On 8 April 1992 Mr King wrote to the Bank seeking an explanation for the Bank having released the funds to Mr Barry and an assurance that the Bank would not further so do without the applicant's approval. For its part the Bank merely responded by saying that the funds had been dispersed in accordance with instructions from Mr Barry's solicitor, and if the applicants desired to discuss the matter further they should speak directly to Mr Agnew. Mr King responded, reminding the Bank that the account was an account of three persons and not one, and that one of the persons conducting the account could not change the arrangements on the account without the agreement of the others.
Mr Agnew responded to Mr King, repeating allegations of delay and asserting that the correct interpretation of the deed of 26 April 1990 was that clause 8(a), in its reference to the date of registration of the plan of sub-division should read that date or eight months from the date the deed was executed, whichever first happened. Mr Agnew's interpretation could not be sustained and no attempt was made in argument to support it. Mr Agnew continued to assert Mr Barry's entitlement to receive the next $260,000 of sale proceeds.
On 9 June 1992 Mr Agnew advised the Bank of the exchange of a contract for the sale of Lot 13 for a sale price of $50,000. He told the Bank that the nett proceeds of sale were to be applied in reduction of Mr Barry's indebtedness to the Bank. On 15 June the Bank saw fit to respond to Mr King's letters of 8 April and 14 April which, until then, the Bank had ignored, asserting that it had acted in good faith and alleging that it had the verbal agreement of Mr Terrence Golby for the settlements to proceed. That verbal authority was denied by Mr Terrence Golby and no evidence was forthcoming on the part of the Bank to support it. I can only find that the Bank had no such authority, and that the senior manager of the Bank who made that claim lied when he said that Mr Terrence Golby had so agreed.
The Bank then forwarded to Mr King authorities for the release of various lots for execution by the applicants, saying that it would not attend any further settlements until those authorities were executed by the applicants. The Bank advised Mr Agnew to similar effect.
Mr Agnew wrote to Mr King asserting that the Bank had no right to refuse to hand over the title or discharge mortgages without the concurrence of the applicants, indicating that the applicants had no standing so far as the title of the property was concerned. This assertion was repeated in a letter to the Bank.
Settlement of Lot 13 was arranged by Mr Agnew for 10.30am on 13 July 1992. As appears from a diary note of that day, the Bank first decided that it would attend the settlement, placing the funds received into a suspense account until the dispute between the applicants and Mr Barry was resolved. When Mr Agnew was advised of the Bank's decision, he became upset and irate, questioning why the Bank should take any notice of the applicants when Mr Barry was the owner of the land. Mr Agnew argued that the account should never have been set up in a way that Mr Barry was a party, suggesting that Mr Barry "wouldn't know what day it was", ie that he had not understood the position when accepting the arrangement. Mr Agnew threatened to hold the Bank liable in damages for any delay.
At this stage it would seem that someone from the Bank spoke to the Bank's solicitors. The advice received was apparently that it was in the Bank's best interests to settle on Mr Barry's authorisation and to credit the proceeds to Mr Barry's indebtedness. The basis of this advice does not appear, nor is it clear whether the reference to the "best interests of the bank" is a reference to commercial or legal considerations.
Thus the Bank determined to act in its best interests and to prefer one of its customers (Mr Barry) to the detriment of other of its customers (the applicants), instead of taking the rather wiser course of putting the money into a suspense account until the entitlement to the money as between Mr Barry and the applicants could be determined, if necessary, by litigation between Mr Barry and the applicants. A decision was made by a Mr Fletcher on behalf of the Bank, that further settlements could proceed with the proceeds being applied in reduction of Mr Barry's indebtedness, and once that indebtedness was cleared then in reduction of the joint indebtedness of the applicants and Mr Barry. In the result, the sum of $43,809 was credited to Mr Barry's account.
Further correspondence passed between Mr Agnew and Mr King in an attempt on the part of Mr King to secure a compromise. That correspondence was to no avail.
On 8 September 1992, Mr Wall, who in the meantime had replaced Mr King as solicitor for the applicants, wrote to the Bank noting that it appeared that the Bank had allowed the proceeds of sale of Lot 13 to be paid directly to Mr Barry. Incidentally, it may be noted that the Bank at no stage appears to have advised the applicants that it had decided to allow the proceeds of sale to be credited to Mr Barry, or that it had credited further amounts in that way. Mr Wall asked certain questions of the Bank and requested copies of certain information. To this letter the Bank responded, saying that documents requested would be provided if the Bank's costs and expenses of complying were paid.
On 3 November 1992, the applicants commenced proceedings against Mr Barry and the Bank in this Court in the Australian Capital Territory. It is unnecessary to refer specifically to the matters alleged in the pleadings. The Bank responded by alleging a default by the applicants under the facility entitling them to cancel the accommodation and requiring immediate payment of $96,000 and interest. It is not quite clear how this sum of $96,000 was calculated, since the balance outstanding in accordance with a bank statement as at 1 December 1992 was $110,574.69.
On 16 December 1992, the sale of a further lot was settled for $50,000. The proceeds were again credited to Mr Barry.
The consequence mathematically appears to be that, as at 24 January 1993, the anniversary of the registration of the plan of sub-division, the Bank had permitted to be credited to Mr Barry's account the sum of $145,963.16. It is the case of the applicants in the present proceedings that this amount was wrongly credited to Mr Barry as the Bank had an obligation, contractual or fiduciary, to ensure that moneys emanating from the sale of the sub-divided lots should be used to repay the borrowings from the Bank on the joint account for development costs.
The Canberra proceedings in this Court were ultimately settled. Under the settlement Mr Barry paid to the applicants the sum of $30,000. He agreed further to sell Lots 5 and 7 in D.P. 815245 and pay the nett proceeds of sale to the applicants. It seems that the two lots were ultimately transferred directly to the applicants.
The correspondence between the Bank and the applicants suggests that they agreed between them that the applicants would discontinue the proceedings, paying the Bank's costs. The order made by Neaves J, however, was an order dismissing the application. No point is made that in these circumstances any issue estoppel arose from that settlement.
Thereafter almost two years elapsed before the present proceedings were commenced in March of 1995. In them, the applicants are represented by a firm of solicitors other than the firm which represented them in the proceedings which were discontinued against the Bank in 1993. There is no point in speculating as to the delay in bringing the present proceedings, or the reasons why the present proceedings were commenced, when the earlier proceedings had been discontinued.
THE CASE IN CONTRACT
As already mentioned, the applicants put their case primarily in contract.
It is alleged by the applicants in their amended statement of claim that it was an express term of the finance agreement between the applicants and Mr Barry on the one hand, and the Bank on the other, that the Bank's facility was to be cleared from the sale of lots in the sub-division. In the alternative, it is submitted that there was an implied term of the agreement that the Bank would only grant partial discharges to enable lots to be sold on the basis that the nett proceeds of sale of each lot would be applied in reduction of the advance. The breach alleged is the act of the Bank in permitting proceeds of sale to be banked other than to the credit of the joint bank account of the applicants and Mr Barry, while moneys were outstanding to the Bank on the joint facility.
For the Bank it is submitted there was neither an express nor implied term as alleged by the applicants, that the reference in Bank correspondence etc to the loan being cleared from the sale of lots was not at all part of the contractual relations between the applicants and the Bank, but if it were that it was a stipulation or condition for the benefit of the Bank which the Bank itself could waive.
In support of the proposition that the provision that repayment of the advance from the proceeds of the sale of lots was not a contractual obligation, the following matters are put. First, it is said that neither Mr Alston nor Mr Hall had authority to bind the Bank, at least so far as a facility in the magnitude of that granted in the present case was concerned. That may be conceded. However, clearly, both Mr Alston and Mr Hall could act as agents for the purpose of communicating to those in the Bank with authority the offer to take the financial accommodation put by the applicants. This is what happened when Mr Hall conveyed to his superiors the terms of the offer. As so conveyed, the terms of offer included the stipulation that repayment was to be made from the proceeds of sale of the sub-divided lots.
Next it is said that the terms of the contract conflict with the agreement that was actually concluded between Mr Barry and the applicants, subsequent, it must be said, to the making of the contractual arrangements with the Bank. It is said that it is inconceivable that Mr Barry would have acquiesced in an agreement with the Bank which took a form different from that which he had agreed (in fact was to agree subsequently) with the applicants and was disadvantageous to him, leaving him with a prospect of waiting indefinitely for his money. Behind this submission is the question of whether and how Mr Barry participated in the formation of the contract with the Bank.
It seems from the evidence adduced that Mr Barry left the entirety of the negotiations in respect of the facility with the applicants. No doubt he did so because the applicants were putting in security for finance which Mr Barry himself had been unable to arrange. Also, the arrangement Mr Barry negotiated with the applicants ensured that he was to be indemnified against any liability to the Bank by the applicants. This was not, however, a matter known to the Bank. I find that in these circumstances Mr Barry constituted the applicants his agent for the purposes of negotiating the contract with the Bank and, to the extent that the contract arranged was different from that negotiated between Mr Barry and the applicants or was disadvantageous to Mr Barry, the Bank has no standing to complain.
On the evidence, it is not at all surprising that the arrangement made by the applicants with the Bank took the form it did. Clearly, all of the applicants and Mr Barry assumed that the sub-division would be completed within eight months, and that all of the amounts borrowed from the Bank (which sum was not the totality of the obligations which the applicants were undertaking) would be paid out of the sale proceeds. No doubt it is this which explains the reason for the form of contract.
It might be mentioned that the Bank appears never to have seen the actual agreement between Mr Barry and the applicants until, at the earliest, around June or July 1992. Having regard to the terms of the internal memorandum of 12 March 1990 which forms the basis of the offer conveyed by Mr Hall to his superiors for acceptance, and in accordance with Mr Terrence Golby's evidence, I find that Mr Terrence Golby told Mr Hall that the arrangement was that all development costs outlaid were to be repaid from the sale proceeds. Mr Terrence Golby was clearly asked by Mr Hall for an estimate of these costs and put the figure at $470,000. Thus when Mr Hall referred to all development costs being repaid from initial sales and added the words "Viz 470,000 rounded up to 500,000" he was not saying that only $470,000 or for that matter $500,000 was to be repaid from initial sales, but that all development costs were to be so repaid and that these were estimated to be in the vicinity of $470,000 to $500,000.
Then it is said that the provision that development costs were to be paid out of the sale proceeds was not really intended by the applicants to be part of the contractual relationship with the Bank. It is suggested that the reference to repayment was a mere casual (and not contractual) observation. With respect, this submission can not be accepted. If the matter depends upon subjective factors, I would find that both of the applicants intended the requirement that the proceeds of sale be used to discharge the facility to be a contractual term and not a casual `throw away' observation. Objectively, it was a critical matter for the applicants that the moneys being borrowed, moneys which it will be recalled were to be used for the benefit of Mr Barry, the owner of the sub-division, be repaid out of the proceeds of sale of the sub-division. It was not the Bank that required the development costs to be paid out of the proceeds of sale, although it would, no doubt, have been desirous of some such a stipulation binding the applicants. Had it been the Bank, one might more readily have inferred that the provision about repayment was a stipulation for the benefit of the Bank. But in the present case, both in the conversations with Mr Alston and in the conversations with Mr Hall, it was Mr Terrence Golby and not the Bank who raised the important matter of repayment, not as a casual matter but, as Mr Hall himself understood when he wrote the internal memorandum forming the basis of the offer, as a term of the offer itself. Thus when the Bank came to make its formal offer, which may be said to be an acceptance of the applicants' initial offer, the Bank included as a term the requirement that repayment be out of the proceeds of sale not, as might normally be the case as a stipulation for its own benefit, but as a contractual term operating for the benefit of all parties to the contract.
Accordingly, the Bank breached its contract with the applicants when it acted, as it believed it rightfully could, in its own interest rather than in the interest of one of its customers by favouring one of them to the exclusion of the others. Inferentially, there were two advantages to the Bank in taking this course. First, it was faced with an aggressive solicitor in Mr Agnew and a rather less aggressive solicitor in Mr Ahern, so that the Bank could no doubt see advantages to itself in going along with the interests of Mr Barry rather than the interests of the applicants. Secondly, there is little doubt that in its dealings the Bank was very conscious of the advantages to it of the Barry connection with the firm of estate agents with which relatives of Mr Barry were involved. Although I would stop short of finding as a fact that this matter definitely influenced the Bank in siding with Mr Barry at the expense of the applicants, such an inference is clearly open on the facts.
Then it is said that there is not to be found in the evidence an undertaking on the part of the Bank that the Bank would adopt a regime for repayment of the loans that would be to the benefit of the applicants and the detriment of Mr Barry. Such a direct term can not be found. Indeed, it would be absurd to suggest that such a term would have been agreed to by the Bank. But that is not to derogate from the conclusion that the Bank contracted with the applicants on the basis that the loan was to be repaid from the proceeds of sale of allotments and that it then acted in breach of that contract.
Then it is said that in any event the applicants could not rely upon the contractual term with the Bank so as to establish a breach because the applicants had themselves been in breach of their contract with Mr Barry, that that breach had not been waived and in consequence that the Court
should not permit the applicants to have the benefit of their breach of the contract with Mr Barry.
Reference is made to the fact that under the agreement with Mr Barry, the applicants were required to complete the sub-division within an eight month period. They did not, and in the result it is said the applicants were in breach of that contract. It is said that nothing in the correspondence or other evidence to which reference has already been made constitutes a waiver of that breach so that Mr Barry was entitled to damages against the applicants. Thus the applicants were seeking to claim a benefit flowing from their own breach and this they could not do. No authority was cited for the application of such a rule in a circumstance such as the present.
No doubt there will be circumstances where the Court will ensure that a plaintiff can not benefit from its own breach of contract. But no such principle is applicable here. The only relevant contract is the contract between the applicants (and Mr Barry on the one hand) and the Bank. It is hard to see why the fact that the applicants may have been in breach of their agreement with Mr Barry, an agreement entered into subsequently to the agreement with the Bank, albeit related to that agreement, should excuse the Bank from performing its bargain with the applicants.
Thus, I find that although the applicants were subject to any waiver in breach of their agreement with Mr Barry in failing to complete the sub-division in the eight month period, that matter is irrelevant to the contract with the Bank. I do not therefore find it necessary to reach a conclusion as to whether the evidence before me sufficed to constitute a waiver of that breach. Certainly Mr Barry never took any proceedings against the applicants for breach and indeed settled proceedings against himself, not necessarily to his own benefit.
Having found that the Bank was in breach of the contractual arrangements with the applicants, there arises then the question of the damages which the applicants have suffered. But for the settlement with Mr Barry this would have been simple. The damages would in essence be calculated by reference to what would have happened had the Bank performed its contract. In this event amounts totalling $145,963.16 would have been paid into the joint account on or by 16 December 1992. That account would, in the result, have been in credit, with the consequence that the Bank would have been owed no money thereafter in respect of the joint borrowing and the applicants would have been entitled to a discharge of their securities, so far as those securities related to the joint borrowing.