Xenophou v Richani
[2004] SASC 301
•24 September 2004
SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
XENOPHOU v RICHANI
Judgment of The Full Court
(The Honourable Justice Duggan, The Honourable Justice Besanko and The Honourable Justice Anderson)
24 September 2004
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS - IMPLIED TERMS - TERMS ESSENTIAL TO ENABLE PERFORMANCE
Appellant had trouble obtaining finance for building project in the amount of $14 million - agreement made with respondent to give commission if he could arrange finance for appellant - commission to be one apartment in the complex - whether agreement oral or written - meaning of the word 'arrange' - whether organising meeting with appellant and Bank enough to constitute 'arranging' of finance - whether other pre-conditions satisfied - whether causal link broken because of change in bank structure - appeal dismissed.
Halsbury's Laws of Australia [325-11580]; Bank Merger (BankSA and Advance Bank) Act (SA) 1996, referred to.
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) CLR 337; Zurich Australian Insurance Ltd v Wood (1997) 69 SASR 572; Suttor v Gundowda Pty Ltd (1950) 81 CLR 418, applied.
Water Board v Moustakas (1988) 77 ALR 193, discussed.
Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 76 ALJR 436; Warren v Coombes (1979) 142 CLR 531; Burchell v Gowrie and Blackhouse Collieries Ltd [1910] AC 614; LJ Hooker Ltd v WJ Adams Estates Pty Ltd (1977) 138 CLR 52; Moneywood Pty Ltd v Salamon Nominees Pty Ltd [2001] HCA 2; (2001) 202 CLR 351; DHN Food Distributors v Tower Hamlets London Borough Council [1976] 1 WLR 852; [1976] 3 All ER 462, considered.
XENOPHOU v RICHANI
[2004] SASC 301Full Court: Duggan, Besanko and Anderson JJ
DUGGAN J I would dismiss the appeal for the reasons given by Besanko J and Anderson J.
BESANKO J This is an appeal from orders made by a District Court Judge after a trial in that Court. The second defendant was ordered to pay the plaintiff the sum of $200,680.00 inclusive of interest. The second defendant appeals to this Court. The first defendant was successful before the Judge and took no part in the appeal. In my opinion, the appeal should be dismissed.
The issues before the Judge and the important findings made by the Judge are set out in the reasons for judgment of Anderson J. I gratefully adopt his statement of those matters and I will repeat the facts only where it is necessary for the purposes of explaining my reasons.
The agreement between the respondent and the appellant was contained in a letter dated 16th September 1996 which was signed by both parties. It was in the following terms:
“16/9/96
To: Harry Richani
26 Liberator Drive
Paralowie S.A. 5108This letter is to confirm an agreement between myself, Theodore Xenophou and Harry Richani in relation to the development known as 9 East Tce Adelaide. If Harry Richani can arrange through the St Georges Bank a construction loan of a minimum of $14,400,000 with interest capitalized during the construction period at the ruling rates of interest (approx $10.5%) I’m prepared to give a unit on level three (3) free of charge to Harry Richani, as his full and final commission.
This offer is subject to the offer from St George’s Bank coming earlier that (sic) the offer from Baulderstone-Hornibrook who are negotiating now with Adelaide Bank and Dresdner Bank. Also subject to acceptable terms from St George’s Bank and strict confidentiality.
Acceptable approval must be confirmed by Xenophou’s solicitors.
(Signed) T. Xenophou Witnessed by
H. Richani John Blunt
16/9/96”
The first issue before the Judge was what was the legal test to be applied to the facts as found by him in order to determine if the plaintiff had arranged through the St George Bank Ltd a construction loan of the type specified in the agreement. The Judge considered that issue turned on the meaning of the word “arrange” and that was common ground between the parties. The Judge took into account the circumstances surrounding the agreement in accordance with principles stated in cases such as Codelfa Construction Proprietary Limited v State Rail Authority of New South Wales (1982) 149 CLR 337 per Mason J (as he then was) at 352 and Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 76 ALJR 436 per Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ at [10]. That approach by the Judge was not challenged by the appellant. The Judge drew two conclusions from the surrounding circumstances, namely, that the appellant was having great difficulty in obtaining finance for the project involving the construction of the Botanic Apartments, and that the appellant was personally in a difficult financial situation. Those conclusions by the Judge are not challenged by the appellant.
The legal test formulated by the Judge was that the acts of the respondent must have caused the St George Bank to offer a construction loan that fulfilled certain criteria. I think the correct test is whether there was a sufficient causal link. In other words, the correct test is whether the acts of the respondent caused (in the relevant sense) the result specified in the agreement. I say that for two reasons.
First, the agreement did not stipulate that the respondent must carry out a certain amount of work before he became entitled to the consideration referred to in the agreement. The parties could have done that in the agreement, but that is not how they decided to approach the matter. It would be difficult for the Court to construe the agreement such that it required a certain amount of work by the respondent because there are no factors which would give a clear guide as to the amount and type of work required before the respondent became entitled to the consideration set out in the agreement. This agreement was an agreement negotiated between two parties who each had considerable commercial experience. The respondent faced the prospect of carrying out considerable work and a loan not being secured, while the appellant faced the prospect of the respondent recovering a substantial benefit and yet performing very little work. That was the nature of the agreement. I should add that none of this is to say that the amount of work carried out by the respondent is irrelevant to the question whether the respondent has become entitled to the consideration specified in the agreement. That matter will be relevant to whether there is the necessary causal link between the acts of the respondent and a loan of the specified type.
Secondly, in an analogous area the courts have applied a test of causation. A number of cases have come before the courts where an agent seeks to recover from a vendor a commission in relation to a sale of property by the vendor to a purchaser. To determine if the agent is entitled to his commission the courts have applied a test of causation. In other words, to succeed the agent must show that some act of his was the causa causans or the efficient cause of the sale (Burchell v Gowrie and Blackhouse Collieries Ltd [1910] AC 614 at 624; LJ Hooker Ltd v WJ Adams Estates Pty Ltd (1977) 138 CLR 52; Moneywood Pty Ltd v Salamon Nominees Pty Ltd [2001] HCA 2; (2001) 202 CLR 351). I do not understand it to be necessary for the agent to exclude other causes before he will succeed.
The Judge applied a test of causation and although he did not use the words, effective or efficient, I think it is clear enough from his reasons that that was what he had in mind.
The question of causation is ultimately a question of fact. The Judge took the view that it was sufficient if the respondent did no more than get the borrower and lender together and there was a causal link between the introduction and the final loan.
On the facts before the Judge there were two particular matters which required consideration in relation to the causation issue. First, the construction loan that was ultimately given to the appellant’s company came not from the St George Bank but from a subsidiary of the St George Bank. Secondly, the construction loan that was ultimately given to the appellant’s company was for the sum of $14,003,000.00. The amount specified in the agreement between the appellant and the respondent was a minimum of $14,400,000.00.
Before the Judge the respondent represented himself, although a solicitor appeared for the appellant to put submissions in reply. It is important to note that before the Judge it was not argued that the two matters which I have identified were sufficient of themselves to preclude recovery by the respondent. As to the first matter, the Judge noted:
“If the view is taken that Mr Richani’s introduction caused a construction loan to be offered and accepted, no point was taken that any such loan came from BankSA rather than the St George Bank.”
As to the second matter the Judge noted:
“No point was taken that the essentials of the construction loan concerning the amount, interest rate and capitalization of interest during the construction period, were not met. On my own assessment of the evidence they were met.”
Before this Court the appellant was represented by counsel and he sought to take a different approach in relation to the two matters which I have identified. He sought to argue that not only were the two matters powerful reasons why, as a matter of causation, the acts of the respondent did not cause a loan of the specified type, but also that the two matters were sufficient of themselves to mean that the terms of the agreement were not satisfied. The principles governing the circumstances in which an appellate court will entertain a point not raised in the court below are well established. In Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 Latham CJ, Williams and Fullagar JJ said (at 438):
“Where a point is not taken in the court below and evidence could have been given there which by any possibility could have prevented the point from succeeding, it cannot be taken afterwards. In Connecticut Fire Insurance Co v Kavanagh, Lord Watson, delivering the judgment of the Privy Council said, ‘When a question of law is raised for the first time in a court of last resort, upon the construction of a document, or upon facts either admitted or proved beyond controversy, it is not only competent but expedient in the interests of justice, to entertain the plea. The expediency of adopting that course may be doubted, when the plea cannot be disposed of without deciding nice questions of fact, in considering which the court of ultimate review is placed in a much less advantageous position than the courts below.’ The present is not a case in which we are able to say that we have before us all the facts bearing on this belated defence as completely as would have been the case had it been raised in the court below.”
Not without some hesitation, I have decided that the appellant should be permitted to raise the point he now wishes to raise. As to the first matter, namely, the identity of the lender, I think this raises a question of law, or mixed fact and law, and that the evidence that is before the Court is all the evidence which could be put before the Court. As to the second matter, namely, the amount of the loan, I think this raises a question of mixed fact and law and that the evidence relevant to the issue was thoroughly canvassed in the Court below.
I turn now to consider the question whether either or both of the two matters which I have identified precludes recovery by the respondent under the agreement irrespective of the issue of causation.
By the Bank Merger (BankSA and Advance Bank) Act 1996 the assets and liabilities (excluding certain assets and liabilities) of Bank of South Australia Limited were transferred to and vested in Advance Bank Australia Limited (“Advance Bank”). The Act was proclaimed to come into effect on 1st December 1996. The Act also gave Advance Bank the right to carry on business in South Australia under, inter alia, the names “Bank of South Australia” or “BankSA”.
In January 1997, St George Bank acquired all the issued share capital of Advance Bank.
It seems that as a matter of convenience the commercial lending section of BankSA was retained and that the file in relation to the proposed loan to the appellant or his company was transferred to that section in about June 1997.
The loan ultimately granted to the appellant’s company was granted by Advance Bank, a subsidiary of St George Bank, through its division, BankSA. It is true that St George Bank and Advance Bank are separate legal entities. However, the fact is that the negotiations commenced with the St George Bank which was the bank identified in the agreement, and they were completed with a subsidiary of that bank. There is nothing to suggest that the identity of the lender as between the St George Bank and one of its subsidiaries was of any significance to the appellant. Nor is there anything to suggest that the change from St George Bank to Advance Bank through its division, BankSA, in any way affected the flow or course of negotiations between those entities and the appellant. It seems that the St George Bank for its own commercial reasons decided to grant the loan through one of its subsidiaries.
It must be remembered that the Court is not being asked to lift the corporate veil for the purposes of imposing a liability on the St George Bank. Even in that situation the courts will, on occasions, lift the corporate veil in the case of companies within a group (DHN Food Distributors Ltd v Tower Hamlets London Borough Council [1976] 1 WLR 852; [1976] 3 All ER 462). The issue in this case is whether, for the purposes of an agreement between the appellant and the respondent, the St George Bank and its wholly owned subsidiaries are to be treated as one. For the reasons I have given, I think the answer to that question is yes, providing the necessary causal link is otherwise established.
In order to deal with the second matter it is necessary to say something about the course of the negotiations between the St George Bank and the respondent. As I have said, the agreement was dated 16th September 1996. The St George Bank made two indicative offers to the appellant, one on 18th September 1996 and the other on 25th October 1996. It is unnecessary to relate the details because they were overtaken by subsequent events.
The St George Bank made an offer to the appellant’s company on 19th November 1996 and that offer was accepted on 29th November 1996. The loan was to be for the sum of $14,903,000.00 and it was subject to a number of pre-conditions and conditions. Again, it is unnecessary to relate the details because the particular agreement was overtaken by subsequent events. It seems that the proposed borrower was unable to fulfil one of the pre-conditions of the loan, namely, the provision of a guarantee by a Mr Dallwitz which was itself supported by a guarantee from the National Bank of Australia Ltd in favour of the St George Bank.
In June 1997 there was a meeting between the appellant, his representative and representatives of the St George Bank to discuss the proposed loan and, as a Bank officer said in a memorandum prepared at about that time “to effect hand-over of the control of the file to BSA”.
BankSA, a division of Advance Bank, made an offer to provide a loan facility to the appellant’s company by letter dated 8th July 1997. The Judge found that the offer was accepted by all relevant parties on 17th July 1997. The offer was to provide facilities which totalled $14,903,000.00. The offer by the bank was subject to a number of pre-conditions including the provision of a guarantee for $2,000,000.00 by Mr Dallwitz of the liability of the borrower to the lender, and a guarantee for $5,300,000.00 by an Australian Trading Bank in respect of cost overruns under the building contract and the costs of default by the builder.
The appellant submits that the requirement for those guarantees means that the loan was not a loan for a minimum of $14,400,000.00. He submits that in a practical sense he was required to find other sources of finance. I reject that argument. The fact is that the bank was offering to provide facilities totalling $14,903,000.00. Once agreed, and subject to compliance with the terms and conditions of the agreement, the borrower had a right to that amount and was under an obligation to repay that amount. The appellant, or at least his company, did agree to the terms and conditions.
In my opinion, on 17th July 1997 a construction loan which answered the description in the agreement between the appellant and the respondent had been agreed. The fact that, for reasons I will outline in a moment, that loan was not the loan ultimately taken up by the appellant’s company does not mean that the conditions of the agreement were not satisfied. I think that on 17th July 1997, the respondent became entitled to the consideration referred to in the agreement.
In late July 1997, Mr Dallwitz advised the bank that he could not provide the required guarantee, and he offered instead to provide a cash sum of $900,000.00 to enable the slab footings to be completed. This variation was acceptable to the bank which made a revised offer of a facility totalling $14,003,000.00 by letter dated 8th August 1997. The Judge found that the revised offer was accepted by all relevant parties on 15th August 1997. There was a further variation to the loan agreement on 29th October 1997, but it is not necessary to mention the details. By letter dated 15th December 1997, BankSA as a division of Advance Bank advised the appellant’s company as follows:
“I refer to the Bank’s Letter of Offer dated 8th August 1997 and subsequent variation to facility dated 29th October 1997.
I advise the only remaining pre-condition to be satisfied is evidence of compulsory building indemnity insurance (HIA) in respect of the Works. All other pre-conditions have been met to the Banks satisfaction.
Once satisfactory evidence HIA insurance is in place the construction funds of $11,751,000 will be made available for drawing, on a cost to complete basis, in line with the Letter of Offer, Variation to Facility and Facility Agreement.”
The Judge found, and it is not disputed, that the facility referred to in this letter was for a total amount of $14,003,000.00 and the rate of interest was 9.40 per cent.
The appellant submits that the construction loan ultimately granted was for a lesser amount than the amount specified in the agreement between the appellant and the respondent and that therefore the respondent did not become entitled to the consideration referred to in the agreement. I reject that argument because as I have said the loan offered on 8th July 1997 and accepted on 17th July 1997 met the requirements of the agreement. For the purposes of the agreement the fact that that was not the loan which was ultimately taken up is immaterial. Even if I am wrong about that point, I think that in the circumstances the appellant cannot rely on the fact the loan was, relatively speaking, for a slightly lesser amount than the amount specified in the agreement. I do not think the appellant can rely on the fact that he borrowed a lesser amount to avoid his obligations under the agreement in circumstances where, because of re-arrangements on the borrower’s side, a lesser amount is sought from the bank.
I return now to the Judge’s finding that the acts of the respondent were an effective or efficient cause of the loan. That issue is, as I have said, a question of fact. The Judge expressed his conclusions on that issue as follows:
“Do these twists and turns and difficulties in arriving at acceptable pre-conditions and conditions to a construction loan mean that there is no causal link between the initial introduction and the final loan? I think not. The parties were effectively the same. The purpose of the loan remained constant. The total finance required fluctuated only a little. Discussions and negotiations were ongoing, with genuine attempts on all sides to reach agreement.
There was a continuity between the initial introduction and into the indicative offers and offers of facilities, the last of which was acceptable. It would be very surprising in the context of this development if the formula acceptable to all parties could have been struck at the first attempt. After all, Mr Xenophou had not been able to achieve that with the Adelaide Bank. In this case, with each failed attempt at reaching the right formula, the parties continued to work and re-work the pre‑conditions and conditions. Eventually, those negotiations came up with an acceptable formula. In my view, the initial introduction on 16th September, 1996 led to and caused a construction loan fulfilling certain stated criteria, to be offered and accepted. That part of the agreement was met.”
I am not persuaded that the Judge erred in reaching those conclusions. It might be said that the question whether the respondent’s acts were merely a cause (which would not be sufficient) or were an effective cause was finely balanced, but there was evidence upon which the Judge could reach the conclusions which he did.
I would dismiss the appeal.
ANDERSON J This is an appeal from a District Court Judge in which his Honour awarded the respondent $200,680, inclusive of interest, for a claim that the respondent made for commission as a result of his arranging a loan for the appellant.
Some matters were argued in this appeal which were not the subject of dispute at the trial. The learned trial judge clearly regarded these issues as non-contentious during the trial. Such issues included the fact that there was an acceptance that the pre-conditions of the agreement were satisfied, there was no point taken in relation to the ultimate lender being BankSA and not St George Bank or that the final amount loaned was a different amount to that set out in the written agreement.
These matters probably involve questions of law but at least involve questions of mixed law and fact. The appellant did not have the advantage of counsel in the court below and I have taken that factor into account. The rule relating to the introduction of new arguments on appeal is with respect succinctly summarised by Cox J in Zurich Australian Insurance Ltd v Wood (1997) 69 SASR 572 at 578 where his Honour says:
“The general rule is that a party is bound by the conduct of his case at the trial, and it is only in the most exceptional circumstances that he will be allowed on appeal to raise a new argument which, deliberately or inadvertently, he failed to put during the hearing: see University of Wollongong v Metwally (No.2) (1985) 59 ALJR 481; Coulton v Holcombe (1986) 162 CLR 1. However, the rule is not absolute: see, eg, Electricity Commission (NSW) v Yates (1993) 30 NSWLR 351; Doherty v Murphy [1996] 2 VR 553. Every case will stand to be determined on its own facts, with the appeal court bearing steadily in mind the powerful considerations of public policy to which expression was given in the two High Court cases”
The rule is further dealt with in Halsbury’s Laws of Australia [325-11580] in footnote 4 where many cases are cited including Water Board v Moustakas (1988) 77 ALR 193 at 196:
The footnote reads:
“The appellant may be permitted to raise the new point if it is established by the findings of the trial judge and all the necessary evidence is before the appellate court. If there is no unfairness to the other side, the appellant ought not to be prejudiced by the failure of its lawyer to perceive earlier another way in which its case could be put.”
In my view, the points urged on us for the first time in this appeal fit within that test and the appellant was allowed to raise them. In the end, as these reasons make clear, I ultimately reject these additional arguments of the appellant.
Background
Mr Xenophou (“the appellant”) was attempting in September 1996 to undertake a development project known as the Botanic Apartments on East Terrace, Adelaide. The development was to consist of 93 luxury apartments within an eight-story complex. The site was previously purchased in his own name and he had received both planning and building approval.
The appellant was having difficulty obtaining the finance necessary for the project, which was in the range of $14 to $15 million. The appellant and Mr Richani (“the respondent”), had known each other for some years and had been involved in previous business dealings. They happened to meet again one night at the Adelaide Casino. The appellant discussed his inability to obtain finance for the project with the respondent. The respondent says that the appellant agreed to give him a third floor apartment in the complex if the respondent arranged finance for the development in the amount of $14,400,000. Following this discussion the respondent arranged a meeting for the two of them with a representative of the St George Bank (“the Bank”). The respondent had previously received finance from the Bank for other developments but the appellant had no prior dealings with this particular bank. The respondent at this time was also negotiating with the bank for finance for himself.
The respondent’s evidence is that the meeting at the Bank lasted for a couple of hours. At one point the respondent left the meeting to get some items from his car. It seems likely that at this point the appellant either wrote out or completed an agreement, which both he and the respondent later signed after the respondent returned with various papers and plans. The agreement, in the appellant’s handwriting, is on the letterhead of “Castle Building Co. builders and Estate Developer” with the words “Theodore Xenophou Principal” also on the letterhead. It is dated 16th September 1996 and is Exhibit P9 in the case. It reads:
“16/9/96
To: Harry Richani
26 Liberator Drive
Paralowie SA 5108
This letter is to confirm an agreement between myself, Theodore Xenophou and Harry Richani in relation to the development known as 9 East Tce Adelaide. If Harry Richani can arrange through the St Georges Bank a construction loan of a minimum of $14,400,000 with interest capitalized during the construction period at the ruling rates of interest (approx 10.5%) I’m prepared to give a unit on level three (3) free of charge to Harry Richani, as his full and final commission.
This offer is subject to the offer from St George’s Bank coming earlier that (sic) the offer from Baulderstone-Hornibrook who are negotiating now with Adelaide Bank and Dresdner Bank. Also subject to acceptable terms from St George’s Bank and strict confidentiality.
Acceptable approval must be confirmed by Xenophou’s solicitors.
(Signed) T Xenophou Witnessed by
H Richani John Blunt 16/9/96”The learned trial judge found that this document was treated at the trial by both parties as embodying the agreement between the parties.
Following the signing of the document, the appellant then entered into negotiations with the Bank and the proposed builder. In January 1997, the Bank merged with Advance Bank, a subsidiary of which was BankSA. The appellant then continued negotiations with BankSA. The Bank made several offers subject to pre-conditions being met, which were subsequently substituted or varied during the negotiations which continued with BankSA.
The negotiations commenced soon after the meeting of 16 September 1996 with an indicative offer from the Bank on 18 September 1996. The subsequent steps in the negotiations are all set out by the learned trial judge in his reasons [at 41] where the learned trial judge sets out 10 different stages chronologically involving both the Bank and BankSA.
Finally the pre-conditions for BankSA’s offer of finance were met and the money was advanced. This is evidenced by way of a letter dated 15 December 1997 from BankSA to Andin Pty Ltd. Andin Pty Ltd was the appellant’s company and was the first defendant in the original action (“Andin”). This letter reads:
“I refer to the Bank’s Letter of Offer dated 8th August 1997 and subsequent variation to facility dated 29th October 1997.
I advise all pre-conditions have been met to the Bank’s satisfaction.
The construction funds of $11,751,000 is available for drawing, on a cost to complete basis, in line with the Letter of Offer, Variation to Facility and Facility Agreement.”
Although it is not stated in the letter, the “Offer of Facility” referred to is for a total amount of $14,003,000 at an interest rate of 9.40%. I deal with the change in the amount originally sought, namely, from $14.4 million to the lesser amount of $14.003 million later in these reasons.
The development proceeded and when completed the respondent approached the appellant for his commission, which was denied. The respondent then brought an action for the value of the apartment which he said he was promised.
Findings of Trial Judge
From my reading of the learned trial judge’s reasons it seems to me that these are the important findings of his Honour including inferences drawn from those findings:
1The project involved the construction of 93 luxury apartments in an eight-storey complex.
2Mr Xenophou was having difficulty in raising the sum of approximately $14 million to finance the construction.
3Mr Xenophou and Mr Richani knew each other, had visited each other’s homes, had previous business dealings with each other and in particular Mr Richani had been asked by Mr Xenophou to see if he could sell the whole project.
4The two met at the Casino and a discussion took place regarding the project and an agreement was reached.
5The agreement involved Mr Richani arranging a meeting for the purpose of introducing Mr Xenophou to a financier for the project which Mr Richani did.
6Prior to the meeting, Mr Richani did not disclose any details as to which Bank he had arranged the meeting with.
7Some time prior to the conclusion of the meeting which took place at the offices of the Bank an agreement was signed (Exhibit P9). The agreement was witnessed by Mr Blunt from the Bank.
8Mr Xenophou up until that meeting had not had any dealings with the Bank.
9Mr Richani had previous dealings with the Bank and was currently dealing with it.
10The Bank was new in the marketplace and was an aggressive financier.
11Various offers were made by the Bank during the period of negotiation but were not accepted. The pre-conditions were also varied or substituted.
12Some considerable time later finance was approved.
13The construction of the apartments proceeded to completion.
14Mr Richani then claimed that he was entitled to one apartment on level 3 as his commission for arranging the construction loan.
15The learned trial judge accepted the respondent’s evidence about the circumstances of the meeting. He found that the respondent arranged the meeting but did little else.
16There was no mention of Andin anywhere in the written agreement and both parties had signed in their personal capacities.
17The learned trial judge found that it was not to the point that the reward for Mr Richani was disproportionate to the effort he put in. His Honour gave reasons for this important finding as follows at [38]:
“… In the circumstances of this case, there is nothing implausible about such an arrangement. Mr Xenophou was very keen from a personal and commercial perspective to see this development to fruition in his hands. He was unable to secure an offer of finance through any source and was prepared to give Mr Richani a unit if he could successfully introduce a source who would agree to provide a construction loan. Obviously Mr Richani stood to gain significantly for relatively little effort, but that was nonetheless the agreement. I expect that Mr Richani negotiated such a good deal for himself in the knowledge that he knew of a potential source of finance that was not known to Mr Xenophou. Mr Richani had had dealings with the St George Bank and was aware of its desire to enter the commercial development market on competitive terms. Therefore, in my view, it was sufficient if Mr Richani introduced or found the St George Bank for Mr Xenophou. More, of course, had to be done before Mr Richani was entitled to his commission or fee.”
18The learned trial judge found that the respondent became entitled to his commission, once certain conditions were fulfilled. He found the conditions were fulfilled.
19The conditions to be fulfilled were firstly, that the offer came from the Bank before the offer that the defendant was awaiting from Baulderstone-Hornibrook, secondly that the terms from the Bank be acceptable, to the borrower thirdly that there be strict confidentiality and finally, that acceptable approval be confirmed by the defendant’s solicitors.
Finding as to what was intended by “arrange”
The learned trial judge in looking at the meaning of the word “arrange”, posed the question in this way, namely, whether it [at 30]:
“means no more than getting the borrower and lender together and a construction loan is thereby secured”.
His Honour proceeded on the assumption that the loan was obtained as a result of this introduction but dealt with the causation argument later in his reasons. His Honour considered the factual setting in which the agreement was created and relied upon the principles in Codelfa Construction Proprietary Limited v State Rail Authority of New South Wales (1982) 149 CLR 337 and Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 76 ALJR 436. His Honour concluded that in the circumstances of this case, the word “arrange” meant no more than getting the borrower and lender together, and if the meeting resulted in the required construction loan coming into fruition then the plaintiff became entitled to his commission. As already stated, although the commission seemed disproportionate in light of the amount of effort on the plaintiff’s part, nonetheless his Honour held that this was the agreement made between the parties.
His Honour’s use of the Codelfa principle in relation to establishing the factual matrix surrounding the agreement was not challenged in the appeal. What was challenged was merely his Honour’s application of the Codelfa principle to certain facts which his Honour found relevant to the background and the inferences which he drew from those facts. It is not therefore one of those cases where it can be argued that his Honour has acted on an incorrect interpretation of the facts. His Honour has simply selected some facts as being more important than others in making his findings and in drawing inferences from those facts. It was submitted that this Court is entitled to draw different inferences and should do so – see Warren v Coombes (1979) 142 CLR 531. In my view, it is not to the point that his Honour could have made different findings by relying on other facts, because there was evidence to support the findings which he did make. I have set out what I regard as the important findings in paragraph 49 hereof. I agree with both the findings and the inferences which are set out in that part of his Honour’s reasons.
Finding as to causation
The learned trial judge also found for the respondent on the issue of whether his introduction of the appellant to the Bank caused the Bank to offer the construction loan to Mr Xenophou. He found that while the respondent did nothing further than arrange the initial introduction, he was prepared to do more had he been asked to do so. His Honour states in his decision:
“[42]No point was taken that the essentials of the construction loan concerning the amount, interest rate and capitalization of interest during the construction period, were not met. On my own assessment of the evidence they were met.”
His Honour found that the terms of the agreement were met and that:
“[47]…the initial introduction on 16th September, 1996 led to and caused a construction loan fulfilling certain stated criteria, to be offered and accepted.”
As to the other conditions, as already set out, his Honour found that the offer did come from the Bank before any offer from Baulderstone-Hornibrook; the terms were acceptable to the Bank and there was no evidence that the plaintiff had not maintained strict confidentiality throughout. As for the last condition, that is receiving approval of his solicitors, his Honour found that on the evidence, Mr Xenophou had waived that condition by electing not to seek legal advice about the conditions. Consequently all these conditions were satisfied thus permitting the respondent to receive his commission.
The learned trial judge further found that although the company Andin undertook the development this did not preclude the plaintiff from obtaining relief, even though the agreement was made in a personal capacity. It was the Bank’s requirement that a special purpose company undertake the development and therefore Mr Xenophou’s obligation to comply with this condition was not to be used as a means for him to avoid giving the plaintiff his commission.
Once again it was not suggested that his Honour did anything other than make findings of fact on evidence which was available to him. It is not to the point that he may have had other options available in relation to findings because in my view there was evidence to support the findings which he did make.
Finding as to plaintiff’s entitlement
As the apartments had been sold at the time judgment was given on 23 December 2003, the learned trial judge awarded the plaintiff value for the apartment. He calculated it on the basis of the cheapest apartment available on the third floor of the complex as at December 1997. This is the time that he found the respondent’s entitlement accrued. He awarded an amount of $145,000 for the apartment and a total value of $200,680 inclusive of interest. Costs were also awarded for the respondent against Mr Xenophou. There was no challenge on appeal to the method of assessment or the award of damages.
Grounds of Appeal
The grounds for appeal contained in the amended notice of appeal are as follows:
“2.1The learned Trial Judge erred in finding that the respondent became entitled to his commission by arranging a meeting between the appellant and St George Bank which meeting occurred on 16 September 1996.
2.2The learned Trial Judge erred in finding that the term “arrange” meant no more than getting the borrower and lender together and, if a construction loan of the specified type came into existence, then the respondent became entitled to his commission.
2.3The learned Trial Judge further erred in finding that the Respondent had satisfied the requirement for obtaining a commission for arranging a loan with the St George Bank by a purported arrangement of a loan through BankSA.”
Arguments on Appeal – Ground 1
The subtlety of amended ground 1 was not argued at the trial. The argument put by the appellants was that the loan that was ultimately finalised did not comply with the criteria agreed to on 16 September 1996 and therefore the arranging of the meeting did not lead to the grant of the loan in its final form. Despite the fact that this aspect was not argued at trial I think that the argument is nonetheless available as it involves questions of mixed law and fact.
We were told by counsel for the appellant that the primary submission of the appellant, pursuant to amended ground 1, is that the loan finally approved and accepted did not accord with the loan proposed in the letter, (Exhibit P9). The appellant was seeking a loan in the amount of $14.4 million but this was at a time when the appellant was also relying on a guarantee from a Mr Dallwitz in the amount of $2 million. In the end, there was no guarantee from Mr Dallwitz but $900,000 was received from Mr Dallwitz as a cash advance with Baulderstone-Hornibrook providing a $5.3 million guarantee on cost overrun, meaning that the ultimate figure required by the appellant, after the negotiations, was $14.003 million, as evidenced in the letter dated 15 December 1997 from the Bank to the appellant.
The full factual findings relating to this point were made by his Honour in his reasons [at 41], albeit that the legal argument put to this Court was not put to him.
Whilst it was argued that his Honour could and should have made other findings, there was no challenge to his Honour’s actual findings of fact. Those findings of fact each have an appropriate evidentiary base in my view and upon those findings it is my view that the argument on this point must fail. The loan as finally approved did differ from that originally contemplated but the factors which his Honour sets out in [41] of his reasons regarding the changed circumstances illustrate how the final loan was varied or moulded to suit the new circumstances including the change from a guarantee by Mr Dallwitz to Mr Dallwitz actually providing funds.
It was argued that Mr Dallwitz therefore became another lender and as such the finance provided by him could not be said to have been arranged by the respondent. In other words, the arranging of the meeting and the contribution by Mr Dallwitz were quite unrelated.
I do not consider that this aspect changes in any way the fact that by virtue of the bank loan, the project was able to proceed. It does not matter that the circumstances varied slightly. The effective cause as I indicate later in dealing with the third ground of appeal, was the introduction of the appellant to the lender by the respondent. The appellant of course readily consented to the change of circumstances in order to finalise the loan. He was still pursuing the substantial portion of the loan following his introduction to the Bank by the respondent.
To some extent the argument on amended ground of appeal 3 overlaps with this ground. I deal again with the point under ground 3 but the end result is in my view that the loan, even though the amount differed of necessity, resulted from the introduction of the appellant to the Bank and therefore the legal obligations under the agreement were met by the respondent.
In my view, this ground of appeal should fail.
Ground 2
The intended meaning of the word “arrange” was analysed in some detail in both the trial and before this Court. It was the main argument at trial. Counsel for the appellant argued that it meant more than just introducing, and was more towards the concept of formalising a deal or securing an offer. Counsel referred to the length of time over which negotiations took place, from the original meeting on 16 September 1996 until December 1997 when the agreement was concluded. He submitted that the amount of the loan and the complexity of the negotiations during this time required much work by the appellant and that the simple act of the respondent in arranging the introduction was not enough in this situation to constitute arranging the loan. It was argued that the word “introduce” is quite unambiguous, and therefore would have been used in the agreement had this been the parties’ intention.
The respondent claims that he did everything that he was asked to do and therefore no obligation was breached. Further, he claims that the Bank’s requirement of confidentiality excluded him from doing anything further. The respondent gave evidence during the trial, that on occasions he would phone the Bank and would be told that only the appellant could make inquiries about the transaction.
Counsel for the respondent emphasised the importance of the respondent’s refusal to disclose the name of the Bank to the appellant prior to the scheduled meeting. He submitted that this conduct showed that the essential focus of the transaction was one of obtaining the introduction.
Counsel for the respondent then attempted to argue that there was both an oral agreement and a written agreement. I believe that this argument is not available in view of the way the trial was conducted by both parties accepting that the relevant agreement was the written agreement which is Exhibit P9. In any event, it is quite unnecessary from the point of view of the respondent.
As indicated earlier, Codelfa was relied upon in relation to the issue of deficiencies in expression by the parties. I have dealt with this matter already in paragraphs 51 and 52 of these reasons.
Decided cases, of which there are few, in relation to any meaning of the word “arrange” are really of little assistance. This is because so much depends in each case on the surrounding circumstances in which the parties reached their agreement.
Likewise, the dictionary definitions do not really assist in the circumstances of this case.
Counsel for the respondent argued that the meaning of “arrange” was irrelevant. Whilst I do not fully understand the submission I gather that the argument was that because the meaning of “arrange” was not the subject of cross-examination of the respondent during the trial, even though it had been mentioned during examination-in-chief, it should not be now argued. He cited the case of Water Board v Moustakas. This case discussed the issue of fairness in raising a point on appeal that had not been argued at the trial. It was put therefore that there had been an acceptance of the respondent’s case by the appellant at the trial. I have already dealt with this point in paragraphs 36 and 37 hereof.
Counsel for the appellant argued that with respect to the failure to cross-examine on the meaning of the word ‘arrange’ there had in fact been several attempts to do so. This is evidenced in the trial transcript. They remained no more than attempts because counsel for the respondent objected to the line of questioning, preventing it from proceeding any further. He sought to distinguish the case of Moustakas from the present case. I do not think that this line of argument takes the case anywhere from either party’s point of view.
The fact that there was no cross-examination of the respondent about the intended meaning of “arrange” is not to the point. It is a question of interpretation of what the word meant in the context of the nature of the agreement between the parties and having regard to the surrounding and relevant background facts. Indeed, the meaning of “arrange” was the central issue at the trial and remains a matter of construction for the court regardless of whether the respondent was cross-examined on the topic and regardless of what the respondent said it meant.
In my view, the learned trial judge was quite correct in his interpretation of “arrange” in the context of the factual background. His Honour’s findings as to what the parties meant by “arrange”, as I have already indicated, are based on the evidence and in my view accord with good commonsense in the context of what the appellant was doing in desperately seeking an introduction to a lender as a means to find finance he was unable to find himself.
The respondent clearly arranged the introduction of the appellant to the Bank. It was this act which his Honour found led to and caused the loan to be offered and accepted. I agree with the learned trial judge. Likewise, as I have clearly indicated, I agree with the use that the learned trial judge made of the decision in Codelfa. Therefore in my opinion this ground of appeal should fail.
Ground 3
No point was taken in the trial as to the change in banks from St George which merged with AdvanceBank, a subsidiary of which was BankSA. Ground 3 of the amended notice of appeal takes this point. I have already dealt with this point in paragraph 35 hereof.
The learned trial judge deals with all the stages in negotiations in his reasons [at 41] as I have already indicated in paragraph 45 hereof.
These progressive developments show chronologically how the negotiations proceeded without any suggestion that it was not always the same parties conducting the same negotiations in relation to the same loan, albeit, that of necessity the exact amount of the loan altered and the name of the bank changed. For the purposes of this transaction, it is correct to say that the Bank and BankSA were the one entity.
Counsel for the appellant argued that, contrary to the finding of the learned trial judge, the various events that occurred during this time in which the respondent played no part, effectively severed any causal effect of the original meeting organised by the respondent and the loan which was eventually entered into. He argued the term “effective cause” in this context. It was argued that the introduction of the appellant to the Bank by the respondent was not the “effective cause”.
Counsel for the respondent argued correctly in my view that the fact that the loan was eventually granted by another bank did not break the causal link, as the change in lenders was imposed upon the parties in a situation that was out of their control. Counsel referred to a memorandum dated 3rd June 1997 from a Mr Jackson of the Bank to a Mr Steve Osborne of BankSA. The memorandum is a handing over letter at the time of Mr Jackson’s departure from the Bank. It informs Mr Osborne of the current status of the transaction and contains information about the structure of the loan, the concept of the building, the identity of the development, the proposed facility and the conditions of sale, including the guarantee by Mr Dallwitz. It illustrates the continuity in the processing of the transaction which had commenced some time earlier. Again, the appellant was a willing party to the handover of the processing of the transaction from the Bank to BankSA.
All these factors support the submission from the respondent that there had been effective performance. Counsel for the respondent contended that the respondent became entitled to his commission in December 1997 when the letter approving the final loan conditions was issued by the Bank and accepted by the appellant. I have set out this letter in paragraph 46 of these reasons. I agree that it provided the final approval and therefore the entitlement to commission.
I agree with the learned trial judge that it was the initial introduction of Mr Xenophou to the officer at the Bank on 16 September 1996 that led to and caused the ultimate construction loan being offered by the Bank and accepted by Mr Xenophou. In my opinion this ground of appeal should also fail.
In my view therefore, for the reasons set out I would dismiss the appeal.
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