Amann Aviation Pty Ltd v The Commonwealth [1994] FCA 678 | Case summary

Federal Court of Australia|1994-09-21|Before: Carr JJ

Nos. NG41 1994 and NG90 of 1994. Each required leave. In the judgment on the

first appeal, which was delivered 22 July 1994 (reported (1994) 123 ALR 11), we dealt

with the question whether (assuming that there had been an event of default) Mr Wayland had been validly appointed to that office. At first instance, it had been decided that, initially, the recetver and manager had not been validly appomted but that such invalidity was soon cured by a resolution of the Board of Directors of NZI Cap Corp a few weeks later. In our first judgment we held that Mr Wayland, given the above assumption, had been validly appointed from the outset. We granted leave to appeal and set aside those orders and declarations made by the primary Judge

which had given effect to the contrary conclusion; see the text of these orders, 123

This appeal, No. NG90 of 1994, is brought by leave and is concerned with so much of the trial as involved an allegation that the first-named respondent ("NZI Securities") and NZI Cap Corp contravened s.52 of the Trade Practices Act 1974 (Cth) ("the Act") by engaging in misleading and deceptive conduct as to the term of the loan facility. The trial also was concerned with the issue of whether an event of default had occurred and whether, depending on the answers to the foregoing questions, the applicant (Mr Poignand) and those whom he represented (for this was a representative application brought pursuant to Part IVA of the Federal Court of Australia Act 1976 ("the Federal Court Act")) were entitled to any relief under the Act. At first instance the respondents were successful in respect of all of those issues. The group members on whose behalf the representative proceeding was commenced

were Ripoll, as the former Trustee of the DYV Unit Trust ("the Trust"), Rosewick Pty

Limited ("Rosewick") (the successor as trustee), unit holders in the Trust and

guarantors of the liabilities of the trustee to the first and second respondents.

It 1s umportant for what follows to appreciate the extent of the issues which were tried. On 15 October 1992, in advance of the trial, the Court, by consent, ordered that "the issues arising under paragraphs] 26A and 42 (c) of the amended Statement of Claim and all issues of damages or other relief" be tned separately from and subsequent to all other issues arising under the amended Statement of Claim. [It is said in the judgment below, 120 ALR at 248, that on 15 October 1992, the Court was constituted by Gummow J; examination of the Court record shows that on that day the matter was before another Judge.] Put broadly, paras. 26A and 42 (c) contained allegations to found the claims to relief made for the guarantors. It was alleged that in the case of each guarantor, before execution of the guarantee to NZI Cap Corp of the obligations by Rupoll, there was communicated the alleged representations made as to the term of the Joan facility. What did go to trial was the allegation that NZI Securities and NZI Cap Corp had contravened s. 52 of the Act in connection with the entry or proposed entry by Ripoll into the arrangement for the

finance facility. This turned upon the question of whether Ripoll had been misled.

The primary Judge held that neither NZI Securities nor NZI Cap Corp had contravened s. 52 in connection with the entry or proposed entry by Ripoll into the arrangement for the finance facility. He made a declaration to that effect which was, necessarily, negative in form. Its effect was adverse to the applicant and

naturally the applicant had not sought such relief. Nor was there before the Court

any cross-claim by the respondents. His Honour then ordered that otherwise the application should be dismissed. Before us it was, in effect, conceded that it was necessary to read down that order so as to preserve what, on any footing, was

remaining subject matter, namely the claim made for the guarantors.

It also is significant that the action was brought as a representative proceeding under Part IVA of the Federal Court Act (ss. 33A-33ZJ). The applicant, Mr Poignand, brought the proceeding as the representative party. Mr Poignand did not lodge an appeal. The present appellant is a umt holder in the Trust and a group member who has not opted out. She brings the appeal as representative of the group

It also should be noted that s. 33ZB makes special provision as to

judgments given in a representative proceeding. It provides:

"33ZB A judgment given in a representative proceeding:

(a) must descnbe or otherwise identify the group members who will be affected by it; and

(b) binds all such persons other than any person who has opted out of the proceeding under section 33J."

The term "judgment" is defined in s. 4 of the Federal Court Act in terms which reflect those in which the appellate jurisdiction of the High Court is set out in s. 73 of the Constitution. Accordingly, in a case such as the present, this expression is to be understood as requiring compliance with s. 33ZB in the orders of the Court; see

Driclad Pty Limited v Federal Commissioner of Taxation (1968) 121 CLR 45 at 64-5,

Landsal Pty Limited (In Lig) v REI Building Society (1993) 41 FCR 421 at 424-5,

Copperart Pty Limited v Federal Commissioner of Taxation (1994) 94 ATC 4259 at 4261. That being so, it 1s common ground that s. 33ZB was not compled with in the orders made by the primary Judge on 7 January 1994. During the hearing of the main appeal, we granted leave to the respondents to file a cross-appeal seeking variation of those orders so as to comply with s. 33ZB. The cross-appeal presupposed

those orders would not be set aside on the main appeal.

The following is, in essence, a summary of his Honour's description of the factual background and the evidence given before him. In 1985 Ripoll was incorporated for the purpose of becoming the trustee of a unit trust. In that capacity, having obtained a finance facility of $7 million from Australian Guarantee Corporation ("AGC"), Ripoll acquired land at Dee Why with a view to constructing thereon a retirement village to be known as "Dee Why Gardens". This was to be a seven-stage development of self-contained apartment units and hostel units. The venture was to generate revenue from selling ninety-nine year leases of those units (hereinafter referred to as sales of those units) and otherwise conducting the business of runmng that retirement village. Rupoll effectively was controlled by two of its directors, namely Roger James Poignand, a qualified chartered accountant and former merchant banker, and John Dalton Courtney, another qualified accountant, now

Construction of the retirement village commenced with a builder recommended by AGC. That builder was replaced and construction proceeded, but there was friction between the Ripoll interests and AGC. Messrs Poignand and Courtmey decided to explore the possibility of alternative finance. Dunng December 1986 and January 1987 they had discussions with Janine Middleton, then an account

As a result of those discussions, on 20 January 1987 Ms Middleton sent Ripoll a letter, on behalf of NZI Securities, offering a finance facility of up to $15 mullion, including capitalised interest, for a term of four years from the original

drawdown. Other conditions, also stated in the letter, related to interest and security.

This offer was not accepted. Discussions continued, mainly between Mr Poignand and Ms Middleton. A major topic was Mr Poignand's desire to obtain a term longer than four years. Mr Poignand gave evidence that on 27 January 1987 he told Ms Middieton that four years was not long enough, that "this type of project takes six or seven years". He said that Ms Middleton promised to discuss this matter with her superior and that subsequently she suggested to Mr Poignand "four years with an option to extend for a further term of two years, provided you meet the

Mr Poignand said that he asked, "Does that mean provided we perform

then we have got an extra two years?", and Ms Middieton replied: "Yes. If everything

goes according to plan there should be no problem with renewal. It 1s understood this

Ms Middleton agreed that Mr Poignand pressed her on the length of the term. She said that she told him that NZI (a composite reference to the group of which NZI Securities and NZI Cap Corp formed part) did not provide loans, except for lease finance, for longer than three or four years. Her evidence was that Mr Poignand responded by referring to his experience with AGC and expressing concern that NZI might require repayment of the facility before it was able to be repaid. She said that she replied: "Prior to the maturity of the loan, NZI would review the facility and, if all was going well, NZI would consider extending the loan at that time." She further said that Mr Poignand replied that that was not enough, he needed "a long- term commitment now". Ms Middleton's evidence was that she discussed the question with her superior and had a subsequent conversation with Mr Poignand. At that subsequent conversation she said that she told Mr Poignand that NZI would not grant a facility for a term longer than four years, but added: "However, NZI would be prepared to approve a facility for a term of four years with an option to extend for two years by two 12-month tranches at NZI's sole discretion." She said that Mr Poignand asked whether the discretion to extend the term could be held by Ripoll, but she said it could not. Ms Middieton's evidence was that there was further discussion during which Mr Poignand pointed out that he might not be dealing with her in four years' time and she observed that, whatever bank he dealt with, there

would be no guarantee of having the same account officer all the time. She said that

the conversation ended with Mr Poignand saying that he was not happy, "but if that 1s

the best that's on offer, then I guess I have no choice other than to accept it."

On 17 February 1987, Ms Middleton sent Ripoll a further letter of offer, again on behalf of NZI Securities. That letter was similar to the earlier offer except in two respects. The interest margin was reduced and the proposed term was described in this way: "Four years from the original drawdown. A_review will be

Ripoll did not accept this offer either. Negotiations took place about the financial terms. Eventually agreement was reached and Ms Middleton thereupon instructed Peter Doyle, a partner in Mallesons Stephen Jaques, solicitors, to prepare the necessary documentation which included a facility agreement, a deed of charge, a memorandum of mortgage and guarantees. Mr Doyle deputed Adrian Culey, a

solicitor employed by his firm, to prepare the first draft of those documents.

Ms Middleton's instructions to Mr Doyle included a copy of the letter of offer of 17 February 1987. Mr Culey noted the description of the proposed term, did not think it was intended to confer on Ripoll an option of extension but related to NZI's position and was unnecessary. His first draft of the facility agreement did not

When Mr Doyle came to consider Mr Culey's draft documents, he was uncertain as to what was intended in relation to the term of the loan. Mr Dayle telephoned Ms Middleton. She gave him instructions and he amended the draft facility agreement to accord with them. The clause which Mr Doyle drafted to deal with the extension of the term of the loan was not affected by the several drafts through which the facility agreement went, other than in respect of its number. In its

"5.08 On the third anniversary of the first Drawdown Date, the Financier will review the Facility with a view to extending the Repayment Date by a further period of 12 months. If the Financier 1s prepared to so extend the Repayment Date, 1t will notify the Company accordingly and request the Company to advise whether it so wishes the Repayment Date to be so extended. Upon receipt of such notice from the Financier, the Company shall advise the Company (sic) within seven (7) days as to whether it wishes the Repayment Date to be extended. If the Company so advises the Financier, the Repayment Date will be extended for a further period of 12 months and otherwise the Repayment Date will remain unaltered."

By reason of the definitions clause in the facility agreement and in the events which transpired, the "drawdown date" was 3 April 1987, the review required by clause 5.08 fell due on 3 April 1990, the Company was Ripoll and the "Financier" was NZI Cap Corp. NZI Cap Corp was substituted for NZI Securities as the Financier at the last moment, apparently because the latter company did not hold an Australian banking licence. Although his Honour stated that the evidence did not disclose when a copy of the facility agreement was first made available to Rupoll, we were taken to undisputed evidence which showed that this occurred on 2 April 1987. On that date, being the day before settlement, there was a meeting at the offices of

Mallesons Stephen Jaques in Sydney. It was attended by Mr Poignand, Mr Courtney,

Anthony Hawkins (Ripoil's solicitor), Ms Middleton, Mr Doyle and Mr Culey.

Aspects of the facility agreement, not including clause 5.08, were discussed.

On the following day, 3 April 1987, there was a further meeting at the offices of Mallesons Stephen Jaques at which several documents were executed. They compnised the facility agreement which was signed by Mr Poignand on behalf of Ripoll, a deed of charge (which made no reference to the term of the loan) and a memorandum of mortgage of Real Property Act land (which also made no reference to the term of the loan). During the course of that meeting, Ms Middleton handed to Messrs Poignand and Courtney a revised letter of offer dated 3 April 1987, this time written and signed by her on behalf of NZI Cap Corp. In that letter the amount of the loan remained unchanged and the terms were much the same as before, except that the interest rate was reduced slightly. The stated term of the loan reproduced

exactly the language used in the letter of 17 February 1987, namely:

"Term: Four years from the orginal drawdown. A review will be conducted at the end of year three with an option to extend for two years."

The letter, as in evidence, also bore the following endorsement above the signatures

of Mr Poignand and Mr Courtney and the date 3 April 1987:

The offer 1s hereby accepted on_the terms and conditions set out m

the foregoing facility Letter from N.Z.1. Capital Corporation Limited dated the 3rd April, 1987.

ACCEPTED for and on behalf of Ripoll Holdings Pty Limited." [Emphasis supplied]

The trial yudge found that it was not clear to what extent the documents executed on 3 April 1987 were read by the persons acting on behalf of Ripoll. Mr Poignand swore that he was not provided with a copy of the draft facility agreement at the meeting of 2 April 1987 or thereafter, and that he did not read it before signing it on 3 April 1987. He said that he assumed that the term of the facility, as stated in the facility agreement, corresponded with that stated in the letter of offer of 3 April 1987. Mr Courtney is dead and there is no way of ascertaining what he knew about the documents. Mr Hawkins did not give evidence. Ms Middleton deposed that she recalled Mr Poignand commenting at the meeting of 3 April: "I have been up half the night reading the facility agreement". Counsel did not challenge this evidence in cross-examination but Mr Poignand subsequently denied making the comment. Mr Doyle, not surprisingly, had no specific recollection of the meetings of 2 and 3 April 1987 and was dependent on his notes. The notes were silent about presentation of

".. It was the normal procedure and the usual practice followed by me im relation to a meeting of this kind for there to be provided to all persons present a copy of the facility and secunty documents (including the facility agreement) then under consideration. I have no Treason to doubt that this usual practice was followed at the 2 April 1987 meeting."

"It was also normal procedure and my own usual practice in relation to a transaction of this kind for there to be provided prior to the settlement of the transaction copies of the facility and security documents to the solicitors for the borrower. While I do not have a

specific recollection of how this practice was implemented in relation to the transaction involving Rupoll Holdings Pty Ltd, I have no reason to think that there was any departure from it"

Construction of the retirement village continued and umuts in the village were sold progressively, with the net proceeds of sale being applied in reduction of the balance outstanding to NZI Cap Corp. It would appear that sales proceeded satisfactorily through to about April 1990 when, with the approval of NZI, the Rupoll interests decided to suspend construction work until the number of unsold units was reduced. In December 1989 there was a change in the ultimate ownership of NZI when a company referred to in the correspondence as "General Accident", a United

Kingdom-based insurance company, took over NZI Corporation.

Both the letters of offer and the facility agreement referred to a review at the end of the third year i.e. 3 April 1990. Although there was some confusion in the evidence about the timing and result of that review, there was broad consistency between Mr Poignand's version of events in 1990 and early 1991 and Ms Middleton's version of those events. Ms Middleton conducted an annual review in April 1990 and prepared a memorandum recommending extension of the facility and supporting Ripoll until completion, but stating that a decision could be made in January 1991 as to whether to extend the facility or seek "... repayment at maturity in April 1991". A further review took place in September 1990 and Ms Middleton prepared another report. NZI's internal documents indicate that a recommendation that the Ripoll loan be extended for an extra six months to allow for refinancing was forwarded to its head

office in New Zealand. Between September 1990 and December 1990, Mr Poignand

had frequent contact with Ms Middleton, who told him in December that she had

recommended an extension, but that her head office in New Zealand would not extend the facility. In the meantime sales of units in the retirement village during the second half of 1990 were very disappointing. Mr Poignand sought alternative finance and on 15 March 1991 wrote to Ms Middleton stating "We are now quite confident of

refinancing our facility with NZI, however, not on the due date of 3 April 1991."

Ms Middleton sent a formal letter to Mr Poignand on 28 March 1991,

"Please accept thus letter as notificauon that this facility matures on 3 April 1991. On that date, the facility will be payable m full. If payment 1s not forthcoming the facility will be in default and interest will be at the prescribed rate of 5% over the appropriate bank bill rate,"

Mr Poignand responded on 2 April 1991 by letter which included the

"I acknowledge receipt of your letter of 28 March 1991 and advise as follows:

I recognise the facility matures on 3 April 1991 ..."

The letter went on to express confidence in alternative sources of refinance and

protested at the rate of interest which NZI proposed to charge.

On 15 April 1991, General Accident announced that it had decided to

dispose of, or wind-down, the activities of NZI Bank in order to concentrate on

insurance activities. As a result, many banking staff lost their jobs. They may have

included Ms Middleton. Whatever the reason, Ms Middleton left NZI's employment in April 1991. The file relating to the Ripoll loan eventually passed to NZI's legal

officer, Austin Millott. Mr Poignand kept Mr Millott formed about his efforts to

arrange new finance and Mr Millott did what he could to assist, cluding writing a letter dated 9 July 1991 at the request of Ripoll's solicitors. That letter stated the

"Ripoll Holdings Ltd obtamed a loan facility from NZI Securties Australia Ltd in 1987 All terms and conditions of this loan have been met by your client.

The facility expired in April 1991 and because General Accident (parent company of NZI Corporation) has decided to close all banking operations in Australia and New Zealand we have requested your client to obtain refinancing of the facility

Copies of the press release issued by NZ] Bank Ltd 1s enclosed.

We have been in contact with ail! our customers and have requested they seek refinancing. The account of Ripoli Holdings has been

conducted in a most satisfactory manner and our request 1s no reflection on their ability to perform."

Although NZI had decided in April 1991 to decline further advances to Ripoll, on 10 July 1991 Mr Millott on its behalf agreed to advance $200,000 for ongoing expenses in connection with the maintenance of the village and marketing.

Thereafter NZI made no further advances, apart from the capitalisation of interest as

In about July 1991 NZI engaged Mr Wayland to investigate Ripoll's

affairs and in September 1991 Mr Millott mentioned to Mr and Mrs Poignand,

apparently for the first time, the possibility of appomting a receiver and manager. They continued to seek refinancing of the joan. Those efforts were not successful. On 6 December 1991 NZI Cap Corp served a formal notice of demand on Ripoll setting a deadline for a firm and acceptable proposal whereby the loan would be repaid, failing which it would look to its securities including the appointment of a receiver. On the same day notices of demand were sent to each of the guarantors. A refinancing proposal was put to NZI but rejected and on 16 March 1992 NZI appointed Mr Wayland as receiver and manager to Ripoll. A few days later Rupoll resigned as trustee of the unit trust and a new trustee, Rosewick, was appointed in its

On 17 June 1992 Mr Poignand filed an application mn this Court under Part IVA as a representative of Ripoll, Rosewick, the guarantors and the unit holders. In that application and the statement of claim filed with it, 1t was claimed, amongst

other things and to the extent relevant to this appeal:

: that NZI Securittes and NZI Cap Corp had engaged m conduct which was misleading or deceptive or was likely to mislead or deceive contrary to s.52 of the Act; and

. that by doing so they had induced (a) Ripoll to enter mto the facility agreement and security documents ancillary thereto and (b) the guarantors to guarantee payment by Ripoll of sums due by it under the finance facility agreement.

As we have indicated, issue (b), directed to the guarantors, was set apart from the

At the hearing, the case put by Mr Poignand was that those two respondents misrepresented to him and Mr Courtney, representing Ripoll, the provision contained in the facility agreement concerning its duration. Two separate musrepresentations were alleged based upon the two identical portions (set out above) of the letter dated 17 February 1987 wntten by Ms Middleton on behalf of NZI Securities and the letter dated 3 April 1987 wntten by her on behalf of NZI Cap Corp, which latter document had been handed to Mr Poignand and Mr Courtney at the settlement meeting on 3 April 1987. It was argued that the first representation was calculated to convey, and did convey, to Ripoll that any facility agreement prepared on behalf of NZI Securities would give Ripoll an option to extend the facility for two years after the expiration of the initial four year term, subject only to a satisfactory review at the end of year three. It was submitted that the representation contained 1n that letter was important because Mr Poignand and Mr Courtney were thereby persuaded that it would be possible to achieve a satisfactory arrangement with NZI and as a result they desisted from looking elsewhere for finance, while there was

It was argued that the second letter which Mr Poignand and Mr Courtney were asked to sign at settlement misrepresented the effect of cl. 5.08 and that this misrepresentation caused Ripoll to execute the facility agreement without its representatives realising that not only did it fail to give Ripoll a renewal option, but that the only extension mentioned in it was for a penod of twelve months and not for

17, As to reliance, Mr Poignand deposed as follows in para. 23 of his

"In entering mto the guarantee that I gave to NZI | relied on the letter of offer of 3 April 1987 in particular the term of the offer being 4 years with an option to extend the term for a further 2 years upon a Teview at the end of year 3. I believed that the option to extend was Ripoll's option provided Ripoll satisfied the review. I would not have entered into the guarantee if the term of the facility was simply 4 years or a maxmum of 5 years being 4 years with an option for an extra year following a review at the end of year 3. As a director of Ripolt I would never have agreed to Ripoll entering into the Facility Agreement for a term of simply 4 years or a maximum of 5 years bemg 4 years with an option to extend the facility for a further year. Ripoll relied upon the representations by NZI that the term would be for 4 years with Ripoll having an option to extend the facslity for a further 2 years upon a review at the end of year 3"

at first ice In respect of the complaint based upon the letter dated 3 April 1987,

"Criucal to this submussion, of course, 1s that those protecting Ripoll's mterests were unaware of the difference between the term of the letter and the wording of cl 5.08. Mr Potgnand said that he did not tead cl 5.08 He said he accepted the letter of offer, and executed the facility agreement and security documents, in the belief that the latter documents were consistent with the letter. Mr Poignand says that he would not have taken this course if he had known that cl] 5.08 gave the option to NZI Cap Corp and it was open to NZI Cap Corp to refuse an extension even if Ripoll passed the three year review *

"As my narrative of facts shows, Mr Poignand and Ms Middleton are mn conflict concermng their conversations on this subject. That conflict 1s at the heart of the issue. So it is appropmate for me to say immediately that I was more impressed with Ms Middleton, as a witness, than with Mr Poignand."

After noting that Ms Middleton had the disadvantage of having been away from the subject matter of the case for almost two years while living in England, hus Honour balanced that against the fact that she no longer worked for NZI which gave her a degree of independence that she would not otherwise have had. Hhis Honour also stated that Ms Middleton impressed him as being a fair and honest

By contrast, his Honour said that Mr Poignand turned out to be an unreliable witness and that there were a number of topics in relation to which his Honour found difficulty in believing what Mr Poignand said. His Honour gave three examples of evidence that was not credible. This was followed by another reason which his Honour gave for acceptmg Ms Middleton's version of the conversations between Mr Poignand and herself in February-March 1987 rather than that of Mr Poignand. This was the instruction given by Ms Middleton to Mr Doyle when, after failing to understand the reference to an option in the letter of 17 February 1987, he telephoned Ms Middleton for enlightenment. She gave him more detailed instructions. When he swore his affidavit, he could not recall what instructions she gave him, but he deposed that cl. 5.08 reflected those instructions. Mr Doyle was not

cross-examined. His Honour observed (120 ALR at 251):

"Once it is accepted that Ms Middleton gave Mr Doyle instructions to the effect of cl 5.08, 1t 18 difficult to believe that she said something different to Mr Poignand."

{It 1s appropriate to interpolate here that the appellant, who for the appeal has replaced Mr Poignand as the representative party, draws attention to the fact that if cl. 5.08 reflected Ms Middieton's instructions to Mr Doyle, those mstructions, on her own evidence, differed from her conversation with Mr Poignand. There was no mention in cl. 5.08 of the second of the two 12 month tranches referred

to by her and there was no mention of the option to extend for two years as set out in

The primary Judge rejected Mr Poignand's evidence that until late 1990 or early 1991 he believed that Ripoll had an option, subject to passing the three year

review, to extend for a further two years. His Honour also referred to the following

(i) the fact that it was not until long after Mr Wayland's appointment as receiver and manager that Mr Poignand first suggested that Ripoll was entitled to extend the term or that the company had been misled;

(ii) in December 1990 when Ms Middleton informally warned Mr Poignand of the likelihood of non-extension, he did not react by reminding her that Ripoll had an option to extend for a further two years;

(iit) in his letter dated 15 March 1991 Mr Poignand volunteered a reference to "the due date of 3 April 1991";

(av) when Mr Poignand received Ms Middleton's formal letter of 28 March 1991 stating that "the facility matures on 3 April, on which date it will be payable in full", he responded with a letter dated 2 April 1991 stating "T recognise the facility matures on 3 April 1991";

(v) "fejven when NZI intimated its intention of charging penalty interest, there was no word of remonstrance" [but ef (vi) infra};

(vi) an NZI file note dated 17 April 1991 recorded a telephone call from Mr

Poignand reporting that he and his wife were leaving for the United States to negotiate further for refinancing the facility and expressing

"strong dissatisfaction with [NZI's] actions to charge penalty mterest". The note contained no indication that Mr Poignand contested NZI's assertion that the loan was in default or argued that NZI was unable to charge penalty interest.

His Honour expressly acknowledged the fact that 1t may have been unwise for Mr Poignand to adopt an extremely truculent posture as, even if Ripoll was right, litigation would have been undesirable. But he went on to say (120 ALR at

"However, it would have been possible for Mr Poignand politely to make the point that he had been told that Rupoll had the benefit of a two-year option. Even if Mr Poignand made a pragmatic assessment that, regardless of fault, the relationship had in fact broken down and 1t was therefore better to look elsewhere for finance, an experienced businessperson would surely say something when told that NZ] would impose penalty interest."

Finally, the primary Judge referred to counsel's failure to call Ripoll's

solicitor, Mr Hawkins, and expressed a conclusion in these terms (120 ALR at 253):

"1 can only infer that they chose not to call Mr Hawkins because they thought his evidence would not assist the applicant, that 1s, he would not say that he failed to read cl 508 pnor to execution or to communicate its contents to Mr Poignand. If, knowing the terms of cl 5.08, Mr Poignand executed the facility agreement, he has a problem about causation. But his problem goes deeper than that; if, knowing the terms of cl 5.08, he none the less executed the facility agreement, without any protest or request for change, it becomes extremely difficult to believe that those terms departed from his oral agreement with Ms Middieton."

His Honour then weighed up the seeming inutility of an agreement along the lines claimed by Ms Middleton. What was to be gained by giving NZI,

rather than Ripoll, an option? His Honour said that at one stage of the hearing it

seemed to him that the only way of making sense of the condition in the letters of offer was to treat it as referring to a provision whereby Ripoll would have a legally- enforceable right to extend the facility for a further two years provided that it passed the year three review. His Honour concluded that this was not the correct view. On its proper construction, cl. 5.08 did confer an additional benefit on Rupoll, namely that it required NZI to consider the possibility of an extension to the term. His Honour

*A commitment to review the facility with a view to extension was very much second best, from Mr Poignand's point of view But 1t was better than nothing, and, so far as the evidence shows, Mr Poignand had not received a better offer from any other financier. I think 1t 1s probably true that he said to Ms Middleton, as she alleges, that he was not happy but "if that is the best that's on offer, then I guess I have no choice other than to accept it".

Having regard to all of the above matters, 1 have reached the conclusion that Mr Poignand (and so Ripoll) was not misled as to the duration of the facility. The agreed condition was not well expressed in the letters of 17 February and 3 Apmil, but I think that it was to the effect of that contained in cl 5.08 of the facility agreement

The effect of my finding that NZI Cap Corp was not guilty of musleading conduct in relation to the duration of the facility 1s that the facility agreement and security documents must be left to operate according to their tenor, with the result that the facility expired on 3 Apnil 1991."

In those circumstances his Honour found that when Ripoll on 3 April

1991 failed to repay NZI Cap Corp, there arose an "Event of Default" within the

meaning of the charge entitling NZI Cap Corp to appoint a receiver and manager.

The orders at first instance The Reasons for Judgment were delivered on 7 January 1994 and the

Minutes of Order carry the same date. The concluding paragraphs of His Honour's

reasons (120 ALR at 261) bear out the pomt made by counsel for the appellant that

the orders were pronounced without the matter having been stood over for the bringing in of short minutes. The relevant declaration made by the Court was

"(a) Neither NZJ Securiues Australia Limited nor NZI Capital Corporation Limited contravened s. 52 of the Trade Practices Act 1974 in connection with the entry, or proposed entry, by Rupoll Holdings Pty Limited into an arrangement for a finance facility on behalf of the DYV Unit Trust."

Otherwise it was ordered that the application be dismissed and that the applicant pay to the respondents 80% of their costs of the proceeding. Other relief was given upon the issue of the validity of the appointment of the Receiver and Manager. That has been considered in our reasons for judgment delivered 22 July 1994 and forms a

Paragraph 33Z (1) (c) of the Federal Court Act empowers the Court, in determining a matter in a representative proceeding to "make a declaration of liability". We shall assume, without deciding, that this includes what has been called a

The application of what Lord Wilberforce described as "some careful scrutiny" always is appropriate before the making of a negative declaration: Camilla Cotton Oil Co. v Granadex SA [1976] 2 Lioyd's Rep 10 at 14. See also the authorities

collected in Kawasaki Steel Corporation v "Daeyang Honey" (1993) 120 ALR 109 at

114-5, and the discussion, with particular reference to forum shopping, by Mr

Lawrence Collins in his "Essays in International Litigation and the Conflict of Laws", 1994, pp. 276-283. That is not to deny the utility of the remedy in some disputes, but

it 1s hard to see how such relief could ever be given when it 1s adverse to one side and

not sought, in appropriately framed process, by the other.

Care also is needed where the effect of the declaration 1s to determme part only of the relevant controversy which comprises the matter before the Court. It 1s worth recalling what was said by Barwick CJ and Jacobs J, when dealing with a vendor and purchaser dispute, in Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR

"Unless the parties are agreed on the consequences which flow from a declaration that such a contract has or has not been validly rescinded it 18 generally undesirable that a court should so declare without any orders for consequential relief."

See also, as to the inutility of declarations made in general terms, The University of

New South Wales v Moorhouse (1975) 133 CLR 1 at 9-11.

Like various other provisions of Parts IV and V of the Act, s. 52 does not create liability by vesting in any party any cause of action in the ordinary sense of the term; rather, s. 52 establishes a norm of conduct and failure by those to whom it 1s addressed in its various operations to observe that norm has the consequences

provided for in the range of remedies found pnncipally mn Part VI: Tobacco Institute

of Australia Ltd v Australian Federation of Consumer Organisations Inc. (1988) 19 FCR

Accordingly, what was said in Neeta and Moorhouse 1s very much applicable where a declaration 1s sought as to contravention of a particular provision of Part IV or Part V of the Act before final judgment and in advance of any determination as to whether there should be substantive relief under ss. 80, 82, 87 or other provisions of Part VI: ASX Operations Pty Limited v Pont Data Australia Pty Limited (No. 2) (1991) 27 FCR 492 at 500, Magnan International Pty Limited v Westpac Banking Corporation (1991) 32 FCR 1 at 15, General Newspapers Pty Limited v Telstra Corporation (1993) 45 FCR 164 at 192-3. Each of these is a decision of the Full Court. Further, an interim declaration, dealmg other than on a final basis with the rights of the parties, is not to be made because such a declaration would be "a contradiction in terms": .R.C. v Rossminster Ltd [1980] AC 952 at 1014 per Lord Diplock; see also at 1007 (Viscount Dilhorne), 1027 (Lord Scarman). Part of the difficulty to which the appellant points, as representative party, is that, being necessarily final, the declaration encroaches upon what appear still to be live issues as regards the guarantors who are group members. This point was developed by the appellant in the first four submissions which we set out in the next section of these

This is not to say that in an appropriate case a declaration as to contravention of s. 52 by particular conduct may not constitute the final relief that is

given. A recent, and significant, example 1s Tobacco Institute of Australia Lid v

Australian Federation of Consumer Organisations Inc. (1993) 113 ALR 257. Where

other final relief is given disposing of the issues between the parties, it may be appropriate to grant a declaration as to a particular issue which has been resolved as a step in the final resolution of the controversy. An example 1s the declaration made by the High Court in Park Oh Ho v Minister for Immigration and Ethnic Affairs (1989) 167 CLR 637, as to the unlawfulness of the detention of the appellants in a period

whilst they were held in custody pursuant to void deportation orders.

The considerations we have mentioned have even greater force in a case such as the present where the Court is dealing with a representative proceeding under Part IVA. Here, the impact of a declaration in the form of that which was made upon the conduct of the issues as they affected the guarantors was of crucial importance. They were bound by the declaration, by operation of para. 33ZB (b). In our view, the discretion to make a declaratory order, even if otherwise to be supported despite the applicability of the reasoning in the cases discussed above, will miscarry if there is failure to consider its mpact upon the group members whose substantive rights will be bound by it. One purpose of s. 33ZB is to make it plain on the face of the record that such matters have entered into the decision-making

process leading to the grant of such a declaratory order.

In the form in which it stands, the declaration is, at best, calculated to impede the trial of the remamung issues concerning the guarantors. The declaration should be set aside. No alternative in acceptable form was propounded before us. In

view of what we have said as to the miscarriage of discretion in making the

declaration, it is unnecessafy to determine whether the requirements of s. 33ZB are

We turn now to consider what might be descnbed as the substantive

contentions on the appeal although, as we have indicated, they are linked with the

The appellant's contentions on appeal were essentially as follows:

the conclusion that Mr Poignand was not musled as to the duration of the facility did not mean that neither NZI Securities nor NZI Cap Corp were guilty of misleading conduct in relation to the duration of the facility, as suggested by the terms of the declaratory relief.

it was an error to assume that if Mr Poignand were not misled, it followed inevitably that Ripoll was not misled and that was an end of the matter. This ignored the position of Mr Courtney, the guarantors and the unit holders. Mr Courtney had signed his acceptance of the letter of 3 April 1987 and his Honour had made no finding and there was no evidence that Mr Courtney was a party to any of the relevant conversations between Ms Middleton and Mr Poignand or that Mr Poignand or anyone else had communicated to Mr Courtney the contents of those conversations;

the issue of whether the guarantors were in fact misled specifically was excepted from the trial which took place before his Honour and the application should not have been dismissed in toto;

his Honour had "coalesced" two issues namely (a) whether there was misleading conduct and (b) whether Ripoll was misled;

when viewed in the light of the type of people who were intended to read the letters of 17 February 1987 and 3 April 1987, the identical portions of those letters (set out above) amounted to a representation that the facility agreement would provide a four year term for the loan with an option to renew (at Ripoll's option) for a further term of two years subject to a satisfactory review at the end of the third year;

. there was an obvious inconsistency between the term as described in those two letters and as described 1m cl. 5.08 not only as to who had the option but also as to the length of the extension (two years compared to one);

. his Honour erred in his conclusion that "[t]he agreed condition was not well expressed in the letters of 17 February and 3 April, but I think that

it was to the effect of that contained in cl. 5.08 of the facility agreement."

The corporate respondents' first contention was that in characterising their conduct it was not appropriate to focus simply on the above passages from the two letters. Those letters had been preceded by the conversations between Mr Poignand and Ms Middleton. Ms Middleton's version of those conversations had been accepted in preference to those of Mr Poignand and, in those circumstances, the references to the option in the letters clearly would be understood by Mr Poignand as meaning an option in NZI's favour. So understood, nothing contained in the letters

The difference between the two year period of extension referred to in the letters and the 12 month extension referred to in the facility agreement was somehow to be explained by the fact that in her evidence Ms Middleton said that she thought the effect of cl. 5.08 was to provide for two consecutive 12 month extensions. In those circumstance, Ripoll would have had little difficulty m obtaimmg rectification

of the facility agreement to require NZI to carry out the review exercise twice.

It was submitted that the term of the loan did not matter once the true nature of the option was appreciated, namely that it was at NZI's discretion whether there would be any extension. In those circumstances it did not matter whether the

extended term was for one year, two years or twenty years.

Conclusions on the Appeal In our view, that submission of the respondents cannot be sustamed. However, we should first make it quite clear that we reject the appellant's attack on his Honour's findings concerning Mr Poignand's credibility. This is not a case where the trial judge could be said to have failed to use or has palpably misused his advantage of seeing and hearing the witnesses give their evidence: Devries v Australian

National Railways Commission (1993) 177 CLR 472 at 479.

Nevertheless, in our view (which does not in any way depend on questions of credibility) there was a significant difference between the description in the above letters of the term for which the loan might be extended and the wording of cl. 5.08. Clause 5.08 mentions only one 12 month extension. Even on the respondents' case, cl. 5.08 should have provided for the circumstances in which the term of the loan was to be extended for two years. As his Honour observed, a

commitment to review the facility was better than nothing.

We would add that the law would oblige the financier to conduct the Teview in good faith and, perhaps, also reasonably, in the sense of paying regard to

the interests of both parties; Ammann Aviation Pty Ltd v Commonwealth of Australia

(1990) 22 FCR 527 at 532, 542-4, affd (1991) 174 CLR 64 at 96, 150; Renard

Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at 280; of Hughes Bros Pty Ltd v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (1993) 31 NSWLR 91. In Poseidon Lid v Adelaide Petroleum NL (1994) 68

ALJR 313 at 320, Mason CJ, Dawson, Toohey and Gaudron JJ said:

"{T]here can be no doubt that a contract to provide a commercial advantage or opportunity, if breached, enables the innocent party to bring an action for damages for the loss of that advantage or

In the present case a commitment to review the facility with the possible result beng a two year extension of its term was sigmficantly different from the 12 months

At the very least, the primary Judge appears to have overlooked this two years/one year difference when reaching the conclusion set out in the passage at the middle of page 254 of the abovementioned report. To that extent it was not in our opinion correct to say that the agreed condition in the letters was to the effect of that contained in cl. 5.08 and thus Mr Poignand (and so Ripoll) was not misled as to the duration of the facility. It is, in our view, open on the facts for there to be a finding that in all the circumstances one or both of the corporate respondents engaged in conduct which contravened s.52 of the Act on a basis which does not appear to have been considered by his Honour. That finding should be made only by

a judge upon review of all the evidence both documentary and oral, not by ourselves.

It was suggested by Mr P.M. Jacobson QC for the respondents that the

case had not been fought at first instance on the matter of the two years/one year difference but only on the question of which party had the option to extend the term. Mr J.P. Hamilton QC for the appellant disputed the suggestion. Their differences on this point were, of course, expressed with appropnately polite regrets about this circumstance. It is enough for us to say that our examination of the pleadings, Mr Hamilton's brief opening when Ms Middleton's evidence was taken de bene esse, paragraph 23 of Mr Poignand's affidavit sworn 29 January 1993 (set out earlier m these reasons and upon which, we were told, he had not been cross-examined) and the transcript, in particular the cross-examination of Ms Middleton at pp.1137-1139, shows that the question of the period of the extension formed an important part of the applicant's case at first instance. At issue was not simply the matter of which

What we have said leads, in our view, inevitably to the conclusion that there must be a new trial. At that trial all issues in the ligation should be disposed of, putting aside only issues of quantification of damages, if the Judge taking the trial

is of the view that it is appropriate to defer the hearing of that question.

There remain some subsidiary matters which were debated or sought to

As his Honour had held that there was no musleading or deceptive conduct on NZI Cap Corp's part, the term of the loan came to an end in accordance with the terms of the finance facility agreement. Accordingly, it was not strictly necessary (as his Honour expressly acknowledged) to consider whether there existed other events of default available to NZI Cap Corp to justify its appointment of a receiver and manager. However, despite a request made by the applicant at the hearing to excise those matters from the hearing, those issues were fully argued and tried, and his Honour gave short reasons (120 ALR at 258-60) for finding that two such events of default had occurred. However, his Honour also found that other

alleged events of default asserted by the respondents had not occurred.

The appellant now seeks to appeal from the finding that the two events of default had occurred. For thew part, the respondents, by their notice of contention, submit that his Honour should have held that the other alleged events of default had been made out on the evidence. However, in the light of our conclusion that the appeal shouid be allowed, the orders made at first instance set aside and a new trial ordered between all the parties on all issues, it 1s neither appropriate nor necessary that we deal with his Honour's observations made by way of obiter dicta, either in this aspect of the appeal or in dealing with the notice of contention. Once the orders made at first instance are set aside and a new trial ordered, it must follow, subject to one qualification, to be mentioned shortly, that all issues may be fully Telitigated. There can be no estoppel arismg agaist a party by reason of any finding

made by the trial Judge once the orders made at first instance are set aside.

Amann Aviation Pty Ltd v The Commonwealth

At a glance

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Judgment (210 paragraphs)

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Cases Cited (21)

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