Altius Pty Ltd v Abignano Nominees Pty Ltd

Court of Appeal (NSW)|2023-07-19|Before: Leeming JA, Adamson JA, Stern JA, Walton J

Solicitors: Commlex Pty Ltd (Appellants) Macpherson Kelley Pty Ltd (Respondents) File Number(s): 2023/2331 Decision under appeal Court or tribunal: Supreme Court Jurisdiction: Common Law Citation: Abignano Nominees Pty Ltd v Altius Pty Ltd [2022] NSWSC 1739 Date of Decision: 21 December 2022 Before: Walton J File Number(s): 2017/320112

HEADNOTE [This headnote is not to be read as part of the judgment] Altius Pty Ltd (Altius) is the trustee of a unit trust which was created by deed dated 26 March 2012 for the purpose of pursuing the development of a property named Pasadena of which Altius became the registered proprietor. The unitholders in the unit trust were entities associated with Paul Peterkin (the Peterkin entities) and Biagio Abignano (the Abignano entities). Altius, and the Peterkin and Abignano entities, entered into various agreements between 2012 and 2016 in order to enable the development. Although these agreements provided for various specific methods of providing Altius with funds to hold Pasadena and pursue its development, the parties did not utilise these methods, and instead advanced money to Altius interest-free in equal amounts, being the proceeds of a previous development undertaken by the parties known as "SPAN", as well as other amounts advanced from time to time. During 2015, the parties negotiated for the Peterkin entities to purchase the units in Altius held by the Abignano entities. An option agreement to that effect (the option agreement) was executed on 14 March 2016. The option agreement provided for the purchase price for the Abignano entities units in Altius to be adjusted by the "Holding Costs Contribution" (as defined). Shortly thereafter, a dispute arose between the parties as to whether the amounts loaned by the Abignano entities to Altius constituted "Holding Costs Contribution(s)", such that any liability to the Abignano entities had been discharged by the payment of the purchase price. By statement of claim filed on 23 October 2017 and a further amended statement of claim filed on 20 March 2020, the Abignano entities claimed a total of $926,173.72 (the sum of their half-share of the proceeds of the SPAN development ($671,369.30) and other monies advanced to Altius ($254,804.42)) plus pre-judgment interest. In its defence filed on 3 August 2020, Altius alleged that the loans from the Abignano entities were discharged by the purchase by the Peterkin entities of the Abignano entities' units in the unit trust and were therefore no longer payable. In the alternative, Altius alleged that the Abignano entities were estopped from asserting that it owed monies pursuant to the loans by reason of their conduct in relation to the sale of the units in the unit trust to the Peterkin entities. Altius further made a cross-claim to the effect that the parties had agreed that the terms of sale of the units included a term that the price to be paid for the Abignano entities' units was to be reduced by the amount that the Abignano entities would otherwise be required to contribute to Altius to enable it to clear all of its liabilities (including those not owed to the Abignano entities). Altius alleged that the Abignano entities made representations to this effect and thereby had caused Altius loss by misleading or deceptive conduct. The primary judge held that none of the loans from the Abignano entities to Altius fell within the definition of Holding Costs Contribution because none was, relevantly, "pursuant" to the joint venture agreement, the unit trust deed or the unitholders agreement. The primary judge therefore held that Altius was liable for the amount claimed. As to the cross-claim, the primary judge rejected the allegation that there had been any common understanding to the effect alleged in the cross-claim, and on that basis found that none of the representations had been made out so as to give rise to a claim for misleading and deceptive conduct. Altius appealed on five grounds. Grounds 1-3 alleged error in the primary judge's conclusion that the loans by the Abignano entities to Altius did not fall within the definition of "Holding Costs Contribution" in the option agreement. Grounds 4 and 5 relate to the cross-claim and challenge the primary judge's finding that the second, third and fourth representations were not made. The Court (Adamson JA, Leeming and Stern JJA agreeing) held, allowing the appeal: (1) The loans made by the unitholders were made to Altius pursuant to the joint venture agreement, in the sense of being "consequent on" or "in conformity with" it. Altius had, in effect, no capital from its unitholders. The only way the sole purpose of the joint venture agreement could be fulfilled, given the refusal of its unitholders to make capital contributions to it, was for it to borrow money from lenders or its unitholders or related parties: [98]-[99] (Adamson JA). Birchill v Premier Holdings Pty Ltd [2011] NSWSC 1020, applied. (2) The negotiations between the parties indicate a common intention that the Abignano entities' share of Altius' liabilities would be discharged on the transfer of units in the unit trust. This was the evident purpose of the insertion of cl 3.2(a)(ii) into the buy-out agreement: [86]-[90] (Adamson JA). (3) This construction is also supported by the commercial effect of the transfer of the Abignano entities units to the Peterkin entities. Consideration of the financial effects of the parties' posited constructions indicate that construction for which the Abignano entities contended is wholly uncommercial, viewed from the point of view of both parties in the context of the circumstances which applied at the time, because it delivers an unwarranted windfall to the Abignano entities and imposes an unwarranted penalty on the Peterkin entities: [106]-[111] (Adamson JA). Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310, applied; Zhu v Treasurer of the State of New South Wales (2004) 218 CLR 530; [2004] HCA 56, cited. (4) It is clear when the option agreement is read in context that the definition of "liabilities" in cl 1.1 includes the holding costs paid by the unitholders since 2012. It was plainly the intention of the parties that the Peterkin entities' acquisition of the Abignano entities' units in the unit trust would bring to an end their commercial relationship with respect to Pasadena: [115], [118] (Adamson JA). (5) The inference ought be drawn that the parties did not intend the option agreement to contain all of the relevant matters affecting the sale of the Abignano entities' units in Altius to the Peterkin entities, because of the making of an earlier collateral agreement between the parties through their solicitors, which was consistent with the option agreement: [114]-[115] (Adamson JA). Hoyt's Proprietary Ltd v Spencer (1919) 27 CLR 133, applied; Maybury v Atlantic Union Oil Company Limited (1953) 89 CLR 507; [1953] HCA 89, applied. (6) The promise that the purchase price would be adjusted to take into account the Abignano entities' share of the unitholders' loans to Altius was consideration for entering into the option agreement. The intention that the promises were to be contractually binding can be inferred from the words and conduct of the parties when viewed objectively: [116] (Adamson JA). Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1; [2016] HCA 26, cited; Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; [1984] HCA 64, cited.

JUDGMENT

LEEMING JA: I agree with the orders proposed by Adamson JA and, subject to the following, which is by way of elaboration and emphasis rather than qualification, with her Honour's reasons. My reasons assume familiarity with, and do not unnecessarily repeat, what is contained in the reasons of Adamson JA.
The issue is one of construction of a clause in an "Option Agreement" dated 14 March 2016 prepared in order to bring to account at least part of the different financial contributions which had been made by Messrs Abignano and Peterkin and the companies they controlled at the ending of their joint venture. The adjustment in the Option Agreement relevantly required determining: the sum of all liabilities for all outstanding contributions payable in respect of holding costs of the Property … by any or all of Abignano, Biagio, and Abignano Nominees pursuant to any or all of the Joint Venture Agreement dated 3 May 2012, the Altius Unit Trust deed dated 26 March 2012 and the Unit Trust Share and Unitholders Agreement dated 29 March 2012 until 11 November 2015 [emphasis added].
The wording in the Option Agreement reflects earlier wording in a "Buy Out Agreement" dated 17 November 2015. The date of 11 November 2015 reflects the time when Messrs Abignano and Peterkin reached agreement as to price. The Buy Out Agreement contemplated the preparation of the Option Agreement "in a more detailed and precise form than, but not inconsistent with" adjustments in cl 3.2, which became the critical clause. In order to resolve the parties' submissions as to the meanings to be given to "liabilities for all outstanding contributions" and "pursuant to" it is necessary to have regard to the history of the joint venture which is fully summarised by Adamson JA, to which I would add the following.
The two men involved in the events giving rise to this litigation employed a wide range of legal structures to conduct their affairs, and aspects of the documentation of their relations are difficult to reconcile. By way of example, Altius owned the Pasadena development as the trustee of a unit trust, but Altius was also party to a Joint Venture Agreement with Abignano Nominees Pty Ltd and Ms Sheridan Peterkin, each in their capacity as trustees of family trusts. The Joint Venture Agreement was expressed to have as a party "The partnership of trusts described in Part 3 of the Schedule", and elsewhere proceeded on the basis that a trust was a legal person. It also provided in cl 14.1 that nothing in the Agreement will be deemed to constitute a partnership between the parties. It is difficult to reconcile cl 14.1 with the partnership said to be a party to the Agreement. Two separate companies, Jerolu Investments Pty Ltd and B & J Abignano Pty Ltd, were trustees of superannuation funds associated with each man, and became unit holders of the unit trust and entered into a Unit Trust Share and Unit Holders Agreement. Although the unit trust was settled prior to Altius entering into the Joint Venture Agreement, the latter provided in cl 14.2 that "Altius holds all the legal and beneficial interests in the Asset [ie the Pasadena land]". Notwithstanding cl 14.2, argument in this Court proceeded on the basis that Altius was a trustee.
It was obvious that funds would be required to acquire and develop the Pasadena land. Originally there were external lenders. The Unit Trust Share and Unit Holders Agreement contemplated "Further Capitalisation" through issuing further units, and the Joint Venture Agreement contemplated "Initial Contributions" of $610,000 and "Second Contributions" of $1,000,000 to $2,000,000 and provided that they did not constitute a loan but represented "risk capital" and did not give rise to any obligation to repay. However, it was common ground that the parties diverged from what was stated in their formal contractual documentation and instead lent funds to Altius for the purposes of carrying out the development.
That in turn leads to an examination of the evidence bearing upon the loans made to Altius. Financial statements were prepared for the various companies and trusts, but it was common ground that they were unreliable, including as to the amounts lent to Altius. Much greater weight was placed upon a hand-written ledger which was said to reflect payments discharging Altius liabilities (such as to consultants retained to progress a development application, and for ongoing expenses such as rates). These payments discharging liabilities of Altius were treated as being funds lent on an undocumented basis that was interest-free and repayable on demand. There is no reason, for the purposes of resolving this appeal, to depart from this characterisation which was common ground between the parties.
The departure from what was formally documented between the parties does not alter the fact that when Messrs Abignano and Peterkin chose to bring their joint development of the Pasadena project to an end, they did so by executing formal written contracts negotiated by solicitors. The dispositive issue in this appeal remains one of contractual construction. However, that context is important in understanding the force of the contractual language.
First, there is no sound reason to construe "all outstanding contributions" in the critical clause as confined to the Initial and Second Contributions which were never called upon, especially when it is preceded by "the sum of all liabilities for". The precise wording may be infelicitous, but the evident sense was to bring everything to account. "All" contributions was not confined to contributions in the nature of capital, especially when the Initial and Second Contributions were not called upon, and when most of the development was funded by debt. Although this appears to have been controversial before the primary judge, if there was any dispute about it, it was far from the forefront of the submissions in this Court.
Secondly, the loans from both Abignano entities and Peterkin entities are to be regarded as being "pursuant to" the Joint Venture Agreement for the purposes of the clause reproduced above. That agreement spoke in terms of the "Initial Contributions" and the "Second Contributions", which were to be supplied on demand by Altius and were stated not to constitute loans. The parties departed from the terms of the Joint Venture Agreement. But the departure, reflecting a decision to lend funds to Altius, did not deny to those loans the status of being "pursuant to" the Joint Venture Agreement. The purpose of the joint venture was to develop the Pasadena Project, for which funds whether by way of debt or equity were required. The loans were in fact indispensable to the Project defined in, and which was the purpose of, the Joint Venture Agreement, which makes the conclusion that they were "pursuant to" the Joint Venture Agreement one which is readily reached. Another way of making this point is that the parties' decision not to call for the Initial Contributions and the Second Contributions did not bring the Joint Venture Agreement to an end. Rather, the Joint Venture Agreement continued, although the calls contemplated by it were not made, with the Project being funded by loans, rather than the issuing of units. Those loans readily answer the description of "pursuant to" the Joint Venture Agreement as that agreement had been implemented in 2015, namely, without there being calls of capital.
As Adamson JA has explained, the reasoning of the primary judge that the clause was not engaged because loans were not "pursuant to" the Joint Venture Agreement cannot be accepted, and was not enthusiastically defended. Indeed, in their written submissions, the respondents did not defend the reasoning in terms, but claimed that the finding that the loans were not payable "pursuant to" the various contracts "encapsulates a finding that there were no 'outstanding' obligations" (written submissions, para 22, original emphasis). The looseness and inconsistencies in the formal documentation mentioned above assists in the conclusion that "pursuant to" is not to be construed narrowly.
Thirdly, although "the sum of all liabilities for all outstanding contributions" is far from precise prose, the critical word is "outstanding". An equal number of units had been issued and paid for, and approximately equal contributions thereafter had been provided by the companies associated with each man. One of the purposes of the running sheet was to ensure that the ongoing costs were borne equally. Indeed, there was friction between Messrs Abignano and Peterkin because the former claimed he was unable to contribute his share of funds to discharge Altius' liabilities. In those circumstances, the "outstanding" contributions in the clause are to be understood as by way of adjustment in order notionally to equalise the total amounts of funds lent to Altius by the Abignano and Peterkin entities.
Fourthly, the point of making an adjustment so as to equalise the indebtedness of Altius to the Abignano and Peterkin entities was so that the joint venturers could be placed in the position of equality which was at the heart of the venture, and so that when Mr Peterkin was buying out Mr Abignano, the fact that both had lent money to Altius could be disregarded and the parties could strike a commercial agreement as to price. The point of the Buy Out Agreement and the Option Agreement was to permit Mr Abignano to exit the joint venture, leaving Mr Peterkin as sole owner of Altius with secured external debt. The adjustment of $600,000 reflected the fact that the Abignano entities would cease to be liable, directly or indirectly, to the extent of half of the first ranking indebtedness to the bank. Central to any negotiation as to the price to be paid for Peterkin to acquire sole ownership of Altius (and thus the Project), was the need to identify the value of Altius (and thus of the Project). That is the natural approach to take, and it was the only way to assess the attractiveness of the offers from third party purchasers that led to the execution of the agreements.
Fifthly, the commercial considerations summarised by Adamson JA are, with respect, compelling. The effect of the acquisition of the entirety of Altius by Mr Peterkin meant that the Peterkin loans to Altius could be disregarded. It is difficult to reconcile with any commercial sense a result which required an adjustment for the equalisation of the parties' loans to Altius, on the basis of which a price was to be paid to an Abignano entity, which was then entitled to sue to recover the entirety of its outstanding loan.
Sixthly, it is to be borne in mind that the two men were already in dispute over a separate joint venture, and the evident purpose of the Buy Out Agreement and the Option Agreement was to bring the Pasadena joint venture to an end. It should not lightly be concluded that when one party was buying out the other, pursuant to agreement which makes express provision for adjustments for "all" "outstanding" contributions, there was to be left over an entitlement of one venturer to sue the other.
It is true that the result involves some straining of the language in the parties' formally documented bargain. However, the language (which is the result of drafting negotiations as explained by Adamson JA) is itself far from pellucidly clear, and when regard is had to all of textual, contextual and purposive considerations, in accordance with Victoria v Tatts Group Ltd [2016] HCA 5; 90 ALJR 392 at [51]-[75], I am comfortably satisfied, for the reasons given by Adamson JA and the matters summarised above that the appeal should be allowed.
ADAMSON JA: Biagio Abignano and Paul Peterkin were each property developers. In 2012, they decided to develop a property on Pittwater Road, Church Point (Pasadena) on which a motel was located and entered into agreements for that purpose. A unit trust was created of which Altius Pty Ltd (Altius), the first appellant, was trustee. Altius became the registered proprietor of Pasadena. Its costs were funded by loans from Mr Abignano and Mr Peterkin. When their development application was refused by Pittwater Council on 21 October 2013, they ultimately decided that Mr Abignano would sell his units in the unit trust to Mr Peterkin. The dispute which was the subject of the proceedings in the Court below and in this Court was whether the loans from entities associated with Mr Abignano to Altius were discharged by the sale of the units held by entities associated with Mr Peterkin (as Altius contended) or whether they were still outstanding and recoverable, as Walton J (the primary judge) found.
Mr Abignano and Mr Peterkin conducted business through various entities, including unit trusts, family trusts, superannuation trusts and limited companies. It was common ground that the differences between these entities were not material to the determination of the appeal. Accordingly, no distinction will be made between the various Peterkin entities (which will be referred to as the Peterkin entities) and the various Abignano entities (which will be referred to as the Abignano entities), except where necessary for the narrative.
By notice of appeal filed on 15 February 2023, the appellants (Altius and other Peterkin entities) challenge the primary judge's finding that the option agreement pursuant to which the Peterkin entities acquired the Abignano entities' units in Altius did not have the effect of discharging or otherwise repaying the loan monies advanced from time to time by the Abignano entities to Altius and that, accordingly, the Abignano entities were entitled to judgment against Altius for the amount of that loan ($926,174.72) together with pre-judgment interest of $302,854.14. The appellants submit that the primary judge's construction was incorrect and seek that the judgment be set aside (grounds 1-3). In the alternative, the appellants contend that they are entitled to relief on the basis of alleged misleading or deceptive conduct on the part of the Abignano entities (grounds 4-5).
The relevant agreements must be construed by reference to the objective circumstances and the genesis and purpose of the transaction: Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35]. Accordingly, some analysis of the facts is required before turning to the legal issues.

The creation of the unit trust

In early 2012, Mr Peterkin and Mr Abignano discussed the possible purchase and development of Pasadena. As a result of these discussions, a unit trust was created (the unit trust) by deed dated 26 March 2012, of which Altius was appointed trustee for two unitholders, Jerolu Investments Pty Limited (Jerolu), one of the Peterkin entities, and B & J Abignano Pty Limited, one of the Abignano entities (the unitholders). Each of the unitholders was a trustee of a superannuation fund for the benefit of Mr Peterkin or Mr Abignano respectively. The trustee was not entitled to be indemnified by the unitholders, although it was entitled to be indemnified by the trust fund, if acting in good faith (cl 18.6).

The purchase of Pasadena and the unitholders agreement

On 28 March 2012, Mr Peterkin and Mr Abignano successfully bid at the auction for the sale of Pasadena. The purchase was initially funded through Mr Abignano's father.
On the following day, 29 March 2012, an agreement entitled "Unit Trust Share and Unitholders Agreement" was entered into between each of the unitholders, Mr Peterkin and Mr Abignano. Of present relevance, cl 3.1 provided that, unless the unitholders unanimously agreed to other activities, the activities of the trust would be confined to the acquisition, development, holding, rental and ultimate sale of Pasadena.
Clause 3.3 of the unitholders agreement provided: "The Parties will, at all times throughout this Agreement, act towards each other with the utmost good faith and with the purpose of carrying out the intention evinced by this Agreement."
Clause 8 provided that certain decisions required the unanimous written approval of all unitholders. These decisions included any borrowing by the Trustee: cl 8(g).
Clause 11 provided for Altius' further capitalisation by unanimous resolution of unitholders, each of whom would be entitled to invest in the trust in a pro rata amount calculated by reference to the number of units held. If the unitholder did not wish to invest that pro rata amount, there was a process for dilution, or sale, of the unitholder's interest. This process was not utilised.
Clause 13 provided: "None of the provisions of this Agreement shall be deemed to constitute a partnership or joint venture between the parties hereto or any other person and no person shall have any authority to bind the other in any way except as expressly provided for in this Agreement."

The joint venture agreement

On 3 May 2012, Altius, Abignano Nominees Pty Limited (a trustee for a family trust associated with Mr Abignano) and Mr Peterkin's wife (as trustee for The Bodhi Trust) entered into a joint venture agreement for the acquisition, development, leasing and sale of Pasadena. There was a partnership between the trustees.
In the joint venture agreement, the expression "the Project" was defined to include the acquisition, development, leasing and sale of Pasadena. However, the term "Project Costs" was defined as being limited to the development costs of Pasadena: cl 1.1 and Part 10 of the Schedule.
Clause 3 of the joint venture agreement, entitled "General Objectives", provided that the general objectives of the joint venture were to protect Altius from the commercial risks associated with the development of Pasadena and to "reward the parties according to their respective roles". Altius' role was to hold the asset (Pasadena) and do such things as were necessary to develop Pasadena for ultimate sale. The role of the two other parties was to make specified contributions ("Contributions", which comprise "Initial Contributions" and "Second Contributions") and "to provide, at its own expense, such further funds as may be required from time to time for the purposes of completing the Project Costs (such additional costs are not to be deemed Contributions for the purposes of this Agreement unless the Parties agree in writing)": cl 3.4.2. It was accepted that cl 3.4.2 did not apply to holding costs of Pasadena (as distinct from development costs) because of the limited definition of "Project Costs" (referred to above).
Part 5 of the schedule to the joint venture agreement provided that Initial Contributions were $600,000 and Second Contributions were $1-2million. As no notice for either the Initial or the Second Contributions was issued, these payments did not become due.
Clause 3.7 of the joint venture agreement provided that the Joint Venture would not acquire assets or borrow or enter into any commitment or liability which was not provided for in the agreement.
Clause 3.8 of the joint venture agreement provided that Altius was entitled to raise and borrow money for the development of Pasadena and to secure the repayment against Pasadena as long as the borrowing did not exceed a specified figure and that neither the Abignano entities nor Mrs Peterkin would be required to guarantee any such borrowings or to give an indemnity for the repayment of the borrowings. This clause authorised Altius to obtain loans from the Peterkin and Abignano entities from time to time to fund the interest costs and other expenses which it incurred.
Clause 3.10 of the joint venture agreement provided that the provision of a Contribution did not constitute a loan and did not give rise to an obligation on the other party to repay such contributions. As no Contributions were provided by the parties, this clause had no material effect. Provisions were made for the parties' "Entitlements" and for security for those "Entitlements" (cll 6 and 8). However, the Entitlements derived from Contributions, which were never called for.
Clause 12 of the joint venture agreement provided: "12. ASSIGNMENT 12.1 Except as provided in this clause, neither party shall sell, or permit to sell, give or otherwise dispose of, charge or encumber, in any way any legal or beneficial interest in or under this Agreement without the prior written consent of the other party which the other party may (in its absolute discretion) give or refuse. 12.2 It is fundamental that each party shall not mortgage, charge or otherwise encumber any part of its interest under this Agreement other than under Clauses 3. 7, 3.8 and 6."
The effect of this clause was that neither Mr Peterkin nor Mr Abignano could dispose of, or mortgage, Pasadena without the consent of the other.

The completion of the purchase of Pasadena

On 9 May 2012, the purchase of Pasadena completed. The funds required, $2,543,712, were advanced to Altius by an entity associated with Mr Abignano's father. On about 23 May 2012, Altius made a partial repayment of $300,000 from the monies which had been paid for units in the unit trust by the Abignano and Peterkin entities ($150,000 each).
Mr Peterkin and Mr Abignano can be taken to have chosen (whether consciously or otherwise) not to utilise the method provided for in the joint venture agreement for funding Altius through Contributions. Instead, they each advanced money by way of interest-free loans to Altius to fund the costs associated with Pasadena and to prepare a development application for the proposed development. It was accepted that these payments to Altius created a debt in favour of the payer. Thus, each of Mr Peterkin and Mr Abignano (through their respective entities) became a creditor of Altius for the amounts advanced.
It was also common ground that the mutual intention of Mr Peterkin and Mr Abignano was that their loans would be paid out when Altius obtained funding from a third party for the development of Pasadena. They agreed to keep the loans from their respective entities equal as they wanted to avoid issues which had arisen with respect to a previous development which they had undertaken of two lots, Lots 1 and 3, at Mona Vale (the SPAN development). Mr Abignano and Mr Peterkin regarded the substantial equivalence of sums advanced as obviating the need for interest to be calculated on loans by them to Altius. The evidence showed that Altius' book-keeper endeavoured to keep track of the various payments made by the Peterkin and Abignano entities, with a view to achieving and maintaining relative equivalence of payments. These payments were recorded in an Account Transactions ledger in Altius' books of account.
By letter of offer dated 20 November 2012, the NAB offered an interest-only loan facility to Altius in the sum of $2.4million which was secured by a mortgage over Pasadena (the NAB mortgage). It was also secured by mortgages over the two lots at Mona Vale which comprised the SPAN development. Part of the funds advanced by the NAB on 17 December 2012 was used to repay the loan from Mr Abignano's father. Mr Peterkin and Mr Abignano each guaranteed Altius' obligations under the NAB loan facility. As Altius had no income, Mr Abignano and Mr Peterkin had to meet the interest payments on the NAB loan from their own resources. This was done by way of loans to Altius.

The development application

On 5 February 2013, a development application with respect to Pasadena was prepared and lodged with the Pittwater Council.

The SPAN proceeds

In early to mid-2013, the lots in the SPAN development were sold and the proceeds applied to reduce Altius' indebtedness to the NAB, with the balance being paid to Altius. It was common ground that the following payments were made: $612,000 on 1 February 2013; $86,739.10 on 4 February 2013 (to Altius) and $588,000 on 3 July 2013 (to NAB). These payments were recorded in Altius' general ledger under the entry "Loan from SPAN". The payments represented further loans to Altius from the Peterkin and Abignano entities in the sum of $349,544.55 (each) in February 2013 and $294,000 (each) in July 2013.

The dispute as to the way forward

The development application with respect to Pasadena was refused on 21 October 2013. This led to discord between the unitholders as Mr Abignano wanted to sell Pasadena but Mr Peterkin wanted to retain it with a view to developing it. The costs of holding Pasadena (land tax, insurance, Council rates and interest on the NAB loan) continued to be incurred and borne by them equally by way of loans to Altius.
In August 2014, Mr Abignano informed Altius, when asked to make payments to equalise the amounts paid by Mr Peterkin, that he was "unable to make any contributions at the moment". This led to Mr Peterkin instructing solicitors, Brook Worthington, who sent a letter of demand to Mr Abignano on 25 November 2014 requiring him to make payments within specified times. The letter concluded: "My client is unwilling to contribute any further risk capital under the Joint Venture Agreement until Abignano matches the capital contributed by [Peterkin] to date. If that result is not achieved the Joint Venture Agreement may be deemed to come to an end and Altius may be required to place the assets of the trust on the market for sale as it will have no other source of funding to meet the Project Costs."
It was common ground that the word "contribute" was used in its usual sense and referred to monies, the payment of which constituted a loan to Altius and, in this context, did not refer to a "Contribution" under the joint venture agreement. The reference to "risk capital" in the letter of demand was inapposite as, except for the initial subscription amount paid for units in the unit trust, neither the Peterkin nor the Abignano entities had made any capital contribution to Altius, since all monies were provided by way of loan. Further, it was accepted that a sale of Pasadena could not occur except by agreement between Mr Peterkin and Mr Abignano.
A letter in similar terms to the one of 25 November 2014 was sent on 1 December 2014, this time from Mr Abignano to Brook Worthington, in which he purported to require the Peterkin entities to make a payment to Altius to equalise the contributions.

The transfer of the Abignano interests in Altius to the Peterkin interests

Offers from a third party to buy Pasadena

In October 2015, Mr Peterkin and Mr Abignano received, through a local real estate agent, an offer to purchase Pasadena for $5.5million ("subject to formal DA approval"). The offer was subsequently increased to $6million. A subsequent unconditional offer (which did not require development approval) was received on 20 October 2015 for a purchase price of $5.75million.
It appears to have been common ground that, had any of these offers been accepted, the purchase price would have been applied to repay the NAB loan (and any other third-party creditors) and that the balance would have been paid to the Peterkin and Abignano entities in equal shares. As no differentiation was made between the respective entities, it was not necessary for separate cheques to be drawn in favour of the (unitholder) creditor of the loan (to repay the loan) or the unitholder (for the balance of the proceeds). Thus, the parties envisaged that the NAB would be paid out and that the balance would be paid to the unitholders, including in satisfaction of Altius' liabilities to them.

Negotiations between Peterkin and Abignano for Peterkin to acquire Abignano's units in the unit trust

By email dated 16 October 2015, Mr Parsons (who by that time was acting as solicitor for Mr Peterkin and the Peterkin entities) communicated an offer from the Peterkin entities to purchase the Abignano entities' units in the unit trust for $2.25million. The offer included the following: "Your client would have to make an adjustment for his share of liabilities (including Mortgage) up to the date of settlement."
In response, Mr Siddle (the solicitor for Mr Abignano and the Abignano entities) made a counter-offer on the same day which was, in part, in the following terms: "In the circumstances, we are instructed to make a counter-offer whereby our client will sell its units in the unit trust to your client for $2,850,000 with an adjustment up to the date of settlement for our client's share of liabilities, including the mortgage."
In his response to the counter-offer, Mr Parsons made an offer of $2,350,000 on 20 October 2015. Mr Siddle, in an email sent later that day, sought clarification "whether [the Peterkin entities'] counter-offer of $2,350,000 … [was] subject to an adjustment for [the Abignano's entities'] share of liabilities, including the mortgage.". This confirmation was given. This was a significant point in the negotiation because it constituted a collateral agreement that Altius' liability to the Abignano entities was to be discharged on settlement by the payment of the purchase price for its units (this matter is addressed further below). Once this matter had been agreed between the respective solicitors for the Abignano and Peterkin entities (who together constituted the governing mind of Altius), the matter was not expressly revisited.
On 27 October 2015, Mr Siddle made a further offer of $2.7million on similar terms ("with an adjustment up to the date of settlement, being six weeks after the acceptance of the offer, for [the Abignano entities'] share of liabilities, including the mortgage"). Mr Parsons, on behalf of Mr Peterkin, sought further time to respond to the offer.
On Thursday 5 November 2015, Mr Peterkin and Mr Abignano met and came to an agreement that $500,000 of the $2.7million would be payable at a nominated date and that the balance ($2.2million) would be payable within seven days of receipt of a lease from Crown Lands in respect of Lot 3 (land adjacent to Pasadena).
However, it appears that Mr Peterkin and Mr Abignano also met on about 11 November 2015 and agreed that the purchase price would be $2.6million, rather than $2.7million. The new figure (which was reflected in the buy-out agreement and the option agreement) was confirmed by Mr Parsons in an email dated 12 November 2015 to Mr Siddle in which he set out his understanding of the agreement reached. It included the following: "In respect of the current Altius Unit Trust loan account, adjustment of Vendor liabilities to date and half NAB Mortgage on settlement."
On 13 November 2015, Mr Siddle sent a proposed draft agreement for Mr Parsons' review. The draft omitted reference to the adjustment for the liabilities of the Abignano entities. Mr Parsons pointed out the omission in an email sent on 16 November 2015 and proposed that "all liabilities for all outstanding contributions to the property payable by Mr Abignano until the date of this agreement" be included in cl 3.2(a) (which provided for the purchase price and the earlier payment of $500,000). Mr Siddle sent a further draft on 16 November 2015 which included as an adjustment (in draft cl 3.2(a)(ii)) "all liabilities for all outstanding contributions to the Property payable by Mr Abignano until 11 November 2015".
Further exchanges of drafts ensued, which led to a further draft being sent by Mr Siddle to Mr Parsons on 17 November 2015, which proposed cl 3.2(ii) in the following terms: "all liabilities for all outstanding contributions payable in respect of holding costs of the Property by any or all of Abignano, Biagio, and Abignano Nominees pursuant to any or all of the Joint Venture Agreement dated 3 May 2012, the Altius Unit Trust Deed dated 26 March 2012, and the Unit Trust Share and Unitholders Agreement dated 29 March 2012 until 11 November 2015;" [The emphasised portion was an addition suggested by Mr Parsons and accepted by Mr Siddle.]
A further iteration of the clause subsequently passed between the solicitors as follows: "all liabilities for all outstanding contributions payable in respect of holding costs (including but not limited to; water rates, council rates, land tax, issued invoices relating to the development application) of the Property by any or all of Abignano, Biagio, and Abignano Nominees pursuant to any or all of the Joint Venture Agreement dated 3 May 2012, the Altius Unit Trust Deed dated 26 March 2012, and the Unit Trust Share and Unitholders Agreement dated 29 March 2012 until 11 November 2015;" [The emphasised portion was an addition suggested by Mr Parsons and accepted by Mr Siddle.]

The buy-out agreement

The negotiations set out above culminated in the exchange, on 17 November 2015, of an agreement between Altius, Mr and Mrs Peterkin, Mr Abignano and the Abignano and Peterkin entities for the grant of a put and call option to Jerolu and another one of the Peterkin entities, as purchasers, in respect of the units in Altius held by the Abignano entities (the buy-out agreement). Pursuant to the buy-out agreement, the Peterkin entities were obliged to pay a nominated Abignano entity the sum of $500,000 by way of non-refundable initial consideration (which would be credited to the purchase price).
The recitals to the buy-out agreement said: "A. Jerolu and Abignano are the only holders of all the units in the Altius Unit Trust, established by the Altius Unit Trust Deed dated 26 March 2012 between Altius as trustee and Jerolu and Abignano as unitholders. B. Jerolu, Abignano, Peterkin, Biagio and Altius are parties to Unit Trust Share and Unitholders Agreement dated 29 March 2012 in relation to the Altius Unit Trust. C. Altius, Abignano Nominees and Sheridan are parties to a Joint Venture Agreement dated 3 May 2012. D. Jerolu holds the legal title to 172,500 units in the Altius Unit Trust on trust for the Peterkin Superannuation Fund. E. Abignano holds the legal title to 172,500 units in the Altius Unit Trust on trust for the Abignano Superannuation Fund (the "Abignano Units"). F. Abignano Nominees and Sheripeter are the only holders of all the shares in Altius. G. Abignano Nominees holds the legal title to 1 fully paid A Class share in Altius on trust for The Biagio Abignano Family Trust H. Sheripeter holds the legal title to 1 fully paid A Class share in Altius on trust for … the Peterkin Family Trust. I. Abignano Nominees as trustee for The Biagio Abignano Family Trust and Sheripeter as trustee for the Peterkin Family Trust jointly hold 1 E Class share in Altius. J. At the request of Jerolu and Sheripeter, Abignano and Abignano Nominees have agreed to enter into an option agreement for the sale to Jerolu and Sheripeter of the Abignano Units and the Abignano Shares respectively on the terms set out in this Agreement. K. The parties intend that the terms of this Agreement are binding on and from the date of this Agreement. L. The parties, and each of them, consent to the sale of the Abignano Units and the Abignano Shares on the terms set out in this Agreement."
Clause 3.1 of the buy-out agreement provided that the sale would proceed on the basis of a put and call option agreement which was to be entered into "as soon as practicable after the date of the [buy-out] agreement". Clause 3.2(a) provided: "The parties agree that the Option Agreement will be in a more detailed and precise form than, but not inconsistent with, the provisions of this Clause 3.2. The parties agree that the Option Agreement will provide for the following: (a) that the purchase price for the Abignano Securities shall be $2,600,000 ('Purchase Price'), which amount shall be adjusted as at the settlement of the Transaction for: (i) the amount of $600,000 on account of Abignano's liabilities with respect to the mortgage registered over the Property ('the NAB Mortgage'); and (ii) all liabilities for all outstanding contributions payable in respect of holding costs of the Property (including but not limited to water rates, council rates and land tax, but excluding costs relating to any development application with respect to the Property) by any or all of Abignano, Biagio, and Abignano Nominees pursuant to any or all or the Joint Venture Agreement dated 3 May 2012, the Altius Unit Trust Deed dated 26 March 2012, and the Unit Trust Share and Unitholders Agreement dated 29 March 2012 until 11 November 2015; and (iii) the Consideration; …"
Clause 4.1 of the buy-out agreement provided that Jerolu (a Peterkin entity) released the Abignano entities from liability in respect of the NAB mortgage (apart from the amount referred to in cl 3.2(a)(i)); any amount in respect of the ownership, holding, development or maintenance of Pasadena from 11 November 2015; any amount in respect of the development application from 11 November 2015; and "any amount whatsoever, from 11 November 2015". Other releases are contained in cl 4. Clause 4 does not contain any express release by the Abignano entities.
In early 2016, there were communications between Mr Siddle and Mr Parsons regarding the completion of the buy-out agreement. On 2 February 2016, Mr Parsons asked Mr Siddle whether he had instructions about the option agreement (envisaged in recital J to the buy-out agreement). They spoke about the "figures" for the adjustment. On 17 February 2016, Mr Siddle sought from Mr Parsons a "detailed breakdown" of Peterkin's schedule of "outstanding contributions" so that he could obtain instructions. This request was reiterated on 3 March 2016.
On 4 March 2016, Mr Siddle raised the issue of the NAB mortgage with Mr Parsons and expressed Mr Abignano's preference that he be released from his position as guarantor of Altius' obligations under that mortgage upon completion of the option agreement.
On 7 March 2013, Mr Parsons responded to a further draft option agreement which had been sent by Mr Siddle. He said, of present relevance: "… Further, as regards the sum to be adjusted under cl 3.2(a)(ii) of the Agreement of 17 November 2015 (referred to in your draft as 'Holding Cost Contribution'), that sum is a sum determined by reference to the entire account between our respective clients and Altius since mid-2012. It is unnecessary and onerous to require our client (as a condition of valid option exercise) to serve a statement of the amount to be paid, together with 'all and any documents evidencing its composition and calculation'. Any concerns on your client's part may be ameliorated as follows: 1. We advise that our clients will exercise the option. It is their intention to serve an exercise notice regardless of whether the terms of the further option agreement can be finalised, bearing in mind the binding nature of the Agreement of 17 November 2015. 2. We understand that your client is aware of most if not all of the amounts that are payable by him by way of 'Holding Cost Contribution'. We will finalise and send to you shortly our client's calculation of the final calculation of the amounts owing by your client, together with such documents as, on our client's understanding, he may not have. If there are any particular issues with those calculations, or any need for further verification, we can address them in correspondence prior to completion."
On 8 March 2016, Mr Parsons wrote to Mr Siddle and informed him that Mr Peterkin calculated the amount of the adjustment pursuant to cl 3.2(a)(ii) at $16,720.71 (being half of the difference between the total payments made by the Peterkin entities and those made by the Abignano entities which was said to be $33,440.71, as calculated in a schedule, referred to as a running sheet, which was provided). The running sheet set out all amounts (apart from the SPAN proceeds) paid by either the Peterkin or Abignano entities (which are differentiated in the schedule) since 1 August 2012. Thus, it purported to give a complete picture of the unitholders' loan accounts since their inception.
On 10 March 2016, Mr Siddle wrote to Mr Parsons informing him that it was unlikely that Mr Abignano would agree on the figure for adjustments before the proposed completion of the option agreement and proposed that that sum be withheld from the purchase price and paid into Mr Siddle's trust account, pending agreement.
On 11 March 2016, Mr Parsons provided a "settlement sheet" which proposed that a cheque be drawn in favour of an Abignano entity, Abignano Nominees Pty Limited, in the sum of $1,483,279.64 and that a further amount (referable to the disparity in contributions) in the sum of $16,720.36, drawn on an entity to be advised. This implied the following calculation: Description Figure Gross price $2,600,000 Less $500,000 contribution $2,100,000 Less the Abignano entities' half-share of the NAB loan of $1.2million of $0.6million $1,500,000 Less the disparity of $16,720.36 $1,483,279.64

The option agreement

On 14 March 2016, Altius, Jerolu (a Peterkin entity), Mr Abignano, Mr Peterkin and Mrs Peterkin executed a put and call option (the option agreement). Upon execution, the NAB mortgage was discharged in its entirety; a cheque in the sum of $1,483,279.64 was provided to Mr Siddle, signed transfer forms for the units and shares in Altius were delivered to Mr Parsons; Mr Abignano resigned as a director of Altius and $16,720.36 was retained in Mr Parsons' trust account.
The recitals to the option agreement provided: "A. Jerolu and Abignano are the only holders of all the units in the Altius Unit Trust, established by the Altius Unit Trust Deed dated 26 March 2012 between Altius as trustee and Jerolu and Abignano as unitholders. B. Jerolu, Abignano, Peterkin, Biagio and Altius are parties to Unit Trust Share and Unitholders Agreement dated 29 March 2012 in relation to the Altius Unit Trust. C. Altius, Abignano Nominees and Sheridan are parties to a Joint Venture Agreement dated 3 May 2012. D. Jerolu holds the legal title to 172,500 units in the Altius Unit Trust on trust for the Peterkin Superannuation Fund. E. Abignano holds the legal title to 172,500 units in the Altius Unit Trust on trust for the Abignano Superannuation Fund (the 'Abignano Units'). F. Abignano Nominees and Sheripeter are the only holders of all the shares in Altius. G. Abignano Nominees holds the legal title to 1 fully paid A Class share In Altius on trust for The Biagio Abignano Family Trust. H. Sheripeter holds the legal title to 1 fully paid A Class share in Altius on trust for the Peterkin Family Trust. I. Abignano Nominees as trustee for The Biagio Abignano Family Trust and Sheripeter as trustee for the Peterkin Family Trust jointly hold 1 E Class share in Altius. J. On 17 November 2015, Altius, Jerolu, Abignano, Abignano Nominees, Sheripeter, Paul Peterkin, Sheridan Peterkin, and Biagio Abignano executed a binding Agreement ('Agreement'), a copy of which is annexed hereto and marked 'A'. K. By the Agreement, Jerolu and Sheripeter (together the 'Purchasers'), as purchasers, and Abignano and Abignano Nominees (together the 'Vendors') agreed to enter into a put and call option for sale by and purchase from the Vendors of the Abignano Shares and the Abignano Units (together to be referred to as 'Abignano Securities') for the Purchase Price. L. By the Agreement the Purchasers and the Vendors agreed that they would enter into an option agreement in a more detailed form, and they further stipulated certain matters that were to be provided for in such option agreement. M. This Option Agreement is entered into by the parties in accordance with their obligations in the Agreement."
Clause 1.1 of the option agreement defined "Holding Costs Contribution" to mean: "… the sum of all liabilities for all outstanding contributions payable in respect of holding costs of the Property (including but not limited to water rates, council rates and land tax, but excluding costs relating to any development application with respect to the Property) by any or all of Abignano, Biagio, and Abignano Nominees pursuant to any or all of the Joint Venture Agreement dated 3 May 2012, the Altius Unit Trust Deed dated 26 March 2012, and the Unit Trust Share and Unitholders Agreement dated 29 March 2012 until 11 November 2015."
Clause 6.4 of the option agreement provided: "6.4. The Purchase Price shall be $2,600,000, but that sum shall be adjusted on Completion as follows: (a) by allowing in the Purchasers' favour the sum of $600,000 on account of Abignano's liabilities with respect to the mortgage registered over the Property; and (b) by allowing in the Purchasers' favour the Holding Costs Contribution; and (c) by allowing in the Purchasers' favour the amount of the Consideration; and (d) by allowing in the Vendors' favour, an amount equal to the Abignano Contribution."
It was common ground that cl 6.4(d) did not arise as there was no "Abignano Contribution" as defined in cl 1.1 of the option agreement (as distinct from Holding Costs Contributions, as defined).
Clause 10 of the option agreement provided: "The parties note that, upon Completion, the releases and indemnities provided for in Clause 4 of the Agreement shall have effect."
On 14 March 2016, the Peterkin entities exercised the call option for the purposes of purchasing the interests of the Abignano entities in Altius which led to the Abignano entities executing transfer forms for those interests in favour of the Peterkin entities. As a consequence, as at 14 March 2016, the Peterkin entities became entitled to the interest held by the Abignano entities in Altius. On and after 14 March 2016, in preparation for completion of this transaction, the parties corresponded through their solicitors as to the amount of the Holding Costs Contribution.

The dispute about the meaning of holding costs

By 18 March 2016, it became apparent that there was a dispute about the meaning of Holding Costs Contribution. In a letter of that date, Mr Siddle said, in part: "We note your client contends that the Holding Costs Contribution is quantified in the sum of $16,720.21. In support of that contention your client has provided a spreadsheet setting out numerous payments, a copy of which is enclosed. From a review of the enclosed spreadsheet, it appears as though the exercise your clients have undertaken in arriving at the quantum of Holding Costs Contribution is to identify the net position as between Altius Pty Limited (Altius) and your clients and then calculated a payment to be made by our clients to equalise our clients' respective contributions to Altius. It is our clients' position that· that is not the intention of the Holding Costs· Contribution adjustment. Rather, the intention of that adjustment was to ensure that our clients met their share of any holding costs in respect of the Property· (as defined in the Option Agreement) which had been incurred, but which remained outstanding, as at 11 November 2015."
Mr Parsons responded on 24 March 2016 setting out the basis of the adjustment and the background to the clause (that there had been a disparity in monies paid to Altius which arose from Mr Abignano's refusal to meet any payments in respect of Pasadena from about May 2015, other than interest payments under the NAB mortgage). Mr Parsons said, in part: "In or around May 2015, we were retained to act in respect of this matter; this is when your client refused to make any further contributions except for interest payments. Both of our clients, Mr Abignano and Mr Peterkin, were both served with various late notices, penalty notices, letters from debt recovery agencies, cancellation of Iiquor licences and letters threatening legal action, all due to late payments. It is under this context that our client made various contributions on behalf of your client and prior to any discussions about the sale of your client's shares and units. Our client always intended to have this adjustment made hence his constant update of the Altius Running Sheet which was made available to your client. We are instructed that your client was always aware of the Altius Running Sheet, and had access to it, as he regularly disputed some of the figures. Notwithstanding that, he knew about the Altius Running Sheet, and could see how the adjustment was calculated via Dropbox. … … Therefore by our calculation the adjusted amount for holding costs is $16,032.08. … We note that during negotiations of the Heads of Agreement, we provided an estimate of $20,000 for the adjustment. …"
Ultimately, on 9 May 2016, the parties agreed to resolve the amount of the adjustment for the Holding Costs Contribution at $13,000, which was accepted to be a compromised figure.
On 13 May 2016, Mr Siddle, on behalf of the Abignano entities, sent a letter of demand to Altius for repayment of a loan said to have been advanced to Altius by the Abignano entities in the amount of $688,000. He said, in part: "As you are aware, Abignano Nominees, lent to you the sum of $688,000 from its share of the sale proceeds of two units in a development undertaken by Abignano Nominees and Sheripeter Pty Limited at Mona Vale [the SPAN development]. We are instructed that the accounts of Altius Pty Ltd record this loan as owing to Abignano Nominees. We are instructed that no loan agreement was entered into with respect to this loan and that no agreement as to repayment has otherwise been reached. The loan is therefore repayable on demand. On behalf of Abignano Nominees we hereby demand repayment of that loan, in the sum of $688,000 within 14 days of the date of this letter failing which our client may take further action against you to recover that amount without further notice to you."
The Peterkin entities refused to pay the amount demanded, alleging that the loan had been discharged on transfer of the Abignano entities' units in Altius.

The pleadings

By statement of claim filed on 23 October 2017, the Abignano entities sued Altius for the amount of the loan (referable to its share of the SPAN proceeds) in the Common Law Division of the Supreme Court. A further amended statement of claim was filed on 20 March 2020 which claimed a total of $926,173.72 (the sum of the Abignano entities' half-share of the proceeds of the SPAN development ($671,369.30) and other monies advanced to Altius ($254,804.42)) plus pre-judgment interest.
In its defence filed on 3 August 2020, Altius alleged that the loans from the Abignano entities were discharged by the purchase by the Peterkin entities of the Abignano entities' units in the unit trust and were therefore no longer payable. In the alternative, Altius alleged that the Abignano entities were estopped from asserting that they owed monies pursuant to the loans by reason of their conduct in relation to the sale of the units in the unit trust to the Peterkin entities. In its reply, the Abignano entities alleged that the relevant mutual assumption made by the parties was that the payments made by the Abignano entities to Altius were to be treated as loans and that Altius was estopped from alleging that the funds received by Altius were received otherwise than as loans to it from the Abignano entities.
Altius also filed a cross-claim against the Abignano entities. In its amended statement of cross-claim filed on 29 October 2020 (the cross-claim), Altius alleged, in paragraphs 26 and 27, that the parties had agreed that the terms of sale of the units included a term that the price to be paid for the units held by the Abignano entities in the Altius Unit Trust was to be reduced by the amount that the Abignano entities would otherwise be required to contribute to Altius to enable it to clear all of its liabilities, including to the NAB, as at 11 November 2015. In paragraph 28, it alleged that Altius' liabilities as at November 2015 included loans from the Abignano and Peterkin entities, the NAB loan and any other loans between 1 July 2015 and 11 November 2015.
Altius alleged in paragraph 40 of the cross-claim that the negotiations between the Peterkin and Abignano entities for the option agreement were conducted on the basis of the following "common understanding" (which was, it alleged, also common to Altius) that: "(1) the amount of Holding Costs Contribution would be the amount necessary to ensure that the 'Abignano' and 'Peterkin' shares of the funding of the holding costs of the Pasadena Land to 11.11.2015 were equal, and (2) in respect of the loans referred to in 28 above (a) that they were, or were to be treated as, not repayable, and on either basis Altius would not be required to repay them, (b) Altius would not require payment to it of any outstanding contributions that would otherwise be due to it from Biagio Abignano, Abignano Nominees P/L and/or B&J Abignano P/L as sums necessary to enable Altius to repay the liabilities referred to in 28 above (as holding costs of the Pasadena Land to 11 November 2015), and (c) the Purchase Price would not be adjusted, ie. reduced, by the amount of those outstanding contributions."
Altius alleged that the conduct of Mr Abignano constituted a representation that, if the option agreement were entered into and completed in accordance with the "common understanding", Abignano would release Altius from any debts owed by it to Abignano and would not sue Altius for any such debts (the second representation). Further representations to similar effect were alleged to arise from subsequent conduct (the third and fourth representations) although these included particular figures for the Holding Costs Contribution (which did not accord with the evidence).
In paragraph 53 of the cross-claim, Altius alleged: "But for the Second, Third and/or Fourth Biagio Representations (1) Altius, and (2) [Peterkin], would not have completed the Option Agreement on the basis of a Holding Costs Contribution amount that did not include the amount that would otherwise have been due from [Abignano] in respect of the holding costs of [Pasadena] to 11 November 2015 pursuant to any or all of (3) the Joint Venture Agreement, (4) the Altius Trust Deed, (5) the Unitholder Agreement."
Altius claimed loss and damage arising from the misleading or deceptive conduct of Abignano equivalent to any amount for which it may be liable to Abignano.

The evidence at first instance

The hearing before the primary judge largely comprised the tender of documents and the cross-examination of Mr Abignano (whose evidence in chief was in affidavit form). Mr Peterkin did not give evidence at the hearing. The parties' submissions before the primary judge largely turned on the construction of the documents and the written communications between the parties and their solicitors.

The primary judgment

The primary judge held, at [79], that none of the loans from the Abignano entities to Altius fell within the definition of Holding Costs Contribution in cl 1.1 of the option agreement because none was, relevantly, "pursuant" to the joint venture agreement, the unit trust deed or the unitholders agreement. His Honour gave three reasons for this conclusion, only one of which, (3), was challenged on appeal: 1. Mr Peterkin and Mr Abignano commenced the joint venture on the basis that it would be funded by "borrowings" (loans) rather than by "Contributions" under the joint venture agreement; 2. loans do not amount to "Project Costs" as defined in the joint venture agreement; and 3. loans were not liabilities which were imposed "pursuant to" the unit trust deed or the unitholders agreement.
Accordingly, the primary judge found that Altius was liable for the amount claimed in the further amended statement of claim.
As to the cross-claim, the primary judge rejected the allegation that there had been any common understanding to the effect alleged in the cross-claim. On this basis, his Honour found that none of the second, third or fourth representations had been made out. The first misrepresentation was not pressed.

The grounds of appeal

Altius relied on five grounds of appeal. Grounds 1-3 alleged error in the primary judge's conclusion that the loans by the Abignano entities to Altius did not fall within the definition of Holding Costs Contribution in the option agreement. Grounds 4 and 5 relate to the cross-claim and challenge the primary judge's finding that the second, third and fourth representations were not made.
The Abignano entities have filed a notice of contention which is confined to the primary judge's dismissal of the cross-claim. In substance, the Abignano entities allege that the primary judge ought to have rejected the alleged representations for separate reasons which related to the pleading.
It was not suggested that, in respect of any of the matters raised on appeal, the findings of the primary judge reflected his Honour's advantage in seeing and hearing Mr Abignano give evidence. There were, on appeal, no disputed findings of fact. The relevant communications which comprised the negotiations for the buy-out and option agreements were almost exclusively in writing between the parties' solicitors and appear in the documents tendered, as is evident from the above narrative.

Grounds 1-3: the challenge to the judgment on the principal claim

Mr Lynch SC, who appeared with Mr Harker for the appellant Peterkin entities, submitted that the primary judge was in error in finding that the loans were not made "pursuant to" the unit trust or the unitholders agreement since the meaning of the words "pursuant to" includes "in accordance with" or "in furtherance of". He submitted that, apart from the subscriptions paid for the units in the unit trust, Altius had no capital. In order to fund Pasadena, Altius needed to borrow from the NAB (in part to pay out Mr Abignano's father) as well as from the Peterkin and Abignano entities. Thus, the loans were made "pursuant to" the unit trust agreement and the joint venture agreement, the purpose of which was to acquire, hold, develop and/or sell Pasadena. He relied on the circumstance that the loans from the Peterkin and Abignano entities funded not only the council rates, water rates and insurance with respect to Pasadena but also the interest payments on the NAB loan.
Mr Lynch accepted that, even if this Court were persuaded that the primary judge was in error in finding that the loans were not made pursuant to the parties' agreements, it would still be necessary for the Peterkin entities to establish that they nonetheless fell within Holding Costs Contribution.
Mr Neggo, who appeared for the Abignano respondents, only faintly supported the reasoning that led the primary judge to conclude that the loans were not made pursuant to the parties' agreements. Rather, he argued that the loans did not fall within the definition of Holding Costs Contribution because: 1. any contributions made by the Abignano entities could not be said to be "outstanding" because there was no further obligation on the part of the Abignano entities to provide funds to Altius; 2. the agreement between the parties was that the loans would be repaid when the loan for construction of Pasadena was obtained (and not from further loans from the unitholders); and 3. the circumstance that the amounts between the Peterkin and Abignano entities were to be adjusted between themselves to bring them into equivalence did not affect Altius' indebtedness to the Abignano entities.
In response to (1), Mr Lynch submitted that the word "outstanding" needed to be read in the context of the whole definition of Holding Costs Contribution which referred to "the sum of all liabilities for all outstanding contributions payable … until 11 November 2015" (emphasis added), rather than "as at" 11 November 2015. He also submitted that the parties in their negotiations had evinced an intention that vendor's liabilities be treated in a similar way to Altius' liability to the NAB: namely, that they were to be discharged on completion of the transfer of the units held by the Abignano entities in Altius so as to sever the relationship between the Peterkin entities and Altius on the one hand and the Abignano entities on the other.
Mr Lynch submitted in response to (2) and (3) that the purpose of the buy-out and option agreements was to bring an end to the relationship between the Peterkin and Abignano entities by adjusting for the difference between the loans to Altius from those entities for the entire period from 2012 to 11 November 2015; and effecting notional repayment of the loans from the Abignano entities immediately.
I accept Mr Lynch's submission that the loans made by the Abignano (and Peterkin) entities were made to Altius pursuant to the joint venture agreement. Altius had, in effect, no capital from its unitholders. It was to acquire, hold, develop and sell Pasadena. The only way the sole purpose of the joint venture agreement could be fulfilled, given the refusal of its unitholders to make capital contributions to it, was for it to borrow money from lenders (such as the NAB) or its unitholders, or related parties. It was accepted that the loan from the NAB (which had been obtained to pay out Mr Abignano's father who had provided funds for the acquisition of Pasadena) was largely paid out from the SPAN proceeds. The SPAN proceeds constituted a substantial part of the loan accounts from the Abignano and Peterkin entities to Altius.
Thus, the loans were entered into "pursuant to" the joint venture agreement, in the sense of being "consequent on" or "in conformity with" it: see the discussion in Birchill v Premier Holdings Pty Ltd [2011] NSWSC 1020 at [35]-[37]. The breadth of such a construction of the words "pursuant to" depends on their natural meaning and their context but some connection is required. I consider that there is such a close connection between the loans advanced by the Abignano and Peterkin entities to Altius and the joint venture which is the subject of the joint venture agreement (which itself empowers Altius to borrow money) as to warrant the conclusion that the loans were made "pursuant to" the joint venture agreement. Accordingly, I regard the primary judge as being in error in finding to the contrary. To that extent, grounds 1 and 2 have been made out.
It is, accordingly, necessary to address Mr Lynch's further submissions that the loans fell within the definition of Holding Cost Contributions. This question turns on the meaning of the words "outstanding" and "liabilities" in cl 1.1 of the option agreement. It is also necessary to address Mr Neggo's submissions referred to above that the option agreement ought not be construed to have the effect of releasing Altius from its liability to the Abignano entities since its only effect was to resolve the indebtedness of the Abignano entities to the Peterkin entities for the transfer of the units.
The negotiations between the parties set out above (and in particular the exchanges in October 2015) indicate a common intention that the Abignano entities' share of Altius' liabilities both to the NAB and to the unitholders (the Peterkin and Abignano entities) would be discharged on the transfer. Because the parties together effectively comprised Altius and there was no distinction made between particular Peterkin entities or Abignano entities, this common intention was sufficient to dispose of this issue between them. After this agreement had been reached as part of the negotiations, the only outstanding issue was the amount of any disparity in contributions. The calculation of the disparity required an analysis of Altius' total liabilities to be completed so that there could be an adjustment for any disparity. I consider that this was the evident purpose of the insertion of cl 3.2(a)(ii) into the buy-out agreement.
The relevance to the transaction of all of Altius' liabilities (to NAB, as well as to its unitholders) was specifically addressed in the correspondence between the solicitors up to and including about 27 October 2015 (as extracted above). Thereafter, their focus was on the disparity (if any) between amounts paid by the respective unitholders as reflected in the "running sheet." The reason for this is plain. There was no need for a deduction to be made for half of Altius' liability to the vendor unitholder (the Abignano entities) because it was selling its units. The amount to be "deducted" from the purchase price to repay half of Altius' total debt to the unitholders was equivalent to Altius' liability to the Abignano entities. Thus, there was no need for this item to be referred to or calculated. The only adjustment that was required to be made was one to take account of any disparity between half of Altius' total debt to its unitholders and the amount of the loan from the Abignano entities.
The provision of the running sheet in March 2016 was important because it disclosed not only the disparity between the respective loan accounts of the Peterkin and Abignano entities as at that date, but also the total amount of the loan accounts since their inception, apart from the amounts referable to the SPAN development (which were, in any event, equal). The significance attributed by both parties to the running sheet (at the time) formed part of the factual matrix against which the meaning of the option agreement is to be ascertained. The running sheet would have been unnecessary had the loans from the Abignano entities to Altius not been discharged on settlement of the option agreement since the quantum of Altius' indebtedness to the Abignano entities would, on that scenario, have been irrelevant to that agreement.
The terminology used in the running sheet corresponded with the words used in cl 3.2(a)(ii) of the buy-out agreement (and the definition of Holding Costs Contribution in cl 1.1 of the option agreement) since the payments made by each unitholder amounted to "contributions" (but not "Contributions") in the usual sense of the word for the "holding costs" of holding Pasadena (by making interest payments to the NAB and other costs such as council and water rates) pending its development.
In these circumstances, "contributions", for the purposes of cl 6.4(b) of the option agreement were "loans" (this being the only way in which the unitholders had contributed to Altius, since the subscription of the initial amount for the units) and "outstanding contributions" comprised any amount necessary to equalise the loans made by the Abignano entities with the loans made by the Peterkin entities. In effect, what was to be "adjusted" was the Abignano entities' liability to the unitholders jointly (the Abignano and Peterkin entities) for its share of the costs incurred by Altius which they had paid to ensure that the contributions (by way of loans) of each unitholder were equal. Mr Neggo was unable to point to any other matter which could conceivably amount to "liabilities" in that context since Altius' only liabilities were to the unitholders (who otherwise had no liabilities apart from a general responsibility to meet the costs incurred by Altius) and to the NAB in respect of loans advanced by them to it.
This construction is not only supported by the parties' negotiations but also by the commercial effect of the transfer of the Abignano's units in Altius to the Peterkin entities.
There were at least two ways in which the Abignano entities could extricate themselves from Pasadena: first, if Pasadena were sold to a third party; or, second, if the Peterkin entities acquired the Abignano entities' units in the unit trust. The Abignano entities, as vendors, can be taken to have had no rational interest in preferring one outcome to the other as long as the commercial return for either was broadly equivalent. For the purposes of these illustrations, I propose to disregard the disparity between shareholder loans because it amounted to a figure in the order of $15,000 and does not materially affect the comparison.
If Pasadena had been sold to a third party at, say, $5.75million (being the most recent third-party unconditional offer), the net result to the unitholders would have been that, subject to adjustments of the differential between the loan accounts, the proceeds would have been used to repay the NAB loan ($1.2million as at 11 November 2015) and the unitholders' loans (a total of $1.89million as at 11 November 2015), leaving a total balance of $2.66million, to be divided equally between the Abignano and Peterkin entities (subject to any differential). Thus, the Abignano and Peterkin entities would each have received about $1.33million, being the remaining equity in the joint venture.
In the events which happened, the Peterkin entities agreed to acquire the Abignano entities' units in the unit trust for $2.6million. On the construction for which the Peterkin entities contended, the result was as follows. From the $2.6million, a total of $600,000 (the Abignano entities' half-share of the NAB debt) was to be deducted, leaving a net return of $2m, of which about $945,000 was referable to the Abignano entities' half-share of $1.89million, being the total of the unitholders' loans. This gave rise to a net return (after repayment of its loan to Altius) to the Abignano entities of $1.055million. This figure, while less than would have been achieved on the latest third-party offer, had the benefit that it was certain, agreed and payable in March 2016 and not subject to the vicissitudes of the third-party purchase or any liability to pay development costs for Pasadena. It not only provided cash to the Abignano entities but it also immediately released Mr Abignano personally from the guarantee he had given to the NAB. Thus, it represented a result for the Abignano entities which was commercially comparable (although not identical) to that which would have been produced on a sale to a third party. I reject Mr Neggo's submission to the contrary.
On the construction for which the Abignano entities contended, the result would have been that the Abignano entities were entitled to $2million on completion of the sale ($2.6million less $600,000, being their half share of the NAB debt) and that, in addition, they were entitled to recover $945,000 from Altius to discharge the loans it had made to it since 2012. Thus, the sale to the Peterkin entities on this basis would improve the financial position of the Abignano entities by $2.945million, which would amount to a considerably better outcome (by a factor of about 2.8) for the Abignano entities than had Pasadena been sold to a third party.
These calculations indicate that construction for which the Abignano entities contended is wholly uncommercial, viewed from the point of view of both parties in the context of the circumstances which applied at the time, because it delivers an unwarranted windfall to the Abignano entities and imposes an unwarranted penalty on the Peterkin entities. A construction which "makes commercial nonsense or is shown to be commercially inconvenient" is to be avoided: Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 at 313-314 (Kirby P), cited with approval in Zhu v Treasurer of the State of New South Wales (2004) 218 CLR 530; [2004] HCA 56 at [82] (Gleeson CJ, Gummow, Kirby, Callinan and Heydon JJ).
It is apparent from a consideration of the parties' commercial relationship and the wording and genesis of the option agreement that the parties did not express their intentions particularly clearly. Their solicitors appear to have drafted agreements which provided for mechanisms (such as capital Contributions) which the parties may have had no intention of utilising. Nonetheless, what is clear is that Mr Abignano and Mr Peterkin wanted to purchase Pasadena and develop it and that its purchase and development (or holding) would be funded exclusively by loans from third parties (Mr Abignano's father or the NAB) or by the unitholders themselves, whose payments on Altius' account (in equal amounts) would constitute interest-free loans to Altius, which was to be repayable on sale of Pasadena to a further investor. That the joint venture ended when the Peterkin entities bought out the Abignano entities' units did not alter the position that the common intention of the parties was to repay Altius' liability to the NAB and pay out the vendor's loan account with Altius so as to discharge Altius from any further liability to the Abignano entities.
Mr Neggo contended that the present was a case like Cherry v Steele-Park (2017) 96 NSWLR 548; [2017] NSWCA 295 where the context was insufficient to defeat the effect of the contractual text. I do not accept this submission. The contractual text is, at first blush, opaque, but when viewed through the prism of context, it becomes tolerably clear that the holding costs paid by the unitholders for Altius since 2012 is what is comprehended by the word "liabilities" in cl 1.1 of the option agreement. The words "outstanding contributions payable" comprehend the obligation of one unitholder to match the other's contributions to preserve the equivalence of payments made for Altius which were reflected in their respective loan accounts.
When an agreement has been made in writing, it is generally treated, unless the parties are shown to have intended otherwise, as comprising the full extent of the agreement between them: Hoyt's Proprietary Ltd v Spencer (1919) 27 CLR 133 at 143-144 (Isaacs J); [1919] HCA 64; Maybury v Atlantic Union Oil Company Limited (1953) 89 CLR 507 (Maybury) at 517 (Dixon CJ, Fullagar and Taylor JJ); [1953] HCA 89. In some cases, a collateral contract, if made after the main contract, may vary the main contract. In other cases, the entry into the main agreement may constitute the consideration for the collateral contract which contains promises which are in addition to those in the main agreement.
In the present case, I consider that the inference ought be drawn that the parties did not intend the option agreement to contain all of the relevant matters affecting the sale of the Abignano entities' units in Altius to the Peterkin entities, because of the making of the collateral agreement made between the parties through their solicitors in October 2015. The collateral agreement comprised express mutual promises that an adjustment would be made to the purchase price by reference to the vendor's share of Altius' liabilities (which included its liabilities to the unitholders under the loans they had advanced to it whenever costs were incurred and paid on its behalf by the unitholders). By this mechanism, all loans in respect of which the Abignano entities were either creditors (comprising loans made to Altius by the Abignano entities) or debtors (such as the NAB loan) would be repaid by Altius on settlement of the option agreement. Thus, completion of the option agreement would bring to an end the financial relationship between Altius and the Abignano entities with respect to Pasadena.
The parties' promises that the purchase price would be adjusted to take into account the Abignano entities' share of the unitholders' loans to Altius were given in consideration for the parties entering into the option agreement, which was the main agreement, and was entirely consistent with it: see the discussion in Maybury at 516-517. These promises were not merely representations but were promissory. Further, the intention that the promises were to be contractually binding can readily be inferred from the words and conduct of the parties (including through their solicitors) when viewed objectively: Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1; [2016] HCA 26 at [22] (French CJ, Kiefel and Bell JJ), citing Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 61-62 (Gibbs CJ); [1984] HCA 64. A reasonable person in the position of the parties would necessarily have understood that the parties intended an adjustment to be made to the purchase price to take account of and discharge the loans from the Abignano entities. The collateral agreement to this effect constituted not only the consideration for, but also an important premise of, the option agreement.
Thus, although the option agreement does not, in terms, provide that the loan by the Abignano entities to Altius is to be discharged by the payment of the purchase price less the deductions, it was not necessary that it do so.
Further, there is no inconsistency between the collateral agreement and the option agreement. I do not regard any construction of the option agreement which would preserve Altius' liability to the Abignano entities after the transfer of their units in Altius as tenable. The wording of the definition of Holding Cost Contributions (including the emphasis on the payment of the outstanding contributions and the words "until 11 November 2015"), the whole of the option agreement (including the identity of the parties, which include Altius and the recitals which comprehensively refer to all the relevant agreements), the factual matrix and the commercial purpose of the transaction in the context of the negotiations which led to the buy-out agreement and the option agreement all indicate that it was plainly the intention of the parties that the Peterkin entities acquisition of the Abignano entities' units in the unit trust would bring to an end their commercial relationship with respect to Pasadena. This required not only that the NAB loan be paid out, but also the loans from the Abignano entities to Altius (with adjustment to equalise the loans as between the two unitholders), thereby severing Mr Abignano's connection with Pasadena and Altius.
The inference that the option agreement was premised upon, and not intended to supersede, the collateral agreement is also supported by the way in which the parties conducted themselves, as evidenced by the terms of their various agreements relating to Pasadena, as well as the wide range of legal structures which Mr Abignano and Mr Peterkin used to conduct their affairs, to which Leeming JA has referred in his Honour's reasons.

Conclusion

It follows that grounds 1, 2 and 3 have been made out. For these reasons, the judgment must be set aside. It is not necessary to address grounds 4 and 5 which challenge the dismissal of the cross-claim, which does not arise once the judgment has been set aside.

Costs

I am not presently aware of any reason why costs on the usual basis ought not follow the event in accordance with the general rule: Uniform Civil Procedure Rules 2005 (NSW), r 42.1. As the cross-claim was responsive to the plaintiffs' claim, it is appropriate for the cross-claimants to have their costs of the cross-claim although it does not arise on the appeal as the judgment has been set aside and the primary judge's dismissal of the cross-claim need not, in these circumstances, be disturbed. However, if any party wishes to be heard in relation to a different order as to costs, application may be made in writing to the Presiding Judge's associate within the period specified by r 36.16 of the Uniform Civil Procedure Rules 2005 (NSW).

Proposed orders

For the reasons given above, I propose the following orders: 1. Allow the appeal. 2. Set aside orders 1, 2 and 4 made by Walton J on 21 December 2022 and in lieu thereof make the following orders: 1. Judgment for the defendant. 2. Order the plaintiffs to pay the defendant's/cross-claimants' costs of the proceedings. 1. Order the respondents to pay the appellants' costs of the appeal.
STERN JA: I agree with Adamson JA and with the concurring judgment of Leeming JA. I also agree with the orders Adamson JA proposes.

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