TTR1 Pty Ltd v Ruckert & Butcher

[2019] QDC 182

DISTRICT COURT OF QUEENSLAND

CITATION: 

TTR1 Pty Ltd v Ruckert & Butcher [2019] QDC 182

PARTIES: 

TTR1 PTY LTD
ACN 608 105 700
(plaintiff)

v

ANTHONY ALAN RUCKERT  
(first defendant)

ROHAN CHARLES BUTCHER  
(second defendant)

FILE NO/S:

3997 of 2018

DIVISION:

Civil

PROCEEDING:

Trial

ORIGINATING COURT:

District Court of Queensland

DELIVERED ON:

25 September 2019

DELIVERED AT:

Brisbane

HEARING DATE:

7-9 August, 16 September 2019  

JUDGE:

Porter QC DCJ

ORDER:

1.       Judgment shall be entered for the plaintiff against each of the defendants in the amount of $360,000 plus interest.

2.       I will hear the parties as to costs.

CATCHWORDS:

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – FORMATION OF CONTRACTUAL RELATIONS – GENERAL OFFERS AND THEIR ACCEPTANCE – where the parties entered into a Loan Deed and a Purchase Deed in respect of property – where the defendants defaulted under both Deeds – where the parties corresponded about settlement of debts due under the Loan Deed – whether the parties reached a binding settlement agreement – whether any binding settlement gave rise to an immediate accord and satisfaction of the existing claims under the Loan Deed – whether any binding settlement gave rise to only conditional accord and satisfaction of the existing claims under the Loan Deed such that absent performance of the terms of the settlement agreement, the defendants remained liable on the guarantees

Bentleys (Sunshine Coast) Pty Ltd & Ors v Thomson [2018] QCA 358
Fraser v Elgen Tavern Pty Ltd [1982] VR 398
Howes v Miller [1970] VR 522
Jones v Dunkel (1959) 101 CLR 298
King Tide Company Pty Ltd v Arawak Holdings Pty Ltd [2017] QCA 251
Masters v Cameron (1954) 91 CLR 353
McDermott v Black (1940) 63 CLR 161
Netglory Pty Ltd v Caratti [2013] WASC 364
Osborn v McDermott [1998] 3 VR 1
Pavlovic v Universal Music Australia Pty Ltd (2015) 90 NSWLR 605
Westpac Banking Corporation v Kingsland (1991) 26 NSWLR 700

Property Law Act 1974 (Qld), s 56

 COUNSEL

M K Callanan for the plaintiff
The second and third defendants each appeared on their own behalf

SOLICITORS:

Moore Lawyers for the plaintiff
The second and third defendants each appeared on their own behalf

Contents

Introduction
Factual background

Introduction
Events leading up to purchase of 209 Jellicoe Street
The proposal for the 207/209 Jellicoe Street development
Purchase of 207 Jellicoe Street

TPB contracts to buy 207 Jellicoe Street
The Sandstone Point Hotel lunch

The Loan Deed and the Purchase Deed

Execution of the Loan Deed
Settlement on 207 Jellicoe Street and advance of funds under the Loan Deed
Key terms of the Loan Deed
Key terms of the Purchase Deed

Default under the Deeds
The settlement negotiations
The demands and the receivers

The witnesses
Further findings

Mr Catton’s instructions

The 21 April telephone call

No binding settlement agreement

The defendants’ cases

Mr Ruckert’s pleaded case and submissions
Mr Butcher’s pleaded case and submissions
Pleading issues

Analysis of the contract formation issue

Character of 16 April proposal as an offer
No acceptance by the 23 April email
Subsequent communications do not give rise to any binding settlement agreement

Conclusion

Any settlement agreement was conditional on performance

Relevant principles
16 April/23 April agreement: conditional accord and satisfaction
Other forms of agreement in no different position

No breach by TTR1 of its duty as mortgagee

Conclusion

INTRODUCTION

1. The plaintiff (TTR1) sues the defendants for $360,000 allegedly owed by them as guarantors of a loan made to a company called The Property Bar Pty Ltd (TPB) pursuant to the terms of a written loan agreement dated 7 October 2016 and supported by a mortgage of certain land acquired with the loan funds by TPB.  The plaintiff’s primary case is that the loan agreement and guarantees were in the form of a deed, that the advance was made and not repaid, and that demands had been made on the guarantors but not answered. 

2. At trial, the first defendant (Mr Ruckert) accepted prima facie liability under the guarantee.  He defended there had been a subsequent settlement agreement between TTR1 and TPB which discharged TPB’s principal liability under the loan agreement and therefore discharged any liability under the guarantee.

3. The second defendant (Mr Butcher) admitted the loan and the guarantee, however he disputed liability on the guarantee on the basis that the guarantee was not in the form of a deed because it was not properly attested and the promise to guarantee was otherwise unsupported by consideration.  The plaintiff responded to this by alleging that, if the guarantee was not in the form of a deed, consideration had been given in any event or, if not, Mr Butcher had engaged in misleading or deceptive conduct by representing that the guarantee was in the form of a deed.  If he was found to be bound by the guarantee, Mr Butcher also alleged that his liability under the guarantee had been discharged by a subsequent agreement between TTR1 and TPB.

4. Mr Butcher also contended that TTR1 had breached its duty as mortgagee to TPB and to him as guarantor in failing to exercise its power of sale and that he could set off that loss against liability under his guarantee (if it was found to bind him). 

5. For the reasons to follow, I find that:

   (a)The document containing the guarantee given by Mr Butcher was properly attested and was binding on him as a deed;

   (b)The liability of defendants on the guarantee was not discharged by any settlement agreement between TTR1 and TPB; and

   (c)There was no breach of any duty known to the law by TTR1 in its exercise of its rights under its mortgage.

6. Accordingly the plaintiff is entitled to judgment against each of the defendants.

FACTUAL BACKGROUND

Introduction

1. Only five witnesses were called at trial: the two directors of the plaintiff (Mr Robertson and Ms Cantrill), the person identified on the Loan Deed as the attesting witness (Mr Franssen), the plaintiff’s solicitor at the time (Mr Catton) and Mr Ruckert.  Mr Butcher did not give or call evidence.  Much of the evidence in this trial was in documentary form or was otherwise not contentious.  There were some key factual matters, however, which were disputed.  Such matters are identified in the course of the following analysis.

Events leading up to purchase of 209 Jellicoe Street 

1. Mr Richard Robertson and Ms Caroline Cantrill are partners in business and in life. They are the directors of the plaintiff.[1]  For some time prior to the events the subject of these proceedings, they jointly carried on the business on a small scale of buying and renovating houses to hold or for resale. 

   [1]Exhibit 86.

2. Mr Ruckert has a background in civil engineering and computing.  In the mid-1980s he did some property investing with success and from 1987 started working as a property developer.  He gave evidence he had done projects valued at up to $30 million.  Mr Robertson and Ms Cantrill met Mr Ruckert in about 2013.  At that time it appears Mr Ruckert was carrying on business as a finance broker, though it seems he was also carrying on business in various other ways related to property development.  For example, at the time of the genesis of the Jellicoe Street transactions which are central to this case, he was working as a “project manager/broker” on a six or seven townhouse project in the same street. 

3. Mr Ruckert initially acted as finance broker for Mr Robertson and Ms Cantrill and their corporate entities.  Mr Ruckert soon became a trusted friend and general adviser on property matters for Mr Robertson and Ms Cantrill.  Their trust in him at the time is reflected in Mr Robertson’s request that Mr Ruckert act as a trustee of a trust of which Mr Robertson was a beneficiary for the purposes of moving trust funds on-shore from New Zealand.  Mr Ruckert introduced Mr Robertson and Ms Cantrill to the idea of property development and I accept their evidence that they believed he had knowledge and experience in the area vastly exceeding their own.  At around this time, Mr Ruckert also appears to have advanced $100,000 to cover a financing shortfall on a settlement on a property purchased by Mr Robertson and Ms Cantrill or one of their companies

4. It was in this context that Mr Robertson and Ms Cantrill came to invest in a property at 209 Jellicoe Street at Toowoomba, which investment was the genesis of this dispute.  The investment came about in this way.  While working on the other project referred to in paragraph [9] above, Mr Ruckert noticed that 209 Jellicoe Street was for sale.  It is uncontentious that it was Mr Ruckert’s suggestion to Mr Robertson and Ms Cantrill that they purchase 209 Jellicoe Street and build a similar project to the one he was working on.  That is, to develop six or seven townhouses.[2]

   [2]TS3-35.4 to .10.

5. Mr Robertson and Ms Cantrill thought that suggestion worth pursuing.  In about mid-2015, they purchased 209 Jellicoe Street.  They also retained Mr Ruckert as project manager to develop the site on their behalf.  It appears Mr Ruckert was paid a fee for his project management services.[3]

   [3]TS3-46.6.

6. 209 Jellicoe Street had a dwelling located on it, but it was in poor condition.  Further, Mr Ruckert advised that it was not worth obtaining tenants as that would interfere with the conduct of the development.[4]

   [4]Evidence of Mr Robertson at TS1-106.23; evidence of Ms Cantrill at TS2-85.14 to .21. 

7. It is not clear how much progress, if any, was made in the development project initially contemplated for 209 Jellicoe Street between acquisition of the property in mid-2015 and December 2015.  However, it appears TTR1 paid Mr Ruckert some $34,580 for project management services.[5]

   [5]The figure in Exhibit 65 was never challenged.

The proposal for the 207/209 Jellicoe Street development

1. In about December 2015, Mr Ruckert started to consider acquiring the neighboring property at 207 Jellicoe Street and conducting a larger development on both sites (the Development).[6]  Part of Mr Ruckert’s duties as project manager for the 209 Jellicoe Street development appeared to have included mowing the lawn at the property.  In the course of doing so, he began negotiations with the owner of 207 Jellicoe Street for the purchase of that property.

   [6]TS3-35.7 to .16.

2. Each of Mr Robertson and Ms Cantrill said that Mr Ruckert told them about his idea for the larger Development but that they did not contemplate being involved as principals or joint venturers in the Development.  Rather, they each said that their understanding was that Mr Ruckert was going to arrange for an investor syndicate to buy 209 Jellicoe Street from them and that Mr Ruckert’s investors would carry out the Development.[7]

   [7]TS2-79.28.

3. Consistent with that position, Mr Robertson said he first met Mr Butcher in mid-2016.  He said Mr Butcher came with Mr Robertson to a premises that he and Ms Cantrill were renovating.  He said that Mr Ruckert and Mr Butcher showed him plans for the larger development but that he was not interested because he understood that Mr Ruckert or his investors would buy 209 Jellicoe Street.[8]  Ms Cantrill gave similar, evidence about that meeting and her attitude to what was shown to them.[9]  

   [8]TS1-106.

   [9]TS2-82.

4. Mr Ruckert’s evidence as to the initial involvement intended for Mr Robertson and Ms Cantrill in the Development was a little different.  He said that his original idea was to carry out the Development by a joint venture between him or investors he introduced on the one hand and Mr Robertson and Ms Cantrill on the other.  He said this was necessary because he believed the larger size of the Development was too much for Mr Robertson and Ms Cantrill.[10] 

   [10]TS3-36.10 and TS3-37.40.

5. There is some documentary evidence that might suggest that Mr Robertson and Ms Cantrill originally contemplated that they would participate as joint venturers in the Development with interests associated with Mr Ruckert in the period up to about May 2016.  There are emails from Mr Robertson showing interest in the development process for the Development which is more consistent with Mr Ruckert’s recollection than that of the Mr Robertson and Ms Cantrill.[11]  Those emails also show Mr Robertson and Ms Cantrill (or TTR1) were paying expenses of the Development. 

   [11]Exhibits 51 to 55.

6. However, that evidence might also be thought to be consistent with Mr Robertson and Ms Cantrill following the progress of the Development and funding some of the steps so as to bring about an early and profitable buy out of 209 Jellicoe Street by Mr Ruckert’s investors.  Certainly by May 2016, they had held that property for about a year as an investment with no income stream and no prospect of the original development proposal being carried out, Mr Ruckert having abandoned that proposal in favour of the joint proposal.

7. The documentary evidence on how the Development was initially planned to be carried out from the perspective of Mr Robertson and Ms Cantrill was incomplete and their evidence was imprecise on the early stages.  It seems likely to me that this imprecision reflects the fact that in the early stages of the proposal for the Development, it was not really clear to them to exactly how TTR1 would be involved and why. Mr Robertson and Ms Cantrill had no experience with development and relied on Mr Ruckert, and it is hard to discern from the evidence what Mr Ruckert said to them from time to time in the early stages. 

8. Ultimately, it is unnecessary to make a final finding on how it was intended that TTR1 be involved in the early stages because the matter is of no relevance to the resolution of the issues in this case.  That is so for two reasons:

   (a)First, the key point is that it was clearly never intended that TTR1 carry out the whole Development itself.  That is not in dispute in the evidence before me (and it is inconsistent, incidentally, with Mr Ruckert’s email to his solicitors at sent on 28 August 2016[12]); and

   (b)Second, as will be seen (see paragraph [32]), Mr Robertson and Mr Cantrill must have withdrawn any interest they did have in being equity participants with Mr Ruckert’s investors in the Development in any way by mid-2016. 

Purchase of 207 Jellicoe Street

[12]Exhibit 56.

TPB contracts to buy 207 Jellicoe Street

1. There is little evidence as to how the Development was progressing after about May 2016.  It might be inferred from the lack of evidence on the subject, that not a great deal of progress was being made.  Certainly, there was no persuasive evidence of any investors being interested in a concrete way in funding the Development over this period (or at any time really).  There were various assertions to the contrary from time to time by Mr Ruckert, but those assertions were generally in vague terms.

2. Despite the seeming lack of interest of external investors (or perhaps because of it) on 2 August 2016, Mr Ruckert caused TPB to enter into a contract to buy 207 Jellicoe Street.[13]  As has been noted, that was a company owned and controlled by Mr Ruckert.  Mr Butcher was briefly a director of TPB at about this time. 

   [13]Exhibit 90.

3. Ms Cantrill said that the decision by Mr Ruckert to purchase of 207 Jellicoe Street through TPB occurred without any prior warning to or discussion with Mr Robertson and Ms Cantrill.[14]  She said Mr Ruckert called Mr Robertson one day and told Mr Robertson he was on the way up to sign the contract.  The contract was signed on 2 August 2016.  The phone call must have occurred on or about this date.  Ms Cantrill gave evidence that she called Mr Ruckert immediately on being told by Mr Robertson what was happening and told him not to buy the property thinking that she and Mr Robertson were going to fund it.  I accept that evidence.  Apart from the fact that I found Ms Cantrill to be generally a reliable historian, such a comment would be likely from her given the delay which had already occurred in the realisation of 209 Jellicoe Street.

   [14]TS2-80.25 to .44.

4. Mr Ruckert confirmed a conversation occurred on the way up to contract to buy the lot.  He did not give evidence about Ms Cantrill’s recollection nor was he cross-examined on it.  However he also suggested that Mr Robertson and Ms Cantrill would have known he was going to buy the property because he would have been staying in contact with the developments of the project.[15] There was no documentary evidence supporting this assertion.  It was given in terms of something that would have happened not something that Mr Ruckert recalled and it was unsupported by any context or document.  To the extent Mr Ruckert intended to convey that he had been in on-going contact about the possibility of TPB buying 207 Jellicoe Street prior to  2 August 2016, I reject it.

   [15]TS3-39.30 to 40.20.

5. What is also established on the evidence is that the request which was made by Mr Ruckert that Mr Robertson and Ms Cantrill fund the acquisition of 207 Jellicoe Street came as an unpleasant surprise to them.  It is to that request I now turn.

The Sandstone Point Hotel lunch

1. On 24 August 2016, Mr Robertson and Ms Cantrill met Mr Ruckert for lunch at the Sandstone Point Hotel.  At that lunch, Mr Ruckert asked Mr Robertson and Ms Cantrill to fund the settlement of the contract to buy 207 Jellicoe Street.  Settlement was due on 9 September 2016.[16]

   [16]Exhibit 25.

2. No witness gave a detailed account of the conversation on that day.  Mr Robertson’s evidence was limited to recalling being asked to fund the settlement.  Ms Cantrill’s evidence did not go much further.  Both, however, had a clear recollection of being asked to fund the acquisition and that this was the first time this had been suggested.  They also both recalled feelings of dismay at being asked.  Each recalled being concerned about the request in circumstances where they understood at that time that they were going to be bought out of the Development by Mr Ruckert’s investors.  Each said they were concerned about what they were asked to do and only reluctantly agreed to fund the purchase.[17]  Although they did not specifically recall expressing their concerns, it is highly probable in my view that they did so.  

   [17]TS1-107.26; TS2-81.35.

3. Mr Ruckert’s evidence on the other hand tended to suggest that:[18]

   (a)He put the proposal to Mr Robertson and Ms Cantrill on the basis that they could fund the acquisition as seed funding for the Development if they chose and that he queried whether they were “okay with this”; and

   (b)He could have obtained alternative funding if they were too concerned about the risks of doing so. 

   [18]TS3-41.

4. To the extent that Mr Ruckert intended to convey that he put a choice to Mr Robertson and Ms Cantrill and suggested that if they did not fund the acquisition, he could still manage to fund 209 Jellicoe Street, I prefer the evidence of Mr Robertson and Ms Cantrill and do not accept that of Mr Ruckert on this point. 

5. I have already mentioned that I accept the evidence of Mr Robertson and Ms Cantrill that by the middle of 2016, they were interested only in being bought out of 209 Jellicoe Street, not in being involved in the Development.  It is convenient at this point to identify the reasons why:

   (a)First, their evidence is consistent with the uncontentious fact that they were novices in this kind of property development. Further, the smaller project had been abandoned by Mr Ruckert and the larger project was making little progress.  Their funds had been tied up with no income from rent for over a year and had no prospect of income for the foreseeable future.  It is unsurprising that in that situation they would seek an exit from the large project which had replaced the smaller one they had thought they were going to undertake;

   (b)Second, as will be seen, the agreements signed by the defendants and TPB finalised in early September 2009 included an agreement for TPB to buy them out of 209 Jellicoe Street.  That is consistent with their evidence; and

   (c)Third, Mr Robertson and Ms Cantrill struck me as persons who were reasonably cautious in the extent to which they took risks in their small scale property activities.  It was recognised by Mr Ruckert that even the 209 Jellicoe Street project was a significant step for them.  It is consistent with their approach to their affairs that they would be seeking an exit from the Development as soon as possible once it seemed that the original project was no longer going to happen and the larger one seemed to involve delay and risk.

1. In that context, it is highly probable that if Mr Ruckert had suggested or even implied that he had an alternative source of funding, or that Mr Robertson and Ms Cantrill were not needed to fund the settlement, then they would have chosen not to fund 207 Jellicoe Street.  To the extent Mr Ruckert’s evidence suggested as much, I reject it. 

2. Further, I reject Mr Ruckert’s evidence that he had alternative funding he could have put in place if they had said no.  He was asking for funding just 15 days before settlement.  His evidence that he could have funded the settlement in another way was not supported by any documentary evidence and his oral evidence on the point was vague.[19]  Mr Robertson and Ms Cantrill were reluctant lenders well outside their comfort zone, as Mr Ruckert knew.  There would have been no good reason to approach them other than that Mr Ruckert had no other credible alternatives.

   [19]TS3-41.25.

3. I find that Mr Robertson and Ms Cantrill were reluctant funders of the acquisition of 207 Jellicoe Street, made that clear to Mr Ruckert, and would have avoided doing so if they thought they had an alternative which would protect their investment in 209 Jellicoe Street.

The Loan Deed and the Purchase Deed

1. Although the discussion of the details of Mr Ruckert’s proposal for funding 207 Jellicoe Street and buying 209 Jellicoe Street was not the subject of oral evidence, the situation of both parties is reflected in email exchanges soon after the Sandstone Hotel meeting.

2. On 28 August 2016, Mr Ruckert sent instructions in the following terms to his solicitors:

   Hi Dave and Troy,

   As discussed with Dave the other day, BAR has come to an agreement with one of my clients for them to fund the purchase of 207 Jellicoe St. Client currently owns the property next door at 209 Jellicoe St (which will be sold to BAR in the future).

   Purchase price is $344,000 with $5,000 deposit paid, leaving $339,000 plus costs at settlement.

   Client has agreed to fund an amount of $360,000 towards the purchase/development of #207.

   Funder is TTR1 Pty Ltd – company detail attached.

   What is required

   Purchase of 207 Jellicoe St

   - Loan Agreement between The Property BAR Pty Ltd and TTR1 Pty Ltd – TTR1 Pty Ltd lending to The Property BAR Pty Ltd - $360,000 for purchase and cost of 207 Jellicoe St

   - TTR1 Pty Ltd is have [sic] a mortgage over 207 Jellicoe

   - Loan agreement to be $360,000 drawdown / 12 month loan term / interest capitalizing at 10% pa flat rate / loan can be paid out early at pro rata per month interest charge / The Property BAR to pay costs from own funds or from the loan

   - Settlement to be Friday 2 Sep 2016

   Heads of Agreement for 209 Jellicoe St

   - The Property BAR agrees to pay interest at 10% pa (flat rate) on the amount of $457,435.48 starting at settlement of the purchase / loan for 207 as noted above – expected to be Friday 2 Sep 2016

   - Term to be 12 months – interest capitalizing – but generally coinciding with the loan as noted about for purchase of 207 Jellicoe St

   - TTR1 Pty Ltd agrees to sign all required applications and forms to allow the lodgement and approval for a DA over the two sites

   - TTR1 Pty Ltd agrees to give The Property BAR Pty Ltd full access to the property at 209 Jellicoe St for the purpose of the DA

   - TTR1 Pty Ltd agrees to sell 209 Jellicoe St to The Property BAR Pty Ltd for the amount of the loan agreement of $457,435.48 plus capitalised interest within 12 months or at a time as agreed between the parties on completion of the DA process

   I know this is short notice. Richard and Carolyn owners of TTR1 Pty Ltd are clients of mine and they have several business connections with me already. They were to develop 209 & 207 themselves but have now opted to fund The Property BAR in a semi JV to do the development.

   TTR1 is preparing the funds for transfer into your trust account for next Wednesday or Thursday (send me the details please), ready for settlement on Friday. So we need these agreements – at least the loan for the $360,000 for the purchase of 207 – by Tuesday? If required the Heads of Agreement for 209 can follow.

   This will just be a loan agreement with the option to purchase and will not go through the AFSL / Lending set up (do not want to settle or actually go to contract on 209 just yet due to stamp duty costs etc). We are planning to set up the AFSL etc structure to buy out TTR1 in the future after the DA is approval [sic] and for the AFSL to raise the funding for the payout of TTR1 and construction of the development.

   [Underlining in original, bold text added]

3. On 29 August 2016, Mr Robertson sent an email to Mr Ruckert in the following terms:[20]

   [20]Exhibit 24.

   Hi Anthony,

   We are still trying to get our heads around the finer details of what you presented law Wednesday – the whole thing has changed considerable [sic] from the original plan & it has created a bit of panic here:

   Some thoughts:

   We understand the plan now as: we lend BAR $360k to buy 207 (This is not good), then Investors buy 207 & 209 (This is good).

   This meanwhile leaves us with a lot of eggs in one very uncertain basket, for ___ ??? months until the Investor Cavalry arrive. (This is not good)

   - particularly, and despite your re-assurances, as Gordon St hasn’t moved yet. However, from where we were sitting, Hood St happened quite quickly…?

   - what was your promised timeframe for all this again ?

   Also, if we are lending $360k to BAR, to be in the 207 Solicitors account this Friday, our lawyer will need time to check your paperwork, before any money moves anywhere, before Friday…

   Coffee ??

4. Mr Ruckert responded as follows:[21]

   [21]Exhibit 24.

   Hi Carolyn and Richard,

   Can we get together tonight? Understand this is a stretch but due to delays with Matusik (Michael has been sick – I gave him my flu) we have been unable to prepare the full IM (Information Memorandum) to be able to raise funds for the purchase and have the investment structure set up. And Garry putting his house on the market meant we had to act or risk losing control of the block.

   A draft copy of the IM is attached.

   We are working to complete the Matusik information and the investment company structure this week and move on to the full wholesale raising from there.

   I’m also looking to put in an allowance for profit share and/or wholesale purchase plus the interest payment in the IM so this will be a good deal for the investors.

   I have written instruction to the solicitors to prepare mortgage docs for 207 so you will have a mortgage over the property at settlement as well as an agreement for the development to buy you out of 209, and start the clock on the 10% interest on both properties.

   At this point I see this as the best way I can protect your input so far, I know you are investing more but it is so I can get the project to buy you out of 209 at a project on what you have invested, instead of driving the price down like I was forced to do with 207. Last thing you need is to have another development take control of 207 and try to buy you out of 209.

   Everyone in the BAR group agrees that you will be look [sic] after and that you will make a profit on your investment so far. I have been thinking (have not talked to the others about it as yet) about of [sic] offering Richard a directorship of BAR, that way you have a say in what the development company does and you can see on the inside what is happening with this and the other project we have in the pipeline. It means you would be doing the part of the developer as well as the bank/investor.

   If you look at 207 by itself there is an issue for you, but when combined with the buyout of 209 it bring [sic] it back to something better for you. At this point you are in all buy name the developer for the sites and BAR is doing the consulting work at no charge.

   As you can see in the draft IM there is a profit to be made, land purchase price needs to adjusted [sic] and funding calculations are on the low side but in general it is showing that it is a good project. Michael Matusik is happy with the pricing of the new units, the down side of this is he believes that this is showing the Gordon Ave is overpriced at $330,000 to $430,000 – that is a problem for the project and something else I need to deal with. I was not part of the planning of that project or the original setting of the value of the units otherwise there would be a different result now and a different product on the site.

   We are doing everything possible to set this up to be a successful project and if you can support it through this stage I will ensure you will make a good return on your money invested.

5. The following observations should also be made:

   (a)First, despite the optimism in that email and the draft Information Memorandum, there was no concrete evidence at trial that any investors were attracted to the Development;

   (b)Second, Mr Ruckert recognised both the reluctance of Mr Robertson and Ms Cantrill and their objective being to be bought out of the development; and

   (c)Third, the comment that Mr Robertson and Ms Cantrill were “in all but name the developer of the sites” might have been true, but it was inconsistent with any intention or wish they ever had.  That situation had been procured by Mr Ruckert’s conduct and influence.

6. Further, I note the bold text comment in the 28 August 2016 email.  Even on Mr Ruckert’s evidence at this trial, the statement that Mr Robertson and Ms Cantrill were to fund the Development themselves was wrong.  Further, the implication in the statement that they “opted to fund” TPB into a semi-JV was also misleading, at least to the extent it suggested a free and informed judgment. 

7. As I have found, the manner in which they reluctantly came to agree to fund the purchase of 207 Jellicoe Street could hardly be characterised in that way. Further, in cross-examination, Mr Ruckert sought to rely on Mr Robertson’s lack of written response to this email (which was copied to him), seemingly as indicating some acceptance of the truth of those comments.  Mr Robertson said he did note that comment and did object to it.  It might be thought that detail was reconstructed by Mr Robertson.  If so, of itself it does not much affect his credit.  It is clear from the other evidence and documents that Mr Ruckert’s statements were wrong. 

8. Mr Robertson sensibly sought legal advice on the issue.  He retained Mr Catton of Catton Roderick Lawyers to advise TTR1 on the transactions.  Mr Catton gave evidence that he advised Mr Robertson and Ms Cantrill to require personal guarantees.  I accept that evidence.  Although it was not specifically addressed in evidence, I infer the defendants were nominated to give guarantees because they were directors of TPB and because both were involved in the transactions (remembering Mr Butcher had met with Mr Robertson and Ms Cantrill about the Development earlier).

9. The documents were drafted by TPB’s lawyer, Mr Evans, largely on the terms specified in the 28 August 2016 email with personal guarantees added.  The documents were prepared quickly.  Settlement was due on 9 September 2016.  It appears that documents, signed and in a form satisfactory to Mr Catton, were provided to him on 8 September 2016.[22]

   [22]Exhibit 1: there was some reservation about an additional clause 17 in Mr Catton’s letter.  It is unclear to what that refers but the point did not come up further at trial.

10. Mr Robertson gave evidence that he was not going to complete the transaction unless reassured that all documents had been properly executed.[23]  That was credible evidence given the deteriorating trust he had in Mr Ruckert, particularly given the proposal that TTR1 fund the purchase of 207 Jellicoe Street.  That was confirmed by Mr Catton who also gave evidence that he was concerned to ensure all documents were properly executed.  He gave evidence he reviewed the electronic versions of the transactions documents for proper signature and tried to insist on receiving originals before settlement.  When that was not possible in time for settlement, he accepted an undertaking from Mr Evans to courier originals to him.[24]  This is consistent with Mr Catton taking the care one would normally expect of a solicitor retained in a lending transaction.

    [23]TS1-108.5.

    [24]TS1-71.41 to 73.47.

11. Ultimately, the following documents were executed:

    (a)A Loan Deed between TTR1 and TPB and the defendants as guarantors;[25]

    (b)A Purchase Deed between TTR1 and TPB providing for TPB to purchase 209 Jellicoe Street;[26] and

    (c)A mortgage in registerable form of 207 Jellicoe Street given by TPB in favour of TTR1.

    [25]Exhibit 62.

    [26]Exhibit 63.

12. The mortgage is dated 8 September 2016.  It is clear from the documentary record that the Loan Deed and the Agreement were signed on the same date.  Those latter two documents were ultimately signed by TTR1 on 7 October 2016, the date those documents bear.

Execution of the Loan Deed

1. The originals of the Loan Deed and the Purchase Deed were not produced by either party at the trial. Copies were tendered without objection.  Apart from one issue, those two documents were not contentious.

2. That issue is of course the question of the validity of the manner of execution of the Loan Deed which is challenged by Mr Butcher.  He pleaded that the Loan Deed did not take effect as a deed because it was not validly attested by the witness.  That involves an issue of law and an issue of fact.  The issue of fact is whether Mr Butcher’s signature was in fact signed before the witness, Mr Franssen, as the attesting clause asserts.

3. Mr Franssen gave evidence.  At that time he was working as a plumber.  He recalled attending Mr Butcher’s business premises about the time of the execution of the Loan Deed because he had been called to the premises with a colleague to deal with a leak which caused significant damage.  He recalled being asked as they were leaving if they would witness some documents and he said he volunteered to do so.  He conceded that he did not specifically recall seeing Mr Butcher sign in front of him.  However he gave evidence that:[27]

   (a)He did recall Mr Butcher, and did recall Mr Butcher actually being in the room when he witnessed the documents.  In contrast he said he did not recall Mr Ruckert (but of course Mr Ruckert does not suggest that his signature was not properly attested);

   (b)He recalled the set out of the room and going in there to witness the documents;

   (c)He did not have a specific recollection of watching Mr Butcher sign but he was highly confident he would not have put his signature to the document without the presence of the other person.  He said he knew how “these things work and I wouldn’t have signed it had I not witnessed an actual signature, definitely”.

   (d)He had no previous or on-going relationship with anyone in the litigation and had not even known about the Court case until a week before he gave evidence.

   [27]TS1-67 to 68.

4. Mr Franssen was cross-examined by Mr Butcher.  He put to Mr Franssen that he had already signed the document when it was put before Mr Franssen.  Mr Franssen disagreed. 

5. It is convenient to deal with this issue now.

6. It should be noted that when Mr Franssen first described what occurred, he said that he sat down, a document was put in front of him and he witnessed Mr Butcher’s signature.  On one view that could be interpreted as stating that he signed immediately a document which already had a signature.  However, this part of his evidence is equivocal.  It depends on what was meant by witnessing the signature.  That potential ambiguity does not persuade me to reject Mr Franssen’s evidence.  The plain tenor of the whole of his evidence was as stated in paragraph [50] above.  While it is true that his evidence relating to the actual observation of Mr Butcher signing is based on what he would have done rather than an actual memory, it is not surprising he might not recall seeing the signing occur. 

7. Further, his evidence that he would not have signed without actually witnessing the signature was persuasive for a number of reasons:

   (a)First, it was explained by a specific matter; i.e. that he knows how witnessing worked.  He was not challenged on this;

   (b)Second, he had no particular reason to give anything other than honest evidence.  No suggestion was made of partiality.  He had no link with any party and he did not strike me as someone eager to get into the spotlight of a trial. Quite the contrary; and

   (c)Third, his manner of giving evidence was consistent with the kind of attention to detail which is suggested by his approach to witnessing.  He was careful in identifying exactly what he specifically recalled and what he did not.

8. It is true that he was not cross-examined with any particular skill or effect.  However, that is no reason of itself to doubt his evidence.  A fortiori when Mr Butcher was the cross-examiner, who it can be assumed was familiar with his own recollection of the signing process. 

9. Finally on this issue, Mr Butcher chose not to go into evidence at all.  Mr Franssen’s account is not disputed by any other evidence.  Of course that does not mean I must accept it, but given it is otherwise persuasive evidence, it is relevant that there is nothing to contradict it from Mr Butcher.  One can therefore infer that his evidence would not have assisted his case on this issue.[28]  It might be thought a little strict to apply the rule in Jones v Dunkel to a litigant conducting his own case, but for two considerations: 

   (a)First, I did specifically warn Mr Butcher at the time he indicated he would not be giving evidence that if he did not, there would be no evidence to contradict Mr Franssen’s evidence;[29] and

   (b)Second, Mr Butcher’s case otherwise depended on little if any evidence that he could admissibly give on the other issues raised in his defence.  His recognition of that during the trial[30] seemed to be justified based on the nature of his defences, other than the witnessing point.  It is hard to identify any reason for not giving evidence other than that his evidence based on his recollection would not have assisted.

   [28]Jones v Dunkel (1959) 101 CLR 298 at 320.

   [29]TS3-111.1 to .11.

   [30]TS3-108.22 to .34.

10. I therefore find that Mr Butcher did sign the Loan Deed as guarantor before Mr Franssen. 

11. The effect of that finding of fact is to dispose of Mr Butcher’s arguments on the binding effect of the Loan Deed as a deed.  It is unnecessary therefore to consider whether the Loan Deed would not have taken effect as a deed as a matter of law if the signature was not applied before Mr Franssen but was adopted in his presence.  Mr Callanan directed me in this respect to the judgment of Edelman J (when a judge of the Supreme Court of Western Australia) in Netglory Pty Ltd v Caratti [2013] WASC 364 at [148] to [169] where his Honour concluded that a deed not executed by the covenantor before an attesting witness was not properly attested and did not take effect as a deed under the equivalent Western Australian provision to s. 45 Property Law Act 1974 (Qld). At first blush, his Honour’s analysis would seem to applicable to s. 45, however, as there are some differences in language and the matter was not fully argued, I express no concluded view on that legal issue.

12. The effect of my finding as to circumstances of attestation also makes it unnecessary for me to deal with the alternative grounds advanced by Mr Callanan for Mr Butcher’s liability under the Loan Deed as an agreement or alternatively for Mr Butcher’s liability for misleading or deceptive conduct in propounding a document apparently signed validly and relied upon as such by the plaintiff, though its solicitor.

Settlement on 207 Jellicoe Street and advance of funds under the Loan Deed

1. There is some suggestion in Mr Butcher’s defence that he does not admit the advance of funds by TTR1 under the Loan Deed to complete the settlement of the acquisition of 207 Jellicoe Road.  The inference that the settlement of 207 Jellicoe Street on 9 September 2016 was effected by loan funds provided by TTR1 is on all the evidence, including that of Mr Ruckert for TPB, overwhelming.  That the total sum of $360,000 was advanced for that purpose is made out on the documents.[31]

Key terms of the Loan Deed[32]

[31]Exhibit 3 at page 2; exhibit 7; exhibit 12; exhibit 13; exhibit 14; exhibit 15 at paragraphs [6] and [7]; exhibit 25 at page 2; evidence of Mr Catton at TS1-84.1 to .4.

[32]Exhibit 62.

1. The parties to the Loan Deed were TTR1, TPB and the defendants as guarantors.  It was executed in the form of a deed.  The Loan Deed provided relevantly as follows:

   (a)By clause 2.1, that TTR1 was to provide the Loan (identified in the Schedule as $360,000) to TPB so long as TPB was not in default on the Commencement Date (identified in the Schedule as 9 September 2016);

   (b)By clause 3.1, that TPB had to repay the Loan on or before the Repayment Date (identified in the Schedule as, in effect, 9 September 2017);

   (c)By clause 2.3, that TPB had to pay interest at 10 per cent, repayable on the Repayment Date if paid on that date, but otherwise at 20 per cent (that is, interest was capitalised and payable when the loan was repaid);

   (d)By clause 5.1, that the Guarantor (identified in the Schedule as each of the defendants) guaranteed payment of the Loan; and

   (e)By clause 6, that if the Loan was not paid when due, then the Guarantors must immediately “on demand from the Lender” pay to the Lender the Loan.

2. It is to be noted that the guarantee did not extend to all sums payable under the Loan Deed. It was limited to a guarantee of payment of the Loan.  The Loan was defined as the capital sum of $360,000.  It was accepted by the plaintiff that this limited the amount guaranteed by the defendants.

3. The effect of the Loan Deed was that TPB was required to repay the loan of $360,000 plus interest on 9 September 2017.

Key terms of the Purchase Deed[33]

[33]Exhibit 63.

1. The parties to the Purchase Deed were TTR1 and TPB, no guarantees were given for the obligations under that deed.

2. The  Purchase Deed relevantly provided:

   (a)By clauses 1 and 2, that TPB agreed to enter into a contract of sale by which TPB would purchase 209 Jellicoe Street from TTR1 for $457,435.48;

   (b)By clause 3, that TPB would pay interest on that sum at 10 per cent per annum from completion of the acquisition by TPB of 207 Jellicoe Street (which in fact occurred on 9 September 2016 as contemplated);

   (c)By clauses 4, 5 and 6, that TPB would seek, and TTR1 would co-operate in seeking, development approval for development of the property;

   (d)By clauses 7 and 8, the parties would enter into the contemplated contract of sale at the latest within 12 months after the date of the Purchase Deed and complete the contract within 45 days thereafter;

   (e)By clause 9, all the interest would be capitalised and paid at settlement; and

   (f)The property would remain untenanted unless both parties agreed to a tenancy.

3. The Purchase Deed was most probably executed by TPB on 9 September 2016, but was executed by TTR1 on 7 October 2016.  Depending on the date properly identified as the date of the Purchase Deed, TPB was required at the latest by 21 November 2017 to complete a contract to purchase 209 Jellicoe Street for $457,435.48 plus interest of some $45,000.

Default under the Deeds

1. TPB defaulted under its obligations under the Loan Deed and then the Purchase Deed.

2. On 7 September 2017, Mr Catton wrote to Mr Evans noting that the Loan was due to be repaid on 9 September and recording his instructions from Mr Robertson that Mr Ruckert had said he was not able to repay the amounts under the Loan Deed.  Mr Catton proposed payment of interest at the default rate of 20 per cent until the Loan was repaid and for settlement of the obligations under the Loan Deed on 21 November 2017, the date specified for completion of the obligations under the Purchase Deed.  The letter called for a response by the next day.[34]  Thereafter, Mr Catton wrote demanding performance under both Deeds on 19 December 2017[35] and 25 January 2018.[36]  It is evident from that correspondence that TPB through Mr Ruckert had in fact made one default interest payment of some $6,600, apparently in response to the demands in the 7 September letter.  Further, on 25 January 2018 TTR1 gave a Notice of Exercise of Power of Sale under the mortgage of 207 Jellicoe Street.

   [34]Exhibit 58.

   [35]Exhibit 17.

   [36]Exhibit 18.

3. It is uncontentious that the obligations under the Deeds remained unperformed and have never been performed. 

4. In the period following the defaults under the Deeds, Mr Robertson and Ms Cantrill continued to deal directly with Mr Ruckert and others from TPB including Brad Fuller.  There is evidence of a proposal made in December 2017 for the obligations in the Deed to be met from yet another attempt to carry out the Development, with at least one meeting to discuss that possibility.[37]  There was never any suggestion that TPB or the guarantors had the funds to meet the obligations under the Deeds, and some clear statements to the contrary.

   [37]TS2-62; exhibit 60.

5. I observe here that over the following months there were further proposals for carrying out of the Development. Mr Ruckert gave evidence of various attempts to do so,[38] and such proposals and potential investors are frequently mentioned in the correspondence. What is absent from any of the evidence adduced in this trial is any persuasive evidence sourced from outside TPB or Mr Ruckert indicating that there was any real prospect of the Development in fact being carried out in accordance with those proposals. There is no written evidence sourced from investors or purchasers. There is no evidence as to how the Development could be financed otherwise. Mr Ruckert stated that the slowing in the property market made successful development problematic. It is difficult to avoid the conclusion on the evidence before me that there was never any concrete prospect of the Development being carried out nor of the obligations under the Deed being met, at the least from September 2017.

   [38]TS3-44.

6. While it is reasonable to assume that some discussions were on-going between Mr Ruckert and Mr Robertson and Ms Cantrill, the next specific event identified in the evidence was a meeting on or about 16 March 2018 between Mr Robertson and Ms Cantrill and Mr Ruckert and Mr Fuller.  While the specific purpose of the meeting was not dealt with in oral evidence, it appears to have been convened so Mr Ruckert could set out how he intended to deal with the defaults under the Deeds.  The 16 April 2018 email from Mr Robertson and Ms Cantrill[39] states that there were three outcomes of the meeting being:

   (a)That Mr Ruckert would provide a feasibility report by 20 March 2018 with a proposal as to how the Development could proceed;

   (b)That Mr Ruckert would provide fortnightly updates on progress in the Development or attempts to pay the sums due under the Deeds; and

   (c)That TPB would transfer the rental income stream from 207 Jellicoe Street from TPB to Mr Robertson and Ms Cantrill.  

   [39]Exhibit 65 and see [76] below.

7. There was no challenge to this summary in the evidence at trial.  The particular focus of the oral evidence about events at this meeting was the last matter: the transfer of the rental stream.  Ms Cantrill said that at about the time of the 16 March meeting, she and Mr Roberston realised that TPB was getting rental income from 207 Jellicoe Street while 209 Jellicoe Street was untenanted on Mr Ruckert’s advice and while TPB was in default under both Deeds.  She said that Mr Ruckert agreed to direct the rental payments to TTR1 as some compensation for the on-going default and failures to pay any default interest.[40]  Mr Ruckert gave substantially similar evidence.[41] 

   [40]TS2-86 to 87.

   [41]TS3-47.

8. There is no suggestion that Mr Ruckert’s direction of the rental payments to TTR1 was in contemplation of, or referable to, any settlement agreement.

The settlement negotiations

1. The events which are central to the main issues in this proceeding began on 16 April 2018.  As already noted, by that time the 16 March meeting had come and gone and the only promise made at that meeting which had been kept to the satisfaction of Mr Robertson and Ms Cantrill was the redirection of the rent for 207 Jellicoe Street. 

2. On 16 April 2018, Mr Robertson and Ms Cantrill wrote the following email addressed to each of Mr Fuller, Mr Ruckert and Mr Butcher (the 16 April email):[42]

   [42]Exhibit 65.

   Good morning Anthony, Brad and Rohan (The Property Bar)

   It is over 1 month since our meeting and we still have no feasibility report sent to us despite reminder emails to you (30 March and again 3 April).

   Our understanding of outcomes from that meeting were to:

   1.Provide a feasibility report (you guys had allocated 4 days (due 20 March) – to prove accurate information on which we could decide if we would consider proceeding with joint venture work with you all

   2.Improvement of Communication – with the emphasis on regular updates (fortnightly updates as suggested by you as monthly was considered too far apart) – none have occurred

   3.Rent transfer from 207 Jellicoe st to us – thankyou we are now receiving this Anthony.

   4.Urgency of action – it has now been 6 months past the date in which The Property Bar was to pay us out of this agreement. Cash flow for us has become critical. You have not honoured your default interest nor provided a feasibility report as promised to show forward progress.

   Further, the safety of 209 Jellicoe street is of major concern. Upon your advice Anthony we have not rented it out so it has now remained vacant for over 2 ½ years – we are maintaining yards at our expense.

   After receiving information from our gardener (4 April) involving a broken laundry window and squatters in the house causing damage, we contacted the Toowoomba Police. They said the tenant from 207 Jellicoe st had reported the break-in and squatters on the 27 March. Police had contacted Sovereign Property who refused to give them any information about us, the owners. Police were unable to enter and take fingerprints nor contact us. We understand confidentiality but not why communication with us was not instigated by you guys. Securing this vacant property is becoming a very costly experience for us (this is twice in 2 months).

   We have also been in contact with Council since January trying to get them to clear their section of the back vegetation which has already been set on fire once – the boundary line of the property is not clear and they refuse to do anything. Our side cannot be cleared until we know where the boundary is. It is a dangerous fire hazard. (Hence prompt action for our survey request Anthony would be appreciated – also any information on work done while you were Project Manager would be good too).

   Basically you guys have not acted on what was agreed at the meeting and we are once again stuck in a time wasting exercise in which all our money is tied up in those two properties when it should have been released to us last September.

   We cannot move on with any plans and you have placed us in a situation which despite you insistence that you want to do “what’s best for us”, you actions/lack of actions indicate otherwise.

   We acted as Private Lenders for you for 12 months albeit grudgingly. A bank would have insisted on interest being paid with immediate monthly repayments.

   We supported you for 12 months with your plans only to have you throw your hands in the air and say “so sad we have no money to meet our agreement”. That is not honourable and what you’re doing now is not either.

   We need out of this nightmare, preferably with cash and not properties. With all your business experience between the 3 of you why don’t you contact your other investors and get us out of this!

   Alternatively we have listed below what you actually owe us to date re this agreement vs our proposal for an “out” option.

   Amounts owed as per Agreement (due 9 September 2017):

   209 Jellicoe street:

   $503 179.03 – Agreed payout price

   $25 158.96 – Default interest owed since 9/9/17

   $528 337.99 – Total owed

   207 Jellicoe street:

   $396 000.00 – Agreed payout price

   $39 600.00 – Default interest owed since 9/9/17

   $435 600.00 – Total owed

   Total payout as of 13/4/18: $963 937.99

   Our Proposal:

   1.The Property Bar Pty Ltd transfers 207 Jellicoe Street (Lot 3 of RP19476) to us (TTR1 Pty Ltd ACN 608105700)

   2.The Property Bar pays for all expenses re this change to agreement (as agreed to in original agreement) including:

   a)          Stamp duty

   b)          Property valuations

   c)          Registration fees

   d)          All legal expenses (including $3,000 incurred by us since 9/9/17)

   e)Return of all rent collected by you from 207 Jellicoe (we calculated 33 fortnights @508.56 = $16,782 this has been adjusted for management fees)

   f)Return of our costs outlaid on this project since original purchase 209 Jellicoe (since no goals as outlined in information memorandum 26th May 2016 were ever actually met)

   “Project management - $34 580

   Rates + water + insurance - $12,432.90 (which you were supposed to be paying but never did)

   Proposed Cash Payout : $66,794.90

   Please note that this proposed cash figure is probably considerably less that what you are budgeting to complete this project. At this stage we can only guess what your budget might be because we haven’t received your overdue feasibility report.

   Be aware also we have not factored in to this:

   1.Any adjustments now these properties are worth considerably less than purchase price

   2.Any default interest/profit that we should have received either as default or payout amounts ($234 500.45)

   3.What we could and were planning to do with our money had it been repaid last September as per agreement

   4.Any stress/loss of goodwill that your failure to honour the original agreement has created

   The Property Bar Ltd which is all 3 of you (including 2 guarantors) need to take this matter seriously.

   We are over the excuses, procrastination and lack of respect that we have received what all we were doing was helping out a friend.

   The three of you are experienced businessmen and developers – is this really how you do business?

   All of the above losses (listed in 1 – 4 above) we are offering to take as our loss if this matter is finalised promptly.

   But we want this finalised within 1 month (no later than 16 May)

   [Emphasis in original]

3. More will be said about this email but it is convenient to note here that the amount of $66,794.90 is the total of the amounts specified in paragraphs 2(d) to (f).  The matters following the heading “Our Proposal” (including all the text down to the last line, which in my view, on an objective reading of the email, is a part of the proposal put) shall hereafter be referred to as the 16 April proposal.

4. Most of the key evidence in this case is recorded in contemporaneous documents, such that differing recollections are of limited relevance to the facts in issue.  A significant exception is the content of a conversation between Ms Cantrill and Mr Ruckert on 21 April 2018 (the 21 April conversation).  Importantly, both agree that a conversation occurred on or about that day and there is much overlap in their recollection of what was said.  The important divergence however is whether Mr Ruckert purported to accept the 16 April proposal in that conversation.

5. Ms Cantrill recollection was as follows:[43]

   MR CALLANAN:  Yes.  I’m just asking to tell me everything you remember about that telephone call?  About, specifically, the telephone conversation?

   Yes?  Termites.  We discovered termites in the property – the 77F Lindsay, rental property, that we’d renovated about 15 – 18 months previously.  I’d gone – we’d found the termites that morning.  Taken photos of the termite damage.  I had immediately rung Anthony, because termites – big dollars.  I was extremely distressed, because we were starting to get, particularly, financially squeezed, at that particular time, because they had not returned funds.  And I left a voice mail message.  Mr Ruckert called me back later.  We – I was in Bunnings.  We were renovating at the time:  a property in Margate.  I remember walking up and down the aisles of Bunnings.  He was talking to me.  Basically, what I said was, “We’ve just discovered termites in 77F Lindsay” – he knew that property because he’d come and visited it with Mr Butcher while we were renovating – and I was extremely distressed.  I said, “Basically, we’re stuffed.  We don’t have the money to do this.  And you owe us money.  You need to give us back our money.”  I indicated that they hadn’t even been paying default interest.  And Mr Ruckert indicated that he didn’t have the money.  He’d told us before he couldn’t afford to give us back the money.  And I insisted that – that we needed the money.  We were in a very, very difficult situation.  I was quite distressed at the time.  I remember Mr Ruckert, initially, was quite, sort of, stand-offish.  But then I managed to calm down a – a little bit, and explain that we really were quite financially strapped, and this termite situation was very difficult for us.  He, then, offered to give us $5000.  And I just went, “Fantastic”.

   Okay?  There was no discussion of the proposal.  I don’t even know whether he knew about it at the time.

   Okay.  So did he indicate to you, at the time, that he knew about it?  No, there was no indication.  We were, simply, talking termites.  And give us our money back.

   Okay.  Now, at that point in time, the 16 April offer, was that something that you wanted accepted?  We had come to the point where we were 

   HIS HONOUR:  Was that something you wanted accepted?  Yes.  At the time, we were very hopeful that it would be accepted.

   [43]TS2-89 to 90.

6. Mr Ruckert’s version was as follows:[44]

   [44]TS3-48 to 49.

   Okay.  Now, I’m now going to move to Ms Cantrill’s evidence about how you came to offer to pay $5000 in a telephone call, okay?  Yes, your Honour.

   …

   All right.  If you turn to divider 20?  Number 20.  Sixteenth of April 2018? 

   Yes?  Yes, your Honour.

   Sitting here now, do you recall when you first read that email?  It would have been that morning.  This has been sent at 6.29 am.  So I’m normally at the office some time before 10 o’clock, depending on how busy I am, but certainly after – certainly before 10 o’clock that day. 

   All right.  Now, you recall Ms Cantrill’s evidence about how you came to offer to pay $5000?  Yes, your Honour.

   She gave evidence of a telephone call she had with you in which she told you about pressure they were under financially because they had discovered termite damage to one of their properties?  Yes, your Honour.

   And she said, in effect, that ultimately you offered to pay $5000 to help them out, or in response to that particular crisis?  Mmm.

   Now, that’s her evidence.  What, if any, discussions do you say you had with Mr Robertson or Mrs Cantrill about the payment of the $5000, which it seems uncontentious was made on the 24th of April?  Yes.

   Go ahead?  Your Honour, I do remember the phone call, but not as clearly as Ms Cantrill does, but I do remember that she was quite emotional and very upset about it and that 

   Upset about what?  The white ants and 

   Okay?  … she was freaking out about the white ants.  I don’t freak out about white ants as much as some people do, so for me in the experience of the – in the building industry and renovated many houses over the last 35 years, it wasn’t such a drama to me, but it was certainly a drama to her and she was freaking out.  And also, I think, the stress for them is was they had discovered white ants in a property that they only just renovated themselves, less than 18 months ago.  So there was concern that they had – you know, that they had created a problem for themselves.  They said they did not have the money and such like.  I was – this loan document here was certainly fresh on the thing.  And my memory is reflected in my email of the 24th.  I think the phone call was being – was the 21st – is that correct, or 22nd?  The 24th is the Monday.

   Well, what do you recall saying in the telephone conversation?  I remember when I – I remember – I’m pretty sure it was a weekend.  Now, I’d had a missed call from them.  I rang them back.  I know she was extremely upset.  That’s my memory of it.

   Yes?  I wasn’t even sure which house they were talking about with the white ant damage.  They have multiple properties and I honestly, at the time, I thought it was a different one, until just recently.

   Okay.  Well, she said to you that she had white ant issues.  She was very upset about it.  They didn’t have the money to deal with it.  What do you say passed in that conversation after that?  I’m saying I can try to help out as best I can and in my recollection was I’ll start making a payment towards the loan agreements.  And on the – I’m pretty sure it’s the 24th when I replied.  That is in line with the way I normally try to do business of – as per your phone call.  Here is – here’s the details of what’s 

   Do you have any independent recollection of that sitting here, or is it just what’s said in your diary note?  It’s – its practice for me.

   Well – all right.  Okay.  Yes?  It’s – I have – I have memory that that’s there and for me to write it in that format afterwards is – my [indistinct] recollection apart from the fact that she was extremely upset and I do refer to it that they need money in the email, because these are people I have been doing business with for five, six years by now.  It’s 

   Do you recall any other discussions about their proposal in that telephone call?  No, your Honour.  It was purely.. 

   Do you remember, sitting here now, anything specifically you said about the proposal, apart from, “I’ll make a payment towards the loan agreement”?  I certainly wouldn’t have got into the details as clear as the email there, but it was – my memory of the – of the conversation was, “I will start making payments, as per your proposal.  We’ll get that agreement finalised.  I’ll get money to you to get it moving.”  And at that time, your Honour, I think in my email I said that I could pay them on Thursday when there was a settlement coming through…

   [Underlining added]  

1. He was correct to submit that the contention has no merit.  Not only could no loss be made out, but neither was the duty alleged one known to the law nor was there any evidence of a breach of the duty alleged or the duty as properly articulated.

2. Mr Butcher submitted that TTR1 had “an equitable duty to act in good faith and to take reasonable care and not act in neglect when dealing with its security”.[91]  No authority was cited for this broad range of obligations as mortgagee.  In the context of exercise of power of sale under a mortgage, the proposition that the mortgagee owes a duty to take reasonable care to obtain a proper price has been rejected in Australia.[92]  In equity, a mortgagee’s duties to the mortgagor (and to a surety) are limited to not acting in bad faith or needlessly sacrifice the interests of the mortgagor, or perhaps more generally, that the mortgagee not take unconscientious advantage of rights under the security. That equitable obligation must however be considered in the context of the particular character of a mortgage and the rights it confers: that is to permit the mortgagee to recoup the secured debt when it is not paid in accordance with its terms.  For that reason the mortgagee is recognised as not being a fiduciary of the mortgagor in exercising powers under the security.[93]

   [91]Second defendant’s submissions at           paragraph 170.

   [92]Tyler, Young and Croft, Fisher and Lightwood’s Law of Mortgage (3^rd Australian Edition) at [20.21].

   [93]Fisher and Lightwood at [20.21].

3. Further, it has been expressly recognised that a mortgagee is not obliged to exercise powers under a security and owes no duty to the mortgagor or a guarantor in that regard.  The mortgagee may exercise a power of sale if it so chooses and when it so chooses.[94]

   [94]Westpac Banking Corporation v Kingsland (1991) 26 NSWLR 700 at 705B.

4. In any event, no evidence was led to justify the conclusion that TTR1 had failed to take reasonable care in its decisions as to when to appoint the receiver and when to seek to sell (either through the receiver or otherwise), much less any evidence of any bad faith in those decisions.  I also observe that the argument seemed to be premised on the incorrect assumption that it was only on appointment of the receiver that the sale could have occurred. 

5. Finally, as Mr Callanan emphasises, the evidence discloses that both Mr Ruckert and TTR1 had made continual efforts to sell one or both properties from at least September 2017 without success.  It is difficult to see how any loss could flow from any breach of the kind pleaded in those circumstances.

6. The contention that there had been a breach of duty by TTR1 as mortgagee is rejected.  It is hard to see how, properly instructed on the law, it could ever have succeeded in this matter.

7. Finally, Mr Ruckert also pleaded that the claim on the guarantee should be reduced by the value of the security.  On the evidence before me, no sum has been yet received by TTR1 from sale of the security.  It is therefore not relevant to the liability of the guarantors as matters stand.  Even if the property had been sold, issues might arise as to appropriation of the sale proceeds to parts of the principal liabilities not covered by the guarantees (recalling that the guarantee is only for the principal debt amount of $360,000).  This contention is rejected.

CONCLUSION

1. There was no genuine dispute of the plaintiff’s claim on the guarantors under the Loan Deed once the question of attestation was resolved.  TTR1 made out its prima facie entitlement to judgment under the guarantees for the principal sum.

2. The defendants’ contentions that their liabilities under the Loan Deed were discharged by an immediate release of those obligations by accord and satisfaction contained in a binding Settlement Agreement have failed.

3. There was no breach of any duty owed to the guarantors in TTR1’s conduct in relation to its decisions on appointing the receiver or the exercise of the power of sale under the mortgage.

4. The consequence is that judgment shall be entered for TTR1 against each of the defendants in the amount of $360,000 plus interest.

5. I will hear the parties as to costs.