authority from Dowding to enter into the contract of guarantee on behalf of the State (cross‑appeal grounds 3(a), 4(a)).
The evidence established that in late February 1988 there was a meeting attended by Dowding, Mr J Berinson (Attorney General and Minister for Budget Management), Edwards and Rees at which a decision was taken that the State should continue its support for Rothwells [26]. Further, at a meeting attended by Dowding, Berinson, Edwards, Lloyd and Rees on 13 March 1988, it was agreed that a loan or deposit of $50 million in Rothwells would be required of the successful tenderer for Westralia Square [29]. The trial judge found that at the meeting on 13 March 1988 Edwards was authorised to, inter alia, offer the assurance that the State would ensure that Rothwells repaid the loan when it became due, or would undertake that obligation itself [299]. The State contends that finding is not open on the evidence.
The trial judge's summary of the evidence of the meeting on 13 March 1988 ([29] ‑ [32]) makes no mention of any discussion about giving an assurance of repayment. Edwards' witness statement adduced as his evidence‑in‑chief is silent on the issue of his authority to provide the guarantee. The trial judge refers to Edwards' evidence in cross‑examination as to his authority as follows:
He said he was authorised to give the assurances because it had been accepted, not by the Cabinet, but at the meeting at the end of February, that the Government had to support Rothwells. The Government had provided support, and that support would remain and, if necessary, additional financial support for Rothwells would have to be organised by the Government. That, he said, was the 'party line' which he was authorised to put to the meeting in Sydney, and he did so [57].
What was reportedly said at the meeting in late February does not support an inference that Edwards had authority to provide a guarantee for and on behalf of the State. It goes no further then identifying the State's position in relation to its support of Rothwells. It falls well short of authorising Edwards to enter into any relevant contract on behalf of the State, whether of guarantee or otherwise. Further, Edwards knew that he could not and the State would not provide a guarantee in writing. Edwards knew a guarantee had to be in writing to be legally enforceable [59].
Dowding's evidence does not support the trial judge's finding that Edwards had authority to give a guarantee on behalf of the State. Moreover, the trial judge rejected Anderson's evidence that Edwards' assurances as to repayment were repeated by Dowding in a telephone conversation on 18 March 1988. The trial judge said he was not able on the evidence to determine precisely what was said in that telephone conversation. He accepted that Dowding would have spoken in encouraging terms but doubted he would have committed the government to a guarantee of repayment [84]. That doubt is a significant impediment in the way of a finding that Dowding gave actual authority to Edwards to enter into a contract of guarantee on behalf of the State.
In support of the finding of actual authority, the appellant relied on evidence given by Edwards in cross‑examination which is not referred to in the trial judge's reasons. Edwards was asked what was said at the meeting on 13 March 1988:
Can you tell me again what you say Berinson or Dowding said which amounted in your mind to an authority to give a promise on behalf of the state?---They said we could give them every assurance they required to do it because the paramount objective was the political one, which was to remove the 50, not because we had any concerns about Rothwells and we were in for the long haul.
…
MURRAY ACJ: Can I just intervene just there for a moment?
That last answer that you gave, Mr Edwards, should I interpret that as being that you were instructed, albeit informally, at the meeting at the end of February 1988 by Mr Dowding and/or Mr Berinson to give those who were to be asked for the money any assurance they required which would persuade them to make the contribution?---Yes, but, with respect, there were two meetings (ts 999).
After informing the judge that counsel for the appellant had been talking about the meeting on 13 March 1988 the evidence continued:
In any event, did I understand your answer correctly, whichever meeting it was, that you were instructed or authorised to tell these other interests anything by way of assurance that would persuade them to make the contribution?---Yes. I mean, that was the context of it. That was the thrust of the position.
So whatever they wanted to hear by way of assurance which would persuade them to make the contribution, you were authorised to tell them?‑‑‑That was my understanding of what I was told, yes (ts 1000).
The trial judge does not refer to or accept this remarkable evidence. Even against what can be described as the surprising conduct of the State and its officials in the Rothwells saga, this evidence stretches credulity. Without seeing and hearing the witnesses, I would decline to make a finding that Edwards was so instructed. In my view, the evidence does not sustain a finding that Dowding expressly or by implication conferred actual authority on Edwards to enter into the contract of guarantee on behalf of the State. I would uphold that part of ground 3(a) relating to Edwards and ground 4(a) of the cross‑appeal.

Notice of limited actual authority (cross‑appeal ground 4(c))

The State contends the trial judge erred in failing to find that the appellant was put upon inquiry as to the limited scope of Edwards' actual authority. It relies on the following statement of principle from Russo‑Chinese Bank v Li Yau Sam [1910] AC 174, 184 cited with approval in Attorney‑General (Ceylon) v AD Silva [1953] AC 461, 480:
If the agent be held out as having only a limited authority to do on behalf of his principal acts of a particular class, then the principal is not bound by an act done outside that authority, even though it be an act of that particular class, because, the authority being thus represented to be limited, the party prejudiced has notice, and should ascertain whether or not the act is authorised.

However, this analysis demonstrates that the standing to enforce the covenants in the deed poll does not directly answer the question whether cl 1 and cl 2 are intended to directly benefit the enforcer (the State). Whether that is so depends upon the proper construction of the Deed of Release.
The aim of the construction exercise is to identify the objectively determined intention of the makers of the deed poll (the Anderson parties). However, where as here the deed poll is provided pursuant to a prior agreement I see no reason why the legal principles applicable to contractual construction do not apply by way of analogy. I accept that the Deed of Release should be construed with regard to the mutually known background facts which provide context and reveal its purpose: Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 76 ALJR 436; Toll v Alphapharm. The existence and terms of the oral release agreement are relevant surrounding circumstances. The State relied on the following additional mutually known facts:
(a)Rothwells had gone into provisional liquidation on 3 November 1988 without having repaid the $50 million to the appellant;
(b)by early December 1988 the SGIC and the GESB were negotiating the purchase of the Anderson/Packer interest in Westralia Square;
(c)Anderson had threatened to sue Dowding and the government in relation to the $50 million provided by the appellant to Rothwells;
(d)the deed was provided at the request of the government through Wran and Turnbull;
(e)the object of the deed was to prevent the threatened claims from being brought (to stop mud flying);
(f)by providing the deed, the appellant and Anderson enabled associated companies to benefit from a transaction with two government instrumentalities which the government would not otherwise have allowed to proceed; and
(g)the deed was made and delivered to the respondent pursuant to an agreement between the Anderson parties and the State.
I would add it was mutually known that Anderson was threatening to sue Dowding and the State on the basis that Dowding had made enforceable promises. That is clearly the language of contract. A contract made on behalf of the State (Crown) by its officers, servants or agents in the course of their authority are State contracts for which the officer or servant is not liable. Thus the threatened contractual claim could only be brought against the State.
That brings me to the State's propositions 2 and 3. I do not understand proposition 2 to be contested. I am satisfied that the expressions 'representations, inducements, solicitations or requests of any kind' are wide enough to include contractual promises (offers).
The first issue in connection with proposition 3 is whether cl 1 and cl 2 are covenants or recitals. The appellant claims that they are recitals. Ordinarily, recitals are introductory statements that are physically separated, and different in nature, from the operative provisions of a contract or deed. They are not terms (conditions or warranties) of a contract or covenants of a deed. In the most common form of release seen in this jurisdiction, recitals identify the nature and scope of the claims and matters in dispute that are intended to be the subject of the release. The Deed of Release is not in that form.
A recital is only evidence of what is recited and if it is a statement of fact it may be relied on as giving rise to estoppel by deed. Whether a provision is a recital or a covenant depends upon the intention of the maker of the deed poll. A provision which is in form a recital may operate as a covenant where it appears to have been the intention of the maker(s) that it so operate: Buckland v Buckland [1900] 2 Ch 534; Re Sugden's Trusts; Sugden v Walker [1917] 2 Ch 92.
In my view, cl 1 and cl 2 of the Deed of Release are covenants not recitals. They are not in form recitals. They follow the expression, and are part of what the Anderson parties 'hereby declare'. Ordinarily, the operative provisions follow, and are the subject of what is declared: Dawes v Tredwell (1881) LR 18; Ch D 354, 359 (Jessel MR). Moreover, cl 5 strongly suggests that all the preceding clauses are intended to be covenants, any one or more of which can be enforced by the nominated persons. For reasons discussed below, I am not persuaded that the sole purpose and effect of cl 1 and cl 2 is to identify, confine or modify the scope of the release in cl 3.
If, as I have concluded, cl 1 and cl 2 are covenants intended to have legal effect, the next issue is what legal effect. Reliance is placed on McDermott v Black (1940) 63 CLR 161, for the proposition that cl 1 and cl 2 constitute a release. In that case a purchaser was induced by fraudulent misrepresentations made by the vendor to enter into a contract of sale of shares. Prior to the date of completion, the purchaser by letter complained of the misrepresentations but in a later letter withdrew all allegations imputing anything improper to the vendor conditionally upon the vendor granting him an extension of time to complete the contract. The extension of time was granted, but the purchaser refused to complete on the extended date whereupon the vendor rescinded the contract. The purchaser then sued the vendor for damages for deceit, relying on the misrepresentations which he had withdrawn. The High Court held that the withdrawal of the allegations amounted to a release of any cause of action in respect of the misrepresentations at law and in equity and constituted a complete defence to the action.
Whether or not it was a release was a question of construction of the contract. Starke J said:
A business arrangement was proposed, and an interpretation should be given to it that best effects the intention of the parties and makes it efficacious. A withdrawal of allegations of false representations on the part of the appellant would be useless from a business point of view if it had only an evidentiary value or was but an affirmation of the agreement, still leaving the appellant open to an action for damages for deceit. Consequently, the respondent's proposal that he would withdraw all allegations imputing anything improper to the appellant means, I think, that he would not bring any action against the appellant in respect of those allegations if an extension of time were granted to him … And this proposal was accepted by the appellant (175).
The promise not to sue effected a release at law (accord and satisfaction) and in equity.
Prima facie, cl 1 and cl 2 are promises not to make or revive in legal proceedings allegations that are inconsistent with the formal declarations and acknowledgements in those clauses. That is, for the reasons explained by the High Court in McDermott v Black, prima facie they constitute a release. That raises the question why have clauses that are intended to have effect as a release when there is an express release in cl 3 of the deed. There are two possible answers. First, the releases in cl 1 and cl 2 are confined to causes of action based on material facts corresponding with the acknowledgements in those clauses. The release in cl 3 is not expressly so confined. Secondly, the acknowledgements in cl 1 and cl 2 do not expressly identify or limit the persons to be released.
It is unnecessary to determine for the purposes of these proceedings whether the scope of the release in cl 3 should be read down to be confined to causes of action based on the material facts identified in cl 1 and cl 2. I am satisfied that the second aspect is significant because it leaves open the possibility of an intention that the persons released by cl 1 and cl 2 are not confined to the nominated persons.
As the State can, notwithstanding cl 5, enforce all the covenants even if it is not a defendant in actual or proposed proceedings, it must a fortiori be intended that it be entitled to enforce the covenants in cl 1 and cl 2 if it itself is a defendant. That conclusion is supported by the fact that the persons nominated in cl 1 and cl 2 are the entire range of people who could potentially expose the State to liability to the Anderson parties relating to the $50 million deposit in Rothwells. Further, the appellant's construction leads to the very odd consequence that the Deed of Release would exclude the very liability (for breach of contract) the subject of the threats that led to the oral release agreement and the Deed of Release. These matters in combination with all the surrounding circumstances compel the inference that on the proper construction of the Deed of Release the covenants in cl 1 and cl 2 are for the benefit of, and can be enforced by, the State. I would uphold cross‑appeal grounds 1(a) and (b).

Whether deed releases the State (ground of appeal 1(c))

This is an alternative construction argument. It is said that an intention to release the State is manifest in the fact that (1) all ministers who comprise the executive government and whose alleged conduct might otherwise have founded claims against that government, are expressly released; and (2) 'the Government of Western Australia' is expressly referred to in cl 1 and cl 2 because it is the legal entity of which the others mentioned and named were representatives or manifestations. The essence of point (1) is the premise that the ministers together constitute the State. This led to an application to join all ministers as parties so they could collectively enforce the Deed of Release. The premise and the application is misconceived. The State is a separate legal entity. The ministry is no more the State than a board of company directors is the company. These matters in isolation do not justify the construction for which the State contends. I would dismiss ground 1(c).

Rectification (ground of appeal 5(b) and (c))

The need for rectification only arises when the court can discern from the document itself and the surrounding circumstances that something has gone wrong which cannot be cured by construction: Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896. I will deal with this ground on the assumption that I am wrong on the construction issue.
The trial judge made the following findings:
In this case, the intention of the parties who executed the deed of release was the intention of Mr Anderson, and I have found that he, in common with those with whom he dealt who acted for the State, intended there to be a release of the State from all liability arising out of the deposit into Rothwells. He did not, in my view, make the reservation which he professes, that he was prepared to release the individuals but reserved his rights to sue the State. Mr Anderson accepted, I think, that those acting for the State sought a complete release of all liability potentially borne by the State or any person or entity acting for the State. All involved mistakenly thought that the deed achieved that outcome. The deed may be rectified accordingly [418].
The trial judge ordered that the Deed of Release be rectified by amending cl 3 and cl 5 to read:
3.That TD and WPA abandon, release and relinquish any legal or equitable rights or claims TD or WPA may have against the State of Western Australia or any of the persons or institutions mentioned in Clauses 1 and 2 above in relation to the deposit of monies by TD and WPA with Rothwells Limited.
5.Each of the persons and institutions named herein including the State of Western Australia shall be entitled to claim the benefit of this Deed as a covenant in his and its favour and plead this Deed in bar to any proceedings brought against it or them or in which it or them may be joined by TD or WPA in connection with any of the matters herein referred to.
The appellant contends the trial judge erred in finding that the Deed of Release was entered into when the appellant and the State were acting under a common mistake.
The equitable doctrine of rectification relates to documents. It is most commonly sought in relation to written contracts. However, rectification can be sought of any document, including a deed poll: Wright v Goff (1856) 22 Beav 207; 52 ER 1087; Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329.
Rectification is available where all parties to a document are under a common mistake at the time of its execution: Maralinga v Major Enterprises Pty Ltd (1973) 128 CLR 336.
Where the document is a deed poll, it is only necessary to prove a mistake by the person or persons who executed it: Wright v Goff (1090). However, where the deed poll is executed pursuant to a prior oral agreement, the starting point is the objectively determined common intention of the contracting parties.
In order to obtain an order for rectification, the objectively determined common intention must persist until the time of the execution of the relevant document and there must be a disconformity between the common continuing intention and the terms of the document. Evidence of a common continuing intention and disconformity compels an inference of mistake.
There is a divergence of authority as to whether the disconformity between the common continuing intention and the document must result from a mistake in recording the common intention or whether it extends to a mistake about the meaning or effect of words deliberately chosen. If the grant of rectification depends upon the basis or reason for the mistaken disconformity between the common continuing intention of the parties and the document, it follows the party seeking rectification would need to adduce evidence of the basis or reason for the mistaken disconformity. There is no such evidence in this case. In particular, there is no explanation provided by any person involved in the drafting or approval of the terms of Deed of Release (Turnbull, Hagar or Wiese) as to the cause of any mistake.
Intermediate appellate courts in Queensland (Winks v WH Heck & Sons Pty Ltd [1986] 1 Qd R 226) and New South Wales (Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd) have rejected the traditional view that rectification is not available where the parties are mistaken as to the meaning or effect of words deliberately chosen. The same position has been taken by single judges of this court: Anfrank Nominees Pty Ltd v Connell (1989) 1 ACSR 365, 387 ‑ 388 (Kennedy J); Frontier Petroleum NL v Anzoil NL (Unreported, WASC, Library No 970286, 4 June 1997) (Anderson J); Mincode Pty Ltd v Isa Pty Ltd (1996) 17 WAR 245 (Steytler J). I am persuaded by Thomas J's explanation of Maralinga v Major Enterprises in Winks (236 ‑ 237). The appellant did not contend that the decisions of the Queensland and New South Wales intermediate appellate courts were plainly wrong. I am not satisfied they are. Accordingly, I should not depart from those decisions: Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89.
The appellant's case on rectification overlaps with its claim that there is no proper evidentiary basis for the finding of the oral release agreement. I have rejected that claim. Accordingly, the starting point is that it was the objectively determined common intention and agreement of the parties that those involved for the State and the State itself were to be released from all liability in relation to the appellant's deposits in Rothwells and the agreement was to be reflected in a Deed of Release to be executed by the Anderson parties. The oral release agreement was made on 21 December 1988. The Anderson parties signed the Deed of Release on 23 December 1988. If the oral release agreement was not varied or abandoned prior to executing the deed poll, the compelling inference is that the Anderson parties executed the Deed of Release pursuant to the oral release agreement.
The finding of an oral release agreement involved the rejection of Anderson's evidence that there was no agreement to release the State and that he signed the Deed of Release on that basis. The evidence as a whole does not support an inference that the oral release agreement was abandoned or varied. For the reasons previously given, the surrounding circumstances after the telephone conversation between Anderson and Wran on 21 December 1988 support the finding of the oral release agreement. I would dismiss ground of appeal 5(b) and (c).

Specific performance (cross‑appeal ground 6)

The State claims that if the trial judge erred in ordering rectification of the Deed of Release, specific performance of the oral release agreement should be ordered in accordance with the trial judge's findings. I infer the order would require the Anderson parties to vary the Deed of Release to achieve the same textual amendments as the rectification order.
The trial judge would have ordered specific performance if he had not upheld the claim for rectification [394] ‑ [401]. As the order for rectification has survived the appellant's challenge, it is unnecessary to determine this ground. However, my preliminary view is that rectification is the only available equitable remedy, where as here, an instrument in writing is purportedly made pursuant to a prior oral agreement: Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55; (2004) 218 CLR 471 [32] ‑ [37]. If the requirements for rectification cannot be satisfied, there seems to be no proper basis to award specific performance.

Costs (ground of appeal 6)

The appellant contended that, it having served on the State a notice to admit facts, the trial judge erred in holding that the appellant should pay the costs associated with proof of the financial position of Rothwells in January 1988 and March 1988. The State did not respond to the notice to admit.
Order 66 r 3(2) of the Rules of the Supreme Court 1971 (WA) provides:
If a party on whom a notice to admit facts is served under Order 30 Rule 2, refuses or neglects to admit the facts within 7 days after the service on him of the notice or such longer time as may be allowed by the Court, the costs of proving the facts shall be paid by him, unless the Court otherwise orders.
As the decision under challenge involves the exercise of a discretion, the appellant has to demonstrate that the trial judge made a material error of fact or law: House v The King (1936) 55 CLR 499, 504 ‑ 505.
The appellant contends the trial judge erred in principle (a) in construing O 66 r 3(2) as justifying an order for costs against a successful party only if the successful party acted improperly or unreasonably; and (b) in ordering the appellant to pay the costs of proof of Rothwells' financial position because no findings had been made on that subject.
Generally, the costs of and incidental to all proceedings are in the discretion of the court: O 66 r 1(1). However, rules are provided that guide the exercise of that discretion. For example, the court will generally order the successful party to an action or matter to recover his or her costs: O 66 r 1(1). That general rule is qualified by O 66 r 3(2). It creates a special rule if a notice to admit facts is served and not responded to, or if the fact is disputed. The prima facie position is that the party who fails to respond or disputes the fact the subject of the notice must pay the costs of proving those facts. The purpose of the rule is to facilitate the proper administration of justice by narrowing the issues in dispute between the parties with the desirable consequence of shortening trials and saving costs: Townsend v Collova [2005] WASC 4 [20]; Meadow Gem Pty Ltd v ANZ Executors & Trustees (Unreported, VSC, 11 June 1996) 4 ‑ 5 (Byrne J). The court has a discretion to depart from the prima facie position. In the absence of a court order to the contrary, the prima facie position prevails.
The trial judge approached the matter by considering whether there were proper grounds to depart from the usual rule that the successful party to an action or matter recover his or her costs. He asked himself the question whether the successful party (the State) had acted improperly or unreasonably. That is the wrong question. The correct question is whether there is any reason to displace the prima facie position in O 66 r 3(2). That error would enliven this court's discretion to intervene if the consequence was a different outcome.

The State raises a further issue of construction. It contends the prima facie position only applies if the trial court makes a finding that the facts the party seeks to have admitted were proven. That is, a finding that the facts were proven is an essential condition giving rise to the prima facie entitlement to costs and is not merely relevant to the exercise of the discretion to depart from the prima facie position. Surprisingly, this question has not been expressly determined in this jurisdiction. Our rule is based on the former O 62 r 6(7) of the English rules and has equivalents in New South Wales (r 42.8(2) of the Uniform Civil Procedure Rules 2005 (NSW)), Victoria (r 63.18 of the Supreme Court (General Civil Procedure) Rules 2005 (Vic)), South Australia (r 263(2)(e) of the Supreme Court Civil Rules 2006 (SA)) and the Federal Court (O 62 r 24 of the Federal Court Rules 1979 (Cth) (Federal Court Rules)).
The issue was raised but not squarely determined by the New South Wales Court of Appeal in Prestige Residential Marketing Pty Ltd v Depune Pty Ltd [No 2] [2008] NSWCA 341. The New South Wales rule relating to authenticity of documents is distinguishable. Proof of authenticity of a document is necessary to, and proven by, its admission into evidence.
A number of cases assume O 66 r 3(2) and its equivalents only apply if the court makes a positive finding of fact (expressly or by implication) the subject of the notice to admit: NMFM Property Pty Ltd v Citibank Ltd [No 11] (2001) 187 ALR 654; Townsend v Collova [18].
Middleton J in Hansen Beverage Co v Bickfords (Australia) Pty Ltd [No 2] [2008] FCA 601 took a contrary position. Order 62 r 24 of the Federal Court Rules materially provides that where a party to any proceedings serves a notice disputing a fact and afterwards that fact is proved in the proceedings he shall, unless the court otherwise orders, pay the costs of proof. Middleton J concluded, without discussion, that a fact was proved in proceedings if evidence of the fact was admitted into evidence [20].
The expression 'proving the facts' in O 66 r 3(2) is ambiguous. It could mean establish the truth by evidence that has been admitted or alternatively, establish the truth to the satisfaction of the court reflected in a finding. Having regard to the purpose of the rule and the consequences of the different meanings, I favour the latter construction contended for by the State. If the prima facie entitlement to costs arises on the admission of relevant evidence at trial, a party who by notice sought the admission of a fact found against him would be entitled to his costs in the absence of a court order to the contrary. The proper administration of justice is not furthered by imposing incentives on a party to make admissions regardless of their proven 'truth'. As the trial judge failed to make a finding as to Rothwells' financial position on 31 January 1988 and 16 March 1988, O 66 r 3(2) does not apply.
Further, and in any event, the trial judge was correct to depart from the prima facie position. The appellant's notice to admit is dated 19 August 1999 and comprises 79 questions, not all of which relate to Rothwells' financial position on the relevant dates. The appellant does not descend to detailing the facts the subject of the notice to admit for which it seeks its costs. I will proceed on the basis that it must be referring to questions relating to Rothwells' bad and doubtful debts, net asset position and solvency as at 31 January 1988 and 16 March 1988. Many of the questions are vague or unfocused or of limited, if any, assistance in resolving the issues in contention. Questions of that type do not advance the purpose of O 66 r 3(2). The following are examples:
40.That at 31 January 1988 Rothwells had bad and doubtful debts well in excess of $100 million.
…
55.That as at 16 March 1988 Edwards knew that:
55.1the accounts of Rothwells for the six month period to 31 January 1988 failed to give a true and fair view of Rothwells' financial position;
…
56.That as at 16 March 1988, Lloyd knew that:
56.1the accounts of Rothwells for the six month period to 31 January 1988 failed to give a true and fair view of Rothwells' financial position.
The appellant also asked the State to admit that Rothwells was insolvent on 31 January 1988, 16 March 1988 and 18 March 1988. A yes or no answer to those questions would be of little practical benefit. Further, much of the factual foundation for the conclusion of insolvency was relevant to an assessment of what Lloyd knew or ought to have known about the financial soundness of Rothwells at the relevant time. As it was, Smith's evidence was inadmissible on that issue.
In summary, the facts the subject of the notice relating to Rothwells' financial position are not such as to further the purpose of O 66 r 3(2). It was proper and reasonable for the State to decline to admit the facts. As I agree with the trial judge on the outcome, this ground of appeal should be dismissed.

Conclusion

In summary, my primary conclusions are as follows:
1.the contract found by the trial judge was a contract of guarantee;
2.the law of Western Australia is the proper law of the contract which s 4 of the Statute of Frauds renders unenforceable;
3.the trial judge considered and rejected the appellant's claim of an unqualified representation that the appellant could be assured the State would continue to support Rothwells;
4.the representation that Rothwells was financially sound was made by the State in breach of its duty of care;
5.the State did not breach any continuing duty of care to advise of any material adverse change in Rothwells' financial position;
6.the State was not estopped from relying on the Statute of Frauds and its equitable estoppel claim could be maintained notwithstanding s 4 of the Statute of Frauds;
7.Edwards did not have actual or ostensible authority to make the assurances the basis of the contract and estoppel claims;
8.the finding of the oral release agreement was open and in accordance with the weight of the evidence;
9.on its proper construction, cl 1 and cl 2 of the Deed of Release are for the benefit of, and can be enforced by, the State;
10.alternatively, the trial judge did not err in ordering rectification of the Deed of Release;

11.the trial judge did not err in ordering the appellant to pay the costs associated with proof of Rothwells' financial position in January and March 1988.

Accordingly, I would uphold ground of appeal 2(b) and dismiss the balance of the grounds of appeal. As to the respondent's notice of contention, I would uphold ground 1 and dismiss the balance. As to the cross‑appeal, I would uphold grounds 1(a) and (b), 3(a) and (c), 4(a) and (d) and 5 and dismiss the balance.
The effect of the aforegoing is that the appellant's claim against the State must fail. Accordingly, I would dismiss the appeal. I would hear from the parties as to the orders necessary to give effect to these reasons.
NEWNES JA: I agree with McLure JA.

31 March 1988	$15 million
6 April 1988	$10 million
11 April 1988	$5 million
12 April 1988	$10 million
13 April 1988	$10 million